2018 WAIRC 00142
WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT


CITATION : 2018 WAIRC 00142

CORAM
: INDUSTRIAL MAGISTRATE FLYNN

HEARD
:
WEDNESDAY, 25 OCTOBER 2017

DELIVERED : THURSDAY, 22 FEBRUARY 2018

FILE NO. : M 166 OF 2014

BETWEEN
:
BRETT COCKMAN
CLAIMANT

AND

GUARDIAN AIR PTY LTD

RESPONDENT

CatchWords : INDUSTRIAL LAW – Fair Work Act 2009 (Cth) – Claim for redundancy entitlement allegedly owed –– Whether employer a ‘small business employer’ – Calculation of annual leave entitlement – ‘Cashing out accrued annual leave’ – Payment in lieu of notice – Accrued jurisdiction to determine common law claim
Legislation : Fair Work Act 2009 (Cth)
Industrial Relations Act 1979 (WA)
Workplace Relations Act 1996 (Cth)
Family Law Act 1975 (Cth)
Industrial Magistrates Courts (General Jurisdiction) Regulations 2005 (WA)
Fair Work Regulations 2009 (Cth)
Case(s) referred to
in reasons : McShane v Image Bollards Pty Ltd [2011] FMCA 215
Avel Proprietary Limited v Multicoin Amusements Proprietary
Limited [1990] HCA 58
Coopes v Daishsat Pty Ltd & Anor (No.2) [2017] FCCA 2210
Fair Work Ombudsman v Grouped Property Services Pty Ltd
[2016] FCA 1034
Beck v Spalla [2005] FCAFC 82
Miller v Sunland Park Pty Ltd [2014] FCCA 89
Rana v Google Inc [2017] FCAFC 156
Manotis and Manotis [2016] FCWA 10
Puddy and Grossvard and Anor [2010] FamCAFC 54
Rizeq v Western Australia [2017] HCA 23
Ruane & Bachmann-Ruane and Ors (Accrued jurisdiction) [2012]
FamCA 369
Wright v Norris Real Estate Pty Ltd [2016] FCCA 707
Rogan-Gardiner v Woolworths Ltd [2012] WASCA 31
Result : Judgment for the claimant
REPRESENTATION:
CLAIMANT : MR JONES (AGENT)
RESPONDENT : MR GERRANS (AUTHORISED BY THE RESPONDENT)

REASONS FOR DECISION
1 On 12 December 2011, Mr Brett Cockman commenced employment as the ‘chief operations manager’ with the respondent (the Company). The agreed annual salary was $125,000. On 18 November 2013, the Company wrote to Mr Cockman, stating that ‘the position of chief operations manager had been made redundant as of 17 November 2013’. Mr Cockman immediately ceased working for the Company.
2 A dispute has arisen as to Mr Cockman’s entitlements arising from the termination of his employment. First, the Company claims (and Mr Cockman disputes) that it is a ‘small business employer’ as defined in the Fair Work Act 2009 (Cth) (FW Act). A small business employer is not required make a redundancy payment to an employee: s 121(1)(b) FW Act. This issue is considered below under the heading, ‘Redundancy’.
3 Secondly, there is a dispute about the calculation of Mr Cockman’s accrued annual leave entitlement at the end of his employment, including about whether he had ’cashed out’ his unpaid annual leave in December 2012. This issue is considered below under the heading, ‘Annual leave’.
4 Thirdly, there is a dispute about the calculation of the payment in lieu of notice to which Mr Cockman is entitled. The Company calculates an entitlement of ‘two weeks’ based upon s 117 of the FW Act. Mr Cockman calculates an entitlement of between three and eight months based upon the obligation of an employer, imposed by common law, to give an employee ‘reasonable notice’ of the termination of employment. Mr Cockman contends that his common law right is enforceable as part of the accrued jurisdiction of the Industrial Magistrates Court when determining a claim under the FW Act. This issue is considered below under the heading, ‘payment in lieu of notice’.
5 The FW Act provides for an entitlement, in specified circumstances, to redundancy payments (s 119), annual leave (s 87) and payments in lieu of notice (s 117). These entitlements are ‘National Employment Standards’ and are enforceable as a result of each also being defined as a ‘civil remedy provision’ of the Act: FW Act, s 44, 539. Mr Cockman, being an employee of the Company, and the Company, being a ‘corporation to which paragraph 51(XX) of the Constitution applies’, are respectively a ‘national system employee’ and a ‘national systems employer’: FW Act, s 13, s 14.
6 The Industrial Magistrates Court of Western Australia (the IM Court) is an ‘eligible state or territory court’ for the purposes of the FW Act: see s 12. If the IM Court is satisfied that there has been a contravention of a civil remedy provision, the IM Court may make orders for the Company to pay to Mr Cockman an amount that the Company was required to pay under the FW Act: s 545(3)(a). The IM Court is not bound by any rules of evidence or procedure and may inform itself on any matter and in any manner as it thinks fit: Industrial Magistrates Courts (General Jurisdiction) Regulations 2005 (WA), reg 35(4). Although the IM Court is not bound by rules of evidence, it remains necessary for Mr Cockman to prove his claim on the balance of probabilities and the IM Court will only act on evidence having rational probative force: McShane v Image Bollards Pty Ltd [2011] FMCA 215 [7].
Redundancy
7 The FW Act provides that an employee is entitled to redundancy pay when employment is terminated at the employer’s initiative and the employer no longer requires the job done by the employee to be done by anyone: s 119 of the FW Act. FW Act
119 Redundancy pay
Entitlement to redundancy pay
(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:
(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.
Amount of redundancy pay
(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

Redundancy pay period

Employee’s period of continuous service with the employer on termination
Redundancy pay period
1
At least 1 year but less than 2 years
4 weeks
2
At least 2 years but less than 3 years
6 weeks
3
At least 3 years but less than 4 years
7 weeks
4
At least 4 years but less than 5 years
8 weeks
5
At least 5 years but less than 6 years
10 weeks
6
At least 6 years but less than 7 years
11 weeks
7
At least 7 years but less than 8 years
13 weeks
8
At least 8 years but less than 9 years
14 weeks
9
At least 9 years but less than 10 years
16 weeks
10
At least 10 years
12 weeks


The Company relies upon the ‘small business employer’ exception found in s 121(1)(b) of the FW Act. FW Act
121 Exclusions from obligation to pay redundancy pay
(1) Section 119 does not apply to the termination of an employee’s employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination as described in subsection 117(1) (whichever happened first):
(a) the employee’s period of continuous service with the employer is less than 12 months; or
(b) the employer is a small business employer.
(2) A modern award may include a term specifying other situations in which section 119 does not apply to the termination of an employee’s employment.
(3) If a modern award that is in operation includes such a term (the award term), an enterprise agreement may:
(a) incorporate the award term by reference (and as in force from time to time) into the enterprise agreement; and
(b) provide that the incorporated term covers some or all of the employees who are also covered by the award term.

A ‘small business employer’ is defined as an employer who employs less than 15 employees: s 23(1) of the FW Act. FW Act
23 Meaning of small business employer
(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.
(2) For the purpose of calculating the number of employees employed by the employer at a particular time:
(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and
(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.
(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.
(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee’s employment, the employees that are to be counted include (subject to paragraph (2)(b)):
(a) the employee who is being dismissed or whose employment is being terminated; and
(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated.

