Sydney Skydivers Pty Ltd T/A Tandem Cairns
[2020] FWC 3813
•27 JULY 2020
| [2020] FWC 3813 |
| FAIR WORK COMMISSION |
REASONS FOR DECISION |
Fair Work Act 2009
s.120—Redundancy pay
Sydney Skydivers Pty Ltd T/A Tandem Cairns
(C2020/2955)
COMMISSIONER JOHNS | SYDNEY, 27 JULY 2020 |
Application to vary redundancy pay on the basis of cannot pay the amount - whether employer cannot pay redundancy payments – not satisfied employer cannot pay redundancy entitlements - application dismissed.
[1] On 28 April 2020, Sydney Skydivers Pty Ltd T/A Tandem Cairns (Applicant/Sydney Skydivers) made an application (Application) to vary the redundancy pay due to one of its former employees, Mr Marcel van Neuren.
[2] The Application was made on the basis that, Sydney Skydivers contended, it did not have the financial capacity to pay the full amount of the redundancy payment due to Mr van Neuren. It sought to reduce the amount of redundancy pay from 16 weeks ($22,736) to 12 weeks ($17,052); a saving of $5,684.
[3] Mr van Neuren opposed the Application.
[4] On 10 July 2020, I issued a decision in transcript 1 as follows:
“In advance of this matter I have had an opportunity to read all of the materials. Obviously, I've been cognisant of the materials which have been filed on the first occasion and on the two subsequent occasions when I have sought additional information.
This matter involves an application to vary the redundancy pay, pursuant to section 120 of the Fair Work Act. The application was lodged on 28 April 2020, by Sydney Skydivers Pty Ltd.
On two occasions I have indicated to the Applicant that, in order to assess an incapacity to pay, it would be necessary for me to receive evidence as to the balance sheet of the Applicant. The information which I've been provided with simply goes to debtors or creditors of the Applicant. No information has been provided as to the assets of the company, despite me indicating, at least on two occasions, that that is information which would be necessary to assess incapacity to pay.
The principal of the Applicant, Mr Onis, has not provided any explanation as to why he has not provided balance sheet information or information as to the assets of the company and I can only assume that that information was not provided because it would not have been of assistance to the applicant in this matter.
As I said, I have had regard to all of the materials. Based on the materials presently before the Commission I am not persuaded that the applicant cannot pay the full amount of the redundancy entitlements to which the respondent is entitled. The application made by Sydney Skydivers Pty Ltd is dismissed.
An order to that effect will be issued later this afternoon and my full reasons for the decision will be issued in due course.”
[5] Following the hearing on 10 July 2020, an Order 2 was made dismissing the Application.
[6] These are my further reasons for the decision.
History of the Application
[7] The matter was first listed for mention and/or directions on 28 May 2020. The Applicant was represented by its principal, Mr Phil Onis. The following exchange occurred between me and Mr Onis 3:
The Commissioner: The application is made on the basis of an incapacity to pay. What I don't understand, from what's been put on behalf of the applicant, Mr Onis, is that the materials explain to me the revenue side of things, what's happening for you, and I can understand that, in current circumstances, revenue's fallen off a cliff. But that is really only one part of the story, when we talk about an incapacity to pay. I don't have, in front of me, any evidence about your balance sheet. So even if your revenue had fallen off a cliff but you had a balance sheet of $1 million, then you wouldn't have an incapacity to pay $5684. Do you understand the point I'm making?
Mr Onis: Well, yes and no. We haven't had any income for months and we're only a tourist-related - - -
The Commissioner: Yes, I understand that that goes to the question of income, it doesn't go to what's on your balance sheet. I don't know how much - what assets you've got, what money you've got there. How are you incapable of paying?
Mr Onis: Well, we have no income coming in.
The Commissioner: Okay. Let me put it to you another way - - -
Mr Onis: What, do you want me to sell something, is that what you're saying?
The Commissioner: No. I'm telling you that you have made an application to say you can't pay this, you have an incapacity to pay.
