Industrial Relations Commission of New South Wales CITATION : Bread of France Ltd and Jean Jacques Taufana [2002] NSWIRComm 94 APPELLANT Bread of France Ltd PARTIES : RESPONDENT Jean Jacques Taufana FILE NUMBER: IRC 924 of 2002 CORAM: Glynn J Appeal - Application for stay - appellant claimed difficulties in paying into court total amount ordered at first instance - such payment one only factor to be considered - stay granted on terms. CATCHWORDS : Practice and Procedure - Application for stay - appellant claimed difficulties in paying into court total amount ordered at first instance - such payment one only factor to be considered - stay granted on terms. LEGISLATION CITED : Industrial Relations Act 1996 s 187 Campbells Cash and Carry Pty Ltd v National Union of Workers, NSW Branch (2001) 104 IR 400 CASES CITED : Green v Brown (2000) 102 IR 30 Stead v State Government Insurance Commission (1986) 161 CLR 141 HEARING DATES: 03/01/2002; 03/13/2002; 03/28/2002; 04/16/2002 DATE OF JUDGMENT: 05/08/2002 APPELLANT: Mr A Duc Baking Industry Association (NSW Employers) LEGAL REPRESENTATIVES: RESPONDENT: Mr R Tonkli Shop, Distributive and Allied Employees' Association, New South Wales Branch JUDGMENT: 10 INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: GLYNN J 8 MAY 2002 MATTER NO. IRC 924 OF 2002 BREAD OF FRANCE LTD AND JEAN JACQUES TAUFANA Application by Bread of France Ltd for leave to appeal and appeal against a decision of Commissioner Tabbaa given on 30/1/2002 in matter no IRC2001/5094 JUDGMENT 1 The background to the application now being considered is set out in the decision dated 30 January 2002 of Commissioner Tabbaa: The Shop, Distributive and Allied Employees' Association NSW, filed a claim under Section 84 of the Industrial Relations Act, 1996 on 30 July, 2001 alleging that Mr Jean Jacques Taufana, a member of that union, had been unfairly dismissed by the respondent on 09 July, 2001. Mr Taufana contended that he had been employed as a Baker by a succession of companies that traded as Bread of France from 01 November, 1978 until his dismissal under the terms and conditions of the Bread Industry (State) Award. The file was allocated on the same day and was listed for preliminary hearing on 03 September, 2001 at which time it was disputed that any termination of employment had occurred. Nevertheless, a proposal had been made for reinstatement of the applicant to his previous position, with all previous entitlements restored but without pay for the period not worked. The proceedings were adjourned to allow Mr Taufana an opportunity to consider the offer. The Commission was advised at a Report Back held on 05 September, 2001, that the settlement offer had been rejected by the Applicant. A filing schedule was directed in relation to the threshold issue as to whether the Applicant had abandoned his employment or had been terminated by the Respondent. 2 The Commissioner did not make any specific finding as to the threshold issue but stated under "Decision" that "his subsequent dismissal was harsh, unjust and unreasonable and for that reason his claim is upheld", before going on to award him $16,000. 3 On 19 February 2002, Bread of France Ltd (the appellant) filed an application seeking leave to appeal and appeal pursuant to s 187 of the Industrial Relations Act 1996. A stay of proceedings was sought. The stay application was allocated to me for determination. 4 The questions raised by the appeal were stated: 1. Whether the Commission had due regard to procedural fairness in hearing matter no. IRC 5094 of 2001. 2. Whether the Commission had due regard for the provisions of section 86 of the Industrial Relations Act 1996 and its importance in dealing with matters under s84 of the Industrial Relations Act 1996. 5 Reasons why leave to appeal should be granted were set out, and then the Grounds of Appeal: 1. The learned Commissioner erred in making an order of compensation in a matter which was being heard on an interlocutory basis. 2. The learned Commissioner erred in stating that the matter was to be heard on an interlocutory basis and then not advising the parties that the Commission was to finally determine whether the dismissal was harsh, unjust or unreasonable. 3. The learned Commissioner erred in not allowing the parties to place further evidence and submissions before the Commission prior to determining whether the dismissal was harsh, unjust or unreasonable. 4. The learned Commissioner erred in not properly applying Smith v Director-General of School Education [1993] 51 IR 204. 5. The learned Commissioner erred in failing to make a positive finding in regard to whether the Respondent had been dismissed or not. 6 The Relief Claimed was then set out. 7 The stay of proceedings was sought because: 1. If a stay is not granted, and the appeal in due course succeeds, the appellant will have had to comply with the order to pay compensation. 2. If a stay is granted, and the appeal in due course is not allowed, the respondent will still be entitled to have the order by Tabbaa C enforced. 3. The balance of convenience favours the proceedings being stayed. 4. Execution of the order would render the appeal nugatory. 8 However, when the application for a stay came before the Court, Mr Duc of the Baking Industry Association (NSW Employers) appearing for its member, Bread of France Ltd, advised the Commission that its primary position was that the company at this stage simply could not raise the money ordered to be paid, but the stay should still be granted. Its secondary submission was that the appellant would be prepared to pay sums of money into court on a monthly basis if the stay were granted. Submissions - Appellant 9 Mr Duc relied upon the principles as to granting an application to stay orders as set out in Campbells Cash and Carry Pty Ltd v National Union of Workers, NSW Branch (2001) 104 IR 400 at 409 ff. In that case, the following two questions were put to be answered in a stay application: (1) Has the applicant for the stay presented an adequate reason for, or an appropriate case, to warrant the Commission's exercise of discretion and on the facts involved there are a variety of matters to be taken into account, including the balance of convenience and the competing rights of the parties. (2) The prospects of success in the appeal may be taken into account, and in that case Walton J, Vice-President found it necessary to consider the prospects of success to assess the balance of convenience. 