The Company argues that at the relevant date it had one employee only, namely, Mr Cockman.
8 Mr Cockman’s response is to note that the employees of the ‘associated entities’ of the Company are to be included when in the count of employees: s 23(3) of the FW Act. He contends that the entity that operates the business known as ‘WA Direct Plasterboard Sales’ (WADPS) is an associated entity of the Company and that the combined number of employees of the Company and WADPS is at least fifteen. Two issues arise for my determination. First, whether the entity that operates WADPS was an ‘associated entity’ of the Company at the relevant date. Secondly, (if so) did the employees of the Company and WADPS number at least fifteen?
Associate Entity?
9 The first issue for me to determine is whether the entity operating a business known as ‘WA Direct Plasterboard Sales’ was an ‘associated entity’ of the Company at the relevant date.
10 The FW Act provides (in s 119) for an employee entitlement to paid redundancy, subject (in s 121(1)) to the non-application of the entitlement if the employer is a small business employer. The significance of this statutory framework and the language of sections 119 and 121 is that the onus is on the employer to prove, on the balance of probabilities, the non-application of the entitlement by reason of the employer being a ‘small business employer’: Avel Proprietary Limited v Multicoin Amusements Proprietary Limited [1990] HCA 58; (1990) 171 CLR 88 at 119 (McHugh J).
11 Section 23 of FW Act provides that a small business employer is an employer with fewer than 15 employees and that, for the purpose of calculating the number of employees employed by the employer, associated entities is to taken to be one entity. Section 12 of the FW Act provides that an associated entity has the meaning given by s 50AAA of the Corporations Act 2001 (Cth) (the CA). Section 50AAA of the CA provides:
50AAA Associated entities
(1) One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.
(2) This subsection is satisfied if the associate and the principal are related bodies corporate.
(3) This subsection is satisfied if the principal controls the associate.
(4) This subsection is satisfied if:
(a) the associate controls the principal; and
(b) the operations, resources or affairs of the principal are material to the associate.
(5) This subsection is satisfied if:
(a) the associate has a qualifying investment (see subsection (8)) in the principal; and
(b) the associate has significant influence over the principal; and
(c) the interest is material to the associate.
(6) This subsection is satisfied if:
(a) the principal has a qualifying investment (see subsection (8)) in the associate; and
(b) the principal has significant influence over the associate; and
(c) the interest is material to the principal.
(7) This subsection is satisfied if:
(a) an entity (the third entity) controls both the principal and the associate; and
(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.
(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:
(a) has an asset that is an investment in the second entity; or
(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.
12 The effect of s 50AAA(1) of the CA is that one entity is associated with another entity (the principal) if the criteria in any one of the subsections (2), (3), (4), (5), (6) or (7) is satisfied.
13 For the purpose of applying the criteria found in each of s 50AAA(2) - (7) of the CA, it is necessary to identify the entity that operated WADPS as at the relevant date. The relevant date for assessing the existence of any ‘associated entity’ of the Company is 17 November 2013, being the earlier of the time of termination of Mr Cockman (by telephone conversation with Mr Gerrans) and the notice of termination of 18 November 2013: s 121(1) of the FW Act.
14 I am satisfied that Roselander Pty Ltd was the entity that operated WADPS as at 17 November 2013. The evidence in support of this finding is twofold. First, for the purpose of proving that at the time of Mr Cockman’s redundancy there were not more than 12 employees of WADPS, Mr Gerrans produced a document entitled, ‘Employee Period Pay Report’ (the Roselander Employee List Document) (exhibit C). The ‘footer’ of the document contained a reference to ‘ROSELANDER PTY LTD’. Secondly, Mr Gerrans explained the significance of the reference in his evidence transcribed at page 72 of the trial transcript: ‘Roselander Proprietary Limited as trustee for the Roselander Trust owned the trading name and trading entity WA Direct Plasterboard Sales up until June 2015.’ In context, I infer that Roselander Pty Ltd was the entity that operated WADPS as at 17 November 2013.
15 Roselander Pty Ltd is associated with the Company if the criteria in any one of the CA subsections 50AAA (2), (3), (4), (5), (6) or (7) is satisfied. Those criteria require an assessment of the evidence on whether the association between Roselander Pty Ltd (or a third entity) and the Company is one of: being ‘related’ (as defined), ‘control’ (as defined); and having a ‘qualifying investment’ (as defined). In some cases, an assessment of evidence on the ‘operations, resources and affairs’ of Roselander Pty Ltd, the Company and a third entity will be required. It is convenient to make the following observations about the evidence relevant to findings (made below) on the concepts identified in the two preceding sentences i.e. ‘related’, ‘control’, ‘qualifying investment’ etc.:
(a) Australian Securities and Investments Commission (ASIC) records adduced in evidence by Mr Cockman concerning the Company, Roselander Pty Ltd and certain other entities (World Environmental Technologies Pty Ltd, Biothys Australia Pty Ltd and R. Watson Nominees Pty Ltd) are summarised in a table set out in an endnote to these reasons. ASIC records as at 17 November 2013:
Name
Directors
Shareholders
Holds Shares in
Guardian Air Pty Ltd
TC (1 Ord)
Note: (a)
TC (1 Gov; 80 Ord)
R. Watson Nominees Pty Ltd (256 Ord)
Watcor Pty Ltd (80 Ord)
S & C J Pty Ltd (80 Ord)
Peter Treen Electrical Discounter Pty Ltd (80 Ord)
AC (56 Ord)
Illawong Investments Pty Ltd (24 Ord)
NM (40 Ord)
Westsky Investments Pty Ltd (13 Ord)
BC (27 Ord)
Roggerrs Pty Ltd (24 Ord)
SSDGPR Pty Ltd (40 Ord)
Note: (b)
(From 30/4/14:) World Environmental Technologies Pty Ltd
World Environmental Technologies Pty Ltd

DG
TC
Note: (b)
DG (Until 30/4/14)
Note: (c)


Biothys Australia Pty Ltd
TC
R. Watson Nominees Pty Ltd

R. Watson Nominees Pty Ltd
RCW
GJW
RCW (1 ord)
GJW (1 ord)
Biothys Australia Pty Ltd (1 ord)
Guardian Air Pty Ltd (256 ord)
Roselander Pty Ltd
RCW
GJW
RCW (2 ord)


TC: Tracey Chester
DG: David Gerrans
RCW: Robert Clarence Watson
GJW: Gloria Watson
MT: Miles Trusty
AC: Adrian Cocks
NM: Noel McEvoy
BC: Brent Morfesse

