Citation:

Parties:

File number:

Judge:

Date ofjudgment:

Catchwords:

FEDERAL COURT OF AUSTRALIA

Gothard, in the matter of AFG pty Limited (Receivers and Managers appointed)(in liq) v Davey [2010] FCA l163

Gotha¡d, in the matter of AFG pty Limited (Receiversand Managøs appointed) (in liq) v Davey [2010] FCAI163

PETERJAMES GOTHARD AND STEVIN JOHNSHERMANAS RECEIVERS AIìD MANAGERS OFEacrr oF AFc pTy LIMTTED (IN LrQ) (AcN 051982 s60), ALLco FINANCE GROUP LIMITED (INLIQ) (ACN 077 721129\, ALLCO FTNANCE(AUSTRALIA) LTMITED (rN LIQ) (AcN 003 3rs446) v STEVEN DAVEY, MTCHELLE SEGAERT,IAI\I GRAYBURN, CHRISTINE BOWEN,TIMOTIryRICH and EVAN GALLAGIIER

NSD 256 of2009

EDMONDSJ

28 October 2010

PRACTICE & PROCEDIJRE-rospondentr€presentative prccoedings--Order 6 r 13 Federal CourtRzles (Cth)-whether respondent representativeproceedings are appropriate in the circumstanoes.

CORPORATIONS- whether the ¡espond€nts and thepersons, ifany, they rçresent are employees ofAFG ptyLimited (Receivers and manage'rs appointed) (inliquidation) ('AFGPL'), Allm Finance Group Limited(Receivers and managers appoinred) (in liquidation)('AFGL') or Allco Finance (Australia) Limired(Receivers and managers appointed) (in liquidation)('AFAL') for the purposes ofs 55ó(1)(e) oftheCotporations Act 2001 (Crh) (.the Acr')

-whether the

respondents and the persons, if an¡ they represent, a¡epriority creditors of AFGP! AFGL o¡ AFAL pr¡rsuant tos 433(3)(o) of the Act.

Held: Rçresentative proceedings are appropriate in thecircumstances; the respondents are anployees ofAFGL,or alternatively AFAL for the pu4nses ofs 556(t)(e); therespondents are priority credito¡s ofAFGL oraltematively AFAL pursuant to s a33(3)(c),

Lcgislation:

Cases citedr

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Corporations Act 2001 (Cth\ ss a33(3)(c)' 556(1)(e)Federal Court Rzles (Cth) O ó r 13

Ackers v Austcorp Interrrational I'td l2OO9l FCA 432Air Greøt Lalces Pty Ltdv K S Easter (Holdîngs) Pty Ltd(198s) 2 NSWLR 309Amann Aviation Pty Ltd v Commonwealth ( I 990) 22 FCR527Amos Removals & Storage Pty Ltd v Small ll98ll2NSWLR 525Attorney-Generalfor Nøw South'llales v The PerpetualTrustee Company (Linited) (1952) 85 CLR2}7Australian Insurdnce Employees Union v WP Insurancesenices Pty Ltd. (1982) 42 ALR 598

Bank of America Nøtio¡øl Trust and Savings Associøtionv Tdylor 119921L Lloyd's Rep 4E4Boston Cotnmercial Services Pty Ltd. v GE CøpitalFinance Australasio Pty Ltd (2006)236 ALR720Bright v Femcare Ltd (1999) 166 ALR 743BT Atstrølasiø Pty Ltd v New South lvales ll997lFCA1553

Carniev Esa¡tda Finance Corp Ltd (1995) 182 CLR 398Dølgety Førmers Ltd (t/as Grøzcos) v Bruce (1995) 12

NSWCCR 36Dømøvskîv Giudice (2003) 133 FCR 438Denman v Midland. Employers Mutual Assurance Ltd[1e5s] 2 All ER 561Duke of Bedford v E//rs [901] AC IEMI Records Ltd v Kudhail ll985l FSR 3óFinønce Sector Union of Austalia v CommonwealthBank of Australiø 120011 FCA I 61 3

Geelong Wool Combing Ltd v Textile, Clolhing andFootweø Union ofAustrølia (2003) 130 FCR 447HJ Lyons & Sando Ltd v Houbon 11963l SASR 29In the matter of C&T GrÍnter Transport Services Pty Ltd(In Liquídation) & Grtnkr Transport Pty Ltd (InLiquidation) (Controller Appoînted) 120041 FCA I 148

Jameson v Professional Investment Senices Pty Ltd(2009) 72 NSWLR 281

McCluskey v lhragiozis (2002) 120 IR 147

Muhiplu Funds Mønagement Ltdv P Dawson NomineesPty Ltd Q007) 164 FCR 275Nolæs v Doncøster Amalgamøted Collieries Ltd ll940lAC l0l4Pitcher v Løngþrd (7997) 23 NSWLR 142

Publíc Trustee v Taylor 11978)VR289Re North Syd.ney District Rugby League Football Club(ailmin apptd); Murrøy v Donnelly (2000) 34 ACSR 630Romero v Auty (2001) 19

^CLC 206

Shawv Binda¡ee Beef Pty Ltdl2007l NSWCA 125

Dates ofhearing:

Place:

Division:

Category:

Number of paragraphs:

Cor¡nsel for the Applicant:

Solicitor for the Applicant:

Counsel for the Respondents:

Solicitor for tho Respondents:

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Smith v Bldndþrd Gee Cementation Co [197013 All ER154Stacey Brothers Plumbing Pty Ltd v Wøterco Ltd 12009fFCA 438Sturesteps v McGrath [2010] NSWSC 169Textile Footweør and Clothing (Inion of Australiø vBellechic Pty Ltd [1998] FCA 1465Tony Blain Pty Ltd trudíng as Acme Merchandising vJørnison (1993) 4l FCR 414Tony Blain Pty Ltd trading as Acme Merchandisíng vJamison (1993) 4t FCR 414Trustees of the Rontan Cølholic Church þr theArchdiocese of Sydney v Ellis (2007) 70 NSWLR 565Wallr¿r v Citígroup Global Mark¿ts Au,stratiø pty Ltd(formerly løown as Salomon Smith Bdms! Australiasecuñties Pty Linited.) (2006) 233 ALR 687Zhang v Minister for Immigrctian, Local Government &Ethnic Afairs (1993) 45 FCR 384

DC Pearce and RC Geddes, Staturory Interpretation inAusualia (6' ed, LexisNexis Butterworths, 2006)FMB Reyrolds, Bowstead and Reynolds on Agency (18úed, Sweet & Mærwell Ltd,2006)GE Dal Pont, Zaw of Agency (l"t ed, LexisNexisButterworths, 2001)Sir WR Anson, Zaw of Contrdct (28ù d OxfordUniversity Press, 2002)

14 September 2009,29,30 and 31 Ma¡ch 2010, I April2010, 6 and 7 May 2010. (tast amended originatingprocess filed I 7 June 20 I 0)

Sydney

GENERALDIVISION

Catohwo¡ds

2s2

Mr IM Jackman SC with Ms KL Eastnan

Cons Chambers Westgârth

M¡ HJ Dixon SC with Ms CL Cochrane

Harmers Workplace Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT RDGISTRY

GENERALDIVISION NSD256Of2OO9

IN TEEMATTEROT'

AFG PTy LIMTTET¡ (ACN 05r 982 5ó0)(RECEIVERTT AND MANAGERI¡ APPOINTED) (IN LIQT]IDATION)

ALLCO FTNANCE GRoUP LIn[rTED (ACN 077 72t 129)(RECEIVERS A¡ID MANAGERS APPOINTED) (IN LIQT]IDATION)

ALLCO FINANCE (AUSTRALIA) LIMITED (aCi\ 003 315 '146(RECEIVERS A¡ID MANAGERS APPOINTED) (IN LIQIIDATION)

BETTYEEN: PETERJAMES GOTHARD AìID STEVEN JOHN SHERMANAS RECEIVERS ATID MAI\AGERS OF EACH OF AFGPTYLIMITED (IN LIQ) (ACN 051 982 560), ALLCO I.INAI\ICEGROUP LIMTTEII (rN LIQ) (ACN 077 72r nÐ, ALLCOFINAICE (AUSTRALIA) LIMITED (IN LIQ) (ACN OO3 315446)ApPlicants/Cross-ResPondents

AIID: STEVENDA\rEYFirst Respondent/tr'l¡'st Cross-Cl¡irnant

MICHELLE SEGAERTSccond Respondent/Second Cross-Claimant

IAII GRAYBURNThird Respondent/Third Cross-Cl¡t¡nant

CHRISTINE BOWENFourth Respondenf,/Fourlh Cross-Claim¡nt

TIMOTITY RICHFifth Respondent/Fifth Cross-Cl¡iment

EVAN GALLAGHERSixth Respondent/Sixth Cross-Cl¡imsnt

JUDGE: EDMONDSJ

DATE OF ORDER: 28 OCTOBER 2010

WHEREMADE: SYDNEY

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TIIE COURT ORDERS TIIAT:

The applicants' application be dismissed

THE COURT DECLARES THAT:

2- The first cross-claimant is a priority credito¡ of Allco Finance Group Limited(Receivers and Managers appointed) (in liquidation) or altornatively Allco Finance

(Australia) Limited (Receivers and managers appointed) (in liquidation) for the

purposes of s a33(3)(c) of tlte Corporutions Act 2001 (Cth).

3. The sccond o¡oss-claimant is a priority creditor of Allco Finance Group Limited(Reccivers and Managers appointed) (in liquidation) or alternatively Allco Finanoe

(Australia) Limited (Receivers and managers appointed) (in liquidation) for ttre

purposes of s 433(3)(c) of fhe Cotporøtions Act 2001 (Cth).

4. The third cross-claima¡rt is a priority creditor of Allco Finance Group Limited(Receivers and Managets appointed) (in liquidation) or altematively Altco Finance

(Aushalia) Limited (Reccivøs and managen appoinred) (in liquidation) for the

purposes ofs a33(3)(c) of the Corporations Act 2001 (Cth).

5. The fourth cross-claimant is a priority credito¡ of Allm Finance Group Limited(Receivers and Managerrs appointed) (in liquidation) or altomatively Allco Finance

(Aushalia) Limited (Receivers and managers appointed) (in liquidarion) for the

pu¡poses of s a33(3)(c) of the Corporations Act 2001 (C+h).

6. The fiffh cross-claimant is a priority creditor of Allco Finance Group Limited(Receivers and Managas appointed) (in liquidation) or alternatively Allco Finance

(Australia) Limited (Receivers and managen appointed) (in liquidation) for the

purposes ofs 433(3)(c) of tLLe Corporations Act 2001 (Cth).

7 - The sixth cross-claimant is a priority creditor of Allco Finance Group Limited

(Receivers and Managers appointed) (in liquidation) or altematively Allco Finance

(Australia) Limited (Receivers and managers appointed) (in liquidation) for the

purposes ofs 433(3)(c) of the Corporations Act 2001 (Cth).

Note: Settlement and entry of o¡ders is de¿lt with in order 36 of the Foderal court Rules.

The text of entered orders ca¡r be located using Federal Law Search on the cour's website.

IN THE FEDERAL COT]RT OT'AUSTRALIA

NEW SOUTH TYALES DISTRICT REGISTRY

GENERALDIVISIoN NSD256of2009

IN THE MATTER OT'

AFG PTY LIMTTED (ACN 051 9t2 560)(RECEIVERS AND MÄNAGERS APPOINTED) (IN LIQTJIDATION)

ALLCo flNANCE GROUP Ln[rrED (ACN 077 721129)(RECEIVERS AND MANAGERTI APPOINTED) (IN LIQT]IDATION)

ALLCO FINA]\CE (aUSTRALIA) LIMITED (aCN 003 315 446)(RECEIVERS AND MANAGERS APPOINTED) (IN LIQT]IDATION)

BETIYEEN: PETERJAMES GOTHARII AIID STEVEN JOIIN SIIERMANAS RECEIVERS AND MANAGERS OF EACH OFAFG PIYLIMITEII (trY LIQ) (ACN 05r 982 560), ALLCO FINANCEGROUP LrMrrED (IN LIQ) (ACN 077 721 r29), ALLCOFINANCE (AUSTRALIA) LIMITED (n{ LIQ) (ACN OO3 3T5446)Applicants/Cross-Responderts

AIrID: STEVENDAVEYFirst RespondenlFirst Cross-Claima¡t

MICHELLE SEGAERTSecond RespondenUSeco¡d Cross-Claim¡nt

IAN GRAYBURNThird Respondent/Third Q¡ess-(l¡in¡¡t

CIIRISTINE BOVYENFourth RespondenlFourth Cross-Cl¡im¡nt

TIMOTIIYRICHFifth Respondent/Fifth Cross-Cl¡irrr¡¡t

EVANGALLAGHERSixth Respondent/Sixth Cross-Cl¡lm¡nt

JUDGE: EDMONDSJ

DATE: 28OCTOBER20I0

PLACE: SYDNEY

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REASONS FORJUDGMENT

INTRODUCTION

Background

on 4 November 2008, a number of companios in trre Allco Finance group ofcompanies ('the Allco Finance Group' or 'the Group,) were placed into voluntaryadministation and Tony McGrath and Joseph Hayes of the ñmr, McGrath Nicol, wereappointed administators. The companies included:

(l) AFG Ptv Limited (ACN Osl 992 560) (Receivers and Managers appointed) (inliquidati on) ('AFGpL'); and

(2) Allco Finanoe Group Limited (AcN 077 7zl r2g) (Reoeivers and Managers

appoinred) (in liquidation) (.AFGL'); and

(3) Allco Finance (Australia) Limited (ACN 003 315 446) (Receivers and Managers

appointed) (in liquidarion) (.AFAL').

on the same day, the applicants were appointed as receivers and managers of AFGpL,AFGL and AFAL.

3 on 26 }{ay 2009, AFcpL, AIGL and AFAL went into riquidation and TonyMcGrath and Joseph Hayes were appointed liquidato¡s of those companies.

4 AFGPL is a wholly owned subsidiary of AFAL and hæ been since l July 2004. Atall times since about I July 2006, AFAL has been a wholly owned subsidiary of AFGL.

A change of company name occuned in respect ofAFAL and AFGL on 4 July 2006as follows:

(l) From 16 June 1987 up to 3 July 2006, AFAL wæ known as 'Allco Finance Group

Limited';

(2) On 4 July 2006, AFAL changed its name to .Allco Finance (Australia) Limited,;

(3) From 1l March 1997 up to 3 July 2006, AFGL wæ known as 'Record InvestnenrsLimited'; and

(4) On 4 July 2006, AFGL changed its narne to .Allco Fina¡rce Group Limited,.

t0

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The applicants, following their appointuøtt as receivers and managers of AFGPL,

AFGL and AFAL, received a number of claims from current and former employees from

within the Allco Finance Group, including the respondents and the peßons, if any, they

represent. The respondents and the peßoff¡, if any, they r€'present, claim that tley are, or

were, ernployees of AFGL and that they should receivo any outstanding employment

e¡rtitle¡nents as priority creditors of AFGL: see ss a33(3)(c) and 556(l)(e) of the

Corporations Act 2001 (Cth) ('the Act'). The respondents' defence and cross-claim cast their

claims so as to include an altemative finding, namely, that if they are not priority cteditors of

AFGL, they are priorit¡r creditors of AFAL.

In January 2009, the applicants \árote to the current and fomrer ernployees advising

them that they would treat therr claims for employee entitlements âs claims against AFGPL

NOtAFGL,

On 27 Ma¡ch 2009, the applioants commenced this proc€eding under s 424 of the Act

seeking directions tom the Cou¡t as to the identity of the employet of tlree groups which

were broadly representative of the employees. Three persons, Steven Dave% Michelle

Segaert and Ian Grayburn, were identified in the originating process ¿!s conhadictors but not

named as respondents to the proceeding.

On I May 2009, the application was amended to name those three persons as

respondents and seek deolarations ftom the Court æ to the entity of which the employees

were priority creditors. Those persons a¡e the current first, second and thitd respondents,

Subsequørtly, the applicant filed a statement of claim, the respondents fiIed a defènce

and a cross-claim ând the âpplicants filed a defence to the cmss-claim,

On 29 Septernber 2009 I made the following ordors:

'1. Ms Christine Bowen be joined as a Respondent and Cross-Claimant to theprooeodirig and oross+laim NSD 256 of 2009 (the Proceedings) and beappoi ed ûo rep¡€s€rit herself and the porsons set out in Armexure'LS3' tothe Affidavit oflisa Arua Spence, swom l0 Septeinber 2009.

2. The First Respondent and Closs-Claim¡qt (First Applic¡nt to the Notice ofMotion) be appointed to represent himself and the persorx set out inA¡mexr¡¡e 'LS4' to the Affidavit of Lisa Anna Spence, swom l0 Septernber2009 as Respondørt and Cross-Claimant in the Proceedings.

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3. The Third Respondent a¡d Cross-Claimant (third Applicant to the Notice ofMotion) be appointed to represent himself and the persons set out inAnnexure 'LS5, to the AIñdavit of Lisa Anna Spenoo, swom 10 Septenrber2009 as Respondent and CYoss{laimant in the proceedings.

4. Subject to Order 5 each party bear their own costs ofthe proceedings.

5. The Applicants pay so much of the Respondens' msts determined by theCourt at the conclusion of the proceedings, not being less tlun the sumroferred to in Order 6.

6. The Applicants forthwith pay to the Respondørts, solicitors the suû of$200,000 on account ofthe detormination conternplated by Order 5.,

t2 At the time of hearing the motion on notico thst gave rise to those orders, I indicated

that I would give my ¡easons for making the orders in paras I to 3 inclusive at the time ofgiving judgment on thc application and these reasons are set out in [13] to [3g] below.

Reasons for judgment or the motior

13 order 6 r 13 of rhe Federal court Rules (ctþ ('the Rules') relevantly provides:

'(l) Where nume¡ous persons have the same interest in any proceeding theproceeding may be commanced, and, uriloss the Court otherwise ordo¡s,continued, by or againsl ¿ury ong or mo¡e of them as representing all or asrcpresenting âll except one or more of them.

(2) At âny slage ofa proceeding pursuant to tlis rule the Court may appoint anyone or nþre of the fespondents or other persons (as represørting whom therespondørts are sued) to r€present all, or all sr(o€pt one or more, of thosopcrsons in the proceeding.'

Overvíew

14 This rule facilitates the administ¡ation of justice by ørabling panies who have the

same interest to secrre a determination in one action rather than in separate proceedings. As

Lehane J observed in Bright v Femcare Ltd (1999) 166 ALR 743 at 752, rules such as r 13

are 'to be teated as being not a rigid matter of prinoiple but a flexible tool of convenience in

the admini stration ofjustice'.

t5 Before the Cou¡t can exercise its discretion to make a representative order rurder O 6

r l3(2), the require¡nernts of O 6 r 13(l) must be satisfied. There are two requiremørts:

(l) First, there must be numerous persons; and

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(2) second, those pffsons must have the 'same interest' in the proceedings.

Only a limiæd nrunbor of authorities have considered the opøation of O 6 r 13 of the

Rulos. Hor*everr, the present rule is similar in its terms to r 7 ,4 of tdte UniJbrm Civil

Procedure Rules 2005 (NSW) ('UCPR') (and identioal to its pr€decessor Pt 8, r 13 of the

Supreme Court Rules 1970 (NSW)), both rules being originally derived from equivaletrt

provisions in the English Rules of Court, and, ultimately, from the former practices of the

Court of Chancryi Cørnie v Esanda Finance Corp Ltd (1995) 182 CLR 398 ('Carnie') at

415. It is well accçted that, when conshuing a statute, refereûce may be made to statutes in

differørt jurisdictions if those statutes are sufficientþ analogous. This is particularly true of

statutes originating from the same sourco: DC Pearce and RS Geddes, Statutory

Intetpretation in Australiø (6ù ed, IæxisNexis Butteisrorths, 2006) at [3.36].