Mr Onis: That's correct.
The Commissioner: And all you've told me is, "My revenue has declined". You have not given me any evidence about your balance sheet. It's only what's on your balance sheet that really tells me whether you can or can't pay something. So that' - - -
Mr Onis: I don't know where you're leading with this.
The Commissioner: Well, if you've got - even if you've had a drop in revenue but you've got lots of assets like if you've got $50,000 in the bank, then you have a capacity to pay. What I'm telling you is - - -
Mr Onis: We don't have 50,000.
The Commissioner: Well, how do I know? You've not put in any evidence about your balance sheet.
Mr Onis: Well, I didn't realise I had to.
The Commissioner: Well, are you saying you'd like to put in that information, or you would like me to make the decision, based on what's before me?
Mr Onis: Well, yes, I can - you put down a list of things you want me to put forward and I'll go and get them for you.
The Commissioner: Well, it's your application. You're the person who has to prove to me that you cannot pay. And currently, based on a couple of graphs to tell me your revenue is down, that doesn't tell me you cannot pay, does it?
Mr Onis: Well, Sydney Skydivers has a wind-up notice on it. It's been deferred because of COVID, but there's - - -
The Commissioner: Again, Mr Onis, how do I know that? That's not in the submission.
Mr Onis: I didn't realise I had to put that forward to you now. So, if we can defer this hearing I'll go and get whatever information you need then.”
[8] As a consequence of Mr Onis’ request to file additional material, the matter was programmed for further hearing on 25 June 2020.
[9] On 4 June 2020, the Applicant filed additional materials. In the accompanying letter Mr Onis wrote:
“Initially I was prepared to produce my company’s balance sheets for the Commission, though when I was advised it would also be shown to Marcel, I decided against this as there is confidential information of creditors in it that he is not privilege to. However, the amount owed to Creditors stands at $500,000. In addition, please find a copy of a wind up notice the ATO has placed on the company.”
[10] At the hearing on 25 June 2020, I explained that confidentiality orders could be made over materials filed. 4 I also expressed the following concern5 about the materials that had been filed to that point in time.
“What troubles me in this matter, to be frank, is when we last spoke about this I explained the nature of the information I would need to make an assessment about whether or not the applicant cannot pay the additional four weeks. I provided that opportunity. To be frank, it doesn't seem that any of the material that's been provided is of particular assistance to me, in that regard. It's interesting that you might have $500,000 worth of creditors, but if you've got $2 million worth of cash in the bank, what's it matter that you've got $500,000 worth of creditors. There's been no information about the balance sheet at all, really. So, currently, the information is pretty thin.”
[11] Consequently, I provided the Applicant with a further (and final) opportunity to file evidence in support of the Application. Unredacted evidence was to be filed in the Commission and redacted evidence served on Mr van Neuren. 6
[12] On 30 June 2020, the Applicant filed an email containing correspondence regarding proceedings brought by the Australian Taxation Office (ATO). The correspondence includes an order of the Federal Court of Australia dismissing the originating process. The order is dated 29 January 2020. The correspondence also included a list of company creditors, a taxation activity statement and an Employer Superannuation Guarantee statement.
[13] On 2 July 2020, my Chambers contacted the Applicant by email to confirm whether a redacted version of the unredacted materials that had been filed in the Commission had been provided to Mr van Neuren in accordance with the Directions issued on 25 June 2020. Mr Onis advised my Chambers that he would not be complying with the Directions.
[14] Because the Applicant refused to do so, on 6 July 2020, my Chambers redacted the documents filed in the Commission and provided the same to Mr van Neuren.
The NES entitlement to redundancy and s.120
[15] The National Employment Standards (NES) provide as follows:
“Section 119. Redundancy pay
Entitlement to redundancy pay
(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:
(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.
