Fajloun v Khoury

After the orders of 14 November 2012

1. Only two days after the orders were made, on 16 November, the respondent's solicitor wrote to the appellant's solicitor, pointing out that, until the date of the orders, the parties had been receiving $14,000 per month each, but that that agreement had not survived the resolution of the interlocutory dispute. He said that the respondent had not received any remuneration from the businesses since 2 August 2012, but noted that, on 17 October, the appellant had paid himself (without the respondent's knowledge or consent) $10,500 from each of Mycorp and Moonstone. He asked that equivalent sums be paid to the respondent. This drew a negative response from the appellant's solicitor, acting on the appellant's instructions. He said: "We note that on 14 November 2012, your client withdrew his agreement to the parties receiving remuneration from each of the businesses they managed. Accordingly, there is no current agreement for the parties to be remunerated from the Companies. If your client wishes to reinstate the orders relating to the payment of remuneration to the parties, then we will seek instructions in this regard." (italics added)
2. Between November 2012 and June 2013 neither the appellant nor the respondent received any income from the businesses. The appellant said in oral evidence that this was because there were insufficient funds in the bank accounts, and so he did not seek to draw a weekly wage. However, he maintained his entitlement to payment as an employee.
3. The appellant's assertion that his reason for not making payments to himself during that time was shortage of funds was challenged in cross-examination. He was referred to bank account records of Mycorp and Moonstone that showed apparently healthy credits, suggesting that shortage of funds was not, and could not have been, the reason for his non-payment of wages to that point. The appellant's answer was that the credit balances in the bank records were not necessarily indicative of the companies' financial position, as there were significant expenses (such as fuel deliveries) to be paid.
4. On 26 June 2013 the appellant contacted his solicitor, Mr Tannous, and asked if he could "pull out a wage". After giving consideration to the question, on 18 July Mr Tannous told the appellant: "The orders allow you to pay employees' wages in cash and you are an employee. You are authorised to make the payments for the sites that you manage so I can see no reason why you cannot make the payments yourself."
5. The appellant did not draw any remuneration, either by way of wages or profit distribution, until late June 2013. On 27 June of that year, his solicitor wrote to the respondent's solicitor, in the following terms: "I also refer to our conversation relating to the payment of wages/directors fees to our respective clients in relation to the running of the service station businesses. I would propose that each of our clients is to be paid the amount of $1,000 per week from each of the service station businesses they operate, as directors fees …" (italics added) On 10 July, the solicitor for the respondent replied, declining to agree, citing unquantified potential liabilities for employee entitlements and payroll tax as the reason.
6. There followed considerable correspondence between the solicitors. In part, this concerned payment of wages to employees. On 12 July, the respondent's solicitor advised that the respondent was proposing to pay employees of the Bankstown and Merrylands businesses by cheque, and sought confirmation from the appellant that he would do likewise in respect of Greenfield Park and Glenquarie employees. On 17 July, the appellant's solicitor responded, saying: "I note that your client has failed to sign the cheques in relation to the wages that our client is paying himself. Pursuant to the court orders, that is a legitimate expense of the businesses that our client is operating and therefore your client is required to sign them. Please ask your client to sign and return the cheques to our client, failing which, we will have no choice but to bring the matter back to court in respect of your client's contempt." (That was the only evidence that the appellant had sought to draw wages from the businesses. The reference to "the court orders" was a reference to Order 2 of the Consent Orders, which required the parties to countersign cheques required for the "day to day operation" of the businesses.)
7. The respondent's solicitor replied, saying that financial matters such as payroll tax and employee entitlements had to be attended to before either the appellant or the respondent drew any money from the businesses, and noting (again) that the appellant had made payments to himself on 17 October 2012, the equivalent of which had not been paid to the respondent.
8. The appellant proceeded to act on the advice Mr Tannous had given him. Between 17 and 20 July he withheld the sum of $34,000 from the Glenquarie business, and $33,999 from the Greenfield Park business. These sums he paid to himself as "wages". It was the appellant's case that this represented "back pay" owing to him since November 2012 (although, in fact, if his claim to entitlement to "back pay" was valid, it should logically have dated from October 2011). It is these payments that the respondent claims (and the primary judge accepted) constituted contraventions of the 14 November order and amounted to contempt.
9. Although the entire sum was taken over a 4-day period, it was entered into the books of the companies as having been made in weekly payments dating from 26 November 2012. Computer-generated "Payroll Advice" records contain entries, that have the appearance of having been made weekly, for payments of $1,000 to the appellant. The documents also record cheque numbers by which the payments purported to be made. The cheque numbers, on examination, coincide with the dates on which the payments purported to have been made. For example, the payment purportedly made on 26 November 2012 was given a cheque number FF 2611. This was so even though no cheque was drawn, and the payment was made to the appellant by the withholding of cash takings.
10. Two other documents, entitled "Weekly reconciliation reports" for, respectively, BP Glenquarie and BP Greenfield Park show "cash payments" on 17 July, 18 July, 19 July and 20 July, for which the explanation given is "Fred wages". A handwritten notation on the BP Glenquarie document reads: "Note: wage for Fred 19/11/2012 - 30/6/2013 32 weeks 1/7/2013 - 14/7/2013 + 2 weeks Each week Net Pay $1000 34 weeks A similar notation appears on the BP Greenfield Park document. The appellant acknowledged that those entries recorded the payments he had made to himself, and that the "Fred wages" had been entered in one document by the bookkeeper on his instructions, and in the other by himself. The handwritten notations made by the bookkeeper were made on his instructions.
11. The appellant was cross-examined about the Payroll Advice records. It was put to him that the entries that purported to show the dates of payment were false. He said that the dates entered reflected the dates on which the payments should have been made. He agreed that cheques had not been drawn, but said that the cheque numbers entered were no more than "a reference".
12. On 25 July 2013, the respondent's solicitor wrote to the appellant's solicitor. He referred to the Consent Orders, extracted Order 1, noted the cash takings of Mycorp and Moonstone that had not been deposited in the companies' bank accounts, and advised that the respondent proposed to commence proceedings to have the appellant dealt with for contempt.
13. On behalf of the appellant, Mr Tannous replied the following day, asserting that the appellant was an employee of the businesses, and that Order 1 therefore did not preclude the companies from paying him in cash, if required, on the proviso that full records were retained, and that he had in fact retained such records. He said that the appellant was owed 35 weeks of wages at $1,000 per week and that there were sufficient funds in the companies to permit the payments to be made. That letter reflected the position later taken by the appellant at the hearing before the primary judge.
14. In short, the appellant's position was that he was, and had always been, entitled to payment of wages of $1,000 per week from each of Mycorp and Moonstone, that his solicitor confirmed that, and that the payments were for "back pay" to which he was entitled, and that he required payment in cash, and that he therefore came within the exception provided within the order.
15. Only very limited evidence was given as to whether payment was "required" in cash. The appellant said, in his affidavit: "29 Based on the advice received from Charly [Tannous], and the fact that I had always had the authority to hire employees and terminate their services without reference to [the respondent] for the sites that I managed, I made the payments in cash which was my required method of payment …" (emphasis added) No cross-examination was directed to this assertion.

