New South Wales Supreme Court CITATION : Bernardino v Abbott [2004] NSWSC 430 HEARING DATE(S) : 13/05/04 JUDGMENT DATE : 20 May 2004 JUDGMENT OF : Gzell J DECISION : Administrator ordered to admit proof of debt CATCHWORDS : EMPLOYMENT LAW - The Relationship of employer and employee - Administrator of employer rejected proof of debt of employee for annual leave, annual leave loading and long service leave - Whether employee a casual or full-time employee - Whether the employee had been paid in cash for his annual leave Corporations Act 2001 (Cth) LEGISLATION CITED : Annual Holidays Act 1944 Restaurants, &c, Employees (State) Award Stoker v Wortham [1919] 1 KB 499 Knight v Bucknill (1913) 6 BWCC 160 CASES CITED : Doyle v Sydney Steel Co Ltd (1936) 56 CLR 545 Reed v Blue Line Cruisers Ltd (1996) 73 IR 420 Hamzy v Tricon International Restaurants (2001) 115 FCR 78 Cetin v Rippon Pty Ltd (2003) PR 938639 PARTIES : Jose Bernardino - Plaintiff Adrian Abbott Deed Adminsitrator of Pinemaze Pty Ltd FILE NUMBER(S) : SC 3347/03 COUNSEL : Ms Tina Jowett - For the Plaintiff Mr Peter Braham - For the Defendant SOLICITORS : Harris Wheeler Lawyers Mark Douglass & Associates, Lawyers IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J THURSDAY 20 MAY 2004 3347/03 JOSE BERNARDINO v ADRIAN ABBOTT DEED ADMINISTRATOR OF PINEMAZE PTY LTD JUDGMENT 1 The defendant was the administrator of Pinemaze Pty Ltd, the employer of the plaintiff. His proof of debt for annual leave, annual leave loading and long service leave with respect to the period prior to the defendant's appointment in the agreed amount of $14,332.50 was rejected by the defendant. The plaintiff appealed to the court under the Corporations Act 2001 (Cth), s 1321. 2 The two issues on the appeal were whether the plaintiff was employed by Pinemaze as a casual employee and whether his holiday pay was paid to him in cash. 3 The Annual Holidays Act 1944, s 3(1) provided, relevantly for present purposes, that every worker should at the end of each year of the worker's employment by an employer become entitled to an annual holiday on ordinary pay. Section 3(5) provided, subject to exception, that payment should not be made by an employer to a worker in lieu of any annual holiday. One exception was contained in s 4(3)(b)(ii). It provided that where the employment of any worker was terminated, the employer should forthwith pay to the worker, in addition to all other amounts due, an amount equal to one twelfth of the worker's ordinary pay for that period of employment. 4 The Restaurants, &c, Employees (State) Award provided that casual employees were entitled to be paid one twelfth of the employee's ordinary pay to pay for the employee's annual holiday entitlement, perhaps under the fiction that casual employment terminated at the end of each pay period. 5 The defendant submitted that the plaintiff was employed by Pinemaze as a casual, his rate of pay compensated him for annual leave and he was not entitled to further payment. The plaintiff submitted that he was employed on a full-time basis but had not been paid for annual holidays. 6 The plaintiff was employed by Pinemaze from 10 March 1997 to 30 April 2002 when the defendant was appointed administrator and thereafter until 6 November 2002. The employment declaration lodged with the Australian Taxation Office when he commenced his employment, which was signed on behalf of Pinemaze, stated that the basis of his employment was full-time. 7 Pinemaze was the owner of a restaurant in Liverpool Street, Sydney. The plaintiff commenced work as the second chef assisting the first chef and making salads and tapas. His hours of employment were from 5 pm to 11 pm Mondays to Thursdays, from 11 am to 3 pm and then from 5 pm until 1 am on Fridays and Saturdays. If special events were to be conducted in the restaurant he was asked to work additional hours. 8 The plaintiff did not receive formal pay-slips. They were handwritten documents that stated the number of hours worked in a week and the amount of cash paid to him. As second chef he received approximately $11 per hour, cash in hand. 9 In 1998, the plaintiff was promoted to first chef and his cash receipt increased to approximately $13 per hour. In 1999, for a period of approximately 18 months, he managed a coffee shop adjacent to the restaurant which was owned by the principals of Pinemaze. Thereafter he returned to the restaurant as first chef. 10 Towards the end, the restaurant was experiencing some difficulty and he was sent home early on occasion. He was sick very seldom during his employment. If he was sick he was not paid. He was not paid overtime rates. His pay depended on the number of hours he worked. 11 The plaintiff said he worked an average of 40 to 50 hours per week. He said sometimes the pay-slip was inaccurate and he would have it corrected in the following week. A pay-slip showing only 33¾ hours was put to him in cross examination. He said it was one of those occasions when a mistake had been made and it was corrected in the following week. 12 The plaintiff was aware that the amount stated in the group certificates provided to him by Pinemaze understated the amount received by him as a net wage. He was also aware that the amounts recorded in the wages book of Pinemaze showing a regular net payment of $495 per week from which tax of $130 had been deducted, bore no relationship to the amount received by him. 13 The plaintiff said he took two weeks holiday around Christmas 1997. He was not paid during that period. When he received his group certificate in July 1998, he said he thought it would record an annual holiday entitlement, but it did not. He spoke with one of the principals of Pinemaze who told him that his annual leave pay would accumulate and he would receive it as a lump sum when he resigned. Having mentioned it to another of the principals and been told the first principal to whom he had spoken knew all about it, he did not raise the subject again. He did not take holidays in 1998 or 1999 but took two weeks in 2000 by which stage the restaurant was experiencing some difficulties. In February 1999 he took a month off. 14 In cross examination the plaintiff conceded that when he started work with Pinemaze he did not know for how long he would be working for them. He said, however, that when he applied he was offered full-time employment. In July 1998 when he had his conversation about annual leave pay, he thought his employment would continue for many years and he would have to wait for many years before he was paid for his annual leave. 