Oliveri v The Australian Industrial Relations Commission

10 The applicant argued that his remuneration was: $65,000.00 (salary as per PAYG Statement - 12 months ending 30/6/03) $ 5,964.00 (superannuation @ 9% of $65,000) $12,372.00 (vehicle - value contested) $83,876.00 (subject to the value of the vehicle)

11 As can be seen there were four factual issues about which the parties disagreed: (a) The first is whether the amount paid to the applicant was $69,600 or $65,000. (b) The second was whether an amount of $12,000 payable to the applicant's wife (who was also employed by Imex) formed part of the "remuneration" applicable to the applicant; (c) The third was whether the superannuation payable in respect of the applicant was to be calculated on the applicant's figures or on Imex's figures; (d) The fourth was whether the value of the use of a private motor vehicle was the value ascribed by the Commissioner of Taxation for the purpose of FBT, or was some lower figure. 12 If the $12,000 paid to the applicant's wife formed part of the applicant's remuneration then it is clear that the Commission did not have jurisdiction. Imex claimed that the amount paid to the applicant's wife did form part of the applicant's remuneration. Imex claimed that in early 2001 the applicant was promoted to the position of National Sales Manager. In that position he could have expected a significant pay increase. In February and March, 2001 when Imex and the applicant re-negotiated his employment arrangements they agreed that $12,000 of the salary otherwise payable to the applicant would be paid to his wife (who was also to take up employment with Imex in April, 2001) so as to enable the applicant to represent to the Commissioner of Taxation that his income was $12,000 less than it otherwise would have been. The applicant, on the other hand, claimed that the arrangement was a proper commercial arrangement which properly reflected the conditions upon which the applicant and his wife were prepared to be employed by Imex. 13 What occurred during the re-negotiation of the applicant's employment contract was explored in the evidence before the Commission in September 2003. Mr Rogers (who carried on the negotiations on behalf of Imex) gave evidence that: 'In April of 2001, Mr Oliveri's wife commenced with the business, on a part time basis, and prior to her commencing, we had some discussions about ways of maximising benefit for Mr Oliveri. It was agreed an amount of $12,000 per month would be transferred from his salary to Mrs Oliveri's salary, on top of the figure she was to be paid in any case. … As at the time of commencement of Mrs Oliveri in April 2001, her annual salary was 16,200 a year, plus 12,000 which she was paid from Mr Oliveri's package.' 14 In his cross examination Mr Rogers said: 'MR HARRIS: Now, to go to the background of the income splitting that you referred to, when Mrs Oliveri was first employed by the company were there discussions with Mr Oliveri about salary? MR ROGERS: There were discussions preceding her employment in about January, February, March 2001. MR HARRIS: And who took part in those discussions. MR ROGERS: Mr Oliveri and myself. MR HARRIS: And what was said? MR ROGERS: It was at the time that our former sales manager retired and Mr Oliveri was taking over as our national sales manager. Accompanying that was a substantial increase to the same as the previous incumbent and we were discussing ways of minimising the tax that would be paid on that increase. MR HARRIS: Minimising whose tax? MR ROGERS: Mr Oliveri's. MR HARRIS: Was there any benefit to the company in doing this? MR ROGERS: Other than having a happy employee, no, and there was no cost either to the company. MR HARRIS: So in discussing ways to minimise the tax paid by Mr Oliveri, what options were considered? MR ROGERS: Bearing in mind that we needed extra office staff, the proposal was that Mrs Oliveri would join us. In addition to her $100 a day, which is what we were paying office staff for the approximately 9 to 2 or 3 o'clock hours, that she would get some of his salary transferred across.' 15 There was no real dispute as to what occurred, although there was and is a dispute as to how it should be characterised. In his witness statement the applicant said 'In or about April 2001 my wife commenced work with the company as Customer Service/ Sales Staff. She worked Monday to Thursday about 20 hours per week or more. At about the time my wife commenced work, Mr Alan Rogers asked me if I would take a reduction in salary of $12 000 per annum. This enabled the company to pay my wife a reasonable salary for the work which she did. He pointed out that there was a taxation benefit to our family in the reduction in my salary and the payment of a better salary to my wife. It was he that suggested that I accept a pay reduction of $12 000 per annum. I accepted Mr Roger's advice and I agreed to be employed by the company at a lesser rate of pay. I have continued to work for the company. My wife earned about $26 000 per annum.' 16 In his cross examination the applicant said: 'MR HARRIS: So one thing you would agree with, I guess, from your evidence, Mr Oliveri, is that you accepted a reduction in your pay when your wife came to work for the business? MR OLIVERI: I was on a salary. I never got any extra money. The money that was offered was given to my wife. MR HARRIS: The money that was offered was all you got, was it? MR OLIVERI: I never got that money." MR HARRIS: Yes. And you go on to talk about - about the effect of the reduction being that your wife could get a reasonable salary. Is that right? MR OLIVERI: I never got that $12,000. MR HARRIS: Could you please answer - - -? MR OLIVERI: Lilian has got that $12,000. MR HARRIS: You will answer my questions, please, won't you? MR OLIVERI: I have answered your question. MR HARRIS: You said, in paragraph 11 it was - and this is the third line, third sentence: It was he that suggested that I accept the pay reduction of $12,000 per annum. I accepted Mr Rogers' advice and I agreed to be employed by the company at a lesser rate of pay. I have continued to work for the company. Now, that is your truthful recollection, is it, of what occurred? MR OLIVERI: I agreed to continue to work with the company. I had known Mr Rogers for some time. I didn't want to ask for any more. I was never given that money. My wife Lilian had that money.' 