The issues at trial

1. In the light of the appellant's acknowledgment of having withheld cash takings, two principal questions arose: (i) was the appellant a creditor of Mycorp and/or Moonstone?; (ii) if so, were the companies "required" to pay him in cash?
2. The first question had two parts. It was common ground that, if the appellant were an employee of the companies, he was a creditor. It was the respondent's position that, whatever had previously been the case, by the middle of 2013 when the payments were made, the appellant was no longer an employee. The appellant's primary position was that he was, and remained, an employee. His secondary position was that, even if his original employment relationship had come to an end, he was, nevertheless, a creditor by reason of the work he continued to do in the businesses.
3. On behalf of the appellant, it was expressly accepted that he bore the onus of bringing the payment within the exception in the order. The concession was based on the decision of the Supreme Court in ASIC v Sigalla (No 3) [2010] NSWSC 1076 at [46]. Whether the concession was correctly made does not arise for consideration.
4. The primary judge answered both questions adversely to the appellant. Both are in issue on this appeal.
5. There was one curious piece of evidence to which it is necessary to refer. The transcript of the respondent's cross-examination records the following exchange: "Q. From mid 2011 to date, you understand that Mr Fajloun is an employee of the two sites he manages. That's correct, isn't it? A. No. Q. When did you terminate his employment? A. Just before the proceedings started. Q. How did you terminate his employment? A. He took a holiday, and the proceedings started. Q. That's how you say you terminated his employment, is that right? A. He was on holiday, and the proceedings started. Q. That's the best answer you can give to my question, is that right? A. Yes."
6. The origin of the notion that the respondent terminated the appellant's employment is obscure. There is nothing in the evidence that suggests that the respondent, in some way, had asserted that he had terminated the appellant's employment, or that he had the authority to do so.
7. Both parties gave evidence about their belief as to the employment status of the appellant. In general, the primary judge held that this evidence was to be admitted as submission, or limited to the belief of the relevant witness. It was not, and could not be, determinative of the issue.

The primary judgment

1. The primary judge began by recounting the facts in a way that has not attracted criticism (although the inferences he drew from the facts are challenged). He stated the legal principles he applied in a way that also has not attracted criticism, and that may be summarised as follows.
2. Where contempt is alleged to arise from non-compliance with a court order, it is necessary that it be established: (i) that an order was made by a court; (ii) that the terms of the order were clear, unambiguous and capable of compliance; (iii) that the alleged contemnor had knowledge of the terms of the order; and (iv) that the alleged contemnor breached the terms of the order. National Australia Bank v Juric [2001] VSC 375 at [37]; Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201 at [31]; Wyszenko v Wyszenko [2012] NSWSC 732 were cited as authority for these propositions.
3. The standard of proof is the criminal standard, that is, proof beyond reasonable doubt: Witham v Holloway [1995] HCA 3; 183 CLR 525; Anderson v Hassett [2007] NSWSC 1310. Proof of a specific intent to disobey the court's order is not necessary. It is sufficient to prove a deliberate commission or omission which is in breach of an injunctive order or undertaking, unless the breach is casual, accidental or unintentional: Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] HCA 46; 161 CLR 98.

(i) was the appellant an employee?

1. Although both the appellant and the respondent swore affidavits and gave oral evidence, and although the credibility of each was attacked, the primary judge found it neither necessary nor appropriate to determine issues of credit in an interlocutory application, in circumstances where credit issues might arise in a final hearing. This gave rise to one of the grounds of appeal.
2. The primary judge stated his conclusion concerning the appellant's employment status in three different forms of language. At [32] he concluded that, by November 2012, "any contract of employment between the companies and [the appellant] had lapsed". Later, he was more specific as to the manner in which the lapse of the employment arrangement had come about. At [38] he concluded that the circumstances were sufficient to indicate an intention on the part of the appellant to abandon the employment contract. Such an intention could be shown where "a mutual consensus between the parties that the contract not be further performed" was established (citing Mareva Building Consultants v Zevon [2013] ACTCA 28 at [22]). In reaching the conclusion that the employment contract had been abandoned, he made express reference to "the introduction of the trust structure, the subsequent breakdown of the parties' relationship and the correspondence between solicitors as to the manner in which remuneration could continue to be paid". In the context of abandonment of employment, he referred to Fitzgerald v Masters [1956] HCA 53; 95 CLR 420 at 431-433. He then proceeded, in [39], to conclude that the employment relationship had "ceased" by at least November 2012, when the proceedings were commenced.
3. He then identified six circumstances that led him to the conclusion that the employment relationship had, by November 2012, ceased. The six circumstances were the following: 1. the intervention, from about mid-2011, of the trust fund by which the appellant was paid, which the primary judge referred to as "the restructuring". That, the primary judge said, suggested that, although the appellant was still being paid wages, the wages were no longer being paid by the companies; 2. by the end of 2012 when the litigation commenced, because of the breakdown in the relationship between the appellant and the respondent, the companies were deadlocked. There had been no directors' meetings for several years (although the evidence was that the business relationship had continued in existence until the end of 2012). The appellant and the respondent were communicating only through their legal advisors. The companies were therefore not able to control the appellant's employment. Control of the manner in which an employee does his/her work is a significant indicium of an employment relationship: Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; 160 CLR 16; Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21; 3. the correspondence between the solicitors was consistent with there being in place no arrangement for the payment of remuneration to the appellant. His Honour referred particularly to Mr Tannous' letter of 16 November 2012 ([34] above) (in response to a request on behalf of the respondent for payment equal to that received by the appellant before the 14 November orders) stating that, as of 14 November: "there is no current agreement for the parties to be remunerated from the companies". His Honour regarded this as: "… consistent with, if not an admission that, there was then no arrangement in place for the payment of remuneration, including wages" to the appellant. He rejected a contention on behalf of the appellant that the subject matter of the letter was "management fees" as distinct from remuneration; 1. the proposal by Mr Tannous on 27 June 2013 ([38] above), on the appellant's behalf, to the respondent's solicitor, for agreement to payment by way of "directors fees" (as distinct from "wages") of $1,000 per week out of the proceeds of the businesses they operated was inconsistent with an entitlement to receive that amount as wages; 2. in cross-examination the appellant conceded that he dated the payments from the next pay week after the correspondence of 16 November 2012. The primary judge accepted a submission made by senior counsel for the respondent that any properly based claim for back pay would have been dated, not from the correspondence, but from the earliest date of an entitlement that arose by reference to the objective facts (on the appellant's case, October or November 2011); 3. the original proceedings, commenced by the appellant, did not include a claim for unpaid wages.
4. The primary judge also referred to, but did not rely on, a contention on behalf of the respondent that the absence of evidence of employment-related documentation - group certificates, PAYG, superannuation - was not indicative of an employment relationship. He perceived an alternative potential explanation for the absence of such documents (non-compliance with regulatory provisions).
5. The primary judge also rejected an alternative contention on behalf of the appellant, that, even if the previous contract of employment had come to an end, he was entitled to retain and pay himself as managing director of the businesses. He gave two reasons for rejecting that contention. The first was that the appellant's claim had been that he was entitled to back pay, and it was too late to change the way in which he put his case. The second reason was that a retrospective appointment of that kind would arguably have not given rise to a properly based relationship of creditor or employee so as to fall within the exception to the order. There is no ground of appeal that directly challenges that conclusion.
6. Accordingly, the primary judge was satisfied that the appellant had not established, on the balance of probabilities, that he was a creditor for unpaid wages as an employee of the companies.

