North Western Health Care Network v Health Services Union of Australia, 164 ALR 147 - [2000] NSWIRComm 77 - NSWIRComm 1998 case summary — Zoe

NSWNSWIRComm

North Western Health Care Network v Health Services Union of Australia, 164 ALR 147

[2000] NSWIRComm 77

Industrial Relations Commission (NSW)|1998-08-19|Before: Sams DP

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Industrial Relations Commission (NSW)

Decision date

1998-08-19

Before

Sams DP

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Original judgment source is linked above.

Judgment (113 paragraphs)

[1]

CITATION : New South Wales Independent Education Union and Allambia Pty Limited, trading as Cuddly Possums [2000] NSWIRComm 77 PARTIES : New South Wales Independent Education Union Allambia Pty Limited FILE NUMBER: 3092 of 1999 CORAM: Sams DP Industrial Dispute, notification under s130 - award entitlements denied - whether there was a transfer of business - who was the real and effective employer - whether employee was a transferred employee - effect of s101(2) of the Act - effect of Supreme Court liquidation order - orders sought for accrued entitlements. CATCHWORDS : Held, Transfer of business occurred - transfer of business occurred before termination of employment - successor employer the real and effective employer from 19 August 1998 - employee a transferred employee - s101(2) not attracted - Supreme Court liquidation order did not terminate employment contracts - employee's service with former employer to be counted - payments to be made for redundancy, annual leave and annual leave loading - orders to be made - costs application adjourned. Industrial Relations Act 1996 Annual Holidays Act 1994 Workplace Relations Act 1996 (Cth) Industrial Arbitration Act 1940 Industrial Relations Act 1991 LEGISLATION CITED : REGULATIONS: Centre Based and Mobile Child Care Services Regulations (No 2) 1996

[2]

AWARDS: Teachers (Non Government Early Childhood Service Centres Other Than Preschools) (State) Award North Western Health Care Network v Health Services Union of Australia, 164 ALR 147 General Rolling Stock Company (1866) 1 Eq 346 Australian Insurance Employees Union v WP Insurance Services Pty Ltd, 42 ALR 598 at 606 Jones v Dunkel (1959) 101 CLR 298 CASES CITED : Finance Sector Union of Australia v P P Consultants Pty Ltd [1999] FCA 1251 Allison v Bega Valley Council, 63 IR 68 at 72 RES Logging Company Pty Ltd v Bridge (1969) 69 AR 604 at 607 Re Australian Industrial Relations Commission and Ors, ex parte Australian Transport Officers Federation and Ors (1990) 171 CLR 216 HEARING DATES: 02/10/2000; 02/11/2000; 03/09/2000 DATE OF JUDGMENT: 05/30/2000

[6]

