Tekno Autosports Pty Limited v Jenkins

Federal Court of Australia|2014-07-25|Before: Gleeson J

The unsigned statutory demand dated 5 February 2014 issued by the defendant and addressed to the plaintiff be set aside.
The signed statutory demand dated 5 February 2014 issued by the defendant to the plaintiff be set aside.
The defendant pay the plaintiff's costs on a party-party basis.
The plaintiff file and serve any application for orders in the nature of a Mareva order, returnable at 9.30 am on 29 July 2014, by 5 pm on 28 July 2014.
The matter be stood over for hearing of the plaintiff's application for indemnity costs to 9.30 am on 29 July 2014. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 215 of 2014

REASONS FOR JUDGMENT 1 The plaintiff ("the company") is the former employer of the defendant ("Mr Jenkins"). The company is engaged in the management and promotion of an independent V8 Supercar team that competes in V8 Supercar races. 2 In February 2014, Mr Jenkins served two documents entitled "Creditor's Statutory Demand for Payment of Debt" on the company pursuant to paragraph 459E(2)(e) of the Corporations Act 2001 (Cth) ("the Act") ("statutory demands"). The debt specified in the statutory demands is said to consist of unpaid wages. 3 The company seeks orders setting aside the statutory demands under s 459H or s 459J of the Act. The company contends that there is a genuine dispute as to the existence or amount of the debt, that the demands are so defective that they would cause substantial injustice if not set aside and that the demands are an abuse of process because these are intended to apply commercial pressure to the company to pay a genuinely disputed debt.

The demands 4 The statutory demands are dated 5 February 2014. One of the demands is unsigned and was received via email and post at the company's principal place of business on 5 February 2014 ("first statutory demand"). The other demand, which is signed, was received by post at the company's registered office on or about 11 February 2014 ("second statutory demand"). 5 In written submissions made on Mr Jenkins' behalf, Mr Jenkins said that he relied only on the second statutory demand. At the hearing, senior counsel for Mr Jenkins, Mr Neil SC, said that he did not oppose an order that the first statutory demand be set aside. Accordingly, that order will be made pursuant to s 459J(1)(b) of the Act. 6 The second statutory demand will be referred to in the balance of these reasons as "the statutory demand".

Amount of alleged debt 7 The schedule to the statutory demand describes the debt as follows: The Debtor Company owes the Creditor the sum of $65,384.61 for unpaid wages from 1 November 2013 to 5 February 2013 [sic] pursuant to a Contract of Employment entered into with the Debtor Company on or about 5 June 2012. 8 At the commencement of the hearing, Mr Neil SC stated that Mr Jenkins sought an order under s 459H(4) varying the demand so as to refer to an amount of $41,666.66. This amount was said to be Mr Jenkins' gross salary for the period 20 November 2013 until 20 January 2014 ("relevant period"). 9 Implicit in the proposed variation were concessions by Mr Jenkins that the statutory demand: a. overstated the debt said to be due and payable by $23,717.95; and b. overstated the period for which wages are said to be unpaid by about 34 days. 10 It is agreed that Mr Jenkins was not paid wages for the relevant period. The company says that it was not obliged to pay wages for that period because Mr Jenkins was taking unpaid personal leave.

Power to set aside statutory demand 11 By s 459G(1) of the Act, a company may apply to the Federal Court for an order setting aside a statutory demand served on the company. Mr Jenkins accepts that the company's application to set aside the statutory demand was filed and served in accordance with the requirements of s 459G. 12 On an application under s 459G, where the court is satisfied, relevantly, that there is a genuine dispute between the company and the defendant about the existence or amount of a debt to which the demand relates, the court must calculate the "substantiated amount" in accordance with the formula set out in s 459H(2). Relevantly, if there is no "substantiated amount" then the court must set aside the demand. In his written submissions, Mr Jenkins accepted that the effect of s 459H in this case is that, if the Court is satisfied that there is a genuine dispute between the parties about the existence of the debt asserted in the statutory demand, then the Court will set the demand aside. 13 Section 459H(4) provides: (4) If the substantiated amount is at least as great as the statutory minimum, the Court may make an order: (a) varying the demand as specified in the order; and (b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company. 14 Section 459J provides: (1) On an application under section 459G, the Court may by order set aside the demand if it is satisfied that: (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or (b) there is some other reason why the demand should be set aside. (2) Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.

