Kronen v Commissioner of Taxation

The Disputed Claim 7 The applicant's factual allegations, as described in the judgment, are as follows: 8 The applicant was employed by Commercial Motor Industries Pty Ltd trading as CMI Toyota from 14 April 1998 to 3 November 2000. He was initially employed as a vehicle salesperson and then as a business manager. His employer was bound by the Vehicle Industry - Repair, Services and Retail Award and his contract of employment with the employer was covered by the Award. 9 The applicant was remunerated by his employer by payments characterised as "retainer" and "commission" and each comprised approximately 50 per cent of his total remuneration. During the applicant's employment, his employer made superannuation contributions in respect of the retainer payments but it did not make superannuation contributions in respect of the commission payments. 10 The applicant says that the employer was obliged to make superannuation contributions in respect of the commission payments, totalling some $4,850.

tHE lEGISLATION AND THE aPPLICATION 11 The originating application asked the Court to review what the applicant described as the decision and conduct of the ATO in respect of its refusal to recover, or to attempt to recover, the alleged shortfall in superannuation contributions payable subject to the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGA Act) by an employer bound by the Award. 12 The SGA Act comprises part of a legislative superannuation guarantee scheme. The scheme imposes a charge on employers who fail to provide a minimum level of superannuation for each of their employees, subject to various exceptions prescribed by the SGA Act and other legislation. 13 The SGA Act establishes the following legislative framework in relation to superannuation contributions which may be payable by an employer. 14 Section 43 provides that the respondent has the general administration of the SGA Act. Section 16 obliges an employer to pay a superannuation guarantee charge on an employer's superannuation guarantee shortfall, which is to be calculated on a quarterly basis. That obligation is also supported by s 5 of the Superannuation Guarantee Charge Act 1992 (Cth) (the SGC Act). In order to reduce and/or avoid incurring a superannuation guarantee charge liability, the employer superannuation contribution needs to be made to a complying superannuation fund or Retirement Savings Account quarterly and by the end of the next month: s 23. 15 Section 17 provides for the calculation of the superannuation guarantee charge. 16 Section 33(1) provides that an employer who has a superannuation guarantee shortfall for a quarter must lodge a superannuation guarantee statement for the quarter on or before the dates specified in the subsection. Section 34 gives the respondent certain powers to require a superannuation guarantee statement from an employer. Section 35 prescribes a system of self-assessment (the superannuation guarantee statement lodged by the employer is taken as its self-assessment of liability for any superannuation guarantee charge). Then s 36 provides that the respondent may issue default assessments if the employer has not lodged a superannuation guarantee statement for the quarter and the respondent is of the view that there is liability to pay the charge. Section 37 provides that the respondent may issue amended assessments at any time in the case of fraud or evasion; or within four years from the day on which the assessment is made in all other cases. 17 Section 42 provides that an employer who is dissatisfied with an assessment may object in the manner set out in Part IVC of the Taxation Administration Act 1953 (Cth). 18 Section 65 provides for the payment of the amount of the shortfall component of the charge by the respondent to a complying superannuation fund or other listed destination for the benefit of the employee. 19 I have called the superannuation guarantee charge the superannuation contribution in these reasons.

