Sylvestor Ho v Horizon Iris Pty Ltd t/a Forbes Hotel
[2010] FWA 9329
•8 DECEMBER 2010
[2010] FWA 9329 |
|
DECISION |
Fair Work Act 2009
s 394 - Application for unfair dismissal remedy
Sylvestor Ho
v
Horizon Iris Pty Ltd t/a Forbes Hotel
(U2010/10879)
DEPUTY PRESIDENT SAMS | SYDNEY, 8 DECEMBER 2010 |
Application for unfair dismissal remedy - jurisdiction - whether employer a small business.
[1] This decision will determine a challenge to the jurisdiction of Fair Work Australia (FWA) to deal with an application, filed by Mr Sylvester Ho (‘the applicant’), under s 394 of the Fair Work Act 2009 (‘the Act’) for an unfair dismissal remedy. The applicant, who had been employed as a Duty Manager at the Forbes Hotel in Sydney for around eight months, was dismissed on 6 July 2010. The applicant seeks eight weeks pay as compensation for his alleged unfair dismissal and makes other claims in respect to award underpayments.
[2] The reason for the applicant’s dismissal was said by the respondent named on the file, Horizon Iris Pty Ltd, to have been ‘due to the decline in revenue over the past 12 months we have had to down size the management structure’. While the applicant disputes the stated reason for his dismissal, it was further argued by the respondent, that the applicant’s dismissal was as a result of a genuine redundancy, which meant that there was a second reason why he was not able to make a claim of unfair dismissal (see s 385 of the Act).
[3] Nevertheless, the primary contention of the respondent is that the applicant does not meet the tests in s 383 of the Act and is therefore unable to bring this application, in that he was employed for less than 12 months and the employer was a small business i.e. one which employed less than 15 employees at the relevant time. There is no dispute that the applicant was employed for less than 12 months. This decision will determine whether the respondent is a small business employer within the meaning of s 23 of the Act. During the hearing of the matter and in light of the various claims of the applicant, I attempted a further conciliation of the application. However, this proved unsuccessful and the parties put further oral submissions on the jurisdictional issue.
[4] Shortly stated, Mr Rod Lawson, Group General Manager, Iris Group Management Pty Ltd, argued that the company known as Horizon Iris Pty Ltd only owns the Forbes Hotel which, at the time of the applicant’s dismissal, employed seven employees. Mr Lawson relied on a letter from Pitcher Partners, the respondent’s accountant, which was expressed as follows:
We act as accountant and tax agent for Horizon Iris Pty Limited.
We confirm that the shareholders of the company are as follows:
Ramy Arnaout | 10 Ordinary Shares |
Wassim Arnaout | 10 Ordinary Shares |
Daniel Arnaout | 5 Ordinary Shares |
Warwick Arnaout | 5 Ordinary Shares |
We further confirm that:
1. The company operates the hotel operation known the The Forbes Hotel.
2. The business is operated from leased premises at 30 York St, Sydney.
3. The Forbes Hotel business is the only business activity carried on by the company.
[5] Mr S Ryan, Solicitor for the applicant, maintained that the real employer was Iris Group Management Pty Ltd, a company which owns and operates a number of other hotels. He submitted that the Corporations Act 2001’s definition of ‘associated entities’ was satisfied in that Iris Group Management Pty Ltd (the Principal) controls the associated entity and/or a third entity controls both the Principal and the associate.
[6] In oral submissions to the Tribunal, Mr Lawson claimed that Iris Group Management Pty Ltd is a ‘banner’ consultancy company which strengthens the buying power for the Group. It does not own or operate anything. Mr Lawson tendered copies of the applicant’s payslips which disclose that he was paid by Iris Group Management - Forbes Hotel ABN70126054251 and a document headed ‘Payment Detail by Department’. This latter document describes the Forbes Hotel as being a department with seven employees as at 4 July 2010, one of whom being Mr Warwick Arnaout (shareholder). Mr Lawson said the Forbes Hotel had a loss of $300,000 last year and this was what triggered the applicant’s dismissal. The Hotel saved $1,400 a week, as he was not replaced.