Evidence 15 The company relied on an affidavit made by Ms Kobe Webb, the chief executive officer of the company. At the hearing, counsel for the company, Mr Assaf, tendered two payslips showing Mr Jenkins' remuneration for the periods 1 September 2013 to 30 September 2013 and 1 October 2013 to 31 October 2013. 16 Mr Jenkins did not tender any evidence.

Genuine dispute: s 459H 17 The principles governing the application of s 459H of the Act were recently summarised in First Equilibrium Pty Limited v Bluestone Property Services Pty Limited (in liq) (2013) 95 ACSR 654; [2013] FCAFC 108 at [21]. Relevantly: 1. The phrase "a genuine dispute" uses ordinary English words and its meaning in any particular set of circumstances must be a question of fact: Troutfarms Australia Pty Ltd v Perpetual Nominees Ltd [2013] VSCA 176 at [5]. … 5. For there to be a genuine dispute, there must be a "plausible contention requiring investigation". It raises the same sort of considerations as the "serious question to be tried" criterion applicable to interlocutory injunctions. At this stage, the Court is not called on to determine the merits of or to resolve the dispute: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787. 6. The threshold is not high or demanding: Kirrak Pty Ltd v Compass Scaffolding& Plant Hire Pty Ltd [2007] NSWSC 1002 at [3]; Roadships Logistics Ltd v Tree (as trustee for the Tree Superannuation Fund) (2007) 64 ACSR 671 at [24]. However, the claim must have some merit and be genuine. That requirement has been described variously as the claim must be "real and not spurious", the claim must have a "real chance of success", there must be a serious question to be tried and, in some cases, it has been said that there is a requirement of good faith: see Abadeen at [33]. 7. A useful analogy to the burden on the party asserting the claim is that of an alleged debtor resisting an application for summary judgment. If the Court sees any factor that, on rational grounds, indicates an arguable case, it must find that a genuine dispute exists even where any case apparently available to be advanced to the contrary seems stronger: see Product People (International) Pty Ltd v Box Seat Company Pty Ltd (in liquidation) [2013] FCA 277 at [25]. 18 In Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [16] to [18], Barrett J said: 16. …The question before me is not whether the plaintiff is a financially respectable and financially responsible company. It is whether it may properly be said, on the whole of the evidence, that a genuine dispute exists as to the existence of the debts the subject of the statutory demand… 17. The test to be applied in cases of this kind has been established in several well known cases, of which those most often quoted are Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 and Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601. Those cases refer to tests of "plausible contention requiring investigation", "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)". 18. These tests, applied in the context of a summary procedure where it is not expected that the court will embark on any extended inquiry, mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger. 19 See also Rohalo Pharmaceutical Pty Ltd v R P Scherer Spa (1994) 15 ACSR 347 at 353-354 and Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39.

Defective statutory demand causative of substantial injustice unless set aside: s 459J(1)(a) 20 By s 9 of the Act, "defect" in relation to a statutory demand includes relevantly a misstatement of an amount or total, and a misdescription of a debt or other matter. 21 In this case, the statutory demand contained at least two errors that might be described as defects, namely: a) a substantial over statement of the amount of the debt; and b) a misdescription of the period for which wages had not been paid. 22 In Re UGL Process Solutions [2012] NSWSC 1256 ("UGL Solutions") at [42], Black J decided that the inclusion in a statutory demand of substantial amounts which the alleged creditor accepted were not due for payment was in itself a defect which could give rise to substantial injustice warranting an order setting aside the demand under s 459J(1)(a) of the Act. The substantial injustice arose from the requirement that the company move to set aside the demand in order to avoid the risk of being wound up "even if they were to pay any amount of it which was otherwise properly due".