The Judgment 20 At [17] of the judgment, Besanko J set out the orders sought by the applicant in the originating application, namely: (1) a declaration that, subject to the SGA Act, the respondent failed to properly determine the liability of an employer and the entitlement of the employee; (2) a declaration that, subject to the SGA Act, the respondent failed to exercise its authority to amend an employer assessment, recover a shortfall in the employer's superannuation guarantee liability, and properly distribute those funds that should have been recovered to the account of the relevant employee; (3) a declaration that the respondent failed to accord an employee his statutory right to fairness and due process; (4) a declaration that, subject to the Award, commission payment fell within the meaning of "ordinary time earnings"; (5) a declaration that the respondent failed to protect the entitlement of an employee to superannuation, as provided for by the SGA Act; (6) an order that the respondent pay $4,850 into a suitable superannuation fund on the applicant's behalf (or directly to the applicant). 21 Perhaps not surprisingly, especially having regard to the claim in (6) above, the respondent made an interlocutory application for summary judgment on the ground that the applicant had no reasonable prospect of successfully prosecuting the proceeding. 22 After considering the respective submissions, Besanko J at [50] concluded: … I do not think the SGAA contains a scheme which gives [the applicant] a right or imposes a duty on the respondent. The words in s 36 (and s 37 if that be relevant) are wholly permissive and it is the employer who is given the right to object. Furthermore, there is no section which provides a trigger to an obligation on the respondent to hear and decide a claim by an employee that his or her employer was not making superannuation contributions according to law. The fact that there might be an administrative structure (that is, employee notification) does not confer a right on the applicant to require the respondent to take action or impose a duty on the respondent to do so. Section 45A (if it be relevant) did not create a duty to hear and determine.

pROPOSED gROUNDS OF aPPEAL 23 The applicant proposes to rely on the following two grounds of appeal: (1) the Court failed to consider, or failed to attach sufficient weight to, the expressed will of the Parliament about how the SGC Act and SGA Act were to function; and (2) the Court confused the narrow right and duty arising from an isolated section, or sections, of the SGA Act with the broader rights and duties arising from the proper operation of the SGA Act as a whole.

Consideration 24 The decision to grant leave to appeal is discretionary. Generally, it is relevant to determine whether in all the circumstances the decision is attended with sufficient doubt to warrant it being reconsidered and whether substantial injustice would result if leave to appeal were refused, supposing the decision to be wrong. 25 In this matter, the focus in submissions was upon whether the judgment is attended with sufficient doubt to warrant it being reconsidered by a Full Court. The additional issue of injustice to the applicant was not contentious; that is, the respondent did not argue that, if there was sufficient merit in the proposed appeal, leave to appeal should otherwise be refused. That was, in the circumstances, an appropriate position to adopt. 26 The applicant provided lengthy and clear written submissions, supported by the information in his affidavit of 2 January 2013. The respondent's written submission in reply was also clear and confronted the real issue. 27 As a starting point, I assume that the applicant has an arguable case that, as against his employer, he is entitled to have the benefit of superannuation contributions calculated by reference to his commission payments. The structure for that entitlement and its enforcement is set out in the SGA Act and the SGC Act, and the Award obliged the employer to make superannuation contributions. The superannuation contributions under the Award were to be made on "ordinary time earnings" as defined in cl 51(b)(iv) of the Award. The applicant's argument is that "ordinary time earnings" included the commission payments. 28 Both sets of submissions acknowledge that the issue now before the Court (and at first instance) was whether the respondent, in circumstances where the employer is alleged to have failed to make the appropriate superannuation payments, has an obligation to enforce the making of those payments (including at the risk of the respondent being liable for them if they are not enforced against the employer: see (6) of the orders sought), and that the employee asserting an entitlement to these payments - in this case, the applicant - may enforce that entitlement against the respondent. The applicant acknowledged in his submission that the issue of who bore the responsibility for "mounting a recovery effort" is crucial. As I have just pointed out: there is an additional necessary step to his proposition, namely that if the respondent has some responsibility for "mounting a recovery effort", that responsibility can be enforced by action by the affected employee. 