T12677
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TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Vincent John Smith and The Engineering Company Pty Ltd
Long service leave dispute - contracting out of entitlement - transmission of business - continuity of employment - application dismissed REASONS FOR DECISION [1] This application was made by the Secretary, Department of Justice (the Secretary), Workplace Standards Tasmania (WST), pursuant to s13 of the Long Service Leave Act 1976 (the Act) for a hearing to settle a dispute concerning the non-payment of long service leave. [2] The dispute is between Vincent John Smith (the employee) and the Engineering Company Pty Ltd (the employer). A conference was set down for Friday 16 June 2006. On that occasion Mr G Williams and Ms L Brundle appeared for WST and Mr B Brewer appeared for Mr Smith. Mr Brewer's appearance was confined to the conference due to the prohibition on legal representation at s14A of the Act. There was no resolution to the dispute, and, at the request of the applicant, it was called on for hearing on 29 November 2007. On that date Mr Smith represented himself and Mr A Flood, of the Tasmanian Chamber of Commerce and Industry, appeared on behalf of the employer. BACKGROUND [3] This dispute has a long and complex history; it was first referred to the Secretary in May 2003; was not notified to the Commission until 2006; and did not proceed to hearing until the end of 2007. It relates to employment which commenced almost three decades ago and concerns a disputed period of employment between September and December 1993. [4] Mr Smith founded Tas Engineering Services in 1969 in partnership with his wife. Tas Engineering Services later became a company, in which Mr Smith was a shareholder and an employee from March 1969. Tas Engineering Services was restructured and became Ulan Nominees Pty Ltd trading as Tas Engineering Services (TES), which was registered on 6 December 1979. In May 1993 TES went into receivership and a receiver/manager was appointed. In September 1993 TES was purchased as a going concern by a new company, The Engineering Company Pty Ltd (TEC) in which Mr Smith was a shareholder. He commenced employment with TEC, although, critically, there is a dispute about the date on which this occurred. [5] The employer contends that Mr Smith's employment was terminated by the receiver/manager on 2 September 1993 and that his employment with them did not commence until 20 December 1993. Mr Smith says that his employment was not terminated and that he continued to work throughout the transmission of business with no break in service. Mr Smith remained an employee and shareholder of TEC until September 1999, when he sold his shares in the company and his employment was terminated. At that time Mr Smith entered into a Deed of Release (the Deed), in which he is described as full time manager and executive director of TEC, and in which he released TEC from any liabilities arising from his contract of employment, excepting for some itemised payments which did not include long service leave. [6] Mr Smith is claiming an entitlement to long service leave pursuant to s8(2)(a)(i),(ii) and (iii) of the Act, for the whole of his period of employment with TEC and TES (excepting for from 1982 to 1986 when he took leave without pay to serve as a Member of Parliament). The amount of the claim is $31,484.94. [7] The employer is disputing the claim on the basis that, they say, the entitlement for the period of his employment with the previous employer, TES, should have been paid at the time of the termination of his employment with them, and also, they say, there was a break in service between the termination of employment with TES and his employment with TEC which exceeded the amount of time allowed for in the transmission of business provisions in the Act. In any event, they claim, Mr Smith entered into an agreement releasing the employer from liabilities in respect of his contract of employment. Mr Smith argues that the parties were unable to contract out of his long service leave entitlements. [8] If, as the employee contends, his commencement date with TEC was 20 September 1993, then he would have an entitlement against the employer for long service leave. If, as contended by the employer, his commencement date was 20 December 1993, he would not. Chronology [9] The relevant chronology is as follows: 28 February 1969 - Tas Engineering Services was established as a partnership between Mr Smith and his wife. 1969 - Tas Engineering Services became a company - Tas Engineering Services Pty Ltd. There were two additional shareholders, one of whom was Mr Peter Jackson. 1 March 1969 - Mr Smith became an employee of Tas Engineering Services. 6 December 1979 Tas Engineering Services Pty was restructured as Ulan Nominees Pty Ltd trading as Tas Engineering Services (TES). 15 May 1982 - Mr Smith became a Member of Parliament. He sold his shares in the company for $1.00 to Mr Jackson and it was agreed that he would take unpaid leave from the company. 