"Some other reason why the demand should be set aside": s 459J(1)(b) 23 Paras (a) and (b) of s 459J(1) are mutually exclusive: Reavill Farm Pty Ltd v Burrell Solicitors Pty Ltd [2013] FCA 1295 at [27] citing Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 51 FCR 446 at 450E per Hill J, and Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 459D-461B per the Court. Accordingly, "some other reason" means some reason other than because of a defect in the demand. 24 In UGL Solutions at [43], Black J said: The Court may set aside a statutory demand under s 459J(1)(b) of [the Act] if it is satisfied that there is some other reason that the demand should be set aside. The Court's power under that section exists to maintain the integrity of the process provided under Pt 5.4 of the [Act] and is to be used to counter an attempted subversion of the statutory scheme, but is not exercised by reference to subjective notions of fairness: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd [(1996) 132 FLR 300]; Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229; CP York Holdings Pty Ltd v Food Improvers Pty Ltd [2009] NSWSC 409. A statutory demand may be set aside under that section where it involves conduct which is unconscionable or an abuse of process: Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22. In First State Computing Pty Ltd v Kyling (1995) 13 ACLC 939, Santow J observed that a statutory demand could be set aside under s 459J(1)(b) by reason of a substantial overstatement in the amount claimed, and that, where a statutory demand has been so grossly inflated as to comprise matters which it should have been obvious from the outset were in genuine dispute between the parties at the time the demand was served, then an order under s 459J(1)(b) setting aside that statutory demand may well be required to prevent such an abuse of the regime under Pt 5.4 of the Act. 25 In Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, Martin CJ (Owen and Miller JJA agreeing) said: 48. Following the introduction of pt 5.4, doubts were expressed as to whether the statutory procedures provided an exclusive code for the resolution of proceedings brought as a result of the issue of a statutory demand. However, in David Grant & Co Pty Ltd v Westpac Banking Corp [(1995) 184 CLR 265] (David Grant), Gummow J, with whom the other members of the High Court agreed, expressed the following view [at 279]: It also may transpire that a winding-up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz. However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction (279). (footnotes omitted) 49. Since that decision, it has generally been accepted that the court retains a residual jurisdiction to restrain reliance on the statutory demand procedure on the ground of an abuse of process: see House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 21 ACSR 527 at 528; [SMEC International Pty Ltd v CEMS Engineering Ic (2001) 38 ACSR 595] at [35]; [Roberts v Wayne Roberts Concrete Constructions Pty Ltd (2004) 50 ACSR 204] [54] - [58] [(Roberts)]; and State Bank of New South Wales v Tela Pty Ltd (No 2) [2002] NSWSC 20 at [5]. In Roberts, the jurisdiction was exercised on the grounds of impropriety of purpose, and a winding-up application was dismissed with costs. Similarly, in Old Kiama Wharf Co Pty Ltd v DCT (2005) ACSR 223; [2005] NSWSC 929, an application to set aside a statutory demand was upheld because the court concluded that the process was being used to 'attempt to apply pressure to a taxpayer to force payment of a debt': at [42]. 50. Adopting the criterion from Williams v Spautz (1992) 174 CLR 509, …suggested by Gummow J in David Grant, there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers - such as the application of pressure to compel payment of the disputed debt.

Employment contract 26 The asserted debt is said to have its source in a written contract of employment between the parties entered into on or about 5 June 2012. Clause 3.1 of the contract provides: In consideration of the Employee performing the Employee's duties under this Agreement, the Company will pay the Employee the Remuneration. 27 At the relevant time, the Remuneration was $250,000 per year, plus superannuation contributions. 28 Other relevant provisions are: 3.3 Payment of salary The Employee's will be paid by equal monthly instalments by electronic funds transfer. 3.4 Tax and Other Reductions The Company will deduct tax, and other amounts it is required to deduct, from all payments to the Employee as required by law. 4.1 Employee's duties The Employee must: a) perform to the best of the Employee's abilities and knowledge the duties assigned to the Employee by the Company from time to time, whether during or outside the Company's business hours and at such places as the Company requires. [sic] b) serve the Company faithfully and diligently to the best of the Employee's ability; c) use their best efforts to promote the interests of the Company; d) act in the Company's best interests; e) comply with all lawful directions of the Company; f) comply with all laws applicable to the Employee's position and the duties assigned to the Employee, and g) report to the person or persons nominated by the Company from time to time. 29 By clause 7.1, Mr Jenkins was entitled to specified leave including "sick leave, carer's leave and/or compassionate leave … in accordance with applicable law". 30 The parties agreed that "applicable law" included the Fair Work Act 2009 (Cth) ("Fair Work Act"). According to Mr Neil SC, relevant provisions of that Act are: a. s 96(1), which provides that for each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave; b. s 97, which provides that an employee may take paid personal/carer's leave if the leave is taken, relevantly, because the employee is not fit for work because of a personal illness, or personal injury, affecting the employee; c. and s 100, which provides that paid personal/carer's leave must not be cashed out, except in accordance with cashing out terms included in a modern award or enterprise agreement under section 101. 31 Clause 7.2 of the contract provides: The Employee's absence on leave counts as service as required by law. 32 By item 7 of Schedule 1 to the contract, Mr Jenkins' position was described as "Team Manager".

