Full Federal Court: 'Casual' Employee Entitled to Annual Leave Payments
A recent decision in the Full Federal Court determined that a labour hire employee was entitled to annual leave payments. Typically, casual employees are not entitled to the same entitlements as a permanent employee and are instead paid casual loading. However, following this decision in WorkPac Pty Ltd v Skene [2010] FCAFC 131, simply paying casual loading and stating an employee is a casual may not be sufficient for an employee to be considered casual under the National Employment Standards (NES).
Case Facts
Mr Skene was employed by WorkPac (a labour hire company) as a dump-truck operator on mining operations in Central Queensland. Mr Skene was first employed from 17 April 2010 to 17 July 2010 in a “drive in, drive out” (DIDO) position, and then again from 20 July 2010 to 17 April 2012 in a “fly in, fly out” (FIFO) position working 12 hour shifts on seven days on, seven days off roster arrangements with little flexibility. During Mr Skene’s second stint his roster was at times provided 12 months in advance.
Upon his termination in 2012, Mr Skene was not paid money in lieu of unused annual leave which he challenged arguing that he was in fact a permanent employee under the NES and therefore entitled to such a payout. WorkPac argued that because Mr Skene had executed a document entitled “Casual or Fixed-Term Employee Terms and Conditions of Employment” and his employment contract provided he was employed on a casual basis, Mr Skeen should be deemed a casual employee.
Mr Skene was successful at first instance before the Federal Circuit Court and WorkPac were ordered to pay compensation and interest for the unused leave on a full loaded pay rate. WorkPac subsequently appealed this decision to the Full Federal Court.
Full Court Findings
The basis of the case was whether Mr Skene’s employment fell within the concept of casual employment. As there is no definition for “casual employee” in the Fair Work Act 2009 (Cth) the Court looked to the common law, modern awards and enterprise agreements to determine if there was a uniform understanding. The Court deemed that no such understanding existed in the context of awards of agreements instead relying on the common law to provide a definition. In doing so the Court established several “indicia” of employment:
- Irregular work patterns;
- Uncertainty as to the period over which employment is offered;
- Discontinuity; and
- Intermittency of work and unpredictability.
On this basis the Court held that an assessment of “the real substance, practical reality and true nature of the relationship” must be undertaken rather than simply adopting the description the parties have given to the relationship.
The Court observed that a ‘casual employee’ describes a type of employment that in part takes meaning from other recognised types of employment. Noting that the point of distinction between full-time and part-time employment is the ongoing nature of those employments, the Court stated that ongoing employment:
“…is characterised by a commitment by the employer, subject to rights of termination, to provide the employee with continuous and indefinite employment according to an agreed pattern of ordinary time (as distinct from overtime) work. A corresponding commitment to provide service is given by the employee.”
In contrast a casual employee was described as having:
“… no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work. Nor does a casual employee provide a reciprocal commitment to the employer …”
In assessing the relationship, the Court noted the following:
- Mr Skeens employment was predictable with rosters at times set up to 12 months in advance;
- The employment was regular and continuous (save one period of approved unpaid leave);
- The FIFO nature of the employment was inconsistent with the notion Mr Skeen had the ability to elect not to work on a particular day or refuse a shift;
- It was unclear if Mr Skeens was actually paid any casual loading (however the Court held that the payment of a casual loading amount does not necessarily confirm casual status);
- There was a strong suggestion that the work was not subject to significant fluctuation.
The Court subsequently dismissed the appeal being unable to find any error in the primary judge’s assessment of the relationship factors.
Considerations for employers
The case provides that simply describing your employee as a casual may not be sufficient for them to be classed as a casual under the NES as courts will look beyond the agreement or contract to determine the true nature of the relationship. Employers should be mindful of their working arrangements and review their workplace to ensure that a casual employee will actually be characterised as a casual.
WASCA clarifies the law of set-off in insolvency
In the recent matter of Hammersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) [2018] WASCA 163 the Court of Appeal of the Supreme Court of Western Australia held that the attachment of a security interest under the Personal Property Securities Act 2009 does not preclude set-off in insolvency pursuant to section 553C of the Corporations Act 2001 or at general law.
