All Districts Coating Pty Ltd v Barhoum

History of the proceedings before the Federal Magistrate 4 The history of the proceedings before the Federal Magistrate is as follows. The respondent (the applicant in the proceedings before the Federal Magistrate) instituted proceedings against the applicants (the respondents in the proceedings before the Federal Magistrate) alleging that his employment had been terminated in contravention of s 659(2)(a) of the WR Act. In his application, the respondent sought orders for reinstatement, compensation, and the imposition of a penalty on the applicants. The Federal Magistrate found that respondent's employment had been terminated in circumstances proscribed by s 659(2)(a) of the WR Act and imposed a pecuniary penalty on the applicants: Barhoum v All Districts Coating Pty Ltd & Ors [2008] FMCA 172 (22 February 2008). The Federal Magistrate, however, thought that there was insufficient material before the Court to properly assess either the reinstatement or compensation issues, and ordered the filing of further submissions and/or evidence in relation to these issues. The issues of compensation and reinstatement were only determined by the Federal Magistrate on 11 July 2008: Barhoum v All Districts Coating Pty Ltd & Anor (No 2) [2008] FMCA 924.

History of the proceedings in the Federal Court 5 On 18 April 2008, the applicants filed a notice of appeal in this Court, that is, after the Federal Magistrate made the first set of orders on 22 February 2008 (that were revised on 28 March 2008) but before the Federal Magistrate made the second set of orders on 11 July 2008. The orders made by the Federal Magistrate on 22 February 2008 (revised on 28 March 2008) were interlocutory (see All Districts Coating Pty Ltd v Barhoum [2008] FCA 1525), and hence leave to appeal should have been sought: s 24(1A) of the Federal Court of Australia Act 1976 (Cth). Indeed, when the matter was first before the Court, the question was raised about the applicants filing, in addition to the notice of appeal, an application for leave to appeal. The applicants did not take the step of applying for leave to appeal but sought to defend the institution of the appeal on the basis that the orders appealed from were final. The respondents filed a notice of motion, dated 23 May 2008, seeking that the notice of appeal be stuck out as incompetent. On 3 June 2008, I reserved my decision on the question of whether the appeal was incompetent. Meanwhile, on 5 September 2008 the applicants filed a notice of motion (that was amended on 2 October 2008) seeking to amend the notice of appeal to embrace the Federal Magistrate's further orders of 11 July 2008. 6 I did not deal with the applicants' notice of motion of 5 September 2008 and on 14 October 2008 I dismissed the appeal as incompetent. All Districts Coating Pty Ltd v Barhoum [2008] FCA 1525.

The Federal Magistrate's approach to the identity of the respondent's employer 7 I will refer shortly to the grounds of appeal. However as one central element, they challenge the approach of the Federal Magistrate of not determining who the employer was and failing to find, as the applicants contended before the Federal Magistrate, that the second applicant was the employer. The evidence before the Federal Magistrate led his Honour to make the following observations and findings about the third applicant and the two companies he controlled, which are the first and second applicants (the first second and third respondents respectively in those proceedings) at [40] and [41] of the reasons for judgment published on 22 February 2008: Barhoum v All Districts Coating Pty Ltd & Ors [2008] FMCA 172: While, clearly, the first and second respondents are separate entities, on balance and given the evidence before the Court, I am satisfied that the third respondent used both entities interchangeably in the conduct of the affairs of the painting business, in which both he and the applicant were engaged at the relevant times. The respondents plainly had some difficulty in producing, even before this Court, relevant documentation going to the issue of who, or which entity, it was exactly that employed the applicant, or was given to the applicant during the time of his employment. Even additional documentation subsequently produced to this Court (for example, pay slips, group certificates etc) reveal that the third respondent used the first and second respondents interchangeably in the conduct relating to the business and, in particular, in the discharging of obligations relating to the pay, remuneration, and conditions of employment of the applicant (and other employees) and was perceived by others to have done so. 8 To similar effect were his Honour's observations and findings at [63] and [64]: In all the circumstances, therefore, based on the all the evidence provided to the Court, I take the view that Mr Habibeh was the driving force behind the painting business for some years, that up until April 2006, he used the first and second respondents interchangeably