Industrial Relations Commission of New South Wales in Court Session CITATION: Chant v Shennen Publishing & Publicity Company Pty Limited (In liquidation) & Ors [2005] NSWIRComm 337 APPLICANT: Gary Graeme Chant FIRST RESPONDENT: Shennen Publishing & Publicity Company Pty Limited (In liquidation) (ABN 92 000 253 654) PARTIES: SECOND RESPONDENT: Media Investments Australia Pty Limited (ABN 86 095 435 162) THIRD RESPONDENT: Mark Stegman FILE NUMBER(S): IRC 3364 of 2004 CORAM: Schmidt J Unfair Contract - failure of respondents to appear at conciliation or the hearing - ex-parte hearing - employment terminated without notice - outstanding payment of wages - outstanding payment of statutory entitlements - outstanding payment of contractual entitlements - leave from Supreme Court to proceed against liquidated company - termination of employment - applicant a sales executive - thirty years of service - unfairness demonstrated in relation to notice of termination and redundancy pay - contract found unfair - orders made - costs CATCHWORDS: Corporations Act 2001 LEGISLATION CITED: Industrial Relations Act 1996 Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 Brown v Rezitis (1970) 127 CLR 157 Cornell v Titley (2002) 119 IR 334 CASES CITED: Newton v Goodman Fielder Mills Ltd (1997) 81 IR 227 Re Application for Redundancy Awards (1994) 53 IR 419 Westfields Holdings v Adams (2001) 114 IR 241 HEARING DATES: 06/08/2005; 08/26/2005 DATE OF JUDGMENT: 09/23/2005 APPLICANT: Mr J Pearce of counsel SOLICITORS: LEGAL REPRESENTATIVES: Connah, Stead & Co RESPONDENTS: No appearances JUDGMENT: - 12 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J 23 September 2005 Matter No IRC 3364 of 2004 GARY GRAEME CHANT v SHENNEN PUBLISHING & PUBLICITY COMPANY PTY LIMITED (In liquidation) AND OTHERS Application under section 106 of the Industrial Relations Act 1996 JUDGMENT [2005] NSWIRComm 337 1 Gary Graeme Chant claims that the contract of employment between he and Shennen Publishing and Publicity Company Pty Limited (In Liq) ('Shennen'), was unfair in circumstances where the employment was terminated without notice and without payment of moneys owing, including in relation to salary, annual leave loading, annual leave, superannuation and long service leave. 2 The claims were advanced under s 106 of the Industrial Relations Act 1996 ('the Act'). On 16 August 2005, the Supreme Court gave the applicant leave to proceed against Shennen. While the amended summons also sought orders against the second respondent, Media Investments Australia Pty Limited ('Media'), no orders were finally pressed against it. Orders of variation of the contract of employment were sought, together with consequential money orders against Mark Stegman, the third respondent. 3 The orders of variation pressed were: 1. An order declaring the contract between the Applicant and the First Respondent (Shennen) under which the Applicant performed work for the First Respondent is an unfair contract pursuant to s.106 of the Industrial Relations Act, 1996. 2. An order declaring the contract between the Applicant and Shennen and the Second and Third Respondents under which the Applicant performed work for the(sic) Shennen and the Second and Third Respondents is an unfair contract pursuant to s.106 of the Industrial Relations Act. 3. An order declaring void, in whole or in part, ab initio, or at some later date, (except as to moneys and other benefits allowed already or due thereafter to the Applicant) the contracts described in Orders 1 and 2. 4. Further, and in the alternative to Orders 1 and 2, an Order varying from the commencement or at some later date, the contracts described in Orders 1 and 2 by inserting the following provisions: (a) Notwithstanding any provision in the contract, the contract between the Applicant and the Respondents or any of them shall not be terminated without the consent of the Applicant except for serious misconduct unless Shennen or the Respondents shall give the Applicant 12 months notice in writing or pay the Applicant an amount of money in lieu thereof equal to 12 months remuneration payable under the contract; (b) Notwithstanding any provision in the contract, the contract between the Applicant and the Respondents or any of them shall not be terminated without the consent of the Applicant for reasons of redundancy unless Shennen or the Respondents give the Applicant an amount of money equal to 4 weeks remuneration for each year of employment or part thereof, calculated by reference to the total remuneration paid under the contract for the period of 12 months immediately prior to the date of termination of the contract. Such payment shall be in addition to the notice provisions set out in paragraph (a) above. (c) The contract between the Applicant and the Respondents or any of them shall not be terminated for reasons relating to the Applicant's conduct or performance unless: (i) Shennen or the Respondents shall give the Applicant notice of any intention to terminate the contract and provide the Applicant reasons for the proposed decision and adequate factual material in relation to the reasons; (ii) Shennen or the Respondents shall give the Applicant all relevant factual material