PR974164

AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Workplace Relations Act 1996
s.170CE application for relief in respect of termination of employment

Hemmingway, Daryl John

and

Intico (WA) Pty Ltd
(U2006/4658)

DEPUTY PRESIDENT MCCARTHY

PERTH, 26 SEPTEMBER 2006

Termination of employment – jurisdictional objection – whether employer employed 100 employees or fewer – related bodies corporate.

DECISION

Background

[1] This matter relates to an application filed by Mr Daryl John Hemmingway on 22 June 2006 asserting that the termination of his employment by the respondent was harsh, unjust or unreasonable, (“unfair termination”) and/or on the ground of an alleged contravention of s.659 (discrimination or other prohibited reasons). The respondent filed a motion to dismiss the application of Mr Hemmingway for want of jurisdiction. The ground for that motion was stated to be that “Intico (WA) Pty Ltd, at the relevant time, employed 100 employees or fewer (section 643(10) Workplace Relations Act 1996).” The respondent moved for dismissal of the application before the matter was referred for conciliation.

[2] The respondent contends that at the relevant time it employed fewer than 100 employees including the applicant and therefore, by virtue of the provisions of s.643(10) of the Workplace Relations Act 1996 (“the Act”), the applicant is precluded from making the application insofar as it is on the ground that the termination was harsh, unjust or unreasonable.

[3] The application filed by Mr Hemmingway named “Intico Integrity Engineering” as the employer. The respondent’s Notice of Employer’s Appearance indicated that the applicant had given the incorrect name of the employer and stated that the correct name is “Intico (WA) Pty Ltd”.

[4] Attached to the employer’s Motion are a statutory declaration of Mr Gary Winstanley, Manager, Intico (WA) Pty Ltd and an annexure listing employees of Intico (WA) Pty Ltd as at 29 June 2006. The statutory declaration states that apart from the applicant, who is not included on the list, the list of employees at 29 June is the same as on 15 June 2006, the date of termination of the applicant’s employment. That list shows 60 employees including 18 casuals. The respondent therefore asserts that at the time of termination of the applicant’s employment, Intico (WA) Pty Ltd employed 61 employees.

[5] The statutory declaration further states that “…other than Galactron Pty Ltd, which has no employees, Intico (WA) Pty Ltd has no related bodies corporate within the meaning of Section 50 of the Corporations Act 2001 and Section 643(11) of the Workplace Relations Act 1996.”

Provisions of the Act

[6] Section 643 of the Act relevantly provides, in subsections (10) and (11):

(10) An application under subsection (1) must not be made on the ground referred to in paragraph (1)(a), or on grounds that include that ground, if, at the relevant time, the employer employed 100 employees or fewer, including:

(a) the employee whose employment was terminated; and

(b) any casual employee who had been engaged by the employer on a regular and systematic basis for at least 12 months;

but not including any other casual employee.

(11) For the purposes of calculating the number of employees employed by an employer as mentioned in subsection (10), related bodies corporate (within the meaning of section 50 of the Corporations Act 2001) are taken to be one entity.

[7] The questions therefore arise as to which entity was the employer of the applicant and whether that entity was a related body corporate with other entities within the meaning of s.50 of the Corporations Act 2001.

Submissions

[8] The AMWU submitted that Intico (WA) Pty Ltd was not the employer of the applicant.

[9] The AMWU further submitted that it had not been established that the respondent was a constitutional corporation. The respondent submitted that if it were not a constitutional corporation then the AIRC would not have jurisdiction to deal with the application insofar as it related to an alleged unfair termination. The respondent did not submit that Intico (WA) Pty Ltd was or was not a constitutional corporation. In the absence of anything substantive on this issue for the purposes of determining the objection lodged by the respondent I consider that Intico (WA) Pty Ltd is a constitutional corporation.

[10] The AMWU argues for the applicant that the respondent is a subsidiary of another company and therefore a related body corporate of that company, and that related bodies corporate are taken to be one entity for the purposes of calculating how many employees the employer employed at the time of termination of the applicant’s employment. Therefore, the applicant argues, the Commission has jurisdiction in this matter.