as vehicles for the running of his business. When his business ran into some difficulties in late 2005 and early 2006, he sought to restructure his affairs such as to isolate the legal and tax difficulties into which his business had found itself. I accept the applicant's submissions that the preferable view of the evidence before the Court is that the transfer of the directorship of the first respondent and his shares to the fourth respondent was a device to enable the isolation and to address the problems faced by the companies. I did not see this necessarily as an issue of transmission of business strictly within the meaning of Part 11 of the Act. The preferable view of the evidence is that Mr Habibeh operated his business using the first and second respondents interchangeably, and then, for the already stated reasons, sought to isolate his business difficulties from the future running of his painting business and he used, the transfer of shares and directorship of one of his companies to his wife as a means of achieving this objective. 9 Towards the conclusion of his Honour's reasons, the following was said at [106] and [107]: As set out above, the view that I have taken of the evidence and the circumstances presented to the Court, is that Mr Habibeh operated a painting business for some years and had registered, and was the shareholder and director of the second respondent from 1998, and the first respondent from 2004. On the evidence before the Court, that at least since 2004, his business operated using the two companies interchangeably for business purposes. The decision to terminate the employment of the applicant was plainly taken by Mr Habibeh (and from his letter of termination) purportedly acting on behalf of the second respondent. It is clear, therefore, that this order should be made as against the second and third respondents. The preferred view of the evidence is that, notwithstanding the transfer of the shares and directorship in the first respondent to his wife, I accept the applicant's submissions that the painting business continued with the use of the first respondent as the sole vehicle for its continuation. I take the view that the third respondent continues to be the active force in the operation of the painting business now and conducted through the vehicle of the first respondent. In this regard, and given this circumstance, the order as to penalty should also be made against the first respondent. 10 One of the orders made on 22 February 2008 was to the following effect (although these orders were subsequently amended on 28 March 2008 on the basis that the previous orders contained a minor typographical error): 1. The first respondent and/or second respondent and/or third respondent, having breached the requirements of s.695(2)(a)[sic] of the Act, pay a penalty of $7,000. The orders made on 11 July 2008 included the following:

1. There be no order as to the applicant's reinstatement to employment by the respondents.
2. The first and/or second and/or third respondents pay compensation to the applicant in the amount of $26,874.81.
3. The first and/or second and/or third respondents make a payment in respect of the applicant to the relevant superannuation trustee in the total amount of $100 per week, as between the date of termination (13 April 2006) and the date of this judgment (11 July 2008) (117 weeks): $11,700.
4. The first and/or second and/or third respondents make a payment in respect of the applicant to the ACIRT redundancy trust fund in the amount of $60 per week, as between the date of termination (13 April 2006) and the date of this judgment (11 July 2008) (117 weeks): $7,020.
5. The first and/or second respondents pay the applicant's costs as incurred between at the date of the making of the application (2 June 2006) and the date that the third respondent was joined as a party in the proceeding (13 October 2006).
6. The first and/or second and/or third respondents pay the applicant's legal costs as assessed from 14 October 2006 to 22 February 2008 (the date of the earlier judgement).
7. The first and/or second and/or third respondents pay the applicant's costs set in the amount of $1,000 in relation to the hearing on 14 May 2008. It can be seen that the orders are made against each of the applicants in terms that probably created joint and several liability. 11 The draft notice of appeal accompanying the application for an extension of time was cast in the following terms:
8. The learned Federal Magistrate erred in holding that the Respondent was terminated from his employment with any of the Appellants by reason of, or for any reason including, temporary absence from work by the Respondent because of illness or injury within the meaning of the regulations to the Workplace Relations Act.
9. The learned Federal Magistrate erred in failing to determine the identity of the employer of the Respondent.
10. Alternatively, the learned Federal Magistrate erred in failing to find that the Second Appellant was the sole employer of the Respondent.