29 By two decisions of the Industrial Relations Court of South Australia it has been decided that the "Superannuation Guarantee" legislation (primarily the SGA Act and the SGC Act) "cover the field" for the making of superannuation payments so that such rights as might otherwise have existed under contract (Hanafin v Distinctive Data Services (1993) 60 SAIR 408) or under an award (Croft v Lukins [2004] SAIRC 58) for the making of superannuation payments cannot be enforced by that Court. Those cases did not directly address how any entitlement under the SGA Act could be enforced, although s 50 of the SGA Act was referred to in Hanafin, in a passage quoted with approval in Croft at [13]. 30 In Kronen v Commercial Motor Industries Pty Ltd [2006] SAIRC 31, the Industrial Relations Court of South Australia rejected on the merits the applicant's claim (in substance the same claim as he now makes) that his commission payments entitled him to the additional superannuation contributions. Subject to the question of the jurisdiction of that Court, that Court therefore provided him with an avenue for establishing his claim, if it were properly made. It also decided the disputed claim adversely to him. Because the decision was adverse to him, the applicant appealed to the Full Court of this Court. The Full Court in Kronen v Commercial Motor Industries Pty Ltd (CMI Toyota) (2008) 171 FCR 521 (Kronen FC) ruled that, at the time of the decision appealed from, s 179 of the Workplace Relations Act 1996 (Cth) did not give the Industrial Relations Court of South Australia jurisdiction to entertain claims with respect to amounts payable by an employer to persons other than the employee (such as a superannuation fund). By the time of the Full Court decision, s 720 of the Workplace Relations Act 1996 (Cth) had been introduced, under which that Court was given such jurisdiction in relation to amounts payable by an employer to a superannuation fund on behalf of an employee, but s 720 did not operate retrospectively. That is explained in the Full Court decision at [4]. Section 720 came into effect on 27 March 2006. It would appear that, from that date, persons such as the applicant could pursue claims such as the present claim, at least where the superannuation payment became payable on or after that date. Section 720 had a six-year time limit on any such application. 31 The applicant has also endeavoured to pursue his claim unsuccessfully by the other proceedings referred to at [15] and [16] of the judgment. 32 Whilst he has a decision which was adverse to his claim, that decision was found to have been made without jurisdiction. Otherwise, the merits of his claim were not considered by the Full Court. 33 The application determined by the judgment was a different step in an endeavour to litigate his claim that the employer was obliged to make superannuation contributions on the commission payments. It failed because the respondent, under the legislation, could not be obliged to pursue that claim against the employer and could not be liable for the amount of that claim on the basis that the respondent had failed to pursue it. As the judgment records at [20], the respondent took the view that the employer was not obliged to make superannuation contributions on behalf of the applicant in respect of the commissions paid to him. 34 It is not necessary for the purposes of this application to determine that question. I have assumed in the applicant's favour that his claim is reasonably arguable. The issue is whether he has an arguable case that he has an enforceable legal right to oblige the respondent to pursue his claim against the employer. 35 It is a consequence of the applicant's case that the respondent is accountable to him in that way, even though the respondent considers that the applicant's view of the amount of the superannuation contributions under the Award is not correct. Had the respondent formed the view that the employer should have made those contributions, the respondent could have exercised the power in s 36 of the SGA Act to make a default assessment, and in turn the employer could have disputed that assessment under the procedures in Part IVC of the Taxation Administration Act 1953 (Cth). If the employer did not dispute the assessment, it would have been payable, and would have been applied for the benefit of the applicant by reason of ss 65 or 67 of the SGA Act. 36 The proposed grounds of appeal appear to have a general focus and a more specific focus. They are set out above. The first is based on the proper interpretation of the SGA Act and the SGC Act as they operate together, and the second is based on the proper interpretation of the SGA Act only. 37 It is clear that Besanko J approached the issue by considering in detail the provisions of the relevant legislation. I do not think the applicant has demonstrated an arguable case that his analysis of the relevant provisions, or his conclusion as to their effect, is erroneous. The applicant's submissions, I consider, adopt too broad an approach to the relevant provisions and thereby fail to give effect to the detailed way the legislation is to operate and the nature and extent of the respondent's obligations under it. 38 The applicant submitted that Besanko J failed to consider, or gave insufficient weight, to the objectives of the SGA Act and that they demonstrate that the respondent, as administrator of the "Superannuation Guarantee scheme", had the following duties: (a) to do everything within his capacity to ensure that all eligible employees received the full measure of their lawful superannuation entitlement; and (b) to refrain from any course of action that might prevent or unnecessarily hinder any eligible employee receiving all or part of their lawful superannuation benefits. 