New South Wales Supreme Court CITATION : In the matter of International Trade & Tenders (In Liquidation) and the Corporations Law Elisjones v Green [2001] NSWSC 111 revised - 14/03/2001 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2612 of 1994 HEARING DATE(S) : 20 and 21 February 2001 JUDGMENT DATE : 21 February 2001 PARTIES : Barbara Elisjones (Applicant/Appellant) John Duncan Green (Respondent) JUDGMENT OF : Windeyer J at 1 LOWER COURT Decision of Liquidator JURISDICTION : LOWER COURT FILE NUMBER(S) : LOWER COURT John Duncan Green JUDICIAL OFFICER : COUNSEL : Mr R.J. Brender (Applicant/Appellant) Mr M J Cohen (Respondent) SOLICITORS : In Person (Applicant/Appellant) Dickson Fisher Macansh (Respondent) CATCHWORDS : CORPORATIONS - winding up - appeal against liquidator's decision to reject proof of debt for unpaid wages - appeal upheld - CONTRACT - agreement as to wages DECISION : see paragraph 27 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J WEDNESDAY 21 FEBRUARY 2001 2612/94 NATIONAL ADVERTISING SERVICES PTY LTD v INTERNATIONAL TRADE & TENDERS PTY LTD ELISJONES V GREEN - Appeal from Liquidators decision on proof of debt JUDGMENT 1 HIS HONOUR: This is an appeal by Miss Elisjones against the decision of the liquidator of the original defendant in these proceedings to reject a proof of debt which had been lodged by Miss Elisjones, whom I will call the applicant, claiming to be entitled to a sum of approximately $137,000 for unpaid wages due to her by the company International Trade & Tenders Pty Limited at the date that the winding up commenced together with an amount of $14,285.66 for holiday pay. The liquidator disallowed most of the claim by notification dated 13 July 2000 giving reasons for doing so. 2 The applicant was employed by ITT from 27 January 1992 to until 22 November 1993. By that time ITT had ceased business apart from working on a claim which it had against a company, Fujitsu Ltd, for breach of contract. 3 When the applicant commenced work, she originally did so it seems for $200 per week but, in any event, I find that it was agreed shortly thereafter that her wages would be $300 per week plus rent, which she was paying of $1,417 per month. The claim of the applicant is that she was told from the start by Mr Moreland, the managing director of ITT, that although she would not be paid much at the start she should trust him as he would be able to top it up later as funds became valuable. I accept that evidence. She also said that during the time she was at the company she had conversations with Mr Moreland about what her remuneration would be and although he did not name any figure he commonly said: "Trust me, you will be looked after." 4 After the wind down of the company commenced after 30 June 1993, when all the staff other than the two directors, Messrs Moreland and Arthur, and the applicant had left, it was necessary to have the accounting records of the company brought up to date, at least as far as wages were concerned, so that employees who had left could be furnished with the necessary group certificates for tax purposes. 5 The applicant attended to that work. She says that she asked Mr Moreland what amount should be written in the wages book for his wages, Mr Arthur's wages and her wages and that he responded: "Put down the amounts actually paid to each and then show the annual salary at $100,000 each with the difference being owed. If Ted and I need to draw more we can draw it as directors' fees. Understand though I will need you to keep working to maintain the data base and to maintain with Fujitsu we must ensure..." 6 To make sense of the last part of that statement, it is necessary to understand that ITT was making a claim that moneys were owed by Fujitsu under contract that it wished to keep on foot by performing its own part of the bargain so that it would be able to claim against Fujitsu for breach. If the expectations of the two directors as shown in the return as to affairs lodged with the liquidator had any basis at all, then the damages which they thought they might obtain for breach were extremely high, being set in that document at over $21 million. 7 The applicant continued to work for the company mostly in accounting, information preservation and data base-type work and there is no suggestion that she did not perform this work adequately. She was not paid any wages after 1 July 1993. The wages book, which is in evidence, appears to have been made up by the applicant, at least so far as the pages devoted to her wages and those of Messrs Arthur and Moreland are concerned, and against each of those persons there is a notation more or less in line with what she says she was told to do by Mr Moreland. The notation on the page of the wages book relevant to her was: "Employed full-time 1.7.1992 paid part wages. $100,000 has been allowed in accounts 1992 to 1993. Employment continued after 30 June, see later page." 8 There is I think nothing wrong with that last statement because it is not suggested that this wages book was made up on 30 June. Against Mr Arthur there is the entry "$100,000 allowed in accounts". Against Mr Moreland there is the entry "$100,000 allowed in accounts". The plaintiff did receive an additional benefit, or what may have been an additional benefit, by being allotted 500,000 shares in ITT on 25 July 1993. She had previously been allotted 75,000 A class shares. Whether she kept those or whether in some way they were transmogrified into the 500,000 shares which appeared to have been ordinary shares was not made clear but probably it does not matter. The evidence of Mr Moreland is that it was hoped the applicant and the directors might receive, in addition so far as the applicant was concerned to the $300 plus rent which she was getting, some benefit from her shareholding, if the action against Fujitsu were successful. 9 A winding up order was made on 28 July 1994 under which Mr Green was appointed as liquidator. 10 The applicant said that in November 1993 she asked Mr Moreland for a letter giving evidence of her annual wage in writing and he provided her with a letter. That letter is dated 22 November and it says: "This letter confirms that Barbara Elisjones was employed by our company from February 1992 to November 1993 in the position of business development manager and during that period her salary was $100,000 per annum." 11 Mr Moreland said that he was asked by the plaintiff to provide her with a reference that she could use to get a new job and that he had said: "$100,000, that's pushing it" or words to that effect but nevertheless he signed it. 12 There was, however, a letter a little while earlier in the nature of a reference by Mr Moreland and I do not accept that his evidence as to his letter stating the salary was correct, particularly as I find as a fact that the letter dated 22 November 1993 was typed by him. 13 There is a further letter dated 30 October 1993, which it is accepted was not in fact written until 1994, which purports to be addressed to the applicant by Mr Moreland confirming that wages are due to her of $147,000 less wages tax for the year 1993 to 1994. The letter states that wages will be paid on settlement/mediation of the case against Fujitsu. 