[7] In reply, Mr Ryan submitted that a number of hotels, including the Forbes, operate as a group. There had been no downturn in business, just an aberration in trading due to the World Cup concluding. Mr Ryan said that there were exchanges of staff between the Criterion Hotel and the Forbes Hotel. He relied on a number of documents received by the applicant which disclosed that the employer was Iris Group Management Pty Ltd - the applicant’s letter of offer was on the letterhead of Iris Group Management Pty Ltd, signed by Mr Lawson as the Group General Manager of Iris Group Management Pty Ltd; his employment agreement was with Iris Group Management Pty Ltd and his dismissal letter was on Iris Group Management Pty Ltd letterhead and signed by Mr Lawson as Group General Manager.
[8] Mr Ryan submitted that in respect to the Corporations Act, the applicant relied on ss (3) and (7) of s 50AAA. That section is as follows:
Associated entities
(1) One entity (the associate ) is an associated entity of another entity (the principal ) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.
(2) This subsection is satisfied if the associate and the principal are related bodies corporate.
(3) This subsection is satisfied if the principal controls the associate.
(4) This subsection is satisfied if:
(a) the associate controls the principal; and
(b) the operations, resources or affairs of the principal are material to the associate.
(5) This subsection is satisfied if:
(a) the associate has a qualifying investment (see subsection (8)) in the principal; and
(b) the associate has significant influence over the principal; and
(c) the interest is material to the associate.
(6) This subsection is satisfied if:
(a) the principal has a qualifying investment (see subsection (8)) in the associate; and
(b) the principal has significant influence over the associate; and
(c) the interest is material to the principal.
(7) This subsection is satisfied if:
(a) an entity (the third entity) controls both the principal and the associate; and
(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.
(8) For the purposes of this section, one entity (the first entity ) has a qualifying investment in another entity (the second entity ) if the first entity:
(a) has an asset that is an investment in the second entity; or
(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.
[9] Mr Ryan put that Horizons Iris Pty Ltd was the ‘associate’, Iris Group Management Pty Ltd was the ‘principal’ and Iris Hotel Group Pty Ltd was the ‘third’ entity. Mr Ryan tendered the company searches for each of the aforementioned entities.
[10] Mr Ryan also tendered the web page for Iris Hotels. This disclosed that between 1995 and 2006 the Group acquired 12 freehold hotels and one leasehold hotel. It also acquired the Black Stump Restaurants brand. It later sold 11 of the 13 hotels in July 2007.
[11] Mr Ryan referred to s 23 of the Act, which outlines how the 15 employee limitation is to be calculated. ‘Associated entity’ is defined under the Act as ‘having the same meaning given by s 50AAA of the Corporations Act’.
[12] In written submissions, Mr Ryan put that:
a. From November 2009 to July 2010 the applicant worked at the Forbes Hotel Sydney and was given directions by the licensee of the hotel.
b. The hotel license is in the name of the associate and the hotel licensee is Mr Warrick Arnaout.
c. Mr Ramy Arnaout was the sole director and of the associate and the third entity, and a joint director of the principal with his brother Mr Wassim Arnaout.
d. During the employment period the applicant was paid by the principal and not the associate.
e. The associate’s place of business in the company search is stated as the Criterion Hotel and not the Forbes Hotel.
f. The termination letter dated 6 July 2010 was drawn by Mr Rod Lawson in his capacity of “Group General Manager”.
g. Mr Rod Lawson is the General Manager of the principal and the third entity.
h. During the employment period the third entity owned and controlled the following hotels: Forbes Hotel; Criterion Hotel; Hunters Hill Hotel; Clovelly Hotel.
[13] Mr Lawson further submitted that Iris Group Management Pty Ltd and Iris Hotel Group Pty Ltd do not own any hotel businesses. In respect to the latter, it had not owned a hotel for four years. Moreover, Iris Group Management Pty Ltd is a payroll company which makes the salary payments and monitors pay issues, such as payroll tax and workers’ compensation. Mr Lawson claimed that he is not employed by anyone as he is a consultant. Mr Lawson said the website of Iris Capital has nothing to do with this matter, as can be seen by it having a variety of interests. It merely acts as a consultancy company to a number of hotels, which all have different owners. Mr Lawson said the company searches disclose that Mr Warwick Arnaout and Mr Daniel Arnaout have no association with any other company. Mr Lawson provided a further letter from Pitcher Partners and attached bank records showing weekly debits from its accounts identified as ‘payroll’. The letter was expressed as follows:
We confirm that we act as accountant and tax agent for Horizon Iris Pty Limited.