17 On 26 September, 2003 the Commissioner determined that the Commission did not have jurisdiction. The Commissioner concluded that the applicant's remuneration included the amount of $12,000 per annum payable to the applicant's wife: 'Having considered the evidence on behalf of Mr Oliveri and Imex I am satisfied that when Mr Oliveri commenced his role as National Sales Manager there was an agreement initiated by Mr Rogers to engage in "income splitting" for the purposes of minimising/avoiding the income taxation for which Mr Oliveri would otherwise have been liable. This had the intent of adding $12,000.00 to the salary of Mrs Oliveri to take it to around $28,000.00 whereas her salary would otherwise have been around $16,000.00. … I find that Mr. Oliveri's remuneration as at the date of his termination exceeded the statutory limit of $84,500. Lowering the amount to be taken into account from the use of his company-provided motor vehicle would not affect this outcome as the three elements of salary at the date of termination, "income-splitting" $12,000 and superannuation alone total more than the statutory limit.' 18 The applicant appealed to the Full Commission from this decision. There were various grounds of appeal. However, so far as is relevant to the critical question of the characterisation of the payment of $12,000 to the applicant's wife, the Full Commission correctly identified the relevant issue as one of jurisdictional fact. The Full Commission reached the same decision as did the Commissioner: 'It seems to us that the evidence supports a finding that in early 2001 an agreement about Mr Oliveri's future remuneration was reached between Messrs Rogers and Oliveri. As part of that agreement Mrs Oliveri was to be employed by the respondent and paid $28,200 and Mr Oliveri agreed to forego a salary increase of some $12,000 associated with his promotion to the position of sales manager. Mr Oliveri entered into this arrangement because of its perceived tax benefits. … We accept that there was no direct payment of the $12,000 to the applicant, rather this sum was paid to Mrs Oliveri. But that is not to the point. The evidence establishes that rather than receiving a $12,000 wage increase consequent upon his promotion to sales manager Mr Oliveri agreed to forego that increase and in consideration the respondent agreed to employ Mrs Oliveri on a salary which was some $12,000 more than other employees were being paid in commensurate positions. The purpose of the arrangement was to provide a tax benefit to Mr Oliveri. In these circumstances we think that the $12,000 should form part of Mr Oliveri's remuneration.' 19 The Full Commission confirmed that the rate of remuneration applicable to the [applicant] immediately before the termination" exceeded $85,400 and that consequently the Commission had no jurisdiction to hear the applicant's claim. The Full Commission refused leave to appeal and dismissed the appeal. 20 In his amended application for orders nisi the applicant complained that: '(a) The Commission erred in failing to accept that my remuneration was within the jurisdictional limit; (b) The Commission erred in concluding that there was want of jurisdiction as no logically or rationally probative evidence was presented by the respondent to this end; (c) The Commission erred in making a decision against the evidence and or in the alternative against the weight of the evidence in failing to consider relevant considerations and or in the alternative considering irrelevant considerations.' 21 The applicant did not seek to put any new or different evidence before this Court. The applicant relied upon the evidence before the Commission and the factual findings of the Full Commission. 22 The applicant puts two arguments. The first involves an assertion that the evidence before the Commission and the findings of the Full Commission, preclude a legal conclusion that the amount of $12,000 paid to the applicant's wife was "remuneration". For this purpose the applicant points to the finding by the Full Commission that "Mr Oliveri agreed to forego that increase". The applicant says that that finding necessarily means that the amount of $12,000 did not form part of his remuneration. The difficulty with that submission is that it ignores the related finding by the Full Commission that, "in consideration the respondent agreed to employ Mrs Oliveri on a salary which was some $12,000 more than other employees were being paid in commensurate positions". Plainly enough the Full Commission concluded that the agreement to employ the applicant's wife at a higher salary than she might otherwise have received, formed part of the consideration within the applicant's employment contract. That finding, which was not only open on the evidence, but probably unavoidable, meant that the Commission had to consider whether or not the arrangement involved "remuneration". 