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:- (a) Stock levels were too high (thereby affecting cash flow); and (b) Purchasing unsuitable stock; 10. The claim for unfair dismissal relates to a claim for wages for a period of 1 month from the date of dismissal namely 25 April 2001 until the date 1 gained employment being 28 May 2001 on the basis that the dismissal was unjustified and or unlawful. Particulars (i) I have extensive experience and knowledge in sporting retail. (ii) At the date of acquisition of the business by the respondent, an amount of $66,000.00 in stock was purchased. In a period of approximately 1 year stock levels were built up to $180,000.00 directly through the utilisation of profits from the business to purchase stock. (iii) At the time of acquisition of the business an indicative cash flow statement was prepared which indicated that a stock level of $180,000.00 would be reached after 3 years of trade. Under my management, the respondent company achieved this goal within only 1 year. 23 The applicant sought to defend the level stock purchased by a corresponding increase in sales. This increase in sales was not translated into profits or increased liquidity in the business as revealed in detailed financial accounts (attach. 9 to ex 6). OUT OF TIME 24 The application is filed on 6 August 2001, significantly out of time. The evidence is that the applicant approached the Queensland Department of Employment, Training and Industrial Relations in Southport, Queensland on 15 May 2001, 21 days after the conclusion of the relationship, seeking to file an application in that jurisdiction. Exhibit 3 is correspondence dated 15 May 2001 from Mr D F Cox, Senior Industrial Inspector, to the Industrial Registrar of this Commission confirming that event. The applicant then set about obtaining the necessary application form to file in this jurisdiction. The form was completed the form, at first incorrectly and on return from the Registry resubmitted to achieve effective filing on 6 August 2001. 25 There is evidence of some time in the period leading up to 6 August 2001 occupied in the transmission of documents by ordinary post between Tweed Heads and Sydney. 26 Having regard to the provisions of s85(3) of the Industrial Relations Act 1996 ('the Act') I regard the reason for delay to be acceptable and the length of the delay such that acceptance of the application be allowed and conclude in so doing that no hardship is caused to the applicant or the respondent thereby. JURISDICTIONAL ISSUE - WAS THE APPLICANT AN EMPLOYEE? 27 The central issue between the parties is whether the applicant was an employee whose employment was terminated, giving rise to jurisdiction. 28 The evidence is that John and Debra Prince were brought into the venture at the initiation of the applicant whose primary motivation was to become the proprietor of his own business. Commercial arrangements were made to facilitate this with Mr and Mrs Prince bearing the majority, though not all, of the commercial risk, the applicant and David Prince standing to benefit by the acquisition of equity. 29 Payments to the applicant cannot properly be categorised as wages in my view as they are not made in respect to any contract of employment, industrial award, or hours worked. 30 There is no evidence of the formation of a contract of employment to support a finding of an employer/employee relationship. The only evidence of association between the applicant and respondents is of a commercial nature at the applicant's initiation. 31 The applicant contends that a payment of two weeks income offered by Mr and Mrs Prince and accepted by him on 25 April 2001 is evidence supporting the argument that he was an employee. 32 I accept the evidence of Mr and Mrs Prince that the applicant accepted the end of their relationship on 25 April 2001 and requested financial assistance until he could find a replacement source of income and that they offered the equivalent of two weeks drawings as a compassionate gesture, being concerned of the applicant's needs. 33 The payment made and accepted does not materially assist in the determination of this matter. Application of the Control Test results in a conclusion that Mr Vernon was free to set his own hours of work, determine the tasks he would undertake, the method and priority thereof. 34 I find on the evidence before me that the applicant was not an employee. Accordingly there can be no dismissal from employment to ground jurisdiction. 35 The conduct of the applicant in any event would not in my opinion give rise to relief. The applicant's assertion that his good management had taken stock levels to the three year target in 12 months displays a complete lack of comprehension of the cash needs of the business. A continuing refusal to acknowledge the requirements of his fellow directors that a gradual and planned increase in stock levels be achieved is not a point of commendation as presented by the applicant in his affidavit; it is the root source of the problem, which he fails to recognise. 36 The application is dismissed. oo0oo DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.