39 In adopting a purposive interpretation of the SGA Act, in conjunction with the SGC Act, it is not clearly the case that the respondent is (as the applicant alleges) obliged to pursue such a claim as the applicant's present claim even when the respondent does not agree with it. Nor, to take the next step, is it clear that the respondent is obliged to do so at the behest of an employee who has a particular view about the extent of an entitlement to superannuation contributions under the SGA Act. 40 Obviously, under the provisions referred to in the judgment, and in the submissions both before Besanko J and on this application, the respondent must consider the enforcement of the obligations of employers under the SGA Act. Those obligations, relevantly for present purposes, are imposed by ss 16, 17 and 23 of the SGA Act. As noted, there is a system of self-assessment imposed on employers by s 35. The employer must, in certain circumstances, lodge additional documentation under s 33. 41 The respondent, who has general administrative responsibility by reason of s 43, may take enforcement action under ss 36 and 37. I respectfully agree with Besanko J that it is a decision for the respondent about whether, when and how to take such action. There is no provision (other than the general administrative responsibility given by s 43) which appears to permit an employee such as the applicant to be entitled to require the respondent to take steps which the respondent does not consider appropriate as part of the enforcement powers under ss 36 and 37. If the contrary were the case, it is difficult to see what "quality control" could be imposed on that obligation. That is, it is difficult to see how a line could be drawn which would prevent the respondent from being obliged to pursue pointless or hopeless claims by an employee. That is not to suggest that the applicant's claim falls into that category. I have assumed his claim that contributions based on his commission payments should have been made is an arguable one. But, obviously, there are those who would persist in unarguable cases. There are degrees of "arguableness". The submission of the applicant is presented as one involving an absolute obligation on the respondent at the request of an employee. It does not address how "arguableness" is to be assessed, or whether that is to be assessed by the respondent or by a Court or whether the obligation arises from the subjective assessment of an employee (which would equate to an absolute obligation). 42 There is no provision in the legislation which suggests any such entitlement on the part of an employee. That is in contrast to what is provided for in s 42, by which a legislative structure is provided for an employer to dispute an assessment of the respondent. Had a right such as that contended for by the applicant been intended, it could and would have been clearly expressed. 43 It now appears, following the decision of the Full Court in Kronen FC, that s 720 of the Workplace Relations Act 1996 (Cth) (now traceable through to the Fair Work Act 2009 (Cth)) enables an employee in the position of the applicant to seek an order which, if unsuccessful, would be relevant to the respondent's decision whether to issue an assessment under ss 36 or 37. 44 It should also be noted that there is, and could be in the circumstances, no suggestion that the decision of the respondent not to take enforcement action against the employer was made in bad faith or for a purpose other than a proper purpose. 45 I should mention some other matters raised by the applicant. The submissions of the applicant in some respects (the effectiveness of the superannuation guarantee scheme, the means of its enforcement including reversed onus of proof, the complexity of the legislation) concern matters of policy rather than informing the proper construction of the relevant provisions. As I have sought to show, the judgment does not mean that an employer can simply ignore its statutory obligations under the SGA Act without potential sanction; that is clearly not correct. Nor did I find in the material extraneous to the SGA Act itself, referred to by the applicant, anything which particularly supported the construction of any of the provisions of the SGA Act, including s 43, contended for by the applicant. 46 For those reasons, I consider that the reasons of Besanko J in the judgment are clearly correct. I respectfully agree with and adopt his careful analysis and assessment of the legislative provisions. 47 In my view, there is no prospect of the applicant successfully arguing on an appeal that he has, in the circumstances, an enforceable legal right to require the respondent to take action under either of ss 36 or 37 of the SGA Act, or under any other provision of the SGA Act, to compel the employer to make the additional superannuation contributions which the applicant asserts should have been paid, or that the respondent has in the circumstances a corresponding legal duty to do so. 48 I accordingly refuse to give to the applicant leave to appeal from the judgment. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.