John Hardie v Stannard Marine Pty Ltd t/as Port Lincoln Tugs Pty Ltd [2009] AIRC 810; (18 September 2009)

[2009] AIRC 810

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Workplace Relations Act 1996

s.643 - Termination of employment

Stannard Marine Pty Ltd T/A Port Lincoln Tugs Pty Ltd

termination of employment - 2nd motion to dismiss for want of jurisdiction - fewer than 100 employees.

[1] On 24 November 2008 Mr Hardie lodged an application through which he sought relief with respect to the termination of his employment with Port Lincoln Tugs Pty Ltd (PLT). Mr. Hardie's application was made pursuant to section 643(1)(a) of the Workplace Relations Act 1996 (the Act), on the grounds that this termination of employment was harsh, unjust or unreasonable.

[2] On 8 December 2008 the Commission received a Notice of Employer's Appearance which advised that the correct name of the employer was Stannard Marine Pty Ltd (ACN 00590278) trading as Port Lincoln Tugs Pty Ltd. The employer also filed a Notice of Motion to Dismiss the application on the grounds that it employed fewer than 100 employees.

[3] On 9 January 2009 Mr Hardie sought to amend his application so as to rely on section 659(2)(e).

[4] Both these issues were considered at a hearing on 27 February 2009. In my decision and order of 17 March 2009 ([2009] AIRC 237 and PR986056) I refused the employer motion to dismiss the application for want of jurisdiction and also refused leave to amend the grounds upon which the application was made.

[5] Mr Hardie's application was subsequently referred for conciliation. This conference occurred on 17 April 2009 but did not result in an agreement. As a result, a certificate and assessment were issued on 24 April 2009.

[6] On 1 May 2009 Mr Hardie's representative, Dr Bakker sought a revision of the assessment issued on 24 April 2009. This was refused by advice provided to the parties on that same day. Mr Hardie's notice of election to proceed to arbitration was lodged later that day.

[7] For reasons known only to them, the parties then engaged in an exchange of correspondence. In the course of this exchange, McCarthy Ausgroup, representing the employer, foreshadowed that it sought to file a further motion to dismiss the application for want of jurisdiction on the grounds that the employer employed fewer than 100 employees.

[8] A second motion to this effect was ultimately lodged on 22 May 2009. As a matter of convenience, I retained the Commission's file with respect to Mr Hardie's application rather than referring this second issue to be dealt with in the course of a hearing on the merits. No party objected to this approach.

[9] Whilst the employer sought that the second motion be dealt with on the papers, it was listed for hearing on 14 July 2009 because of the very large amount of material provided. On 27 May 2009 both parties were directed to file in the Commission and serve on each other, by 7 July 2009, any additional material relied upon in the matter so as to accommodate a request from Dr Bakker for further time to examine the employer documentation.

[10] Mr Hardie and Dr Bakker did not comply with these directions. The McCarthy Ausgroup sought that the matter be determined on the papers. Further directions were issued on 13 July 2009 wherein the matter was re-listed for 11 August 2009 subject to the advice below:

"This hearing is conditional upon Mr Hardie providing written material confirming his position in response to the material provided by Port Lincoln Tugs Pty Ltd by 4 August 2009. In the event that this material is not received by this date, I propose to cancel the 11 August 2009 hearing and determine the matter on the material already provided to me."

[11] The Commission received a large quantity of written material from Mr Hardie's representative on 4 and 6 August 2009. The provision of this material clearly breached the 13 July 2009 directions and placed the Commission and the McCarthy Ausgroup in significant difficulty given the imminent hearing. As a consequence, the hearing set for 11 August 2009 was cancelled and the parties were advised that I would consider the matter on the basis of the written material before me, together with any additional material either party sought to provide by 13 August 2009.

[12] I have considered all of the material before me in reaching a conclusion in this matter.

[13] It is appropriate to pause at this point and comment that I have grave reservations over Dr Bakker's conduct of this matter to date. Dr Bakker has consistently failed to apply the courtesies which the Commission would normally expect and her behaviour has been indicative of an absence of the knowledge of the Commission and its processes which could reasonably be expected from an experienced legal representative.

[14] The findings set out below should be read in conjunction with my decision of 17 March 2009.

[15] Section 643 relevantly states:

"(1) Subject to subsections (5), (6), (8) and (10), an employee whose employment has been terminated by the employer may apply to the Commission for relief in respect of the termination of that employment:

(a) on the ground that the termination was harsh, unjust or unreasonable; or

(b) on the ground of an alleged contravention of section 659, 660 or 661; or

(c) on any combination of grounds in paragraph (b) or on a ground or grounds in paragraph (b) and the ground in paragraph (a).

(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 systematic basis for at least 12 months;

(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.

