Commander Australia Limited v Kerr - [2004] NSWIRComm 74 - NSWIRComm 2001 case summary — Zoe

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Commander Australia Limited v Kerr

[2004] NSWIRComm 74

Industrial Relations Commission (NSW)|2001-08-13|Before: Wright J, Walton J, Staff J, Mr P

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Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2001-08-13

Before

Wright J, Walton J, Staff J, Mr P

Source

Original judgment source is linked above.

Judgment (67 paragraphs)

[1]

Industrial Relations Commission of New South Wales in Court Session

[2]

CITATION : Commander Australia Limited v Kerr [2004] NSWIRComm 74 APPELLANT: Commander Australia Limited PARTIES : RESPONDENT: David Andrew Kerr FILE NUMBER: IRC 4577 of 2003 CORAM: Wright J President; Walton J Vice-President; Staff J Appeal - Application for leave to appeal - Finding at first instance that annual remuneration was less than remuneration cap - s 108A of Industrial Relations Act 1996 - Whether annual remuneration was to be determined according to the actual amount paid to the employee in the 12 months preceding termination of employment or whether an incentive payment earned in previous financial year by reference to respondent's performance but paid during 12 months' prior to termination of the contract forms part of remuneration package for the purposes of s 108A - Purposive approach to interpretation - Importance of interpreting particular words in context - Held that remuneration package for the purpose of 108A was to be determined according to what applicant "paid" or "received" in the 12 months preceding termination of employment - Leave to appeal granted - Appeal upheld - Decision set aside. CATCHWORDS : Unfair contract - Appeal - Application for leave to appeal - Finding at first instance that annual remuneration was less than remuneration cap - s 108A of Industrial Relations Act 1996 - Whether annual remuneration was to be determined according to the actual amount paid to the employee in the 12 months preceding termination of employment or whether an incentive payment earned in previous financial year by reference to respondent's performance but paid during 12 months' prior to termination of the contract forms part of remuneration package for the purposes of s 108A - Purposive approach to interpretation - Importance of interpreting particular words in context - Held that remuneration package for the purpose of 108A was to be determined according to what applicant "paid" or "received" in the 12 months preceding termination of employment - Leave to appeal granted - Appeal upheld - Decision set aside. Industrial Relations Act 1996 s 83 s 106 s 108A s 108B LEGISLATION CITED : Industrial Relations Amendment (Unfair Contracts) Act 2002 Interpretation Act 1987 s 33 s 34 Workplace Relations Act 1996 (Cth) Austeck Pty Limited v Charalambos Atsalos [2003] NSWIRComm 290 Brasier v Link Recruitment Pty Ltd Whelan C, 13 August 2001, Print PR 907688 Carlton Brewery Limited v Federal Commissioner of Taxation (1947) 73 CLR 446 CIC Insurance Limited v Bankstown Football Club (1997) 187 CLR 384 Club Employees (State) Award and other Awards, Re (2002) 122 IR 272 Construction, Forestry, Mining and Energy Union (New South Wales Branch) v Delta Electricity [2003] NSWIRComm 135 Crowe v UCS Developments Pty Ltd [2003] NSWIRComm 234 Crown Employees (New South Wales Fisheries Salaries and Conditions of Employment) Award [2003] NSWIRComm 405 CASES CITED : Fischer v SMS Employees Pty Ltd Watson SDP, 19 September 2000, Print T0978 Flaherty v Intertan Australia Ltd [2000] NSWIRComm 225 Fox v GIO Australia Limited [2002] 56 NSWLR 512, (2002) 120 IR 410 Jones v Wrotham Park Settled Estates [1980] AC 74 Kerr v Commander Australia Limited [2003] NSWIRComm 232 Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 Mills v Meeking (1990) 169 CLR 214 Mitchforce Pty Ltd v Starkey (No 2) [2003] NSWIRComm 458 Police Association of New South Wales v Commissioner of Police (2002) 123 IR 301 Whittaker v Comcare (1998) 86 FCR 532 HEARING DATES: 02/23/2004 DATE OF JUDGMENT: 04/08/2004

[9]