14 The applicant says she typed this letter out at the request of Mr Moreland, gave it to him on a piece of paper which did not have the letterhead of ITT on it and he must have taken that away, photographed it onto an ITT letterhead, signed it and sent it back to her. Mr Moreland said that he did not see that letter until he saw it as a result of the applicant's proof of debt lodged with the liquidator and that he did not sign it. I find, however, that he did sign it and in signing it knew its contents. 15 It does, I should say, not necessarily coincide with the figures put forward by the applicant because it appears to relate to a twelve month period in 1993 to 1994. Miss Elisjones said that she insisted on getting this letter in essence as the price for continued assistance to the company, in other words, that she did not want there to be any doubt about the money paid to her. 16 Both directors prepared and furnished to the liquidator as required under the Corporations Law a report as to the affairs of the company. The significance so far as this claim is concerned is that each of them showed under "Schedule E claim by employees" salaries due to the applicant of $147,208.28, to Mr Arthur $100,000 and to Mr Moreland $198,128. The first of the returns to affairs was prepared by Mr Moreland and I accept Mr Arthur's evidence that to a large extent he took his figures from the figures typed by Mr Moreland on his return. 17 The figure of $137,208 also appears in Schedule I, which gives details of a contingent asset, being the claim against Fujitsu Australia limited. That claim sets out the costs incurred by ITT in fulfilling its part of the contract. That claim of costs includes the three figures for wages which I have set out and another figure for staff wages. I see no reason to think that those figures are unrelated to the statement which the applicant says that Mr Moreland made, namely, to put in the figures for wages for the 1992/93 year at $100,000 for each of those persons. 18 It is of some relevance or significance that while those figures would have indicated on their face an extremely high wage due to the applicant of something in the order of $1,900 per week, that does not seem to have put any red light in front of either director when they signed the returns which they did. 19 There was some evidence, somewhat confusing, about the wages book. When the wages book, which is Exhibit 2, was shown to both Mr Moreland and Mr Arthur in the witness box, each said that it was not the wages book which they had seen when they inspected Court records which had been lodged in the Court for the ITT claim against Fujitsu. Mr Moreland had taken a photostat copy of the book which he said he had seen when inspecting those records. It is agreed now that the copies of the wages book which he says that he took while inspection of the Court records was carried out is a copy of the wages book which is in evidence in these proceedings. 20 Quite what the significance of all of this is it is difficult to determine, other than it does seem that the directors were endeavouring to show that some new book had been written up by the applicant which had nothing to do with the original figures which had appeared in the original wages book. If that was the intention then it failed, but I doubt much turns on that other than I think it means that I should place more reliance on the entries in Exhibit 2 than I otherwise might have done. 21 Mr Arthur did not know of arrangements made between Mr Moreland and the applicant, or at least he did not hear them being made, although I accept he was aware she was being paid $300 plus the rent for her flat. It is not suggested that he heard of any subsequent agreement but, on the other hand, it is not suggested that Mr Moreland did not have authority to come to that agreement if he did come to it, as he was the managing director. 22 It is clear that Mr Moreland and Mr Arthur have made representations to the liquidator setting out reasons why the applicant's claim should not succeed. They may have some financial interest in whether her claim does succeed, and in fact I think they clearly do, but that does not necessarily mean that what they say ought not to be believed. In essence their submissions to the liquidator are no more than that. 23 If the applicant is to succeed, then it is necessary for me to find that the original deal was that the salary would start at a certain level but that this would be adjusted when the position of the company became clearer and it is also necessary for me to find that if a deal was made it was an agreement as to wages from the commencement of employment until termination of employment, rather than some agreement to make some one-off payment in the future if things went well. 24 There is one further matter of some significance that I should mention and that is that the group certificate for the applicant for the year ending 30 June 1993 showed a gross amount of salary of $32,500. She, of course, says that was the amount she was paid rather than the amount of wages she was entitled to be paid, albeit backdated by agreement. 25 I should say at this stage that in my view it is understandable why the liquidator determined to reject the proof of debt or to reject it in part on the basis of submissions put to him. That does not mean, however, that I should find that his decision was correct. In fact, in my view, it was not correct and the applicant's case on the appeal against the rejection is made out. I do that on the basis that I accept her evidence that the $300 per week plus rent was never going to be the final amount of her wages for the period that she worked with the company, that the conversation which she alleges she had with Mr Moreland, which was never put to issue in any real way, took place and that, therefore, that agreement having been made, there is evidence which supports that fact; in particular, there is the letter prepared and signed by Mr Moreland stating her salary to have been $100,000 per annum during the whole of her employment and there is the other letter which is signed by Mr Moreland as to wages due. 26 I accept that the wage is a very high wage, but it was perfectly clear that there was a real benefit to the company in obtaining, and for that matter keeping on, the services of the applicant. However, I do not find that the deal or agreement was that some lump sum would be paid in consideration for her keeping on doing the work which would be required for a successful claim against Fujitsu. Rather I consider that it was the agreement which was alleged by the applicant as her wages throughout the period of employment. 27 It follows from that the appeal against the proof of debt should be allowed. It will be necessary for the parties to agree on the figure to be calculated in light of my decision. ******** Last Modified: 03/14/2001 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.