1 By notification, pursuant to s130 of the Industrial Relations Act 1996 ("the Act"), the New South Wales Independent Education Union advised of a dispute with Allambia Pty Ltd ("Allambia") trading as Cuddly Possums, in respect to award entitlements for its member, Ms Tania Rue. 2 The notification was lodged on 16 June 1999 and was expressed as follows: The dispute arises in relation to the award entitlements not being provided on the termination of employment to Ms Tanya Rue, a member of the union. Ms Rue commenced employment on 24 November 1995 as an early childhood teacher. Her position was made redundant on 4 April 1999 due to falling enrolment numbers. The Centre changed owners in October 1998, when the business was sold to the previous owner's brother. During the period of the change of owners, the centre continued to operate from the same premises, the same children attended the service and all the staff continued to work in the same way. The day to day running of the centre was and still is being conducted by the previous owner. Ms Rue's employment was terminated at the conclusion of her shift on 4 April. She was provided with four weeks payment in lieu of notice, and one week's pro rata annual leave. At no time were the provisions of Part C - Redundancy of the award applied in relation to notification and discussion with either the Union or Ms Rue. Payment of severance pay in accordance with Part C - Redundancy, has not occurred despite there being more than 15 employees employed by Allambia Pty Ltd at the time Ms Rue's position was made redundant. Annual leave entitlements accrued before the transfer of business have not been made, despite being nominated on the employment separation certificate. Superannuation payable under both the Award and the federation (sic) legislation has not been paid since July 1997. Payments were being made to a non approved fund and when Ms Rue sought to have payments made to her nominated fund in accordance with the award all payments ceased. A complete statement of service has not been provided. A statement of service is an award entitlement and is essential for establishing the appropriate classification of Ms Rue in future employment. Allambia Pty Ltd are maintaining they do not have any responsibility in relation to Ms Rue's employment prior to the transmission of business on 16 October 1998. The relevant industrial instrument is the Teachers (Non Government Early Childhood Service Centres other than Pre Schools) (State) Award. 3 Compulsory conference proceedings were listed for 25 June 1999, at which time Ms Moore appeared for the notifier and Mr Morphett (Agent) with Mr Clarke appeared for the respondent. Following preliminary submissions, I directed the parties to confer and report back on 3 September 1999. The Commission chaired private conferences with the parties on 21 October, following which I issued the following statement and directions: In this matter the Commission has chaired conferences with the parties and has been asked by the respondent for time to allow the respondent's legal advisers to consult with their client as to the future of this matter. I am prepared to accede to the request and allow fourteen days for that to occur. I require the respondent to advise the outcome of those discussions within fourteen days and if there is no resolution of the matter I will issue the appropriate certificate of attempted conciliation and, in anticipation of the matter not resolving, I propose to tentatively set the matter for hearing and issue directions. I direct: 1) That the notifier of the dispute file and serve any affidavit material upon which the notifier relies by 4.00pm on 23 December. The material that is to be filed by the notifier is to include draft orders that the notifier will be requesting the Commission to approve. 2) The respondent is to file and serve any affidavit material and such other evidence upon which it relies by 4.00pm on 19 January 2000. 3) That the notifier file and serve any material in reply by 4.00 pm on 3 February. I shall set the matter down for hearing commencing at 10.00am on 10 February and continuing at 10.00am on 11 February, 2000. I also issue the following recommendation: The Commission is of the view, having heard the parties privately on this matter, and in view of the various exchanges of settlement that have been made, that it would be a great pity if this matter could not be resolved by mutual agreement. The issues that are to be determined are complicated but I also observed both privately and I do so now on record, that the employee concerned has certain rights which cannot be extinguished in circumstances of company take-overs. While the true legal position is yet to be determined - and may well be determined in the respondent's favour - the rights of the employee concerned in this dispute must be protected by this Commission and the true employer must be held responsible.

[21]