10 In this case the appellant has put forward an adequate reason for the Commission to exercise its discretion to stay, because the prospects of success in the appeal are strong. 11 The problem the appellant has identified with the Commissioner's decision at first instance is that she indicated that she was to hear the matter on an interlocutory basis but the Commissioner then, rather than deciding the interlocutory point as to whether there had been a termination or dismissal, moved to a final determination and decision, which resulted in the Commissioner awarding $16,000 to the applicant below. 12 If the Commission were to not grant the stay and the money was paid to the respondent, there has been no evidence led whether that money could be repaid. 13 There has been evidence from the company that there is no ability to pay an amount into Court of $16,000 in total. This company is undergoing some financial difficulties and has at least an operating loss of $10,000, but the cash flow of which this Commission has evidence indicates that $2,000 a month can be paid into court comfortably by the company to secure a stay. The company is not going to fold over the next couple of months and if there is concern about that, the company will be putting moneys into court. Submissions - Respondent 14 Mr Tonkli of the Shop, Distributive and Allied Employees' Association, New South Wales Branch (the SDA), appearing on behalf of its member, Jean Jacques Taufana, submitted the Commissioner, in finding that a termination did in fact occur, was able to conclude on that basis and within the context of the submissions of both parties with respect to the termination, whether that termination was in fact fair or unfair for the purposes of the Act, and she found that it was unfair. It is impossible to separate the two. 15 That decision was based on factual findings that were reasonably open to the Commissioner and on that basis there is no substantial reason to consider that the appeal will not be successful. 16 With respect to the financial situation of the company, he made the point that the company have had four occasions on which to present documents in respect of the financial situation of the company. The onus is in fact on them (see Green v Brown [(2000) 102 IR 30]) to demonstrate a proper basis for a stay and to demonstrate the company is not in a financial position to pay moneys awarded by the Commission. 17 In no way did the documents produced present a full and final disclosure of the company's financial position. The respondent relied on the evidence given by Mr Brian Coopland and simply said that the company have not presented consistent documents that can be relied upon. The documents have many errors, many inconsistencies. The applicant has not satisfied the onus to demonstrate its inability to pay. 18 With respect to where the money should go, it is a concession of the respondent employee to say that the money should be paid to the court and not directly to him as is the ordinary course in decisions of the Commission. He is not asking for the moneys to be paid to him and hence he has not needed to demonstrate his ability or inability to repay the moneys. What he was asking, of course, was that the entirety of the moneys, the balance of which is now $14,000 of $16,000, be paid into Court. The reason for his very deep concern, is the very fact that the company have not been able to present consistent documents and also the very fact that the company has given evidence that they have been trading since the beginning of this financial year at a small operating loss. If that is to be accepted by the Commission, there is a concern that, given that the appeal is not for many months, it could be that the company, if the appeal is not successful, will not be in a position then to pay the moneys. 19 Mr Taufana has been found by the Commissioner to be entitled to be paid the money ordered to be paid to him. It would be incredibly unfair and unfortunate, given his length of service, if this appeal was not upheld by the Commission and the company, months from now, was not in a position to be able to pay him the moneys that the Commission had ordered him. It is in the interests of the applicant and in no way will it affect the appellant if those moneys be paid into Court. The moneys will be there. They will be there for the company to take back if they win the appeal, with interest, but it guarantees the moneys will also be there for Mr Taufana in the event the appeal is not upheld by the Commission. 20 On that basis he asked to have the full amount of the moneys paid into Court in order to protect the interests of the applicant below, and to uphold the decision of the Commissioner. Financial Evidence 21 To support its claims as to its financial difficulties, the appellant adduced evidence in the first instance from Mrs Tee Chin Chong, General Manager of the appellant, and on the next occasion from Paul Hopper, one of the company's directors. Neither was able to assist in any practical way with the flimsy documents produced (3 pages on the first occasion and 2 pages on the next). 