8 February 1986 - Mr Smith failed to be re-elected to Parliament and repurchased his shares in TES and returned to work with the company as manager. [This does not count as a break in service but the time away is not included when calculating years of service, pursuant to ss5(1)(i)(j) and 5(2) of the Act]. 21 May 1993 - Ulan Nominees was placed in receivership. Mr Michael Cooke of Peat Marwick was appointed receiver/manager. Mr Smith continued his employment whilst the company was in receivership and until such time as the business was sold to a new company - The Engineering Company Pty Ltd (TEC). Mr Smith, Mr Shamsher Kanji (a solicitor) and Mr Jackson were shareholders in the new company. 2 September 1993 - this is the date of a letter from the receiver/manager terminating Mr Smith's employment with Ulan Nominees Pty Ltd (Receiver and Manager Appointed) [Mr Smith denies any knowledge of this letter]. 20 December 1993 - the employer says that this was the date that Mr Smith was first employed by TEC. 24 September 1999 - Mr Smith sold his shares in TEC and his employment was terminated. A deed was executed setting out agreed entitlements payable to Mr Smith and releasing TEC from liabilities arising from Mr Smith's employment contract. 22 May 2004 - Mr Smith referred the dispute to The Secretary. 17 May 2006 - WST referred the dispute to the Commission. 16 June 2007 - Conciliation conference - matter adjourned sine die. 29 November 2007 - the dispute was brought on for hearing at the request of Mr Smith. Documents - Workplace Standards Report [10] A considerable number of documents were provided to the Commission as attachments to a report prepared by WST. Set out below are relevant extracts from some of the documents:
"5. The employment of all existing employees will be taken over by the purchaser and the vendor will allow an adjustment in respect of accrued annual and long service leave entitlements, the latter being calculated in respect of pro rata entitlements for all employees who have 7 or more years completed service. For the purposes of this calculation, Messrs V. Smith and P. Jackson are not to be included."1 (my emphasis)
"5. If the sale materialises, Messrs V. Smith and P. Jackson are willing to forego their entitlement to annual and long service leave which they have told us is approximately $50,000.."2
"ULAN NOMINEES PTY (RECEIVER AND MANAGER APPOINTED) "I refer to your recent discussions with Mr Chris McTye of my staff and advise that your services as an employee of the above company are no longer required, effective from September 2, 1993.
Clause 7 - 'EMPLOYEES' of the agreement reads:
Clause 1 - Interpretation - of the Agreement defines transferring and non-transferring employees:
The facsimile says that the figures had been notified by the auditors.5
"Re Vincent John Smith ... Mr Smith commenced employment with The Engineering Company Ltd (`TEC') on 20 December 1993 and terminated on 24 September 1999. He was employed as a full time manager and executive Director of TED (sic) and his salary entitlement as at 24 September 1999 was $70,400 per annum. I have attached Deed dated 24 September 1999 between: Candahar Pty Ltd [the vendor]
Under clause 4.1 of the Deed, Vince Smith resigned as full time manager and executive director of TEC. I refer you to clause 8.3.2.3 of the Deed which states: "the retirement of Vince Smith as a full time Manager and executive director of the Engineering Company with effect from the end of that meeting with retirement being by written notice by Vince Smith acknowledging that he has no claim against the Engineering Company whether in respect of salary, fees, compensation or entitlement for loss of office, loans or otherwise except for the entitlements referred to in Clause 3.2" The entitlement of Vince Smith was specified in clause 3.2 which states: "The entitlements of Vince Smith which are excepted from the release referred to in Clause 4.1 and 8.3.2.3 are...." [sets out entitlements to superannuation and redundancy payments.] At clause 9.2.2 of the Deed, each of the Vendor and Vince Smith provided the following warranty to the Purchaser "The Engineering Company is not indebted and/or liable to the Vendor and/or Vince Smith in any sum or sums of money or in respect to any other obligation whatsoever except as specified in the recitals." TEC purchased from Tas Crane Services Pty Ltd (Receiver and Manager Appointed) and Ulan Nominees Pty Ltd (Receiver and Manager Appointed) the business of steel fabrication, engineering and crane hire at Bass Highway, Somerset pursuant to an Agreement dated 27 September 1993, a copy of which I have attached to this letter. Mr Vince Smith had been employed by Ulan Nominees Pty Ltd (Receiver and Manager Appointed) from 1 March 1969 until his termination effective from September 2, 1993. I attach a copy of this letter of termination dated September 2, 1993..."7 .
