Fair Work Act 2009

s.394 - Unfair dismissal

Application for an unfair dismissal remedy - company in voluntary administration - s 440D of the Corporations Act 2001 - whether permission of a Court required in these circumstances.

[1] On 12 July 2018, Mr David Wallis (Mr Wallis) made an application for remedy for unfair dismissal under s 394 of the Fair Work Act 2009 (Cth) (Fair Work Act). Mr Wallis' employment was terminated by Corridors College Limited T/A Corridors (Corridors/Administrators) on 22 June 2018.

[2] During the course of the matter the circumstances of Corridors changed when it was placed into voluntary administration. Consequently, the dispute before the Commission was whether s 440D of the Corporations Act 2001 (Cth) (Corporations Act), operated to stay the proceedings in the absence of the Administrator's (defined in paragraph 9) consent or with leave of the Court.

[3] I have found that s 440D of the Corporations Act does not represent a bar to the application for remedy for unfair dismissal.

[4] Having heard the matter on 30 October 2018, I allowed the parties (notwithstanding the notable absence of Corridors or its Administrators) to file further submissions addressing an authority that was raised in the telephone Hearing. On 31 October 2018, correspondence was received from a legal representative informing this Commission that the Administrators were legally represented and its client now no longer objected to the jurisdiction of the Commission having premised such objection on s 440D of the Corporations Act.

[5] I simply observe that there are potential consequences for the Administrators who have persistently, for the most part, been non-compliant with the Directions issued by this Commission and declined to present for Hearing. The Commission has discretion as to when and how it will deal with such an application and the matter will be listed shortly for the purpose of making further directions.

[6] Set out below are the reasons for my decision.

[7] On 11 October 2018, the parties attended a Mention. At the Mention both agreed to participate in a further conciliation conference with a view to seeing whether the matter could be resolved without proceeding to arbitration. The matter was listed for conciliation on 19 October 2018, and for a hearing on 30 October 2018 regarding the jurisdictional issue of the minimum employment period.

[8] Directions were issued to the parties on 11 October 2018 and 16 October 2018. The Directions issued on 16 October 2018 were issued subsequent to the email received from Lavan Legal on 15 October 2018. The email was from a solicitor from Lavan Legal advising Chambers that Corridors had instructed that it had been placed in voluntary liquidation and requested that the conciliation conference for 19 October 2018, be adjourned. Neither Corridors nor the Administrators attended the conciliation conference and it did not go ahead.

[9] On 18 October 2018, Mr Corey Turner (Mr Turner), Executive Restructuring Services, KPMG, informed Chambers by email that Corridors had been placed into voluntary administration on 17 October 2018 and that Messrs Clint Joseph, Matthew Woods and Hayden White (the Administrators) were appointed joint and several Administrators of Corridors pursuant to s 436A of the Corporations Act.

[10] Section 436A of the Corporations Act provides that a company may appoint an administrator if the board of that company thinks it is or will become insolvent:

(1) A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that:

(a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and

(b) an administrator of the company should be appointed.

(2) Subsection (1) does not apply to a company if a person holds an appointment as liquidator, or provisional liquidator, of the company.

[11] The role of an administrator is set out in s 437A of the Corporations Act and relevantly provides that:

(1) While a company is under administration, the administrator:

(a) has control of the company's business, property and affairs; and

(b) may carry on that business and manage that property and those affairs; and

(c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and

(d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration.

(2) Nothing in subsection (1) limits the generality of anything else in it.

Note: A PPSA security interest in property of a company that is unperfected (within the meaning of the Personal Property Securities Act 2009) immediately before an administrator of the company is appointed vests in the company at the time of appointment, subject to certain exceptions (see section 267 of that Act).

[12] Mr Turner further informed the Commission in the email dated 18 October 2018 that pursuant to s 440D of the Corporations Act, all proceedings were stayed in the absence of the Administrator's consent or with leave of the Court. Mr Turner then advised that the Administrators did not intend on providing their written consent for the proceedings to proceed. In a subsequent email dated 22 October 2018, Mr Turner advised the representative for Mr Wallis that the Administrators would not be filing any material on behalf of the respondent. [1]

[13] On 19 October 2018, Chambers issued to the attention of Mr Turner an email referring to the non-compliance with the Directions. A further email referring to ongoing non-compliance was subsequently sent to Mr Turner on 25 October 2018. On 25 October 2018, Mr Turner contacted Chambers and it was reiterated to him that compliance with the Directions of the Commission was required. Prior to the Hearing set down for 30 October 2018, Mr Turner was contacted and he confirmed that neither he nor the Administrators would attend the telephone Hearing.

[14] On 30 October 2018, Chambers informed the parties that the Hearing would be constrained to the issue regarding the stay under s 440D of the Corporations Act. Further, the respondent was directed to file with the Commission an Administrators Form 505 and any evidence setting out the prescribed information about the appointment had been published (see 450A of the Corporations Act). On 30 October 2018, Mr Turner sent to Chambers a copy of the Form 505, External Administration or Controllership Appointment of an administrator or controller. The company named on the Form 505 was Corridors College Ltd.