Horizon Iris Pty Limited is the lessee of premises at 30 York St Sydney and operates the hotel operation known as The Forbes Hotel.
We confirm that Iris Group Management Pty Limited is an administration company which processes the venue payroll for the employees of The Forbes Hotel. The wages for employees of The Forbes Hotel are paid directly by Horizon Iris Pty Limited from the operating bank account of the hotel.
Iris Group Management Pty Limited does not operate any hotel business in its own right. It is an administrative vehicle for outsourced centralisation of payroll functions for various entities which are grouped for payroll tax and other purposes and is designed to simply (sic) administrative processes.
[14] Mr Ryan noted that summonsed payroll records disclose 41 employees of the Forbes Hotel had received recent group certificates. Mr Lawson said that this might be so, but at any given time there were no more than 15 employees employed at the hotel. Mr Ryan added that there was not a single document which demonstrated that Horizon Iris Pty Ltd ever employed anyone.
CONSIDERATION
Relevant legislative provisions
[15] Section 382 defines a person who is protected from unfair dismissal as:
382 When a person is protected from unfair dismissal
A person is protected from unfair dismissal at a time if, at that time:
(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and
(b) one or more of the following apply:
(i) a modern award covers the person;
(ii) an enterprise agreement applies to the person in relation to the employment;
(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.
[16] The applicant was employed for approximately eight months and was covered by the Hospitality Industry (General) Award 2010 [MA000009]. Minimum employment periods are defined at s 383:
383 Meaning of minimum employment period
The minimum employment period is:
(a) if the employer is not a small business employer—6 months ending at the earlier of the following times:
(i) the time when the person is given notice of the dismissal;
(ii) immediately before the dismissal; or
(b) if the employer is a small business employer—one year ending at that time.
[17] Section 23 of the Act defines a ‘small business employer’ as follows:
23 Meaning of small business employer
(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.
(2) For the purpose of calculating the number of employees employed by the employer at a particular time:
(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and
(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.
(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.
(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee’s employment, the employees that are to be counted include (subject to paragraph (2)(b)):
(a) the employee who is being dismissed or whose employment is being terminated; and
(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated.
[18] ‘Associated entities’ is defined in the Dictionary of the Act as ‘associated entity has the meaning given by section 50AAA of the Corporations Act 2001’ (see par 8).
[19] Section 385 of the Act defines an unfair dismissal in the following terms:
385 What is an unfair dismissal
A person has been unfairly dismissed if FWA is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.
Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.
[20] It is pertinent to observe that there is presently very little authority within FWA dealing with the relationship between s 23 of the Act and the meaning of ‘associated entities’ under the Corporations Act for the purposes of establishing whether an employer is a small business employer, being one which employs less than 15 employees, at the relevant time. Neither party could direct my attention to any decision of the Full Bench or of a single member which has considered the issue before me in this case. However, it has come to my attention that on 22 July 2010, Richards SDP published a decision in Adams v Condamine Catchment Natural Resource Management Corporation Limited T/A Condamine Alliance [2010] FWA5374, in which his Honour described the following issue before him in that case as:
[13] The issue that is before me now then is to determine is whether or not the Respondent has within its company structure any associated entities, if it does, whether those associated entities employ any persons who should be included in determining the number of employees employed by the Respondent at the relevant time.
[21] His Honour observed that the employer had no related bodies corporate. However, the employee in that case contended that the employer had ‘associated entities’ in that various Landcare organisations or groups were provided with funding through the employer. It was asserted that the employer therefore ‘controlled’ the ‘associated entities’. His Honour then referred to the definition of ‘control’ under s 50AA of the Corporations Act and concluded:
[23] The practical control which the Respondent exercises over Landcare is limited principally to the contractual relationship it forms with Landcare as the service providers to which it awards funding for project work. 4 Such control does not extend to the meaning of control defined at s.50AA of the Corporations Act.5 It appears from the contracts themselves that the degree of control over the contracted entity’s (that is in this case, Landcare’s) financial and operational policies that arises is limited to the provision of funding, subject to availability of the government funding and the achievement of the key deliverables or outcomes. Indeed, the contractual relationship between the Respondent and Landcare appears to be an ordinary contract to render services for a consideration (subject to the availability of funding and competent performance).