(ii) was payment in cash "required"?

1. Given the primary judge's conclusion that the appellant did not establish that he was a creditor or employee, it was not strictly necessary that he construe "required" as used in the order or determine whether any money due to the appellant was "required" to be paid in cash. However, he gave consideration to the interpretation that could be placed upon the word, noting that the appellant had contended that payment in cash was "required" as that was his preference, and he was entitled to impose cash payment as a requirement of his employment.
2. The primary judge concluded that a stated preference on the part of a creditor was insufficient to establish a "requirement" for the purpose of the order. He held that a: "… 'requirement' involves at least 'reasonable need' for a particular course to be taken, and more than a mere request or preference that it be taken." He considered that: "… the concept of 'required' extends to permit a payment in cash required by commercial necessity, for example, for a delivery of petrol, if only cash would be accepted by the delivering party." Ultimately, he concluded that the appellant failed to establish a "reasonable need" for payment in cash.

Were the terms of the order clear and unambiguous?

1. The primary judge also considered whether any ambiguity attended the meaning of "required" in the order, such as to contraindicate a finding of contempt arising out of breach of the order, if given one of a number of possible meanings. This was in the context of an issue raised on behalf of the appellant.
2. He found no ambiguity, but held that, even if there were, the appellant had failed to establish that, on either of two possible competing constructions, cash payment was "required". (The two competing constructions were legal or commercial necessity on the one hand, and a reasonably based preference by the appellant on the other.)
3. He rejected a further argument advanced on behalf of the appellant, invoking s 323 of the Fair Work Act 2009 (Cth) which prescribes four alternative methods of payment of wages, one of which is cash. He rejected the argument because, although the section prescribed four alternative means of payment, it did not follow that payment in cash was "required".

The grounds

1. Nine grounds of appeal were pleaded. Grounds 1 and 2 challenged the primary judge's conclusion that the appellant was not an employee of the companies, and therefore not a creditor, and therefore not entitled to payment from the companies. Ground 3 asserted error on the part of the primary judge in declining to make findings with respect to the credit of the witnesses. Grounds 4-7 inclusive asserted that the appellant was entitled, otherwise than as an employee, to authorise and receive payment for services provided from October 2011 (and was therefore a creditor). Grounds 8 and 9 asserted error in the approach taken by the primary judge to the construction of "required" as it appears in Order 1.

The appellant's submissions

1. As a preliminary matter, the appellant first attacked the primary judge's conclusion that the contract of employment had been abandoned. Counsel referred, as had the primary judge, to the decision of the High Court in Fitzgerald v Masters, which sets a high bar before a conclusion that a contract has been abandoned may be drawn. Counsel submitted that any act of termination had to be accepted or adopted by the appellant, because only he had the authority to make employment decisions about the Greenfield Park and Glenquarie sites.
2. Counsel for the appellant then made two main points, which may be summarised in the following way: (i) based on the informal management arrangement between the appellant and the respondent, the appellant had the authority to make employment decisions concerning the Glenquarie and Greenfield Park businesses. So much was accepted by the respondent in cross-examination. That being the case, the respondent had no authority to terminate his employment. (I note in passing that the primary judge did not interpret the respondent's evidence (extracted above at [53]) as a claim that he had the right or authority to terminate the appellant's employment. He noted the respondent's evidence, which he considered to be "plainly correct" that he did not personally have the capacity to bring about the termination of the employment relationship between the companies and the appellant.); (ii) various indicia of termination of contract were not present, or were not shown on the evidence to have been present. One was the absence of any consideration passing from the respondent for the discharge of the employment contract; another was the absence of any of the ordinary incidents of such a termination - payment of holiday pay, accumulated long service leave and the like.
3. Counsel then dealt sequentially with the six circumstances upon which the primary judge had relied in reaching his conclusion that the contract of employment had "ceased".
4. The first such circumstance was the interposition of the trust, by which the appellant was paid after the middle of 2011. Counsel pointed out that the arrangement "did not suit" the appellant. (It would be more accurate to say that the appellant's evidence, not contradicted by the respondent, showed that he was not involved in and was unaware of the arrangement until after it had been implemented.)
5. Counsel then focussed on the second circumstance upon which the primary judge relied, the "control" test. He suggested that reliance on Stevens v Brodribb was misplaced, since that case was decided in the context of the "conceptually distinct" issue of attribution for the purposes of the law of torts and, in particular, for the purpose of distinguishing between employees and independent contractors, with the significant consequences (in the law of tort) that the distinction can have. He focussed also on the finding that, because no directors' meetings of the (employer) companies had been held for some years, control could not have been exercised. He argued that the "day to day control over employees need not be effected by a board meeting", and that that was especially the case in circumstances where the directors had divided responsibility for the four sites between themselves. He also noted, in passing, that the cessation of the directors' meetings predated the time when it was held that the appellant's employment had ceased - in other words, the appellant had been an employee during part of the time that effective control by the companies had ceased.
6. Counsel for the appellant addressed the third to fifth circumstances upon which the primary judge relied compendiously, on the basis that, in effect, the primary judge treated each of them as evidencing an admission on the part of the appellant (through his solicitor). He submitted that the weight to be accorded to conduct said to constitute an admission is variable, and may be very little. He cited the decision of Giles JA in Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [106].
7. In particular, he contested findings made by the primary judge at [41], which, he argued, were not supported by the terms of the correspondence of November 2012. At [41], the primary judge dealt with the letter from Mr Tannous of 16 November 2012, telling the respondent's solicitor that there was no arrangement in place for the payment of remuneration, which he construed as tantamount to an admission made on the appellant's behalf. Counsel argued that the November correspondence, properly understood, was directed to directors' or management fees, and not wages. The issue here was whether there was confusion between "wages" and other forms of payment (for example, management fees or directors' fees). Counsel pointed to evidence, including evidence of Mr Tannous, that his intention had been to refer to the latter, that is, directors' fees or management fees, as distinct from the "wages" of $1,000 per week.
8. He also submitted that the primary judge ought not to have relied on the appellant's selection of the first pay period after 16 November as "the manifestation of termination"; this was because that was not a basis upon which the respondent had relied.
9. The final circumstance upon which the primary judge relied was the absence of any claim by the appellant, in the original proceedings, for unpaid wages. There was evidence from Mr Tannous, not referred to by the primary judge, that an amendment in order to make such a claim was proposed; further, no cross-examination was directed to the appellant to give him an opportunity to explain why such a claim had not been made in the original proceedings.
10. Counsel summarised his argument with respect to employment as follows: "a. The evidence established, and the primary judge appeared to find, that the appellant was employed by Moonstone and Mycorp until no later than November 2012; b. the respondent bore the onus [of proof]- on the criminal standard or, alternatively, to a high civil standard- that the contract of employment was discharged; c. the primary judge held that the contract had been abandoned by agreement; d. however: i. in practical terms the only person who had authority to terminate the contract was the appellant- and he denied terminating the contract; ii. no consideration supported the alleged agreement to terminate; and iii. because of the primary judge's decision that he would not make credit findings, there was no reason for him not to accept the appellant's evidence unless that evidence was inconsistent with objectively ascertainable matters which justified a contrary finding, but in the context of the heavy onus that was borne by the respondent; e. the matters relied upon by the respondent did not discharge that onus."
11. In any event, counsel for the appellant argued, whether or not the appellant was an employee, he was "otherwise a creditor" because he had, between October 2011 (when he last drew wages) and November 2012, continued to perform the same work as he had previously, for which he had not been paid.
12. With respect to whether payment in cash was "required", counsel sought to make four points. First, he contended that the word encompasses "a legitimate request for payment [in cash]", and that the appellant had made such a legitimate request (to Mycorp and Moonstone). Second, he contended that, even accepting the construction of the primary judge (commercial necessity) this element of the proviso was satisfied. Third, he sought to revive the argument under the Fair Work Act, that the legislative prescription of means of payment of wages, of which one is cash, was sufficient to satisfy the terms of the exception to the order. Fourth, he contended that there was, within the terms of the proviso, sufficient latent ambiguity to mean that the appellant could not properly be found guilty of contempt based on breach.

