Commonwealth v Baume

JUDGMENT:

• 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: Grayson DP DATE: 15 November 2000

Matter IRC 3051/2000 ANDREW JOHN FLAHERTY v INTERTAN AUSTRALIA LTD Application re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION 1 By application filed on 30 June 2000, Andrew John Flaherty (the applicant) seeks relief under section 84 of the Industrial Relations Act 1996 (the Act) from alleged unfair dismissal by Intertan Australia Ltd (the respondent). 2 In the course of conciliation on 24 July 2000, the respondent indicated its intention to challenge the Commission's jurisdiction to hear and determine the applicant's claim on the basis that his annual remuneration exceeded the $ 69,200 statutory limit prescribed for the purposes of s 83 (1) (b) of the Act. 3 The respondent was directed to furnish the applicant with written particulars of that and any allegations upon which it relied in terminating his employment on 9 June 2000. 4 The matter went over for further conciliation to 8 September 2000 on which date the Commission acceded to the request of the parties that the jurisdictional issue be listed for hearing and determination. 5 At hearing on 3 November 2000, Mr. M. Vincent of counsel appeared for the applicant and Mr. A. Macinnis, solicitor for the respondent. 6 The respondent's challenge to jurisdiction raises two questions for decision which may be broadly stated thus: a) whether an amount of $38,610 described as an "annual bonus" paid in July 1999 but calculated by reference to the performance of stores under the Applicant's management for the financial year from 1 July 1998 to 30 June 1999 is to be included in the calculation of the applicant's annual remuneration b) whether the applicant's private use generally of a motor vehicle provided by the Respondent causes the applicant's remuneration to exceed the threshold and more particularly whether in that context travel to and from work constitutes private use. 7 If either of these questions is answered in the affirmative, the result will be that the Commission lacks jurisdiction. If both questions are answered in the negative, then it is accepted that the application is within jurisdiction. 8 The parties agree, leaving the disputed issues aside, that the applicant's conditions of employment are not set by an industrial instrument and that his annual remuneration for the purposes of section 83 (1) (b) is otherwise as follows:- Base salary $ 37,000 Base bonus $ 10,000 Superannuation $ 6,200 Stock Option Plan $ 355 Monthly Bonus $ 6,554 TOTAL $60,109 9 Further and notwithstanding the numerous authorities cited by the advocates within the course of argument, their collective research was unable to discover anything directly on point in respect of either question raised for decision. 10 In saying that, it is of course well settled that the value of the private use of the "company" motor vehicle is to be ordinarily regarded as part of an employee's remuneration. The authorities, however, appear silent on the question whether travel to and from work constitutes private use. 11 Evidence was called from the applicant and from Mr. M. Page, the respondent's National Administration Manager and a number of documents were admitted into evidence on either side of the record. 12 As to the first issue the evidence relevantly disclosed three types of bonus which were paid to the applicant as part of the respondent's contractual obligations to him in his capacity of District Manager. 13 There was a base bonus, a monthly bonus and an annual bonus. 14 The base bonus was made up of an amount of $200.00 paid each week by way of an advance against the monthly and annual bonuses each of which in turn were calculated by reference to the business performance of 31 stores under the applicant's control as District Manager. 15 The annual bonus is as the name implies calculated on the basis of the year round business performance of those stores between 1 July of each year and 30 June the following year and its quantification and actual payment to the bonus recipient, in this case the applicant, takes place after profit and loss statements for the year are finalised. 16 The amount of $38,610 paid to the applicant in late July 1999 was in that way, referrable to the business performance and in turn his personal contribution thereto, of stores in his district throughout the period 1 July 1998 to 30 June 1999. 17 The applicant's dismissal from the respondent's employ took effect on 9 June 2000 and if the language of the statute in its reference to annual remuneration is construed to mean and include the remuneration actually received by the applicant during the 12 months immediately before his dismissal, then his claim is well beyond jurisdiction. 18 With every respect to the careful and considered submissions put by the applicant's counsel, it is difficult to see how it could be otherwise in the circumstances of this case although one can readily appreciate why the applicant would wish it to be so when it is considered that inclusion of the annual bonus in the annual remuneration amount for the year in which it was earned rather than the year in which it was paid would greatly assist him because, such was the business performance of his stores in the 1999/2000 year, a nil annual bonus was earned. 19 The 1999/2000 year, conversely, would seem to have been something of an aberration in that regard and it is generally accepted by the parties, I think, (although there was no direct evidence as to this) that the movement of the annual bonus in any other relevant year of the applicant's employment from the "payment" year to the "earnings" year would have been a sleeveless forensic errand for him because his annual bonus in other years was of sufficient quantum to cause his annual remuneration to exceed the rate specified for the purpose of s 83 (1)(b). 20 At all events, such a construction of s 83 (1)(b) is not available as I am disposed when the settled principles are properly applied. 21 Section 83 (1) (b) of the NSW Industrial Relations Act (the Act) is expressed as follows:-