Mr Jenkins' suspension from work 33 On 16 October 2013, Ms Webb wrote to Mr Jenkins to "confirm" his "suspension from work until further notice pending an investigation" into alleged misconduct by Mr Jenkins. The letter set out brief details of the alleged misconduct and stated: You will continue to be employed throughout your suspension and will continue to receive your salary and contractual benefits in the normal way… When we have carried out our investigations, we shall notify you to confirm whether the company proposes to take any further action. 34 On 18 October 2013, the company received a medical certificate from Dr Simone Wright, certifying that for the period 17 to 31 October 2013 inclusive Mr Jenkins "WILL BE UNFIT to go to work due to stress related to conflict in the workplace". 35 Also on 18 October 2013, a solicitor representing Mr Jenkins, Michael Gillis ("Mr Gillis"), wrote to Ms Webb. Among other things, Mr Gillis disputed the company's entitlement to suspend Mr Jenkins' employment and claimed that the company's action in suspending Mr Jenkins had damaged and would continue to damage Mr Jenkins' reputation. The letter concluded by saying that "we would expect you should have completed all your investigations by close of business of Monday 21 October 2013". 36 By letter dated 21 October 2013, Nick Stevens of Stevens & Associates Lawyers ("Mr Stevens") informed Mr Gillis that he had been instructed to act for the company in connection with Mr Gillis's 18 October 2013 letter. 37 By letter dated 23 October 2013, Mr Stevens responded Mr Gillis's 18 October 2013 letter maintaining the company's entitlement to suspend Mr Jenkins and saying: Our client maintains that it is a reasonable and lawful direction to suspend your client on full pay and have him not perform work for a closed period during the course of an investigation into an allegation that your client breached a lawful direction and may have taken an action constituting serious misconduct in relation to disbursements and invoices…Our client exercises this option in good faith, does not intend to suspend Mr Jenkins for an extended period and wishes to meet with him as soon as possible having regard to his medical certificate which states that he is to remain on personal leave until 31 October 2013…. As your client is absent on personal leave until 31 October 2013, our client is unable to contact him to obtain his response until such time as he is given a medical clearance to return to work. Our client will not provide more information to your client regarding the Full Investigation until it has had the opportunity to meet with him on his return to work. Given the serious nature of the Full Investigation referred to above, it is clearly not appropriate for your client to be present in its workplace at this time. Your client was informed in the letter of 16 October 2013 that if the allegations are found to have occurred it may result in the termination of his employment. 38 By letter dated 28 October 2013, Mr Gillis responded to Mr Stevens' letter of 23 October 2013 saying, among other things, that the company had breached the employment agreement by directing Mr Jenkins not to attend a V8 Supercar event which commenced in Bathurst on 11 October 2013. 39 By two letters dated 30 October 2013, Mr Stevens responded to Mr Gillis' letter of 28 October 2013. In one of those letters, Mr Stevens said, relevantly: Our client maintains that, under the Agreement, it is open to it to issue a lawful and reasonable direction to Mr Jenkins to not attend work whilst the Initial Investigation is still on foot and that its actions thus far are consistent with the recent body of case law on this point. Notwithstanding the Initial Investigation, given that Mr Jenkins has provided our client with a medical certificate which certifies him medically unfit for duty until 31 October 2013, it would be entirely inappropriate for our clients to require Mr Jenkins to attend work prior to this date. Despite his suspension, Mr Jenkins is not able to be ready, willing or able to perform his job at this time. …any damage allegedly caused to your client's reputation due to his absence from the trackside at the Gold Coast V8 Supercar Race is not attributable to our client as Mr Jenkins was absent on personal leave (with a medical certificate) at this time. …Our client looks forward to progressing the Initial Investigation with your client when he is fit to resume work on Friday 1 November 2013. 40 On 31 October 2013, Ms Webb sent Mr Jenkins an email, directing him to attend a meeting on 1 November 2013 to discuss the future of his employment with the company and the matters under investigation. The email identified four matters for discussion at the meeting. On the same day, the company received a second medical certificate from Dr Wright, certifying that for the period 31 October 2013 to 29 November 2013 inclusive Mr Jenkins "WILL BE UNFIT to go to work due to stress related to conflict in the workplace". 41 On 1 November 2013, Mr Jenkins sent Ms Webb an email giving six months' notice of termination of the employment contract. The email concluded: Once I have been cleared by my doctor to return to work, I will be available to resume my duties as Team Manager of Tekno for the balance of the notice period and also assist with your investigations. 42 By letter dated 14 November 2013, Ms Webb responded to Mr Jenkins' 1 November 2013 email. The letter included the following: As you are aware, our investigations into your conduct during your employment as Team Manager are ongoing ("the Investigation"). The matters which are the subject of the Investigation are detailed in both my letter of 16 October 2013 ("the Suspension Letter") and email of 31 October 2013 ("the Email"). Despite your resignation, the Investigation will continue until we are satisfied that all issues arising have been resolved. I note that, in accordance with the medical certificate provided to Tekno on Thursday 31 October 2013, you have been deemed medically unfit to return to work until Friday 29 November 2013. Whilst you are currently on paid personal leave, I note that your last day of paid leave is Tuesday, 19 November 2013 after which time you will be on unpaid personal leave until your expected return to work date of 29 November 2013. In the interests of furthering and finalising the Investigation, I request that when you are fit to return to work, and prior to attending the Tekno offices, you contact me directly via email or phone to arrange a time for you to meet with the Tekno executive to discuss the matters raised in the Suspension Letter and the Email which are the subject of the Investigation. 43 Consistent with the 14 November 2013 letter, Mr Jenkins did not receive any remuneration for the period 20 November 2013 until 20 January 2013. It is not in issue that, if the company was correct in treating Mr Jenkins as on personal leave from 17 October 2013, then Mr Jenkins had exhausted his entitlement to paid personal/carer's leave by 20 November 2013. 44 On 22 November 2013, Mr Jenkins supplied the company with a third medical certificate from Dr Wright which stated that Mr Jenkins was not able to work at all from 17 October 2013 to 9 December 2013. 