The respondent's submissions

1. The respondent was largely content to rely on the reasoning of the primary judge. With respect to the question of abandonment of employment, he submitted that the existence or cessation of a contract (including a contract of employment) is a matter to be determined objectively from the conduct of the parties. He submitted that the six circumstances identified by the primary judge were objective indicators (to which, he added, no challenge was to be found in the grounds of appeal.)

Was the appellant an employee?

1. A number of considerations persuade me that the conclusion that the appellant was not an employee of Mycorp and Moonstone cannot be sustained. In reaching that view I have borne in mind that it was accepted on behalf of the appellant that he bore the onus of establishing (on the balance of probabilities) that he was an employee and therefore (subject to establishing the payment in cash was "required") came within the exception for which Order 1 provided.

(i) the intervention of the trust

1. The significant reliance placed by the primary judge upon what he considered to be the "restructuring" of the payment arrangement was, in my opinion, misplaced.
2. The respondent accepted in cross-examination that the appellant was an employee of Mycorp and Moonstone at least between 2007 and 2011. That appears to be uncontentious. For the intervention of the trust to have a relevant bearing on the employment relationship between the appellant and those companies, it would have to be shown that the "intervention" or "restructuring" was such as to bring about an end to that relationship.
3. On the assumption that the appellant's trust assumed responsibility for payment of his wages, one potential explanation is that the appellant surrendered his employment with Mycorp and Moonstone, and entered into a contract of employment with his trust, which then hired his services to Mycorp and Moonstone. That appears to have been the position taken by the respondent. However, when examined, the evidence to establish that that was the explanation is far from clear. It is necessary to set it out in some detail.
4. Initially, evidence of payment by the trust was given, although obliquely, by the appellant in his affidavit. I say obliquely because the reference to the trust was made in the course of the appellant recounting a conversation he had had with the respondent in the second half of 2011, in which the appellant asked: "Why is my trust fund paying my wages?" to which the respondent replied: "That's the way it has to be set up."
5. In cross-examination the appellant agreed that, in July 2011, he had acquired a company called Fajloun Investments Pty Ltd. The transcript then records the following: "Q. Fajloun Investments Pty Ltd was the trustee of a trust that you established in June of 2011? A. I followed by [sic - my] instructions. Q. May I take it that you're agreeing with me that a trust was established by-- A. It was established, yes. Q. And Fajloun Investments Pty Ltd was the trustee of that trust? A. That's correct. Q. And the payment arrangement that was in place, on and from the establishment of that trust, was that you would be paid for the services that you rendered by payment to this trust?"
6. This question was met by an objection and the question was rejected. Senior counsel then directed the appellant's attention to some documentary evidence (to which I will come) which showed payments to the appellant's trust and the respondent's trust. Senior counsel then asked: "And the arrangement that you had in place by agreement, I suggest, on and from July 2011, was that you would each receive remuneration for the services rendered by you personally by payment to your trust?" There was an objection to that question, which was also rejected. The primary judge said: "… In order to shortcut this, may I respectfully suggest that the question that needs to be addressed is whether payment was being made to the trust in substitution for remuneration to [the appellant]."
7. At a later point in the cross-examination, in respect of a period after 27 June 2013, it was put to the appellant that he was not an employee of either of the companies. The appellant maintained that he was. The following is recorded: "Q. You were not an employee of either of these companies? A. Yes, I was. Q. You were a director of each of them? A. A director plus an employee. Q. You had no agreement in place which entitled you to be paid any wage at all? A. I was getting a wage. Q. You were getting a wage? A. Previously, before the 2011. Q. That is completely untrue? A. What makes you say that? Q. Well, before 2011? A. That's correct. Q. Before the trust situation was introduced? A. That's correct. Q. The trust situation altered what had gone before? A. No, it didn't. Q. The trusts were in substitution or [sic - for] any wage, I suggest? A. No, it wasn't. … Q. And it was your understanding implicit in your question, correct me if I'm wrong, that you were now being paid by your trust fund? A. That's how it was set up to be. Q. And that's the way you understood it to be operating? A. Yes. Q. The arrangement? A. Yes. Q. After the creation of the trust whatever you would be paid would be paid for whatever work you did you'd always be paid through the trust? A. No. Q. That's what you're saying here? A. No. That's how it was set up to be. Q. You say here 'why is my trust fund paying by wages'. The trust fund was paying your wages? A. Because the accountant then was George Khoury's cousin Charlie. They set it up amongst themselves … The account set it up the way himself that suited themselves. I was convinced to set it up that way. … Q. Well it suited you too? A. No, it didn't. Q. You went ahead and acquired a trustee company and set up a trust? A. That's what they required me to do. Q. And you were not being paid wages in addition to management fees or any other fee? A. Yes, I was. Q. You were being paid remuneration through this trust through whatever it is that you were entitled to be paid? A. I was also taking from the site a wage. Q. You were taking cash, weren't you? A. That's correct. Q. Without any lawful authority at all? A. Everybody knew about it. … Q. The arrangement that you put in place once the trust was established had all of your remuneration of whatever type coming to you through this trust? A. That was just pure profits that was going into the trust." (italics added)
8. Mr Tannous was also cross-examined about the trust arrangement. The following cross-examination is recorded: "Q. You were aware prior to 14 November, that there was no arrangement in place about [the appellant] personally or [the respondent] personally being entitled to remuneration in respect of management of the business? A. They were entitled to remuneration. Q. By their respective family trusts? A. That was the manner in which they were receiving the money for tax purposes, but they themselves were entitled to that money. Q. What do you mean by 'entitled to receive if for tax purposes'? A. Well, they'd set up some structure for the purposes of them being able to minimise or reduce the amount of taxes they had to pay, but the reason they received those moneys was for their own - to themselves. Q. Effort you mean? A. That's right. … Q. In any event, on the instructions that you had, as at 14 November, the arrangement that had been in place since the middle of the previous, year 2011, was one in which your client [the appellant's] trust, was to receive all of the income which he had otherwise earned by applying his services, management, control, everything, at these two service station sites?" There was an objection to that question. The question was allowed, and the following question was asked: "Q. You were aware from your instructions from [the appellant] as at 14 November 2012, that the entire remuneration to which he had become entitled by reason of his personal performance of services at the business BP Glenquarie and BP Greenfield Park, was to be paid to the trustee of his trust?" to which the answer was "No".
9. There was some evidence in the respondent's affidavit about payments made by Mycorp and Summer Tides. (Summer Tides is not material to the appellant in this respect.)
10. Two documents exhibited to the respondent's affidavit are instructive. Each is entitled "Account Transactions [Accrual]"; one relates to Mycorp, one to Summer Tides. The entries on each commence on 19 July 2011, a date that corresponds with the approximation (mid July 2011) of the starting date of the $14,000 per month arrangement (according to the appellant's evidence). Each then records a series of payments nominated as "Management Fee", to the appellant and the respondent, via their trusts. The Mycorp document records that, between July and December 2011, the payments to the trusts were somewhat irregular (and certainly not weekly), but in consistent amounts - to the appellant's trust, $1,818.28; to the respondent's trust $3,181.82. From January 2012, however, the payments to each are recorded on a regular monthly basis, and are consistently in the amount of $3,500. The Mycorp payments, the respondent said in his affidavit, were: "(a) made as a management fee; and (b) paid to trusts associated with myself and Fred Fajloun and not to us personally, for the provision of our services by our respective trusts to the BP Merrylands Business."
11. That is entirely in accordance with the appellant's evidence of the arrangement that was made in mid-2011 and is only consistent with the payments being payments in accordance with the agreement for payment of $3,500 to each party from each business. Their characterisation as "management fees" is not consistent with classification of the payments as "wages". In 2012, there is no recorded payment to the appellant's trust in addition to the $3,500, representing wages. If, as the respondent conceded, the appellant had been entitled to payment of wages up to the time of the November orders, this documentation does not establish that they were paid through his trust.
12. A similar pattern can be seen in the Summer Tides account. Until December 2011, Summer Tides is recorded as paying "Investment Trust - FF" sums of $1,818.18 and "Investment Trust - GK [the respondent]" sums of $3,181.82, again on a somewhat irregular basis, and, as from January 2012, consistent monthly payments to each trust of $3,500.
13. That Summer Tides paid the appellant in the second half of 2011 is of interest, because Summer Tides was not one of the companies that employed the appellant, and paid his wages. That would indicate that, whatever the irregular payments of $1,818.28 were for, it was not the wages to which the appellant was then entitled. There is no documentary evidence of any regular payments to (or by) the appellant's trust in the amount of $1,000 per week, from any of the companies.
14. In the light of this evidence, it is difficult to conclude that the payments made to the appellant's trust were, or were intended to be, in substitution for the wage entitlement he had previously enjoyed.
15. As counsel for the appellant pointed out, it was necessary to distinguish between two forms of payment. One was the weekly "wages" that had been paid to the appellant. The other was the $14,000 per month payable to each of the appellant and the respondent, apparently by way of distribution of profits. The respondent agreed, in cross-examination, that the arrangement for the payment of $14,000 per month to each of them was in addition to the wages that the appellant had been receiving and that the appellant remained entitled to payment of his wages after the introduction of that arrangement. He also agreed that, if the appellant remained an employee, he would continue to be entitled to payment of the wages, as distinct from the $14,000 per month.
16. There was no evidence that the appellant had resigned his employment with Mycorp or Moonstone. There was no evidence that he had entered into an employment relationship with Fajloun Investments Pty Ltd. There was no evidence of any contract for services between Mycorp or Moonstone and Fajloun Investments Pty Ltd.
17. Exhibited to the appellant's affidavit were two bundles of MYOB documents, both entitled "Payroll Advice", one relating to Mycorp, and one relating to Moonstone. They cover the period 1 July 2013 to 22 April 2014. They purport to record regular weekly payments to the appellant, (giving his employment classification as "director") of $1,000, and record payments of PAYG tax, holiday and such leave accrual, and superannuation guarantee levy payments.
18. It may be that these documents, like the payroll advice documents for 19 November 2012 and 26 November 2012, were fabricated. If so, they provide an unsatisfactory foundation for any inference that the appellant was, or construed to be, employed by Mycorp or Moonstone.
19. Notwithstanding that, in my opinion, the evidence was inadequate to support a conclusion that a "restructuring" had taken place which resulted in the cessation of the appellant's employment by Mycorp and Moonstone, and his employment by Fajloun Investments Pty Ltd. That the appellant did continue to be an employee is supported by two further things. The first is that he continued, in exactly the same way as before, to operate the Glenquarie and Greenfield Park businesses. To an extent, that is equivocal, in that he would have done so whether employed by the companies or the trust. The second thing is the absence of any evidence from the trust, or any evidence of any attempt to have trust documents showing the appellant's employment, produced to the Court.