(a) the relevant time is the time when the employer gave the employee the notice of termination, or the time when the employer terminated the employee's employment, whichever happened first; and

(b) for the purposes of calculating the number of employees employed by the employer, employee has the same meaning as in paragraph (b) of the definition of that term in section 636."

[16] As a consequence, if it is established that the employer, including any related body corporate had fewer than 100 employees as at the time of the termination of Mr Hardie's employment, or when notice of that termination was given to him, whichever was the sooner, he is excluded from being able to make the application.

[17] Mr Hardie asserts that his employer was Port Lincoln Tugs Pty Ltd (PLT). He was paid by PLT and the termination of his employment was effected by PLT.

[18] This issue fundamentally turns on the question of which entity was the employer of Mr Hardie and whether, at the relevant time, that employer had related bodies corporate with employee numbers which would mean that the combined count exceeded 100.

[19] Section 50 of the Corporations Act 2001 states:

(a) a holding company of another body corporate; or

(c) a subsidiary of a holding company of another body corporate;

the first mentioned body and the other body are related to each other."

[20] A subsidiary is defined in section 46 of the Corporations Act in the following terms:

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

(i) controls the composition of the first body's board; or

(ii) 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

(iii) 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 concept of control is itself defined in section 50AA of the Corporations Act.

(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:

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

(b) 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.

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

(b) 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."

[22] Mr Hardie asserts that the termination of his employment took effect on 4 November 2008. This termination of employment was confirmed by letter of 7 November 2008. I am satisfied that 4 November 2008 is the relevant date for the purposes of subsection 643(12). Consistent with my decision of 17 March 2009, I am satisfied that PLT was the employer of Mr Hardie.

[23] In the March 2009 proceedings PLT provided evidence of the number of employees engaged by it, and other companies in the Stannard Marine Group to the effect that the total relevant employee numbers were 67. In my decision of 17 March 2009 I observed:

"[31] There is no dispute that Mr Hardie was employed by Port Lincoln Tugs Pty Ltd. The Stannard Group asserts that Port Lincoln Tugs Pty Ltd is one of three subsidiaries of Stannard Marine Pty Ltd, that Stannard Pty Ltd is wholly-owned by Stargate Pty Ltd which itself is owned by Mr Stannard. If this is the case, the evidence before me clearly establishes that the Stannard Group employed fewer than 100 employees at the relevant time.

[32] However, the evidence of Mr McAllister was that Port Lincoln Tugs Pty Ltd was 50% owned by Stannard Marine and 50% owned by Svitzer Marine, a substantial maritime employer. Mr McAllister advised that Port Lincoln Tugs Pty Ltd had a four-person board, two of whom were appointed by Stannard Marine and two by Svitzer. No evidence was provided to me with respect to the exercise of control within that Board. In closing, Mr McCarthy advised that his enquiries indicated that the Port Lincoln Tugs Pty Ltd Board had no casting vote arrangement and that in the event of a dispute the matter would go to arbitration. Notwithstanding this, Mr McCarthy advised that the Stannard Group conceded it had a controlling interest in operational issues.

[36] The starting point for the Stannard Group was that, as a series of related bodies corporate which included Port Lincoln Tugs Pty Ltd, it employed fewer than 100 employees.

[37] I am unable to agree with this starting point. Mr Hardie was employed by Port Lincoln Tugs Pty Ltd. Accordingly, that corporate entity must represent the starting point for any consideration of related bodies corporate. Whilst I have noted Mr McCarthy's assertions relative to the control of Port Lincoln Tugs Pty Ltd, the evidence before me does not establish that Port Lincoln Tugs Pty Ltd is a subsidiary of the Stannard Group or, for that matter, Stannard Marine. It may be that Port Lincoln Tugs Pty Ltd is such a subsidiary on the basis of a casting vote arrangement or another suitable arrangement but I simply do not have evidence before me to this effect. Further, if it is the case that Port Lincoln Tugs Pty Ltd is a subsidiary of Svitzer, the employees engaged by the Stannard Group are not relevant to the employee count and the number of Port Lincoln Tugs Pty Ltd employees may be increased by what appears to be the very much larger Svitzer employee numbers.

[39] On the information before me I am not satisfied that Port Lincoln Tugs Pty Ltd, including any related bodies corporate, had fewer than 100 employees at the time of the termination of Mr Hardie's employment, or when notice of that termination was given to him, whichever was the sooner."

[24] In summary terms, PLT now argue that the total number of employees is 29 on the basis that this represents the employees of PLT only or, in the alternative, 67 if PLT and the other companies in the Stannard Marine Group are taken into account. PLT assert that it was not aware of the need to prepare submissions to argue that PLT was not a related body corporate to Svitzer Marine until after the hearing on 27 February 2009 had commenced and the issue was raised by Mr Hardie's representative. Further, that PLT was therefore unable to properly dispute this clause in the March 2009 proceedings.