13 Ms Rue said that at no time was she told her employment had been terminated, even though she knew staff at Tired Teddy's had received termination letters. Mrs Wotton had said "There is no need for all that". 14 On 2 September 1998, Ms Rue received notice from Nicholls & Co of a creditors' meeting to be held on 15 September. Ms Rue appointed her union official, Ms V Groom as her proxy and lodged a proof of debt claim with the liquidator for annual leave, annual leave loading and severance payments (Tp 17). Through the sale process, Ms Rue said that it was "business as usual". All staff remained employed and Mrs Wotton continued to operate the Centre. She was subsequently advised that Mrs Wotton's brother, Mr John Clarke, had purchased the business. 15 There was a meeting in November 1998 between Mr and Mrs Clarke and Ms Rue, at which Mrs Clarke was asked about the employees' accrued holidays. She had replied that her "entitlements were lost during the liquidation". Ms Rue had no further contact with Mr Clarke until she was terminated by him on 9 April 1999 for reasons of redundancy. 16 In oral evidence, Ms Rue attested that her employment conditions did not change after 24 August 1998. She had worked continuously from 18 August 1998 until 9 April 1999, with no change in the opening hours of the Centre. 17 In cross examination, Ms Rue denied that she was told by either Mr Nicholls, or Mr Brown (the liquidators) that her employment contract had been terminated as a consequence of the Supreme Court order. However, she was aware that if the sale did not go ahead, the centre would close. She agreed that she was uncertain, whether or not, she would receive her entitlements. She assumed if the business was sold, her entitlements would be protected. 18 Ms Rue acknowledged receiving the liquidator's report (dated 27 October 1998) which said in Pt 5, dealing with employee's unpaid holiday pay and superannuation, totalling $58,963.48, that there were insufficient funds to allow for distribution to be made to the employees. This was confirmed by the new employer in November 1998. 19 Ms Jacqueline Veronica Groom is an organiser for the NSW/ACT Independent Education Union, who has responsibility for the South-east and Central-west of New South Wales. In her affidavit evidence, marked Ex'7', Ms Groom describes various conversations with Mr Brown (the liquidator). In two conversations, on or about 19 August 1998, Ms Groom said that Mr Brown had told her that the staff could continue working and they would be paid. In the week commencing 24 August, Mr Brown told her that he knew of a buyer interested in purchasing the centres and, in the meantime, the centres would remain open and the employees would be paid. 20 Ms Groom had said that if the centres were sold, the employees' entitlements would be protected by s102 of the Industrial Relations Act. Mr Brown had replied "yes, but if the prospective purchaser knows this then the sale will not go through". Ms Groom attested that the substance of this conversation was repeated in several other telephone calls and at the meeting of creditors on 15 September. She reaffirmed this evidence in the witness box. 21 Ms Groom had advised members to complete a proof of debt form in order to ensure outstanding entitlements (including redundancy benefits) were taken into account by the liquidator. 22 Ms Groom said she did not receive a copy of the minutes of the 15 September creditors' meeting until some months later. The minutes were not a true and correct record of the meeting as they did not record discussion of s102 of the Act. 23 In oral evidence, Ms Groom contested Mr Brown's version of the conversation at the meeting of creditors on 15 September. She accepted that there was "considerable uncertainty" as to whether the businesses would close. She further said it wasn't her place to go along with the liquidator deceiving the prospective purchaser by not revealing obligations under s102. 24 Mr John William Clarke is a director of Allambia. He provided affidavit evidence (Ex'A') and gave oral testimony. He described the details of the purchase, in October 1998, of the three child care centres previously owned by Coralpalm. Attached to his affidavit is the Sales Agreement between Coralpalm (in liquidation) - the vendor, and Allambia as the purchaser. He said it was a term of the agreement that all employees of Coralpalm were terminated by the vendor on 18 August as a consequence of its liquidation (Cl 6.1). 25 Mr Clarke attests that he became aware of the winding up of Coralpalm through his sister, Judy Wotton, then a director of Coralpalm. He had offered to the liquidator, Nicholls & Co, that Allambia take over running the three child care centres on a caretaker basis in order for prospects of sale to be explored. He became aware that the only asset of Cuddly Possums Long Day Centre (and the others) was its goodwill and that if the centres closed - even for a day - they would lose their Department of Community Services licences. Mr Clarke subsequently entered into a licence arrangement to run the three centres effective from 24 August 1998. 26 Mr Clarke attests that this caretaker arrangement was on the understanding that he was not responsible for any of Coralpalm's liabilities prior to 24 August, and that while retaining all the employees, their employment had been terminated on 18 August. Mr Clarke employed his sister, Mrs Wotton, as manager of the centres. 27 Between 24 August and 16 October, Mr Clarke, along with several other parties, discussed purchasing the businesses with the liquidator. Agreement was finally reached for Allambia to purchase the centres from Coralpalm. He subsequently wrote to all employees confirming their new employment. 28 In April 1999 Ms Tanya Rue was made redundant as the number of children had dropped and the choice had been to make a teacher position redundant, or close the centre. Ms Rue's termination entitlements were calculated from 24 August 1998 to 9 April 1999. Mr Clarke says that Ms Rue was overpaid annual leave in the amount of 40.33 hours. She did not receive severance pay as her employment was less than one year. 29 He assumed the reference to twenty days' annual leave in the separation certificate was a clerical error made by his sister whose signature appears on the certificate. 30 In oral evidence, Mr Clarke says he was informed by Mr Brown (the liquidator) that all the employees had been terminated on 18 August 1998. 31 He described the sale process as "a very messy affair" and there was considerable doubt as to whether he would be the successful purchaser. 