[15] The Hearing was conducted in the absence of the Administrators. Mr Mullally, the Applicant's representative (Mr Mullally), sought to rely on written submissions filed with the Commission and did not seek to tender any evidence. Having listened to the submissions that Mr Mullally sought to rely upon, and after bringing to the attention of the parties a further authority on the operation of s 440D, Mr Mullally and the Administrators, were provided with additional time until 4.00pm on 31 October 2018 in which to make submissions concerning the operation of s 440D of the Corporations Act.

[16] Section 440D of the Corporations Act provides circumstance when there is to be a stay of proceedings:

(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:

(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

[17] Section 58AA of the Corporations Act provides the following definition in relation to the meaning of 'court' and 'Court':

(d) a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act.

(2) Except where there is a clear expression of a contrary intention (for example, by use of the expression "the Court"), proceedings in relation to a matter under this Act may, subject to Part 9.7, be brought in any court.

Note: The matters dealt with in Part 9.7 include the applicability of limits on the jurisdictional competence of courts.

[18] An application under s 394 of the Fair Work Act falls within the meaning of 'civil proceedings' under s 500(2) of the Corporations Act.[2] In light of this, I see no reason why the meaning of 'civil proceedings' as understood in the context of s 500(2) would not extend to s 440D of the Corporations Act. While that section refers to 'criminal proceedings', clearly an application under s 394 of the Fair Work Act would not constitute such given it has been determined to be a 'civil proceeding'. Further, the reference to a 'prescribed proceeding' does not in turn mean a 'civil proceeding'.

[19] On behalf of Mr Wallis, Mr Mullally advanced that s 440D did not operate to stay Mr Wallis' application and neither the consent of Administrators nor leave of the Court was required for the Commission to continue to hear Mr Wallis' application.

[20] Mr Mullally submitted that for the purpose of an application for an unfair dismissal remedy, the Commission was not a court but was performing an arbitral function. In support of his submission, Mr Mullally relied upon the decision of the Full Bench in Smith & Ors v Trollop Silverwood & Beck Pty Ltd[3] (Smith), which while decided under the predecessor legislation to the Fair Work Act, was followed by the Commission in Leteizia v Australian Music Group T/As Allans Billy Hyde Musi (Leteizia)[4]. In Smith, the Full Bench of the Commission determined that the Commission was not a 'Court'.

[21] This matter has been argued on the basis that the unfair dismissal application is a proceeding against Corridors, being a company for present purposes, in relation to its property. The issue then turns on whether the Commission is a 'Court' for the purpose of s 440D of the Corporations Act.

[22] Mr Mullally was correct that Smith was decided under a former legislative regime. However, in Leteizia, Commissioner Jones observed that the analysis of the jurisdiction, functions and exercise of the powers in Smith were apposite to the scheme and provisions of the Fair Work Act.

[23] The decision of Smith was subsequently followed in Mr David Clifford v S&N Civil Constructions Pty Ltd[5] (Clifford). In Clifford, Senior Deputy President Richards considered the operation of s 440D of the Corporations Act in the context of an application for an unfair dismissal remedy.

[24] The respondent employer in Clifford entered into voluntary administration and a month later the administrator advised the applicant he was dismissed. The contention advanced was the proceedings were invalidly instituted and that the application must be dismissed because the applicant had lodged his application after the respondent employer went into administration and before the deed of company arrangement was completed.

[25] The Senior Deputy President observed that s 440D of the Corporations Act dealt with circumstances in which a company had moved into administration voluntarily, which provided for a more gradual process of considering the prospects of the business before moving to any future resolution of the company's affairs.[6]

[26] With regard to the application for unfair dismissal remedy, the Senior Deputy President found that s 440D did not represent a bar to the applicant in Clifford lodging his application.[7] Referring to the decision in Smith the Senior Deputy President explained that the word 'court' in s 471B of the Corporations Act did not include a reference to the Australian Industrial Relations Commission. It appeared to follow, according to the Senior Deputy President, that 'a similarly worded provision in respect of s.440D of the Corporations Act (which concerns a company in voluntary administration) would not exclude the jurisdiction of the Fair Work Commission'.[8]

[27] The Senior Deputy President made observations in Clifford that it appeared unusual that a court may not supervise an administrative tribunal in respect of voluntary administration and a compulsory winding up, it may in relation to a voluntary winding up or liquidation.[9] Despite the observation made, the Senior Deputy President considered that he was required to apply the authority of the Full Bench in Smith.[10]

[28] In the circumstances of this matter, I am satisfied the s 440D of the Corporations Act does not apply to unfair dismissal proceedings conducted by the Commission.

Mr P Mullally, Workclaims Australia, for the Applicant.

[1] Applicant's Outline of Submissions filed pursuant to the Directions of Deputy President Beaumont dated the 16th October 2018 Annexure PEM1.

[2] Silalahi v CMI Industrial (Forge) [2012] FWA 7275.

[3] (2003) 142 IR 137.

[4] 2012 FWA 9609.

[5] [2013] FWC 235.

[10] Ibid [34]; see also David Klemm v Penrice Soda Products Pty Ltd (in liquidation) [2016] FWC 3170.

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