SUBMISSIONS AND EVIDENCE Mr Smith [11] Mr Smith read a statement into the record, outlining his case. [12] He said that after the ANZ bank put TES into administration it was agreed that a new company would be formed, called The Engineering Company, which would take over all employees who wanted to transfer. [13] Clause 7(1) in the sale agreement, [which said that upon completion the purchaser would offer employment to each employee, excepting for Mr Smith], was, he said, inserted as "punishment" by the bank for the bank's dilemma. This had no validity, because, after completion, TEC could employ whomever they wanted under whatever terms and conditions were agreed by the parties. [14] Mr Smith told the Commission that the new company began employing people on 20 September 1993. He totally rejected allegations that he was dismissed by the receiver on 2 September 1993 and that he was not re-employed by TEC until 20 December 1993. He said that: he had not seen the letter purporting to dismiss him any earlier than shortly before the conference before the Commission in 2006; at no stage did anyone tell him his employment was terminated; he continued to work from his office in Somerset; and he continued to be paid his salary. [15] Mr Smith provided three documents headed "Witness Statements" which were unsworn signed statements. The first, from Mr Tony Hite, dated 2 October 2006, reads: "I was employed in the capacity of Administration Manager by Ulan Nominees Pty Ltd trading as Tas Engineering Service in 1993 including during the period the business was in receivership. My employment was transferred to The Engineering Company when that company commenced operating the business on 20th September 1993. To the best of my knowledge Vince Smith was employed throughout the period of the receivership and his employment continued when the business was taken over by the Engineering Company. I had many discussions with Vince at different times to resolve various matters concerning the day to day running of the businesses. ..."9 [16] The second, from Irene Lucy Dunham, dated 6 September 2006, reads: "I was formerly employed as a Pay Clerk by Ulan Nominees Pty Ltd trading as Tas Engineering Service. I commenced employment in February 1987 and advanced to the position of Pay Clerk approximately three years later. I was employed in this position during 1993 including during the period the business was in receivership and my employment was transferred to the Engineering Company Pty Ltd when that company commenced operating the business. My duties included preparing the payroll and superannuation payments and drawing the wages cheques. Vince Smith was also employed in the business during 1993. To the best of my recollection Vince continued to be employed during the period of the receivership and his employment continued when the business was taken over by the Engineering Company in September 1993. His wages were paid throughout this period. In particular, to the best of my recollection Vince Smith continued to be employed in the business and his wages were paid throughout the period September 1993 to December 1993. He was still employed in the business when I left in May 1994. I would certainly have been aware if Vince had been absent from the business for any extended period during the time when the business was in receivership or after it as taken over by The Engineering Company, or if wages cheques were not being prepared for him during this time. ..."10 [17] The third, from Peter Lawrence Jackson, undated, reads: "On the 20th day of September 1993 I was employed by The Engineering Company Pty Ltd and was also a shareholder of that company. I commenced my employment with The Engineering Company on 20th September 1993 when that company took over the business formerly operated by Ulan Nominees Pty Ltd trading as Tas Engineering Services. I was initially employed by The Engineering Company in the Estimating Office and then appointed Fabrication Shop Manager. To the best of my knowledge, information and belief Vince Smith was employed continuously from the 20th September 1993 to the 20th December 1993 and onwards by the Engineering Company. I saw him every day at different times to discuss various matters concerning the day to day running of the business. These discussions would be in the Estimating Office, the Fabrication workshop or his office. The Estimating Office is located in the main administration building. Vince's office was situated in the front of this building. ..."11 [18] Mr Smith presented a superannuation statement which, he said, showed that he commenced employment with TEC on 20 September 1993 and that he joined TEC's new superannuation plan, which was only available to TEC employees, as of that date. [19] The Statement, headed "MLC Master Trust - The Engineering Company Pty Ltd" sets out a summary of his account which contains a number of particulars, including: "Date Joined Employer 20 September 1993 [20] Also handed up was a statement from MLC setting out Mr Smith's Eligible Termination Payment which describes the eligible termination period as being from a start date of 20 September 1993. [21] Mr Smith produced a hand-written calculation in relation to his redundancy payment at the time of the termination of his employment in 1999, which, he said, was agreed by TEC. It reads [omitting the figures]. "Vince Smith Redundancy Calculation Completed Years Completed Years [22] Mr Smith also submitted the facsimile included in the WST Report from Mr B Hodgetts, the company accountant, setting out long service leave and annual leave calculations, and showing a commencement date with TEC of 20 September 1993.14 [23] Mr Smith said that in respect of the group certificate which showed a commencement date of 20 September 1993 (sic) [20 December 1993], it