(ii) "the control test"

1. The second circumstance that influenced the primary judge to conclude that the employment relationship had come to an end involved what is called "the control test", which his Honour accepted to be "a significant factor in establishing an employment relationship".
2. In my opinion, "the control test" was applied inappropriately. The "control test" was devised to differentiate (generally in order to determine issues of vicarious liability) between employees and independent contractors. Both Brodribb and Hollis, which were cited as authority, were such cases. In any event, the control issue is concerned with the authority to direct or control the manner in which work is performed, as distinct from the practicality of exercising control: Humberstone v Northern Timber Mills [1949] HCA 49; 79 CLR 389 at 404. That Mycorp and Moonstone may have become practically dysfunctional as a result of the breakdown of the relationship between the appellant and the respondent did not shed any light on their authority to direct the appellant as to how he did his work. (In the circumstances of this case, the question of control is somewhat academic, as the appellant and the respondent were both directors of both companies.)

(iii) communications by the appellant's solicitor

1. The third matter as to which I have difficulty is the reliance by the primary judge on correspondence between the appellant's and respondent's solicitors, and events following the 14 November orders. Particular reliance was placed upon the letter of 16 November 2012 written by Mr Tannous, the appellant's solicitor, in response to a request made on behalf of the respondent for payment of $21,000 to correspond with payments to the appellant prior to the 14 November orders. The response was: "We note that on 14 November 2012, your client withdrew his agreement to the parties receiving remuneration from each of the businesses they manage. Accordingly, there is no current agreement for the parties to be remunerated from the Companies."
2. The primary judge stopped short of treating this letter as an admission, but accepted it as evidence that there was no arrangement in place for payments of remuneration (including wages) to the appellant. Similarly, he regarded the request by the appellant that Mr Tannous approach the respondent's solicitor with a view to arranging a mechanism for payment as "inconsistent with an existing entitlement". He further relied upon the letter by Mr Tannous, following that request, purporting an agreement for payment of "director's fees" as inconsistent with an entitlement in the appellant to be paid wages.
3. The conclusion fails to make the essential distinction between an entitlement to wages, and a means by which any such entitlement is to be met. Moreover, no reference was made to what I consider to be a significant item of evidence. Order 2 of the Consent Orders established a regime for the payment of outgoings of all four businesses by the appellant and the respondent preparing and countersigning cheques. On 17 July 2013, Mr Tannous wrote to the respondent's solicitor, saying: "I note that your client has failed to sign the cheques in relation to the wages that our client is paying himself. Pursuant to the Court orders, that is a legitimate expense of the businesses that our client is operating and therefore your client is required to sign them. Please ask your client to sign and return the cheques to our client, failing which, we will have no choice but to bring the matter back to Court in respect of your client's contempt."
4. The inference to be drawn from this is that the appellant had sought to resume the payments to himself of wages (by cheque), and had done so openly, but had been thwarted in his attempts by the respondent's refusal to countersign the cheques. Whether the respondent was justified in doing so is not to the point. The appellant's conduct, in this respect (and that of his solicitor) is not inconsistent with an assertion to an entitlement to payment of wages, and is, in fact, entirely consistent with such an assertion.