[11] It was submitted by the AMWU:

“…Intico (WA) is not in fact a separate entity. Intico Integrity Engineering, or the Intico Group, consists of as at 6 July 2006, 11 registered entities and these are Intico Pty Ltd, Intico (WA) Pty Ltd, Intico (Northern Territory) Pty Ltd, Intico (Queensland) Pty Ltd, Intico (Victoria) Pty Ltd, Intico (South Australia) Pty Ltd, Intico Holdings Pty Ltd, Intico Engineering Services Pty Ltd, Intico Pipeline Services, Intico LB Pty Ltd and Intico Integrated Engineering Pty Ltd. It is our submission that these companies are not separate entities.” 1

[12] And further:

“They are, in reality and practice, one company and the corporate structure amounts to a sham in the sense that it is a cloak or device. Because the corporate structure is a sham, the Commission should pierce the corporate veil and count the number of employees that work for the Intico Group as a whole, and not Intico (WA). The Commission should count all Intico employees employed by each of the Intico entities, and I propose to make submissions on two points. Firstly, why the Commission should pierce the corporate veil in these circumstances, and secondly, why the Intico corporation structure is a sham. It is our submission, sir, that the Commission should depart from the separate legal entity doctrine affirmed in Saloman v Saloman Co Ltd (1987).” 2

[13] The AMWU argued for the applicant that “the company in question is attempting to hide behind the corporate veil in order to avoid a statutory duty”. 3

[14] It appears that the AMWU is arguing on two bases. Firstly that Intico (WA) Pty Ltd is a related body corporate with other entities and that more than 100 employees are employed by the related bodies. Alternatively if Intico (WA) Pty Ltd is not a related body corporate with other entities, that the corporate structure is a sham in the sense that it is a cloak or device, and that it is thereby attempting to avoid the unfair dismissal element of the application.

[15] Mr John Anthony Hutchins, Chartered Accountant, gave evidence on behalf of the respondent. He described the history of the ownership of Intico (WA) Pty Ltd as follows in examination in chief:

“…It was a company set up in 1995 to conduct engineering services in Western Australia and it was 50 per cent owned by another company called QED International out of Panama city and 37 and a half per cent owned by Galatron, the company you were just talking about, as trustee for Bogal [sic] Family Trust and the remaining 12 and half per cent was owned by a company called Snowy River Motor Body Works.
…
In about 1996 the Panamanian company left and Bogal [sic] Family Trust and Snowy River Motor Body Works took over its shares. At that point
I'm sorry can I interrupt you there once again. When you say Bogal [sic] Family Trust are you still referring to Galatron Pty Ltd as trustee for the Bogal [sic] Family Trust?---Yes I am.

Thank you. Continue please?---So at that point the company was then owned at 75 per cent by Galatron as trustee for Bogal [sic] Family Trust and 25 per cent by Snowy River Motor Body Works. In about 1999 Snowy River Motor Body Works was bought out and four new people came in to take over its shares.

And what happened then?---They stayed in that fashion for another couple of years and then slowly over the period from about 2001 to now, those people left to be the company in the situation you were describing before and the current position being 82 per cent for the Bogal [sic] Family Trust and the rest with Gallagher.” 4

[16] The evidence of Mr Hutchins as to the history of ownership of the respondent does not support the argument of the AMWU that the corporate structure is a sham or device to “to avoid a statutory duty”.

[17] It is evident that Intico (WA) Pty Ltd is a private, proprietary limited company, incorporated on 31 May 1995. The corporate structures of other “Intico” companies long precede the introduction of the exclusion of employers with 100 or fewer employees from unfair dismissal claims. It is absurd to suggest that the company structures were set up with the intent of avoiding applications of this nature.

[18] Whether companies are related or not requires determination according to the provisions of the Corporations Act 2001. Section 50 of the Corporations Act 2001 provides:

Related bodies corporate

Where a body corporate is:

(a) a holding company of another body corporate; or
(b) a subsidiary of another body corporate; or
(c) a subsidiary of a holding company of another body corporate;

the first-mentioned body and the other body are related to each other.

[19] It is not suggested that Intico (WA) Pty Ltd is a holding company of another body corporate. Whether Intico (WA) Pty Ltd is a subsidiary requires consideration of s.46 of the Corporations Act 2001. Section 46 provides as follows:

What is a subsidiary

A body corporate (in this section called the first body) is a subsidiary of another body corporate if, and only if:

(a) the other body:

(i) controls the composition of the first body’s board; or

(ii) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body; or

(iii) holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(b) the first body is a subsidiary of a subsidiary of the other body.