32 In cross examination, Mr Clarke confirmed that the temporary licence arrangement was verbally entered into and operated until the sales agreement was finalised. The agreement incorporates both the licensing agreement effective from 24 August, and the terms of sale as at 16 October. Mr Clarke was shown a letter dated 24 August 1998 from the liquidator to Mr Clarke's solicitor, which disclosed that the purchase of the goodwill at that time was contemplated at $90,000. The eventual sale price was $25,000. Mr Clarke gave evidence that since August 1998, Allambia had sold both Cuddly Possums, Blayney and Cheeky Cherubs at Parkes. He said that he had sold Cuddly Possums for $32,000 for plant and equipment and $6,000 for goodwill. 33 Mr Graeme Brown, is the manager of A R Nicholls & Co and was the Court appointed liquidator of Coralpalm. In his affidavit, Ex'B', Mr Brown said that on 19 August 1998, he, Mr Nicholls and Mr Wotton visited the three child care centres, then owned by Coralpalm. He said, at each centre, either he, or Mr Nicholls, informed employees that as a result of the liquidation their employment contracts were automatically terminated and that existing entitlements may, or may not be paid, depending on whether the businesses were sold, and how much was paid for them. 34 Mr Brown confirmed that a caretaker arrangement was entered into with Allambia on 24 August 1998. On 2 September 1998, Mr Brown wrote to all potential creditors, including employees, advising of a creditors' meeting on 15 September and enclosing a summary of the company's affairs, forms for the appointment of proxies and proof of debt forms. Ms Groom attended as a proxy for Ms Rue. Mr Brown attests that Ms Groom had asked about the employees' status and had acknowledged his reply that all employment contracts had been terminated and the new employer would accept no responsibility of employee entitlements due by Coralpalm. Annexure B, the minutes of the meeting, disclose this exchange. The total of outstanding employee entitlements and superannuation was $58,963.48. 35 In respect to the sale process, Mr Brown attests that between 18 August and 16 October, there was "considerable uncertainty" as to whether a sale would take place. There needed to be an agreement between the potential purchaser, the liquidator and other charge holders. The agreement took effect on 16 October 1998. 36 Mr Brown confirmed Mr Clarke's understanding of Allambia's liabilities arising only from 24 August 1998. He said that, after distribution of sale funds, there was no funds to distribute to unsecured creditors, including the unpaid employee entitlements owed by Coralpalm. In his report to creditors of 27 October 1998, Mr Brown had advised that the company had traded whilst insolvent. However, the liquidator had decided not to take action against the Coralpalm directors, but the creditors might seek to do so. 37 In reply to Ms Rue's affidavit, he said it was Mr Nicholls, and not himself, who spoke at the meeting on 19 August with the employees. He said that he had spoken to Ms Groom on various occasions and stressed to her that employee entitlements would only be paid if a sale eventuated. After the sale, he informed her that there were insufficient funds to meet the employees' entitlements. Mr Brown said Ms Groom acknowledged the situation and had even said "at least they've still got their jobs". 38 Mr Brown said that Ms Rue was informed that her employment was terminated at the meeting on 19 August, in the letter to creditors of 2 September and through her proxy, Ms Groom, at the meeting of creditors on 15 September 1998. 39 In oral evidence Mr Brown described the process of liquidation and how it applied to Coralpalm. He said that the centres were costing about $18,000 a week to run and that the liquidator was not in a position to assume the operating role. Its role was to close the centres down, gather the assets and sell them. However, Mr Craig Wotton put it to the staff that they would continue to be paid by him as there may be somebody interested in buying the business; but the sale would take some time to put in place. 40 Mr Clarke became involved in temporarily running the centres by assuming the running costs and employing the existing staff. The Department of Community Services was content with Mr Clarke doing so as he already had a licensed child care centre at Orange. 41 Mr Brown said that the company had no assets, as the centres, equipment and furniture were all under lease to ESANDA and the ANZ Bank. Initially, Mr Clarke had agreed to purchase the goodwill for $130,000. He had, in fact, paid a deposit of $13,000 into the liquidator's trust account. One of the charge holders, a Mr Samra, was to be paid $50,000 by Mr Clarke and the sale price was re-negotiated to $90,000. ESANDA and the ANZ had also negotiated favourable terms with the liquidator. However, the Samra deal fell through and Mr Clarke withdrew his offer. Mr Brown sought to prevail on him and finally the liquidator was left with no choice but to accept an offer of $25,000 out of which Mr Samra was paid $10,000. 42 Mr Clarke had spent close to $100,000 in running costs to this point. The liquidator only had goodwill to sell. The implications of not reaching an agreement was that the centres would close. 43 In cross examination, Mr Brown described his recollection of various conversations with Ms Groom. He said that on 20 August 1998 he had told her the employees had been terminated. He recalled that she had said she could not sanction her members working without pay. However, he was aware, Mr Wotton had made arrangements for the staff to be paid, but as far as the liquidator was concerned, they were working on a voluntary basis. Mr Brown did not recall saying, in a conversation with Ms Groom, in the week of 24 August, that he knew of a buyer for the centres and in the meantime the centres were to remain open and the staff would continue to be paid. He said Ms Groom had never mentioned s102 of the Act and he denied saying that, if the prospective purchaser knew of the obligations under s102, the sale would not go through. He also denied that this was said at the meeting on 15 September. 44 Mr Brown said it was his understanding that the order of the Supreme Court of 18 August 1998 automatically terminated the employees' employment. While stating that the company, Coralpalm, was thereby dissolved, he conceded a winding up order doesn't always lead to dissolution. A liquidator may carry on the business as far as may be necessary to wind it up, so long as funds are available to do so. This was not the position with Coralpalm, as no funds were available. 45 In respect to the temporary licence arrangement, Mr Brown conceded that the reference to it in the final sales agreement was because verbal approval had been obtained beforehand. The Department of Community Services had reluctantly agreed to the temporary arrangement, after Mr Brown had discussed it with them.

