Industrial Relations Commission of New South Wales CITATION: Zey v Almondo Pty Ltd [2005] NSWIRComm 1083 Applicant : Ms. Eedra Zey PARTIES: Respondent: Almondo Pty Ltd. FILE NUMBER(S): 5143 of 2004 CORAM: Ritchie C Application for unfair dismissal. Applicant an employee of a two person company. Other employee the director an sole owner of company. Applicant and director in a de facto relationship. Applicant carried out admin. work for the company and superannuation company. CATCHWORDS: Applicant terminated when de facto relationship broke down. Tax minimisation scheme set up to benefit both parties. Commission found that parties had not set out to establish a true employer/employee relationship. Once de facto relationship broke down ,employer/employee relationship could not survive. Commission found that in these particular circumstances the termination was neither harsh, unjust or unreasonable. Industrial Relations Act LEGISLATION CITED: 1996 CASES CITED: Bradley v Bradley 1978 AR 94. HEARING DATES: 05/12/2005 EXTEMPORE JUDGMENT DATE : 06/03/2005 Applicant was self represented. LEGAL REPRESENTATIVES: Mr.J. Lynch,solicitor of Barkus Edwards Doolan DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: RITCHIE C 3 June 2005 Matter No IRC 5413 of 2004 IN THE MATTER OF: Eedra Zey and Almondo Pty Ltd Application by Eedra Zey re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996. DECISION [2005] NSWIRComm 1083 Background. 1 Ms. Eedra Zey (the applicant) filed an application on 26 August 2004 against Almondo Pty Ltd (the respondent) for unfair dismissal. Conciliation was attempted on 10 September 2004, 15 October 2004, 8 November 2004 and 9 December 2004. A timetable for the filing and serving of witness statements was provided to the parties. A mention date was held on 30 March 2005 and a hearing date of 12 May 2005 was provided to the parties. 2 At the hearing the applicant represented herself and Mr. J. Lynch, solicitor, of Barkus, Edwards and Doolan appeared for the respondent. At the completion of final submissions the decision was reserved. Applicant's Case. 3 The applicant was the only witness for her case. 4 It was the applicant's case that she was an employee of the respondent commencing in August 2002. It was accepted by both parties that the applicant and a Mr. Lindsay John Atkinson, the director of the respondent, lived in a de facto relationship residing at the same address as the registered address of the respondent. 5 The only two employees of the respondent were the applicant and Mr. Atkinson. The applicant carried out duties consisting of bookkeeping ,operation and financial management of the respondent. 6 The applicant was paid a set amount per month regardless of the actual hours worked in that month. The applicant stated that she averaged 10 hours per week with a maximum of up to 35 hours and in some weeks no hours worked at all in other weeks. Contributions to a superannuation fund were also made on behalf of the applicant. The applicant said she received approximately $42,500 for year ending June 2003 and between $41,000 to $43,000 for year ending June 2004. 7 On 10 August 2004 the applicant received an email from Mr. Atkinson stating: " I wish to formally inform you that you are no longer the bookkeeper and that all records for Almondo Pty Ltd, Almondo Superannuation Fund along with partnership or personal taxation or BAS should be forwarded to me immediately." 8 It was the applicant's submission that she believed that the termination was unfair because there was no reason given, no warning, no evidence of misconduct or poor performance and no opportunity to defend her right to continue in employment. 9 It was the applicant's view that the termination was motivated by personal reasons of Mr. Atkinson and was not related to her employment. 10 In her application she sought reinstatement or monetary compensation. Respondent's Case. 11 Mr. Atkinson was the only witness for the respondent. 12 It was Mr. Atkinson's evidence that he was the sole director and shareholder of the respondent holding the only two $1 shares issued. He acquired the respondent as a shelf company in August 2002. This acquisition was for the purpose of entering into a service contract with the Commonwealth Bank where he worked as a Area Manager for the Sydney CBD and contracted his services through the respondent. 13 Mr. Atkinson confirmed that he lived in a de facto relationship with the applicant which commenced in October 2002 and ended at the end of July 2004. During this period of time Mr. Atkinson received accounting advice from a Mr. Mike Birrell who had previously been the accountant for the applicant. Mr. Atkinson on the advice of Mr. Birrell (for tax planning purposes) he could split the income derived from the respondent with the applicant to the extent that each would receive a salary. Superannuation contributions were made on behalf of the applicant and Mr. Atkinson by the respondent to the Almondo Superannuation Fund of which Mr. Atkinson was the sole trustee. 