in relation to the reasons for the proposed decision, including an outline of information provided by any relevant person interviewed by Shennen or the Respondents; (iii) the Applicant has been given an opportunity to defend himself against all allegations made in relation to his conduct and/or performance after receipt of factual material referred to in paragraph (c)(ii) above; (iv) Shennen or the Respondents have undertaken a thorough investigation of allegations made in relation to the Applicant's conduct or performance including properly testing any factual matter presented by the Applicant in his defence against factual matters referred to in paragraph (c)(ii) above; (v) Shennen or the Respondents shall make any decision to terminate the contract reasonably and fairly having regard to: A. the Applicant's personal circumstances; and B. the satisfactory (or otherwise) performance by the Applicant of his obligations under the contract. (d) If the contract between the Applicant and the Respondents or any of them is terminated without the consent of the Applicant, the Respondents shall pay to the Applicant on termination all unpaid salary, leave loading and all statutory entitlements including annual leave and long service leave and superannuation entitlements in respect of that whole period of employment of the Applicant by the Respondents or any of them. 5. An order that the Second or Third Respondents, or both of them, pay the Applicant such sum of money in connection with the contract as the Commission considers just in the circumstances of the case. 6. An order for the payment of interest on sums money ordered to be paid by the Commission. 7. Such further and other orders as the Commission deems fit. 8. An order that the Second or Third Respondents, or both of them, pay the costs of the proceedings. 4 The money orders sought in the amended summons were: (a) The amount claimed in respect of clause A2 and 4(a) is $61,934.24 which is calculated by reference to the Applicant's total remuneration of $61,934.24 including an amount of $5,113.84 on account of superannuation; (b) The amount claimed in respect of clause A2 and 4(b) is $152,453.50 which is calculated by reference to the Applicant's total remuneration of $61,934.24 including an amount of $12,587.90 on account of superannuation; (c) The amount claimed in respect of clause A2 and 4(d) is $37,244.83 which is calculated by reference to the figures set out in paragraph B16 of this Summons; (d) The amount claimed in respect of Order A5 is $30,509.29 being the Applicant's entitlement to long service leave calculated pursuant to the Long Service Leave Act, 1955 (e) The amount claimed in respect of Order A6 is $655.50 being the Applicant's entitlement to annual leave pursuant to the Annual Leave Act, 1946. (f) The Applicant claims an amount in respect of stress, loss of trust, impairment of employment prospects and reduction in the Applicant's quality of life of $30,000.00 (g) And the Applicant claims an amount of interest in respect of the amounts in paragraphs (a), (b), (c), (d) and (e) above. 5 Orders (d) and (e) were not pressed at the hearing, given what was pursued in Order (c). 6 The hearing proceeded ex-parte. While the second and third respondents had filed a reply to the applicant's summons, they failed to participate in the conciliation conducted by the Court under s 109 of the Act. There was no appearance for any respondent at the hearing. 7 Evidence was called from the applicant, Mr Chant. His evidence was that he had worked for Shennen as a sales executive from May 1972, until the termination of his employment in January 2004, when he was employed as the National Advertising Manager. 8 In 2001, the shares in Shennen had been acquired by Mr Stegman. At that time, Shennen maintained a bank account in which $175,000 was deposited, 'for salary and other statutory entitlements for the employees' of Shennen. In July 2001, that sum was transferred to another bank. Mr Stegman invoiced Shennen for 'work done' and the moneys in the account were transferred to another account, owned by Media, which later dissipated the funds. Mr Stegman was a director and shareholder of Media. 9 In August 2003, Mr Stegman ceased communicating with employees of Shennen and refused to take Mr Chant's phone calls. Shennen's business involved publishing a magazine. The last issue was produced in June 2003. Mr Chant continued working on selling advertising for the September 2003 and later issues. He had to deal with enquiries from irate advertisers and subscribers. In September, Mr Stegman removed most of his documents from Shennen's offices. In December, he removed other items including computers and furniture. He then instructed Mr Chant to take leave until January. On his return to work on 5 January 2004, Mr Chant found that the doors were locked and employees denied access. 10 Mr Chant threatened to commence legal proceedings. 11 Unfair dismissal proceedings were commenced later in January. They are presently stood over pending the hearing of this summons. Mr Chant found alternative employment in January, although he finds the work less lucrative and financially rewarding. 