[1] An ordinary person might consider that businesses in large chains sharing the same corporate signature, might be considered together for the purposes of the Workplace Relations Act 1996 (Workchoices) in relation to the assessment of the number of employees in such businesses. This is not necessarily so.

[2] Workchoices limits the inclusion of employees for the purposes of assessing whether there are more or less than 100 such employees to a consideration of those businesses that are "related bodies corporate" as referred to in Section 50 of the Corporations Act 2001.

[3] The selection of this limitation is very deliberate. It does not, as an ordinary person might think, include associated entities. These associated entities are referred to in other sections of the Corporations Act 2001. They exist where one company (a principal) exercises control over the management of another company (the associate). They reflect the corporate arrangement which an ordinary person, who is not a corporate lawyer, might consider involves related bodies corporate.

[4] I hear the submissions of such persons who are applicants in unfair dismissal applications before this Commission. Such applicants are frequently unpleasantly surprised and disappointed to discover that the related bodies corporate referred to in Workchoices is a very different corporate creature from the one they imagined.

[5] I heard this jurisdictional objection on 23 March 2007. Quinn Muir's Pty Ltd (QM) was represented by Counsel and an instructing Attorney. Mrs Harland was represented by a Solicitor. The final document provided by QM for my consideration reached me on 29 August 2007.

[6] Mrs Harland filed an application alleging she was unfairly dismissed by her employer QM. She said in her application:

"The dismissal by the Good Guys was unjust on the basis that I have worked for this company for five years as a full time employee. I have never been given any warnings or had any interviews. My performance had never been questioned but praised. On the day I was dismissed when I enquired about the reason for the dismissal the only answer given to me was 'not happy'. I enclose herein a copy of a work reference given to me by the Good Guy (sic) prior to my dismissal being a testimony of this.

The only explanation of my dismissal is the fact that my partner, also an employee of the Good Guys, resigned one month prior to my dismissal.

I am 58 years old and I have now found it very difficult to obtain appropriate full time employment. Currently, I going (sic) through financial hardship. I would seek this Commission to exercise its powers to compensate me for the manner this company has treated me and so many others."

[7] QM contended that the applicant was a poor performer and that her employment was terminated on that ground.

[8] QM submitted that Mrs Harland could not make a claim against it for unfair dismissal because it is excluded from the operation of the Workplace Relations Act 1996 (the Act) by the following subsections.

Section 643(10) An application under subsection (1) must not be made on the ground referred to in paragraph (1)(a), or on grounds that include that ground, if, at the relevant time, the employer employed 100 employees or fewer, including:

(a) the employee whose employment was terminated; and

(b) any casual employee who had been engaged by the employer on a regular and systemic basis for at least 12 months;

Section 643(11) For the purposes of calculating the number of employees employed by an employer as mentioned in subsection (10), related bodies corporate (within the meaning of section 50 of the Corporations Act 2001) are taken to be one entity."

[9] Section 50 of the Corporations Act 2001 is set out below:

a subsidiary of a holding company of another body corporate; the first-mentioned body and the other body are related to each other.

[10] A subsidiary of a holding company, a holding company of a subsidiary and the subsidiaries of the same holding company are related bodies corporate.

[11] Mrs Harland is one of those persons who considered that she was employed by an employer which is part of a national chain of stores which has more than 100 employees within its organisation and that therefore, she was entitled to make a claim pursuant to s.643 of Workchoices and have it heard.

[12] In determining this application I considered various other sections of the Corporations Act 2001 some of which are set out below:

A body corporate (in this section called the first body) is a subsidiary of another body corporate if, and only if:

controls the composition of the first body's board; or

is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body; or

holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(b) the first body is a subsidiary of a subsidiary of the other body.

