David Andrew Kerr v Commander Australia Ltd [2003] NSWIRComm 232 | Case summary

1 On 23 April 2003, David Andrew Kerr (the applicant) filed a Summons for Relief under s 106 of the Industrial Relations Act 1996 (the Act) against Commander Australia Limited (formerly PlesTel Pty Limited) (the respondent). 2 The relief sought by the applicant included orders varying or avoiding his contract of employment with the respondent, the grant of exercise of options and/or payment of moneys in relation to them and redundancy payments, plus interest and costs. 3 The applicant commenced work with the respondent on 6 November 2000 and his position became redundant as from 5 July 2002. 4 On 7 May 2003, the respondent filed a Notice of Motion seeking the following: 1 an order setting aside the originating process filed by David Andrew Kerr in this matter in the Industrial Relations Commission of New South Wales in Court Session on 23 April 2003 and served on Commander Australia Limited on 30 April 2003; and 2 a declaration that an application can not be made by David Andrew Kerr for relief under section 106 of the Industrial Relations Act 1996 (the Act) in respect of the contract of employment that is subject of these proceedings; and 3 an order for costs. 5 Grounds and reasons advanced to support that Notice of Motion are that: 1 The respondent to this Motion (David Andrew Kerr) was employed under a contract of employment under which he was paid a remuneration package in excess of the remuneration cap during the period of 12 months immediately before the termination of the contract. 2 The application in the proceedings relates to the contract of employment referred to in paragraph 1. 3 Under section 108A of the Act no application can be made under section 106 of the Act in respect of the contract of employment. 4 The application is not competent to invoke the jurisdiction of the Industrial Relations Commission of New South Wales in Court Session under section 106 of the Act. 6 The total payments made to the applicant during the period 5 July 2001 to 5 July 2002 the 12 months limitation period set by s 108(1)(a) in relation to the making of an application under s 106, were $221,194.54. That amount of $221,194.54 included the incentive payment of $39,860.00 made to the applicant in September 2001. 7 (Because of the almost exact coincidence of dates, it is convenient to also refer to "the 12 months limitation period set by s 108(1)(a)" as FY 01/02). 8 In this decision I refer to each of the parties by its standing in the substantive proceedings. Submissions - Respondent (Applicant on the Motion) 9 The position advanced by Mr P Kite SC on behalf of the respondent was direct. The applicant had actually received the amount of $221,194.54 as remuneration during the period 5 July 2001 and 5 July 2002. He therefore, in accordance with s 108A(1)(a) and s 108A(3)(a), definition of remuneration cap, could not make an application for an order under Division 2 of Part 9 of Ch 2, unfair contracts, of the Act. 10 The words "is paid or received" in s 108A(1)(a) set a very objective test: what was paid was received. In this case, the $39,000 was paid and received in the relevant period and it was payable and receivable in the relevant period that being the 12 months immediately before the applicant's termination. 11 Mr Kite relied upon a decision of Grayson DP in Flaherty and Intertan Australia Ltd [2000] NSWIRComm 225 to support his submissions. The applicant in that case had sought relief under s 84 of the Act from alleged unfair dismissal. The respondent challenged the jurisdiction of the Commission to hear and determine the matter on the basis that the applicant's annual remuneration exceeded the statutory limit prescribed by s 83(1)(b) of the Act. Two components of the remuneration were said to bring the remuneration above the statutory limit: private usage of a car, and an annual bonus paid after the end of the financial year to which it was related. 12 In the course of his decision at par [19] and par [20], his Honour implied the proposition that the only remuneration within the meaning of s 83(1)(b), referred to the remuneration actually received in the relevant period of 12 months preceding termination of employment. The language in s 108A was even clearer with its specific referred to "paid or received" during the relevant period. Submissions - Applicant (Respondent to the Motion) 13 Mr A Tudehope of counsel on behalf of the applicant submitted that the amount of the incentive payment, though actually received in the FY 01/02, in fact referred back to remuneration for the FY 00/01. 14 The applicant's remuneration for the twelve months prior to his termination on 5 July 2002 was therefore $180,000 because, as the applicant had been advised on 11 September 2002, no incentive payment would be made for the FY 01/02. 15 That remuneration of $180,000 for the period 5 July 2001 to 5 July 2002 was therefore under the remuneration cap of $200,000 that would preclude the applicant, in terms of s 180A(a) and s 180A(3), definition of remuneration cap at (a) of that definition, from prosecuting an application for relief pursuant to s 106. 