Pre-condìtìons to the *ercìse ol dßcretÍon

Order 6 r 13(2), rurlike O 6 r 13(1), does not expressly require that, where an applicant

seeks to appoitrt a r€spondent as representing other persons, the respondent and the other

persons must have the'same interest in [the] proceodings'. Nor does it expressly require that

there be 'numerous peßons'. However, as Sackville J observed tn BT Australasia Pty Ltd v

New South lfales ll997l FCA 1553 ('BT Australasia'), 'so much seems to be implicit in O 6,

r I3(2), having regard to the terms of ¡ l3(l)'. This view wæ also taken by Waller J on the

equivalerit English rule in Bank of Am.erica Natio¡øl Trust and Savings Association v Tøylor

11992J I Lloyd's Rep 484 at 494 - 495,

In any event, the parties conceded that that these requirements were satisfied and that

thc question for the Court wæ primarily one of discretion.

Dßcrelíonary consìderøtíons

The Cor¡rt's discretron whether or not to make a representative order under O 6 r 13 is

to be exercised havrng regard to the objective of facilitating the adminisration ofjustice by

enabling parties having the s¿rme interest to receive a detednination in one action, rather than

separate âctions: tf lus tralasia. There are a number of facto¡s relevant to the determining

whethe¡ a rçresentative respondents' proceeding is appropriate in these circumstances. I

will address these factors in tum.

20

2t

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Ø The nature ofrespondent representøtive proceedings

The applicants in their w¡itten submissions made much of the distinotion between the

nah¡ro of applicant (or plaintiff¡ represontative actions arid respondent (or rlefendarrt)

representative actions. This Court has recognised the significant distinction between the two:B'I' Australasia; stacey Brothers Ptumbíng pty Ltd I wøterco Ltd [2oog] FcA 43g (, stacey

Brothers').

rn stacEt Brothers, Kenny J observed that 'some ca¡e needs to be taken' with regard

to Carnie because it concemed plaintiff representative actions, not defendant rrryresentative

actions.

At [30], her Honour said:

'Speaking generally, it rny be accepted thåt an important purpose of thereprcsentative procedure in O 6 r t3 of the Federal Court's rules, whether thoproceeding is an applioant r€pr€sertative proceeding or a respondont repr€sentativeprooeeding, is to avoid numerous proceedings where one proceeding cor¡lã determinea common questiotr in which r¡ütrcrous persons have the same intorest. There are,however, differences in the purposes of applicant and respondont rçresentativeprooeedings. In the present caso, in conhast to an applioant repfesentative actior¡ thequestion is whether thero can be a single dotermination of a common issue of law orfact in a way that binds those interested to justifi some ¡elief the applicant soeksagainst them. This must be determincd by reference to the iss¡¡es that the proceedingraises and the relief that is sought.'

(Emphasis in original.)

And at [3a], her Honour said:

'As foreshadowed I accept that there are sigriñcant difforences between plaintiff (orapplica¡t) representative actions and dcfendant (or respondont) r€presøtativeactions: see also 8T (Australasia) Pty Ltd v New South frtales U997] FCA 1553 perSackvillc J. As Sackville J noted, members of a rçresented group nny have much togain when r€presented by a plaintiff and everything to lose vyhen ¡€p¡eserited by adefendant.'

However, their Honours' observations should not be read out of context. Sackville J's

comments were made in light of the Law Reform Commission's report en.utJed Grouped

Proceedings in the Federal Court (Report No 46, 1988). The Commission acknowledged

that, 'la]lthough defendant classes appear to mirror plaintiff classos they differ in several

important respeots'. These differences were identified at para 6 ofthe Report as follows:

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A dofendsnt rç,presentativo doos not voluntarily take on that role but isselected to rcprescnt others by the plaintiff

Although a reprcsentative plaintiff who brings proceedings on behalf of agtoup exposes group members to the risk of tleir claim being defeatd noperson¿l liability ensues. Proceedings against a represencative defendant onthe other h¿nd exposes defendant group membors to the risk of liability beingfound against theor and th¡t they will håve ro pay damages

The i¡stitution of a ft,preseûtative claim preverts the limitation periodrunning agai¡st I member of the plaintiff group; where I claim is broughtagainst a re,prosentativo group tho timitation poriod will ce¿se to run in favourof group meûbers.'

Ordinarily the naturo of respondent repressntativ€ proceedings would be a factor

against constituting such Focedings. However, the facts at hand differ importantly ûom a

typical respondents' representative proceeding. The applicants in this case are seeking

declarations from the Cou¡t as to the identity of the employer of the respondents to ascertain

whioh entity is liable to pay various entitlements. There is no risk of liability being found

against the representative respondents and them having to pay damages. Nor have the

particular representative respondents been selected by the applicants. As such, it could not be

said in this instance that 'mernbers of a roprosonted group may h¿vo muoh to gain when

r€presented by a plaintiff and ev€rything to lose when represented by a defendarrt.' For this

reason the nature of respondent representative proceedings is not a factor against constituting

such proceedings.

(2) The characþrtsfics of the class ot group

The pøsons to be represented should form an identifiable group or cløssi Amos

Removaß & Storage Pty Ltd v Small [981] 2 NSWLR 525 ('Amos Removals') al 529 - 53O.

The fact that the rçresented group is a fluctuating o¡ indefinite body is not an obstacle to a

represetrtative actio& provided that it can be deterrrined whether or not & particular person

fallswithintheclass: Dulceof Bedford vEI&b[901] ACI('Ellis')atll;ZhangvMinister

for Immígration, Local Govemment & Ethnîc Aîa,rs (1993) 45 FCR 384,

It has been held that the class may permissibly be defined by reference to tho olients

of a particular finn or parties who have errtered into aû ¿rû¡rngeme¡rt with a litigation funder.

No particular significance necessarily attaches to the questton whether the class is defined

exclusively by that partioular description (the 'opt in' procedure) or includes all potentially

25

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affected pef,sons (the 'opt out' procedu¡e): see Jømeson v Professional Inyest¡nent Semices

Ptv Ltd (2009) 72 NswLR 28t atl44)- t471, tgsl - tl2ll; MuhþIex Funds Management

Ltd v P Dawson Nominees Pty Ltd (2OO7) 164 FCR 275.

It would be inappropriste to order representative proceedings if the essential inquiries

concern the individual circumstances ofthe members: Stacey Brothers at l3gl; Geelong Wool

comhing Ltd v Textile, clothing anà Foofweør (Jnion of Australia (2003) 130 FCR 44?('Geelong wool') ar l72f; Trustees of the Roman catholic church þr the Archdiocese ofsvdnev v Ellis (2007) 70 NSWLR 565 at [83J. The imposition of a pøralty would be an

example of an essential enquiry specific to an individual: Geelong lloot ar llzf. A common

interest would also be defeated if the respondents were to rely upon different defenc es: Stacey

Brothers at [391.

The applioants acknowledge that the respondorts a¡e an identifiable group or class;

they have a common interest or community of inte¡est with all other former employees withrespect to the question of identiffing their former employer; the defence filed by the

rospondents is not such that it would defeat a finding of commonality of interest; and the

relief sought is not specific to the r€,presentatives.

Accordingly, this would indicete tlrat representative proceedings are appropriate in the

circumstances.

(3) The suitabilíE of the rcprcsentative

Those selectod to bo a rçresenting party, must have a common interest or a

community of interest with all other members: amos Removab, However, some mønbers,

and even the representing party, may have separate interests in addition to â common interest:

Ellß at7.

ln Amos Removals, Hunt J identiñed three requirements for defadant representative

proceedings. One requirernent (at 530) was that the person selected as a rqrresontativc must

be in management of the group or class and have cont¡ol of its ñ¡nds. As Kenny J correctly

obserrved in Stacey Brothers at 1371, '[s]ubsequent cases indicate, howwer, that

'Tnanagement" is neither a suffioient nor necessary requirement, although there must be

something that binds the group togcther so as to give rise to a comnonality of interest and

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¡endef, a rqresentative prooeeding appropriate'. Respondent representative orders have been

made in ci¡cumstances where there has been no manageûrerit and control, although there has

bee¡r some other factor linking the g¡oup: see Tony Blain Pty Ltd trading øs Acme

Merchandßing v Jømßon (1993) 4l FCR 414; EMI Records Ltd v Kudhøil [985] FSR 36.

In these casos, there were factors other than mere managemerit and conftol that supported the

representative order, such as knowledge within the group of the group's menrbers, co-

ordinated action" and common p¡¡rpose.

I¡ Cønie the willingness and ability of tho representative as a party to litigious

proooedings $,as also thought to be a relevant factor. As Brennan J said at 408, '[t]ho solf

proclaimed carrier of a litigious banner may prove to be an indolent or incompetent champion

of the common cause in the cou¡troom.'

The applicants have made no complaint as to the suitability of the rqnesørtatives, and

nor should they. For the reasons c¿rnvassed above thene is a common interest between the

represeûtatives and their respective cl¿¡sses, Whilst thøe may be no management a¡rd conkol,

other factors such as a co-o¡dinated action and co¡nmon purpose are presEnt. There is

nothing to indicate that the represe,rrtative will not execute the litigation in a way that is

anything less than mmpetent. Moreover, the representative parties and their classes have

retained the same solicitors, Therefore, the classes would not er(ecute the litigation in a

manner any different from their respective represmtatives,

This further demonskatos tho appropriatonoss of representativo proooodings.

(4) The compøralive cost of representølive proceedÌngs

Rule 7.4(4D) of the UCPR roquiros the Court to consider the comparative cost of

representative proc€edings. That rule, which wæ inserted in December 2009, is derived fiom

a similar provision in s 33N of the Federdl Court of Australia Act 1976 (Cth) ('thc Federal

Court Act'). Section 33N relates to rqrresentative proceedings conduct pursuant to Pt IVA of

the Fede'ral Cou¡t Ac{. Order 6 r 13 of the Rules does not contain an equivalent p¡ovision.

However, nah¡rally aûy consideration on the appropriateness of represeritative proceedings

must include its comparative cost and efficiency. This approach is consistent with the

underlying purpose ofO 6 r 13 as prwiously discussed.

37

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At the time of making the representative orde¡s there were 49 former ernployees whou/ere represented by the same ñrm. The benefits to cost and efficiørcy of threerepres ørtatives is selÊevident.

Conclusion

For these reasons, I am of the view tlrat representative proceedings would facilitatethe administration of justice by allowing persons who have the same interest to secr¡¡e a

determi¡ration in one action ratherr than in separate proceedings.

The hearing of the applic¡tion

I heard the application (frrrther amended originating process and amended statement

of claim) and c¡oss-claim (amended cross-claim) over six days from 29 March to I Aprilinclusivo and on 6 and 7 May 201O.

on the last day of the hearing, I granted leave for Timothy Rich and Evan Ga[agherto be joined as the fiffh and sixth respondents respectively to the effect that neither of themcontinued to be represented by the fourth respondørt, christine Bowen. I also granted Ieaveto the respondørts to reopen their case and read a¡r affidavit of Mr Gallagher affirmed13 Novemben 2009 whioh I aalrnitted into evidenoo, subject to a number of objections Iupheld and a number of paragraphs that were not pressed.

To reflect the leave granted on the last day of the hearing fo¡ M¡ Rich and MrGallagher to be joined as the fiffå and sixth respondents respectively, subsequent to the

hearing, a second ñ¡rther amended originating process and a ñ¡¡ther amended statement ofclaim were filed by the applicants and a further amended defence and a further amended

c¡oss-claim wene ñled by the respondents. The fr¡rther amended statement of claim pteaded

that the first respondont, Steven Davey was representative of himself and the persons listed inschedule I hereunder; the third respondent, Ian Graybum, was representative of himself and

the persons listed in schedule 2 herounder; and the fourth respondent, christine Bowen, was

rq)resentative of ho¡self and the persons listed in schedule 3 he¡eunder:

4l

Schedule I Schedule 2 Schedule 3

Bronwyn Skinner David Swain Chris Waring

John Pace Deborah Stoddart Gerard Pacheco

Julian Radford Eliza Tong Harmen Fredrikze

Julían Ross Matthew Bangel Jr¡lie Keon

Nick Cov.'ney Raman Bh¡lla Paul Lam-Po-Tang

Nicola Hanrahan Robert Partos Paul Marando

Ray Fleming Vinay Kolhatkar Peter Manchester

Robert Clow Giorgio Leung Philip Hodgkinson

Tony Wong Sandra l-ai Richa¡d Tebbutt

NeiI B¡own Shirley Cao Suzannah Hogan

Larissa Wong Todd Stanley

Catriona Green (nee Ogilvie) Bernha¡d Voll

Nevell Skuse Tze Masters

Sarah Currie Phillþe Sung

Karen Cuenco WayneHome

Heidi Elliot (nec Pritchard)

Jim Hope Murray

Geoffrey Johnson

Laura Hayos

On the Friday before the hearing commenced, the applicants filed a statement of

agreed facts ('SAF') comprising some 97 paragraphs. At the commencement of the hearing,

the SAF (together with two volumes of documents referred to theroin) were tendered and

admitted into evidenoe: Ex l. After the conclusion of the heanng a supplemertary agreed

statement of facts was filed by the respondents comprising two paragraphs together with

copies of docrune¡rts referred to therein. For the purposes of these reasons, I propose to teat

this suppleÍientary agreed statement as if it were part of Ex I .

-12-

The rellef sought

43 The applicants seek decrarations that for the purposes ofs 433(3)(c) ofthe Act:

(1) The respondenrs are nor priority crediton of AIGL, AFAL and, the ñfth and sixthrespondents, are also not priority creditors ofAFGpL;

(2) the first, second, third and fourth respondents are priority creditors ofAFGpL.

44 By their cross-claim, the respondents are seeking decla¡¿tions that for the purposes ofs 433(3)(o) of tho Acr, they are prioriry credito¡s of AFGL or AFAL.

THE LEGISLATIVE PROVISIONS

4s Seotion 433(3)(c) ofthe Act provides (omitting inelevant parts):

'In the case of a compan¡ the receiver ... of the company must pay, out of theproperty coming into his, her or its hands, the following debts or u'oó*i. in priorityto any claim for prinoipal or interest in respoot ofthe debontufes:

(c) ... any debt or &nount tlnt in a winding up is payable in priority ro otherunsecured debts pursuant to paragraph Ss6(l )(e) . ..,

46 Section 556(t)(e) ofthe Act provides (ornitting irrelwant parts):

¿Subject to this Division, in the winding up of a company the following debts andclaims must be paid in priority to all other rr¡rsegu¡ed debts Ld chims:

(e) ... n'ages, superannuation oontributions and superannwtion guaranteo ohargepayable by the comp¿rny in rospect of servioes ¡endered to ihe company Èyemployees before the rolwant date;'

47 Secrion 433(9) of the Acr provides:

'For the purposes of this sectiorq the ¡efErences in Division ó of part 5.6 to thorelevant date a¡e to be read as references to the dåte of tho appointrnent of thereceiver, or possession being take¡r or control being assrmed, as thê iase may be.,

48 The term 'wages' is defined in s 9 of the Act in ¡elation to a compary to mean:

'[A]ñounts payable to or in respect of an ønployee of the company (u,hether theemployee is remunerated by salary, wages, commission or otherwisà) under anindustrial instnrment, including amounts payable by way of allowance o¡¡eimb'rsement but excruding amounts payable in respect åf leave ofabsence'.

49

-13-

The term 'induskial instrument' is defined in the sarne section as;

a contract of employment; or

a law, award, dgternination or agreeûent relating to te¡ms or conditions ofemployment'.

There a¡e, relevantly, definitions of the terms 'ernployoo' and 'superannuation

contribution' in relation to a company, in s 556(2), but they are ofno particular assistance in

the present case.

There was a good deal of argummt as to the proper conskuction of s 556(1)(e) of the

Act and its application to the variety of factual circumstances in this case but, at this stage, Ido not propose to analyse the different argrunents which were ventilated with a view to

coming to conolusions on that issue. For preseot purposes, it suffices to say that, unassisted

by authoriry having regard to the terms of s 556(l)(e), its statutory context, the legislative

policy and purpose as is discernable from its presence in the Act and fiom relevant exbinsic

material as well as the definition of 'wages' in s 9, I am of the view that a porson can only be

a priority creditor of a company under s 556(1)(e) if he o¡ she has been an employee of the

company bofore tho rolovant date, and then only for amomts payable (but not paid) to the

psrson as an employee in respect of services rendered befo¡e the ¡elevant date, in the present

case, before the date of appoíntment of the applicants as receivers. So understood, thc task

and only task is to idørtifr whioh of AFGPL, AFGL o¡ AFAL, if any of thern, was tho

employer ofeaoh of the respondats and the group of pecons, if any, each represents befoÌe

the appointnent of the applicants as receivers on 4 Novernber 2008. On the other hand, the

applicants say that while so much may be necessafy! it is not sufficiernt; they say, that even ifI was to fud that the rospondents, or some of them, were'actually employees' of AFGL or

AFAL, that would not be sufficient to make those respondms priority creditors of AFGL o¡

AFAL in respect of unpaid entitlements, because neither of those companies is liable to pay

those respondmts; only AFGPL hæ that contactual liability. Further, they say, that where

what is payable to those respondants by the entity having that contrach¡al liability was not in

respect of services rørdeted to that entity, but rather in respect of servicæs rendered to another

entity, the second limb or integer ofs 556(l)(e) is not satisfied. Fo¡ reasons which I proûle

below, the applicants' submissions hâve no fouridation in fact or law.

'(a)

(b)

53

54

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IDENTIF"YING AIY EMpLoyER FROM Trvo oR MORE possIBILrrIES: T¡rr,.RELEVA¡IT PRINCIPLES TO BE APPLIED

unsurprisingl¡ the outcome in cæos which have been mncemed with iderrtifting anemployer of a person or group of pøsons from two or more possibilities, whethen from withinthe same group of companies or othenrrise, has tumed on thei¡ own facts and, in consequencq

the case law in this area is of limited assistance. Nevortheless, it is possible to discern ce11ain

general principles that the murts have applied in the identification process. The courts haveadopted the position that in undertaking this exøcise, they æe entitled to take a wide view ofthe putative relationship, beyond the terrrs of the contractual docurnentation, to examine howthe parties conducted themselves in practice and whether, where the¡e is conhactualdocumentation, the reality of the situation accords with the terms of that documentation orwhether it points to another entity being the employø.

I thought it would be helpñrl ifl analysed these principles before moving to considerthe evidence so to give guidanoe to tlat consideration, in particular, the relative weight to beaccorded to difforent matters.

rn In the natter of c&T Grintet Transport senices pty Ltd (n Liquidation) &Grinter Trunsport Pty Ltd (In Liguidation) (controller Appointed) 120041FCA I l4B, Firtll J

at [20] said:

'Í20! The principles ro be applied in rhe ider¡tification of the omployer of anernployee s'here there ar€ two or more possible ernployers, are reaiornbly wellsettled- For present purposes I \yould note the following:

(1) A contract of serr¡ice cunot be transferred by one einployer to anothel ornovated as between them without the enrployee's consent Nokes vDoncûster Amalgamated Collieries Ltd Íl94OJ AC 1014; Re CoogiNominees Pty Lld (Administrøtors appointed): McCluskey v Karagiosis(2002) 120 IR 147. Questions of ostoppel apdlii Smith v Blandford GeeCementation Co Ltd |970) 3 AII ER 154; the enrployee's consent must bo areal one whaher express or implied and is .hot to bo raised by operation ofIaw-": Denham v Midland Employers Mutual Assurance Ltd Ít955JZ eB 437st 443.

(2) The totality of the oircumstances surrounding the relationships of the variousparties including conduct subsequ€nt to the creation of an allegedemploynent relatioruhip is relevant to the assessment to be made: Romero vAuty (2001) 19 AGLC 206 at [10]arñ,l4Zl-1441.

