Suzana Costigan v Dobont Pty Ltd

[2014] FWCA 1455

[2014] FWC 3947

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Suzana Costigan
v
Dobont Pty Ltd
(U2013/16036)

John Costigan
v
Dobont Pty Ltd
(U2013/16037)

COMMISSIONER MCKENNA SYDNEY, 26 JUNE 2014

Applications for relief from unfair dismissal.

[1] Suzana Costigan and John Costigan, who are spouses, have lodged applications pursuant to s.394 of the Fair Work Act 2009 (“the Act”) each alleging they were unfairly dismissed by Dobont Pty Ltd (“Dobont”) on 4 November 2013 and seeking remedies of compensation.

[2] The applicants submit that in each application the Commission should find in favour of the claims on the following bases: (a) there was no valid reason for dismissal based on conduct or capacity; (b) neither reason for the dismissal nor an opportunity to respond was provided by Dobont; (c) Dobont had access to external human resources management expertise; (c) the humiliation suffered within the community, with past clients and workplace and industry colleagues; and (d) personal effects had not been returned.

[3] By way of short background, Mr Costigan was formerly an employee and sole director of Dobont, and the licensee of the real estate agency that traded under franchise arrangements as LJ Hooker Katoomba. Dobont objects to Mr Costigan’s application, submitting he was not an employee of Dobont on 4 November 2013, being the date Mr Costigan contends he was unfairly dismissed. Dobont contends Mr Costigan was a director of Dobont and was paid a director’s fee; and that the terms of any employment contract proposed to be made with Mr Costigan were only under negotiation at the time Mr Costigan was removed as a director. At this time, Dobont contended, Mr Costigan’s employment had not been confirmed and (as is common ground) no formal employment contract had been made.

[4] There is no dispute Mrs Costigan was employed by Dobont as a senior property manager on the date she was dismissed on 4 November 2013. Dobont contends Mrs Costigan engaged in serious misconduct following prior warning and that her dismissal was consistent with the Small Business Fair Dismissal Code (“the Code”).

[5] The applications essentially proceeded in tandem, with evidence and submissions by and on their own behalf from Mr Costigan and Mrs Costigan respectively. Dobont’s evidence and submissions were received from its current sole director, Stephen Simonds and from Pierre Wakim, who is a director of a company which has a substantial shareholding in Dobont.

Mr Costigan

[6] From at least 2013, if not earlier, Dobont was encountering significant financial difficulties. In consequence of those difficulties, the Australian Taxation Office, for example, was twice “poised” to wind-up the company; Dobont had unpaid GST, superannuation guarantee charges and unpaid pay as you go withholding tax. From around August 2013, Dobont, through Mr Costigan as its then sole director, began arrangements designed, in effect, to attempt to save the business. Among other matters, there was evidence of the appointment by Mr Costigan of a voluntary administrator and the signing by (among other signatories) Mr Costigan and Mrs Costigan of a deed of company arrangement (being an instrument under Div 10 of the Corporations Act 2001).

[7] Much of the evidence adduced by the parties concerned matters in relation to the corporate arrangements effected with the new financiers/corporate shareholders, a certain loan of $25,000, and the competing contentions about the effect of various arrangements (not all of which were employment-related or employment-specific). The evidence of Mr Wakim, particularly, detailed such matters. Parts of the evidence also concerned a contract of employment Mr Costigan was seeking to negotiate for himself with the new financiers and a draft heads of agreement involving the Costigans and the new financiers.

[8] Section 396 of the Act requires that four matters be decided before considering the merits of the applications:

“396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.”

[9] Dobont contended Mr Costigan’s employment with Dobont implicitly or inherently ceased at the time he voluntarily appointed an administrator on 13 August 2013, whereas Mr Costigan contends that on or about 3 August 2013, Mr Simonds (representing the shareholders) said in a meeting that Mr Costigan would be continuing in his employment with Dobont in the capacity as a sales person on a full-time basis. Mr Costigan did not receive any wages or commissions as an employee of Dobont from 10 August 2013.

[10] In the period thereafter, Mr Costigan sought to negotiate a contract of employment with Dobont on terms and conditions he proposed be entered into, but no such contract was ever made between Mr Costigan and Dobont. On 17 September 2013, however, with the inception of a deed of company arrangement (which did not refer to employment of Mr Costigan), Dobont retained the services of Mr Costigan as an interim director of the company. That is, by resolution dated 3 October 2013, matters were determined as follows:

“RESOLVED that Dobont Pty Ltd retain the services of John Costigan as an interim director of the company for a fee of $1,000 per week to be paid from inception of the deed of company arrangement dated 17th September 2013.

Further RESOLVED that all decision in respect of payments and expenses incurred by the business are to be authorised by the members.”

[11] Dobont contends Mr Costigan was not an employee in the time relevant to this application, but that he was paid a weekly director’s fee of $1,000 for his services as an interim director in accordance with the resolution dated 3 October 2013. Dobont further contends Mr Costigan was not dismissed on 4 November 2013, but was removed from his role as an interim director by the members of the company on 1 November 2013 - with the removal confirmed to Mr Costigan in a letter dated 4 November 2013 which relevantly read:

“Please be advised that as at Friday 1st November 2013 at a meeting of the members of the company you were removed as both director and secretary of the company Dobont Pty Ltd.

All company assets are to remain with the company or be handed back to the company immediately. This includes your mobile phone and keys to the office of [address].

Please note that you are not to transaction on any bank account in the name of the company either trading account or trust account. You are expressly on notice that you are not to cause any detriment to the assets of the company and that any records that have been obtained as a consequence of your directorship remain records of the business.

The licensee in charge of the business is to be changed immediately as nominated by the members.

Please note that all contact from hereon in respect of the business and your former position as a director is be made to - [contact person and details]”

[12] I am not satisfied Mr Costigan was an employee of Dobont on 4 November 2014. The evidence leads me to conclude Mr Costigan was, on the date he contends he was dismissed from his employment with Dobont, a person who had been receiving a directorship-related emolument rather than having an employment relationship. Mr Costigan’s last payslip as an employee of Dobont for the pay period ended 9 August 2013 was in evidence. It seems likely Mr Costigan’s employment with Dobont ceased on or about the date the administration commenced, although the date and the precise mechanism by which the employment relationship then terminated are unclear in circumstances where Mr Costigan was, to around that time, the “owner” of his own business, i.e., he was sole director, the senior employee and the licensee of the real estate agency. Although Mr Costigan apparently performed certain sales and licensing-related work for Dobont in the period to 4 November 2013, I have not been satisfied Mr Costigan was, to the date he contends he was unfairly dismissed, then performing such work in the capacity of an employee of Dobont. For example, only days before Mr Costigan asserts he was dismissed from employment (and at a time when he was being paid $1,000 a week as an interim director), Mr Costigan wrote to Mr Simonds in the following terms seeking to formalise a separate employment agreement with Dobont:

“It’s interesting to see how diligently you are following up the results of my sales efforts, however you are not so diligent in formalising the agreement on which my sales are based.

I will let you know how settlements are going as soon as we have the employment agreement and the heads of agreement formalised.

By the way, [named individual] threatened yesterday to withdraw all [named group] business by the end of the month, he thinks that not having an agreement in place for my efforts at this late stage is ridiculous, subsequently he can’t see how any arrangement with him could ever be reached.

Please respond as a matter of urgency.”

[13] Matters related to a contract of employment Mr Costigan was seeking to negotiate for himself as well as a heads of agreement concerning both the Costigans were factors that led, directly and indirectly