16 In his examination of s 108A, Mr Tudehope stressed the importance of the words "remuneration package". Legislation 17 Insofar as is relevant s 108A provides as follows: 108A (1) An application cannot be made for an order under this Division if the application relates to 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 … (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. … monetary remuneration includes any performance-based bonus or incentive payment. … remuneration package means the total value of monetary remuneration and employment benefits payable or receivable under a contract of employment. Consideration 18 Both counsel were in agreement that it was appropriate at this stage of the proceedings to determine the preliminary objection to jurisdiction, Mr Kite referring to Euphoric Pty Limited v Ryledar Pty Limited (2002) 117 IR1 and Virtue v NSW Department of Education and Training (1999) 92 IR 428 at 447-448 and to the exposition of the Hickman principle, with special reference to proposition (e) at [85] in Mitchforce v Industrial Relations Commission & ors [2003] NSWCA 151. Mr Kite submitted that "the existence of "inviolable limitations or restraints" on jurisdiction in relation to proposition (e) arose in these proceedings because of s108A. 19 All evidence that could be brought forward on this issue was before the Court. 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. 29 The applicant was employed under a contract of employment, the terms of which were reviewed at the commencement of the financial year and varied if the proposed variations were satisfactory to the applicant. 30 The applicant was employed for less than two years and his original contract of employment was reviewed and varied only once. 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, 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. 36 In cases such as this, each one will have to be decided upon its own facts. Even if the applicant had received the amount of $19,999 as a management incentive payment for FY 01/02 after his termination he would have been within the cap of $200,000. If he had received $20,001, he would be barred by s 180A from making an application under s 106. 37 Section 83(1)(b) and s 108A use different terminology to set a remuneration cap barring access to the jurisdiction of the Commission but it is not necessary, in my view, for the purposes of this judgment to explore those differences in considering the case of Flaherty referred to by senior counsel for the respondent. 38 The principle applied by Grayson DP in Flaherty at pars [26] [27] was that bonuses paid consistently with obligations under employment contracts, as opposed to bonuses paid sporadically, will be included in consideration of annual remuneration even if received after the close of the financial year. In Flaherty the amount of the bonus was related back to the applicant's annual remuneration for that financial year and the resulting total took the application above the remuneration cap for the purposes of s 83(1)(b). 39 Even if it were to be assumed that the incentive payment made to the applicant in September 2001 was not payment of a sporadic bonus, when the same principle that was applied in Flaherty is applied to that September payment, the result is the same in that it would be taken into account in the applicant's remuneration received in accordance with his contract of employment for the period 6 November 2000 to 30 June 2001. 40 However, I do not take into account in this decision any distinction between a sporadic or regular bonus. The point to be considered is whether the management incentive paid in September 2002 was an element of a remuneration package under a contract of employment paid or received (or payable or receivable) in relation to employment undertaken during the 12 months immediately before the termination of the applicant's services. 41 Mr Tudehope to support his submissions as to a proper understanding of s 108A relied upon the Second Reading debate to insert the word "annual" before the words "remuneration package" in s 108A(1)(a). The word "annual" is not found in s 108A, and, in my view, making such an assumption, does not assist my deliberations. 42 The Court finds that the applicant was employed under a contract of employment under which he was not paid, for the period of 12 months immediately before the termination of that contract, a remuneration package in excess of the cap set by s 108A of the Act in relation to the making of an application pursuant to s 106. 43 The Court orders the Motion be dismissed. 44 The respondent is to pay the applicant the costs of the Motion, either as agreed or as assessed. *****************************

David Andrew Kerr v Commander Australia Ltd

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Judgment (7 paragraphs)

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