(3) Documentation created by one or more of the parties describing orevidencing an apparent €mployment relationship will be ¡elevant to, but notnecessadly determinative of, the true oharacteT of that relationshi p: pitcher v

-15-

Langford (1991) 23 NSWLR 142; Møns Fabrics Pty Ltd & Nathanfrtholesale Fabrics Pty Ltd v Whipps (1991) 33 AILR 167. In d*erminingthe identþ of a disputed employer, the Cou¡t is entitled to considor 'Ihefeality of purported contractuå¡ arrang€rnents": Dalgefi Farmers Ltd t/aGrazcos v Brzce, NSWCA, 3 August 1995. The documqltation ûny havebean brougbt into cxistence for other purposes, for example, øx minimisationor tho rcduction of insu¡ance preûiums, without reflecting the reality of thepa¡ties relatio¡ship: ibid; Pitcher v Langford,, at 149; Sharrment Pty Ltd vfficial Trustee in Banbtptcy (1988) I E FCR 4a9 at 454.

Conversiorx and conduot at the time of the alleged engagement of theemployoe is of oonsidef,able significâûce: Romero, at [9] , The beliefs of theemployees as to the idetrtity of their omployer is admissible and is entitled toweigþt: Pitcher v Langþrd.

In cases ofthe ørgagemart of new srnployeos to work in a business in whioha nrunber of separate corporate entities pafticipate other*'ise t}an as partners:

"... it was opon to those contolling the business to select whichcompany should be the ernployer provrdod that the selection wasconsisteût with tho finanoial aad administative organisation of thebusiness and was not otherwise a sham-"

See Textile Footwear and Clothing Union of Australia v Bellechìc Pty Ltd, FCA,Ryan J, l9 November 1998.'

The majority of the NSW Court of Appeal (Basten JA dissenting) made tho following

observation in Shaw v Bindaree Beef Pty Ltd 12007) NSWCA 125 ar [59] regarding the

court's earlier decision in Pircåer v Langford (1991) 23 NSWLR 142:

'The result in .&'¡cå er v Langþrd ltrnad on its own facts, and on the need fo¡ error inpoint of l¿w. There is no doubt, ho$'ever, that without going so fa¡ as to find a shamthe 'Teality of purpottod contsctual arrangernents" (per Handley JA) can beoonsidere4 and the case illustates tbat it can extend to tho identity of a contractingparty and thÂt it can be found thåt a pufpoted conFacting par6r was not in realitypârty to the contraot wo¡r whcre a written contract gives it as the paly.'

The majority furth€r noted (at [61] - [62]) ttrat determination of the eritity that entered

into a conhact is based upon an objective a¡¡sessmeît of the state of aiïairs bet$,een the

p¿rrties.

ln Dalgety Farmers Ltd (t/as Grøzcos) v Bruce (1995) 12 NSWCCR 36, Kirby ACJ

(with whom Cla¡kc and Cole JJA agreed) mâde the following observations;

'Disputes conceming the employmørt of shearers are not uncommon. Specifrcall¡disputes have quito tequently arisen out of "paper" arrangerrents designed to settlethe assignmed of eñployment to a particular organisation ... There is no alternativein such cases but to examine the detailcd cr¡idence.

(4)

(5)

55

57

t6-

'E

In disputes conceming the erdsto¡¡ce of emplo]denr_tlTe arrangements, and thecharacterisation of those arrangernents, the prooi of pupä ao"rr-ätutio",'

"tùougtrrclevÐnt, wilt nor necessa¡ily he dcterminatìve ... rriejUcy ¡n ana ganúev jÀîPjtchey ... rrade ir plain that, in determining the idørtity ofa drsputed employer, theCoul is entitled to oonsider the reality of thõ purported contrach¡al arrangåú. . . .

[]Jhe ga.ner arranganerits [are] not irrelevant, and should not æ ifrio*J .._ fodaermining whether a cont¡act of seri/ice has been ente¡ed, and if so wi¡i whom, ít isnecessary to look to the circumstances of lhe engageiner¡t and to ascertain who ii wasthSt gfferod ernployment, and whether the worÈer-accepted that offer. To deterrrinowhether what then e¡sued was indeed employment (in the sonse of a oontact ofservice) it is necessary to look to the whoie óf ths ÈUtionst ip.... Thus tho sea¡chwhich is on is for the essefice of the relationship, not the simple touohstone of actualcontrol, or the right of control.'

rn Pitcher' at r50, the Nsw cou¡t of Appear observed that estabrishmerit of anernployment relationship, where in dispute, will often take a court into a detailed examinationof the features of the relationship between the parties. This case was recently followed insturesteps v McGrath [2010] Nswsc 169, a case involving the identification of theemployer in a corporate group.

It is open to persons controlling a business in whioh a group of companies is involvedto seleot an ortity within the corporate group to be the employer. Howevor, as Ryan J pointedotrt iî Textile Footwear and clothing union of Ausrrøtia v Bellechí.c pty Ltd I l99g] FcA1465, if such a selection is to be made, the arrangement must be consisterit with the ñnancialand administrative organisation ofthe business in o¡der to be effective.

Aspects of the practioal ¡ealities of the relationstrip which have been considered

relevant in the cases referred to above, include a consideration ofthe entity which:

had practical and legal contol a¡rd direction ofthe employees;

made decisions about hiring;

made decisions about disciplinary issues;

made decisions about the level ofremuneration;

actually paid remuneration;

communicated with ønployees about leave;

mado decisions about termination of employment.

59

60

(a)

(b)

(c)

(d)

(e)

(Ð

(e)

63

-17 _

ln Australian Insurance Employees Union v W Insurance Services Pty Ltd (1982) 42

ALR 598 at 606, Evatt J held that the fact that Mrs Roberts' salary was paid by WPA and thât

tax group certificates issued to her showed that company æ her employer was not conolusive

evidence of the fact that it was the employor. Evatt J was satisfied th¿t that arrangement was

one of financial convenie¡rce to the Watkins Group, with tho rosult that those facts were

'neutral indicia' in determining the issue which company was her employer in the legal sense

during the relevant period.

ln Textile Footweù and Clothing Union, Ryan J observed that despite the

inhoduction of 'Bellechic Pty Ltd' as the name on the pay slips and group certificates, the

preferable analysis was th¿t they remained ernployees of David Keys Aushalia Pty Ltd, or

Bellhop Pty Ltd as it becarne, aûd that compâny made their services available to Bellechic

Pty Ltd upon the latter agreeing to pay their wages and attend to the tax deductions on behalf

of Bellhop Pty Ltd.

ln Romero v Auty (2A01) 19 ACLC 206 ('Romero'), Warren J held that insofar as

documents suoh as pay advice slips, group certificates and superannuation documents may

have referred to a new o¡ diffìererit employer, namel¡ Westbury Joinery Services an implied

assignment does not arise,

ln Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at

330D, the NSW Court of Appeal held actual subjeotivo intention to bo a factor the law takos

into account in determining whether a contract exists.

TÍrr'. EVIDENCE

Before dealing with the evidence specific to each respondent and the group of

persons, if any, each rqrresents, I propose to deal first with the evidence going to the birth

and wolution of A-FGPL ând to then deal with the respective roles and activities of AFGPL,

AFGL and AFAL in the Allco Finance Group, specifically their respective roles and activities

in relation to the employmørt of employees within the group, by reference to business books

and records, financial statements and accounting records, as u,ell as records of repofts to

statutory and regulatory bodies or prepared fo¡ the adminisEators or the applioants as

receivers and rnanagers. There doæ not appear to be any substantivc dispute as to the

findings ofprimary fact this evrdence suppo¡ts; merely differences ofview on the findings or

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cônclusions of seoondary fact that might be drawn thorefrom and their significance inresolving the ultimate issues.

66

Thc Birth and Evolution of AFGPL

Mr Timothy Rioh, the fifth respondent, gave evidence going to the incorporation ofAFGPL in l99l a¡d to its assumption as a 'central payroll entity' for the Allco FinanceGroup in or a¡ound 1994 - l9g1. Relevantly, his evidsrce in chiofwas:

'Í71 .. , I was the Fin¿ncial Controller and Company Sooretary ofthe Allco Group.In that role, and giv€n the-structr¡re of the Allco Group, e¿ch month we were req,riràto prepare at leâst E to 10 sets of management accounts. These accounts ore¡e foreach of thc separate joint ventrues and operariñg entities in tÏe Group. \üherenecossary' eaoh of these efitities was registcred with the relevant tax authority as agfoup tåx pâyer. this required that the monthly forms necessary for the ta* urrthoritywere completed for e¿ch such e,lrtity. This was a time consuming exercise whichrequirod considorable duplioation of work.

t8] Further, because the Allco Group was operating by way ofpafnerships, eachtime_ the partners of a partnership changed, or a now joint venh¡rg was created, wenooded to register the new partroship with the relsvant taxation authority ('Taxdepartment') as a tax payer and/or payroll errtity.

l9l In or around 1995, the NSW Rwenue OfEce conducted a payroll audit oftheAllco

_group of companies. As a result of tho audit and the signifrcant duplication of

work for eaoh company, I had discussions with Brian Holrnes, whom I rmãorstood atthe timo was the Direotor - Administratior, about these accounting issuos and said tohim words to the eff€ot of,"it would be ñuch easier fwe have a-central enüry fromyhilh yte could pay employees," to which Mr Holrnes agreed. It was my viei-tlnt,by having one central entity as the payroll entity, it wor¡ld streamline the accountingand reco¡d keeping activities, reduce unnecessary duplication of work and save ãconsiderable amorurt of time.

tlO] I recall that I wrote a memorandün to M¡ Holmes setting out how I thoughtthe Allco Group could be structwed with one central payroll entity. I have ñotretâined a copy of this memorandum. I do however recdl that the memora¡dr¡msuggested that the group uso a special purposo oomp¿rny to be the singlo group taxpayer for the purposes of the group payroll, and as such this company wor¡ld be thegoup tax payer on record and registe,red with the Tax Depalment. Themomorandurr also described how omployee costs and oxpenses u'ould be allocated tothe different joint ventu¡es and other oporating entities to ensr¡¡e tl¡at the appropriatcjoint ventures and eotities would bear the eoonomic costs associãted

- with

ønployment.

l11l It was f¡y vie\r, that AFGPL would be a oompany to fill the role of centralpayroll entity for the Allco Group. It was never intended by me or anyone else thatany otåer activitics related to employment be cffried out by AFGpL, but that itwould be an administ¡ative entit% for the purposes of registering for group andpa¡rroll tax.

67

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t12l In or a¡ound 1994, I registered AFGPL with the Tax Departûent, as theAllco Group tax payer. I recall that this involved the completion of a numbor offoûns to the effect thât AFGPL was going to be group taxpayot and payroll ørtitywithin thc Allco Group.

U3] In or arou¡rd 1994, a deed of cross guarantee was put in place for thecompanies in the Allco group. I do not recsll l¡ere being forrral arangements put inplace withi¡ the Allco Gfoup pursuant to which fi¡nds wor¡ld be ransfered into andout of AFGPL.

t14l In or about 1996, it was deoided to or€ate a oentral treasury for the grorrp. Tomy knowledge, as Compariy Secretary ard Finaûcial and Managerrent Accountant attlrat time, Allco Man2gernent Limited and AFAL jointþ took on this role. Coupledu'ith the cmss gu¿¡rantee, this allowed the cåsh pa)¿úents in relation to salaries to bemade direotly fiom treasury and cur€nt accounted to the relevant joint ventures andoperating edtities. AFGPL did not charge a service fee or a management fee to anyother entity in respect of aoting in the oental pay¡oll oapacity. Employee accnralsfo¡ annr¡al leave and long senrice leâve co inued to be acoormted for in the divisionfor whioh tho ornployeo provided services. After this time, I considered AFGPL tobe an a&ninistrative nicety. . . .'

In c¡oss-examination, Mr Rich was pressed to concede that one of the roles AFGPL

would h¿vo as a 'oental payroll entity' would be to pay employees. Mr Rich resisted making

such a concession saying that it had more to do with steamlining 'the accounting and record

keeping activities' and to 'reduoe unnooessary duplication of work'. The most that Mr Rich

would concede is enrbodied in the following exhact from the t¡anscript of his cross-

examination (T309.28 - 45):

'Yes, Thank you. And then in paragraph 12 you refer to registering AFGPL with thotax departmeút as the Allco Gmup øxpayer. Conect?--That's right.

A¡¡d that rsflootod the intention that it would be AFGPL that wor¡ld be rernittingmoney to e,rployees which they had eamed. Coroct?--No. It would be the entitythat would be r€mitting the group lax to the tax deparûnent.

And it r¡ade se¡se to do it that way beoause AFGPL, as you expected, would be theentity that would be paying the employees?--I don't think we had envisaged at thatpoint who would aotually pay the anployees. We werc more concedied ìÀ/ith the factthat we had a lot of duplication of administative work.

But you did envisage who would be payng ernployees when you had your discussionwith Mr Holmos in paragraph 9. Corect?--As I said, I would have used tlat term ina general sense.

Yes. And in a general sense it includes 1þE ir¡portant task for a payroll e,ntity ofpaying ernployees. Correcl?--lt oould h¡vs included that, yes.'

68

-20 -

A littlo later (l3IO.Z9 - 312.13),the transcript reads:

'1lnrrk you. Now, can I ask you to go to paragraph 17, please? you refer therc toJanuary 2003. And if you drop down to the seventh lirr" yõu say:

Notwithstafiding g¡ven I had set the company up ds the payroll entity _

just pausing tlere. You are using the words payroll entity there in the same sensethat ìr,e discussed in relation to parag¿ph 9?---yei.

thank you. And you are here giving evidenoe about events in January 2003.Correct?---Yes.

So AFG Pty Limitod had now been firrfilling that function of payron entity for abouteight years. Co¡rect?---yes.

Including ¿u¡ you undeßtood it, bearing the liability to pay cørployees the money thatthoy eamed in working for the Allco group?--Not neceisar y."

Well, was tlnt achrally your undrrstanding or not, th¡¡t AFGPL was payiûg theemployees the money tbat they had eamod in working for the Allco go,rpf---fi-ayh¿ve.been the case that - very eârly on thåt AFG did pay ernployees. I don't actr:ally¡ecall whether money ù firnds wøe put through a bank account_ But certainly forthe majority of that eight years, I don't boliève that the ach:al paymenß t; theemployees came from AFG pty Limited.

Whether_ or not. the cash was physioally paid by AFG pty Liñited, it ìyas oetainlyyour understanding in January 2003, was it not, that AFGpL was liable to pay yourown remuneration?---ìJVell, I would never have thought of ¡\FGPL as the person -the entity that was paying my salary, no.

I see. Ilave a look at this document. And I will hand a copy to your Honour. Doyot¡ see yow n¿une on the left hand side ofthåt document?--yes. I do.

And is it your signature about half way down the page on the right hand side?---yes_It is.

Thank you And you aro applying thoro for a tax frle numbor. Is that correct? Sorry,the question in - sorry, the question in question 2 is:

Do you authorise your pq)er to give your tax fle number to the lfustee ofyout suPerannuation furd.

Cor¡ect?---Yes ,

Ând by payer there, you understood t¡.at to mean the payer of your remuneration inworkiqg for the Alloo group. Correct?--I would actually havo thought thât thât $'asthe payer ofmy group tax, I think.

AII right- And, then, do you see a little over half way down there is â section O) tobe compløed by the payer. And do you see at about three quârters of the way downthe page the payer is ¡eferred to âs AFG Pty Limited?--yes.

-21 -

And did thåt oorospond to your und€f,stetding at the timo, that AFG Pty Linrited wasthe paycr ofyour group tax?--It was the rogistered group tax payef.

Yes. Thank you. Because you in fact had had it registerod as the group tax paycr?--That's right.

Is tløt right?--That's right.

Yos. And so you certainly understood AFG Pty Limited to be paying yoü group tax.Is that right?--Certainly to be the registered group tax pay€r.

Woll, you undersûood that it was the payer of your group tax, did you not?--Well, atthat point I wouldn't say I kæì¡/ who was paying. \ ho was making the payments,no.

I see. You didnt lmow who was making the paymonts, but you do know that youhad registered that company, AFGPL, as the group tær payer?--Yes.

Yes. As part of its role as payroll eritity. Coíect?--Thât's right.

Whioh inolude{ as you lmd€f,stood it at this tiûe, paying the rønunoration esmed bypeople like yourself working for the Allco group?--Well, at this point in time, whiohwas 2003, I wasn't working i¡ ¡þs ¡dñi¡i5üation areå any nnrg. I would have justassumed tlat things rr¡ert as, you lcrow, they were on the face of it. If the payrollpeople had asked me to sigr a form saþg "This is the form you have to sign toprovide your tax file number details", then I probably would håve signed it. Iwouldn't nooessa¡ily have thought that this was the company that was paying orotherwise.'

69 The Directors' Report attached to the financial statements of AFGPL for the year

ended 30 June 1997 recnrd, inter alia, the following:

,2. PRINCIPALACTIVITIES

The principal activity of the company during the yoar was to hold interosts inpartnefships and act as ageût and r¡¡¡¡gcr for a joirt venluxe. There has been nosignificant change in the nature ofthose activities du¡ing the ye€r.

3. TRADINGRESI.JLTS

The net profit for the year ended 30 J¡¡ne 1997 after income tax expense of $3,022(1996 $17,866) was $s,832 (19e6 $32,0s9).'

70 The Directors' Report attached to the fin¿ncial statements of AIGPL for the year

ended 30 June 1998 rccotd.- ¡ntet alîd, the following:

,2. PRINCIPALACTIVITIES

The principal activity of the company during the year uras to hold interests inpartrerships and act as agent and manager for a joint venture. There has beør nosigniñcant ùange in the nature ofthese activities during the yeâr.

71

-22 -

3. TRADINGRËSULTS

Th€ net profit for the yeår ended 30 Jr¡ne l99g after inoome trax expense of $g,rg6(1997 $2,562) was $14,s53 (1992 $S,832).'

The Roles snd Activities of AFGpL, AFGL and AFAL

In a Questionnaire for Di¡ectors and officers compreted for Ferriø Hodgson and

McGrath Nicol in relation to AFGPL by its directon, Ray Fleming, David coe, David Vealand Christopher West, they stato , inrer alia, the following:

(l) AFGPL had a share capital of$4;

(2) no sup€rannuation policy was effectod tfuough AFGpL;

(3) AFGPL has been dormant since the møger of Record Investrnents Limited and AllcoFinance Group on I July 2006;

(4) AFGPL remains dormant, has no products or servicos, agerits, customers or suppliers;

(5) AFGPL has no bank aocounts;

(6) the directors were awa¡e of the dormant status of AFGpL;

(7) AFGPL was targeted as pârt of an entity closr:re project to be wound up and de-

registered;

(8) AFGPL has no crcditors;

(9) AFGPL did not pay payroll øx, pAyE and withholding amounts, superarmuation,

fringe børeñts tax, or inoome tax because the company did not trade;

(10) AFGPL does not have any employees.

An earlier report as at 4 November 2008 reco¡ds that no money is owing by AFGpLfor ernployee entitlements.

There has been no accounting for employee liabilities or costs by or in acmunts ofAFGPL since I July 2000, exc€pt the expense of worker's compensation insurance in the

year ended 30 June 2o02 of $2,250. Ttere is no indication in the financial statemerits,

ledgers or joumals at any time between 2003 and 4 November 2008 of AFGpL that there was

accounting for the obligations that would arise from employment conhaots (such as

-23 -

obligations for salary, superaruruation, long service leave, annual leave, workers

compensation or payroll tæ<).

There a¡e no enhies in the tial balance accounts of AFGPL reflecting the accru¿l ofemployee entitlemats, liabilities or costs, such as annual leave, long senrice leave,

superamr¡åtion, salaries, bonuses, workers componsation, payroll tax or fringe beneñts tax

for 2001 to 2009 (except the expense of workers compmsation insurance in fhe year ended

30 Jr¡ne 2002 of$2,250).

AFAL was the primary entity for the accounting, funding and seftlement of the Allco

Finance Group ernployment related liabilities and expenses. AFAL reoeived funding from

AFGL for this purpose.