Background
In 2012, Hammersley Iron Pty Ltd (Hammersley) engaged Forge Group Power Pty Ltd (Forge) to undertake building works with respect to the construction of power stations at West Angelas and Cape Lambert in Western Australia.
In 2013, Forge obtained finance from a bank and in exchange, granted the bank security over its personal property. Accordingly, the bank registered the security on the Personal Property Security Register (PPSR) in July 2013 pursuant to the Personal Property Securities Act 2009 (PPSA).
The bank appointed receivers and managers to Forge in 2014 and Forge subsequently went into liquidation.
Proceeding below
Relying upon contractual rights, equitable set-off and set-off in insolvency pursuant to s553C of the Corporations Act 2001 (CA), Hammersley argued that its claims against Forge exceeded those that Forge had against it, and that it was entitled to rely upon the set-off described above and to prove for the balance in the liquidation of Forge.
In response, the receivers of Forge contended that:
- section 553C of the CA provided a code governing set-off in insolvency;
- set-off under section 553C did not apply because there was no mutuality as a result of the equitable interest in Forge’s claims against Hammersley subsisting in the bank because of the operation of the PPSA; namely, that the attachment of the security interest in the collateral pursuant to section 19 of the PPSA conferred on the bank a proprietary interest in the collateral at the time of attachment
- the ‘Securities Claims’ of Forge against Hammersley were not ‘accounts’ within the meaning of section 10 of the PPSA because they were not “claims for identifiable monetary sums due by ascertainable dates arising from disposing of property or the granting of rights in the ordinary course of business”. The primary judge upheld that contention, finding that the Securities Claims “were ‘claims that arose after the receivers were appointed by reason of the alleged wrongful draw down by Hammersley of securities provided by Forge’”; and
- as a result, Hammersley was required to pay what it was due to pay to Forge (for the benefit of the bank) and was left to prove in the winding up of Forge for its own claims pari passu with other creditors.
Tottle J upheld contentions of Forge (by its receivers) in the proceeding below.
The decision on appeal
On appeal, the Court of Appeal of the Supreme Court of Western Australia upheld Hammersley’s appeal.
In a lengthy judgment which incorporated a detailed analysis of the relevant principles and their background, the Court of Appeal delivered a single judgment, finding that:
1. Even assuming that the effect of the attachment of the security interest in the collateral pursuant to section 19 of the PPSA conferred on a secured creditor a proprietary interest in the collateral at the time of attachment, that did not of itself operate to destroy the mutuality required for a set-off to apply.
Rather, an analysis of the terms of the relevant security instrument, together with the relevant terms of the PPSA, is required in order to determine whether mutuality is destroyed on a case-by-case basis.
Here, an analysis of the relevant General Security Agreement, when read with the PPSA, indicated that at the relevant date, Forge retained the right to apply payments received from Hammersley for its own benefit by paying down its indebtedness to the bank and to trade creditors and was not available to the bank. Accordingly, there were mutual dealings between Hammersley and Forge within the meaning of s553C of the CA sufficient to enliven the operation of the set-off pursuant to that section.
2. Section 553C of the Act was not a code governing all applicable circumstances of set-off in insolvency. Rather, the Court held that “there is nothing in s553C or its purpose or policy which would relieve the chargee of any equities which would otherwise apply to the charged debt.”
As a result, if statutory set-off pursuant to section 553C is not available, then the result is not that the chargee takes its interest in the claims of Forge free of any equities otherwise available under the general law or imposed by other statutory provisions, such as s80(1) of the PPSA. Rather, any rights taken by a chargee such as the Bank are taken subject to the terms of the contracts between Hammersley and Forge “and any equity, defence, remedy or claim arising in relation to” those contracts. The foregoing may include the right of set-off.
3. Forge’s ‘Securities Claims’, namely, claims that Hammersley had wrongfully drawn down against securities provided by Forge after the appointment of receivers, were ‘accounts’ within the meaning of section 10 of the PPSA. That was significant because if the Securities Claims were not accounts (the finding by the primary judge), then they were not capable of set-off because they would not be taken to have existed at the time of the appointment of the receivers. The Court determined that the Securities Claims were ‘accounts’ because they arose from the maintenance of bank guarantees which Forge provided to Hammersley pursuant to terms of the relevant contracts which was an aspect of Forge’s usual business of providing building services.