45 On 19 December 2013, Mr Jenkins supplied the company with a fourth medical certificate from Dr Wright which stated that Mr Jenkins would require treatment from 9 December 2013 to 17 January 2014 and would be reviewed again on 17 January 2014. This fourth medical certificate reiterated that Mr Jenkins was not able to work at all from 17 October 2013 to 9 December 2013, however, it was interpreted by Ms Webb as certifying Mr Jenkins' unfitness to work until 17 January 2014. 46 On 5 January 2013, Mr Jenkins sent an email to Ms Webb seeking to arrange a meeting on 13 January 2014 "to find a resolution to the matter surrounding my employment". 47 By email dated 10 January 2014, Ms Webb proposed a meeting on 20 January 2014 "to discuss matters surrounding your employment as communicated by email 31st October 2013". The email continued: With respect to the Workers' Compensation medical certificate dated 9th December 2013 - listing yourself as requiring treatment until 17th of January 2014, and your previous email communication stating you will require medical clearance to attend a meeting/return to work, I request that you please provide said clearance prior to confirmation of the proposed meeting, and no later than 5:00 p.m. Friday 17th January. I await your reply. 48 The reference, in Ms Webb's email, to "your previous email communication" is probably a reference to Mr Jenkins' 1 November 2013 email. 49 By letter dated 16 January 2014, Mr Gillis wrote to Mr Stevens referring to Mr Jenkins' suspension by the company which, the lawyers continued to maintain, had occurred in the absence of a contractual entitlement to do so. The letter included the following: Whilst our client has been unable to perform his duties because of a medical condition, his medical condition has not: 1. interfered with the process of your investigation (as your client required our client to be absent from the office during the investigation); and 2. prevented your client from communicating to our client the results of its investigations. Your client has not as yet communicated to our client the results of its investigation. As such we can only conclude the investigation is continuing and our client remains suspended from his employment in accordance with the terms of the Suspension Letter. With respect, the investigation process has now taken an unreasonable amount of time. Please provide our client with the results of the investigation or at least a short timeframe when your client anticipates it will conclude the investigation. In the meantime, your client has failed to honour its obligation under the terms of the Suspension Letter and make our client's salary payments and provide him the other contractual benefits during the suspension which is continuing. If our client's normal salary is not paid by 5.00 p.m. 17 January 2014, we are instructed to commence proceedings to recover the unpaid salary in accordance with the terms of the Contract of Employment and Suspension Letter without further notice to you or your client. 50 Mr Stevens replied to Mr Gillis by letter dated 17 January 2014, stating: On 22 November 2013 [sic] your client's entitlement to paid personal/carer's leave expired. Since that time, Mr Jenkins has been absent from work on unpaid personal leave. As such, Mr Jenkins has not been paid, as you state in your letter, his "salary and contractual benefits in the normal way" since commencing on unpaid personal leave on 25 November 2013 [sic]. … Mr Jenkins' most recent medical certificate certifies him unfit for work until today's date. Our client intends to meet with your client to progress the Investigation upon your client being certified fit to return to work and communicated such to him, via email, on 10 January 2014. Until such time as our client has had the opportunity to meet with your client, our client will not be in a position to conclude its Investigation and communicate the outcome of the Investigation to your client. 51 On 22 January 2014, Ms Webb wrote a further email to Mr Jenkins, noting that she had not received a response to her 10 January 2014 email. The email continued: Your last medical certificate, dated 9 December 2013, expired last week on 17 January 2014. If your condition is such that you are still unfit to return to work please send us, as a matter of urgency, a medical certificate as evidence of your lack of fitness. If you are fit to return to work, please indicate when you intend to return to work and meet with us (off-site, away from the company's premises) so that we may finalise our investigation ("the Investigation"). Please note that as we have completed the information gathering phase of the Investigation, your suspension on full pay is now lifted so that we may commence the final phase of the Investigation by hearing your response to the allegations and communicating the information that we have obtained through the Investigation to you. Accordingly, until such time as you attend for work and meet with us, you will not receive any payment as you are no longer suspended on full pay and have not applied to use any of your accrued annual leave entitlement. Further, until we have had the opportunity to meet with you, we will be unable to complete the Investigation and communicate the findings to you. A copy of this email will be sent to your lawyer, Mr Gillis. I look forward to receiving your prompt reply. 52 The same day, Mr Stevens received an email from Mr Gillis who said, among other things, that Mr Jenkins was available and medically fit to meet with Ms Webb. That email included the following: As our client was suspended from his duties on full pay whilst your client gathered its information for its investigation, it is irrelevant whether our client was sick or mowing the lawns whilst he was suspended as your client did not require him to attend the workplace or undertake any work. Please confirm our client will be paid his full pay and benefits during the course of the suspension. 53 On 28 January 2014, Mr Stevens sent an email to Mr Gillis in which he said relevantly: a. It would have been inappropriate for the company to have required Mr Jenkins to attend for work, or consult him regarding its investigations into the allegations against him over email, whilst he was deemed medically unfit to return to work; b. Mr Jenkins was absent on paid and unpaid personal leave from 18 October 2013 until 17 January 2014; c. The company first indicated its intention to meet with Mr Jenkins, upon him being certified fit to return to work, to discuss the allegations and evidence against him in Mr Stevens' 23 October 2013 letter; d. Once Mr Jenkins presented the company with medical certificates certifying him unfit for work, the company could not require him to attend the workplace or undertake any work. Consequently, the company had not paid Mr Jenkins since his paid personal leave entitlement expired on 22 November 2013. 54 It is unnecessary to go into any detail as to the events following 28 January 2014, except to say that on 7 February 2014, the company terminated Mr Jenkins' employment.