must have been an administrative error, unnoticed by him until before the conference in the Commission in 2006. [24] According to Mr Smith, the Deed dated 24 September 1999 [relating to the sale of his shares and the termination of his employment with TEC] was signed under duress. He said he knew that contracting out of long service leave was prohibited and he signed it in the belief that his long service leave entitlement would remain intact. He said that he did not agree to releasing TEC from their obligation in respect of long service leave. [25] Mr Smith referred the Commission to correspondence between his lawyer and Mr Flood, regarding the inability of the parties to contract out of long service leave entitlements. Mr Brewer, representing Mr Smith wrote on 2 August 2007: "...I note that section 17 of the Long Service Leave Act 1976, prohibits contracting out of liabilities for long service leave imposed by the Act. ... The decision of Dean v Cumberland Newspaper Group to which you refer to in your letter is of no assistance to The Engineering Company. That case was concerned with claims being made under the Racial Discrimination Act 1975 and the Disability Discrimination Act 1992. Unlike the Long Service Leave Act neither of those Acts contained a provision prohibiting contracting out of liabilities imposed by those Acts. Accordingly, the Deed of Release in that case was simply interpreted in accordance with normal contractual principles. I also note that the warranty contained in clause 9.2.2 of the Deed was only given to the purchaser under the Deed, Metal Roofing and Cladding Pty Ltd. Accordingly, it does not assist the Engineering Company in respect of Mr Smith's claim. ..." [26] Mr Flood cross-examined Mr Smith in relation to his statement and the written evidence he produced. [27] Mr Smith testified that he did not recall any discussions between himself, Mr McTye or Mr Cooke about the possible termination of his employment. Regarding the letter of dismissal, he said that he had no knowledge of it. [28] Mr Flood referred Mr Smith to a letter signed by Mr Tony Hite, of TES, dated 3 September 1993, to Lend Lease Services, which reads: "Please find enclosed our supplementary remittance for the termination of Mr Vince Smith. In respect of the proposed benefit please proceed and process Mr Smith's benefit. ..."15 [29] And to a second letter to Lend Lease, also signed by Mr Hite, and dated 8 September 1993: "RE: TAS ENGINEERING SERVICE SUPERANNUATION PLAN - 1098 We refer to the benefit payment request by Mr Vince Smith and enclose for your attention the notice of termination of his employment by the Receiver and Manager."16 [30] Also to a third letter, from Lend Lease Corporate Service to Mr Hite, dated 27 October 1993, which says: "Member Statements Please find attached statements for those members who received a proportion from the reserve allocation of $80696.88 on 12th August 1993. Messrs V.Smith and P.Jackson have not been included as they received benefit statements on their termination from the Tas Engineering Service Fund. ....."17 [31] Mr Smith was asked why Mr Hite would have referred to the termination of his employment. Mr Smith said: "Well, I can't answer that. I didn't write this letter and I haven't seen it, but I presume it was in response to Mr McTye's letter because he was dealing with Mr Hite and maybe this, again, was part of the negotiations at that time for the takeover of the company, and Tony wanted to get his ducks in a row about claiming superannuation. That's all - the only explanation I can give."18 [32] Mr Flood questioned Mr Smith regarding the group certificate: "...you have claimed that you were employed by the Engineering Company from September through to 20.12.93; do you have any evidence of that? Do you, for example, have a group certificate from the - for that earlier period?---No, I don't, but I'll just remark that the group certificate says: If you're not employed for the full year state the period - and that would have been on everyone's group certificate. That's correct, and whoever has drafted this has - I'm inferring from that that they believe you didn't work the full year and then - - -?---Well, they put the wrong date on - - and then the part of the year that you did work was from 10.12.93 to the end of that financial year?---Well, I mean, all I can say to that is that someone's put the wrong date on that certificate because it would have been ludicrous to take over a new company with an investor from Sydney that you knew nothing about engineering. ...And why would I want to disappear off the scene for three months as we're saying, exactly three months on the 20th of the ninth which I given evidence that I was in the....superannuation scheme from, do you think they would have let me disappear for three months, have three months holiday....I'll just say it's a ridiculous situation and I - the only explanation that I can give is that that has had the wrong date put on it, for what reason I don't know."19 [33] Mr Smith told the Commission that an error in his group certificate would have escaped his attention because it would have gone straight to his accountant. [34] He said that he had been unable to provide other evidence such as bank statements and pay slips because they had all been thrown out. Mr Flood for the Employer [35] Mr Flood submitted that Mr Smith's continuity of service was broken between September and December 1993. According to the employer, his employment was terminated by the receiver/manager and he was not employed again on or about the business until TEC engaged him on 20 December 1993, which was outside of the two-month limit for deemed transmissions, as provided for in s2.2 of the Act. [36] If, however, the Commission were to find that there was no break in