3 The evidence on the issue was set out by her Honour in the judgment under appeal in the following terms: [20] The applicant's total remuneration on appointment on 6 November 2000 (financial year 00/01), as set out in his letter of employment dated 19 September 2000, was: Base Salary $170,532 Superannuation (minimum) $ 9,468 Fixed Remuneration $180,000 Management Incentive at 100% achievement $ 60,000 Total Remuneration $240,000 [21] The applicant was also advised in that letter of employment that "[incentive] payments will be made after the audit sign-off and will generally occur in the September payroll". [22] As is clear, the nature of the incentive plan was such that the actual money amount, if any, that would be paid to the applicant as part of his remuneration for any financial year, could not be determined until that particular financial year had been closed off after 30 June i.e. the amount of his incentive payment, if any, for the period 6 November 2000 to 30 June 2001 (FY 00/01) would not be known until after 1 July 2001 (FY01/02). [23] By letter dated 4 September 2001, the applicant was advised: I am pleased to confirm the approval of your incentive payment for the period 1st July 2000 to 30th June 2001. Based on my recommendation, the payment of: $39,860-00 less tax will be included in your September 2001 pay. [24] That payment was part of his remuneration for the FY 00/01, but was paid to him in the FY 01/02. [25] By letter dated 23 July 2001, the applicant was advised: I am pleased to advise that effective July 1, 2001 your total remuneration is increased from $240,000 to $254,400 per annum. As part of this your fixed incentive (base salary, superannuation and car) will remain at $180,000 and your incentive for 100% performance under the attached 2001/2 PlesTel Management Incentive Plan will increase from $60,000 to $74,400 per annum. [26] The effect of that letter was that the applicant's remuneration for the FY 01/02, comprised $180,000 base salary, with the possibility that that amount would be increased by up to $74,400 if the conditions of the Management Incentive Plan were satisfied. [27] By letter dated 11 September 2002 (two months after his position had been made redundant), the applicant was told: Commander Communications Limited's full year results for the year ended 30 June 2002 have been announced. As you will be aware, the Management Incentive proportion of your total remuneration for the last financial year [FY 01/02] was dependant on the company's results. (My emphasis) ... Unfortunately the financial goals set for 2001/02 were significantly underachieved. Therefore you are not eligible for any Management Incentive payment. This applies without exception to all employees covered by the Management Incentive Plan. [28] The result of there being no incentive payment made to the applicant for the FY 01/02 meant that his total remuneration for that financial year was $180,000.

[10]

4 Her Honour found that the relevant remuneration package for the purposes of the s 106 application was $180,000. Her Honour's detailed analysis of the issues was as follows: [31] The words "is paid or received (or is payable and receivable)", particularly relied upon by Mr Kite, cannot be considered in isolation but must be read in context with the remainder of s 108A which includes a number of specifically defined terms: contract of employment, employment benefit, monetary remuneration, remuneration cap, remuneration package. [32] The applicant's remuneration package for the FY 00/01 comprised a base rate of $180,000 and a management incentive of $60,000. The base rate was paid during that financial year. That payment, in terms of s108A(1)(a) was not paid or received (or payable or receivable) during the period of 12 months immediately before the termination of the applicant's services. However, a management incentive payment for the FY 00/01 did become due and payable, and was paid to the applicant, in September 2002 [ sic, the relevant date should be September 2001], a date which was during the period of 12 months immediately before his termination. [33] In accordance with the applicant's contract of employment his remuneration package for the FY 01/02 comprised a base rate of $180,000 and a management incentive of $74,400. The base rate of $180,000 in that remuneration package was paid or received during the period of 12 months immediately before his termination. [34] The payment of the management incentive of $74,400 for the FY 01/02, was not guaranteed, but, if it were to become payable or receivable, payment of that component of the applicant's remuneration package for the FY 01/02, would become payable and would be paid, in accordance with past practice during September 2002 (FY 02/03), two months after the applicant's termination. [35] However, no management incentive became payable as part of the applicant's remuneration package for the FY 01/02. That had the result that the applicant, in the period of 12 months immediately before his termination received, in accordance with his contract of employment for that period, only the base rate of $180,000 included in his remuneration package for the FY 01/02.