[55]

The Evidence 59 In my view, much of the evidence advanced by the respondent is sketchy and confusing. I am not satisfied that the Commission was provided with full details surrounding the sale of Coralpalm to Allambia. The Commission is left to speculate on certain aspects of the sale and to wonder why persons materially relevant to the events, namely Mr and Mrs Wotton and Mr Nicholls, were not called to give evidence. The principles discussed in Jones v Dunkel (1959) 101 CLR 298 arise in such circumstances. This comment, I hasten to add, does not infer any criticism of Ms Devine, who, I should say, acquitted herself admirably in difficult circumstances. 60 There are obvious conflicts of evidence between Ms Groom and Mr Brown. The primary conflict relates to the following matter: Whether Mr Brown, in phone conversations with Ms Groom, had said that the sale would not go through if the prospective purchaser knew of the protection of employee entitlements under s102 of the Act. 61 It would seem extraordinary that Mr Brown, as a Court appointed liquidator, would withhold such information from a prospective purchaser. In any event, it would be most unlikely that a prospective purchaser, particularly acting upon legal advice, would not know, or not ask, about such liabilities. It would appear Mr Clarke was subsequently told about it, and gave instructions for the sales agreement to be amended accordingly (see the handwritten amendment to cl 6.1 of the Sales Agreement (Ex'A' Annexure A). 62 Per contra, Mr Brown concedes Ms Groom raised the matter of s102 of the Act, at the meeting of creditors on 15 September. Amazingly, the minutes Mr Brown prepared make no reference to such inquiry. Not surprisingly, it was a matter of some significance. 63 Against this background, I am left in some doubt that Mr Brown's recollections of conversations with Ms Groom are accurate. 64 I find other aspects of Mr Brown's evidence to be curious. For example, he said that it was either he, or Mr Nicholls, who told employees on 19 August that their employment had been terminated. He later conceded that he wasn't in the meeting at the time and he assumed Mr Nicholls had told the employees. 65 Mr Brown's report to creditors (Ex'B' Annexue D) only identified outstanding employee entitlements in respect to annual leave and superannuation. He accepts this was not the total amount - claims for redundancy payments were not included. He said that he didn't know why the total amount wasn't included and then, in re-examination, said it was unnecessary because there were no funds to pay any of the entitlements anyway. In my view, the report, at the very least, misrepresented the true state of the company's indebtedness. 66 I later make findings of credit in respect to Ms Rue's version of the meeting of 19 August. 67 However, another aspect of conflicting evidence, relates to Ms Rue's entitlements to accrued annual leave. Ms Rue disputes the respondent's contention that she is only owed 96.46 hours. Ms Devine relied on Ex'D' as evidence of this figure. However, Ex'D' discloses that the period of accrual to which 96.46 hours applied, is "for the period 1/1/98 and 14/8/98". No records were produced for the period prior to 1 January 1998. 68 In light of this evidence, I am perfectly satisfied that Ms Rue's oral testimony is to be preferred to that of Ex'D'; the expressed terms of which does not cover the entire period of employment. I find accordingly.