83(1) [Application] This Part applies to the dismissal of a) - b) any other employee, except an employee for whom conditions of employment are not set by an industrial instrument and whose annual remuneration is greater than $62,200 (or such greater amount as is prescribed by regulations) 22 The regulations relevantly provide:- 5A(1) [Amount prescribed] For the purposes of section 83 (1) (b) of the Act, the amount prescribed is: a) except as provided by paragraph (b) - the specified rate referred to in regulation 30BB of the Workplace Relations Regulations of the Commonwealth from time to time, or b) that amount as indexed from time to time in accordance with regulation 30BF of those Regulations. 23 As at 1 July 1999 the specified rate became and remains for the purpose of these deliberations, $69,200. 24 Importantly, in my opinion, the NSW Parliament in enacting those provisions intended that there should be some degree of consistency in such matters between the Act and its federal counterpart and this, the respondent argues, lends weight to the proposition for which it contends in this case. 25 In that regard, Mr. Macinnis for the respondent drew attention to the provisions of Regulation 30BC of the Workplace Relations Regulations which relevantly define the rate of remuneration per year for jurisdictional purposes as the greater of:

(i) the remuneration actually received during the period of 12 months immediately before termination or (ii) the remuneration that the employee was entitled to receive in that period

and whilst it is not submitted that the federal Act binds this Commission, it is the respondent's contention in circumstances where as here neither the NSW Act nor the regulations contain an equivalent provision, preference ought be given to an interpretation of s 83 (1) (b) of the NSW Act which promotes consistency between the federal and state systems. I am inclined to agree 26 The Commission has in the past drawn distinctions between bonuses paid sporadically and gratuitously or by way of benevolent generosity by employers (see McBlane v National Transport Insurance Ltd (1997) 77 IR 185, Harrison DP) and bonuses paid consistently with obligations arising under employment contracts (see Taylor v Ragham Pty Ltd, McLeay, C 4 September 1998 unreported) . 27 In the former category, the bonus will be excluded from consideration of annual remuneration. In the latter category, it will be included. 28 There is no dispute in this case that the applicant's bonus falls into the latter category albeit, as the applicant would have it, for inclusion in annual remuneration for the 1998/99 year rather than the 1999/2000 year in which he was dismissed. 29 In that regard and with every respect to the applicant's counsel, it seems to me that his reliance in part on the Commission's decision in Lewis v Archer Hydraulics Pty Ltd (Tabbaa, C IRC 2961/97, 31 August 1998 unreported) may be somewhat misplaced. 30 In that case, the learned Commissioner rejected the proposition urged upon her by the applicant that she should construe the term "annual remuneration" as requiring the averaging of the applicant's annual rate of pay over the 12 months prior to his dismissal in order to arrive at a lower amount and thereby bring the applicant within jurisdiction. 31 The Commissioner there had evidence before her going to an increase in the applicant's annual salary rate from $50,000 to $57,000 shortly before the dismissal and she chose after examining various authorities including Shead v Summit Western Pty Ltd [(1998) 81 IR 347] to adopt the approach urged upon her by the respondent namely, that the most recent and higher rate of annual salary was the appropriate starting point for the calculation of annual remuneration. 32 This had the effect of denying the applicant access to the jurisdiction when other components of his remuneration such as superannuation, motor vehicle private use, home telephone and so on were added in. 33 The approach Tabbaa, C. chose and with respect, was bound to choose consistently with the decision of the Full Bench in Shead's case, was calculated to avoid the unintended consequences about which the Full Bench in Shead spoke in the following terms at 356,357: "If the word "remuneration" is interpreted on the narrow basis urged …………………… then a broader class of person would have access to relief under s 84 than would be the case if the word is used with its ordinary broad meaning This would be so because so long as the monetary compensation of an employee's package fell below the specified sum the employee would be entitled to bring an application, irrespective of the total value of the package Adoption of such a narrow construction would, however, have other relevant consequences. In s 89 the orders which may be made in favour of a successful applicant are dealt with . They include in s 89 (5) the power to order compensation "not exceeding the amount of remuneration of the applicant during the period of 6 months immediately before being dismissed". Thus, in adopting a narrow construction o f the word "remuneration" limited to the monetary component of an employee's package the compensation order which the Commission could make would be constrained to the monetary component of the package. Agreements which employees and employers reached from time-to-time about composition of "remuneration" packages would have consequences both for the right to have a termination decision reviewed by the Commission under the 1996 Act and the orders which the Commission could make in a successful case.