continuity of service, then the employer relied upon the Deed entered into between the parties in 1999 in which Mr Smith released the employer from any liabilities arising from the contract of employment in consideration of the foregoing of debts owed by Mr Smith to the company. [37] Mr Flood told the Commission that the long passage of time between the events and the matter coming before the Commission had made it difficult for the employer in their search for evidence. The events took place 14 years ago, prior to the employer employing Mr Smith and during the period when a receiver/manager was running the business. The application for hearing of this matter was not referred to Workplace Standards until May 2003, four years after the termination of employment, and it was not brought before the Commission until 2006. The receiver/manager has destroyed their records. Mr Smith has not provided the employer with any records. There is no evidence that confirms his employment between September and December 1993. [38] Mr Flood submitted that no weight should be given to the three statements tendered by Mr Smith, as the witnesses were unable to be questioned and their veracity was unable to be challenged. [39] In Mr Flood's submission, one of the major pieces of evidence is the group certificate. It is clear that Mr Smith made no attempt to have the group certificate changed when it was issued to him at the time. It should be accepted as a correct document. [40] Mr Flood said that Mr Smith could have provided the Commission with pay slips for the period in question; he could have provided a group certificate for that period; he could have provided bank statements detailing payments made to him; he could have produced a letter of offer of employment, but he chose not to. [41] The Act deals with an actual transmission at s5.4 where the employee works for one employer on one day and another employer on the next in the same job. The evidence does not support that. At s2.2 the Act deems that a transmission occurs where an employee's employment is terminated and they return to the same workplace but with a different employer within two months. The evidence shows that there was a greater than two month's break between September and December 1993. [42] Mr Flood contended that the only relevant period of service with TEC is from December 1993 until the termination of his employment in September 1999, amounting to a period of less than seven years, therefore there is no entitlement to long service leave. [43] Whilst Mr Smith's lawyer had claimed that the Deed entered into between the parties had no relevance because of the provisions of s17 of the Act, Mr Flood said that he did not believe that the Deed amounted to contracting outside of the Act. The Deed acknowledges that if Mr Smith had an entitlement to long service leave then that would be offset by Mr Smith's debt to the company of $75,000. It was not a case of Mr Smith giving up an entitlement. [44] Mr Flood cited a case in the Federal Magistrate's Court, Dean v Cumberland Newspaper Group [2003] FMCA 561 (Dean) in which an employee claimed an entitlement to workers' compensation and signed a Deed of Release similar to the one in this case which discharged the employer from all suits, demands, claims or proceedings relating to the employment. The employer later relied on the deed when the employee made claims under two Federal Discrimination Acts. The court considered the nature of the negotiations which resulted in the deed and determined that the words in the deed should be given their natural and proper meaning. [45] In this case, the matters set out in the Deed included Mr Smith offsetting any long service leave entitlement. The Deed released The Engineering Company from all matters relating to the employment contract. FINDINGS The questions to be determined are: (1) Does the Deed entered into between the parties bar the Commission from ordering payment of long service leave, if liability should be established? (2) Is there an entitlement to long service leave? In order to determine this question, it is necessary to make findings as to the commencement date of Mr Smith's employment with The Engineering Company. [46] The second of these questions has been made more difficult due to the passage of time, the complexity of Mr Smith's business arrangements, and the directly conflicting evidence. The Deed [47] The employer submitted that Mr Smith had entered into a deed of release in 1999 which released them from any liability to pay long service leave. [48] The employee argues that the Act precludes any "contracting out" of long service leave entitlements. [49] The Act, at s17, provides: "Except as otherwise expressly provided in this Act, the provisions of this Act have effect notwithstanding any covenant, agreement, or arrangement to the contrary (whether entered into or made before or after the commencement of this Act), and no such covenant, agreement, or arrangement operates so as to annul, vary, or exclude any of the provisions of this Act. [50] There is no doubt that Mr Smith entered into an agreement in which he agreed to forego any claim to liabilities arising form his contract of employment. This is set out in the Deed dated 24 September 1999, at clause 4: "4.1. Subject to the entitlements referred to in Clause 3.2, Vince Smith releases and forever discharges The Engineering company from its obligations and any liabilities under the Employment Contract and resigns as the full time Manager and relinquishes his position as executive director of the Engineering Company but will remain a director of the Engineering company." [51] Clause 3.2 sets out payments that are exempted from the release, listing superannuation and redundancy payments, but not long service leave. It must be the case, therefore, that