Mark Cotton v Harpoon Investments

Mark Cotton v Harpoon Investments - [2001] NSWIRComm 198 - NSWIRComm 1999 case summary — Zoe

[19]

(1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. 3 A "contract" is relevantly defined in s 105 of the statute as meaning "any contract or arrangement, or any related condition or collateral arrangement …"; and an "unfair contract" is defined as one "that is unfair, harsh or unconscionable". Relevant background to summons 4 The applicant was a telecommunications engineer with degrees from US universities in computer science and business administration. On 31 January 1996 the applicant received a letter of offer of employment as a Technical Officer with the respondent. The applicant commenced employment with the first respondent on 26 February 1996 in the State of Victoria on an initial probationary period of two months. After two months the applicant's annual salary was to increase from $45,000 to $60,000. The contract of employment also provided for the reimbursement of expenses incurred by the applicant, a payment in respect of superannuation of $3,000 per annum and a bonus on performance with the amount to be advised. No bonus was paid to the applicant during the period of his employment. The applicant said in his evidence that the bonus was "a significant inducement to enter into the contract" although the applicant was not aware of the size of any bonus or in fact whether he would even receive a bonus.

[20]

5 The position of technical officer reported to Mr Curtain as director of operations and Mr Dale as director of product services. As the applicant described his position, the first respondent was brokering pre-paid discount calling phone cards and the applicant's brief was to manage "the company's telephone service provider relationship". The applicant said that his responsibilities "steadily increased to include design, programming, testing, installing and maintaining the company's phone card system." Mr Curtain's evidence regarding the applicant's role was that the first respondent purchased the licence for "Voice Operating System" (VOS) and that In or about the end of April 1996 our first VOS Software Licence arrived together with an associated piece of computer hardware from a company Dialogic Corporation Inc being the equipment in which VOS software relies to run. Cotton installed the software and the hardware and commenced to write the software which was needed before the equipment could be utilised as a telephone answering system. By the end of May 1996 Cotton had finished the development phase of the small system on which he was working and the Company made a decision to run it in tandem with the system which was already operating for us and located at Hawthorn in Victoria. That system was functioning perfectly. Our intention, however, was to gain greater control over the operation and development of such a system and it was for this purpose that Cotton had been employed. 6 On 17 April 1996 Mr Curtain met with all employees, including the applicant, and asked them to accept a lower rate of pay from time to time in order to allow the first respondent to continue operating. The applicant agreed to this and accepted a lower salary of $35,000 per annum. The applicant said, however, he agreed to the lower salary on the basis he was told by Mr Curtain that the problem affecting the first respondent was only for a limited term and that "we will pay you back-pay when it becomes financially possible to do so." Mr Curtain said that he informed the applicant of the nature of the problems confronting the first respondent and told him he could resign or keep working at a reduced rate of pay. Mr Curtain said he "talked about reviews when the Company became financially viable in the future", but "there was no mention of back pay in the context deposed by Cotton."

[21]

7 In the latter part of 1996 the applicant said he spent one month in Sydney installing equipment at "World Exchange". Mr Curtain said in his evidence that the applicant spent approximately one week in Sydney. In November 1996 the applicant said that he had a discussion with Mr Dale and Mr Curtain regarding his "proposed Sydney trip" and put up a proposal that he be made a director and shareholder of the first respondent because "I am working extremely hard and my responsibility had increased greatly." The applicant said that Mr Curtain's response was that he would talk to the Board and consider the matter. Mr Curtain's recollection of the discussion, corroborated by Mr Dale, was that the reference to the "Sydney trip" was a proposal by the applicant that he move to Sydney to live. Mr Curtain said that as the first respondent had no Sydney offices and no money earmarked for expansion, the applicant's proposal was categorically rejected. As to the applicant's proposal regarding a directorship and shares, Mr Curtain agreed that he told the applicant that the Board would consider the request and "At that time, I was personally in favour of such a proposition, as I was then of the view that Cotton had talents in computer programming which I believed made him a valuable member of the team." 8 In respect of the move to Sydney, the applicant said that because of the installation of a new system in Sydney it was necessary for him to be located in that city. He said it would have been too difficult to operate the system remotely from Melbourne. The applicant said that he was transferred to Sydney for an extended period of time with the knowledge and consent of Mr Curtain and Mr Dale. That the transfer was with their consent was evidenced, the applicant said, by the fact that his expenses in relation to the Sydney location were reimbursed by the first respondent. Mr Curtain said in his evidence that despite it being unnecessary for the applicant to do so and notwithstanding the first respondent's objections, the applicant did move to Sydney in December 1996. The applicant was reimbursed expenses but only to the extent that such expenses would have been incurred if the applicant had remained in Melbourne. Whilst in Sydney the applicant performed much of his work from his residence in Coogee. That is, for much of the time he was able to operate the system remotely. The system was located at Rosebery, some ten minutes, the applicant claimed, from his residence and thus he was able to reach the site quickly to remedy any faults or problems that arose with the system. The applicant said "I had to be available around the clock to monitor and modify the system which began to carry millions of connected call minutes."