[24] This relationship seems to me to be remote from the breadth of the notion of control envisaged by s.50AA of the Corporations Act. Such contracts are likely of only one of a number of sources of revenue for Landcare and, in any event, do not appear to extend to determining decision making about its wider financial or its operational policies. 6
[22] It followed that the employer did not have ‘associated entities’ for the purposes of the Act and, as it had less than 15 employees, the dismissed employee’s application for an unfair dismissal remedy was beyond FWA’s jurisdiction.
[23] Leaving this decision for the moment, it would appear that all of the documentary evidence relating to the applicant’s employment suggests he was employed by Iris Group Management Pty Ltd. So much so is demonstrated by:
- His letter of offer;
- His employment contract; and
- The letter of dismissal.
However, I think it beyond doubt that the applicant was effectively and practically employed by the Hotel’s operator, Horizon Iris Pty Ltd, trading as the Forbes Hotel. Nevertheless, whether it is, or has, any ‘associated entities’ is crucial to the determination of this case.
[24] Horizon Iris Pty Ltd has four shareholders - Mr Ramy Arnaout, Mr Daniel Arnaout, Mr Warwick Arnaout and Mr Wassim Arnaout. This is the Company said to be the owner of the Forbes Hotel. Mr Warwick Arnaout and Mr Daniel Arnaout are not shareholders of the so-called payroll company, Iris Group Management Pty Ltd. Mr Ramy Arnaout appears to be the only common director of Iris Hotel Group Pty Ltd, Horizon Iris Pty Ltd and Iris Group Management Pty Ltd. It does not appear that Mr Warwick Arnaout or Mr Daniel Arnaout have any connection to Iris Hotel Group Pty Ltd.
[25] On the state of the evidence, I do not see how Iris Hotel Group Pty Ltd could be said to be an ‘associated entity’ being the ‘third entity’ as claimed by Mr Ryan. In any event, I accept that the entity known as Iris Group Management Pty Ltd is a payroll / administration company which pays all of the employees at the Forbes Hotel from monies which are remitted to it from the operators of the Forbes Hotel, being the shareholders of the company known as Horizon Iris Pty Ltd. As its very name suggests, it is a management company of a Group. Moreover, I do not accept the characterisation of such a payroll/administration company as controlling the operations of Horizon Iris Pty Ltd, or employing its employees. In this respect, I consider the correspondence from the Accounting firm, Pitcher Partners, to be instructive and conclusive evidence that:
1. The Forbes Hotel premises is leased by Horizon Iris Pty Ltd which operates the Hotel, employs its employees and outsources its payroll functions to Iris Group Management Pty Ltd;
2. Iris Group Management Pty Ltd is an administration / payroll company which collects monies from Horizon Iris Pty Ltd and remits the salaries back to the employees at the Forbes Hotel; and
3. Horizon Iris Pty Ltd does not own, or operate any other business activity and, in particular, does not own or operate any other hotel business.
[26] In addition, and adopting the ‘control’ test identified by Richards SDP in Adams v Condamine Alliance, the documentary evidence, in my opinion, establishes that neither Iris Group Management Pty Ltd nor Iris Hotel Group Pty Ltd exercise any control, direction or influence over the operations of Horizon Iris Pty Ltd, as contemplated by the definition of ‘control’ under the Corporations Act.
[27] That said, even if I be wrong in respect to the above findings, there still remains a prima facie argument that the applicant’s dismissal was as a result of a genuine redundancy and, if this assertion is correct, then his application would also fail for want of jurisdiction under s 385(d) of the Act. However, I do not have sufficient evidence before me at this stage to form any concluded view on that question.
[28] For the aforementioned reasons, I am satisfied that the respondent in this matter is a small business employer for the purposes of the Act. In order for the applicant to be protected from unfair dismissal, he must have been employed for more than 12 months. As there is no dispute that the applicant was employed for approximately eight months, this application under s 394 of the Act, is not competently before FWA. Accordingly, the application must be dismissed for want of jurisdiction under s 587 of the Act. An order to that effect will accompany the publication of this decision.
DEPUTY PRESIDENT
Appearances:
Mr S Ryan, RAC Lawyers, for the applicant
Mr R Lawson, Group General Manager Horizon Iris Pty Ltd, for the respondent
Hearing details:
2010
SYDNEY
15 October
Final written submissions:
Respondent’s: 1 November 2010
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