22 The company was given a further opportunity to support its claims. The company's accountant, Craig Howard Jones, presented, and was examined on, financial records of the company which were said to support the profit and loss account for the period 1 July 2001 (when the company commenced operation in its most recent incarnation) and 28 February 2002 (amended on transcript by Mr Jones to 23 March 2002). The bundle of documents was more substantial than the earlier documentation, being additional computer printouts of records. Even then, Mr Jones (who had not prepared the documents) was not able to explain all the entries, "imagining" that some large amounts listed would be part of the funds used to acquire the business. 23 Handwritten figures added by Mr Jones to the printouts referred to the three types of expenses he said were not included in the detailed account: leasing, legal fees and workers' compensation. 24 In explaining various figures, Mr Jones described the connection between Bread of France and the business acquired by it: Goodwill represents the difference between what was paid to acquire the business and the net assets that were acquired. So in this case there were no assets acquired but there were liabilities that were taken on when we acquired the business; that is employee liabilities and creditors. Q. So that means money owing - creditors I would have thought was money owing to you or the previous company, but you are not talking about debtors, are you? A. No, we are talking about suppliers creditors. We took on certain creditors and we took on the employee liabilities. We transferred those over. They were liabilities of the business when it was purchased. So, in terms of preparing a balance sheet, those employee liabilities and creditors are on the credit balance, the offsetting debit balance is goodwill. Q. There was some continuity - may be continuity is not the right word - there was some connection between the company that took over and the previous company? A. That's correct. Q. Could you explain that? A. The directors of the company were the same in both instances. The previous company, Australian Retail Bakeries got into financial difficulties and went into liquidation. At that time the only operating business was the David Jones businesses, which operate on a short term arrangement. The licence agreements under which they operate were such that if the company had gone into liquidation those licences would have been lost, so they would have been of no value to the liquidator. These businesses were acquired for "appropriate consideration" by the directors and the employees' liabilities and creditors were also taken on. Q. You say "appropriate" - taken on for "appropriate consideration? A. For market consideration. … TONKLI: Q. Just a very final question, why isn't a bank reconciliation performed more than once a year on this account? A. This is only a small company. We, as you are aware, do not have a lot of resources. If the company was more profitable we would have staff to do this more regularly, but we have had to run very leanly so we have concentrated our efforts elsewhere and I will be doing this at the end of the year in one hit, which is more efficient. 25 The respondent called Brian William Coopland, FCPA, an accountant for 40 years, employed for the last twelve months by the SDA to give evidence as to his examination of the company's accounts. Asked his opinion of them by Mr Tonkli, he said: A. The documents that I received I would say are in three stages that we have looked at here. The first two, the profit and loss and balance sheet which were for a period from July to February; the next stage was the profit and loss that was pulled out from the MYOB system which was run off on 23 March. Now, these figures on the 23rd were the figures that were on the document of July to 28 February, so I look at that as a discrepancy. Then the supporting documents for the profit and loss figures which were headed up on 1 July to 23 March were different figures again. So in my opinion it is very hard to judge the validity of those figures based on the different stages that they were prepared. When you are looking at it you would assume it would be from 1 July to 28 February. … Q. I pointed out to Mr Jones in cross-examination that there were a number of discrepancies with respect to figures shown on the front of the profit and loss and the transactions recorded in the detailed profit and loss that occurred during or prior to 23 March, that were not recorded - what do you say about those? A. The MYOB system is geared to a date, so therefore if you ask for a report that says from a particular period to a particular cutoff time the system will generate those particular entries. Now, in the case where you would have entries not picked up in that particular run but as a date that should have been picked up, I can only assume there they probably would have been posted after the event. … Q. Can you explain to the Commission how many discrepancies you found and go to some detail about what they are? A. On the schedules, there are 22 discrepancies, where the items have a date prior to the 23rd, but haven't appeared in the listing in the profit and loss. Categories are numerous. In some instances where it makes a significant difference to the profit and loss as in the GST free sales, there are items there which account for something like 20 odd thousand dollars. … Unless you have anything else you wish to raise in respect of the documents? A. The only thing I can think of as against the balance sheet itself, it is that most businesses use balance sheets as a guide to their transactions and ongoing profitability. I find it strange the balance sheet has not been prepared from the system itself. It should be a complete back page and it flows to a balance sheet that you have set up and the first thing you do when starting a company would be have a record of assets and liabilities, so you would first of all have your balance sheet because you would not have profit figures at that stage because you have not started the business, and if you want a loan for any purpose the bank would ask for the balance sheet to show whether you are able to get a loan. It is strange the bank reconciliation has not been prepared every month. How do