(a) Previous Directors were: SL (5/6/08 – 22/11/10); RCW (Ceased 22/11/10); MT (5/6/08 – 8/1/10);
(b) Previous Shareholders included: R. Watson Nominees Pty Ltd who transferred its one ‘Gov’ to TC on 9/10/12.
(c) Previous shareholder was DG who transferred his share to the Company on 30 April 2014.
Those ASIC records reveal that, as at 17 November 2013:
i. The Company had issued two classes of share: one (1) governing share, held by Tracey Chester and 800 ordinary shares held by nine different entities, including 256 shares (32%) held by R. Watson Nominees Pty Ltd. The sole director of the Company was Tracey Chester.
ii. R. Watson Nominees Pty Ltd had issued two ordinary shares to Robert Clarence Watson. The two directors were Robert Clarence Watson and Gloria Watson.
iii. Roselander Pty Ltd had issued two ordinary shares to Robert Clarence Watson. The two directors were Robert Clarence Watson and Gloria Watson.
(b) Neither Mr Cockman or the Company adduced the Constitution of the Company as evidence on the rights or restrictions that attach to the one governing share held by Tracey Chester in the Company compared to the rights or restrictions that attach to the 800 ordinary shares. I am unable to make findings on the existence of any rights or restrictions. However, in circumstances where the onus is upon the Company to prove that it is not a small business employer, it is appropriate to draw an inference that the absent evidence would not help the case of the Company. Jones v Dunkel (1959) 101 CLR 298 at 320-1
The result is that, on matters requiring a poll of members of the Company such as the election of directors and voting at a general meeting of the Company, it is appropriate to infer that those matters will be resolved by either Tracey Chester alone as the holder of the one issued governing share or the nine entities holding ordinary shares (in proportion to their share holding) or by some combination of Tracey Chester and the nine entities holding ordinary shares in the manner provided for by the Constitution of the Company.
(c) It is not in dispute that, in addition to being the sole director of the Company, Tracey Chester was the chief executive officer (CEO) of the Company. The Roselander Employee List Document also identifies Tracey Chester as an employee of Roselander Pty Ltd. Mr Gerrans gave evidence that her role in Roselander Pty Ltd was limited, describing her as an employee in the accounts division. A chart, apparently prepared by Mr Cockman for the trial of this case, and a print out of a ‘Linked In’ web page (adduced by Mr Cockman) of uncertain date, describe Tracey Chester as the ‘CEO’ of WADPS. Little weight should be given to those documents. In any event, in cross-examination, Mr Cockman conceded that he had no personal knowledge of the role performed by Tracy Chester in Roselander Pty Ltd. Tracey Chester was not called by the Company to give evidence. Again, in circumstances where the onus is upon the Company to prove that it is not a small business employer it is appropriate to draw an inference that the absent evidence on the role of Tracey Chester would not help the case of the Company. In circumstances where Tracey Chester was an employee of Roselander Pty Ltd (irrespective of her role) and where the directors of her employer, Roselander Pty Ltd, were also the directors of a company, R. Watson Nominees Pty Ltd, holding 256 of 800 ordinary shares in the Company, it is open to infer that Tracy Chester, as an employee, was subject to the direction of those directors of Roselander Pty Ltd when exercising rights associated with being the holder of the one issued governing share in the Company.
(d) Mr Cockman adduced a document in the form of a chart on an A4 sheet headed, ‘Watson Family Group’ identifying a large number of entities including ‘Roselander Pty Ltd’, ‘R. Watson Nominees Pty Ltd’ and ‘World Environmental Technologies’ and including what could be interpreted as the percentage of an entity ‘owned’ by another identified entity. The provenance, purpose, author and date of the document is unknown and, for that reason, my view is that: limited weight can be placed on the document; and where inconsistent with ASIC records, no weight can be placed on the document.
(e) Mr Cockman adduced two documents concerning a business trading as ‘World Environmental Technologies’ (WET) (a letter from WET business dated 12 October 2012 and a ‘capability statement’ of WET business). Extracts are set out in an endnote to these reasons. Extracts from Letter of 10 October 2012
I'd like to advise you that Biothys / Guardian Air will now fall under one umbrella World Environmental Technologies (WET).
The company is now broken up into two divisions, Petroleum and Environmental.
Petroleum:
The Petroleum Division specialises in maintenance and servicing for the fuel industry, and the selling of diesel conditioners for the commercial and industrial sectors.
Environmental:
The environmental division specialises in air quality, odour control, brand fragrance and water treatments.
New appointment:
We have newly appointed Brett Cockman as Chief Operations Manager for the company. Brett brings a wealth of knowledge to the company with having senior roles in State Government and CSIRO.
Sean Lewer will remain your main point of contact and service provider for site with David King (Burswood / Crown inducted) as your second contact when Sean is unavailable.
Changes:
- Please update internal records to reflect the trading name of World Environmental Technologies Pty Ltd and remove any reference to Biothys / Guardian Air.
Extracts from Capability Statement
The Business Model
World Environmental Technologies ('WET') is Perth-based and privately owned. WET was incorporated in 2012 as the parent company of four subsidiary companies including Guardian Air which was established in 2008. WET has deliberately focussed on two key technology segments (environmental and petroleum) developing its competencies in odour control, air and water treatment, pest management and fuel quality enhancement.
…
The Management Team
Ms Tracey Chester (CEO) has qualifications in journalism and marketing and brings in excess of 20 years experience in company management including company secretarial, executive and non-executive roles within the Watson Group and Chester family companies.
Mr Brett Cockman (Chief Operations Manager) …
Mr Sean Lewer (Business Development Manager) is a founding shareholder of the business and his significant business development and technical skills provides a valuable platform to support the ongoing growth of WET. Having established several businesses servicing a range of industries including waste management, animal production and hospitality with high performance misting technologies and air quality enhancement his experience and networks are invaluable.
Mr Leigh Wolinski (Senior Projects Manager) brings significant marketing and sales closing capability to WET. He is supported by extensive technical / mechanical knowledge critical to the development and implementation of air treatment devices. Having managed teams of salespersons in the real estate industry and carrying out marketing roles within the hospitality sector he provides valuable support and integrity to WET's market presence.
Products, Services, and Delivery
WET is a brick and mortar company serving the Australian domestic market. The company has ambitions to partner with other successful technology businesses. WET has spent considerable efforts and resources to establish relationships with the local hospitality, commercial building and mining sectors and more recently fuel distribution businesses within Western Australia. Amongst other growth initiatives, WET is currently establishing its wholesale operations to offer a premium range of fuel and oil additives with wide application. The company's administrative functions are performed and delivered by staff co-located within the Watson Group operations.
The documents were transparently created for marketing purposes and must be assessed accordingly. Of present significance is a claim in the capability statement that ‘administrative functions (of the WET business) are performed and delivered by staff co-located within the Watson Group’. I infer that, in this context, the ‘Watson Group’ may be taken to include Roselander Pty Ltd, a company in which Robert Clarence Watson and Gloria Watson were sole directors and shareholders.
(f) Mr Gerrans gave evidence of regular meetings attended by (unidentified) shareholders of the Company in which the ongoing operations of the Company were the subject of discussion. Mr Gerrans stated that Robert Clarence Watson did not participate in those meetings. I infer that those shareholders included some or all of the members identified in ASIC records.
Were Roselander Pty Ltd and the Company ‘related bodies corporate’: s 50AAA(2) of the CA?
16 The effect of the definition of ‘related bodies corporate’ in s 50 of the CA is that I must consider whether the Company is a ‘subsidiary’ of Roselander Pty Ltd. The effect of the definition of ‘subsidiary’ in s 46 of the CA is that the Company is a subsidiary of Roselander Pty Ltd ‘if, and only if’ (relevantly) Roselander Pty Ltd:
(i) controls the composition of the Company board; or
(ii) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the Company.
17 It is apparent from my findings above at paragraph 17 that, as a result of Tracey Chester being the holder of the one issued governing share in the Company and being an employee of Roselander Pty Ltd, it is open to me to infer that she was subject to the direction of Roselander Pty Ltd whenever there was a poll affecting the composition of the Company board, or a poll of votes at a general meeting of the Company. It follows that Roselander Pty Ltd and the Company were associated by reason of being ‘related bodies corporate’. For completeness, I make the following additional findings on s 50AAA of the CA.
Did the Company ‘control’ Roselander Pty Ltd: s 50AAA(3) of the CA?
18 The effect of the definition of ‘control’ in section s 50AA of the CA is that the Company controls Roselander Pty Ltd if the Company has the capacity to determine the outcome of decisions about the financial and operating policies of Roselander Pty Ltd. It is apparent from my findings in paragraph 15 that, save for a claim made for marketing purposes about the possibility of sharing administrative functions, there is no evidence of the Company having any influence on the business of Roselander Pty Ltd. The Company did not ‘control’ Roselander Pty Ltd.
Did Roselander Pty Ltd ‘control’ the Company and were the operations, resources or affairs of the Company material to Roselander Pty Ltd: s 50AAA(4)?
19 Assuming (for the same reasons identified in paragraph 17 as to Tracey Chester’s role as an employee of Roselander Pty and a director of the Company) that Roselander Pty Ltd had the capacity to determine the outcome of decisions about the financial and operating policies of Company, there is no evidence that the operations, resources or affairs of the Company were material to Roselander Pty Ltd.