[25] Again, in summary terms Mr Hardie's position is that:

"PLT was a controlled entity of the former Adsteam Marine Ltd and owing to a successful 100% takeover and merger by SvitzerWijsmuller, a wholly-owned subsidiary of AP Moller-Maersk, Adsteam Marine Limited became at 23 March 2007, a subsidiary of SvitzerWijsmuller. [1]" (sic)

[26] PLT has provided a Register of Members and Share Certificate which indicates that it is 50% owned by Stannard Marine Pty Ltd (Stannard Marine) and 50% owned by Adsteam Marine Investments (JV) Pty Limited, now trading as Svitzer Marine Investments (JV) Pty Limited.

[27] PLT argues that it is not a subsidiary of either Stannard Marine or the Svitzer Group consistent with section 46 of the Corporations Act in that neither Stannard Marine nor the Svitzer Group generally has the capacity to determine an outcome of decisions about PLT's financial or operating policies consistent with section 50AA of the Corporations Act. Further, that neither Stannard Marine nor the Svitzer Group have a practical influence which can be executed over PLT pursuant to section 50AA(2)(a) of the Corporations Act. Thirdly, that neither Stannard Marine nor the Svitzer Group has exhibited any practice or pattern of behaviour over PLT's financial or operating policies which would then deem PLT to be a subsidiary of either Stannard Marine or the Svitzer Group.

[28] PLT referred to the Articles of Association in conjunction with section 47(a) and (b) of the Corporations Act in this respect. Article 79 is particularly relevant in this regard in so far as it states:

"Article 79 (Amended by special resolution dated 25 March 2003):

"While Stannard Marine Pty Limited or Adsteam Marine Investments (J.V) Pty Limited shall hold any shares in the Company they shall each have the right from time to time to appoint two Director in respect of such holding." (sic)

[29] PLT relied on a number of authorities to support its position, but particularly, on the Supreme Court of Western Australia decision in Mount Edon Gold Mines (Aust) Ltd v Burmine Ltd [2]. It also relied upon the decision of Drake SDP in Harland v Quinn Muirs Pty Ltd (Good Guys)[3]. In this decision the Commission stated:

"[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."

[30] PLT further referred to a number of its Articles of Association. Of particular relevance are Articles 69 and 71.

[At any meeting unless a poll is demanded as hereinafter provided every resolution shall be decided by a show of hands and on a show of hands every member present in person or by proxy or duly constituted attorney or by a representative appointed pursuant to the Companies Act shall have one vote.]

In the event of a Deadlock at any meeting of the Company or any meeting of Directors and Director or any member of the Company may request that the meeting be adjourned and an independent Chairman (as hereinafter defined) shall be invited to such adjourned meeting. Upon such request being made that Chairman of the meeting shall adjourn that meeting to a convenient date and at such adjourned meeting he shall invite the said independent Chairman to preside and at such adjourned meeting the said independent Chairman shall take the chair and upon any resolution being put to the vote he shall have a casting vote.

The independent Chairman for the purposes of this Article shall be:-

(a) The person from time to time appointed ad hoc for such purpose by the Directors.

(b) Failing Agreement among the Directors for the appointment of such Chairman the appointment shall be made by the then President of the New South Wales Branch of the Australian Society of Accountants."

[31] With respect to section 46(a)(iii) of the Corporations Act, PLT has provided evidence of its share issue.

[32] It has also provided a copy of the Register of Directors and states:

"…. We note that Mr Chris Stannard and before him Mr Alan Graham Stannard, collectively the Stannard family, have always been "Managers" of the Company. In a practical sense, this title of "Manager" refers to their capacity as "Chairman" of the Board of Port Lincoln Tugs Pty Ltd."

[33] In this respect I have taken it that PLT seek to distinguish between a Chairman of the Board in an operational sense and the independent Chairman with a casting vote referenced in the Articles of Association.

[34] I have noted that PLT has said that the need for this second motion was derived from a procedurally unfair last minute issue raised in the course of the March 2009 hearing such that it was unable to respond in as detailed a fashion as it would have preferred to do.

[35] Mr Hardie's position is that PLT is an entity controlled by the Svitzer Wijsmuller Group of Companies and accordingly, employees of related bodies corporate total in excess of 600 employees.

[36] Mr Hardie's submissions deal in some detail with the takeover of Adsteam Marine Limited by Svitzer Wijsmuller in 2006. These submissions detailed the activities formerly undertaken by Adsteam which included tugboat functions. They detail the Adsteam executive remuneration arrangements which Mr Hardie asserts were extended to employees of PLT.