Conclusion
The decision is of significance because it confirms that attachment of collateral in a security interest in a secured creditor pursuant to section 19 of the PPSA does not, of itself, act to destroy mutuality sufficient to permit set-off to occur in insolvency.
Also significant is the finding that section 553C of the CA is not a code that applies in respect of set-off in insolvency to the exclusion of general law principles.
ATO Commences Examinations to Identify Phoenix Activity
The Australia Taxation Office recently commenced public examinations in the Federal Court, in relation to a group of entities connected to pre-insolvency advisor Philip Whiteman. The examinations will review the suspected promotion and facilitation of phoenix activities and tax schemes.
ATO Deputy Commissioner Will Day has revealed that the examination will investigate over 45 service providers, clients and employees of these advisors and alleged ‘dummy directors’ of phoenix companies. In doing so, it has appointed Pitcher Partners as liquidators, who will investigate the affairs and conduct of the entities before further legal action is pursued.
The ATO has taken a strong stance on illegal phoenix activity in recent times, asserting that it “deprives employees of their hard-earned wages and superannuation entitlements, unfairly disadvantages honest businesses by undercutting prices and leaves suppliers with unpaid debts.”
The activity is estimated to cost businesses, employees and the government $5.13 billion per year, and so the ATO is committed to “detecting those who promote and facilitate illegal phoenix behaviour, and disrupting those who willingly engage in phoenixing.”
ASIC to revise RATA with launch of ROCAP
Next month, ASIC is expected to launch it's Report on Company Activities and Property (ROCAP) which will have the effect of revising the existing RATA form. It has been designed in response to law reform and industry consultation, and serves to enable insolvency practitioners to obtain better information about events leading up to an external administration, including information about asset recoveries and reporting to ASIC.
Relevantly, the revised form seeks to minimise costs by:
- reducing the time spent dealing with large quantities of paperwork, by simplifying the process in which information is collected from directors about an external administration;
- providing directors with a form that they are able to complete themselves, thus reducing time spent following up information that was excluded in the first instance; and
- reducing requests from liquidators under ASIC's Liquidator Assistance Program.
Ahead of ROCAP's launch, ASIC has recommended that insolvency practitioners review their internal processes, such as changes to internal systems, precedents and checklists, to ensure they are equipped for its introduction this November.
Postal Evidence Rule Extended to 7 Days
Last month, the Senate passed the Civil Law and Justice Legislation Amendment Bill 2018, which serves to improve the operation and clarity of civil justice legislation administered by the Attorney-General.
Schedule 5 of the Bill introduces amendments to the Evidence Act 1995, by extending the postal evidence rule to accord with changes to Australia Post delivery times.
Currently, s 160 (1) of the Evidence Act states that “it is presumed … that a postal article sent by prepaid post addressed to a person… was received at that address on the fourth working day after having been posted.”
However, under the amendments, post will now be deemed to have been received on the ‘7th working day.’
The change will come into effect on the day which the Bill is given Royal Assent, which is likely to be in early October.
However, it is important to note that this change will not affect Commonwealth deeming rules, which, pursuant to The Acts Interpretation Act 1901, deem that service is “to have been effected at the time at which the letter would be delivered in the ordinary course of post."
Banking Royal Commission Reveals Culture of 'Greed and Dishonesty'
On the 28th of September, Kenneth Hayne, Head of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, published an interim report following months of investigations. The report reflects on the first four rounds of public hearings, which considered consumer lending, financial advice and small to medium enterprise loans.
Commissioner Hayne’s findings reveal that misconduct in the banking sector has been driven by greed, with financial institutions prioritising profits over people, and upholding shareholder interests over those of their customers.
Among the illegal and unethical practices exposed by the inquiry are findings of fees for no service, irresponsible and negligent lending practices, and failure by the banks to comply with policy requirements in the event of a breach.
Moreover, the investigation has revealed instances of charging fees to deceased persons, advice that cost one consumer almost $500 000 and the issuing of a credit card that would take the holder 138 years to pay off.