[20] The respondent submits that there is no legally enforceable right in the memorandum and articles of association of Intico (WA) Pty Ltd that Galactron Pty Ltd can control the composition of the board of directors of. Intico (WA) Pty Ltd. Nor, it submits, is there evidence of any shareholder agreement for that purpose.

[21] In any event, the respondent argues that s.48(2) of the Corporations Act 2001 precludes Intico (WA) Pty Ltd from being a subsidiary of Galactron Pty Ltd due to the shares in Intico (WA) Pty Ltd held by Galactron Pty Ltd being held in a fiduciary capacity and any power exercisable being in a fiduciary capacity.

[22] Section 48 of the Corporations Act 2001 provides (relevantly) as follows:

Matters to be disregarded

(1) This section applies for the purposes of determining whether a body corporate (in this section called the first body) is a subsidiary of another body corporate.

(2) Any shares held, or power exercisable, by the other body in a fiduciary capacity are treated as not held or exercisable by it.

[23] Galactron Pty Ltd holds the shares in the respondent as trustee for the Boegel Family Trust. Consequently s.48(2) provides any shares are treated as not held, and any powers are treated as not exercisable, by Galactron Pty Ltd, even though Galactron Pty Ltd is clearly the majority shareholder in the respondent.

[24] Even if it were established that the respondent is a subsidiary of Galactron Pty Ltd, evidence has been provided that Galactron Pty Ltd has no employees. For the application to be within jurisdiction insofar as the applicant alleges that the termination was harsh, unjust or unreasonable, it would need to be established that the other companies with “Intico” in their names are also related companies. That has not been established in this matter.

Findings

[25] I am satisfied from the evidence from the respondent that Intico (WA) Pty Ltd was the employer of the applicant. 5

[26] I accept the argument of the respondent that Intico (WA) Pty Ltd and Galactron Pty Ltd are not related companies within the meaning of s.50 of the Corporations Act 2001. I also accept that there are no other companies with which Intico (WA) Pty Ltd is a related body corporate.

[27] It has been established that Intico (WA) Pty Ltd employed 100 or fewer employees at the time that the applicant’s employment was terminated

[28] Section 645 provides as follows:

(4) If a respondent has moved for the dismissal of an application made, or purported to have been made, under subsection 643(1):

(a) on the ground referred to in paragraph 643(1)(a); or

(b) on grounds that include that ground;

subsection (5) applies to the application.

(5) If the Commission is satisfied that an application to which this subsection applies cannot be made under subsection 643(1) on the ground referred to in paragraph 643(1)(a):

(a) because the employee is excluded from the operation of Subdivision B by section 638; or

(b) because of the operation of subsection 643(6) (which relates to qualifying periods); or

(c) because of the operation of subsection 643(10) (which relates to employers of 100 employees or fewer);

the Commission must:

(d) if paragraph (4)(a) applies - make an order dismissing the application; or

(e) if paragraph (4)(b) applies - make an order dismissing the application to the extent that it is made on the ground referred to in paragraph 643(1)(a).

(6) If:

(a) a respondent has moved for the dismissal of an application to which subsection (5) applies; and

(b) the Commission is not satisfied as mentioned in paragraph (5)(a), (b) or (c) in relation to the application;

the Commission must make an order refusing the motion for dismissal.

[29] Therefore, pursuant to s.645(5)(e) the application will be dismissed to the extent that it relies on the ground that the termination was harsh, unjust or unreasonable.

BY THE COMMISSION:

DEPUTY PRESIDENT

Appearances:

A. Talbert for the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union for the applicant
T. Casperz, of counsel, instructed by G. Paull, CCI Legal for the respondent

Hearing details:

2006.
Perth:
July 13,
September 5.

Printed by authority of the Commonwealth Government Printer

1 Transcript PN175.

2 Transcript PN176.

3 Transcript PN184.

4 Transcript PN98-103.

5 Statutory declaration of Mr Gary Winstanley annexed to Motion to dismiss the application for want of jurisdiction.