15 The defendant requested the plaintiff to manage the restaurant under his administration. He was subsequently appointed the licensee of the premises. The defendant conceded that under his administration, the plaintiff was a full-time employee entitled to annual holiday pay. The restaurant closed on 6 November 2002. 16 In Stoker v Wortham [1919] 1 KB 499 at 503, Swinfen Eady MR cited with approval what Hamilton LJ had said in Knight v Bucknill (1913) 6 BWCC 160 at 164-165 that the word "casual" was not a term of precision but a colloquial term. The Master of the Rolls went on to say: "There is a class of cases where it is quite clear the employment is regular, permanent, stable and not casual. There is another class of cases on the other side of the line where manifestly the employment is of a casual nature. Between those two it may become more and more difficult to say on which side of the line the individual case falls." 17 Both cases were cited by McTiernan J in Doyle v Sydney Steel Co Ltd (1936) 56 CLR 545 at 565 when his Honour said that the term "casual work" was not capable of exact definition. At 551, Starke J said the term was not one of precision: it was a colloquial expression. At 555, Dixon J said that what was casual employment was ill-defined. 18 In Reed v Blue Line Cruisers Ltd (1996) 73 IR 420 at 425, Moore J construed the words "workers engaged on a casual basis for a short period" to refer to a situation: "where the employment is known to the parties at the time of engagement to be informal, irregular and uncertain and not likely to continue for any length of time." 19 Those words were quoted with approval by a Full Court of the Federal Court in Hamzy v Tricon International Restaurants (2001) 115 FCR 78 at 89 where their Honours said: "The essence of casualness is the absence of a firm advance commitment as to the duration of the employee's employment or the days (or hours) the employee will work. But that is not inconsistent with the possibility of the employee's work pattern turning out to be regular and systematic." 20 In Cetin v Rippon Pty Ltd (2003) PR 938639 at par 59 the Industrial Relations Commission said: "Consistent with the approach of Moore J in Blue Line Cruisers , the informality, uncertainty and irregularity of an engagement supports a conclusion that the employment has the characteristic of being casual. Conversely regular and systematic engagements with a reasonable expectation of continuing employment are usually not characteristic of casual employment." 21 In the instant circumstances, the fact that the plaintiff was paid an hourly rate limited to hours actual worked, that on occasion he worked irregular hours, that he received no overtime or public holiday loadings, that he worked in a variety of roles including his work at the next door coffee shop and that he received no sick pay, no annual leave pay nor payment for public holidays are suggestive of casual employment. 22 On the other hand, the employee declaration, his expectation that he would be working for Pinemaze for many years, his appointment to the fixed positions of second chef, first chef and manager of the coffee shop, the regular hours of work each week and the circumstance that the continued performance of his functions was regarded as full-time employment by the defendant are suggestive of full-time employment. 23 In my view, the regularity and stability of his employment and the expectation that it would continue for a considerable length of time outweigh other aspects of the matter. I am of the view that the plaintiff was not engaged in casual employment and was entitled to annual leave pay. 24 The second issue arose in these circumstances. On 31 December 2001, a cheque for $4,500 was drawn, said to be for wages. The wages book of Pinemaze suggested that the restaurant was closed during that week. I was invited to draw the inference that the cheque was used to pay employees' annual leave and that the plaintiff participated in the cash distribution. 25 The plaintiff denied he received any payment for annual leave. It was submitted that I should not accept that evidence and should view all his evidence with suspicion because, knowing that his group certificates understated his income, he included them in his tax returns without disclosure of any further receipt of wages. 26 The records of Pinemaze could not be accepted at face value. The wages book bore no relationship to amounts paid to employees. The cheque in question could have been utilised by the principals of the business for other purposes. The cheque stub did not say "annual leave" and the mere fact that it said "wages" is not sufficient for me to conclude that it was paid to employees, that the plaintiff participated in the distribution and that it represented a payment of annual leave. There are too many steps in that chain for the inference to be drawn with any degree of safety. 27 In my judgment the plaintiff's proof of debt should not have been rejected. I will make an order that the defendant admit the plaintiff's proof of debt for annual leave, holiday loading and long service leave in the agreed amount of $14,332.50. I will hear the parties on the appropriate terms of that order. I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons. ********** Last Modified: 06/07/2004 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.