12 The second and third respondents' pleading raised this Court's jurisdiction to entertain the claims made, given that leave to proceed against Shennen had not been obtained from the Supreme Court, as required by s 417B of the Corporations Act 2001. They denied any obligation to pay contractual and statutory entitlements pursued by the application, as flowing from the employment, or the money orders otherwise claimed and asserted that the claims were precluded by s 109A of the Act. As earlier noted, the Supreme Court has now given the applicant leave to proceed. No respondent appeared to press the matters raised in their response to the summons. The jurisdictional matters raised appear to me to have no foundation, for reasons which follow. 13 The applicant's case was that the contract and arrangement between the parties was unfair in a number of respects. Upon acquiring Shennen, Mr Stegman gave him assurances as to the future operation of the company and his ongoing employment, which were not honoured. Mr Stegman took steps which used up all of Shennen's financial reserves, abandoning the business so that employees were left in a position where their employment came to an end, through no fault of their own, without notice, payment of outstanding wages, statutory entitlements, or redundancy pay. 14 In the circumstances of his case, the applicant argued that after 30 years' service, his contractual entitlement to four weeks' notice was unfair. 12 months' notice was sought. That he had no entitlement to any redundancy pay was also argued to be unfair. Redundancy pay calculated on the basis of four weeks' pay per year of service was sought. It was argued that the test case minimum under the Re Application for Redundancy Awards (1994) 53 IR 419, would not provide fair redundancy pay in the circumstances of this case, given the applicant's years of service and the circumstances in which the employment came to an end. 15 Orders for outstanding statutory entitlements and annual leave loading were also pressed. The approach of Haylen J in Cornell v Titley (2002) 119 IR 334 was relied upon. As to the money orders sought against Mr Stegman, the approach in Ace Business Brokers v Phillips-Treby (2000) 100 IR 420 was submitted to be available in this case. Consideration 16 Mr Chant seeks orders under s 106 of the Act declaring void or varying the terms of the contract and arrangement between he, Shennen and Mr Stegman. 17 The section provides: 106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 18 It will be seen from s 106(5), that the making of money orders in proceedings such as this, are restricted to an order made 'in connection with any contract declared wholly or partly void, or varied'. I am satisfied on the evidence that the contract in question is unfair, as that term is defined in s 105 of the Act and that as a matter of justice, orders varying the contract here in question should be made, both as to notice and redundancy pay. I am also satisfied that justice requires that outstanding pay and statutory entitlements be ordered. 19 For reasons not revealed in the evidence, this contract came to an end without any notice being given, when Mr Stegman abandoned the business he had acquired some years earlier when he purchased Shennen's shares. As a result, after 30 years' service, Mr Chant was given no notice of the termination of his employment or any redundancy pay and on any view, was treated in the most shabby manner imaginable by Shennen and Mr Stegman. Not even Mr Chant's outstanding wages or statutory entitlements were paid. The evidence showed that he later received a payment from the General Employee Entitlement and Redundancy Scheme ('GEERS') established by the Australian Government to deal with situations such as this one. Mr Chant accepts that should money orders be made in his favour in this case, which he is able to recover, part at least of that sum will have to be repaid. The amount received from GEERS comprised unpaid wages, outstanding annual and long service leave and a payment of four weeks' in lieu of notice. There was no payment for redundancy pay, given the absence of any statutory or contractual entitlement to such a payment. 20 I am well satisfied that in the circumstances of this employment, where Mr Chant commenced employment as a salesman and worked his way up by promotion to the position of National Advertising Manager, that four weeks' notice of termination after 30 years' employment was unfair. Of course Mr Chant, in fact, received no notice of the termination of his employment, or any payment in lieu thereof at all. The payment made by GEERS in these circumstances, but underlines the public interest in the Court exercising its discretion to remedy the unfairness here established. That is a consideration which must always be taken into account in the exercise of the Court's discretion under s 106 (see s 146(2)). 