Is there a genuine dispute as to the existence or amount of the debt to which the demand relates? 55 Mr Jenkins accepts that the debt specified in the statutory demand is overstated by an amount of $23,717.95.

Whether the company was entitled to treat Mr Jenkins as on unpaid personal leave during the relevant period 56 As to the balance of the debt, Mr Jenkins' written submissions argued that there is no genuine dispute because: a. The company "unilaterally took it upon itself to appropriate the value of leave owing to [Mr Jenkins] until those balances were exhausted, and then unilaterally treated him as being on 'unpaid leave'"; b. Neither of those unilateral actions was contractually authorised, nor discharged the company's primary contractual obligation to pay Mr Jenkins' salary while, as was always relevantly the case, Mr Jenkins remained ready, willing and able to serve; c. Without express contractual authorisation (which did not exist in this case) an employer who unilaterally excludes an employee, who remains ready, willing and able to serve, from the opportunity to do so cannot also lawfully refuse to pay any part of the excluded employee's remuneration. 57 At the hearing, Mr Neil SC put a different argument. He did not seek to argue that Mr Jenkins was ready, willing and able to serve the company during the relevant period. No doubt, this was because there is plainly a genuine and significant factual dispute between the parties on this point, arising from the medical certificates provided by Mr Jenkins and the course of the communications between the parties. 58 Instead, Mr Neil SC argued that it did not matter whether Mr Jenkins was ready, willing and able to serve the company during the relevant period. His argument involved the following propositions: a. In the circumstances of this case, the company was not entitled to suspend Mr Jenkins without pay: see Gregory v Phillip Morris [1988] IR 397 at 414. However, it was entitled to suspend Mr Jenkins pursuant to clause 4.1 of the employment contract; b. On 16 October 2013, the company suspended Mr Jenkins' obligation to render service in return for his remuneration; c. Thereafter, the company had suspended its right to insist upon Mr Jenkins performing any work until 22 January 2014; d. When clauses 3.1 and 4.1 of the employment contract are read together, in order for Mr Jenkins to become entitled to his remuneration, all that he had to do was to perform the duties that were assigned to him by the company from time to time: cf Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 466; e. However, the company did not assign any duties to Mr Jenkins in the relevant period, except for one instance on 31 October 2013 when Mr Jenkins was directed to attend a meeting; f. Whether Mr Jenkins was fit to go to work was entirely beside the point because Mr Jenkins had previously been told that he was not required to go to work. The medical certificates had no significance because they were submitted after the suspension; g. In any event, Mr Jenkins did not apply to take personal leave. Leave is a right vested in the employee not the employer. Leave connotes permission to be absent from work: The Queen v Hamilton Knight (1949) 86 CLR 283 at 306. An employer cannot choose to treat an employee's non-attendance as personal leave, whether paid or unpaid unless the employee requests it. 59 The company's case is that it is not liable to pay Mr Jenkins' wages for the relevant time because the facts demonstrate that Mr Jenkins took personal leave during that period. It is agreed between the parties that, if the company was entitled to treat 17 October 2013 to 20 January 2014 as a period of personal leave, then Mr Jenkins would not be entitled to paid personal leave during the relevant period. 60 Taking into account all of the matters raised on Mr Jenkins' behalf, I am satisfied that there is a genuine and substantial dispute between the parties as to the company's liability to pay the wages claimed in the statutory demand. The company's case raises issues about the terms of the employment contract and the correct characterisation of the events that occurred which are plainly unsuitable for resolution on a summary basis. Without attempting to be comprehensive, issues relevant to a determination of that dispute include: a. The precise scope of Mr Jenkins' duties while suspended from work. Even assuming in Mr Jenkins' favour that the company had suspended its right to insist upon Mr Jenkins performing any work until 20 January 2013, the company also made plain its desire to meet with Mr Jenkins to discuss the matters under investigation. On one occasion, the company directed Mr Jenkins to attend such a meeting. Did the company have a right to require Mr Jenkins to participate in the proposed meeting? Was the company entitled to treat Mr Jenkins as being on personal leave in the light of his non-attendance at the meeting? b. The effect of Mr Jenkins' submission of the four medical certificates to the company. Was the company entitled to treat the certificates as requests to take personal leave, justifying Mr Jenkins' non-participation in the proposed meeting and the decision not to pay wages during the relevant period? c. The significance, if any, of the fact that the company informed Mr Jenkins in October and November 2013 that it was treating him as on personal leave? d. Whether the correct construction of the facts is that the company unilaterally "cashed out" Mr Jenkins' accumulated personal leave, contrary to s 100 of the Fair Work Act. 61 I am satisfied that there is a genuine dispute between the company and Mr Jenkins about the existence of the debt to which the demand relates. The substantiated amount of the demand is nil. Accordingly, the court must order that the demand be set aside pursuant to s 459H(3).