the Deed purported to release The Engineering Company from any liability in respect of long service leave. [52] I cannot agree with Mr Flood's contention that the Deed did not contract outside of the Act. Clearly, that was its intent. The provisions of s17 of the Act mean that the Deed has no effect insofar as long service leave is concerned and therefore its existence is not a bar to the Commission making an order should an entitlement be established. [53] The case of Dean does not assist the employer. I agree with the arguments advanced by Mr Smith's lawyer in correspondence with Mr Flood. Dean concerned different Acts. The Long Service Leave Act 1976 is clear in its intent and contracting out of long service leave entitlements is precluded. [54] The employer also argued that the Deed offset a debt owed to the company by Mr Smith, and therefore, in effect, if there was an entitlement to long service leave, then it had already been paid. That may or may not be the case, but, should an order in favour of the employee be made, any dispute about the terms and effect of the Deed would be a matter for determination in another jurisdiction. Continuity of Service [55] There is little disagreement between the parties concerning the period leading up to 1993. Mr Smith was employed from March 1969 by Tas Engineering Services, his employment transmitted to Ulan Nominees Pty Ltd trading as Tas Engineering Services in December 1979. This was a direct transmission of business with no break in service. Tas Engineering Services was placed into receivership in May 1993. It was sold as a going concern to The Engineering Company in September 1993. [56] The disagreement and directly conflicting evidence concerns the critical issue of whether Mr Smith's employment continued without a break, or whether he was dismissed by the receiver/manager of Ulan Nominees on 2 September 1993 and not employed by The Engineering Company until 20 December 1993, a break in employment of more than two months. [57] The Act makes provision for the continuity of employment in cases of transmission of business. [58] Section 5(4) provides: "Where a business is, whether before or after commencement of this Act, transmitted from an employer (in this subsection referred to as "the transmittor") to another employer (in this subsection referred to as "the transmittee") and a person who at the time of the transmission was an employee of the transmittor in that business becomes an employee of the transmittee - (a) the continuity of the employment of that employee shall be deemed not to have been broken by reason of the transmission; and (b) the period of employment of the employee with the transmittee shall be deemed to include the period of his employment, and any period deemed to be a period of his employment, with the transmitter." [59] Section 2(2) provides: "Where an employee is employed in or about any place in the business of an employer and the employment of the employee with that employer is terminated, and, not later than the expiration of a period of 2 months from the date on which that employment was so terminated, the employee becomes employed in or about that place in the business of some other employer, the business of the employer by whom his employment has been terminated shall, for the purposes of this Act, be deemed to have been transmitted to the employer by whom he so becomes employed if the business in which he so becomes employed is of the same, or substantially the same, kind as the business in which he as employed in the employment that has terminated." [60] Clearly, Mr Smith's employment would be deemed to be continuous had he, as he claims, continued to work with no break at the time of the transmission of business in 1993. If there was a break between 2 September 1993 and December 20 1993 (more than two months), as claimed by the employer, then his employment period with The Engineering Company can only be counted from December 1993. [61] The evidence that was presented in support of Mr Smith's claim was: his own evidence; the signed statements of Tony Hite, Irene Dunham and Peter Jackson; the superannuation statements; the fact of his inclusion in a list of employees in an agreement dated 20 September 1993; and start dates shown in redundancy and long service leave calculations prepared in 1999. [62] Evidence in support of the employer's claim that Mr Smith's employment with them commenced on 20 December 1993 was: the letter of termination dated 2 September 1993; correspondence to Lend Lease referring to the termination of his employment in September 1993; correspondence from Lend Lease referring to Mr Smith's termination from the Tas Engineering Service Fund; the terms of the purchase agreement; and the group certificate showing a commencement date with The Engineering Company of 20 December 1993. [63] Mr Flood, for the employer, said Mr Smith had "chosen" not to provide evidence by way of bank statements, pay slips or other documentary evidence in support of his case and that substantiated the employer's claim that there was a break in service. Mr Smith told the Commission that those records were no longer available. I observe that the company also did not provide any pay records for the period in question. I do not think the absence of pay records for the period favours the case of one side over the other. The passage of time since the events in question accounts for the lack of documentary evidence in this respect. [64] There is however, some documentary evidence. There is a group certificate which shows that Mr Smith was employed from 20 December 1993 to 30 June 1994 and that he was not employed for the whole year. Mr Smith, during his evidence, said: "someone's put the wrong date on that certificate." He said that he would not have noticed at