The accounting records indicate that AFGPL had no employees,

AFGPL did not aooowrt for any persons as its employeos.

From I July 2007 to 30 June 2008 eFGPL has had no income and had expørses ofonly $200. The only signiñcant balance sheet movement fo¡ AFGPL since 30 lune 2007 was

the closr¡re of the AFGPL bank acoount and the Eansfer of the closing balance to the Allco

Finance (Auskalia) Limited No 2 Account.

In the 2006 Annual Report for AIGL, it was described in the balance sheets as at

30 June 2006 as inourring liability for employee entitlements and as making payments to

suppliers and employees. AFGL's liability for employee entitlements and employee

payments for 2006 and 2005 a¡e the same as tl¡ose of the oonsolidated entit¡ which indicates

that, for intemal accorurting purposes, the employee entitlenent liabilities for the

consolidated group are üeated æ belonging to AFGL.

The 2006 Annual Report for AFGL states that the consolidated financial staterrents

incorporate assets, liabilities and ¡esults ofa list of subsidiaries, AFGPL is not inoluded in

that list. AFGPL is not mentioned in the Annual Rçort at all.

-It,e 20Q7 Annual Report for AFGL did not mention AIGPL as having any role in

¡elation to employees, their remuneration, or other prccesses affecting them.

81

-24 -

82 AFGPL ìYas not included in the list of significant subsidiaries in the re,port; nor wa5AFGPL described as having a role in relation to detennining key management personnel¡eÍlunef,ation ot other terms of their engagement.

83 The audited financial statements fo¡ AFAL for the years ended 30 June 2003 through2006 indicate that it accounted for employment related expenses and liabilities as if it was anemployer during that period.

84 During the period I July 2006 to 4 November 200g, Employee Journal Entriesindicate that payments relating to employee entitlements were made by AFAL and recoveredfrom other companies within the goup, not including AFGpL.

85 AFCPL did not contibute to the Allco Finance Group's profit during the period

covered by the 2002 consolidated statutory aocounts.

66 AFGPL was not mentioned in the Financial Report for 2008 for AFGL as having arole of any kind.

a7 AFGPL was not included in the list of significant subsidiaries in the notes to thcconsolidated financial statements of AFGL for the year ended 30 June 2008. A subsidiarywas said to be signiñcant to the group based on:

(l) Its contribution to the group's profit;

(2) the size ofthc investment;

(3) whether it is a key holding subsidiary within the group;

(4) the main operating subsidiaries in each ofthe countries in which the group operares;

and

(5) whethef, it holds licences to carry out c€rtain specified investing activitics and

management finctions.

88 AFGPL is not listed as a party to the Alloo Group Deed of Cross Gua¡antee in notes

to the consolidated fi¡rancial statements ofAFGL for year ended 30 Jr¡ne 200g.

l--I

i

I

ì

89

L

_25 _

A-FGPL did not contibute to the Allco Finance Group's profit during the period

oovered by the 2008 consolidated statutory accot¡rits.

Atr agreemeot dated 12 May 2008 existed between Automatic Data Processing

Limited ('ADP') and AFAL for provision of payroll services, AFGPL was not a party, nor

was reference made to it. ADP prepared PAYG payment summ¿¡ries (group certiñcates) and

payslips for ernployees, under the agreemørts.

From at least 12 May 2008 ADP arrangd for each of the responderrts to be paid their

mont¡ly salary and paid superannuation paynents to each efirployee's nominated

superannuation firnds.

An agrewrent dated 14 Septerrber 2006 between Smart Salary Pty Limited and

AFAL as employor providod for Sma¡t Salary Pty Limited to provide salary packaging

services for employees in the Allco Finance Group. AFGPL was not a party to the

agreement, nor was it roferred to itr the agreernent.

Payroll Tæ< liabilities were aocounted for and settled by AFAL not AFGPL.

An intemal doc¡¡me¡rt entitled 'Employeo Briefing April 2008' described the Group's

intention to exit some of its businesses to reduce debt and an anticipated headcormt reduction

from 620 to 350. The document contained no mention ofAFGPL.

An intemal document entitled 'Business Plans-Communication to Employees

Manager QAA 17 Mæch 2008' described a restructr:ring programme aimed at exiting non-

core activities and shuoturiug oore business differently. The document contained extensive

discussion of the impact on employees including anticipated redundancies, the decisions

about making positions ¡edundant, procedì¡res to be followed and entitlernents on

redundancy. AFGPL is not mentioned in the document.

An intsmal door¡ment entitled 'Allco Finance Group 1"Allco") Redundanoy

Guidelines (Extract) Effective 5 March 2008' sets out the general approach that the group

wished to take in the event of redundancy. The document dealt with the selection of

9l

-26 -

employe€s for redundancy and entitlement on t€rmination on the ground of redrmdancy. The

documerit made no mention of AFGpL,

97 The bank statements for AFGpL for the period 5 July 2005 to 22 M,ay 200g, duringwhich time AFGPL had a bank accor¡nt, show no activity during this three year period apart

from a single deposit on 7 February 2006 of $50,000, which was a distribution to A-FGPL

arising from ajoint vørture a¡¡angement.

98 The bar¡k statements referred to above indicate that the hank account was olosed on

22May 2008.

99 AFGPL did not have a bank account tom on or about 22 May 200g.

100 The bank statements for AFGPL for the period 5 July 2005 to 22 Ntay 2Q08 show no

paymmts related to ønployee entitlemefits, or payments of any kind.

ì01 Natasha Kent, Belind¿ Casting Lina Marotta, Bevan Jaensch, Mark McGee, Dorma

Hall, Penina Joseph and Deepax Sethuram sigred payment authorisation forms during 2006,

2007 and 2008 which authorised payments from the following accounts with the

Commonwealth Bank of Auskalia to state and federal tax offices for payroll tax and PAYGwithholding ta:< and FBT instalmerits:

(l) Allco Finance (Australia) Limitd - CBA No 2 Account, BSB 062 022, Account

Numbq 10099606; a¡rd

(2) Allco Management Limited No 3 Account, BSB 062 022, Account Numb et 319126.

102 Wages werc paid to employees in the Allco Finance Gtoup from a bank account in the

ryme o{ 'Allco Finance (Australia) Limited No. 2 Account', the aocourt number being

062 022 10099609,

103 AFGPL did not make any payments to any superannuation fund.

104 The documents exhibited to Ms Wagner,s fi¡st affidavit (Ex 4) show it was AFAL

that paid employee's salaries, superannuation contributions and pAyG tax.

t07

r0E

-27 -

supenannuation statements provided to employees note AFGL as the ernployer.

AFGL represented to the ATo that it was the employer in the choice of Superannuation

Funds Standard Choice Forms provided to the ATO by the Allco Finanoe Group.

Regardless of the division of the business in which the employee is recorded as

having worked, or the legal entity which is reco¡ded in æsociation with the employee's name

in the payroll records, the money for salaries, tax paymerits and superannuation for all

ernployees was provided by AFAL,

The documents exhibited to Ms Wagner's first affidavit (Ex 4) show it was AFAL(not AFGPL) that paid the October 2008 salaries and PAYG tax.

The bank staternents fo¡ AFGPL for the period 5 July 2005 to 22 \l[ay 200g show no

paymerits related to employee entiuerrierits, indeed they show no payments of any kind until

22 l:ùfay 2008 when the bank account rr¡as closed.

Worker's compensation liabilities wøe paid for by AFAL not AFGpL.

Workers compensation insu¡ance was maint¿ined which named the insured as

AFGPL, Payment of the prerniums for this insurance was mado by AFAL from a bank

account with commonwealth Ba¡¡k of Auskalia Account Name Allco Finance (Austalia)

Limited - CBA No 2 Account BSB 062 022 AccotntNumber I0099606.

No workers' oompensation insurance policy is reflected in the trial balances o¡

døailed general ledgers of AFGPL.

The board of AFGL created the Human Resou¡ces and Remunenation Committee

(HR&RC). The purpose of the HR&RC wæ to make decisions and/or ¡ecommendations in

relation to rernwreration, human resources matters, and employment policies and practices in

relation to the Allco Finance Group. The HR&RC repoÉed to thc board of AFGL and was

responsible to the boa¡d of AFGL, AFGPL did not have such a oommittoo.

112

tt4

-28 -

The HR&RC was rosponsible for:

(l) Approving AFGL's remuneration policy and any subsequent changes to the

remuneration policy;

Ø approving the terms ofthe Share Plans offers and participant cligibility criteria;

(3) approving AFGL's results and relwant profit share pool(s) created for the purpose ofSTI paymørts (i.e. short term, annual incentive or performanc€ aligned pay);

(4) determining the remuneration arrangements of thc Executive chairman and other

executive directors for approval by the board ofAFGL or sha¡eholders ofAFGL;

(5) approving the rem¡ureration ar¡arigements for the other Executive Committee

members and any other individual or class of employee æ requested by the board ofAFGL;

(6) being informcd of and monitoring the remuneration 8¡rangements of other senior

executives or class of ønployee as requested by the board ofAFGL;

(7) providing guidance to the boa¡d of AFGL on evaluating the performance of the

Executive Chairman and other Exeoutive Committee menrbers;

(8) rwiewing and making recommendations to the board of AFGL on the total level ofremuneration of non-executive directors and for individu¿l fees fo¡ non-executive

directors and the Deputy Chairman of the boârd of AFGL, including any additional

fces payable for membership of board of AFGL committees;

(9) reviewing management succession plaruring fo¡ AFGL in general, but specifically in

regard to the CEO of AFGL and Executive Committee meûrbers of AFGL;

(10) rwiewing the group's obligations on matters such as super¿rnnuation and other

employment benefits and entitlenents; and

( 1 I ) considering suoh other matters æ requested by the board of AFGL.

The HR&RC performed thc above fimctions without roforenoe to AFGPL.

One of applicants gavo evidence with respect to the use of an entity within corporate

groups as an employhg entity; that it is not unusual for a corporate group (of the size and

structural complexity of the Allco Finanoe Group) to have an entity (or a limited number ofentities) set up or allocated as the employers within the corporate group; from an accounting,

-29 -

financial and gøre'ral administrative porspective, that it minimises costs if the number ofemployers within a corporate group is restricted. Some of the administrative and legal

obligations of employers, according to the evidence, includo:

(l) Payment of compulsory employor superannuation contributions to an employee's

nominatod superannuation fund or the employer's default fund;

(2) accrual and payment ofvarious tlpes of leave including annual leave, personaVcarer's

leave, compassionate leavg long service leave and parentål leave;

(3) payment of monthly payroll tax in respect of employee wages to an applicable Office

of State Revenue. In New South Wales, the pøyroll Tax Act 2002 (NSW) provides

that an employer is liable ûo pay payrolt tax on wages and is to be registøed under

that Act;

(4) payment of fünge be¡refits tax to the ATo in respect of beneñts provlded toemployees such as living away tom home allowance, salary sacrificing arrangerients

and leased motor vehicles;

(5) registation and withholding of PAYG tax from employees' salaries and the

remittance ofthat tax to the ATO on a quarterly basis;

(6) to be registered æ an employer with the appropriate workers' compørsation insurer

and then pay workers' compøsation insurance premiums in respeot of a compulsory

workers' compørsation polioy; and

(7) keçing of employee reoo¡ds in accordance with the Fair I{ork Act 2009 (Cth) uróthe llorþlace Relations Act 2006 (Cïh}

I t6 According to the respondents, on no view ofthe evidenco lvere any ofthe ñr¡rctions in

[15(l) to (7)] above performed by AFGPL; rarher the evidEnce shows it was AFAL or

AFGL tlrat performed those funotions:

(1) As to (l) and (5) - The documents exhibited to Ms Wagrer's first affidavit (Ex 4)

show it tvas AFAL not AFGPL that paid employee's salaries, superannuation

contibutions and PAYG tax. These documents show thât PAYG in respect of each ofthe respondents was remitted to the ATO by AFAL.

(2) As to (2) - The bank statements fo¡ AFGPL for the period 5 JuIy 2005 to 22 tr{ay

2008 show no payments ¡elated to employee entitlomonts, indeed thcy show no

-30-

paymøts of any kind until 22 Nlay 2008 whe¡r the bank ac@unt was closed, AFGpLnever acoor¡nted for employee expenses or liabilities of any kind between 2002 arß. 4November 2008.

(3) As to (3) and (4) - The Fringe Bonefits Tax expense ledger ancl payroll Tax clearingliability account was coded to AFAL for acoounting purposes.

(4) As to (6) - No payments in respect of workers' compensation insurance were made byAFGPL. AII payments were made by AFAL and recorded in the accounts of AFAL.

(5) As to (7) - The minutes of the AFGL Board and the Annual Rçorts show úrat since

I July 2006 AFGL was the company making the decisions about employment matters.

It was from AFGL (rathor than any of the other 867 entities) that en¡ployees received

conespondence in relation to their employment and letter ofoffer.

As indicated at [65] above, and subject to what I have to say in [r l8] below, the¡e was

no substantive dispute that the evidence supported the findings of primary fact in [66] to

[l 14] above; merely differrences of view as to findings or conclusions of semndary fact that

might be drawn therefrom and their significance in resolving the ultimate issues. So much is

exemplified in the applicants' reply submissions:

(1) That the Allco Finance Group rçrese,nted ro third parties that AFGPL was the

employing entity for Aushalian employees: tho attachment to the email headed 'AllcoEmploying Entities as at 30 June 2008' incorporated as schedule l l to the syndicated

Facilities Agreement dated 7 November 200s (Ex l1); and nothing which represented

that AFAL and AFGL we¡e employing entities.

(2) The accounting widence should be t¡eated with some caution. The accowrting

evidence will not assist the court to answer the questiotr as to which entity had the

liability to pay the respondents' wages and superannuation payme,nts.

(3) There are accounting reco¡ds which are consistent with the employees being

employed by AFGPL. AFGPL's name was used for the purpose of rçresenting to

third parties, such as the ATO, workers' oompensation insurers and State payroll tax

offices, which entity was responsible for relevant liabilities: Ex 4, Tab I l. The

wide'nce shows that AFGPL paid the tax component of $1,358,441 from oash in the

AFAL No 2 Account. AFAL provided a treasury function for the AFGpL employees.

(4) AFGPL was not a dormant company within the Allco Finance Group.

l---31 -

(5) Mr Rich gave evidence about the reasons for establishing AFGPL and its use as a

payroll ontity: see T309/l - 40. It w¿¡s clear thst AFGPL was set up for the puq)ose

of paying wages and salary, Mr Rioh understood A¡GPL to be paying'your' group

tax: T3l l/41.

(6) Mr Pace, who was employed as an aooountant by AFGPL and working within the

Allco Finance Group, agreed that AFGPL prepared and filed Business Activity

Statements (BAS): T261. It was clea¡ that Mr Pace had a limited understanding of the

role of AFGPL and much of his evidence wâs irrelevant to the issue which properly

arises for determination.

(7) The BAS reh¡ms set out in the SAF, Tabs 14 - 19, nominate AFGPL as paying rhe

vast bulk, if not all, of the salary and wagos of the Allco Finance Group. Those

retums give detail about the salaries and wages consistently with the proposition that

AFGPL was the company that was liable to pay tåeir remrmeration,

(8) The evidence also shows that AIGPL was Eeated ¿¡s a large rernitter fo¡ PAYG

purposes: '1262. It also paid fünge benefits tax: T267 .

(9) The evidence does not support the respondents' contention that AFGPL had no assets

o¡ expenses, specifically in relation to employees. M¡ Pace's evidence he¡e shows itdid, and further th¿t this corresponded with a greator numbs¡ of employees in the

Allco Finance Gtonp: T262, 269,

(10) Furthø, the evidence does not support the respondents' contention that AFGPL had

no employee-related expenses and that AFAL paid all employee-related expenses and

did not reoover any monoy from AFGPL. There is ¡efereûce to AFGPL name or code

which appeared in the AFAL's accounts: see Mt Samuels' evidence at T283/17,

285 I I 4, 286 / 9, 288/ t, 289 I 2t.

(11) This evidence does not sl¡pport a finding that an eûtity othe¡ than AFGPL was

contraotually liable to pay the employees.

At this stage, I would merely make the followrng brief observations by way ofresponse to these reply submissions:

The payroll sìrmmary report at Ex 4, Tab ll, does not provo that AFGPL paid the

bulk ofthe salaries and the tax that was being paid on those salaries,

(r)

(2)

(3)

(4\

(5)

(6)

-32-

The mattors referred to at [ll7(3) above, do not prove that AFAL provided a

'treæury firnction' for AFGPL employees, whatwen that means.

Paragraph I lz(+)]: This is no mo¡e than a gerreral denial; it does not put in issue anyof the findings of primary fact. Even if AFGpL was not 'dormant', it was so inactive

that its business, if any, was nondescript.

Paragraph ul7(S)l: The tanscript atT3lll4l, or ovon thereabouts, does not support

the statement thåt Mr Rich understood AFGpL to be paylng .your' group tax.

Paragraph |17(7)l: The BAS retums (Ex l, Tabs 14 - 19) do not prove that AFGpLpaid the vast bulk, ifnot all, ofthe salary and wages ofthe Allco Finance Group.

Paragraph [1I7(8)]: The evidence at T262 does not establish that ArGpL was heated

as a large remitter for PAYG pu{posos; and the evidenc a aT T267 does not establish

that AIGPL paid fringe benefits to<.

Paragraph tllT(9)l; The eviderice at T262, T269 does not establish rhe respondarts,

contention, that AFGPL had no assets or expenses, specifically in ¡el¿tion to

ønployees, to be false,

Paragraph [17(10)]: The widence atTZB3llT,ZgS/14,29619,288/l and 289/t2 does

not establish the respondents' contention, that AFGpL had no employee-related

expenses and that AFAL paid all employoe-related expørses and did not recover any

money from AFGPL, to be false,

tr'irst Respondent Group: Document¿ry Ev¡dence

Each of the persons in this group, reprosented by Mr Stevør Davoy, either originally

made an agreernent with AFGL (when named 'Record lnvestments Limited') or, having

previously made an agreement with AFAL (when named .Allco Finance &oup Limited'),

made a new agreement with AFGL, the terms of which æe analysed below.

By letter dated 3l July 2006, Mr Davey was offered fuIl-time employment with the

Allco Finance Group:

(7)

(8)

I t9

t20

-33 -

ALLCO FINANCE GRO{JP UMITED AB}rsÐ0q,3i5..åI Lsvs¡ e¡4. Grbtrdy, r Mac{lEri€ Plæ srdhey NslÂ, 20lx)

TeEptone @ 9255 4lCú FGùn¡c m 92{l 2560 $ /*.o1hÞ.Go¡n.Eu¡t\ALLCO

3l July 2006 * 75+

cA 2 Fr t/tfo¿'Mr Stevê Dâwy4 Telowie Cour¡Duel NSW 2158

Dear steve

EMPLOYMENT AGREEMENT

I am pbased lo confirm our dgr to lrou ot full time employrr¡ent wlth Al¡co Finance Group('Aücr') ¡n the posit¡on cif Director - Allco Wholesde Funding, the detf¡¡ls of which areenclog€d in lhe pa5il¡on d€sdípt¡ôn atfðched lo ütls lêtt€r or as olhenrrËe o'(plained lo you.Report¡r¡g to myself. your pæltlon b basBd h Sydnay ând vyill commence on 1 Augu€r 2000.