Does Roselander Pty Ltd have a ‘qualifying investment’ in the Company etc.: s 50AAA(5)?
20 The effect of the definition of qualifying investment in s 50AAA(8) of the CA is that it is necessary to ascertain whether Roselander Pty Ltd:
(a) has an asset that is an investment in the Company; or
(b) has an asset that is the beneficial interest in an investment in the Company and has control over that asset?
21 There is no evidence that the assets of Roselander Pty Ltd, legal or beneficial, include investments in the Company. Submissions made on behalf of Mr Cockman wrongly assume that the common directors and shareholders of Roselander Pty Ltd and R. Watson Nominees Pty Ltd result in the former holding the ‘same’ investments as the latter.
Does the Company have a ‘qualifying investment’ in Roselander Pty Ltd etc.: s 50 AAA(6)?
22 It is necessary to ascertain whether the Company:
(a) has an asset that is an investment in the Roselander Pty Ltd; or
(b) has an asset that is the beneficial interest in an investment in Roselander Pty Ltd and has control over that asset?
23 There is no evidence that the assets of the Company, legal or beneficial, include investments in Roselander Pty Ltd. The only evidence of the assets of the Company, apparent from my findings in paragraph 15, is of assets relevant to the conduct of the WET business and, from 30 April 2014, of the sole issued share in World Environmental Technologies Pty Ltd. There is no apparent connection with an investment in Roselander Pty Ltd.
Does a third entity control both the Company and Roselander Pty Ltd and are the operations, resources or affairs of the Company and Roselander Pty Ltd both material to the third entity: s 50AAA(7)?
24 The only ‘third entity’ with the capacity to determine the outcome of decisions about the financial and operating policies of the Company and Roselander Pty Ltd are Robert Clarence Watson and Gloria Watson. As directors of Roselander Pty Ltd they have the capacity to determine the financial and operating policies of Roselander Pty Ltd. They also have the capacity to direct their employee, Tracy Chester, in the manner that she discharges her role as the sole director, CEO and holder of the sole governing share of the Company. Accordingly, Robert Clarence Watson and Gloria Watson have the capacity to also determine the outcome of decisions about the financial and operating policies of the Company.
25 There is no evidence that the operations, resources or affairs of the Company and Roselander Pty Ltd are both material to Robert Clarence Watson and Gloria Watson. The uncontradicted evidence of Mr Gerrans is that the operations of the Company were the subject of monthly ‘investor’ meetings and that Robert Clarence Watson did not participate. There is some evidence of Robert Clarence Watson having a role in meeting a potential client of the Company. However, there is insufficient evidence to make a finding of ‘materiality’ to Robert Clarence Watson.
At Least 15 Employees?
26 As a result of my finding that Roselander Pty Ltd is, for the purposes of the FW Act, an ‘associated entity’ of the Company, the next issue for me to determine is whether the number of employees of the Company and Roselander Pty Ltd numbered at least fifteen on 17 November 2013.
27 The Company case is that, including employees of Roselander Pty Ltd, the Company was nevertheless an employer who employed less than 15 employees, namely 13 employees. Those employees comprise Mr Cockman, as the sole employee of the Company, and 12 of the 13 persons who are listed on the Roseland Employee List Document. Mr Cockman’s case is that, in addition to the 13 ‘conceded’ employees there should be added: two identified employees of the Company (Mr Leigh Wolinski and Mr Sean Lewer); and four identified employees of Roselander Pty Ltd (Mr Geoffrey Jones, Ms Katherine White, Mr David King, Mr Brian Goodwin). Mr Cockman also relied upon a statement in marketing material of WADPS referring to employing ‘over 40 staff’. Exhibit 8. The relevant text reads, ‘WA Direct Plasterboard is a family owned and operated business specialising in the provision of plasterboard and building materials throughout Western Australia. Established in 1950, we are proud to have grown to become one of WAIS most trusted suppliers of plasterboard, building systems and wall and ceiling materials - as well as quality tools and accessories, Today, we employ over 40 staff, with branches located in Welshpool and Kalgoorlie. Our dedicated team ensures that every customer receives the very best service and advice. And with a fleet of I5 trucks at our disposal, we are also able to deliver goods anywhere, anytime.’
I do not regard the marketing material as a reliable basis for determining the number of employees of Roseland Pty Ltd. I prefer to place weight on the Roseland Employee List Document and other evidence described below.
Mr Geoffrey Jones is an employee
28 The evidence of Mr Gerrans on Mr Jones is not contradicted; I am satisfied as to its reliability. While an employee of Roselander Pty Ltd, Mr Jones was injured at work and was unable to work. As a result, he became entitled to ‘workers compensation payments’ under a workers compensation insurance policy maintained by Roselander Pty Ltd. The effect of the policy was that regular payments were remitted from the insurer to Roselander Pty Ltd for payment to Mr Jones. Mr Jones’ name appeared in the Roselander Employee List Document for the purpose of enabling the processing of those payments from the insurer to Mr Jones. Mr Gerrans emphasised that Mr Jones was not engaged in work for the Company. My conclusion is that, as at 17 November 2013, Mr Jones remained an employee of the Company. His contract of employment was not terminated, as a matter of law, by his injury or by him being unable to work as a consequence of his injury or be his receipt of workers compensation payments. There is no evidence of Roselander Pty Ltd or Mr Jones expressly initiating the termination of the employment contract. Nor is the termination of his employment contract to be implied from the fact of Mr Jones being unable to work while in receipt of workers compensation payments. It follows that, as at 17 November 2013, his contract of employment remained on foot and he remained an ‘employee’.
29 The Company contends that any work done by the other persons identified by Mr Cockman as ‘employees’ was done as independent contractors. It is convenient to adopt the statement of relevant principles from two cases, amended as relevant to this case, omitting citations, and reproduce those statements in an endnote to these reasons: Coopes v Daishsat Pty Ltd & Anor (No.2) [2017] FCCA 2210; Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 (Katzmann J). Coopes v Daishsat Pty Ltd & Anor (No.2) [2017] FCCA 2210:
[17] The determination of [the issue of whether the Respondent employs fewer than 15 employees] requires consideration of the question of whether particular individuals are or are not employees, ‘employee’ being separately defined in the first Division of each Part (with one exception) of the FW Act in which the term appears: FW Act, s 12 (definition of ‘employee’). For the purposes of the general protections provisions of the FW Act the meaning of ‘employee’ is set out in s 335 of the FW Act, and provides that ‘employee and employer have their ordinary meanings’. Essentially, the issue to then be determined by the court would appear to be whether or not [certain … persons] … are employees of the Respondent. …
…
[19] Whether a person is an employee or not is a question of law and there are many factors which may point to a contract being a contract of employment, with their relative importance varying with the circumstances. Control of the employee exercisable by the employer is a prominent factor, but not the sole criterion, and is one of a number of possible indicia of employment, including but not limited to ‘the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and the provision of holidays, the deduction of income tax and the delegation of work by the putative employee’. Payment of wages by a third party is not fatal to the existence of a contract of employment between an employee and an employer and employees may have so-called ‘host’ employers. The rendering of invoices is usually ‘quite foreign to an ordinary employment relationship’. Of course, the rendering of invoices and the labelling of an employment relationship in a particular way has never been determinative of a person not being an employee if the invoices and labelling are part of a sham arrangement designed to avoid the persons being designated as employees. In a now oft quoted passage the Federal Court in Re Porter; Re Transport Workers’ Union of Australia [1989] FCA 226; (1989) 34 IR 179; (1989) 31 AILR 382; IR at 184 per Gray J (‘Porter’) it was said ‘the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck.’
Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 (Katzmann J)
[39] The question of whether someone is an employee or an independent contractor is not to be determined by what they may be called or, indeed, what they may call themselves. A label, consensual or otherwise, cannot affect ‘the inherent character’ of the relationship. Further, the relationship between the parties is to be found not merely from these contractual terms. The system which was operated thereunder and the work practices imposed … go to establishing ‘the totality of the relationship’ between the parties; it is this which is to be considered.
[41] A contract of employment is based on personal service. Shortly put, the difference between an employee and an independent contractor is ‘rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own’. Control (and later the right to control) the manner in which the work is done was once determinative. For some time now, however, it is regarded as only one relevant factor (albeit an important one); the totality of the relationship must be considered. Other indicia of an employment relationship include ‘whether tax is deducted; whether sub-contracting is permitted; ... whether uniforms are worn; whether tools are supplied; whether holidays are permitted; ... whether wages are paid ...; what is disclosed in the tax returns; whether one party ‘represents’ the other; for the benefit of whom does the goodwill in the business inure; how ‘business-like’ is the alleged business of the putative employee – are there systems, manuals and invoices; and so on ...’.
[42] The modern approach to determining whether someone is an employee is ‘multi-factorial’. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another.
In summary, the principles that guide me in an assessment of the evidence in this case are as follows:
(a) The question of whether someone is an employee or an independent contractor is a question of law and is not to be determined by what they may be called or, indeed, what they may call themselves. A label, consensual or otherwise, cannot affect ‘the inherent character’ of the relationship.
(b) A contract of employment is based on personal service. The difference between an employee and an independent contractor is the difference between a person who serves the employer in the employer’s business, and a person who carries on his or her own trade or business.
(c) Control and the right to control is one relevant factor (albeit an important one). The totality of the relationship must be considered. The modern approach to determining whether someone is an employee is ‘multi-factorial’. The object of the exercise is to paint a picture from the accumulation of detail. Not all details are of equal weight or importance in any given situation.
(d) Factors that are relevant to determining whether a person (the Worker) is an employee or an independent contractor include:
· What are the payment arrangements? Regular payments to the Worker (i.e. payment of a ‘wage’) suggests the recipient is an employee. Payments initiated by delivery of an invoice from the Worker suggest a payment to an independent contractor. Payments to a Worker that were not initiated by the Worker suggests an employer/employee relationship. Taxation and superannuation arrangements may suggest the nature of the relationship e.g. ‘PAYG’ taxation arrangements suggests an employer/employee relationship.
· What are the workplace arrangements? A Worker who is permitted to sub-contract tasks is less likely to be an employee. A Worker who has an entitlement to holidays is more likely to be an employee. A Worker who uses his or her own tools is more likely to be an independent contractor.
· For the benefit of whom does the goodwill inure? A Worker who is held out as ‘representing’ a principal is more likely to be an employee (e.g. wearing uniforms in the name of the principal or communicating with third parties in the name of the principal).
Mr Leigh Wolinski is an employee
30 The Company case is that Mr Wolinski was engaged as a subcontractor to perform certain tasks which, if not performed correctly, were required to be corrected ‘without charge’ to the Company. His ‘main’ source of income as a real estate agent was not related to his work for the Company. He was paid on invoices with the Company accounting for GST. The case was supported by the oral evidence of Mr Gerrans and Ms White and, absent contradictory evidence, may be accepted as accurate. Mr Cockman’s evidence is that he worked alongside Mr Lewers and Mr Wolinski in premises at Burswood; each worked full time (‘[in] the office every day, same time, every week’); the Capability Statement accurately stated the role of Mr Wolinski as ‘senior projects manager’ who reported to Tracey Chester as CEO; Mr Wolinski was ‘held out’ as an employee of the Company.
31 Mr Cockman’s evidence is not necessarily inconsistent with the case of the Company and may also be accepted as accurate. My conclusion is that, as at 17 November 2013, Mr Wolinski was an employee of the Company. The significance of the Company and Mr Wolinski adopting the ‘contractor label’ and arranging payment accordingly is less significant to me than Mr Cockman’s evidence of regular hours and regular duties of Mr Wolinski and of the overall impression that Mr Wolinski’s daily work was directed towards building the goodwill of the business of the Company rather than the goodwill of his own business. There is also evidence of him being subject to the control of the Company, including him accepting the instruction to deliver a letter of termination to Mr Cockman.
Mr Sean Lewer is not an employee
32 The Company case is that Mr Lewer was engaged as a subcontractor to perform certain tasks which, if not performed correctly, were required to be corrected ‘without charge’ to the Company; his activities, unrelated to his work for the Company included playing music in a band and operating his own window cleaning business. Like Mr Wolinski, he was paid on invoices with the Company accounting for GST. Mr Lewer also participated in regular ‘investor meetings’ on the direction of the Company. The Company case was supported by the oral evidence of Mr Gerrans and Ms White and, absent contradictory evidence, may be accepted as accurate. Mr Cockman’s evidence is that he worked alongside Mr Lewers as described above; the Capability Statement accurately stated the role of Mr Lewers as a ‘business development manager’ who was the founding shareholder of the business. Mr Lewers was ‘held out’ as an employee of the Company (e.g.. by email address). Again, Mr Cockman’s evidence is not inconsistent with the case of the Company and may also be accepted as accurate. My conclusion is that, as at 17 November 2013, Mr Lewers was not an employee of the Company. Although there are obviously similarities with the position of Mr Wolinski (payment arrangements, regular hours and regular duties; work directed towards building the goodwill of the Company), there is also evidence that Mr Lewers was not subject to the control of the Company. He participated in investor meetings. His dealings with Mr Cockman in the last days of his employment suggested that he was not subject to direction by Ms Tracey Chester.
Ms Katherine White is an employee
33 Ms White stated that she was engaged as an independent contractor by a variety of entities including the Company and Roselander Pty Ltd to perform administrative tasks including the preparation of payroll. She was engaged in that role by the Company and, at the request of Ms Tracey Chester, she made calculations of Mr Cockman’s entitlements on the termination of his employment. She said that she performed a similar role for Roselander Pty Ltd (trading as WADPS) and for other entities. She stated that she did the payroll for ‘about five different companies’ (including the Company and WADPS).
34 I infer from her evidence that her only clients were those introduced by a person who had a connection (officeholder, shareholder, investor etc.) to an existing client. There is no evidence on the payment arrangements for Ms White or of the workplace arrangements e.g. whether she worked from her own premises or from the premises of her clients. I note that an email from Ms White on 1 July 2014 was from her email account ‘kathy.white@guardianair.com.au’ and was signed by her as ‘accounts manager’, ‘Guardian Air.’ I note that in her ‘LinkedIn’ web page, Ms White identifies herself as a ‘personal assistant’ at ‘WA Direct Plasterboard’, although I must be cautious that a ‘LinkedIn’ web page may be inaccurate insofar as Ms White may not have been afforded the opportunity to update the page with timely and accurate information. My conclusion is that, as at 17 November 2013, Ms White was a part-time employee of the Company and a part-time employee of Roselander Pty Ltd. The significance of Ms White adopting the ‘contractor’ label is less significant to me than: her evidence of regular tasks for the Company (payroll) and Roselander Pty Ltd (payroll) over a lengthy period; the evidence of Ms White being ‘held out’ in email communications as an employee of the Company and of her being subject to the direction of Ms Tracey Chester.
Mr Brian Goodwin and Mr David King are not employees
35 Mr Gerrans stated that Mr Goodwin was engaged in the Kalgoorlie operations of Roselander Pty Ltd and, perhaps, other entities. Mr Gerrans was unsure as to the precise remuneration arrangements of Mr Goodwin, except that, his name not appearing in the Roselander Employee List Document, Mr Goodwin was not employee of Roselander Pty Ltd. Mr Gerrans stated that Mr King was engaged ‘through a labour hire company to perform various duties’ for entities that included the Company and Roselander Pty Ltd. Ms White gave evidence to similar effect as Mr Gerrans. There is evidence of communications from Mr King using the email of WADPS (‘david.king@directplasterboard.com.au’) when communicating with Mr Cockman about the circumstances of the termination of his employment. My conclusion is that, as at 17 November 2013, Mr Goodwin and Mr King were not employees of the Company or of Roselander Pty Ltd. The (admittedly scant) evidence suggests payment arrangements and irregular ‘task-based’ work that are consistent with work of each as an independent contractor.
36 In the result, there are 16 relevant employees: Mr Cockman, Mr Wolinski, Ms White and the 13 persons named on Roseland Employee List Document. The Company was not a small business employer at the relevant date.
Conclusion on Redundancy Issue
37 The Company has failed to satisfy me that the ‘small business employer’ exception applies when assessing Mr Cockman’s entitlement to a redundancy payment as provided in s 119 of the FW Act. The effect of s 119(2) of the FW Act is that Mr Cockman is entitled to redundancy pay calculated by reference to his ‘period of continuous service with the employer on termination’. The relevant commencement date is 12 December 2011. If the relevant ‘termination date’ is the date of written notice of termination (18 November 2013), the period of continuous service is less than two years, giving rise to an entitlement to four weeks pay. The result is the same if the termination date is ‘extended’ for two weeks to 2 December 2013, being the period of notice required by s 117 of the FW Act (as calculated below) or ‘extended’ for 5.5 days to 24 November 2013, being the period of unpaid accrued annual leave at 18 November 2013, or ‘extended’ for two weeks plus 5.5 days to 8 December 2013, being both of those periods. The result is different if the termination date is extended by a period of ‘reasonable notice’ required, at common law, to terminate an employment contract. Mr Cockman argues in favour of a period of 3 – 8 months i.e. for a termination date of between 18 February 2014 – 18 July 2014. I consider a similar argument below at paragraph 45 for the purpose of determining the end date of Mr Cockman’s employment for the purpose of calculating his annual leave. For the same reasons as articulated at paragraph 45, I do not consider that the text and structure of s 119 of the FW Act provide for resort to a termination date calculated by reference to an implied term of the contract of employment.
Annual Leave
38 The FW Act provides that Mr Cockman is entitled to four weeks (20 days) of paid annual leave, accruing progressively during the year and accumulating from year to year: s 87 of the FW Act. At the end of his employment, the Company was required to pay to Mr Cockman the amount that would have been payable had he then taken any untaken annual leave: s 90(2) of the FW Act.
39 The Company contends that, in December 2012 and in accordance with industry practice, Mr Cockman was paid the whole of his annual leave accrued over the preceding year i.e. he cashed out the whole balance of his accrued annual leave. The Company case is supported by the oral evidence of Mr Gerrans The following are quotes from the transcript of the evidence of Mr Gerrans:
[B]ecause of the nature of the small business, that this - and the industry that it’s in, that they quite often pay out annual leave on an agreed basis annually at Christmas
… It - quite often in this - in the building industry and these things, because a lot of businesses can’t carry annual leave on the books, they give the opportunity to staff to be paid out in lieu of… not taking it during the year.
I think in reality, because of the nature of the small business, that this - and the industry that it’s in, that they quite often pay out annual leave on an agreed basis annually at Christmas and I think he - there was a payment in December 2012 … and then he - so he’s been paid those holiday pays and then he’s taken holidays in June [2013]
and Ms White The following quotes are from the transcript of the evidence of Ms White:
[D]ue to the fact that it’s a small company, we can’t afford to carry over holidays so we make it an agreement when the employee starts that it’s a forced rule that holidays are paid out over the Christmas period, ah, usually because we, um, close the company for two weeks over the period. So therefore whatever’s owed at that time is paid out in full.
… Tracey asked me to pay Brett, um, a period of four weeks, um, for the month of June [2013]as he was going away. Um, I alerted her to the fact that he had only accrued two weeks holiday pay. Um, she said in good faith could we please pay the four weeks, um, as he was going to be away that long and didn’t want him to be financially out of pocket.
as to the practice of a small business in the industry of the Company and of the Company in particular. The Company did not call a witness to give evidence of being present when Mr Cockman was handed a cheque or cash in December 2012 on account of unpaid annual leave.
40 Mr Cockman disputes receiving any such payment and denies the existence of an agreement between him and the Company to cash out accrued annual leave. Mr Cockman contends that his entitlements upon termination should reflect (on his calculation) the 12 days of untaken annual leave that had accrued at the end of 2012. Mr Cockman gave evidence denying any agreement to receive any payment in lieu of unpaid annual leave and denies having received, in December 2012, any payment on account of untaken accrued annual leave. The following are quotes from the transcript of the evidence of Mr Cockman:
I did not owe time back to the company. There was carry forward of leave from 2012, which then allowed my fiancée and I to take holidays in June [2013], which was approved by Tracey Chester. And, ah, the lead up to 2012, I requested six days’ leave over that, um, period of time, the Christmas close down period. And there’s documentation to support that. The fact that the company may have applied a policy of paying out was certainly never - never explained to me and was certainly never agreed. So on that basis, I was always - in my mind, always had sufficient leave to, ah, service any leave that I did take.
….
…If there was additional cash paid, I can only presume that was a bonus. The Watson family were extremely generous towards me, ah, particularly when I travelled, so I didn’t question it and, um, I - I don’t question it now. But I know there is a, ah - there is, ah, certainly evidence that I can provide to show there was email traffic to confirm what I was, um, asked to rely on, in terms of, ah, leave entitlements.
He conceded that Tracey Chester may have made a cash payment to him of an unknown amount shortly before Christmas, 2012. Mr Cockman stated that any such payment was not tendered or received by him on account of annual leave obligations; he believed it to be a ‘Christmas bonus’.
41 For the following reasons, Mr Cockman succeeds on this issue:
· Mr Cockman’s credible and plausible evidence of not receiving a payment must be accepted given that the Company did not call direct evidence (a witness or a business record) of the payment being made.
· The FW Act provides that an employer and an employee may, subject to certain conditions, agree to an employee cashing out accrued annual leave: s 94 of the FW Act. Two of those conditions were not satisfied by the Company in this case:
(i) each agreement to cash out an annual leave entitlement must be contained in a separate agreement in writing: s 94(3) FW Act. The Company did not adduce evidence of a written agreement to cash out leave in December 2012. The “industry practice” is not an answer to the statutory obligation of a written agreement.
(ii) cashing out accrued annual leave is prohibited unless, after cashing out, the employee’s remaining accrued annual leave entitlement was at least four weeks: s 94(2) of the FW Act. If Mr Cockman cashed out 12 days leave in December 2012, he did not have any accrued annual leave entitlement.
· The Company did not produce written records that confirmed the alleged agreement or the alleged payment in December 2012. The failure to produce those records is significant. The FW Act provides that an employer must make (and keep for seven years) certain proscribed records and if an employer fails to keep those records, the employer has the burden of disproving any relevant allegation: sections 535(1), 557C(1) of the FW Act. Regulation 3.36(2) of the Fair Work Regulations 2009 (Cth) provides that the Company was required to make and keep the following records:
(2) If an employer and employee agree to cash out an accrued amount of leave:
(a) a copy of the agreement is a kind of employee record that the employer must make and keep; and
(b) a kind of employee record that the employer must make and keep is a record that sets out:
(i) the rate of payment for the amount of leave that was cashed out; and
(ii) when the payment was made
42 Mr Cockman’s entitlement to accrued annual leave on termination will reflect his employment commencing on 12 December 2011 and his evidence of having taken eight days leave in 2012 and 26 days leave in 2013 i.e. a total of 34 days. I note that the Company calculations assume Mr Cockman took 20 days leave in 2013. Absent Company records, I prefer to rely upon the evidence of Mr Cockman.
The relevant ‘end date’ of his employment is required to calculate Mr Cockman’s accrued annual leave entitlement.
43 The Company contends that his accrued annual leave entitlement is to be calculated on the basis that his employment ended on the last day that he ‘worked’ (15 November 2013) or the date of on which he was given oral notice of termination of his employment (17 November 2013) or the date on which he was given written notice of termination of his employment (18 November 2013).
44 Mr Cockman contends that his accrued annual leave entitlement is to be calculated on the basis that his employment ended at the end of the expiration of the minimum period of notice of termination required by s 117 of the FW Act (two weeks i.e. 2 December 2013) or at the end of the expiration of the ‘reasonable notice’ period required, at common law, to terminate an employment contract (3 – 8 months i.e. between 18 February 2014 – 18 July 2014).
45 My view is that, for the purpose of calculating Mr Cockman’s accrued annual leave entitlement, the relevant ‘end date’ of his employment is the date at the end of the minimum period of notice required by s 117 of the FW Act i.e. 2 December 2013. Section 90(2) of the FW Act creates an obligation to pay accrued annual leave entitlement, when ‘employment of an employee ends’. In context, ‘employment’ ends for the purpose of s 90(2) of the FW Act when the legal relationship of employer/employee ends as provided by the FW Act. The Company arguments in favour of 15 – 18 November 2013 ignore the text and structure of s 117 of the FW Act providing for either (paid) work until the end of the notice period (s 117(1)) or for payment in lieu as if the employee worked until the end of the notice period (s 117(2)). Mr Cockman’s argument in favour of 18 February 2014 – 18 July 2014 ignores the whole of s 117 of the FW Act and, indeed, the whole of the FW Act in favour of importing the common law on ‘reasonable notice’ for the purpose of calculating the end of employment for the purpose of s 90(2) FW Act. Put plainly, there is nothing in the text or structure of s 90, Division 6 of Part 2-2, Part 2-2, Chapter 2 of the FW Act as a whole that would invite resort to a concept outside Part 2-2 of the FW Act on the National Employment Standards for the purpose of calculating the end of employment.
Conclusion on Annual Leave issue
46 Mr Cockman’s accrued annual leave entitlement is to be calculated on the basis of employment between 12 December 2011 and 2 December 2013. Employment for one year, 11 months, 21 days at four weeks per annum (per s 87(1) of the FW Act) equates to an entitlement to 39.5 days. Mr Cockman had taken 34 days leave. His accrued annual leave entitlement at the end of his employment was 5.5 days. This calculation is included in a reconciliation undertaken below in the conclusion of these reasons.
Payment In Lieu Of Notice
47 Section 117 of the FW Act provides for a ‘minimum period of notice’ of termination of employment calculated by reference to the length of the period of continuous service as at ‘the end of the day the (written) notice (of termination) is given’. There is also provision for an increase of the notice period by one week if the employee is over 45 years old and has completed at least two years of continuous service with the employer at the end of the day the notice is given. FW Act
117 Requirement for notice of termination or payment in lieu
Notice specifying day of termination
(1) An employer must not terminate an employee’s employment unless the employer has given the employee written notice of the day of the termination (which cannot be before the day the notice is given).
Note 1: Section 123 describes situations in which this section does not apply.
Note 2: Sections 28A and 29 of the Acts Interpretation Act 1901 provide how a notice may be given. In particular, the notice may be given to an employee by:
(a) delivering it personally; or
(b) leaving it at the employee’s last known address; or
(c) sending it by prepaid post to the employee’s last known address.
Amount of notice or payment in lieu of notice
(2) The employer must not terminate the employee’s employment unless:
(a) the time between giving the notice and the day of the termination is at least the period (the minimum period of notice) worked out under subsection (3); or
(b) the employer has paid to the employee (or to another person on the employee’s behalf) payment in lieu of notice of at least the amount the employer would have been liable to pay to the employee (or to another person on the employee’s behalf) at the full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum period of notice.
(3) Work out the minimum period of notice as follows:
(a) first, work out the period using the following table:

Period

Employee’s period of continuous service with the employer at the end of the day the notice is given
Period
1
Not more than 1 year
1 week
2
More than 1 year but not more than 3 years
2 weeks
3
More than 3 years but not more than 5 years
3 weeks
4
More than 5 years
4 weeks

(b) then increase the period by 1 week if the employee is over 45 years old and has completed at least 2 years of continuous service with the employer at the end of the day the notice is given.
It is not in dispute that written notice of termination was given by the Company to Mr Cockman on 18 November 2013 (after commencing on 12 December 2011) and that he was over 45 years old at that date.
48 The Company propose to make a payment to Mr Cockman in lieu of notice by reference to its obligations under s 117 of the FW Act. The Company calculated the relevant ‘minimum period of notice’ under s 117(3) as being ‘two weeks’ on the basis that Mr Cockman had not completed two years of employment as at 18 November 2013. The ordinary meaning of the text of s 117 FW Act supports the Company interpretation. Section 117(1) expressly refers to the employer giving written notice of the day of the termination. Section 117(3) expressly refers to a calculation of the relevant period of continuous service as ‘at the end of the day the notice is given’. The relevant ‘end date’ for the purpose of s 117 is 18 November 2013.
49 Mr Cockman’s response is that, in addition to an obligation imposed by s 117 of the FW Act, the Company has an obligation, imposed by common law, to give an employee ‘reasonable notice’ of the termination of employment (the Common Law Reasonable Notice Obligation). Mr Cockman contends that the Company has breached this obligation. He submits that a period of reasonable notice, given the circumstances of Mr Cockman’s employment would have been a period of between three and eight months and he seeks damages for breach of the obligation.
50 A threshold question is whether the IM Court has jurisdiction to determine a claim based upon the Common Law Reasonable Notice Obligation. Two preliminary points can be made. First, the FW Act does not expressly confer jurisdiction upon the IM Court to determine a claim of in the nature of the Common Law Reasonable Notice Obligation. By s 539(2) of the FW Act, defined persons may apply in relation to a contravention a specified civil remedy provision of the Act to a specified court. Depending upon the particular civil remedy provision, the specified court is one or more of the Federal Court, the Federal Circuit Court, and ‘an eligible State or Territory court’. The IM Court is an eligible state or territory court. The result is that the jurisdiction of the IM Court expressly conferred by the FW Act is identified by reference to the ambit of the civil remedy provision which is the subject of a claim. Secondly, the Industrial Relations Act 1979 (WA) (IR Act) does not confer jurisdiction upon the IM Court to determine a claim in the nature of the Common Law Reasonable Notice Obligation. The IM Court is a ‘court of record’ created by s 81 of the IR Act. However, unlike the Magistrates Court of WA or the District Court of WA or the Supreme Court of WA, the IM Court does not have a general civil law jurisdiction. For example, the Magistrates Court (Civil Proceedings) Act 2004 (WA) provides:
6. General civil jurisdiction
(1) The Court has jurisdiction to deal with —
(a) a claim for an amount of money that is —
(i) a debt or damages, whether liquidated or unliquidated;
…
where the amount claimed, even if it is a balance after allowing for a payment on account or for any admitted setoff or for any other amount, is not more than the jurisdictional limit…
The jurisdiction of the IM Court is proscribed by sections 81A and 81AA of the IR Act. Nothing in those provisions would confer jurisdiction on the IM Court to determine a claim of the nature of the Common Law Employment Claim.
51 Mr Cockman submits that, in common with the Federal Court and the Federal Circuit Court, the IM Court has an ‘accrued jurisdiction’ which allows a court exercising Federal jurisdiction Court to determine an entire matter brought before them, including matters of non-federal jurisdiction of the nature of the Common Law Reasonable Notice Obligation. He draws attention to decisions of the Full Court of the Federal Court (Beck v Spalla [2005] FCAFC 82) and the Federal Circuit (Miller v Sunland Park Pty Ltd [2014] FCCA 89 affirming the existence the accrued jurisdiction of those Courts. Emphasis is placed upon Miller v Sunland Park Pty Ltd as an example of a case where the Federal Circuit Court determined a federal claim for a contravention of the Workplace Relations Act 1996 (Cth) and, exercising accrued jurisdiction also determined a non-federal claim for damages in common law arising from a breach of an employment contract. The alleged breach of employment contract in that case, like the case of Mr Cockman, was a failure by an employer to give reasonable notice of the termination of employment.
52 The accrued jurisdiction of the Federal Court, Federal Circuit Court and the Family Court is undoubted: Rana v Google Inc [2017] FCAFC 156. It is convenient to quote (without citations) the relevant paragraph of Halsbury’s Laws of Australia [125-115]:
[Federal courts] have accrued jurisdiction which allow them to determine an entire matter brought before them, including matters of non-federal jurisdiction linked to the matter before the court. Whether a claim is sufficiently linked to a matter to be covered by the accrued jurisdiction of the court is a practical question based upon the facts and circumstances of the case. It will include circumstances where there is a common substratum of facts, both claims arise out of common transaction and facts or where the determination of one is essential to the determination of the other. It will not include matters that are separate or disparate.
53 The accrued jurisdiction of federal courts follows from the conferral of federal jurisdiction upon those courts by a law of the Commonwealth Parliament as provided by s 77(i) of the Constitution. E.g. Stack v Coast Securities (No 9) Pty Ltd [1983] HCA 36; (1983) 154 CLR 261 at 292 per Mason, Brennan and Deane JJJ: ‘[A] Commonwealth law conferring jurisdiction on a federal court under s 77(i) of the Constitution with respect to proceedings under a federal statute … carries with it authority to determine non-federal aspects of the controversy between the parties’.
By s 77(iii), the Constitution also empowers the Commonwealth Parliament to invest any court of a state with federal jurisdiction with respect to any of the matters mentioned in sections 75 and 76 of the Constitution. Section 539(2) of the FW Act (noted above) is an example of Commonwealth law conferring federal jurisdiction upon a state court. Supporting Mr Cockman’s contention, Professor Lane opines that ‘a s 77(iii) State Court is as much favoured by the doctrine of accrued jurisdiction as is the High Court or another federal Court.’ P H Lane, Commentary on the Australian Constitution (2nd edition at page 623) as cited by Thackray J in Valley and Valley [2005] FCWA 98 [45].
Further, there is at least one example of a Commonwealth law, namely sections 41(3) and 69H(2) of the Family Law Act 1975 (Cth) conferring federal jurisdiction upon a state court, namely the Family Court of Western Australia, being held to result in the state court having accrued jurisdiction to determine non-federal claims: Manotis and Manotis [2016] FCWA 10 [151] per Crisford J citing Puddy and Grossvard and Anor [2010] FamCAFC 54 (Family Court of Western Australia has the same accrued jurisdiction as the Family Court of Australia).