Whether the amount of the debt due and payable is Mr Jenkins' gross or net salary 62 The company also argued that there is a genuine dispute as to Mr Jenkins' entitlement to claim his gross salary for the relevant period as a debt. In particular, it relied upon clauses 3.3 and 3.4 of the employment contract. 63 Mr Jenkins acknowledged that the amount of $41,666.66 which he now claims, includes an amount of $16,503.12 which would ordinarily be withheld by the company on account of his liability for PAYG tax. He relied on Atlas Tiles Ltd v Briers (1978) 144 CLR 202 at 218 and 243 ("Atlas Tiles") and Cassaniti v Commission of Taxation (2010) 186 FCR 480 at [31]-[33] ("Cassaniti") in support of his argument that the debt properly comprises his gross salary for the relevant period. 64 On behalf of the company, Mr Assaf submitted that Atlas Tiles was concerned with a different issue, namely the assessment of damages for wrongful dismissal. In any event, it had been overruled in Cullen v Trappell (1980) 146 CLR 1. The relevant passages in Cassaniti are directed to the legislative scheme in the Taxation Administration Act 1953 (Cth) and not to the amount of the debt due and payable by an employer to its employee. 65 While I am not convinced that the company has a strong argument on this point, that is not the test. In my view, it has an arguable case arising out of the particular terms of the employment contract which is not suitable for determination on a summary basis. Accordingly, regardless of whether there is a genuine dispute as to the existence of the debt, I am satisfied that there is a genuine dispute as to the amount of the debt insofar as it claims Mr Jenkins' gross salary without deducting the tax required to be deducted by clause 3.4 of the employment contract.