(iv) other circumstances

1. The consequence of these conclusions is that four of the six circumstances that were held to be indicative of the cessation of employment between the appellant and Mycorp and Moonstone must be discarded. That leaves the fifth and sixth circumstances. The fifth was that, when he did begin to withhold cash in order to pay himself what he called "back pay" the appellant did so only from the first pay period after the date of the November orders. The primary judge considered it probable that, had the appellant been asserting a genuine (or genuinely held belief in) an entitlement to wages, he would have commenced the payments from the "earliest date of entitlement that arose from the objective facts rather than to a date selected by reference to an exchange of correspondence between the parties".
2. One difficulty with this approach is that, when he did begin to withhold money, the appellant appears to have been completely open about it. He asserted that, as required by the order, he maintained proper records, and there was no contention that he did not do so, or that what he had done could not be readily exposed. It is true that the appellant falsified the documentation, but this does not appear to have been done in order to conceal the withholding of cash. So far as the evidence goes (and there is no finding either way on this) the records were created to reflect payments to which he was, on the appellant's case, entitled in the ordinary course in accordance with the arrangements between the parties.
3. The final circumstance upon which reliance was placed was the failure of the appellant to claim in his original proceedings for "back pay". When Mr Tannous was cross-examined about this, he said that he expected that there would be an amendment to the pleading to make such a claim. In any event, the failure to make such a claim in the initiating proceeding is an insufficient foundation for a finding that the appellant was not, or did not regard himself as, an employee of the companies.
4. In my opinion the finding that the appellant was not an employee, and therefore not a creditor, cannot stand. The evidence established, on the balance of probabilities, that the appellant was employed by Mycorp and Moonstone.

Was payment in cash "required"?

1. My conclusion above makes it necessary to consider whether payment in cash was "required" within the terms of the exception to the order.
2. The direct evidence of the reason that the appellant made payments to himself in cash was sparse, although the history I have recounted above provides a substantial basis for an inference to be drawn.
3. In his affidavit, the appellant said: "29. Based upon the advice received from [Mr Tannous], and the fact that I had always had the authority to hire employees and terminate their services without reference to [the respondent] for the sites that I managed, I made the payments in cash which was my required method of payment. I thought that Mr Tannous' advice was correct and I relied upon him as my solicitor." (italics added) No cross-examination was directed to this assertion.
4. It had become apparent that, if the appellant were to receive wages, it would necessarily be in cash. That much is clear from Mr Tannous' email of 17 July 2013, complaining that the respondent had refused to countersign cheques submitted to him for payment to the appellant.
5. The primary judge's treatment of the meaning of "required" as it appears in the order was relatively brief. Having considered various authorities, he concluded that the concept of "required" extended to permit a payment in cash if required by "commercial necessity", as where a supplier of fuel would accept payment only in cash. He also accepted that "the element of 'requirement' involves at least 'reasonable need' for a particular course to be taken, and more than a mere request or preference that it be taken".
6. He held that, even if there were in the order some ambiguity about the meaning of "if required", and the exception to the order could be construed to encompass either "legal or commercial necessity on the one hand" or a "reasonably based preference" by the appellant on the other, breach was established, since the appellant had established no reasonable basis for such a preference. He expressly held that the fact that payment in cash avoided the need for the respondent's consent to the payment does not provide a reasonable basis for the preference.
7. Here I depart from the reasoning of the primary judge. If, as I consider to be the case, the appellant was an employee of Mycorp and Moonstone, and therefore entitled to be paid wages, a need for payment in cash arose in circumstances where the respondent refused to facilitate payment by the only alternative means.
8. In my opinion the evidence established that, in the circumstances, payment in cash was "required".
9. These conclusions mean that it is unnecessary to address Ground 3 of the appeal, by which the appellant complains of the failure to make findings with respect to the credit of the parties.
10. The consequence of these conclusions is that, in my view, the appeal should be allowed and the finding of contempt quashed. I propose the following orders: 1. Appeal allowed; 2. The determination that the charge of contempt against the appellant was proved beyond reasonable doubt is quashed; 3. The Notice of Motion filed by the respondent be dismissed; 4. The respondent to pay the costs of the appeal. It may be that consequential orders for payment also need to be set aside. No such order is sought in the Notice of Appeal.
11. EMMETT AJA: The question in this appeal is whether the appellant, Mr Fred Fajloun, committed contempt in respect of Order 1 made by consent by Brereton J on 14 November 2012 (the Order). The respondent, Mr George Khoury, sought declarations that Mr Fajloun disobeyed the Order and was in contempt of the Order. For reasons published on 4 July 2014, a judge of the Equity Division, sitting in the Corporations List (the primary judge), found the charge of contempt proved beyond reasonable doubt. On 27 August 2014, his Honour directed judgments against Mr Fajloun in favour of two corporations, who are respondents to the appeal. By Notice of Appeal filed on 2 October 2014, Mr Fajloun appealed from the Orders made by the primary judge.

The Order

1. The Order was made in proceedings brought by Mr Fajloun against Mr Khoury and five corporations (the Equity Proceedings). The dispute that was the subject of the Equity Proceedings arose out of arrangements between Mr Fajloun and Mr Khoury concerning the operation of several service stations. The arrangements were variously characterised as a partnership and a joint venture. It is not necessary for the purposes of these proceedings to resolve any issue as to the precise relationship between Mr Fajloun and Mr Khoury.
2. In the Equity Proceedings, Mr Fajloun sought:

• declarations that he and Mr Khoury conducted the businesses of the service stations in partnership;
• orders winding up the affairs of the partnership; and
• a declaration that the affairs of several of the corporate defendants had been conducted in an oppressive manner. Mr Fajloun also claimed damages and other relief in respect of breach of duties owed by Mr Khoury to the corporate defendants.

1. Four service station businesses were the subject of the arrangements between Mr Fajloun and Mr Khoury. They are known as BP Bankstown, BP Glenquarrie, BP Greenfield Park and BP Merrylands. The second defendant, Mycorp Group Pty Ltd (Mycorp), owns the BP Bankstown and BP Glenquarrie businesses. The third defendant, Moonstone River Pty Ltd (Moonstone), owns the BP Greenfield Park business. The fifth defendant, Snowy Falls Pty Ltd (Snowy Falls), owns the BP Merrylands business. The fourth defendant was Summer Tides Pty Limited (Summer Tides). Mr Khoury is the sole director and shareholder of Snowy Falls. Each of Mr Khoury and Mr Fajloun is a director and shareholder of Mycorp and Moonstone.
2. In November 2012, differences arose between Mr Khoury and Mr Fajloun concerning the affairs of the businesses. Mr Fajloun commenced the Equity Proceedings with a degree of urgency. On 14 November 2012, the Court, by consent, made several orders in the proceedings, including the Order. The Order was in the following terms: [Mr Fajloun] and [Mr Khoury] shall take all reasonable steps to cause all cash takings for each of the businesses operated by [Mycorp], [Moonstone] and [Summer Tides] to be deposited into the bank of that business, save that this order shall not prevent [Mr Fajloun] and [Mr Khoury] from paying creditors (including employees) in cash, if required, on the proviso that the payer retains full records of such payments.
3. Order 2 made on 14 November 2012 provided, relevantly, for Mr Fajloun and Mr Khoury to deliver to the other, each business day morning, any cheques required for the day-to-day operation of the business operated by any of Mycorp, Moonstone and Summer Tides. Mr Fajloun and Mr Khoury were to counter-sign and return the cheques by 10.00 am the following business day. Under Order 3, neither of them was to be permitted to refuse to counter-sign and hand over any cheque provided by the other, unless:

• The cheque was in favour of a supplier of goods or services that was not required for the day-to-day operations of Mycorp, Moonstone and Summer Tides; or
• Mr Fajloun and Mr Khoury, as the case may be, were not reasonably satisfied that there were sufficient funds in the account against which the cheque was to be drawn to meet the presentation of the cheque.