[61]

Was there a transfer of business? 79 The Commission was referred to two authorities which are relevant to this question. While decided under s149(1)(d) of the Workplace Relations Act 1996, to my mind, both decisions reflect what is the generally accepted principles, under Federal and State law, applicable to the circumstances of business transfers. 80 In North Western Health Care Network v Health Services Union of Australia, Nicholson J said at 157: In my opinion the focus in s149(1)(d) on the business or part of a business in the context "of an employer who was a party to the industrial dispute" results in the reference to "the business or part of a business" taking its colour from the activity in which the employer was involved and in relation to which the industrial dispute arose. The inability of succession, assignment or transmission to occur in respect of a business (although possible in respect of part of a business) suggests the paragraph intends a general and not legally specific characterisation. This is supported by reference to the definition of "employer" and in terms of s149(1A). There is a long history of understanding of the paragraph in this way. Section 170LB is a definition for the specific purpose of a single business and should be confined to that circumstance. It is an inadequate change to set aside the prior understandings. There is no reason why "outsourcing" or "mainstreaming" from government to private enterprise should attract a different application of the section in itself. 81 And in Finance Sector of Australia v PP Consultants Pty Ltd [1999] FCA 1251, the Federal Court reaffirmed the policy considerations discussed in North Western Health Care Network v Health Services Union of Australia. At p12 of the unreported decision the Full Bench of the Federal Court said: The policy considerations supporting this approach were touched on in North Western Health Care Network , especially by Madgwick J Section 149(1)(d) is designed, among other things, to protect employees against a loss of their award entitlements following a transfer of the business, or the part of the business, in which they are employed. That being so, it is logical to focus on the nature of the activities undertaken by the two employers and the question whether there is any material change in the nature of the employee's duties or working conditions. This is more pertinent to the underlying policy of the paragraph than the characterisation of the detail of the legal arrangements between the two employers. 82 These authorities confirm that strict legal tests as to the successor arrangements between two employers should not stand in the way of a logical focus on the work performed. This is necessary to ascertain the extent of the similarity of the work and whether there has been any material change or alteration. 83 To use a rather quaint saying, If it looks like a duck, walks like a duck and quacks like a duck - it probably is a duck. It is hard to imagine what the sale of Coralpalm to Allambia was, if not a transfer of business. The sale displays all the conventional ingredients found in a typical transfer of business. 84 In my view, this is a classic and unremarkable example of a seamless transfer of business. I arrive at this conclusion by referring to the following factual circumstances.