11. Further, the learned Federal Magistrate exceeded his jurisdiction in making orders against persons who were not the employer of the Respondent.
12. The learned Federal Magistrate erred in holding that any of the Appellants should be liable in costs.
13. An order staying the orders of the learned Federal Magistrate pending determination of this appeal.
14. An order that the appeal be expedited.
15. An order that the time for the institution of this appeal be extended to 16 October 2008.
16. Such further or other grounds as the Court consider appropriate.

Consideration 12 It was common ground that the applicable test was that embodied in O 52 r 15 of the Federal Court Rules, namely, that time can be extended for special reasons. The decision of the Full Court in Jess v Scott (1986) 12 FCR 187 is still viewed as one of the more authoritative discussions on how the discretionary power should be exercised, although I note that O15 r 15 has been amended since that decision. In Jess v Scott, the Full Court observed (at 188) that leave to appeal out of time is to be determined by the Court's view of the demands of justice in accordance with the broad judicial discretion. Other authorities have pointed to matters that might inform the exercise of that discretion as including the explanation for the delay, the issues sought to be raised in the appeal (including the strength of the putative appellant's case), whether the appeal is bona fide and whether the judgment appealed against has been complied with by the putative appellant (on the assumption that no stay has been ordered). 13 In his submissions, counsel for the applicants submitted that, having regard to the history of the proceedings in this Court, there was a clear explanation for the delay in bringing the appeal. He also submitted that the Federal Magistrate was bound to determine who the employer was and, assuming contravention of the WR Act, could only make orders against the employer. The Federal Magistrate had failed to make the relevant finding as to who the employer was and, according to the applicants, had made orders that were, impermissibly, cast too widely. Counsel for the applicants contested the submission made on behalf of the respondent that the failure of the applicants, or one of them, to satisfy the monetary orders made on 11 July 2008 was a relevant consideration militating against extending time. Counsel for the applicants submitted, in effect, that the applicants were entitled to not comply with the orders but on the footing that the respondent could exercise rights of enforcement. 14 Counsel for the respondent submitted that there was no satisfactory explanation for the delay. He submitted that the Federal Magistrate had power to make the orders his Honour did and the failure to find who the employer was was not fatal. This was particularly so having regard to s 728 of the WR Act even though, as he accepted, that section had not been relied on in the proceedings before the Federal Magistrate. He also submitted that the respondent's non-compliance with the orders is a relevant consideration and that it could be inferred that the appeal was not brought bona fide. In that context, and more generally, he referred to the failure of the applicants to file, as required by O 52 r 15(3)(c) of the Federal Court Rules, an affidavit setting out the nature of the matter and the factual and legal issues in dispute. 15 I now consider these competing contentions. I accept that there is an explanation of sorts for the delay in instituting the appeal against the judgment of the Federal Magistrate. The orders made on 22 February 2008, which were finalised on 28 March 2008, were interlocutory and the applicants were entitled to wait until final judgment was given on 11 July 2008 before filing a notice of appeal challenging both sets of orders. I accept that there was uncertainty attending the status of the first orders (and the notice of appeal that had been lodged on 18 April 2008 against those orders), and that uncertainty remained until I gave judgment on 14 October 2008. However, it could not have been (and there was no evidence to this effect) that the applicants and those advising them believed, without qualification or reservations, that the appeal filed on 22 February 2008 was competent and that the notice of appeal could be amended to challenge the later orders of 11 July 2008. 16 The explanation, which I accept, was that there was uncertainty attending the status of the original notice of appeal (that is, whether the appeal was competent) and reluctance on the part of the applicants to incur the cost of filing a further notice of appeal once final judgment was given. If this were a case where there were no other factors militating against the extension of time, I might consider extending time given the position in which the applicants found themselves after they filed the original notice of appeal and before my judgment of 14 October 2008. That said, avoiding the cost of filing a further notice of appeal is a comparatively unsatisfactory explanation for failing to adopt what would have been the obvious and cautious approach, namely, filing within time a notice of appeal against the orders of 11 July 2008 in which the earlier orders could have also been challenged. 