1. Order 3 also provided that any works that were to be undertaken on the properties or buildings were to be deemed to be a supply that was not required for the day-to-day operations of the businesses. A draft of the proposed orders had contained a provision for each of Mr Fajloun and Mr Khoury to be paid remuneration of $3,500 per month in respect of the management of the businesses that they respectively operated. That draft was struck out because the parties did not reach agreement as to that matter.

The Dispute Concerning Remuneration

1. On 16 November 2012, Mr Khoury's solicitor wrote to Mr Fajloun's solicitor noting that agreement had not been reached on 14 November 2012 regarding remuneration for Mr Khoury and Mr Fajloun and that Mr Khoury had not received any remuneration since 2 August 2012. The letter suggested that Mr Fajloun had paid himself amounts of $10,500 from each of Mycorp and Moonstone on 17 October 2012 and requested that Mr Fajloun draw equivalent cheques in favour of Mr Khoury. Mr Fajloun's solicitor responded saying that Mr Khoury had withdrawn his agreement for the parties to receive remuneration and that there was, accordingly, no current agreement for the parties to be remunerated. The letter said that, if Mr Khoury wished to reinstate the proposed orders relating to the payment of remuneration to the parties, the solicitor would seek instructions from Mr Fajloun.
2. By email of 27 June 2013, Mr Fajloun's solicitor proposed to Mr Khoury's solicitor that each of them be paid the amount of $1,000 per week as directors' fees, from each of the service station businesses that they operated. He suggested that Mr Khoury would be paid $1,000 per week from each of BP Bankstown and BP Merrylands and that Mr Fajloun would be paid $1,000 per week from each of BP Greenfield Park and BP Glenquarrie. The email sought confirmation that Mr Khoury agreed to that proposal.
3. Thereafter, Mr Fajloun drew two cheques of $1,000 each in favour of himself from the bank accounts of Moonstone and Mycorp and sent them to Mr Khoury for signature under cover of remittance advices but described the payment as a "management fee". On 10 July 2013, Mr Khoury's solicitor responded saying that Mr Khoury did not accept Mr Fajloun's proposal on the basis that there may exist a substantial liability on the part of each of Mycorp and Moonstone for employees and for payroll tax, which needed to be quantified so that the proposal for payment of directors' fees could be assessed.
4. On 12 July 2013, Mr Khoury's solicitor wrote to Mr Fajloun's solicitor, indicating that Mr Khoury was intending to make payment of all wages to all employees of BP Bankstown and BP Merrylands by cheque, with a view to ensuring award compliance and remittance of appropriate tax and superannuation deductions. The letter sought confirmation that Mr Fajloun would take the same approach for BP Glenquarrie and BP Greenfield Park. In further correspondence, Mr Fajloun's solicitor emphasised that Mr Fajloun would need to authorise any such payments. Mr Khoury's solicitor recognised that Mr Fajloun would be involved so far as payments were made by cheque.
5. On 17 July 2013, Mr Fajloun's solicitor sent an email to Mr Khoury's solicitor saying that Mr Fajloun was signing the wages cheques. The email said that Mr Khoury had failed to sign the cheques in relation to the wages that Mr Fajloun was paying himself. The email then said that, under the Order, that was a legitimate expense and that, therefore, Mr Khoury was required to sign the cheques. The email requested Mr Khoury's solicitor to ask Mr Khoury to sign and return the cheques to Mr Fajloun, failing which, the email said, they would have no choice but to bring the matter back to Court in respect of Mr Khoury's "contempt". The email said that Mr Fajloun's solicitor was preparing a schedule in relation to the back pay in wages relating to staff working under awards, which would be submitted to Mr Khoury's solicitor.
6. Later on 17 July 2013, Mr Khoury's solicitor responded to the email from Mr Fajloun's solicitor, saying that concern had been raised in recent emails as to accruing liability for payroll tax and the proper completion of matters concerning Business Activity Statements and employee entitlements. The email said that those matters needed to be attended to before Mr Fajloun or Mr Khoury drew in money on any of the corporations. Mr Fajloun's solicitor responded later still on 17 July 2013, saying that Mr Fajloun was working in the businesses and would be entitled to draw a wage in the same way as any other employee. The email requested Mr Khoury to sign the cheques "pursuant to the Court orders". The email requested confirmation by the following day that Mr Khoury would sign the cheques, failing which an application would be made to enforce "the Court orders". Mr Khoury's solicitor responded later still on 17 July 2013, drawing attention to the fact that no agreement was in place concerning remuneration of the directors.

The Alleged Contempt

1. It is common ground that, on 17, 18, 19 and 20 July 2013, Mr Fajloun caused cash takings of the BP Glenquarrie and the BP Greenfield Park businesses to be paid into his own bank account, rather than into the bank accounts of Mycorp and Moonstone respectively. The total amounts involved were $34,000 and $33,999. Mr Khoury alleged that those payments constituted a contravention of the Order and therefore contempt.
2. Mr Fajloun denied the charge of contempt on the basis that he was a creditor of each of Mycorp and Moonstone, in his capacity as an employee, and that the payments were in respect of debts due to him for unpaid wages. He asserted that the corporations were "required" to pay the debts in cash, within the meaning of the Order.
3. As indicated above, on 4 July 2014, the primary judge found the charge of contempt proved beyond reasonable doubt. On 27 August 2014, his Honour directed judgment in favour of Mycorp against Mr Fajloun in the sum of $34,000, together with interest, and directed judgment in favour of Moonstone against Mr Fajloun in the sum of $33,999, together with interest. His Honour ordered Mr Fajloun to pay Mr Khoury's costs of the Notice of Motion by which the contempt charge was brought, on an indemnity basis. His Honour did not consider that it was necessary to make a declaration that Mr Fajloun was in contempt, having addressed that matter in detail in his earlier reasons. His Honour declined to impose any further penalty on Mr Fajloun.

The Appeal

1. Mr Fajloun's Notice of Appeal contains nine grounds. Grounds 1 to 5 are concerned with whether Mr Fajloun was a creditor of Mycorp and Moonstone in his capacity as an employee. Grounds 6 and 7 are concerned with whether Mr Fajloun was a creditor of Mycorp and Moonstone in some different capacity. Grounds 8 and 9 are concerned with whether Mycorp and Moonstone were "required" to pay in cash any moneys owed to Mr Fajloun as a creditor.