[38]

29 The essential issue in this matter is the proper construction of s 108A of the Industrial Relations Act as it bears on the issues in the current proceedings. That provision is in the following terms: 108A Employment contracts in respect of which applications cannot be made (1) An application cannot be made for an order under this Division if the application relates to a contract of employment under which: (a) a remuneration package that exceeds the remuneration cap is paid or received (or is payable or receivable) during the period of 12 months immediately before the application is made (or, if the application concerned relates to a contract that has been terminated, immediately before the termination), or (b) a remuneration package is paid or received (or is payable or receivable) during a period of less than 12 months immediately before the application is made (or, if the application concerned relates to a contract that has been terminated, immediately before the termination) that would, if the remuneration package had been paid or received (or been payable or receivable) for a period of 12 months, have exceeded the remuneration cap. (2) An application cannot be made for an order under this Division by a person who is a partner carrying on a business if: (a) the application relates to a contract between that partner and the other persons carrying on that business in partnership, and (b) the share of the net profits, or payments contingent on the net profits, of the business that are paid to or received by (or payable to or receivable by) the applicant during the period of 12 months immediately before the application is made (or, if the application relates to a contract that has been terminated, immediately before the termination) exceed: (i) $200,000, or (ii) if an amount is prescribed for the purposes of paragraph (b) of the definition of "remuneration cap" in subsection (3) - that amount. (3) In this section: "contract of employment" means any contract or arrangement under which work is done by a person in the capacity of an employee, and includes a related condition or collateral arrangement with respect to such a contract. "employment benefit" means a benefit provided to an employee at the cost of his or her employer (being a benefit of a private nature) and, without limitation, includes: (a) contributions payable to a superannuation scheme by an employer in respect of the employee, including any liability of that employer to make any such contributions or to pay costs associated with that scheme, or (b) the provision by an employer of a motor vehicle for private use by the employee, or (c) any other benefit prescribed by the regulations for the purposes of this definition. "monetary remuneration" includes any performance-related bonus or incentive payment. "remuneration cap" means: (a) $200,000, except as provided by paragraph (b), or (b) any greater amount prescribed by the regulations (being a regulation that increases the amount by reference to increases in the amount referred to in section 83 (1) (b)). "remuneration package" means the total value of monetary remuneration and employment benefits payable or receivable under a contract of employment.

[48]

39 In Crowe v UCS Developments Pty Ltd the Full Bench referred to the Explanatory Memorandum to the Industrial Relations Amendment (Unfair Contracts) Act 2002. It is plain that reference to extrinsic material, such as parliamentary debates and papers, is permissible in the process of statutory interpretation: see s 34 of the Interpretation Act 1987. The intention of the Bill and of the Explanatory Memorandum to the Bill was considered in Crowe v UCS Developments Pty Ltd at [34] in the following way: Section 108B was enacted as a part of the amendments made to the Industrial Relations Act by the Industrial Relations Amendment (Unfair Contracts) Act 2002 which took effect on 24 June 2002. The intention of the amending Act in relevant respects is reasonably plain on its face. It was intended that applications seeking orders directed towards contracts of certain identified types and satisfying certain conditions, should be removed from the scope of the unfair contracts provisions of the Act; namely, those applications which seek to vary or avoid contracts (as defined) providing a remuneration package that exceeds an identified "remuneration cap", or those which seek an order to vary or avoid the terms of certain kinds of partnership agreements. The amending Act also required that any application for an order under s 106(1) be brought within 12 months of the termination of the relevant contract or arrangement. Those observations seem to be confirmed by the objects of the amending Act, identified in this way in the Explanatory Memorandum to the Bill: (a) to prevent an application being made to set aside or vary a contract of employment by the making of an unfair contract order if the remuneration package paid or receivable under the contract during the 12 months preceding the application (or, if paid or receivable for a shorter period, that would have been paid or receivable if converted to an annual basis) exceeds $200,000 (or a greater indexed amount), and (b) to prevent an application being made to set aside or vary a contract between partners in a partnership by the making of an unfair contract order, and (c) to require the Commission to take into account whether or not an applicant (or person on behalf of whom an application is made) took any action to mitigate loss in assessing the amount of money payable in connection with a contract that is set aside or varied by an unfair contract order, and (d) to require an application for an unfair contract order in relation to a contract that has been terminated to be made within a period of 12 months after termination.