Your total rernun8ration paokage lncludes fhe fofloríng componenls:

'f . a fixed salary compônent of per annuñ¡, inclusive of bese salary,superannuatlon ând eny salary pack8ged benefitE (including applicabl6 FgT), rÂù¡icf' rnâybe åvaibble lo you ¡n aocorlence wi¡h Allco policy, and

2- a discrutionary annual perfofnìance bonuÊ ¡ncÌu6lÍe of supêrånnuEt¡on of up to 100% offsod salary, dependent upon divþlonal and/or Group p€rfomence, tour acÌúeìreîìent ofEgreed key rqsult er€e.6 rKRA6') and yor¡r contihu¡ng eñployment u/ith Altoo, Wì€reemployment commence€ pari tÆy thtuugh lhe financlal yesr, the bonuÊ will be ofrrBdon a ptg{ãfå basiB prþvidlng you hsrre been emdoyed for a rninimum of 3 months of thefinancial yeaç end

3. any ôther benefit cr ent¡tler ent conte¡n€d ¡n thls Agreeñent,

Please find ettached ourlemls & condltons of employmentfor you to rev¡eu/ añd sign. Toaccept the ofür, p¡Be5e slgn both copies of th¡s l€tel and initial each pqe of the Bms &condil¡oñs 0f employment, þ sþn¡fy your undercland¡ng snd Aoc€ptânce ofthe terms añdretum to L¡na Maroüa. Peyroll Manager prior b yqur commrnccmênt

I em delighled lhat yor,r tnve decided to joln Allco- I belleræ that you are ¡bining at ane,€ftìng tiÍF end know th€t làe ekills an.t ergerieîce hel you brlng þ lhe rob wlll provide aslgnif¡cenl b€nefr to lhe busirçeg. I lock foll¡Ied to worl(ng tùlth ],ou to dellver a succe$fulor¡tcohe for üìe futufE growtlì and Euccess ol Allco.

Yo¡¡rs sincerely

ô-+FLn*\Jim I'bpe MurråyEreq¡tlve Diredor & Head of Whólesale F¡nanc¡al Serv|ces

0.i u u i.ls

ÂI.LCO RNAITCE GROUP UI,IIÍEDP¿96 2 ot rO

I underslând and eccept the terms and condlions of lhis offer of employr.n€n¡ with AltcoFinarìce croup-

J,þþb

íi..JiJtì{tll

-35

ALLCO RHAìICE GROUP U¡IITÊDPlgâ 3 of t0

STANDARD TERIIS AND CONDñO¡\¡S OF EMPLOYTì¡E T

EmployerYou wlll be fornal¡y employed by AFG Pty L¡m¡ted.

Responclbllltlêa & ObligÊtiona

The respon6ibùit¡es for your po€ition arE thoBr outlhsd ¡n your poe¡tion description in your lener ofoffer or as oùrcrwbe explained to yol!

Dufing the course of yoúr emrloyment wilh A¡lco, you may be. rBqulred lo undeÊ¿ke âdd¡t¡onal orvar¡sd responE¡b¡liüê6. You are rBqul€d lo cÐrty or¡tyour respor¡È¡bll¡tles ¡n a prEfes8ionâl andd¡ligent menr¡er, lD e standard expecÞd by Albo and to devote your t¡ma and attention ¿urìng yrorkhours exclusively lo your dutles. ln addit¡o( yoU must at ãll limes comdy with ahd observe Alco,spollcles aûd pmc€dures, ss yeried from time ic t¡tf€ at lhe dissÐlion of ¡Jbo- Cop¡es of al¡ Allcopolic¡es wlll be pEvid€d 1o yôu on your comrn€noe¡n€nl wlth Allm ûd aÞ arrsibbte on the AlboÍñtÉneì,

Oulslde Work

Dur¡ng rhe brm of ,our omploFrÞnt, you muil not ìviüout the prir writt8n carBent. parlkrþate in eny aclivltlee (dtec{y or indlrEcty) hât msy r0pt6ent a confrict ol inrerest with

Albn or w¡ü rhe bus¡neEses io wtìlct¡ A[c¡ oper8tes;. undsrEke any appo¡nuûent or po6lt¡on thot f€ l¡kely to inlßffBle wlth the pllormance of your

rBsponsib¡l¡$æ unde¡ thb Agreemellt o¡. hâve any dirsct ôr indirBct pecunlary interest that wouìd ¡n.any way cômpmmise the

perfomance ol your duties.

Workihg Houra

Our regular houra of work âre 38 per week, lo be !¡r$k€d within a spread between 8,30am to 5.30pmMonday to Friday ãs âgrE€d wflh your menâger,

You may be requit8d to uork outside ¡hese hours in acçordanoe yrilh thê needs of Allco and yourposlttbn. You w¡ll not þs pÐid oy€rt¡me fd lloufg Íto*ed out5ide oid¡riäry hou¡s.

Ramun¿mdon Packegê

Paymeñt of your sahry wili be by wEy of mdìlhly cþct€nb tunds translþr lnto yor¡r nomíoaledaocount (186Ê tÐ.a on, authoüed deducdons End âny dedud¡ôns reqü¡€d by lâw), apflbx¡mâiely twoweeks pAyment ln arr€ars and two ure€ks pây.nênt h ad\.aricê.

Salary w¡l be feVerved annuâlly as at I July ãnd êdjj€lmelltE may be ãwârded st he dls¡re,ti¡rn ofAllco con8ldedng sucî facfors as buslnesE p{ tormanco. pôrtonal peÍomaæe and markel trends.

All details ærla¡ning to your remuneral¡on pætage afe mnEideæd @oñdenthl ånd lhBretore shouldmt b€ dlEcuEsed !rrl$ other employees- Remulìglaüú enqu¡fles should be addl'essed directty to yourMãnager.

Anîual Pcrfolmance Borlus

As pstt dyour tobl rernuneratþn packãge, Nho ney Plovile b you lhe opportunity to parlb¡pate rh

ãn arìnual p€rbnnÉrlõe bonus. t lllefE appllcsblB. lhþ will b€ deb¡l€d ¡n our küsr of ofüt b yÒu- ThBãnnùål bonùs petiod @rllrrÊtrc$s Ofi 1 July and condudes on 90 June eadr yeâ¿ EÍgù¡lity b r€ceivea bonus payrr€nt 'E al lhe d¡scretion of Alþo conEider¡ng Euch fåctors as lh8 schleìr8ment of sp€c¡ficKRAS as deþmkled by Alþo in con¡uncllon ìyilh your Mañâg6r and buslnes€ perfû.ítance- KR^s $,if

Slêv6 fjrvey

írrrrrrri n K

-3ó-

ALLCO FINAI¡CE GROuP UUTTOpege¡l of i0

be s€t annt¡dly ãt lhe commonce¡nont of êach firìânc¡âl year. Bonus pâymeû6 ere inclùsive o[su-peË¡nnua¿on and wirr be rnade E¡ rh€ lompþt¡on of eåch fnanciar yeír once resurc ere fir,ìdis€d.wherê €mpþymÊnr comrììsrìce9 p€ri rrây rhiogh the anandâiy€aì í¡ì Iåoìrs r¡¡rr ¡e oæred or¡ apro-ErrE oasE prbvrd'ng you havÊ bosn €mptoyed lor a mhlrnurif ol 3 montle ol lie financjEl y€âr-

To be el¡g¡ble to rec'¡ve a bonus payment, }!u must bo smDroy€d with Atrco at uìe rime rhâ boîuspaynþnas âre mãde. rn the event thãt Abo teminates yo,rerípoymenr, 6r feasofls orhef rhan poorpeúonnance or conducr retEtsd mdteß, ihen Atho may'at bdú"éüon ilåi"

" p*.a oonu"

pâym8nt in åc¿ordance wfh KRAacìievÊm€ntá th€ llme ot termination. "'

Supera¡nurl¡on

Allco will maks paymef¡b ¡n accordance ìíittl ifs s|aEtory requkefter,t6 ¡ìto a suærannuâliorì fund ofyour cho¡c€. You havs thg opt¡on gf dtrec{¡ng Altco to mäke äddilioriet cüfilbutiäns 1r,,rp to stetutoryfÍn¡ts) to you¡ nominzfed super fi¡nd frotn yorrr salary f you choose, under a salary såérificeaîângemenL Pleâse conlacl pâyrþl if you wlsh to ¿o sã.

Probal¡oñsry PorIod

Yoü are ¡nitiållyernploy€d br a lhr6e morÌth pftbetion8ry perbd during which tim8 your performanceard conduct wi¡l ôe a6Eeseed. Upon suæessfut compbiión oi you¡ põÞa¡nary périod io¡t w¡tt ¡eappoht€d as a perûìan8nt employ€€ of Atco.

lf you do not achieve sst¡sfâdory perfomancÊ ôr conducl during or at lhe condus¡on of üeprobatfoiary period, Allco mãy tehinate your employn€ít w¡th one week's not-ce or pâynent in lleu.

Leãvs Ent¡l¡emenb

The þave enttlements sEt ou¡ below represBnt enthlsß¡ents fDr tulftime employges. LeavÊenlilþmenls lor pal{¡mê emplo}€eE witi be pro-r€is bes€d on lhe oumbBr of dày6 vrorl€d wNlsteítiü€menb for fired te¡ít employees ì¡/ill be celcuhted b8sed on lhe pþport¡oñ-ol the yearemFloyed.

Adíuêl Lc,aye

You al€ endùed lo 20 days ânnual le.ave per year (h âddilbn to pubtb hotldâye). Onemonth's no¡ice of your int€ntbn f,o take all or part of your annual lear/e ent¡llementE isprefe¡red-

Allco msy observa an €nnual cbse down f¡ør ChriEtmås to Nery yeã.. ot ãt othef t¡rnes f4ayrequ¡r€ anrual leave !o be taken by indlvld¡¡âls andrG groupa. tn lh€ 6vÞñt. of a dosê doli¡n oroller requ¡reme b take Enôuat tealr€, ststr virll be pr¿vided with at teâsl one nônth,E noti:eof lhe need to tEkE annual leâve ât thât l¡me.

S¡çX and Ce,rt,r LaÊvo

You are 6ñüt¡ed io 10 dgy€ sicÌ and carer leave per year. A m€d¡câl oe¡tlf¡caæ b fequ[ed forlear€ of 2 or morE cons€cudve dåyE or in oU¡Er drc{mEÞ]æss de€m8d appropriate by A co.

' Èo¡rg Seff¡iEc-¿âbve

Aflco mSkes prwlôion br bng serv¡ae leave h accordano€ with âppllcable long servlce teavel6Eblatlon.

Olhet Læve En ømønls

SrcÊ brwyíidutirÍ.

-37

AI.LCO FINANCE GROUP T]MIIEDPass 5 of t0

All other læve eûl¡tleñBnts pR¡r¡ded ln âccorder¡ce with sþlulory r€qutremenls orAllcopol¡cyr âs \rar¡ed flll tlme lo ¡¡me.

Fufth€r o,Qhnâlion, lncludlng proc€dursl 6dyìce ceñ be 6und on tñê A c! lntrEnot.

No Sr¡roking Í¡olby

No employ€sê permltle{, !o smo¡(ê on Alco premises, €¡thsr dur¡ng or outside ñornat $¡orkiog hourE,excêpt in de8¡!¡nsted smok¡ng areâs.

Heahh, Salety & Dbcrlmin¡t¡on

Alkô iE committod b providing â ssie ârìd heelthy workiñg eriv¡ronment þr all emplo)Áees Ðnd onefree frcm all ftÍms ôf haraæñsnt ¡ntim¡datlon and unlawlul dìscrlmiñstion. Accûdingty. you arerequk€d io ebdlE Dy lhe all polþigs. prüedures snd all Eaf8ty rules and proèdures opeÈting withinAllco. Th¡9 iñdudæ s r8qullement tlEt employees nct ü,ort( undsr tìe inñuerìce of ârry sìcotìol ord.r.tgs (whBth€r legal or llbgal) Éhqt fmpa¡r tfiE¡r ab¡lcy Io Eaf8ty prrform lhe¡r dut¡es- Allco rÍây r€quiedrug and alcohol leÊtíng. incluúng rBndom tsst¡ng. Cofries of aü Allco pol¡cies wilt be provided þ yôuon your oomr¡1encemBñt ìNittì Allco and are Syailsble on the A co intranel,

lntel¡ectual Proporty

You acknoÌ4edge and agreê lnat Allco is lhe sde and excusive oìÂm€r d etl coplrr¡ght {yorks or ollìe¡suue6t malter, cf@tlons, inventbns, dæigns ând olher ¡ntelloctLel prop€ny releÞd to copyrisht wor*screaled of desígned by you ¡n ttt6 course ot your emdoyment.

You agree that yo¡, qrape elry ¡ro€l rlghb you roay have, bo'ù in any onìstjng aîd ln ellluùre work6made or dss¡gned by you iî lhe course of yor,í emplDyment. You furlher agree thet yo.J w¡lt GoperaÞ r/ilh Alho ln l€gisÞrlng or olherlxGg pmtiedling eny ¡nt€ll€clual property created duríng youremploymer( ãnd thãt )¡ûu will el(ee4Þ any documenb necêsEâiy to ghr€ effect lo thls-

EÍn¡oyees Dea¡lng ¡n Aflco F¡nenc€ Group FlrËncisl Products

11 ls agreed óât yô.¡ l/vill coñply vrith Alþo's Slañ Finaræbl ProducE Dealiry Pol¡cy, aE vâried lromllme lo l¡rne This policy b deslgned to Fovid€ prot€d:rorì to Allco Fhance croup Llm¡led, its relstedpartreE ard ib employees by IesifÈùng d€aüngs by ernplqiees h F¡nancial Products during csrle¡ntimes, or $hen elIlploy€es afe ¡n posseÊsion of certa¡n Vpes of lnlomalion.

Cont¡de ntrEll¡y

OqrÍrg your empþyment vilh Alcô. you will hwe Eacess to and make (ls€ of oonlidenËt lnbrñât¡onh carry¡ng ost yDl¡r dutieB. Sr¡dt lnformâtlsrì ¡ndtde6 finandâ|, úarkßdrE end 6ftaþglc fibrrEl¡on;pocedutEs, @$h!/e8 and method6; ca¡cuHione, manllsls, lrade secrEts. brmulas and co tpt¡terâofttYal€l rcporb arid ahalyses: hr¡nìan lèswfç€s lnbrm8ûþn lndudlng ¡smuneÞt!-on dotâitsircseafch of d3vobFnsr¡t information; lnfuirmt¡on o!€r wÈlrñ lntgllscùal property r¡ghts áre h€ld: ândanylfihg ûratsd 'bonfËentlslì o¡ othsnr4s,e knoyñ by you b be regeñled by Alco þ be conftleîliel-

You m¡¡8t ßot whethêr ùJirE emplóyment cr Efier the tenninaliorì oI your employmsnt wilhout lìmit ¡n

time. dl5d08e t0 any perEoh eny coûrdenÛ'at intonnalion of !¡rhìdì you mey poe6e8g ard yDu muEl notíìake use of arry sN.¡ch coñfdent¡âl lnforÍ¡8t¡on ts ga¡n di€dy or ¡rìdireoüy any lmproper 60\raotâgo toyou orþ a!ìy Oth€f parEoc or blnjur€ or cAæe logs eürer ht€nlbnBlly or un¡ntentioflally dúr$lly orlnd¡r€dly to Alco or ¡G bßlnessæ.

Cor¡tl¡ct of lntGr¿st

Sllvc D¡vct

li,illî;tZ

38-

You agreâ to disdose all dirÞct, lndlrect, actu9L poteñtiel erd peræiued conll¡cls of inte¡€st ¡h w¡itirigto ycur msn¡¡gsr. A cônfl¡ct of ¡nteæst a?¡Eos wtì;n sn emptoyae hâs a élreci or an Indired intêrrst ina proF€rly, lnrrE8t¡nent or trân5acï¡on in whicì the empbyèe knowE or bel¡eyes Alco io have an¡nlerest-

This lvriüen disclo6ute is to setout lull deÞils of!,our inret€st, lf a oonflict ol ¡nt€resi ls doemed toexist, fohoedrE d¡scr¡ssi{xìs uìth you it wil be al Ábo's discretlon b d8tefmine f,rtìEt action vyill bebken-

Othor EmptoFengDirec{orEhlps

During yout eñploym€nt ¡t is a-greed fhat you r¡vill not wlihout the witten cone¿nt of Allco erEege ¡ñâly o$¡ef Þusmess ol ocçupâtion or become â dirEdot, employeq Agen¡, mns¡¡fiant or parb¡ef ot ãnyotñer pelson, f¡rm or comp€ny (oüar than an AIco Finance Group coimp€rry).

Rolu¡n of CoûpEqr Propsrty

lf your adpiol/ment ¡s tÞrninsled. you 6hall relum to Allco all Alco properly ir your poss€Gsioû(includlng wilhoul limiFdtion coítputsr liles and dbks), and any ôihêr maler¡als con6litrjl¡ng orconbiñing conñdential information.

Êus¡ns€5 Tr¿sel

Given the rìaûore of Allcois business it i6 '€qul€d

that you ¡,¡nd€rtake lor busine€s puçoses 6uctrdomæt¡c end intemationâl trevel rcqu¡rË.d lo fu¡f¡ll your duties,

Tãrmlnatioñ of Etnploymenf

Your employmentwith Alloo w¡llterûlnale by your resjgnat-on or by Allco's tErminalion of yourmntr8cl. ln ellher csse, one morth's wrinen noüo8 must b€ gíven by you or AUco,L,pon recelp( ot yourwritt€¡! not¡ce or upon bsue of notlce io you by Altcô, Allco has the option ofprovidiìg you t¡vilh one mônth's paymeîl bsEed on your fùed reûìuner€lbn pack3ge Or Þan the€of ¡nlieu of noflce- Such payment lñay be lr,¡thheld until ltE rgt¡¡m or any conliderìt¡al inlonnetion o. Atlcopfoperty. (¡ncluding ¡ntElþctúâl property) ln your pos8essìon and until the satbÊctory cúnpþtion oÍAllco's exit procedures.

Albo rE6€rv€s üle rþht b tefmlñate your employment w¡lhoul nolice for f€asons wh¡cl \'!ould lust¡tysumrnÍy disrnbeal at cornmon laúr, ifÈudlng n¡lt¡bú t¡mìÞtion, ll you:

. coñmit any ser¡ous or peß¡slont Þrgac.h of any of ths pro\r€¡on€ of ltris Agr€€ment:

. are gullty of sny serioue misrondué o¡ willful nâgt6ct iñ üìÐ petfutmarìc€ of yûrtrempþyment dul¡e6;

. 9re lñ bfeâch of AllcD's policies ând pfwedutÉ &r Ùre lime belng ¡n lorce:

. (br fflSnClaf ãnd leaderehlp postt-ons) b6com€ bankrupl or meke âny anâr€snent orcarnpoelt¡on wÎh your cfÞditdß:

. eß convbted of €ny cnrm¡nãl oftnce olher ü|an eñ ofeíce wlth ¡n lhe leêEonable opinlon ofA¡lco does r¡t atTec-t !'our pciliôn æ an srrployæ; or

ÂLI.oO FINAI{CÊ GROUP UIUÎIEDpaæB of i0

Your orñplsyment r'Ey slso b€ tÉrminâtÞd al lhe disafetid of Allco lf you are absenl frDrî ryort fotmorG lhen five con8ecuüve deys w¡1thoüt ñoüffcatirn t0 AkÐ.

Gârd6n Lesve

S.cw DaYcl

i.iil¡lr3

-39-

AI.I-CO FIÑANCE GROIJP UIJIITEDpagG Z ofio

Y.o-urîa,y b€ rÉquùed.byÁtlco dany tirne (inck¡dlng bul not limitÊd to, durlng any notice period or fo¡the pü¡posr of invesäg8t¡fE any mâüer h wlì¡ch yoü a¡! ¡npflctlBd or lnvolvsdt'nrt to Dfu,lln oi'''dul¡es for A¡co e¡dro¡ a¡end foú vort snd Arcob premieee fGardân Lea¡'").

' Thh rÍày abo erÉnd

b comnuniulion ìvih oüìer employsÊÊ, c¡¡6torneÈ, cllenb endor 6uÞpl¡ers.