[79]

iv) the temporary licence arrangements with Department of Community Services commenced on 24 August 1998. 96 However, establishing the effective date of transfer is clouded by the fact that at least for some purposes, Coralpalm - despite being in liquidation - seems to have retained certain responsibilities for the Department of Community Services licence and its associated legislative requirements beyond 18 August. 97 Even more curious is the arrangements for paying the employees between 18 and 24 August. The evidence points to Mr Wotton, a former director of Coralpalm, as the helpful benefactor. 98 Ms Devine made no concessions as to who the employer was for the period between 18 and 24 August. She insisted that it wasn't her client, Allambia - so who was the effective employer? 99 Presumably on Ms Devine's submission, some unnamed and unknown entity assumed complete responsibility for the business. This cannot possibly be the correct analysis. 100 The Commission was helpfully referred to a number of authorities which have identified key criteria which will be evident when determining who is the effective employer. Such criteria includes: 1. The true employer will be in control of the business, thus giving directions or instructions and exercising other management functions. See Australian Insurance Employees Union v WP Insurance Services Pty Ltd, 42 ALR 598 and RES Logging Co Pty Ltd v Bridge (1969) 69 AR 604; 2. There will be able to be established a "substantial identity" between the work performed, and activities conducted, by the old and the new employers. See Re Australian Industrial Relations Commission and Ors; ex parte Australian Transport Officers Federation and Ors. (1990) 171 CLR 216; 3. The fact that wages might be paid by another person or company, is not conclusive evidence that it is the employer. Such arrangements might merely be for financial convenience and may not assist in determining the correct legal position. See Australian Insurance Employees Union v WP Insurance Services Pty Ltd and RES Logging Co Pty Ltd v Bridge ; 101 Despite the obvious overlap, I am convinced, on the balance of probabilities, that Allambia was the effective employer from 19 August 1998. I have arrived at this conclusion having regard for the following:

[87]

The effect of the liquidation 104 By order of the Supreme Court of New South Wales, Coralpalm was wound up, and Nicholls & Co was appointed as liquidator on 18 August, 1998. 105 Ms Devine argued that the effect of this order was to terminate the contracts of employment effective from that date. She relied, as did Mr Brown, on General Rolling Stock Company. With respect, I do not agree. The correct interpretation of this case can give no comfort to the respondent's argument. 106 Both parties referred me to various text book interpretations of the effect on employees of liquidation orders. Ms Howell, submitted correctly, in my view, that General Rolling Stock Company, is authority for the proposition that the liquidation order is one which gives notice to terminate. It does not give effect to the actual termination. The reference is short and succinct: The winding up order, which is advertised in the newspapers is notice to all the world of the winding up. 107 Ms Howell referred me to an extract from Australian Corporate Insolvency Law at p313, which is directly applicable to the set of circumstances which pertain here: ... under s477(1)(a), the liquidator has the power to carry on the business of the company to the extent that it is necessary to do so for the beneficial winding up of the company. Often the carrying on of the business of the company facilitates the realisation of the assets of the company as the company can be sold as a going concern. 108 In my opinion, if s477(1) of the Corporations Law allows the liquidator to carry on the business, then it must logically mandate the liquidator to carry on the contracts of employment so as to ensure the business itself is able to continue. In such circumstances, the practical effect of the liquidation order would be to do precisely the opposite to what Ms Devine contends. It would extend the contracts of employment where they might otherwise have been terminated upon notice. 109 Even without the correct interpretation of General Rolling Stock Company, it would, in my opinion, be inimical to the precepts of contemporary labour law, that liquidation orders of the Supreme Court would have the effect of unilaterally, and instantly, terminating employment contracts. 110 Principles of industrial justice would be gravely compromised; particularly in circumstances where employees have absolutely no idea or warning that such orders would have the immediate effect of cancelling their employment contracts. 111 Except in circumstances of justified summary dismissal, employees have a right to receive notice of termination and employers have an obligation to give such notice.

North Western Health Care Network v Health Services Union of Australia, 164 ALR 147

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