14 In the financial year ending June 2003 the applicant received $42,500 in wages and $20,000 in superannuation contributions. In the year ending June 2004 the applicant received income of $6,000 and a superannuation contribution of $33,604. 15 Mr. Atkinson admitted sending the email on 10 August 2004. At that point Mr. Atkinson did not recognise that an employer /employee existed. He did not believe that one had commenced when the applicant started doing the books for the respondent company and the superannuation company. The actual amount of work the applicant carried out to maintain the books of the respondent and its superannuation company was out of proportion to the amount of remuneration received by the applicant. From Mr. Atkinson's point of view it was a tax arrangement rather than a normal employer /employee relationship. It was his view, based on quotes from an accounting firm, that that an outside firm could carry out the same work as the applicant had done at a fraction of the cost. 16 It was the initial view of the respondent that the applicant was not an employee but this view altered and the respondent accepted that the applicant was an employee. 17 It was the submission of the respondent that the de facto relationship ceased to exist with the applicant vacating the domestic/business address and taking various documents without authority, which were the property of the respondent. The trust between the parties had broken down, their de facto relationship was over. Consideration and Decision. 18 This case is an unusual one. The de facto relationship and the employer/employee relationship were in my view inseparable. I do not believe once the de facto relationship founded the employer/employee relationship could have survived. 19 The respondent was an entity of just two persons. It is my finding that the employer/employee relationship was in existence as a consequence of a tax minimisation scheme. The work carried out by the applicant was directly involved in handling the financial affairs of her de facto partner. After being a witness to four conciliation meetings and a hearing I did not see any evidence that a normal employer/employee relationship could have been maintained post the de facto relationship break up. In such a small organisation, dealing in such sensitive material, the issue of trust between the two persons would be fundamental. 20 In cross examination Mr. Atkinson was asked the following question with respect to reasons for termination of the applicant : Q. What are those reasons ? A. Because of a breakdown of personal relationship and the animosity that existed between both parties; the lack of trust that existed; the fact that I had to report removal- unlawful removal of property to the police and talk to them about other matters I don't wish to address here. There was a complete lack of trust and we could never have an ongoing relationship on any level. 21 In my view in this case, the absence of trust was the death knell of the continuation of the employer/employee relationship. 22 I note the comments made by Macken J. in Bradley v Bradley 1978 AR 94 at 97: It is not every relationship pursuant to which work is performed in an industry which will attract the jurisdiction vested in the Commission by s.88F. Work may be performed by one person for another for reasons which are fundamentally social, political , religious, or out of filial duty or compassion. I do not consider that work performed pursuant to such considerations is cognisable pursuant to s.88F. The law has long-recognised the existence of such contracts or arrangements and has steadfastly set its face against intruding itself into such areas unless there is an intention between the parties entering into such arrangements to make a legally enforceable bargain. A son may clean the family car or mow the lawn of the family home, for a remuneration paid by his parents; such an arrangement may seem to fall within the letter of s.88F. Yet such an arrangement is not one properly able to be attacked under the section. It lacks a fundamental dimension of any contract in that it is not entered into with the intention that a legally enforceable obligation should result from the formation of the arrangement or contract. 23 I do not believe that the relationship that existed in this case could have been subjected to the normal employer/employee strictures. How would a conventional counselling for poor work performance take place ? I do not believe that the parties set out intentionally to form an employment contract. It was formed as a consequence of receiving advise from an accountant with the intention to minimise their tax bill. 24 For the above reasons which I believe it is necessary under s. 88(f) of the Industrial Relations Act 1996 to take into account, it is my finding that the termination of the applicant by Mr. Atkinson was neither harsh, unjust or unreasonable and therefore it would be inappropriate for this Commission to intervene in this matter. I therefore dismiss matter no IRC 5143 of 2004. 25 This matter is now concluded. D. RITCHIE COMMISSIONER 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. 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