the time because the certificate would have gone straight to his accountant. Mr Smith presented as a person who takes a close and direct interest in the detail of his financial affairs and I think it unlikely that both he and his accountant would have overlooked such an error, if there were one. However, I have concluded that there was no error as to the date, for reasons which follow. [65] As at September 1993, Mr Smith was on a salary of $49,010 per annum, as shown in the schedule attached to the Agreement, an amount of $942.50 per week.20 The group certificate is for a period of 27 ½ weeks, amounting to almost $26,000. $26,000 is the amount shown on the group certificate. There was no evidence of any other group certificate for that financial year. Mr Smith was asked if he had a group certificate for the earlier period and he replied: "No, I don't". I am persuaded that it was not simply a matter of the wrong date being typed on the certificate. The amount of wages shown on the certificate equates to the amount Mr Smith would have earned during that period of time according to other evidence. It is improbable that errors in relation to both the date and the amount of wages would have been overlooked by both Mr Smith and his accountant. [66] Of significant weight, also, is the evidence of the letter of termination, effective from 2 September 1993, signed by Mr Cooke of Peat Marwick, the receiver/manager. Mr Smith said that he had never seen the letter before proceedings commenced before the Commission in 2006. Whilst that is conceivably possible, the letter existed and it was addressed to him. There is a contemporaneous reference to it in another document. In a letter dated 8 September 1993, Mr Tony Hite of Tas Engineering Service, wrote to Lend Lease Services, saying: "We refer to the benefit payment request by Mr Vince Smith and enclose for your attention the notice of termination of his employment by the Receiver and Manager."21 [67] Correspondence to Lend Lease refers to a benefit payment to Mr Smith, presumably related to the termination of his employment. In a letter dated 27 October 1993, Mr Andrew Blakemore of Lend Lease, wrote: "Messrs V. Smith and P. Jackson have not been included as they received benefit statements on their termination from the Tas Engineering Service Fund."22 It seems from the evidence that Mr Smith received a benefit from the fund on the termination of his employment with Tas Engineering Services in 1993. [68] There were many documents prepared in relation to the purchase of Tas Engineering Services by The Engineering Company. I am of the view that Mr Smith would have seen most, if not all, of them. He was a principal party in both of the companies. The Agreement, dated 20 September 2003, makes specific references to Mr Smith and his employment status. The Agreement distinguishes between "terminating employee" and "transferring employee", making it very clear that Mr Smith was a terminating and not a transferring employee. At clause 7.1 it is stated that employment shall be offered to all employees, "except for V..J. Smith."23 At clause 7(6) it says: "For the purposes of this agreement V.J. Smith shall not be considered to be a transferring employee even though he may become an employee of the Purchaser." Clearly, from this evidence, at the time of the purchase Mr Smith's employment was not transferred to the purchaser, although it is noted that he may be employed by them in the future. [69] The evidence of the group certificate, the letter of termination, the correspondence with Lend Lease and the clauses in the Agreement of 1993, would of themselves be sufficient for me to make a finding that Mr Smith did not work for The Engineering Company any earlier than 20 December 1993, were it not for other, conflicting, evidence, which is dealt with below. [70] Mr Smith relied upon Schedule 3 of the Agreement of 1993, which is a list headed "Employees". His name is included in that list and the date of the Agreement is 20 September 1993, which, he argued, showed that he was an employee on that date and, by inference, could not have had his employment terminated on 2 September. I do not accept that this is necessarily the case. The agreement differentiates between "terminating" and "transferring" employees and the list could well include both. It could also have been prepared at an earlier date. There was no evidence as to the purpose or provenance of the list of names. [71] Mr Tony Hite, Ms Irene Dunham and Mr Peter Jackson all provided signed statements to the effect that, to the best of their recollection or knowledge, Mr Smith was employed throughout the period in question. I think it unlikely that all three would have provided statements that they knew to be untrue. It is likely that they believed that Mr Smith continued to work during the period in question. The time in question was over 14 years ago and none were present to have their evidence tested in cross-examination. The weight of this evidence is diminished because of those two factors, but it still has some weight. [72] Mr Smith relied on various documents which referred to an employment start date of 20 September 1993 (or, in one case, alternatively, 1969). It is important to note that 20 September 1993 is the date on which all transferring employees were transferred from Tas Engineering Services to The Engineering Company. I note that if his employment was terminated on 2 September 1993, as shown in the letter of termination, and he was re-employed on 20 September 1993, then the break in employment would have been less than two months and he would have an entitlement pursuant to s2.2 of the Act; but this was never Mr Smith's argument, he was adamant in his avowals that he continued to be employed throughout and that his employment was never