you know what your cash and ongoing profits have been, what outstanding cheques are still in the system you have actually drawn that have not been presented and, when you look at the bank statement, that is not the worth of the business but it is how much you have in the bank at that stage, subject to all your cheques coming in. … Q. Do these documents in front of you in your professional opinion, would they enable the Commission to determine the financial position of the company as at today? A. No I do not think they could, because you are looking at a mixture of dates, entries, there is no definite cut off point and given there is no balance sheet that is struck, which are struck at a point in time to give you some idea how you stand then and at this stage we cannot rely on that balance sheet because it is dated the 28. I do not know where the figures came from or what they are. 26 Cross-examined by Mr Duc, he said: Q. Wouldn't it be normal, where there are discrepancies as outlined by you and here there is an unaudited management account, that there would be discrepancies? A. When you say unaudited, the auditor doesn't come into it. If you are running a business then the work should be put in, whether audited or not. It should be complying with normal business practice and making sure that the business record information is in the system as it becomes available, particularly with the cheque situation, where you have those records and large sums of money, I would make sure they are accounted for so the position of the business is realistic on a day to day basis. … Q. In the brief adjournment, did you do any calculations what the discrepancies might have meant, or the state of the balance sheet, the profit and loss? In your estimation, would it show the loss indicated in the balance sheet of 10 thousand dollars, would those discrepancies raise that amount or detract from that? A. You would have to look at the pluses and minuses because you have figures here, for instance, the sale figures that have not been taken into account in the presentation of the accounts so, you have those entries on the 23rd which are income, they are not there either, so you would have to strike a new date, to run your reports off, so we have here apples with apples. Q. You are not in a position to show whether it is a worse workings [sic] or better situation? A. I am not in a position to. Consideration 27 I reject the appellant's criticism of Mr Coopland that, because of his background as an accountant in a large international company, he would not be in a position to give evidence about small businesses. The documents and procedures advanced by the appellant were so basic that cogent comment could have been made as to their efficacy by any experienced bookkeeper, let alone a qualified accountant. 28 Having heard the evidence of Mr Jones and of Mr Coopland, I am still not in a position to decide comfortably that the company is in the position that it can pay the sum of $16,000 into Court immediately. That disturbs me. However, the ability of the appellant to pay moneys into court, or to make some other mutually acceptable arrangement in relation to the amount of money awarded below, is only one factor to be taken into account in considering whether a stay should be granted. 29 Those other factors include the proposition that the party who succeeded was entitled to the fruits of victory together with the balance of convenience and the interests of the parties and whether or not the appellant has an arguable case. 30 In Campbells Cash and Carry it was noted (at 409), citing earlier cases, that a sufficient reason needs to be shown to delay the decision made at first instance from being effective pending the determination of the appeal. 31 I note that on the face of the Commissioner's decision, it was expressed to be dealing with a threshold matter, but in fact proceeded to deal with the application to finality. 32 There was some overlap in the submissions as to appeal points proper and to the stay application, and in relation to the appellant's claim that it had been denied natural justice, it relied upon the principle enunciated in Stead v State Government Insurance Commission [(1986) 161 CLR 141 at 147] by a Full Bench of the High Court (Mason, Wilson, Brennan, Deane and Dawson JJ) which was there dealing with an appeal from the refusal of a Full Court of the Supreme Court of South Australia to order a new trial in a particular case. It was there said: Alternatively, if the Full Court is properly to be understood as saying no more than that a new trial would probably make no difference to the result, their Honours failed to apply the correct criterion. All that the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result. 33 The respondent does not seek to have the moneys paid to him directly. There is, therefore, no need to take into consideration questions that might otherwise arise relating to the appellant's recoupment of the sum of $16,000 in the event that its appeal is successful. 34 In all the circumstances I find that the stay sought should be granted on terms that will address the concerns of both the appellant and respondent. 35 The Court orders: (1) The decision of Commissioner Tabbaa handed down on 30 January 2002 in matter no IRC5094 of 2001 is stayed until further order of the Court, subject to compliance with Order 2. (2) The appellant, Bread of France shall pay into Court the next monthly instalment of $2,000 on or before the close of business on 15 May 2002, and thereafter it shall pay into Court, on or before the close of business on the first Wednesday of each month, the sum of $2,000, those payments to continue either until the sum of $16,000 is paid into Court, or until further order of the Court. (3) Should the appellant default in making such payments, any balance outstanding will forthwith become due and payable. **************************** 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.