Whilst no recommendations will be provided until the final report is published next February, the interim report poses 693 questions about the banking, financial services and superannuation industry. These include;
- Whether existing law should be administered differently;
- Whether bank employees should continue to be rewarded for selling products; and
- Whether the current Household Expenditure Measures used by banks to assess suitability for 75 per cent of all loans is still viable, and if not, what should replace it.
As highlighted on the commission’s website, “the Commission cannot resolve individual disputes. It cannot fix or award compensation or make an order requiring a party to a dispute to take or not to take any action.” Instead, the Royal Commission simply investigates and provides recommendations to the government, who will decide which recommendations they wish to adopt by reforming the law.
Therefore, whilst individual consumers cannot expect financial wins to come directly from the Commission, they are still likely to see positive outcomes. This is because the recommendations handed down in the final report will likely prove a catalyst for legislative change, ultimately resulting in greater transparency for banking consumers.
The Commission is currently seeking submissions in response to the interim report, with the final report due on 1 February 2019.
Supreme Court of Queensland Issues Costs Guidelines
Practice Direction 22 of 2018
The Supreme Court of Queensland has for the first time issued guidance as to the appropriate percentage uplift to professional fees to be allowed pursuant to Item 1 of the Scale of Costs (the Scale) contained in Schedule 1 to the Uniform Civil Procedure Rules 1999 (UCPR).
Background
On 24 August 2018, the scales of costs in the UCPR were updated and as a part of those updates, the scales of costs for work undertaken in the Supreme Court of Queensland and in the District Court of Queensland (which had previously existed as Schedules 1 and 2 to the UCPR, respectively) were amalgamated.
Item 1 of the Scale (which had existed in substantially the same form in both Schedules 1 and 2 prior to their amalgamation) provides for an additional allowance to be made over and above the allowances otherwise provided for professional fees in the Scale for ‘General care and conduct’.
Item 1 then sets out a list of factors which must be considered when arriving at an appropriate allowance for general care and conduct.
Historically, allowances for general care and conduct have in practice been calculated by reference to a specified percentage of the professional costs that had otherwise been claimed/allowed by reference to other items in the Scale. Allowances ranged anywhere between 15% to 35% of professional costs otherwise allowed, most commonly falling between around 20% to 30%.
In its current form, Item 1 of the Scale now also provides for the issue of guidelines for the calculation of the general care and conduct allowance in practice directions by the Chief Justice.
Practice Direction 22 of 2018
Practice Direction 22 of 2018 was issued on 10 September 2018 and is entitled “Costs Guidelines”.
The practice direction provides guidelines for the application of Item 1 of the Scale, with its centrepiece being a comprehensive table providing an appropriate range of percentage allowances depending upon the quantum and complexity of each matter.
By way of example, in the Supreme Court:
- A ‘straight forward’ claim where the amount involved does not exceed $2M would attract an uplift between 15%-20%;
- A ‘straight forward’ claim where the amount involved exceeds $2M would attract an uplift of between 20%-25%;
- A ‘complex’ claim where the amount involved does not exceed $2M would attract an uplift between 20%-30%; and
- A ‘complex’ claim where the amount involved exceeds $2M would attract an uplift of 25%-35%.
The table also provides for many other circumstances, including those in the District Court, where the allowances are lower across the board.
The practice direction also provides that characterisation of a matter as straight-forward or complex is to be made on a case-by-case basis, with the intention being that about half of the work in each court will fall into each category.
No doubt over time judicial authority will begin to emerge which will assist in identifying where the line between a ‘straight forward’ and ‘complex’ matter lies.
For those wishing to view it, a copy of Practice Direction 22 of 2018 may be accessed here.
High Court of Australia rules that ‘Holding DOCAs’ are permissible in certain circumstances
Background
Mesa Minerals Limited (Mesa) is a listed mining company which owned a 50% joint venture interest in two manganese projects. It was placed into Voluntary Administration on 13 July 2016.
Voluntary Administrations are governed by Part 5.3A of the Corporations Act 2001 (CA). The object of Part 5.3A is set out in section 435A: being to administer the business, property and affairs of an insolvent company in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence or if that is not possible, results in a better return to creditors and members than an immediate winding up.