Whether Mr Fajloun was an Employee

1. Mr Fajloun says that the primary judge should have held that he was an employee and creditor of Mycorp and Moonstone. He says that, at all times, he remained entitled to receive $3,500 per service station, making a total of $14,000 per month and was entitled to receive, in addition, $1,000 per week. The source of the additional $1,000 per week is not entirely clear and there is some ambiguity in the evidence as to whether that weekly payment was $1,000 from each of Moonstone and Mycorp or whether it was a total of $1,000 from both employers.
2. Mr Fajloun contended that the primary judge concluded that his contract of employment by Mycorp and Moonstone had been abandoned, and advanced several reasons as to why his Honour erred in that conclusion. Mr Fajloun pointed out that Mr Khoury accepted that he, Mr Fajloun, was entitled to receive both the management fee referrable to the sites, of $14,000 per month and the wage that he had been receiving, and that that remained the case at all times after mid-2011. He said that he was not sure about his entitlement to wages and, for that reason he asked his solicitor whether he could "pull out a wage". He said that the matters relied on by the primary judge were insufficient to establish that the contracts of employment were abandoned and contended that Mr Khoury failed to discharge the onus of establishing that the contracts of employment were discharged. He pointed out that he was the only person who had authority to terminate the contracts, that he denied terminating the contracts and that his Honour made no adverse findings in relation to his credit.
3. Mr Fajloun also contended that a finding that the contracts of employment had ceased by November 2012 failed to address his rights to recover wages in preceding periods. He ceased drawing wages in October 2011 and the period from November 2011 until mid-November 2012 comprised approximately 55 weeks, in respect of which he says he would have been entitled to some $55,000 on account on wages, none of which was paid.
4. It is clear enough that Mr Fajloun was an employee of Mycorp and Moonstone until a time during 2011. However, there is a dispute as to whether the relationship of employer and employee between Mycorp and Moonstone, on the one hand, and Mr Fajloun, on the other, ceased during 2011. Mr Fajloun agreed in cross-examination that there was no current agreement for the parties to be remunerated from the corporations.
5. It is common ground that, at some time in the middle of 2011, the arrangements between Mr Khoury and Mr Fajloun, on the one hand, and the corporations, on the other, were altered. It appears that a trust was established for each of Mr Fajloun and Mr Khoury, although the details of the trusts were not in evidence. It may be possible to draw an inference that, under the new arrangements, the trustee for Mr Fajloun was to receive payments of $14,000 per month by way of management fees and that a similar arrangement was in place for Mr Khoury.
6. The primary judge found that, when those arrangements were put in place, the relationship of employer and employee between Mr Fajloun, on the one hand, and Mycorp and Moonstone, on the other, came to an end and he thereafter received all of his remuneration through the trust. Mr Fajloun, on the other hand, contends that, while the trust arrangement was put in place, that arrangement did not alter the relationship of employee and employer that existed between him and each of Mycorp and Moonstone, under which he was entitled to receive a weekly payment of $1,000.

Whether Mr Fajloun was otherwise a Creditor

1. Alternatively, Mr Fajloun says, there is no reason why he could not retrospectively pay himself for the work he had performed that had undoubtedly benefited Mycorp and Moonstone. He says that he was able to pay employees without recourse to Mr Khoury, since the management of the businesses carried on by those corporations carried with it the authority to pay persons who undertook work in relation to the businesses. Thus, he says, even if his employment contracts with Mycorp and Moonstone were terminated, there is no reason why he was not entitled to pay himself retrospectively for work that he had performed for those businesses.

Whether Amounts were "Required" to be Paid in Cash

1. It is by no means clear that Mr Fajloun was entitled to continue to receive weekly payments by way of wages, in addition to management fees payable to his trustee company. Nor is it clear that he was entitled to be remunerated for work performed in some capacity other than that of an employee. However, it is not necessary for me to reach a firm view on that question, since I am not persuaded that either of Mycorp or Moonstone was "required", within the meaning of the Order, to make any payments in cash.
2. It is common ground that payments to Mr Fajloun ceased following the last payment made on 20 October 2011. Even if Mr Fajloun was entitled to receive payments from Mycorp and Moonstone, the question is whether those amounts were relevantly "required" to be paid in cash. Mr Fajloun asserts that his Honour erred in concluding that the payments of the sums due to him were not "required", as that term is used in the Order, to be in cash. He says that his Honour ought to have held that, on the true construction of the Order, a payment was "required" if the payee so demanded or desired. He said that he had demanded payment in cash. Alternatively, he says, his Honour ought to have held that the payments were "required" to be paid in cash by reason of s 323 of the Fair Work Act 2009 (Cth).
3. Mr Fajloun gave evidence by affidavit that, based on advice given to him by his solicitor, and the fact that he always had the authority, without reference to Mr Khoury, to hire employees for the businesses that he managed, and to terminate their services, he made the impugned payments in cash, "which was my required method of payment". He said that he relied on his solicitor's advice as being correct.
4. Mr Fajloun was not cross-examined on that evidence. Nevertheless, I do not consider that that evidence can be determinative of the question. It is no more than evidence of Mr Fajloun's thought processes. That is to say, it appears to be evidence that Mr Fajloun decided that he wanted to make payment in cash of moneys that he asserted were owing to him. If it be assumed that Mr Fajloun was an employee, his entitlement to payment of wages accrued weekly. There was no evidence as to why the two lump sum payments were made at the time when they were made and why payments were not made weekly, as and when the entitlement to wages accrued, although Mr Fajloun asserted that he did not pay himself a wage each week by reason of the cash flow problems attending the businesses.
5. There was no evidence as to what liabilities of the corporations may have regularly been paid in cash. For example, it may be that goods are delivered from time to time to the businesses on the basis that they are paid for in cash on delivery. That might be a circumstance in which the companies might be required to pay a creditor in cash. That is to say, if circumstances arose whereby the corporations could not obtain goods or services, except in consideration of a payment in cash, one could conclude that the creditors in respect of such goods or services were relevantly "required" to be paid in cash. There was no evidence that there was any compulsion for employees of Mycorp or Moonstone to be paid in cash.
6. Under the other orders made on 14 November 2012, Mr Khoury was not permitted to refuse to counter-sign cheques required for the day-to-day operation of the business of Mycorp and Moonstone. Cheques for payment of Mr Fajloun's wages would be cheques required for the day-to-day operation of the respective businesses. Mr Khoury could not refuse to counter-sign cheques for wages if they were presented to him. The evidence of correspondence between solicitors referred to above indicates the extent to which Mr Fajloun attempted to present cheques to Mr Khoury for payment of wages in accordance with the Orders made by Brereton J. No application was made by Mr Fajloun to vary those Orders to deal with his claims to wages. Rather, he simply took the matter in his own hands.
7. Section 323 of the Fair Work Act 2009 (Cth) relevantly provides that an employer must pay an employee amounts payable to the employee in relation to the performance of work in money by one, or a combination, of the methods referred to in section 323(2), and at least monthly. Under section 323(2), the methods include both cash and cheque, as well as money order, postal order or similar order, payable to the employee. Clearly enough, if Mr Fajloun was entitled to be paid wages, that provision did not require that the wages be paid in cash.

Conclusion

1. Whether or not the primary judge erred in concluding that Mr Fajloun was not a creditor of Mycorp and Moonstone, his Honour made no error in concluding that Mycorp and Moonstone were not "required" to pay any moneys owing to him in cash. It follows, therefore, that, his Honour did not err in concluding that Mr Fajloun was guilty of contempt. The appeal should be dismissed with costs.

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