Should the statutory demand be set aside pursuant to s 459J of the Act? 66 Since I am required to set aside the statutory demand pursuant to s 459H(3), it is unnecessary to address this issue in detail. 67 There is a conceded genuine dispute as to $23,717.95 of the debt specified in the statutory demand. Accordingly, the question is whether the statutory demand should be set aside if there were no genuine dispute to the extent that the debt comprises unpaid wages for the relevant period. 68 I am satisfied that each of s 459J(1)(a) and (b) apply to the statutory demand and that, in the circumstances, the statutory demand should be set aside. 69 As to s 459J(1)(a), in my view the errors in the statutory demand fall within the meaning of "defect" in s 9 of the Act. The statutory demand substantially overstated the debt due, apparently by including claims for wages which had been paid. In my view, substantial injustice would be caused to the company if it were to remain subject to a demand requiring payment of a substantial amount referable to wages which it has already paid. As in UGL Solutions, the substantial injustice arises from the requirement to take action to avoid the risk of being wound up for non-payment of amounts previously paid. 70 As to s 459J(1)(b), the company contended that Mr Jenkins' affidavit in support of the statutory demand was deficient. Section 459E(3) requires a statutory demand based upon a non-judgment debt to be accompanied by an affidavit that verifies that the debt is due and payable by the debtor. Certainly, Mr Jenkins' affidavit was incorrect in various respects. In particular, Mr Jenkins stated that: a. he had not been paid his normal salary between 1 November 2013 and 5 February 2013. In fact a payslip dated 15 November 2013 indicates that Mr Jenkins was paid a net amount of $8,781.92 for the period 1 November 2013 to 30 November 2013. b. a total amount of $65,384.61 was due and payable by the company. In fact, no more than $41,666.66 was due. 71 Mr Assaf's submission was that the affidavit was defective in paragraph 9 which reads: There is no genuine dispute of the existence of the amount of the debt [sic]. 72 Form 7 requires the deponent to depose that: 5. I believe that there is no genuine dispute about the existence or amount of the *debt/*any of the debts. 73 On a literal reading of paragraph 9 of the affidavit, it does not make sense. The question is whether it should be interpreted as a statement of the kind required by Form 7. 74 The purpose of the requirement for a verifying affidavit is to enable the court to be satisfied that there is a solid basis for the claim as to the existence of the debt. "The failure to provide such an affidavit is not a defect in the demand, it renders the demand a non-compliant demand and constitutes 'some other reason' why the demand should be set aside under s 459J(1)(b)": Fitness First Australia Pty Ltd v Dubow (2011) 84 ACSR 296; Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd (in liq) (1994) 14 ACSR 565. 75 In my view, the deficient language of paragraph 9 of Mr Jenkins' affidavit, together with the obvious errors in its contents as to the amount of the debt and the period for which wages were not paid, defeated the affidavit's purpose as a solid basis for the claim as to the existence of the debt. The manifest inaccuracies in the verifying affidavit provide another reason for setting aside the statutory demand. 76 Finally, it should have been obvious to Mr Jenkins, from the detailed correspondence between the parties, including the extensive involvement of lawyers on both sides, that there was a significant dispute as to the company's liability to pay him wages for the relevant period unpaid. There is no evidence that the company was not acting in good faith in the position which it took. The debt was significantly overstated by the inclusion of amounts which had been paid. Mr Jenkins did not seek to explain why the debt was significantly overstated, or why that overstatement was not conceded before the morning of the hearing. In my view, it is reasonable to infer that, when Mr Jenkins issued the statutory demand, he knew that there was a genuine dispute as to the existence of the debt, and he issued the demand in order to apply pressure to the company to compel payment of the disputed debt. That conduct is a further reason to set aside the statutory demand.

Conclusion 77 The statutory demand must be set aside. 78 The parties will be directed to file and serve written submissions on the question of costs. I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

Corporations Act 2001(Cth)s 459E, 459G, 459H, 459J

Fair Work Act 2009(Cth)ss 96(1), 97, 100, 101

At a glance

Court

Decision date

Before

Source

Judgment (18 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (23)

Cited By (4)