17 However other factors point clearly, in my opinion, to refusing to extend time for the filing and service of a notice of appeal. 18 The grounds of appeal challenge the approach of the Federal Magistrate in two respects. Firstly, they allege error on the part of the Federal Magistrate in concluding that the respondent was terminated from his employment by reason of, or for any reason including, temporary absence from work because of illness or injury. No attempt was made by counsel for the applicants to demonstrate error on the part of the Federal Magistrate by reference to his Honour's reasons or the evidence or both. Reading these reasons, one is left comfortable with the conclusion his Honour reached. For the purposes of assessing whether there is a strong or even arguable case, I put to one side this alleged error. This leads to a consideration of the other ground raised in the notice of appeal (separately identified in a number of specific grounds), namely, that the Federal Magistrate was bound to find who the employer was, failed to do so and made orders cast too widely that were beyond power. 19 The starting point is, perhaps, the submission of the applicants that the case is extremely strong in relation to two of the applicants. That is because two of them cannot logically have been the respondent's employer. Counsel for the respondent conceded, correctly, that it is at least arguable that in proceedings brought against an employer under s 663, the power to make orders conferred by s 665 is limited to making orders against the employer, even though the power to make any other order that the Court thinks necessary, provided for in s 665(1)(d), is not expressly limited to an order against the employer. That concession having been made, it is logically correct to say that two of the applicants, who could not have been the employer, cannot be ordered to make the payments required by the orders of the Federal Magistrate. 20 It is notorious that businesses, and particularly small businesses, are often structured in a way involving multiple companies and individuals, such that it can be very difficult to determine who the employer is in cases such as the present. The applicants contend that the employer was the second applicant. It is true that the letter of termination, signed by the third applicant, was expressed to be on behalf of the second applicant. However, as the Federal Magistrate found, the evidence was quite inconclusive about who the employer was and showed that the third applicant, who ran the painting business, used the first and second applicants comparatively indiscriminately for a range of commercial purposes associated with the business. The applicants did not take me to any findings or evidence that tended to demonstrate their contention (that the second respondent was the employer) was correct. This, in my opinion, is important in dealing with the applicant's contention that the case is very strong in relation to two of the appellants. The critical question is which two. 21 I presently do not see why whichever of the applicants is the employer should gain the benefit of this uncertainty, the resolution of which could ultimately operate to the benefit of the other two applicants. Putting it slightly differently, why should the applicant that is the employer be allowed to appeal, by the grant of an extension of time, when his or its case on this point is doomed to fail (because a finding will be made against him or it in the appeal that he or it is the employer). In the absence of the applicants pointing to findings or evidence that tended to demonstrate which of the applicants was the employer, I should proceed on the basis that it could be any of the three of them. 22 In any event, the orders, as I earlier indicated, are probably intended to create joint and several liability. Such orders create a common burden between the parties to the judgment, although execution of such a judgment may be directed or levied against and satisfied by one of the parties to the judgment: Trade Practices Commission v Manfal Pty Ltd (1991) 33 FCR 382 at 387. Accordingly, if the applicant that is the employer satisfies the judgment, it does so for the benefit of the other applicants. I have no doubt that the orders were cast in such a way that the intention was to create liability in relation to the specified sum only, which could be paid by one of the applicants or, by contribution, all of them. Thus the liability of the two applicants who are not the employer can be readily satisfied by the satisfaction of the judgment by the employer. This leads me to the last matter raised in argument. 23 Most of the orders made by the Federal Magistrate requiring payment of money have not been complied with (although I accept that the $7,000 penalty that was ordered to be paid in February 2008 has now been paid). No stay of the Federal Magistrate's orders was sought until a few days ago. A failure by an applicant for an extension of time to appeal to satisfy the money judgment against which the appeal is sought to be brought, can, in my opinion, be a relevant factor operating against extending time. 24 The application for an extension of time in which to file and serve a notice of appeal should be dismissed. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Solicitor for the Respondent: Construction, Forestry, Mining and Energy Union (NSW Branch)