The regime provided in Part 5.3A is that the administrator is to investigate the circumstances of the company, form an opinion in respect of certain matters and call a meeting of creditors within 5 days before or after the end of the ‘convening period’, in most cases being 20 business days after the beginning of the administration. The Court may extend the convening period upon application and at the time of the events in question, the convening period could not be extended for more than 45 business days. At the meeting, the creditors may decide either that the company execute a Deed of Company Arrangement (DOCA), that the administration should end or that the company be wound up.
During the period of Voluntary Administration under Part 5.3A, a statutory moratorium is also applied to the claims of creditors against the company in administration.
At the adjourned second meeting of creditors of Mesa on 20 October 2016, the creditors voted in favour of entry into a DOCA, which was executed on 3 November 2016. The DOCA provided that the Administrators were to continue to investigate the property and affairs of the Company to explore the possibility of a restructure or recapitalisation of the Company and report within 6 months with the results of their investigations.
The Deed, in effect, is what is known colloquially as a ‘holding DOCA’.
Proceedings at first instance and below
Mighty River International Limited (Mighty River) owned 13.5% of Mesa and commenced proceedings in the Supreme Court of Western Australia seeking orders, relevantly, declaring that the DOCA was of no force and effect and terminating or setting aside the DOCA. Another shareholder of Mesa, Mineral Resources Limited (Mineral Resources) cross-applied for orders to the effect that the DOCA was not void or alternatively, that it was valid.
Master Sanderson dismissed Mighty River’s application at first instance.
On appeal to the Court of Appeal of the Supreme Court of Western Australia, Mighty River argued that the DOCA was invalid on two basis of note, namely that:
- Section 444A(4)(b) of the CA required that a DOCA specify some property of a company available to pay creditors, which the present DOCA did not do; and
- the DOCA had the effect of impermissibly extending the moratorium upon creditors’ claims and the time for investigation and reporting upon a restructuring proposal beyond the convening period without obtaining an order of the Court to do so. The essential argument was that such an extension was not consistent with the object of Part 5.3A as expressed in section 435A of the CA because it provided for “essentially an extension of the Administration Period”.
The Court of Appeal of Western Australia held the DOCA valid in separate judgments and dismissed the appeal.
The decision in the High Court
By a 3:2 majority, the High Court also held that the DOCA was valid and dismissed the appeal.
The plurality (comprising Kiefel CJ and Edelman J, with whom Gaegler J agreed in a separate judgment) held that:
- the DOCA did not contravene the object of Part 5.3A or impermissibly extend the time for investigation and reporting without an order of the Court pursuant to s439A(6) of the CA because:
- “the operation of the Deed aims to fulfil the object of the Part by maximising the chance of Mesa Minerals' survival or otherwise providing a better return to creditors than would result from its immediate winding up”. Reliance was placed upon evidence that the value of the listed shell of Mesa was between $400,000 and $900,000 and that as a result, sale of the assets of Mesa would be a better outcome for creditors than winding up if the administrators’ investigations determined that the business could not be successfully restructured and continue to operate; and
- the object of Part 5.3A was “not compromised if creditors choose, in a deed of company arrangement, to extend a moratorium beyond the period that they would otherwise have had outside an administration”; and
- in light of its context and purpose, section 444A(4)(b) of the CA did not require that a DOCA must specify some property of a company available to pay creditors’ claims; rather, it required that a DOCA specify any property of a company available to pay creditors’ claims. As a result, the DOCA in question did not contravene section 444A(4)(b).
Gageler J, whilst agreeing with the reasons of Kiefel CJ and Edelman J, delivered a separate judgment further explaining his Honour’s rejection of the argument that the DOCA did not comply with the procedural requirements of Part 5.3A of the CA.
Conclusion
The decision is of significance because it confirms that a ‘holding DOCA’ (although note the questioning of the use of that term on the basis that it has no legislative recognition) is not invalid merely because it has the effect of extending the moratorium upon claims of creditors beyond the convening period in Part 5.3A without leave of the Court. Instead, a DOCA extending the moratorium beyond the end of the convening period will not be invalidated for that reason alone so long as the purpose of the extension is consistent with the object of Part 5.3A; namely, to achieve a better outcome for creditors and/or members than an immediate winding up of the company if the moratorium were not extended.
Further, the decision is also of practical assistance because it confirms that a DOCA need only identify property available to pay creditors’ claims where there is in fact such property available to do so.