terminated. [73] In 1999, when Mr Smith sold his shares in The Engineering Company and his employment ended, Mr Brett Hodgetts of The Engineering Company made some calculations in relation to annual leave and long service leave payments to Mr Smith, which he set out in a facsimile to Mr Ken Broadfoot, also of The Engineering Company. In that document Mr Hodgetts has two alternative commencement dates for Mr Smith, one being 1 January 1969 and the other being 20 September 1993. Mr Hodgetts did not give evidence so, apart from a notation on the facsimile which says: "figures have been notified by Auditors for past few years and I have assumed that they would check facts before agreeing to accruals", I have no knowledge of how Mr Hodgetts ascertained Mr Smith's commencement dates, if, indeed, it was him who did so. [74] Mr Smith provided evidence of belonging to a superannuation scheme which, he said, was only available to employees of The Engineering Company. He said that evidence showed he commenced employment with them on 20 September 1993. The document from MLC Master Trust says: "Date Joined Employer.....20 September 1993; Date Joined Plan.....1 January 1997"24. Included were details of an eligible termination payment by MLC Limited which shows a commencement date with The Engineering Company of 20 September 1993. Also presented was a handwritten calculation in relation to a redundancy payment from The Engineering Company to Mr Smith, which has a commencement date of 20 September 1993.25 [75] After weighing the evidence of the letter of termination, the group certificate and the terms of the Agreement against the commencement dates used for redundancy and long service leave calculations and referred to in the MLC Master Trust statements, I have concluded that the employer's evidence, particularly the group certificate, carries more weight. The letter of termination, the correspondence with Lend Lease and the group certificate, all originated in 1993. The documents presented by Mr Smith were all prepared in 1999, six years later. He joined the MLC Plan on 1 January 1997 and the statement given in evidence was prepared in August 1999. The leave calculations were prepared when he ceased work in 1999. Dates in documents prepared at the time are more likely to be accurate than dates shown in documents prepared some years later. [76] As to why the dates in the later documents were inaccurate I can only surmise. It would have been general knowledge that Mr Smith had been there since the very beginning and was part of the company in all of its manifestations. It would also have been generally known that the Tas Engineering Services employees were transferred to The Engineering Company when it took over. It is possible that people simply made assumptions when preparing documents and calculations when he ceased employment in 1999. [77] After considering all of the evidence, I find that Mr Smith ceased employment with Tas Engineering Services on 2 September 1993 and that he commenced employment with The Engineering Company on 20 December 1993. [78] This seems difficult to reconcile with the statements provided by the three employees who recalled seeing Mr Smith at work throughout the entire period of the transmission of business. One possible explanation, consistent with all of the evidence, and which I think probable, is that Mr Smith did indeed work for the entire period in 1993 including throughout the period of transmission, but that there was a break in the direct employment relationship between 2 September 1993 and 20 December 1993. [79] Mr Smith said that it would be "ridiculous" and "ludicrous" for him to disappear off the scene for three months at such a critical time, a time when he, as a founder, major player and director in both the Tas Engineering Services and The Engineering Company, would have been intimately involved, and I agree with him. It would be most unlikely. However, it seems that, at the insistence of the bank, it was necessary for Mr Smith to cease to be an employee, at least temporarily. [80] Clause 7.1 of the Agreement specifically excluded Mr Smith from being offered employment and clause 7.6 said he was not to be considered as a transferring employee. As he told the Commission: "Clause 7(1) specifically excluded V.J.Smith, which was inserted by the bank as punishment I think they said, for a former director whom they believed was responsible for the bank's dilemma. This exception had no validity as after completion the TEC could employ whoever it wanted under whatever terms and conditions were agreed by the parties."26 [81] I think it probable that Mr Smith continued working on or about the premises of The Engineering Company in some capacity other than that of a direct employee until he was employed by The Engineering Company on 20 December 1993, as shown on the group certificate. What other arrangement he was working under and upon what basis, or if, he was remunerated, I do not know. On the evidence before me I have concluded that he was not an employee of The Engineering Company during the period in dispute. [82] Mr Smith had a claim for long service leave against Ulan Nominees Pty Ltd (Receiver and Manager Appointed) at the time his employment with them was terminated on 2 September 1993. It is not necessary for me to determine what that entitlement would have been because that claim is not before me. [83] Mr Smith's period of employment with The Engineering Company was from 20 December 1993 until 24 September 1999, a period of less than seven years. Accordingly, I find that he has no claim against The Engineering Company for pro rata long service leave under the provisions of the Act. [84] The application is dismissed, and I so order.
P C Shelley Appearances: 2007 Date and place of hearing: 2007 1 WST Attachment 9 |