Amount of redundancy pay
(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:
| Redundancy pay period | ||
| Employee’s period of continuous service with the employer on termination | Redundancy pay period | |
| 1 | At least 1 year but less than 2 years | 4 weeks |
| 2 | At least 2 years but less than 3 years | 6 weeks |
| 3 | At least 3 years but less than 4 years | 7 weeks |
| 4 | At least 4 years but less than 5 years | 8 weeks |
| 5 | At least 5 years but less than 6 years | 10 weeks |
| 6 | At least 6 years but less than 7 years | 11 weeks |
| 7 | At least 7 years but less than 8 years | 13 weeks |
| 8 | At least 8 years but less than 9 years | 14 weeks |
| 9 | At least 9 years but less than 10 years | 16 weeks |
| 10 | At least 10 years | 12 weeks |
…
Section 120. Variation of redundancy pay for other employment or incapacity to pay
(1) This section applies if:
(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
(b) the employer:
(i) obtains other acceptable employment for the employee; or
(ii) cannot pay the amount.
(2) On application by the employer, FWA may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that FWA considers appropriate.
(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.”
The Applicant’s materials and submissions
[16] In the Applicant’s F45A application form, it stated that the company had no capacity to pay. The Applicant contended that,
“Skydiving operations ceased on 23 March 2020 due to enforced Government Covid-19 restrictions. Therefore, we are not generating income. A large component, international tourists, are not able to travel to Australia for the foreseeable future.”
[17] On 12 May 2020 the Applicant made further submissions about the impact of COVID-19 on its business. It made the following submission:
“I have attached reports of our sales for the period January to February 2019 and January to February 2020. When you compare these figures, you can see the decline from 2019 to 2020. Some of our locations were impacted by the recent bushfires, and the resultant decline of tourist had already started to make an impact, continuing into March 2020.
Skydiving operations ceased from 23 March 2020 due to enforced Government Covid-19 restrictions. Therefore, our sales figures reflect this action.
I have attached reports of our sales for the period March to May 2019 and March and May 2020. The significant impact of having to close our business due to Covid-19 is evident. May 2020 recording reflects the refunds and credit card chargeback Sydney Skydivers has had to endure. Most of the Booking Agents we deal with have ceased to operate during this period and therefore we are unable to retrieve outstanding payments from these overdue accounts. A couple of these companies have declared bankruptcy so the finances owed by them are lost.
We are taking the steps of terminating a percentage employment to ensure the business is able to continue trading once Government restrictions are lifted. Payroll is a significant component of expenditure and with the Government not able to advise when tourism will be able to return to Australia, it is an expenditure we need to reduce. International tourism, in particular, accounts for the majority of our income.”
[18] On 4 June 2020, the Applicant submitted what he claimed was a winding up notice from the ATO. No such document was provided. The material consisted of emails between the ATO and Mr Onis in the period 10 September 2018 and 21 September 2018.
[19] On 30 June 2020, the Applicant filed an email containing correspondence regarding proceedings brought by the ATO, a list of company creditors, a taxation activity statement and an Employer Superannuation Guarantee statement.
Mr van Neuren’s submissions
[20] Mr van Neuren opposed any variation to the redundancy payment due to him.
[21] On 18 May 2020, Mr van Neuren submitted that,
“While I have no precise insight into the cash flow of Sydney Skydivers, I do know that currently there is some income produced through freight operations with their aircraft. Also, their payroll cost would be minimal as initially staff had been stood down without pay and have since been offered the government job keeper payment. On top of this, a large portion of their expenditure is proportional to the amount of business they have. No skydiving equals no flying equals no fuel bill for example.
Finally, while income is low for Sydney Skydivers at the moment, they should be eligible for substantial government assistance such as the cash flow boost and other funding that the government has offered.
So while I accept that it could be hard for Sydney Skydivers, in the current environment, to meet their obligations in a lump sum payment, I do not accept that they couldn’t meet their full obligation through a payment plan. Considering that is what they already proposed for the 12 weeks and have apparently decided on for my final pay, I don’t see any reason why they couldn’t do the same for the remaining four weeks.”