54 Notwithstanding the opinion of Professor Lane and the result in Manotis and Manotis, there may be reason to question whether the result of the conferral of federal jurisdiction upon the IM Court by s 539(2) FW Act is an accrued jurisdiction to determine a claim of the nature of the Common Law Reasonable Notice Obligation. Of significance to the underlying rationale of accrued jurisdiction of federal courts and of the Family Court of Western Australia is the use of the word ‘matter’ to delineate the ambit of the jurisdiction being conferred by the relevant Commonwealth law: Rizeq v Western Australia [2017] HCA 23; 91 ALJR 707 at [55] per Bell, Gageler, Keane, Nettle and Gordon JJ; Ruane & Bachmann-Ruane and Ors (Accrued jurisdiction) [2012] FamCA 369 [36]ff (Murphy J). Section 566 of the FW Act confers jurisdiction upon the Federal Circuit Court in relation to any civil matter arising under the FW Act. The jurisdiction of the Federal Circuit Court to determine non-federal civil claims within the (subject) matter of the federal claim may be more readily inferred from the text of s 566 of the FW Act compared to the text of s 539(2) of the FW Act conferring the power on a person to apply to the IM Court in relation to the contravention of a civil remedy provision.
55 In the result, I have not found it necessary to resolve the question whether the IM Court has an accrued jurisdiction to determine claims arising under non-federal law. This is because, making an assumption, in favour of Mr Cockman, that the IM Court does have accrued jurisdiction to determine claims arising under non-federal law, my view is that the Common Law Reasonable Notice Obligation would not fall within the accrued jurisdiction of this court. In Wright v Norris Real Estate Pty Ltd [2016] FCCA 707, in the context of consideration of whether the Federal Circuit Court had accrued jurisdiction to determine a cross-claim by an employer alleging a breach of a common law duty of fidelity in answer to an employee’s claim made under the FW Act, Riethmuller J states (omitting quotation marks and citations):
7. …[A]ssociated disputes must have one common substratum of individual facts and that the determination of one dispute is essential to the determination of the other. The central task is to identify the justiciable controversy. In civil proceedings, that will ordinarily require a close attention to the pleadings (if any) and to the factual basis of each claim.
8. …[I]t is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter. … [T]he question is not at large. What is a single controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships. There is but a single matter if different claims arise out of common transactions and facts or a common substratum of facts, notwithstanding that the facts upon which the claims depend ‘do not wholly coincide’. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other…. Conversely, claims which are completely disparate, completely separate and distinct or distinct and unrelated are not part of the same matter. Often, the conclusion that, if proceedings were tried in different courts, there could be conflicting findings made on one or more issues common to the two proceedings will indicate that there is a single matter.
…
10. In this case, there are no disputed questions of fact or law that are common to both the claim and the cross-claim. There is no dispute that the applicant was employed by the first respondent during the period covered by the cross-claim, nor any dispute as to the nature and terms of that employment that are relevant to the claim.
11. To the extent that there is any dispute relating to the contract of employment, it is only as to the extent of the duties of fidelity or duties of care that the employee owed the employer which does not affect the applicant’s claim under the Fair Work Act.
…
13. Whilst the relationship of the parties results from their contractual relationship as employer and employee, and that relationship is relevant in each proceeding (albeit as an undisputed relationship), the nature of the claims is otherwise disparate.
56 The civil remedy provisions of the FW Act relevant to Mr Cockman’s claim (and which are identified in s 539(2) of the FW Act are): s 119 on redundancy; sections 90 and 94 on annual leave entitlements; s 535 on record keeping; and s 117 on payment in lieu of notice. The substratum of transactions and facts involved in the application of those provisions is separate and distinct from the transactions and facts that would be involved in the determination of the claim based on the Common Law Reasonable Notice Obligation. The FW Act claim requires consideration of facts and transactions relevant to statutory concepts of ‘associated entity’, ‘cashed out annual leave’ and, for the purpose of s 117 of the FW Act, the length of Mr Cockman’s employment. Consideration of a claim based on the Common Law Reasonable Notice Obligation also involves consideration of the length of Mr Cockman’s employment. However, the start date (12 December 2011) and termination date (18 November 2013) of Mr Cockman’s employment are not in dispute. There is no possibility of conflicting findings in different courts on that issue. The facts and issues relevant to the common law claim may be gleaned from the summary of relevant law made by the Court of Appeal in Western Australia in Rogan-Gardiner v Woolworths Ltd [2012] WASCA 31 (Newnes JA with whom McLure P and Allanson J agreed):
46 …[T]he reasonable time for the fulfilment of the [common] purpose [of the parties] is a matter to be determined as at the date of the notice. The common purpose is frequently derived from the desire that both parties may be expected to have to cushion themselves against sudden change, giving themselves time to make alternative arrangements of a sort similar to those which are being terminated.
47 …[T]he primary purpose of giving a period of notice was to enable the employee to obtain new employment of a similar nature.
…
49 The length of the required notice in any case is a question of fact to be decided in the light of the objective circumstances as they exist at the time the notice is, or should have been, given: Saad and Macauslane.
50 …[C]onsiderations which may be relevant to the determination of the period of reasonable notice include the 'high grade' and importance of the position; the size of the salary; the nature of the employment; the employee's length of service; the professional standing, age, qualifications, experience and job mobility of the employee; the expected period of time it would take the employee to find alternative employment; and the period that, apart from the dismissal, the employee would have continued in the employment. … [T]he factors which are relevant in any particular case must, of course, depend upon the particular facts of the case.
57 Significantly, the above facts and issues simply do arise under the FW Act claims.
58 It follows that if the IM Court does have accrued jurisdiction to determine claims arising under non-federal law, my view is that the Common Law Reasonable Notice Obligation does not fall within the accrued jurisdiction of this Court.
Conclusion
59 At the end of his employment, being the end of day of 18 November 2013, Mr Cockman was entitled to:
· $9,611.99, being four weeks (152 hours) redundancy pay as provided by s 119 of the FW Act, for the reasons set out in paragraph 37 above.
· $2,643.30, being 5.5 days (41.8 hours) accrued unpaid annual leave as provided by s 87 of the FW Act, for the reasons set out in paragraph 46 above.
· $4,805.99, being two weeks (76 hours) payment in lieu as provided by s 117 of the FW Act, for the reasons set out in paragraph 48 above.
60 The result is an entitlement, at the end of 18 November 2013, to $17,061.28 (269.8 hours at the relevant rate of $63.2368 per hour). Mr Cockman had been paid in advance for 19 and 20 November 2013 this must also be brought to account. After taking account of the payment in advance (by a reduction of $961.19 being 15.2 hours), the Company was required, under the FW Act, to pay Mr Cockman the sum of $16,100.
61 Section 547(1)(2) of the FW Act provides, in effect, that when making an order that an employer pay an amount to an employee the court ‘must, on application, include an amount of interest on the sum ordered unless good cause is shown to the contrary’.
62 I will hear from the parties on the precise orders to be made.




M. FLYNN
INDUSTRIAL MAGISTRATE