23 The other argument put by the applicant, was the same as that he put to the Commissioner and to the Full Commission, namely that no matter what the arrangement was between Imex and him, the relevant money was paid to his wife and was therefore not his. 24 The correctness or otherwise of that assertion depends entirely upon the meaning of "remuneration" in s 170CC(3)(b) of the WR Act (or, more particularly, the phrase "rate of remuneration" in that par). That word (and that phrase) is not specifically defined in the WR Act (contrast the definition of "rate of remuneration per year" in Reg 30BC of the WR Regs). 25 In ordinary parlance the word "remuneration" means recompense or reward for services rendered by an employee. There are US cases where payments to third parties made in consideration of the employee's services have been treated as "remuneration": see Anaheim General Hospital v Workers Compensation Appeals Board 3 Cal App 3d 468 (1970) at 473 citing Union Lumber Company v Industrial Accident Commission & Thornquist 12 Cal App 2d 588 (1936) at 596. There are also a number of English and Australian cases where "remuneration" has been defined sufficiently broadly to include any consideration benefiting an employee under an employment contract: see The Queen v The Post-Master General [1876] 1 QBD 658 at 663; Connally v Victorian Railways Commission [1957] VR 466 (Connally)at 472, 478. On the other hand, there are also cases which may suggest that the relevant benefit must be received by the person providing the service for it to be considered "remuneration": see S & U Stores Ltd v Lee [1969] 1 WLR 626 at 629. 26 In this case it is unnecessary to resolve the question whether cash payments made to a third party in consideration of an employment contract necessarily constitute "remuneration" of an employee. However the relevant "cash payments" to a third party might be characterized, it is abundantly clear on the authorities that "non-cash" rewards can constitute "remuneration": see Christine May v Lilyvale Hotel Pty Ltd (1995) IRCA 628; Palumpa Station Pty Ltd v Fox (1999) 132 NTR 1; Connally at 467-468; Murwangi Community Aboriginal Corporation v Carroll (2002) 12 NTLR 121. That being the case there would seem to be only two possibilities given the factual findings made by the Commission: (a) As a matter of fact in this case the agreement of the parties to make a payment to the applicant's wife did not mean that the payment was not under the control of the applicant. As a matter of fact the payment of the "extra" money to the applicant's wife was not a payment to her of her remuneration, but a payment to her "on behalf of" the applicant (see Riley J in NT Drilling Pty Ltd v McFarland [2004] NTSC 23 at [7]) made for the purpose of enabling the respective parties falsely to pretend that income due and payable to the applicant was, in fact, payable to his wife. On this basis the relevant payment was clearly "remuneration" to the applicant. The findings by the Commissioner and by the Full Commission as to the purpose of the arrangement would seem to support a conclusion that the arrangement was for the purpose of falsely representing that the arrangements were something that they were not. On the other hand there is no express finding in that regard that the arrangements were effectively a "sham"; (b) Alternatively, the payment was, in fact, a payment made by Imex as part of the employment relationship with the applicant's wife. If so then the cash payment may not have been "remuneration" depending upon what meaning is given to that term (see above). On the other hand, on the evidence before the Commission and on the findings of the Full Commission (see above), the applicant undoubtedly received a promise from Imex that it would employ (and continue to employ) his wife at a salary $12000 higher than might otherwise be applicable. That promise formed part of the consideration for the applicant's employment. That promise was plainly a "non-cash" reward for the services provided by the applicant under his employment contract. That promise formed part of his consideration and was a benefit to him. In order to determine "the rate" of his remuneration that promise needed to be valued just as did his use of a motor vehicle. There might be occasions when the value to the employee of a promise to pay a third party a certain sum might be more or less than the actual cash payment made to that third party. In this case there would seem to be little doubt on the evidence that the value to the applicant of that promise was at least $12000. That was the amount to which he was entitled and which he agreed to "forgo" in return for the promise. That amount (being the value of the promise) formed part of his remuneration. 27 Whether it is the cash payment to the applicant's wife which is considered to be part of the applicant's remuneration or whether it is the promise to make that payment which is so considered the effect in this case is the same - the applicant's remuneration exceeds the jurisdictional limit. The Commission was correct in determining that it had no jurisdiction to hear the application. 28 Having reached this conclusion there is no need for us to consider whether it would be appropriate to grant a discretionary remedy in the circumstances of this case. However, it should not be thought that it would necessarily have been appropriate for this Court to grant such relief where to do so would be to give effect to an agreement of the sort that the parties reached in this case. 29 The application must be dismissed. 30 Imex has not sought any order for costs, even assuming that it may have been entitled to do so in light of s 347 of the WR Act. No order is made as to costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Nicholson, Weinberg and Selway.

Solicitor for the Applicant: McDonald Murholme

Counsel for the First Respondent: No appearance for or on behalf of the First Respondent

Solicitor for the Second Respondent: Tolhurst Druce and Emmerson

Date of Hearing: 18 February 2005

Date of Judgment: 14 March 2005