Without limiting by implication the circumstances in which the composition of a body corporate's board is taken to be controlled by another body corporate, the composition of the board is taken to be so controlled if the other body, by exercising a power exercisable (whether with or without the consent or concurrence of any other person) by it, can appoint or remove all, or the majority, of the Directors of the first-mentioned body, and, for the purposes of this Division, the other body is taken to have power to make such an appointment if:

a person cannot be appointed as a director of the first-mentioned body without the exercise by the other body of such a power in the person's favour; or

a person's appointment as a director of the first-mentioned body follows necessarily from the person being a director or other officer of the other body.

49 References in this Division to a subsidiary

A reference in paragraph 46(b) or 48(3)(b) or subsection 48(5) to being a subsidiary, or to a subsidiary, of a body corporate includes a reference to being a subsidiary, or to a body corporate that is a subsidiary, as the case may be, of the first-mentioned body by virtue of any other application or applications of this Division.

One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

This subsection is satisfied if the associate and the principal are related bodies corporate.

This subsection is satisfied if the principal controls the associate.

the operations, resources or affairs of the principal are material to the associate.

(1) For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity's financial and operating policies.

(2) In determining whether the first entity has this capacity:

the practical influence the first entity can exert (rather than the rights it can enforce) is the issue to be considered; and

any practice or pattern of behaviour affecting the second entity's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

(3) The first entity does not control the second entity merely because the first entity and a third entity jointly have the capacity to determine the outcome of decisions about the second entity's financial and operating policies.

has the capacity to influence decisions about the second entity's financial and operating policies; and

is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members;

the first entity is taken not to control the second entity."

[13] QM is the corporate trustee of the Quinn Muir Unit Trust that operates the Good Guys store at Campbelltown. The Directors of QM are Richard David Quinn and Andrew Ian Muir. The shareholders of QM are Muir Investments Pty Ltd and Quinn Consulting Services Pty Ltd. The Director of Quinn Consulting Services Pty Ltd is Richard David Quinn.

[14] I have considered the contents of two Deeds. The Quinn Muir Unit Trust Deed was supplied to me after the hearing following a request made by me in transcript. The Supplemental Deed between Quinn Consulting Pty Ltd, Muir Investments Pty Ltd and the Muir Electrical Company Pty Ltd (MEC), was supplied at my request after the conclusion of proceedings.

[15] I have considered the evidence of Mr Quinn. In relation to QM, MEC performs a number of functions. It organises QM's advertising [1]; it organises the printing of QM's catalogues; it performs all ordinary accounting procedures for QM, including profit and loss statements[2]; it manages the accounts between QM and MEC[3]; it organises all other accounts[4]; it prepares taxation returns and pays income tax[5]; it provides legal services[6]; it orders stock and pays for it when it arrives; it organises and maintains the payment of salaries including leave entitlements; it pays all the accounts and general bills such as electricity and telephone and, it takes an agreed percentage of profit.

[16] These arrangements are in accordance with Clause 8.1 of the Supplemental Deed which sets out the services to be provided by MEC.

[17] Clause 8.2 of the Supplemental Deed sets out MEC's power to intervene if the business of the relevant store is not conducted in a manner consistent with the standard required by the Good Guys.

[18] MEC has a significant practical influence over QM. Its practices and patterns of behaviour affect the financial and operating policies of QM. I am satisfied that MEC exercises control and influences QM in a manner contemplated by Section 50AA and Section 50AAA of the Corporations Act 2001. A practice or pattern of behaviour that affects the financial or operating policies of an entity is to be taken into account in considering whether another entity controls it. I have considered the evidence and determined that in all the circumstances there is the requisite level of control and I have determined that QM is an associate and MEC is a principal pursuant to Section 50AAA of the Corporations Act 2001.

[19] However Section 643 (11) of Workchoices refers to related bodies corporate within the meaning of Section 50 of the Corporations Act 2001 as being part of one entity for the purposes of considering the number of employees pursuant to Section 643 (10). It does not refer to associated entities. Despite the level of control exercised by MEC over QM as an associated entity the test required by Workchoices is not satisfied. Entities must be related bodies corporate not just associated entities.