And later at 358 It might be assumed, at the least, that the word "remuneration" is used consistently within the unfair dismissal provisions in Pt 6 of Ch 2 of the 1996 Act. Hence, the dilemma raised earlier must be faced - the inevitable consequence of allowing a larger class of person access to the remedy would be to restrict the orders of compensation under s 89 to the monetary portion of a total package. In determining the meaning of the word "remuneration" as used in s 83, consideration must be given to its use in provisions elsewhere in the statute. Words of a statute take their colour from their surroundings and may therefore be limited by their context and by any words of limitation used in connection with the word the meaning of which is to be ascertained; such words of limitation must obviously be given effect: see Commonwealth v Baume (1905) 2 CLR 405 at 414 per Griffith CJ." 34 It was not, as I would read the decision in Lewis , that the Commissioner was establishing or attempting to establish any rule which required strict observance of circumstances at the date of dismissal, it was that she was in the circumstances of that case interpreting the words in s 83 (1) (b) in a way which afforded them their ordinary broad meaning and which allowed the unintended consequences discussed in Shead's case to be avoided. 35 Those principles for interpretation of section 83 have also been discussed and reaffirmed more recently by a Full Bench in Kagan v Primus Telecommunications (Aust.) Pty Ltd (No. 2) [2000] NSWIR Comm 185 and as Mr. Macinnis for the respondent in this case points out with some persuasive force, the principle of interpreting beneficial legislation beneficially does not require a construction which benefits the applicant in this case. 36 I am of the view that the relevant test to be applied in this case should involve consideration of when the annual bonus became due and payable to the applicant under the terms of his employment contract. In that regard, the evidence compellingly leads to a conclusion that it was due and payable at the time it was actually paid namely as soon as practicable after 30 June 1999 when the year round business performance of stores under the applicant's control could be measured. 37 I find that the applicant's annual remuneration included the annual bonus amount of $38,610 and is therefore above the $69,200 amount prescribed by the regulations for the purposes of s 83 (1) (b) of the Act. 38 In such circumstances, the parties agree that it is unnecessary to decide the question raised as to the value to the applicant of the private use of the motor vehicle provided to him by the respondent and I put it aside accordingly with the quiet observation that it would in all probability have been decided in the applicant's favour on the evidence as it stands. 39 The applicant's claim is dismissed for want of jurisdiction. ------------------------------------------

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