Vernon v Broadwall Pty Ltd [2002] NSWIRComm 41

Industrial Relations Commission of New South Wales

CITATION : Vernon v Broadwall Pty Ltd [2002] NSWIRComm 41 PARTIES : Lee Vernon Broadwall Pty Limited FILE NUMBER: IRC 5262 of 2001 CORAM: Harrison DP CATCHWORDS : Application for relief from unfair dismissal - application out of time- approach to Queensland State jurisdiction in time - directed to NSW jurisdiction - evidence of active pursuit of filing - application accepted out of time -Jurisdiction - employment or commercial relationship - no evidence of contract of employment Held - not employee - application dismissed LEGISLATION CITED : Industrial Relations Act 1996 CASES CITED : Jones v Dunkel (1959) 101 CLR 298 HEARING DATES: 02/13/2002 DATE OF JUDGMENT: 03/12/2002

APPLICANT Mr E Johnston of Counsel

LEGAL REPRESENTATIVES: RESPONDENT Mr S Royce Australian Industrial Reinstatement Services

JUDGMENT: - 8 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: HARRISON DP Tuesday, 12 March 2002 Matter No IRC 5262 of 2001

LEE VERNON AND BROADWALL PTY LIMITED

Application re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION [2002]NSWIRComm 41 1 This matter was subject to arbitration proceedings on 13 February 2002 at Murwillumbah Court House consequent upon earlier proceedings which determined that the matter could not be settled by agreement between the parties and which gave rise to directions for the filing and serving of statements of evidence. 2 On hearing Mr E Johnston of Counsel appeared on behalf of Mr Lee Vernon, the applicant. Mr S Royce of Australian Industrial Reinstatement Services appeared on behalf of Broadwall Pty Limited (the respondent) with Mr J Prince. 3 Mr Johnston brought evidence from Mr Vernon. 4 Mr Royce brought evidence from Mr John Prince, a Director of the respondent; Mrs Debra Prince, a Director of the respondent; and Mr David Prince, a Director of the respondent, the son of John and Debra Prince and joint venture partner managing the respondent's' business in conjunction with the applicant. THE EVIDENCE 5 The applicant contends that he was an employee of the respondent company from mid March 2000 to 25 April 2001 when his employment was unfairly terminated by Directors, John and Debra Prince. 6 The respondents assert that the applicant was not an employee but a joint venture partner in a business established at the applicant's initiation, which he had driven to the brink of insolvency, creating compelling financial circumstances to end the relationship and rectify the financial strength of the business. 7 It is not contested that on or about 22 March 2000 the respondent company purchased a sports store at Shop 90, Tweed City Shopping Centre, trading as "Sports Power". At the material time shareholding in the respondent company was the applicant, 49 shares; David John Prince, 49 shares; Debra Ann Prince, 51 shares; and John William Prince, 51 shares. 8 The applicant had worked with David Prince in sports retail at other establishments for some time prior to March 2000, during which time they conceived a proposal to form a partnership and acquire a sports retail business as proprietors. 9 Appendix 4 to exhibit 6, the affidavit of John Prince, is a document titled "Proposal for purchase of Sports Power Tweed". This document was prepared by the applicant to advance the request for financial support from Mr and Mrs Prince. The applicant sought to diminish the significance of this document, relying on the final words of the document which state: "This is not a proposal but rather a gathering of ideas and a rough costing". There can be no doubt that this document is a proposal upon which the ultimate business relationship was founded. 10 Financial support was sought from Mr and Mrs Prince, the parents of David Prince, who agreed to assist the venture. An initial proposition that Mr and Mrs Prince provide or guarantee finance was not viable and consequently the shareholding structure detailed above was established and the respondent company financed by mortgage over the Prince's family home. 11 In furtherance of this arrangement the applicant was requested to make a will bequeathing his share of the business to John and Debra Prince in the event of his untimely death (appendix 3 to ex 6). 12 The applicant conceded that this arrangement was to continue only until the debt had been discharged and he acquired equity in the business, at which time it was intended that Mr and Mrs Prince withdraw from the business and the applicant redraw his will without reference to Mr and Mrs Prince. 13 The Sports Power business was purchased, with the applicant and David Prince operating the business. Debra Prince undertook financial activities including the maintenance of records and payment of bills but took no part in operational issues such as the purchase of stock or store trading policies. John Prince took no active part in the business but did attend Director's meetings. 14 During the course of operation of the business the applicant and David Prince received a weekly amount of $400.00, said by the applicant to be wages; put by the respondent to be drawings from the business. 15 The applicant supports his contentions in respect to wages by reference to an hours and wages record (ex 2) which shows payments of gross wages of $400.00 per week less tax of $59.00 per week to him from 2 July 2000 to 22 April 2001. It is appropriate to note at this point that payment in the week ending 5 November 2000 was $200.00 gross. 16 The respondent contends that this process was no more than a convenient and tax compliant means of allowing drawings to the applicant for the purpose of personal sustenance. 17 The applicant contends that the appropriate weekly wage prescribed by the relevant award was $484.20 per week; however, he was content to accept a lesser amount in order to ensure the highest level of cash was available to the business, consistent with his desire and ambition to acquire equity. 18 At no point did the applicant identify the award used by him to compute this rate of pay, nor was there any attempt to identify the award classification within which his duties would fall. The failure to address this issue leaves open an adverse conclusion in accordance with the ruling in Jones v Dunkel (1959) 101 CLR 298 that there is no award classification within which the duties of the applicant would be encompassed. 19 It is not contested that the arrangement between the shareholders was for gradual increase in stock levels concurrent with repayment of the loan and, on discharge of the mortgage over the Prince's family home, the applicant and David Prince would each acquire 50% of the equity in the business. 20 It is common ground that the termination of the relationship between the parties arose due to the increase of stock levels at a rate which severely affected cash flow to the point of insolvency. Assertions that unsuitable stock had been purchased are also put. 21 The evidence of John and Debra Prince is that they raised the increase in stock levels in excess of budget with the applicant on many occasions and that he failed to respond; steadfastly increasing stock to the point where they became genuinely concerned that foreclosure of the mortgage would see them lose their family residence. 22 In his affidavit (ex 1) the applicant concedes these circumstances in the following terms: 9. The Directors of the Respondent company terminated my employment, alleging the following as grounds for termination:-