[20] Section 50 of the Corporations Act 2001 states that a subsidiary is a related body corporate of its holding company. For convenience I will again set out Section 46 of the Corporations Act 2001 below:

A body corporate (in this section called the first body) is a subsidiary of another body corporate if, and only if:

controls the composition of the first body's board; or

is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body; or

holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(b) the first body is a subsidiary of a subsidiary of the other body.

[21] The definition of "control" in Section 46(a)(i) does not encompass de facto control. Control must arise from a legally enforceable power. Section 46(a)(i) [7] has been held to be directed to a body corporate which:

"…… by virtue of the exercise (whether with or without the consent or concurrence of any other person) of a legally enforceable power vested in it, actually controls the composition of the board of another body corporate. It does not encompass de facto control in the absence of such a power".

[22] The Supplemental Deed contains the following definitions:

"Company" means Quinn Muir's Pty Ltd (ACN 088 786 127).

"Good Guys" means the Joint Venturers known by that name of which the Business forms part to whom MEC provides certain services.

"MEC" means The Muir Electrical Company Pty Ltd (ACN 004 453 945).

"Muirs" means Muir Investments Pty Ltd (ACN 004 276 322).

[23] The Supplemental Deed sets out the proposed manner of director and chairperson appointments to QM. QM's representatives preferred that the actual terms of the Supplemental Deed remain confidential. I noted the Supplemental Deed as a confidential exhibit subject to being able to adequately provide reasons for my decision. I will summarise clause 7 where relevant.

[24] Clause 7 operates so that the number of Directors remains equal between the unitholders with each having one director (clause 7.1 and 7.2). The Secretary of the company is Mr Muir or some person nominated by Muirs (clause 7.4.2). The power of the Directors to undertake certain resolutions or actions is restricted in that they cannot be taken without the prior majority approval of Directors. This includes any proposal to amend the Memorandum or Constitution of the Company (Clause 7.5 (xv)). The Chairman is appointed by the director representing Muirs and is said not to have a second or casting vote (Clause 7.4.1 and 7.4.2).

[25] In summary there are equal numbers of Directors; one of those Directors will be the Chairman appointed by the director representing Muirs; the Chairman is said not to have a second or casting vote, and a number of activities of the Board require the majority prior approval of the Directors.

[26] Is QM is a subsidiary of MEC or Muirs in accordance with Section 46(a)(i) of the Corporations Act 2001 and therefore a related bodies corporate? Does MEC or Muir control the composition of the QM Board or is either MEC or Muir a company in a position to cast, or control the casting of, more than one half of the maximum number of votes that might be cast at a general meeting of QM?

[27] The operation of clause 8.2. ensures that QM's business ultimately operates how MEC requires it to operate but that is not the test. For QM to be a subsidiary of MEC, MEC must control the composition of QM's Board. MEC has de facto control of the operations of QM. I have concluded that that control does not amount to control of the composition of the QM Board by MEC. I find that QM is not a subsidiary of MEC.

[28] By the operation of the Supplemental Deed Muirs controls 50% of the composition of the Board. If the Chairman and Director appointed by Muirs disagrees with the Director appointed by Quinn then they are deadlocked. This could eventually lead to a dissolution of the Company but I do not need to consider that issue. Their arrangement ensures either consensus or disaster. Does that arrangement amount to control of the composition of the Board by Muirs. I do not think it does. I consider that the composition of the Board by the operation of the Supplemental Deed is still equally in the hands of Muirs and Quinn.

[29] I asked the solicitors for QM to provide a copy of the Constitution of QM and they did so on 29 August 2007. The Constitution of QM, in contrast to the terms of the Supplemental Deed, provides that the Chairman does have a second or casting vote.

60.1 In the case of an equality of votes whether on a show of hands or on a poll the chair of the meeting at which the show of hands is taken or at which the poll is demanded is entitled to a casting vote in addition to any vote or votes to which he may be entitled to as a member.

94.1 The Directors may elect one of their number to chair their meetings and determine the period during which the chair is to hold office.

(2) the chair is not present at the time appointed for the holding of the meeting or otherwise does not wish to chair the meeting

the Directors present must elect one of their number to chair the meeting.