Dur¡ng lhe Ga¡den Leave. you uüiï be enliüert to reco¡ìß sstery ênd âll cDnlrâdúai benefls (e)(clud¡noany tBymenl under any bonus 5dlem6 or ho fong term lncÊr ive arlång€menl) ¡n acrco¡üaàce w¡th

-lhe terñìs of h¡E Agr@ment.

pos1 Emplolment RestjatìÉ (only lncludl oa advlcø ol H(¡act ol HR)

You 8re llkely to ob¡ain trede €êcrets ênd conñd€ntÈl inforñalion âboul Alìco and peßônsl knolvledgeof and ¡nñuencê ô\rercuslD ers and sñpoyces ofAtho durhg tll€ course of youiemptm,.eni. iJ-prolect those interests Of Atbo, you âgreê lo b€ bouod by the filov¡¡ng:

(a) For â period of up lo sL months aftéf you? lêrrñinatioî dâte, you will not be emf oyed orsngâged. d¡rectv or Indûecty in any bugness whlclì b Dr is Ebout to be ln coû¡petit¡o; w¡thAllco or any ol ¡t's relabd br/sheÊ6es. This resfticl¡on ¡s llmlled to eteas of hjs¡ness \¡tEreyou wefÊ personally €ng4ed ¡n fof Alø during lhe previou6 1Z monùs, and

(b) For â p8rbd ol 12 months aller your larmìnallon dstq you wíl nof çEnvass or soticit oracce9t Þusiness fÍom âly custcmcr of Alao or ant ot lts reÞlEd bùsheÊses whefe. at anytime durlng the lasl trvefve mor¡üls, lbu e¡th€r hed aÉc€6s b corìt¡dent¡âl inforr¡alion ôrdeafngs w¡th lhese cuslom8rs in your capdcity as an Allco employee, aDd

(c ) For I æriod of 12 months tfter you¡ lermir€t¡on date, you wi not €ntice ortry lo entice toleaye Allco or offer emdoyment or other buEin8ss r€lal¡onsh¡ps b sny emplolf€ø, dirEctor,Ofñocr, corrsult¡rnt 9r assæ¡ate of Altco.

Àllco w¡fl advi8€ you at or prior to your tarminstion dab ¡f ¡t w¡shes lo eûbrce the regtraint ouü¡ned in(a) abovE. tñ the srrent thã¡ lt does, Alho will pÊy you a sum equal lo yoür montrly fked rqnuneretionât the date d ¡êrm¡naülon lor sac$ monù'l ol rrstr8iinL OUrlhg lhi8 p€dod. you riílt not be ent¡tþd to arlypatrnenl undef the ânnuel bohrß schs'le. lh6 bng Em hcent¡ve âreng€mehb or otì€r ùsnefits orent¡üomer s enþy€d aa E¡l employ of Allco. tn the'eìrent tlÉt Altco does nol trdÊh to enforce théf€strå¡nt n0 payment r¡vill be mãd€ to you.

Eâch of the p.ov¡s¡orìs abovê cor¡$¡tne entrely Esparæ Erxf ¡ndsæ¡rdsrt @venåntg tf åny ls louîdto be lnvafd, this vlll not atrecl ttre våÍdlty or enbrç€sþlli0 of eìy ol üìe olher pþvis¡ons_ -

You agrBe that lhe resû'aints set oul above aË rea8oDable and equltåblè shd w¡ll not. pre\r€nt youfrom eamhg e livêl¡hood ¡n ûe event lhet ybut eE¡ployment with A co mrctudes br any reason_

You acknorìdedge the! the rBdËdy ot darnag8s et laìl' br U€aclì of thig sgreement would beinadequsÞ and lh8t ÞñrpoÉry and pêrrñEnent fel¡ef W way of lqiuncdon agâinÊt you may be granted¡n any proo8ad¡ngs whlch Allco may brifg tD Enþrce arry of lhe proìrlsion of lhig egtclmert, withoutnecess¡ly af PIoof of acù¡sl da age sufbred by A¡cô.

Fold,hg louf þrmlmüon of employfìrdr( yûu ãgrE! ñot to mBkE rePrssôntåtbns as oontjnuing lo bein âny úay coffìecGd with the bt¡s¡rÊÊsÊe of Albo or any of lta relaÞd b¡rsinêÈeos.

Oúerpalr¡nenLs & ^dvat¡ce6

If t¡ou þave Alloo. any ovel?a!¡¡nsnb of rsmuneratbñ, bgetlrsrslth âny moni€s adrêñoed I'o you onany BccourlÎ eutorEtically becdne due for FÊymen! You ågtoe tt¡qt Prbr b brmireüon, you wqi sþ nany cor¡senl al¡tl¡otia!ìg A[co Io dedud any outùnding (þbts or mon€ E owed fo Alho by you frofn

Stc\,c IÈYcy

ii,¡il¡'i'.t.4

-40-

ALLCO FINANCE GROUP UIITTEDPEg€ 8 of 10

your final,pey (including wilhoui limllation bôth remunerEtron and ußpald €[eenEEs) o¡t leminalion otyour employ¡nênt

*peneoe

l]LT_:¡¡l L"lT.lrrbf ßasonabte expêns€s incurred wùolty anú necessrity in the course of your work,prorrrrúéd Ihat t|ey have baen pte€pployed by yotrr maniger.

Pereonãl 0elall6

I?y T_ust fee 4tts informed of åñy.hanges to yoü personaldetaits during your emptoymed.rnc[¡clßg yolr.adtress, te¡ephone numbef and emergency corìbct deùails. plEase advisê p€yroìl o!any changes throûghout your erlrptoymeît.

RePr€6entst¡ohs

f hls docum€nt ånd your lsl¡er of offer supersedes and €xclsd€s ãìly pior or cdlãt¿ral negotiatioñ,undersÞnding. cofirmunical¡on, lerrî ol egßement or olher hbßnáËn prcv¡ded to yorr,

-¡Epresentåt¡ons mâde to you throoghôl,l lhe cor¡rse ôf th€ Selætion pKþess. eiher 6y any membor ofAllco of eíy agent or cmsuttant ui,orkng on bellalt ot Àllco, rhat are ;ot rcflected h th¡s Aôreement.

Pfiv¡cy

tt is â condit¡on ol your employrnsnt that you comply w,th the mt'onât pdvacy pdnciplæ as set oul iDthe Plv3çy Aç¡ 1988 (Cth) and A co s priv¿cy pô¡-rcy.

D€allng w¡tfi thê Mêd¡E

You ¡hust nôt without prior cons€nl ol Allco commun¡câte lyith or diGctosê to sny rêprasenlal¡ve ol lh6media Êny lnflnnal¡oî ol any naUJre úatsosver relating þ A[co, ís dlsnts of cu6lomBls-

Transmlss¡of of Suslness

lf follorw¡ng |ransm¡sslon you continue to be employed ìn a positio8 ¡n wh-¡ctì you:

' have Eclcountab¡lll,¡es genÊrâlly Eim¡lgr to ülose undertel€n purEuarit to the lettër of olfe[. perform dúies genelany E¡mitsr to tho€e undertaken pursuånt þ.üìe ¡elt€r ol ofieq or. ere employed on terms and co.¡d¡tlons generally (he s¿¡me eE hGe under lhe ietter of offer.

you¡ posiuon will nût have been made Edundant as a Esult othe ùEnsmEsion and yþu y¡lll not beenl¡tled ûo âny p€yrheht üat may otheslsâ dus to you a6 a r€ult of r€dund€ncv.

Fof tne purposes of thls dause, ùarìsmlssion hcludes:

. sale. tsansrn¡Esio:ì. æs¡gnmedt orf¿nsÞr oi büslness (or part ol a brAtn€ss) by Alloo tô ârelâlôd body corporste or to Any third F y;

. 6ale, lransmisslrô, asslgnñent or dlspos€l oú Bny , âï assets of AIco:

. change fn Allco'S narno:

. outsourc¡ng by Allco; or

. â cÐmblnation of a¡y ôl ti€ abve.

RelationÊh¡p bctween th€ Parl¡e6

The pan|e8 spooncally sgree that thie Agreeñì€nt consüutas the relâtionsh¡p of employer sndempþy6e. Thb Agdg8rnent is pel3onal to the pa¡1¡e6 and ll ¡s not capgb{e of being assigne<L ThisAgreemgñl sup€rgedes Eûy eâdiBÍ agreemeñt between üæ pa¡iÞs, títrether oral or h rvfting.

StcTG D¡vcJ' ¿';.:¡.lti'if' /

I

-41

ALLOO FINÂ}ICE GROUP LIUfIÊDÞâSo I of 10

yvlBr8 lfiis A.greem€rìt sr¡pels€de5 a brmer Empþymeflt A€rGerngrrt wnÀ Allco and sewiæ with Allcôís unbfokeft, pâât unDroì€n gerv¡c€ ì'riüì Allco $rlfl be coutrþd tqwâ¡d8 future 6eNic€ rElatedenl¡tlern€n!9 unless othBrwi8e strted in tñe âgreement or A¡roo's policieÊ, as vafied fþm llmE to t¡me.

Agêncy

You wlll noi lEì,-e th€ aulhorlly to, and shalt not btnd AI¡@ to ûny agr€em€nl or ofñeñrisr hold yourseltout as bdng.aulhoris8d b deal es an egdtt of Alco erc€pt as âulhor¡sed by Alloo aîd yorj sháfndEmnify A¡lcô ln ..sÍrec! ôf€Í uneuttþñG€d repr€Gentâûons, prom'¡ses or ágteernentgmade by you.

Gen€ra!

Th-Is AgreemeDt ¡s cqldltbnal upon !,ou havlng tegâl authõrity to v/ork in îìe A¡sùatia-

Solh Fñ¡es sgr€e fñEl lh¡s Agreement and the covene¡ s, obllgatbns and restrict¡ons contained in itare rÊssonâblB iE alllhe cifcumsbnces-

Should ind¡vídual provisiotis of th¡s Agreemeût æ or b€oorn€ ¡nvelid. ¡t wiil ln no uãy âllBct the vatüyot tlÉ rest oftbs Á€ßêmerñ

Thb Agreement is grovernèd by and aorìsln ed in acDôrdance 'Â,ilh the la{rs of the stãte of New Soulh

Wales.

s.cr? D¡vay

üdr/üiö

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ALLCO FINAT{CE GROUP U¡T¡TEDPege 10 o{ 10

ADDfI¡ONAL TERYIS A¡{D çOT{DfTIONS OF ÉMPLOYMENT

1. Not$,íthslendhg your peltnaíent stâ¡t date of 1 Aglßi 2006, your stsrt dâte br finerE¿at yêdr ZmzbonuÊ pu¡posæ only is I July ã)06.

;i ,J ili ii 7

_43_

t21 There is no evidence of any privity of oonhact betwoon AFGpL and Mr Dave¡ norany evidence that AFGL eritered into the agreement with Mr Davey on behalf of AFGpL. Inparticular, Jim Hope Murray sought the authorisation of Michael Stefanovski to make th€

letter of offer to Steven Davey. Michael Stefanovski was a director of AFGL from 9 June

2005 and a di¡ector ofAFAL from 5 July 2005, but never a di¡ecror ofAFGpL.

122 The following features of the offer of employment are televant:

(1) The offer wæ made by AFGL;

(2) the offer w¿s signed by a director or executive ofAFGL;

(3) the offer was for errployment with rhe .Allco Finance Group (. Allco")' in a

nominated position;

(4) the letter of offer mntained esseritial terms of ernploymerit, rnmely, salary, bonus and

inoentives, the position to be occupied and the person to whom the prospective

employee would be reporting - a person employed in the business of AFGL;

(5) the letter of offer made reference to 'any othø benefit o¡ entitlement contained in thisAgreement' (emphasis added);

(6) the lette,r of offe¡ stipulated that to accept the offer (outlined in the letter) the

ernployee was required to sign both copies of the letter and initial each page of.ourstandard tenns and conditions of ernployment';

(7) the signature of the employee was required at the bottom of the letter to record the

understanding and acceptance of the tenns and conditio¡ls of 'this offer, ofemployment with Atlco.

123 The following featu¡es of the standard terms and mnditions of employment which

were attached to the lener of offer a¡e ¡elevant:

(l) They contain a statement unde¡ the heading ,Employer' as follows:

'You will be fomrally ønployed by AFc pty Limited'

In some other cases the ABN is provided. In the cæe of Stwen Davey's thi¡d letter ofoffer dated 1 May 2008, the st¿nda¡d terrns and mnditions say: 'You will be formally

I

employed be AFG Limited, ABN 51 051 982 560'. The Allco Finance Group does

not include a company called 'AFG Limited,. The ABN is AFGpL's ABN.

(2)

(3)

(4)

(s)

(6)

(7)

_44_

it is providod that rosponsibilities and obligations of the prospective employee are

those outlined in his or her position description in the letter of offer, or as othenx¡ise

explained;

it is provided that working hours muld be agreed with .your manager' - the only¡easonable interpretation is that the manager is the one referred to in the AFGL tetter

ofoffer;

it provides that superannuation will be paid by Allco (defined as Allco Finance Group

in the letter);

the confrdentiality obligations provided for are referenoed to the period of'employment with Allco' ;

the temination provisions relate to termination of .employmmt with Allco, (as

defined in the letter);

under the heading 'Relationship between the Parties', it is provided, inter aliø, that:

'The parties specifically agee that rhis Agreement constitutes therolationship of ernployer and aryloyee. This Agreemear is personal to theparties and is not oapable ofbeing assigned .. _

Where this Agreoment supersedes a formor Employer Agreeineot with Allmand service with Allco is unbrokco. past unbroken servioe with Allco will becounted towa¡ds future service ¡elated entitlements unless otherwise stated inthe Agreerrent or Allco's policies, as va¡ied f¡om time to time.'

'The parties' referred to must be AFGL and Mr Davey - they are agreeing that 'this

agreerrent constitutes the relationship of employer and ernployee and that it is

personal to the parties and is not capable ofbeing æsigned'.

AFGPL was not a paxty to the employment agreernent.

Second Respondent

Ms Segaert was recruited in 2005 fiom a position with a fi¡r¡ncial advisory firm to

work in a role which was described to her by the legal recruitnent agericy as 'a legal position

at Allco Finance Group'.

Ms Segaert was interrviewed for the position by Mr Frank Tearle who, at the time

ocoupied the position of general cor¡nsel at AFAL.

(8)

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121

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There was no disolosu¡e !o Ms Segaert prior to, ûr at tho time she was offe¡ed

employment of an arrangement whereby she would be providing services to AFAL but be

employed by AFGPL. AFGPL was not mentioned to Ms Segaert at any time during the

interviews and discussions which led to hø employm.ent.

Documentary Evidence

In relation to Ms Segaert, the documentary evide,nce may be summarised as follows:

By letter dated 20 July 2005 on letterhead showing AFAL's thør company name and

company number ûom F¡ank Tea¡le (Ge,neral Counsel), the second respondent was

ofrered 'full time employment with Allco Finance Group Ltd (the Company)'. The

letter states: 'Please find attached or¡r Terms & Conditions of Employment for you to

review and sign'. The letter is signod and dated 5 August 2005 under the statement: .I

understand and accept the terms and conditions of this offer of employnent with

Allco Finance Group Limited' (i.e., AFAL). Attached is a document entitled .Terms

& Conditions of Employmørt', which ¡efers to .the Company' and defines

'Company' as 'Allco Finance Group Limited [AFAL], its associated businesses a¡rd

arry other Related Body Corporate and any joint venturg hust, partnership or other

associâtion in [whictr] Allco Finance Crroup Limited holds an interest or is a

participant, either ornøtly or in the futr¡re'.

By letters darod,2g Septembø 2006,21 August 2007, 12 Ocrober 2007 and 7 July

2008, the first trvo and the last of which were signed by Tom lænnox, the second

respondent was given information about bonus paym€rits, the Allco Defer¡ed Share

Plan and the Allco Executive Option Plan and/or salary review, each of which was on

letterhead showing AFGL's company name and number. When she had concems

about the conterrt of this conespondence, she discussed those concerns withr€presentatives of AFGL.

There is no mention at all of AIGPL.

Olhet ùtal:terc

During the course of Ms Segaert's €rnplolment she was made aware of a nunber ofemployment policies and procedures. Thsse included: the Allco Code of P¡ofossional

Conduot, the Related Party Transaction and Conflicts of Interest Policy, the Privaoy Policy

(1)

(2)

130

131

132

r33

r34

135

t36

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and the Employee Handbook. These documents referred to the Allco Finance Group in the

role of employer and contained no reference to AFGpL in any capacþ.

During the cou¡se of her employment, Ms Segaert did not receive any communication

from AFGPL in relation to her eÍiploymeût.

During the course of hø employment, decisions about Ms Segaert's level ofremuneration were made by Frank Tea¡le in about August 2005 and Tom Lennox from 2006

in their capacity as General Cor¡nsel of AFAL and AFGL respectively, and Michael

Stefanovski in his capacity as Chief Operating Officer of AFGL. Mic,hael Stefanovski was a

director of AFGL from 9 June 2006 and a di¡ector of AFAL from 5 July 2005, but never a

director of AFGPL. These decisions were made in acco¡dance with a framework determined

by the HR&RC.

Following termination of her employment Ms Sogaort rocoived a certificate of service

from AFGL describing her as having been employed by AFGL.

Ms Segeart also received correspondence from AMP Superannuation Limited in

relation to hø suporaruruation, which described hø ønployer as AFGL and desoribed

employer payments as having been received from AFGL.

Third Respondent Group: Documentary Evidence

Each employee in this group represented by Mr Ian Grayburn was initially employed

by Rubicon Asset Managern€nt Limited (ACN 095 433 720),

In respect of the thi¡d responden! Mr Grayburn, his ønploymørt with Rubicon is

evidenced by a letter of offer dated S_O_cto'b_er ?99_9,

frf: yl: 19 tg{o*:9 i1 hi1 letter ofoffer to any company within the Allco Finance Group.

As a ¡esult of the acquisition of Rubicon Holdings (Aust) Limited by AFGL on

19 Dece¡nber 2007, aach employee in the thi¡d respondent's $oup mâde aû agreement in

January 2008 with AFGL.

137

138

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Following the acquisition refened to in [137] above, AIGL w¡ote to Mr Graybum(and each person in this group) on 22 January 2008 stating inter alìø, as follows:

'Change ofEmployer

As you loow, Rubicon became part of the Allco Group in December 2007.

As from 1 February 2008, we propose to transfor your errploynent from RubioonAsset Ivlanagement Limited to Allco Fi¡ance Gtoup Linited (the Company). Asyou loow, both of theso oompanies a¡e mombe¡s of the Allco finance Groui. fnereason for tùis charge ls thrt you be emptoyed by the srme coDpanlt as theother employees ofthe Allco Fln¡nce Group.' (Emphasis added.)

Tho statemeût by AFGL in the læt sentence of course has relevance to the position ofall the groups representd in these proceedings; the inference being that all other employees

were similarly employed by AFGL.

The letter required Mr Graybum to acknowledge the change of employer by requiring

a signature under the following notation:

'I aclcrowledge tlat effective from I Febnrary 2008 my employer will be AllcoFinance Group Limited.'

Each of the ønployees in this group acknowledged the change of employer in thcterms set out in [40] above.

Accordingly, by express offer by AFGL and acceptånce by the employees, AFGLbecame the employer of each of the employees in this group to whom services were to be

¡endered with effect from I February 2008 (on the basis that their servioe would rernain

continuous and AFGL would be responsible fo¡ all service-related entitlerrents).