[76]

56 At 167-168 Barwick CJ went on to say as follows: 23. Assuming that the Commission was entitled to go behind the incorporation of the company and to include its managers and shareholders in the orders for payment of money made in the case - and, as at present advised, I see no reason why under a section such as s 88F the Commission should not do so - it seems to me that persons who were not beneficial shareholders could not be included in an order for the payment of money made in connexion with the varied or avoided contract or arrangement merely because they held shares in the company on trust for some known person, even if that person had been connected with the making or operation of the contract or arrangement. 24. The only other basis for an order for payment of money against these appellants in this case could be that they had received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation. But, though one of them received money from the company apparently without giving any consideration therefor, I can see no evidence of any connexion between that payment and the formation or execution of the contract. Further, in any case, in my opinion, an order for the payment by these appellants of a sum of money which was not limited in amount to represent their association with the making or execution of the contract could not be thought in the circumstances of the case to be an order for the payment of money in connexion with the contract or arrangement. This reasoning if applied to the case of the salesman Joyce necessarily leads to the conclusion that an order for the payment by him of the total sum of $7,579.19 could not possibly be regarded as an order within the jurisdiction of the Commission. 25. For these various reasons, any one of which would suffice to support the conclusion, I am of opinion that an order for payment of $7,579.19 jointly and severally by the appellants and Mr. Joyce was beyond the jurisdiction of the Commission. Orders for some amount could have been made in the circumstances of this case against the appellants severally with the possible exception of the appellants Logan, and probably some sum could be ordered to be paid jointly and severally by some of the appellants. But the joint and several nature of the obligation to pay the total sum ordered to be paid provides sufficient reason that the order of the Commission is in excess of the jurisdiction conferred on it by s 88F.

[77]

57 In the same case Menzies J, at 171-172 held as follows: 6. In my opinion the order as made was outside the power conferred by s. 88F. I would not be prepared to say that any one of the items set out could not have been the subject of some limited order but to order that each and all the appellants pay the whole sum of $7,579.19 does seem to me to be in excess of power. 7. Thus, what is the justification for an order against Keith W. Logan, for instance, to pay the respondents $7,579.19 when, so far as appears, he had no connexion with the making of the avoided contract, or with any sum paid or lost by the respondents, or in work done by the respondents as provided by the contract, and the only basis for the order against him could be that he was a bare trustee of one of the shares in Imisons Metal Sand Filling Suppliers Pty. Ltd., the company which made the contract with the respondents that has been avoided. 8. Moreover, the section does not, so it seems to me, authorize adding together a number of different payments to be made, and the making of an order for the total against persons who may have had some connexion with one of the payments included in the addition, but not with the whole amount ordered to be paid. Thus, although I would not exclude the sums of $293.10, $628.20 and $271.17 ordered to be paid as so-called wages from a payment that could be ordered under the section - whether or not payment of these sums could be ordered under s. 92 of the Act - I do not read the section as authorizing an order that payment of these sums as compensation for work done should be made by, for instance, a mere shareholder in John Royce and Associates Pty. Ltd., the business agents who negotiated the arrangement between Imisons Metal Sand Filling Suppliers Pty. Ltd. and the respondents. Of course, upon my reading of the section, the business agent itself could be ordered to repay any moneys paid to it by the respondents for the contract, but to treat a person as liable for the whole $7,579.19, including wages at award rates, because he held a share in the business agent who negotiated the offending contract, seems to me to transgress the limits of the section. 9. While, therefore, being satisfied that any of the items forming part of the sum of $7,579.19 ordered to be paid to the respondents could, in the circumstances, be the subject of an appropriate order under s 88F, I am also satisfied that a blanket order that the whole sum should be paid by each of the appellants - among others - was in excess of power.

[90]

The contract of employment made on 31 January 1996 between the applicant and the first respondent as evidenced by the letter of appointment dated 31 January 1996 from the first respondent to the applicant is to be varied from its commencement by inserting the following provisions: a. Provided that in the event Mr Cotton agrees to accept an annual salary of less than $60,000 per annum during his period of employment for reasons relating to the financial position of the company, he shall be paid in respect of the period between the time when he agreed to the reduced salary and the time when his salary returned to $60,000, a lump sum that equals the difference between the reduced salary and what he would have been paid if his salary had remained at $60,000 per annum. 2) The first and third respondents are to pay the applicant a sum to be calculated in accordance with the proposed variation to the applicant's employment contract in proposed order 1 hereof. 3) The first and third respondents are to pay the applicant a sum in respect of superannuation that represents the difference between what the applicant received for superannuation and what he would have received if he had been paid superannuation contributions at the rate of $3,000 per annum for the period of his employment, which shall be deemed to be 26 February 1996 to 26 August 1998. 4) To the amounts referred to in proposed orders 2 and 3 should be added interest from the date of filing of the summons in this matter (i.e., 11 November 1999) up to judgment on the basis of the rates prescribed in Sch J to the Supreme Court Rules 1970 pursuant to s 94 of the Supreme Court Act 1970. 5) The total of the money amounts in proposed orders 3,4 and 5 hereof shall be paid to the applicant within 28 days from the signing of the orders and on the basis that the first respondent pays two-thirds and the third respondent one-third. 70 The respondents shall pay the applicant's costs of the proceedings in an amount as agreed or, failing agreement, as assessed.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (93 paragraphs)

Parties

Cases Cited (4)

Cited By (1)