95.1 A resolution of the Directors must be passed by a majority of votes of the Directors present at the meeting who vote on the resolution. A resolution passed by a majority of the votes cast by the Directors will for all purposes be taken to be a determination of the Directors. However if the Company has only one Director, that Director may pass a resolution in the manner provided by section 284B of the Law.

95.2 Each Director shall have one vote except that a person who is an alternate Director shall be entitled (in addition to his own vote if he is a Director) to one vote on behalf of each Director whom he represents as an alternate Director at the meeting and who is not personally present.

95.3 In case of an equality of votes at a meeting of Directors, the chair has a casting vote in addition to his deliberative vote."

[30] The Constitution of a Company cannot be amended except by a statutory process. It cannot be over-ridden by arrangements between the shareholders of QM and another party. The Constitution can be amended by a proper process. If the chair exercised a casting vote in accordance with the Constitution but contrary to the terms of the Supplemental Deed that might also give rise to remedies between the parties to the Supplemental Deed. It does not alter the power in the Chairman that arises under the Constitution.

[31] The shareholders can enter into an arrangement with Muirs to cause the Chairman not to exercise his role in a certain fashion but I do not believe that that can be enforced against the Chairman. That would be a matter for a remedy between the parties to the Supplemental Deed. The powers of the Chairman remain, unless amended in a process in accordance with the Corporation Act 2001, as set out in the Constitution.

[32] The Chairman of QM, in accordance with the Constitution of QM, has a casting vote. Muirs, by operation of the Supplemental Deed, appoints the Chairman. I find that QM is a subsidiary of Muirs. Muirs is a holding company of QM and, as contemplated by Section 46(b) it is in a position to cast, or control the casting of more than one-half of the maximum number of votes that might be cast at a general meeting of QM.

[33] As a result of my finding it follows that Muirs is a related body corporate of QM pursuant to Section 50 of the Corporations Act 2001 whose employees are included in the numbers of employees of QM for the purposes of Section 643 (10) of Workchoices.

[34] I caused a search to be conducted for the current company extract of MEC (ACN004453945). The search revealed that the ultimate holding company of MEC is Muirs (ACN004276322). As QM and MEC are both subsidiaries of Muirs they are, in accordance with Section 50 of the Corporations Act 2001, related bodies corporate.

[35] The burden of establishing the facts to ground a jurisdictional exclusion rests with the party raising the jurisdictional exclusion.

[36] Mr Quinn's evidence is that QM had 35 employees at the relevant date. [8]

[37] Mr Quinn says in his affidavit that he had made enquiries and he understood that Muirs has no employees. [9] There was no other evidence provided to me regarding the number, if any, of employees employed by Muirs. I asked Counsel for QM if he intended to call Mr Muir. He declined.[10] There was no evidence provided by any person who was an officer of Muirs or an employee with appropriate authority to provide relevant information.

[38] There was no evidence provided by any person who was an officer of MEC or an employee with appropriate authority to provide relevant information.

[39] I have to be satisfied that the relevant legal entity had 100 or fewer employees on the relevant date. On the material available to me I am not so satisfied.

[40] Although Mrs Harland's solicitor appeared to focus on whether or not MEC was the holding company of QM, it was clear that the corporate structure behind the operation of QM trading as Dick Quinn the Good Guys and the operation of the Supplemental Deed were live matters for the consideration of the Commission at the hearing of this jurisdictional objection. The issues were dealt with by Mr Quinn in his affidavit. [11] Both parties were given an opportunity to consider the Supplemental Deed and make further submissions after the hearing.[12] They did so. QM was represented by Counsel and Solicitors from Melbourne.

[41] The respondents have not discharged their evidentiary burden. They have not established that QM or its related bodies corporate entity have less than the requisite number of employees designated by Workchoices.

Printed by authority of the Commonwealth Government Printer

[7] Mount Edon Gold Mines (Aust) Ltd v Burmine Ltd and Anor (1994) 12 ACSR 727