It is common ground that a conhact of service cannot be transfered o¡ novated ftomone employer to another without the consent of the employee. The mployee's consent must

be the ¡eal consent of the employee and not a constructive mnsent raised by operation of law:

Re C&T Grinter Trdnsport Services; lulcCluskey v Karøgiozß (2002) lZ0 lR 147; Finance

Sector Union of Austrølia v Commonweahh Bank of Ausbalíø l20}1l FCA 1613; Romero;

Textile Footweør and clothing union; smith v Blandþrd Gee cementation co [19701 3 AllER 154; Denn an v Midlønd Employers Mutuøl Assutance Ltd 1L955) 2 All ER 561: Nokes v

Doncaster Amalgamated Collieries Ltd U9401AC 1014.

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It can be seen from [138] and [140] above tlrat the conse¡rt of the third respondent tothe transfe¡ of his employme¡lt was obtained on the basis that his new employer was to beAFGL' Alleged and undisolosed arrangerner¡ts with other ernployers were not the basis onwhich he consented to the ha¡lsfer of his employment.

Following the termination of their employment each of the employees in this group

received a certificate of service ûom AFGL naming the employee and describing theemployee as having been employed by AFGL,

Fourth Respondent Group: Documentary Evldence

Each of the persons in this group, repres€nted by Ms christine Bowen, either made an

agreeme¡rt with AFAL (wherr it was called 'Allco Finance Group Limrted'), or, havingpreviously made an agreomerit with AFGL (when it was called .Record Investnents

Limited') made a new agreemøt with AFAL, or having previously made an agreement withAFAL made a new agreemerit with AFGL.

The dooumentæy ovidence of the fourth respondent's group is in a simila¡ form to the

documentary evidence of the first respondent,s group.

The letter ofoffer dated 10 October 2005 to Christine Bowen was on the letterhead ofAFAL (then known as 'Alloo Finance Group Limited') and was in almost ider¡tioal terrrs tothe letter sent to the first respondent rçroduced in [120] above. The ûont page was endorsed

by tlre signature of the fourth respondent and dated ,l2ll0/O1' under the words:

'I understand and accept the terms and conditions of this offer of employm€nt withAlloo Finance Gtoup.'

Under the heading 'Employer' on the first page ofthe accompanying ,Allco Finance

Group Employment Terms and Conditions,, the following appears:

'You will be formally ernployed by AFG pty Limited, the Álho+aFo_llçqtity.'

The rurderlined description of AFGPL's ¡ole in the Group doos not appear in the tefins and

conditions attached to the letter of offsr to the first responderrt, but their presence does

provide a context for the purpose of mnstuing the words 'formally employed', even where

this description of AFGPL's role in the Group is absent. This is dealt with fi¡rther below.

146

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Fifth Respondent

Documentøry Evidence

On 16 June 2004 the fiflh respondent, Mr Timothy Rich, accepted oonditions ofemployment confifmed in a letter dated I I June 2004 on the letterhead of AFAL (then

known as 'Allco Finance Group Limited') which relevantly provided:

'Dear Tim,

It is with much pleasure that we confirm your position with Allco Finance GroupLimited (Allco) on the terms and conditions set out below:

Posidon ¡nd efrective d¡tc:

You will continue as an Executive Di¡ector - Allm Frmds Managernent Limited(Atr.ll{L) employed by AFG Pty Limited. The activities and results of AFML will be¡E¿¡sd i'"Flicitly as if AFML was a "Division" of A]lco.. References in this lettef toDivision havo the same meani¡g as if the referencæ was to AFML.'

On 10 April 2006 Mr Rich accepted variations to tho terms and conditions of his

'appointnent as an Allco Executive Director employed by AFG Pty Limited (Allco)', The

variatio¡rs are embodied in a lefter dated 10 April 2006 on the letterhoad of AFAL sigred by

Mr David Coe in anticipation of the mergø between AFAL and Recorrd Investncnts Limited.

Conditional on the merger taking place, on the same date Mr Rich ente¡ed into a

Rest¡aint Deed with AFGL (then known as 'Reco¡d Inveshrents Limited') restraining his

activity for various altemative periods other than, inter ølia, as an employee of AFGL or any

'Related Body Corporate'. There is no specific mention of AFGPL.

By letter dated 29 November 2007 on the letterhead of AFGL, Lina Marotta, the

Payroll Managø of AFGL confirmed that Mr Rich wæ a 'full.time employee' of AFGL.

Mr Rich received a lett€r dated I August 2008 on the letterhead of Allco (Singapore)

Limited signed by Mr Nicholas McGtath, Chief Executive Officer, for and on behalf of Allco

(Singapore) Limited, The letter read in part:

'Dear Tim

CHANGE OF EMPIOYER

1, As you are awar€, all of the issued shares in your curnnt ecployer, Allco(Singapore) Limited ("ASL"), ¡rç tho subjeot of a sato and purohaso

t5l

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154

155

156

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agreement betweø inter alia Allco Finance Group Limited and FrasersCentropoint Limited (. FCL) (.SpA,). Upon corryletion unds the SpA,ASL will be owned by FCL and Allco Managønent pte. Ltd. (.AMPL')will become the operating company for tho ranaining Allco group ofcompanies in Singaporc.

2. As the SPA requires your eûployment to bg novated from ASL to anothgrAllco group oomp¿¡ny prior to oompletion urder the SpA, AMpL will takeover as your employer from ASL. Your employrnent with AMpL will beginfrom 5 August 200E ("Effective Datc").

Mr Rich acknowledged receipt of the letter and his agreemerrt to its terms by signing

and retuming a duplicate copy ofthe letter.

On 7 August 2008 Mr Rich ¡eceived an email from the Executive Assistant to M¡Stefanovski attaching a letter on the letterhead of AFGL from Mr Stefanovski dated

26 February 2008 entitled 'Secondmerit Agroement'. M¡ Rich had not pieviously been

provided this letter. lt read in pârt:

.SECONDMENT ACREEMENT

I am pleased to oonfinn our offer ro you of full time employment with Allco(Singapore) Limited f'Alloo") in the position of Counry Head, Singapore (tho dotailsof whioh are enolosed in the position description attached to this letter or as othenvisee><plained to you), or any other sirnilar position that may be required by Allco ftomtime to time in aocordance with its business needs.

Reporting to me, your position is based in Singapore and is a short term socondûeûtthat s¡ill oornmence on 19 Janua¡r 2008 and conclude at the close of business on19 January 2009. As disoussed, this secondment may conoludo at an earlier date orbe extended for up to five months at Allco's disc¡etion.

Upon completion of your secondment, you will be repatiated back to Sydney inaccordance with the repatriation barefits outlined in this Agreement. On retum toSydney your ernployment will continue with Allco Finance Gmup Limited on theterms that applied prior to your secondment as outlined in your Appoiûtnedt Iætterdated 11 Jrme 2004, and the Amendment to the Appointment Letter dated 10 April2006.'

The terms and conditions of his ernploymefit were attached to the letter and were

simila¡ to those sent to the first and fou¡th respondents save that under the heading

' Employer', it provided:

t57

'You will be formally eoployed by Allco (SingaporQ Linited.'

158

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By ernail of the same date! Ivfr Rich rejected the tqrns of the secondment Agfeement

as reflecting the tcrms of the agreernent that he had with Mr stefanovski conceming his

secondment ûo Allco (Singapore) Limited.

By letter dated 27 March2oog the applicants wrote to Mr Ricå in the following terms:

'Dear Sir

Allco Fln¡nce Group Limited ¡nd fhe ¡tt¡ched Asßoci¡ted Compsnles (AttReceivers and Managert Appointed) (All Adniuistratorc Appoi¡ted) (.theCompanies")

Ws refer to our appointment as Receivers & Managers of the Companies on4 Novomber 2008.

We understand th¡t s.ince early 2008 you have been anployed by the Companies'Singaporean ope¡ations, most receúrtly by Allco Maoagemørt Pte Ltd i¡ the role ofCountry Head. We r¡nderstand that after a temporary oxteßion, your employmentwith Alloo Maoagement Pto Ltd oonoluded yestøday, 26 March 2009.

The currcnt status of the receivoships is that the operetions of the Companies areberng wound down. In those citcumstaûces, therc is no longer a position for you toretun to with your formø enrployor AFG Pty Ltd (Reoeivef,s and ManagorsAppointed) (Adûi¡istators Appornted) (.AFGPU), or n'ith aûy other oompany towhich we are appointod. In light of the cürcnt status of ttre receivorships, neitherAFGPL or any other company to which we are appointed, is in a position to onterinto a nen, contract of emplolment with you.'

Other Møfrerc

M¡ Rich's evidence was that he a¡rived in Singapore on 19 January 2008 and that

ovet the following months he had a number of discussions with Mr Stefanovski regardirg the

finalisation of his secondment agreeûient.

In cross-examination, Mr Rich said that whilst in Singapore he still regarded himself

as employed by AFGL; that ât all relwant times he h¡d two employers: one in Singapore -first, Allco (Singapore) Limited and then, Allco Management Pte Ltd; and one in Australia -AFGL,

In response to questions I put to him, Mr Rioh said that whilst in Singapore, he was

paid in Singapore by the Singapore emplolng entity paying Singspore dollars into his

Singapore bank account.

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Sixth Respondent

Docurnentøry Egidence

Mr Gallagþer was employed by RentWorks Limited at the time its acquisirion by the

Allco Finance Group in about 2004. Reritworks Limited became known as Alleasing

Finance Auskalia Limited. By letter dated 221trrre2005 Mr Gallagh€r was offered ongoing

employment with Alleasing Pty Limited undø the same tenns and conditions as he then held

with Rentworks Limited: 'Atleæing Pty Ltd will regard all continuous serr¡ice with

Rentworks Limited as service with Alleasing Pty Ltd for all employee entitlements'. M¡Gallagher accepted this offer on 30 June 2005

On or about I July 2005, Mr Gallagþø received a letter of offer of fr¡ll-time

ernploymørt with Allco IMF Limited (subsequently Allco Singapore Limited) reporting to

Mike Dwyer, Managing Director of Allco IMF Limited.

On or about 2 July 2005, Mr Gallagher received a letter from Chris West, Director, on

the letterhead of AFAL (then Alloo Finance Gtoup Limited) confirming the arrangements

that were to apply during his semndment to Allco IMF Limited. Relevantly, the last

paragraph of this letter reads:

'Upon the conclusion of your secondment, a suitable ørployment opportunity rvill benrade available to you withi¡ the Allco Firnnce Group.'

On 12 Junc 2008 Mr Gallagher ¡eceived an email from Lee Burrows, Human

Resources Manager oftho Allco Finance Group, which reads:

'Good ûo talk to you. I've attached your secondûeút letter and your curent cont'act(and have discussed thom with Beli¡da for my own education having only been ín thebusiness 2 wooks!)

What I can relay here (some of which is drroct from Belinda) is that:

I You arc oû secondment from AFG to Singapore and for tho ú¡ration of thatsecondment your employer is the Singapore entity as per the attached contract - t¡issays Allco IMF but I understand this may have wolved into another ønployer since.

2 Belinda was kecn to reassu¡e tbat whilst (as I understand it) many roles inSingapore are likely to nove as part ofa salo proooss, you would have a totally openchoicc about wheth€r you wanted to move o¡ not

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3 Furtherrrorg your sooondment ¡ettef cleå¡ly sÞtes tbåt a suitabteemplolment oppo¡tunity will be nrade availabre to you within the Allco FirnnceGroup.

I unlgrstanA (naving spoken with Belinds) lro¡.u potential neúousnoss at the moment,but it's clear that whilst technically you are not employed by AFG for the du¡ation oithe secondment only, your futu¡e with the business is sprotested' and AFG wouldindeed become your omployer again should your secondment eod.

Let me loow what more you need from us h€re to give you the cla¡ity / reassu¡anceyou need (and if I've actually addressed your conooms and questions)

Kind regards

Lee'

By lettet dat.d. 22 July 2008 addressed to Mr Gallagþer, d- Ä,[co Manageorent pte

Ltd, and on the letterhead of that company, Mr Neil Brown, the Head of Funds Management,

wlote:

'Dear Evan

EMPLOYMENT AOREEMENT

I am pleased to confi¡m ou¡ offer to you of full time employmørt with AllcoMan¿gem€rit Pte Ltd ("Allco') in the position of Head of Distribution, Asia and theMiddle East, the det¿ils of whioh are enclosed in tho position description attåched tothis letter or as othorwise explained to you. Reporting to mg your position is basedin Singapore and as r€questcd by you, is for a period of at lesst I ye¿f on secondmentcorunarcing on a date to be agrod. Upon completion of the secondmont, you willbe repatriated to Sydney (as per the bonofits outlined under Additional Ter¡ns andConditions of Errployment) to continuo in your role as Head of Dist¡ibution, Asiaand the Middle East.

Please find attached ou¡ t€rms & conditions of eoployment for you to review andsigrr. To acc€pt the offer, please sign both copies of this letter and initial each pageof ttre te¡ms & conditions of ønployment, to signifu your understanding andacceptanoo ofthe t€rûs and retum to me prior to yow commencement.'

Mr Gallagher signed the endorse¡nent on the second page of this letter on 23 July

2008, which readsl

'I understånd and accept the terms and conditions of this offer of ernploymont withAllco Managemørt Pte Ltd.'

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The attached Sta¡rda¡d Terms and Conditions of Employnent commonoed:

'Employer

You will be fomrally employed (on a secondnent b¡sis from Allco Finance GroupLimited) by A]lco Manageinart pte Ltd.'

The attached Additional Te¡ms and conditions of Employment contained the

following;

'Termination of Employment

Al]co reserves the right to te¡rninate the Secondment and the host countryEmployment Agreernent upon 2 month's written notice or payment in lieu.Notwithstending ttrls, you will rem¡i¡ an employee of the home coutrtry untllsuch time as Allco provides writteu notice or p¡ymcnt i¡ lieu that it htãnds totermitrate your primary employment i¡ the hone country. In this situatio¡¡. dlnormal termination rights and obligations ofthe home oountry will appty.'

(Emphasis added.)

By letter deted l4 January 2009 from Mr Rich on the letterhead of Allco Managerient

Pte Ltd, Mr Gallagher was informed:

'Termin¡tion of Secondment and Notice of Redundancy

Following ou¡ disoussion øday, I am u,riting to confirm that as result of yoursooondment with Allco Managernent Pto Ltd coming to an end effectivo 6 February2009, and tÏe appointment of Receivers t6 fts6 fi¡¡n¡s Group Limited (rncludi¡gAFG Pty Limited), it will bo necessary to terminlto your Emplo]¿ment agreement\r,ith Allco Finance Group Pty Limited offective 6 Feb¡r¡ary 20O9 (TerminationDotò.

The terms and conditions of your employment / secondmor¡t with Alloo MâñâgementPte Limited will continue until the Terrnination Date.,

Other M¡tters

Mr Gallagher gave widence in chief by affrdavit affi¡med on 13 Novemb s 2O09

(Ex O)- He was not cross-ex{ùnired. I upheld a number of objectrons to the afûdavit as

affirmed and a nr¡mber of othor paragraphs were not read or pr€ssed.

Mr Gallagher took up his secondment in Singapore on or about 7 July 2006.

I¡ ¡elation to the lette¡ in [ 71] above, Mr Gallagher said he never had an employment

agreement with a company called Allco Finance Group Pty Limited or AFG Pty Limited.

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Mr Gallagþer deposed that, in 2008, Allco IMF Limited became Allco Singapore

Limited. AFGL decided to se|l the real estate management business in Singapore to Fras€f,

and Neave. As a ¡esult of the sale, he had a choice to stay with Fraser and Neave and end his

secondment or accept another secondment role that would have him remain with AFGL. He

decided to accept the role offered by Neil Brown (see [167] above).

FII\DINGS OR CONCLUSIONS OF SECOITDARY FACT

The Second Respondent: Michellc Segaert

The applicants acoept that the second respondent's conhact of emplo¡rm.ent was withAFAL; that AFAL was hø ernployer and that AFGPL had no contracrual liability to pay her

anything. Nevertheless, the applicants say that the second respondent is not a priority

creditor of AFAL for the purposes of s 433(3)(c) of the Act because, consisterir with their

twoJimbed constmction oontended for s 556(l)(e) (see [51] above), the socond respondent

rendered her serr¡ices to AFGL, the parent company, not AIAL, I deat with this latter aspect

below, If suffices for present purposes to note the applicants' ooncession that the second

respondørt is not a priority creditor ofAFGPL for the purposes of s a33(3)(c) of the Act.

The Third Respondert: Ian Graybura

The applicants accqrt that the third respondent's conkact of employment (and the

cont¡acts of employmørt of the persons he represents) was (were) with AFGL; that AFGL

was his (their) employer and that AFGPL had no conEacrual liability to pay him (them)

anything, It was not submitted that the third respondørt, and the persons he rçresents,

re'nderod his (their) services to ar €ûtity oth€f, than AFGL so that, even on the applicants' two

limbed oonskuction of s 556(l)(e), the applicants' concession is not only that the third

respondøt, and the persons he represents, is not a (are not) priority creditor(s) ofAFGpL, but

that the third respondmt, and the persons he represernts, is a (are) priority crerlito(s) ofAFGL. I agree that this concession was properly made.

The First (Sæven Davey) ¡nd Fourtù (Christine Bowen) Respondents

In the caso of both these respondents, the standard ten¡ns and conditions ofemployment att¿ched to their employment offer lEtters contained a similar statement under

the heading 'Employer'. In the case ofthe first respondent, the statemerit read:

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'You will be formally omployed by AFG pty Limitod.'

In the case of the fourth respondent, the stateñent read:

'You will be formally employed by AFG pty Liñited, the Allco payroll entity. '

These statements, if not totally, then very substantially, form the foundation of the

applicants' case that AFGPL was the employer of the first and fourth respondents, and the

persons they respectively represent; and even absent that finding, form the foundation of the

applicants' case that AIGPL was contractually liable to pay the first and fourth respondents,

and the persons they respectively represent, so as to satisfl the fust limb of the two-limbed

constuction of s 556(t)(e) contended for by the applicants in qualifoing them as priority

creditors of AFGPL.

I use the words 'if not totally' deliberately because the applioants' case is also

founded on other material suoh as:

For the financial years onded 30 June 2006, 2007 and 2008, Mr Davey lodged income

tax retums recording that his occupation was .InvesEne¡rt Banker' and his anployer

was recorded as AFGPL;

for the financial yoars endcd 30 June 2006, 2007 and 2008, Ms Bowen lodged income

tax reh¡ms re@rding AFGPL as her employer;

Mr Davey's pay slips referred to AFGPL;

Mr Davey's group certificate for the year ended 30 June 2008 stated that the payer oftax was AFGPL;

Ms Bowen's goup certificâte for the year ended 30 June 2008 stated the payer's

narne as AFGPL.

In respect of this other material, the following observations are rolwant:

The income tax reh¡ms of Mr Davey and Ms Bowen for the financial years ended

30 June 2006, 2007 and 2008 did not record AFGPL as thoir omployer; morely as the

payer of their salary/wages and it is co¡nmon grorurd that eva fhat w&s not factually

cor¡ect; it wa¡¡ common ground that AFAL was the payer even if it onward oharged

the amourt to AFGL or some other entity in the Gtoup, not including AFGPL;

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(2)

(3)

(4)

(s)

(1)

(2)

(3)

(4)

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The reference to AFGPL on Mr Davey's pay slips, in so far as it is a ¡eferrence to thepayer ofhis salary, is factually inconect for tle same reason;

Mr Davey's group certiñcate for the fina¡rcial year errded 30 June 200g is factually

incorrect for the same reason; and

Ms Bowen's group cøtificate for the same year is factually inconect for the same

rea¡¡on.

which leaves us with the fi'*t of the standard terms and conditions of Mr Davoy's and

Ms Bowen's contracts of employment: .You will be formally employed by AFG pty

Limited', and in Ms Bowen's casg with additional words: '... the Allco payroll entity' as the

foundation of the applicants' case that, AFGPL was ttreir employer, but even if it was not,

AFGPL was conhactually liable to pay them, and the pøsons they respectively rçresent.

I am firmly of the view th¿t there is no subst¡nce to either limb of this case for the

reasons set out below.