[22] On 11 June 2020, In response to the material filed by the Applicant on 4 June 2020, , Mr van Neuren wrote,
I believe Mr. Onis was supposed to provide evidence for an incapacity to pay the redundancy in full. No evidence has been provided however so there are really no points that deserve a rebuttal, but I will do so anyway.
Firstly the “evidence” of the wind-up notice: we are presented with two emails from the ATO to Mr. Onis from back in September 2018 (!). The first just explains the nature of a secure payment arrangement and the second is a follow up due to Mr. Onis’ failure to respond in time.
No actual wind up notice has been presented but we can assume that any such action has not proceeded as the emails are from 1.5 years ago so any real wind-up would have been completed by now. I can only assume that Mr. Onis has avoided the wind-up and no evidence has been provided on what the current status is. Also, they have been operating and maintenance work has been done to prepare for full operations so nothing to suggest that the company is actually being wound up. Evidence of operations being commenced is in attachment [Evidence 1.pdf]
Then we get the statement that $500,000 is owed to creditors. Firstly, a statement is hardly evidence of this fact and secondly, it tells us nothing on the balance of assets vs debts which is really what would be needed for an incapacity to pay claim.
Mr. Onis then claims to be in the process of selling his house. No evidence for this is provided either nor how that would impact his (in)capacity to pay.
[23] In response to the redacted material provided to Mr van Neuren, on 6 July 2020, he wrote,
“It appears from the court ruling that the wind-up notice has been dismissed and therefore would be in contradiction to the statements by Mr. Onis during the first hearing call.
There are statements regarding the debt Sydney Skydivers has to creditors and the ATO but nothing regarding assets. Therefore, there is no assessment possible regarding the (in)capacity to pay.
The reduction in redundancy pay that Sydney Skydivers is seeking would likely make no difference in the viability of the business.
Any reduction would diminish of my right to seek payment of the sum as a creditor and/or through the FEG scheme should the applicant become insolvent.”
Facts
[24] The following matters were either agreed or not contested. Consequently, I make the following findings of fact:
a) Sydney Skydivers has been operating for around 36 years.
b) The originating process commenced by the ATO against the Applicant was dismissed on 29 January 2020.
c) The Applicant’s sales revenue fell in the period January – May 2020 compared with 2019 by 48.8%.
d) In May 2020, sales revenue was negative because of refunds and credit card back-chargers.
e) As at June 2020, the Applicant:
i. has trade creditors in the amount of $412,454,
ii. in indebted to the ATO in the amount of $1,100,184.63,
iii. has an outstanding superannuation debt of $429,189.19.
f) Mr van Neuren:
i. is covered by the Amusement, Events and Recreation Award 2010.
ii. was paid $1,421 gross per week.
iii. was made redundant on 8 May 2020.
iv. worked for the Applicant for a period of at least nine years but less than ten years.
v. is entitled to a redundancy payment of sixteen weeks.
Consideration
[25] In an earlier decision Company P v D.S., 7 Commissioner Hampton helpfully summarised some of the key principles, drawing on other decisions made by the Commission, that are relevant to the consideration as to whether it is appropriate to decrease redundancy entitlements on the basis of incapacity to pay. The relevant part of the Commissioners decision is reproduced below:
[32] The ability of an employer to apply to the Commission for a variation in relation to its obligation to pay redundancy has its origins in the Termination, Change and Redundancy Case of 1984.
[33] Drawing upon that decision and the various decisions of the Commission when applying provisions akin to those in the State award, the following principles appear:
• The provision means that the Commission “may” determine to reduce the amount of redundancy pay up to an amount of nil, indicating that the granting of full or partial relief from the obligation is an exercise of discretion in the circumstances of the case. The employer bears the onus of establishing that there are grounds justifying the exercise of the discretion.
• The employer must satisfy the FWC that it is not financially competent or possessed of the necessary funds to make the payment, and has no reasonable source of funds.
• The assessment of financial competence will include consideration of the financial standing of the business including its cash position and the assets of the business.