21 Having regard to Mr Chant's position, his age, remuneration and length of service and the industry in which he was employed, I am satisfied that notice of twelve months must be ordered. The principle of mitigation must also be taken into account, as s 106(6) requires. Mr Chant obtained alternative employment during the notice period fixed. It follows that any earnings generated therefrom during the notice period, must in fairness be deducted from the money orders made. 22 I am also satisfied that justice requires the variation of the contract to provide for redundancy pay. There is no question on the evidence that Mr Chant became redundant in the circumstances in which his employment came to an end. I am, however, not satisfied that the order sought should be made. In this case, redundancy pay in accordance with the test case standard would result in 20 weeks' pay. While the applicant argued that the decision of Hill J in Newton v Goodman Fielder Mills Ltd (1997) 81 IR 227, provided a proper foundation for a more generous payment, I am unable to accept the submission. In that case, his Honour was dealing with a situation where there was a redundancy scheme significantly more generous than the test case provision operating, but with different caps - 75 weeks for award covered employees and 12 months for staff employees. The fairness of the cap in the particular circumstances was at issue, in that case, in a context where staff employees also did not have the right to have untaken sick leave paid out on termination, as award employees did. There was also evidence of more favourable treatment of other employees, on a discretionary basis. There are no such factors here and indeed no foundation in the evidence upon which an order for redundancy pay at the rate of four weeks' pay per year of service could rest. 23 Hill J noted at 238, the overlap in part of the factors relevant to take into account in relation to notice and redundancy pay. The failure to give any notice of termination to an employee made redundant after an even longer period of employment than Mr Chant had, was a factor taken into account by Hill J in Newton, in coming to the conclusions there reached. Longevity of service and the failure to give any notice at all, in circumstances of a redundancy is a factor which has here led me to the conclusion that 12 months' notice and variation of the contract to introduce the right to redundancy, is just in this case. Having reached that conclusion, I am unable to also conclude that a more generous approach to redundancy pay, than that provided by the test case standard, is warranted when there was in this case, no entitlement to redundancy pay at all agreed between the parties. 24 As the Full Court observed in Westfields Holdings v Adams (2001) 114 IR 241, questions of mitigation do not arise in the context of redundancy pay. 25 The applicant also seeks to recover outstanding wages and statutory and other contractual entitlements in relation to annual leave, annual leave loading, superannuation and long service leave. I am satisfied that this is a case where justice requires the making of such a money order, consistently with s 106(5) of the Act. What I earlier said about the GEERS scheme but reinforces that conclusion. 26 Money orders are here sought against Mr Stegman. Given the evidence of his interest in both Shennen and Media, as well as the unfair conduct on Mr Stegman's part, which resulted in the termination of Mr Chant's employment without warning or payment of any of his entitlements, after Shennen's assets had been dissipated to Media, an entity of which Mr Stegman was the beneficial owner and director, I am well satisfied that the circumstances are such that orders might properly be made against him. 27 As discussed by the High Court in Brown v Rezitis (1970) 127 CLR 157, I am satisfied that money orders may properly be made against Mr Stegman, given his causal connection with the unfairness demonstrated on the evidence and the beneficial interest which he had in the results of that conduct. (See also Ace Business Brokers Pty Ltd v Phillips-Treby). On any view, after thirty years' service and assurances provided by Mr Stegman, the treatment was shabby and unfair. It is just to grant the relief sought in circumstances where Mr Stegman has not participated in these processes, to resist the claims advanced. Orders 28 For all of the reasons given, I find the contract of employment unfair and order its variation from 31 January 2001, to provide for 12 months' notice of termination and 26 weeks' redundancy pay, in the event that the employment is terminated on account of redundancy by the employer. Mr Stegman will be ordered to pay the applicant's costs, as agreed or assessed, together with a sum calculated as follows: 1. 12 months' pay calculated by reference to a package valued at $61,934.24 per annum, less Mr Chant's earnings in other employment during the 12 month period, commencing from 5 January 2004, plus 2. redundancy pay of 26 weeks' salary, plus 3. $37,244.83 for outstanding wages, statutory entitlements to annual leave, long service leave, superannuation and annual leave loading, plus 4. Interest thereon calculated from the date of termination to the date of this judgment. 29 The applicant is ordered to prepare, file and serve formal minutes of the orders giving effect to this decision, together with an outline of how the money sums have been calculated, so that final orders may be made. ------------------------ 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.