[37] Mr Hardie relies on the 2006 Adsteam Marine Limited financial report which he asserts lists PLT as a controlled entity. I note that Note 14 of this report in fact lists PLT as a 50% interest as an associate or partnership. PLT is not listed in this report as a subsidiary. Mr Hardie asserts:

"…. We note that Adsteam Marine Limited had a 50% ownership of the company Port Lincoln Tugs, as controlled entities. Thus, Svitzer Marine is in control of Port Lincoln Tugs, as controlled entities. Thus, Svitzer Marine is in control of Port Lincoln Tugs as it obtained 100% of the voting rights attached to Adsteam Marine Limited shares. We also note that controlled entities of the Svitzer Marine Limited group may be eligible to participate in a scheme enabling the issue of up to 1,000 shares to an employee in each financial year subject to the approval of the Svitzer Board."

[38] Mr Hardie's submissions then deal at some length with the former Adsteam operational strategies. These submissions assert that PLT is an entity controlled by Svitzer Wijsmuller in the context of the International Accounting Standards adopted in Australia by the Australian Accounting Standards Board.

[39] Mr Hardie has attached a document which I understand lists the tugs owned by Svitzer Wijsmuller on a global basis. I understand from marks against five of these vessels, that these vessels are operated by PLT but the details of this arrangement and any operational issues are not further set out. Significantly, Mr Hardie's submissions generally focus on the ownership and control arrangements relative to Adsteam and Svitzer Wijsmuller. They do not commence with a consideration of the ownership and control issues directly impacting on PLT.

[40] I am satisfied that both parties to this matter have had a more than adequate opportunity to present all relevant material to the Commission. Further, while the matter was initially listed for hearing, sections 645 and 648 permit the Commission to determine an employee numbers issue on the basis of written material which may be provided by the parties. PLT requested the adoption of this approach and my decision to cancel the hearing of the matter followed a clear warning to Mr Hardie's representative that this would be a consequence of a continuing failure to comply with my directions.

[41] As I indicated in my 17 March 2009 decision, the starting point for consideration of employee numbers, for the purposes of subsections 643(10),(11) and (12), must be PLT.

[42] The material before me establishes that PLT is 50% owned by Stannard Marine Pty Ltd and 50% by Adsteam Marine Investments (JV) Pty Ltd. The material before me confirms that Adsteam Marine Investments (JV) Pty Ltd has, in all probability, been merged with Svitzer Wijsmuller. However, that merger does not establish that Svitzer Wijsmuller employees must be included in any employee count for the purposes of section 643(10).

[43] The reference in section 643(11) to the need to include employees of any related bodies corporate within the meaning of section 50 of the _Corporations Ac_t directs my attention to whether PLT is:

• a subsidiary company of a holding company of another body corporate.

[44] On the information before me there is no dispute that PLT is not a holding company of another company. The disputed issue goes to whether PLT is either a subsidiary of another company or a subsidiary of a holding company of another body corporate.

[45] Section 46 of the Corporations Act directs attention to the issue of control. In practical terms I need to be satisfied that Adsteam Marine or Svitzer Wijsmuller control the composition of the PLT Board, or alternatively, are in a position to cast or control the casting of more than half of the maximum number of votes that might be cast at a PLT general meeting. A third option is that Svitzer Wijsmuller may hold more than half of the issued share capital of PLT.

[46] Of the two parties who jointly own PLT I have directed attention only to the Adsteam Marine/ Svitzer Wijsmuller group because there is no challenge to the information before me which establishes that if PLT and the Stannard Marine group are taken to be related bodies corporate, their total employee numbers did not exceed 100 at the relevant time.

[47] In considering the issue of control, I have had regard to sections 47 and 50AA of the Corporations Act.

[48] The material before me establishes that the Board of PLT is limited to four persons and both Stannard Marine and Svitzer Wijsmuller hold two Board positions each. Further, the casting vote in terms of the operation of the Board is vested in an independent person appointed for that purpose. To the extent to which it might be argued that the Chairman of the PLT Board has that authority, I note that this appointment comes from the Stannard Group rather than the Svitzer Wijsmuller entity.

[49] Finally, neither Stannard Marine nor Svitzer Wijsmuller hold more than half of the issued share capital.

[50] To the extent that it might be argued that Svitzer Wijsmuller own the tugs which PLT operate and hence control PLT, there is simply no material before me which supports this proposition.

[51] To the extent that it might be argued that PLT arrange remuneration on the basis of the approach followed by Adsteam Marine in 2006, I do not consider that this establishes a form of control for the purposes of determination of this issue.

[52] Accordingly, I have concluded that, even if PLT is a related body corporate to Stannard Marine, the combined employee count is less than 100 such that Mr Hardie is excluded from making an application pursuant to section 643(1)(a).

[53] An Order [PR988915] dismissing his application will be issued accordingly.

[1] Dr Bakker's correspondence of 5 August 2009

[2] (1994) 11WAR291; 12 ACSR 727;12 ACLA 185

[3] [2007] AIRC 612

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