• The effect upon the employees immediately concerned will be considered including whether making an order prevents the employee from recovering the entitlement through other means should the company be liquidated; the effect that any order may have on the status of employees as potential creditors should the company become insolvent; and the impact of any order on the employee’s rights under the General Employee Entitlements and Redundancy Scheme (GEERS) or similar schemes.
• The effect upon the continuation of the business, including whether reducing the entitlement of dismissed employees may have a beneficial effect on other employees, thereby enhancing their prospects of being able to remain in employment, are also relevant considerations.”8 (references omitted)
[26] I agree with the Commissioner that these are the relevant principles and respectfully adopt them.
[27] The Applicant filed sales figures. It was clear that the Applicant’s business had been severely affected by COVID-19. The sales figures evidenced a dramatic decline in the Applicant’s sales. Falling revenue obviously affects the ability of a business to meet its expenses and commitments. However, revenue is but one part of the financial story.
[28] The Applicant also filed evidence about its various debts. However, the quantum of creditors is also but only one part of the financial story. In any case, having regard to the quantum of the debts that the Applicant owes, I was not satisfied that the reduction in redundancy payment sort by the Applicant would materially assist it.
[29] In the present matter, the missing piece of the financial puzzle were the assets of a business. On two occasions I put Mr Onis on notice about the importance of being able to see the company’s balance sheet; its assets vis-à-vis its liabilities in order to properly assess the capacity of Sydney Skydivers to pay the additional 4 weeks’ redundancy pay it wanted relief from having to pay.
[30] That information/evidence was never provided. There was no evidence about the Applicant’s cash at bank. No evidence about its other assets and or liabilities. It was, therefore, not possible to form a view about the net asset position of the Applicant. I could not assess its solvency. I could not assess its capacity to pay the additional four weeks redundancy payment to Mr van Neuren.
[31] The Applicant must bear responsibility for the paucity of the evidence it filed in circumstances where it was given more than one opportunity to do so.
[32] Further, if the Applicant ultimately becomes insolvent, it is relevant to consider the effect an order to reduce the amount payable would have on the status of the respondent employee as a potential creditor, as is the impact of any order on the employee’s rights under GEERS. 9 The order sought will diminish those rights and thus was a factor weighing against making the order.
[33] The evidence also did not support a finding that the payment of the full amount will have a beneficial effect on other employees, thereby enhancing their prospects of being able to remain in employment. This is also a relevant consideration. 10
[34] Finally, Mr van Neuren was not a highly paid worker. This was a relevant consideration and weighed against a decision to reduce the amount. 11
[35] Given my findings, there was no basis for the exercise of a discretion to reduce the redundancy entitlement under the terms of s.119 of the Fair Work Act.
Conclusion
[36] For these reasons, I was not satisfied that the Applicant could not pay the full redundancy amount due to Mr van Neuren, and I dismissed the Application.
COMMISSIONER
Appearances:
Mr P. Onis for the Applicant
Mr M. van Neuren for himself
Hearing details:
28 May 2020
25 June 2020, and
10 July 2020
By Microsoft Teams
Printed by authority of the Commonwealth Government Printer
<PR721149>
1 Transcript PN143-148
2 PR720903
3 Transcript, 28 May 2020, PN13-36
4 Transcript, 25 June 2020, PN73-PN74
5 Transcript, 25 June 2020, PN75
6 Transcript, 25 June 2020, PN90
7 [2014] FWC 4673.
8 Ibid at [32] and [33].
9 GEERS is a Commonwealth scheme designed to provide certain entitlements when an employee ceases employment through liquidation or insolvency of their former employer. The Fair Entitlements Guarantee (FEG) is a more recent version of the scheme.
10 Villa Crerarii Pty Ltd v Daniel Kahl; PYL Nominees Pty Ltd [2011] FWA 1581; Moltoni Waste Management v P Fairs, R Ellen and K Birkett [2012] FWA 5590.
11 Moltoni Waste Management v P Fairs, R Ellen and K Birkett [2012] FWA 5590 at [30].
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