AFGPL as Employet

Having regard to the evidence of Mr Ricþ both in chief and in cross-examination, as

to the purposo uderllng the incorporation of AFGPL and its wolution in relation toemployees of the Allco Finance Group, it is clear that its ¡ole was always eovisaged, and in

fact confined, to be a payroll entity for the Group, an employer of remrd for the purpose ofreporting to the relevant authorities the obligations of companies in the Group in relation to

employees in respoct of group or PAYE tax, payroll tax, fringe benefits tax, superannuation

lsvies or charges, workers' compensation insuranoe and other cmployee-based levies. At or

prior to its incorporation, Ml Rich's widence was that it may have beø envisaged that its

role might extend to paying ernployees in the Group and to paylng the ¡elwant taxes and

levies imposed by reference to their employment, but thete wæ no ovidencc that it did any ofthose things; quite the conh8ry, it was common ground that they were all done by AFAL.Thus, its role was confined to that of a rçorting entity for the Group; reporting as the

employer of reco¡d. The words, 'you will be formally employed by AFG pty Limited', have

to be construed in that context and, so conskued, they do not elevate AFGpL to the status ofacommon law employer ofthe first and fourth respondents, and the persons they respectively

rqrresent,

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Such a construction is undoubtedly assisted by the additional words ,tho Allco payrollentity' in Ms Bowen's standa¡d terms and mnditions. Moreover, it arso assisted by thepayslips, group certificates and income tax retums for, in respect of, or ofthe first and fo¡¡rthrespondents ¡eferred to in [lB0] and tlgll above, in the face of the fact that it was commonground that AFAL paid all relevant sala¡ies, taxes and charges.

Such a construction is the mo¡e mmpelling in the face of tho facts that:

(t) Ms Segaerts' (the second respondent's) gnrup cøtifioate for the year ended 30 June

2008 also states that the payer oftax wæ AFGpL and her income tax returns for theyears ended 30 June 2006,2007 and 2008 all record AFGpL's ABN as rhe .payer's

business number', despite the fact that it is now conceded she was not an employee ofAFGPL;

(2) Mr Graybum's (the third respondøt's) payslips referred ro AFGPL and his group

certificate for the year ending 30 Jr¡ne 2008 states that the payor of tax was AFGPLdespite the fact that it is now conceded that he was not an ønployee ofAFGpL, but ofAFGL;

(3) when, in Febru¡ry 2008, Mr Graybum requested a letter f¡om 'personnel' to support

his application to lease a property, Ms Hall, the Human Resources Administator,prepared a letter dated 21 Febnrary 2008 addressed to .whom it may ooncem'

confirming that Mr Grayburn 'is o'rrently employed with AFG pty Limited', despite

the fact that it is now conceded he wâs not an ønployee ofAFGpL, but ofAFGL;

(4) AFGL is reco¡ded as being the first and fourth respondents' ernployer in cenificates

of serr¡ice roceived in 2008 and in supøaruruation documents; and

(5) AFGL is reco¡ded as being the first respondent's ernployer in his ¡edu¡rdancy letter

dated l0 March 2008 and the Allco HIT Limited Annual Report.

Finally on this issue of whether the provision: .you will be formally employed by

AFG Pty Limited', in the standard terms and conditions of the offer by AFGL to the first and

fourth rcspondents made them, upon acceptânce, or at some later time, employees of AFGpL,the respondents made the following submissions which I accopt and adopt.

First, the Full Court and the High Court have made it clear th¿t where (in a case such

as this) there are clauses of a oonEact specially framed with the individuat circumstanoos in

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mind, togethü with standard forrr clauses, it will normally be appropriate to give greater

weight to the specially negotiated clauses: Wølkzr v Citigroup Global Markets Ar/str¡lia Pty

Ltd (þrmerly bzown as salomon smith Børney Australia seatríties pty Linited) (2006) 233

ALR 687 al [77], aitng inter dlia, Hume Steel Limited v Attorn¿y-General (Vic) (1927) 39

CLR 455 per Isaacs J at 462 - 463, Higgins J zÅ.465; Godecke v Kirwan (1973) 129 CLF. 629

per Walsh J af 637. See also Boston Commerciøl Services Pty Ltd v GE Capitat Finance

Australasiø Pty LtdQ006)236 ALR720 at [28] (Rares J).

In any event, it is significant that the term upon which the applicants rely (.You willbe formally employed by AFG Pty Ltd') speaks of frrh¡re srents.

Moreover, it requi¡es that attention be given to the phræe 'formally employed'. The

word 'formally' may have various meanings, including 'in outwæd appeârance, seemingly';

or 'ir the ordinary proper way'; 'e>rplicitly, expressly'; 'with the formalities required to give

validity or definiteness to the action': O{ord Englßh Dictionary Onlîne 2010. If the first

definition is adopted, formal employment in that sense by AFGPL will not alter the tn¡e

position. If the latter deñnitions are adopted, the formalities wae clearly not ørtered into.

On no visw could such a term create an employment relationship between the

employee and AFGPL, In substanoe and effect, the term contemplated the eorployee's ernk¡r

into a fon¡al employment relationship with AFGPL at an rurspecified time in the future.

Until the¡r, the person would be ernployed by AFGL. This is clear on the face of the letter ofoffer and the standard terms and conditions attadred. It is made even clearer by consideration

of the surrounding ciromstances at formation, being the active role AFGL and AFAL were

performing in employment related matte¡s, as distinct from the dorma¡rt status of AFGPL and

its inoapacity to perform an employer rolo. Seo Re North Sydney District Rugby League

Football Club (admin øpptQ; Murray v Donnelly (2000) 34 ACSR 630 þer Bryson J) at [5],

lzsl.

That fi¡rlher steps and fonnalitie,s were required to achieve the outcome of becoming

'formally employed by AFG Pty Ltd' can be illustatod by the letter of offer dated 22 Octobsr

2003 from AFL to Mr Jim Hope Murra¡ who is part of the fourth responde,nt's group. The

letter offers him employment as executive director, Allco Securitisation Limited with effect

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fiom I January 2003 (that is, retrospectively), but states that the company he .will beønployed by is AFG Pry Limited', Employment wirh AFGpL never occur¡ed.

In the absence of any written o¡ oral offa of ønproyment by AFGpL that wasaccepted by the respondents in these groups, it is necessary to consider whether the¡e was acontract which oould be implied to exist based on the conduct of the parties.

Importantly, contracts a¡e not to be implied ligþtly: see Damevski v Giudice e0e3)133 FcR 438 at [82] (per Marshall l) ('Damevski ), citing Brambles Holdings Ltd v Bathurstcity council (2Q01) 53 NSWLR 153, Air Great ra.trcs pty Ltdv KS Easter (Holdings) pty Ltd(1985) 2 NSWLR 309 ('Air Great Lakes), Btacþool and Fylde Aero club Ltd v BlacþootBorough council 9901 3 All ER 25 at 3l per Bingharn l) a¡d, orion Insurance co plc vSphere Dralce Insurance Plc tl990l I Lloyd's Rep 465 ar492-494perHirstJ.

Post-conhaotual conduct is admissible on the question of whether a conkact was

formed See Totnko v Palasty 12007) NswcA 258 at [63] - [67] (Einstein J, with whomMason P agreed)' citíngPethybrtdge v stedikas Hotdings pty Ltdlz}}TlNSwcA t5a at [59]and [2] (campbell JA, Beazley and Basten JJA agreeing), Film Bars pty Ltd v paciJìc FilmLaboratoie-s Pty Ltd (1979) BPR 9251

^t9254 -92ss ¿¡ró. Brambles Hold.ings Ltd v Bathurstcitv council (per Heydon JA) (also øtrng Howard smith & co Ltd e varawø (1907) 5 cLP.68at77;BarrierwharfsLtdvúTScouFelt&coLtil (190s)5 cr,R 647 at668,669,672.

B Sepppelt &Sons Ltdv CommßsionerforMøinRoads (1975) I BpR9,l47 u.tg,l4g,g,l54_91,156). In particular, it is necessary to look at the whole relationship and not only at what

was said and done when the relationship was fi¡st formed: Integrated computer services pty

Ltd v Digital Equipment Corp (Aust) pry Ld (tgSS) 5 BpR l1,ll0 ar II,ll7 - ll,1l8,McHugb JA (Hope JA and Mahoney JA concurring), The following observation of McHugh

JA in Integrated 99An_11y9, p9.1"_i9as al I 1,1 17 is apposite:

'The question in this class of case is whother the conduct of the palies viewed in thelight of the surrounding circumstances shows a taoit understanding or agfeeûrent.The oonduct of the parties, however, must be oapable of províng all the essentialelements of an express contract ...'

ln Dømevski, Marshall J (with whom Wilcox J agreed) considered, first, the

dooumentary evidenoe by reference to general law principles regarding the formation ofcontracts (at [30j - [78]) and, secondl¡ given the perceived ambiguity, the e¡rtire factual

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mahix to detetmine whethen, consideting all relevant evidence, whether there was a contrac{

which could be implied to exist based on the oonduct ofthe parties (at [79] - tl02l).

197 As to the intention on the part ofAFCPL and the employees to create legal relations,

the evidence does not support suoh a conclusion. I¡ Damevski,Mtshall J referred to the

following disorssion in Anson's, Law of Contrøa (28ù ed, Oxford University press, 2002) at

71 as to the test of intention in relation to the creation of legal relations:

'The test of aû intetrtion to effect legal relations is an objective one. It may be thatthe promisor never antioipated that the promise would give rise to any legalobligation, but if a ¡easonable porson would consider there was an inteûtior so tooontract, then the promisor will bo bound.'

See also Austrølian Broadcasting Corp v XIYth Commonwealth Games Ltd (1988) 18

NSWLR 540; Air Great l¿kes Pty Ltd: Blacþool and Fylde Aero Club Ltd and Toyota

Motor Corp Australid Ltd v Ken Morgøn Motors Pty Ltd ll994l 2 VR 106 ^t

176 pet

Tadgell J.

On no view could it be said a contact could be implied to exist between AFGPL and

either of the first or fourth respondents, or those they have been appointed to represent, b¿lsed

on the parties' conduct.

Adopting the anal5ais of Marshall J in Damevski y Giudice at [91], the facts indicate

that no conside¡ation passed between each of the first or fourth respondents and AFGPL.

(l) Each ofthose respondents provided services to AFGL, not AFGPL.

(2) AFGL, not AFGPL, determined the rate it would pay for thoss services. This is

reflected in the documentary evidence and the fact that the Board of AFGL created

and oversaw the HR&RC, rvhose purpose $,as to make decisions a¡rd/or

recoûrmendations in relation to ¡emuneration, human tosolüces matters, and

employment policies and practices in relation to AFGL.

(3) Wages were paid to employees ûom a bank account in AFAL'S company name.

(4) AFAL was a party to the agfeement wíth Autoûratic Data Processing Limited for the

provision of payroll services dated 12 May 2008. From at least 12 May 2008, ADP

arrangd for each of the respondørts to be paid their monthly salary and paid

superannuation payments to each of their nominated superannuation funds.

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Further, the¡e was no conhol or di¡ection exercised by AFGPL over any of the

respondents or those they have been appointed to represent. contol and direction was by

persons as directors and er(ecutive offic€rs of AFAL or AFGL and was not simply by those

persons acting as an employee of AFGPL: cf, Austrøliøn ltuurance Employees llnion v Wp

Insurance Services Pty Ltd (1982) I lR2l2at2l6-217.

AFGL: A contrøctuøl liobiliE to pøy notwìthstanding

The applicants submitted that eve¡r if I was to find that AFGpL was not the employer

of the respondents, nwertheless, AFGPL had a contractual liability to pay them, or at least

those respondents, other than the second and third respondents and, in the latter case, the

persons he rep¡eserits, and that this was sufñcient to satisfu the first limb o¡ integer ofs 556(l)(e) of the Act according to the two limbed conskuction for which the applicants

contended.

I deal with this argument below when analysing the conshuction of s 556(1)(e)

contendcd for by the applicants.

The Fifth Respondent: Timothy Rich

Prio¡ to his short tsnn secondment to Singapore commencing 19 January 2008, Mr

Rich's position was the same as the fourth respondent, and the persons she reprosented.

Where an employee is seconded by his employer to work for another ontþ an issue

can arise as to whethe,Í he becomes an ernployee of that errtity or remains an ernployee of the

seconding entity. This was an issue which came befo¡e Moore I in Finance Sector Union ofAustralia v Commonweøhh Bank of Awtralia (2001) I I t IR 241. In that case the issue was

whether certain employees of the Conmonwealth Bank of Aust¡alia whose services the Bank

had seconded to a comþariy in which the Bank had a shaieholding ('EDSA'), became

employees of that company or remained employees of the Bank,

Moo¡e J approached the issue by applying what might be called the traditional general

princþles for determining who is the errployer of an employce whe¡e there might be two or

more possible employers as set out in [5a] to [6a] above. At [59] to [64], his Honou¡ said:

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'59 It is oonvenient, at this poirÍ, to deel u¡ith aû issue to deal with an issue raisedby the applicants though it was raised as part of a subsidiary o¡ alternative argument.It was contended that fiom l0 October 1997 the seconded ønployees were omployedby EDSA and not the Bank. If this is correct, it may bave

" ¡naieri¿l bearing ìn theoporation of tïe Award. If thc employrrent of the seconded employees with tire Bankwas terminated on 10 October 1997, the only (or at least principal) question thatwor¡ld then arise conceming the operation of the Award would be whetler thotermi¡ations oocu¡red in ci¡cumstanoes that co¡stituted "retenchner¡t,' fo¡ thepurposes ofthe Award.

60 The issue of who is tho ernployer of an omployee, when there might be two(or more) possible ornployøs, can arise in va¡ious legal oonte><ts including who isli{lf !o pay workers compertsation benefirs: see Pitcher v Langþrd (lggl) 23NSWLR 142 a\d. Dalgety Farmers Ltd t/a Gruzcos v Bruce [1996] AILR 4,352; whois liablc to pay redundancy payments: see Marrs Fabrics pty Ltd & Nathanllholesale Fabrics Pty Lrd v Whipps (199t\ 33 AILR !f167; whother a proof of dobtcan be rnintained: see Romero v Auty (2001) 19 ACLC 206; and whøher a person isliable under occupational hoatth and safety legisladon: sæ lïorkCoyer )uthortty(NSfrr) v Swift Placements Pty Ltd (I999) 88 IR 53.

61 In many of the recent Australian cases in whic,h this issue has ariser¡ theCourt has adopted the apprcach of døerrnining which of two possible einployers istho employer by applying the principles dweloped for døerrnining whether a penonwas an ernployer at all. That is, the principles applied to determi¡e whether the¡e wasan emplo)rment relatioDship between an individual and a puøtive employer couldalso be applied to detefiriine which of two putative employors employed anindividual. A oomparatively recent decision of the NSW Court of Appeal, pitcher vLøngford, is ofte¡r cited in suppon of this approach. In thât ma$er the variousmembers of the Court of Appeal proceeded on the basis tb¿t the analysis of Mason Jin Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24 concemingwhen an employment rolationship existed, was apt to apply in ascertaining which oftwo possible employers, was the ernployer. In Stevens v Brodribb Sawmilting Co ptyLld, Mason J acceptod that the right of control over the work of a person (togaherwith the ex€rcise of that right) was an important indicia of the sxistence of anemployment relationship. However his Honour indicated that other indicia can alsobe releyant such as ñode of remuneration the provision and mainternnco ofequipm€nt, the obligation to work the hours of work and pmvision for holidays, thededuction of inoome tax aûd the delegation of work by the putative employee.

62 In the presørt matter, it is clear tbat the day-today control of the work of theseconded employeos was exercised by EDSA. It is an agroed fact (see 33(e) and (f)above at par 5) that tho seconded eorployees worked at the direction ofEDSA thoughit is also an agfeed fact that they did so at the dircction ofthe Baûk. I co¡¡sidor thatthe bettø view of the evideace as a wholo is that while the Bank purported to reserveto itself the ultir¡ate right to contol the work of the secûûded employees iteffectively rolinquished rbar right to EDSA. It musr be aoo€pted that there was somewidence of the Bank aotu¿lly exercising contÌol over the secondod employees bydirecti''g them to relocate and through involvement with somo other eûploymentissuos concerning tÀe seconded employees. Howwer this evidence can be contrastedwith the more general positiur conceming the contol sxef,cised by EDSA.Nonetholess regard must be had to the fact tlrat the seconded €ûiployees continued tobe paid by the Bank, retained theü staff number, g¡ade and classification level andwere afforded benefits available to Ba¡k erriployees but rrot available to ernployees ofEDSA.

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63 These various mattcrs do not provide a crear answer one rvay or the other tothe question of whether the seconded omployees beoame employees of EDSA.Ultimately, however, tho answer emerges, in my opinion, fiom a consideration of theintentions of the parties and, rn paniorlar, tne iosition adopted by the secondedanployees themselves. It was neithor the Bank;s nor EDSÀ's i¡tenrion th¿t thesecondod ernployees would cease to be "mnloyees of the Bank and becomeemployees of EDSA. In addition saoh of the sooonded ønployees rq'ected the offerof EDSd which the Bank e,trcouraged th€rn to acc€pt, io úecomé employees ofEDSA. Whilc the employees rvho rejected the offer were in the difEcult position ofnot knowing whethcr the¡r werc, in the cirçunrstances, er¡titled to ."r",orrcê paym"ot.and also of not krowing wheth€r thoy would projudice any such entidå.rlnt byaccepting ernploynent with EDSA they nonetheless elected to reject employmentwithEDSA_

64 It is a settted principle that there cannot be an assignment of a contâct ofernployment without thg consatt of the employee: see lvo&ds v DoncasterAmalgamated Collieries Ltd [1940] AC l0l4_ This principle was applied by Ryan Jin Textile Footwear and clothing unìon of Arctralia v ge echic (vwqo¡ted, FederalCo¡¡rt of Australia, 19 November t99S) and by Warren ! in Romero v Auty indetermining whether the¡e had been a tansf€r of ø4loyrrerrt (or an assig¡ná ofthe contract of employment) fiom one coúpany to 8l¡othcr. In each instance thecourt conoluded tìero had beø. no transfer or assignment booause the errployeos hadnot coDsented. It is diffioult to avoid, in my opinion, the conclusion that the secondedernployees did not beoome employees of EDSA baving regard to the explioitrejection of the offer of employmøt with that compaûy by each of them. Not onlydid each not conserit to the transfor but cach consciously elected not to take ulemployment u¡ith EDSA . . .'

In the preselrt case, Mr Rich conceded in cross-examination that upon his secondment

to Singapore ho took up a new employment, first with A]lco (singapore Limited, and then

with Allco Management Pte Ltd. The issue which arises, and which I\ioore J in Finance

section union of Austrølia did not have to consider, is whether in taking up a new

anployment with the singaporean company, Mr Rich relinquished or terminated any existing

ernployment with AFGL or AFAL. He did not think so and while that is not irrelevant, it iscertainìy not decisive.

The terms of his secondment agreement did not expressly termirute any existing

employment agreement although such a terrnination might be implied from those very same

terms or from the conduct of the parties.

ln an artícle entitled 'The seconded or hansfer¡ed employee' by Graham Rossiter ofMassey university published in the New Zealand Law Joumal, Augrrst 2007 at 265, roference

is made to two New Zealand cases: Clîford v Rentokil Ltd tl995l I ERNZ 407 and Royds v

FAI (NZ) General Insurance Co Ltd ll99ll 1 ERNZ 820. The leamed autho¡ writes:

208

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'In Cliford v Rentokil ¿ø, the applicâtrt was employed by Ratokil as ân afe¡¡m'nâger'. In 1991, ho agreed to gû to Füi and take on the task of re-sruotruing a Fijicompany. Rentokil and tho second rcspordent were both subsidiaries of the sameparent company. The applicant claimed he was oonstructively dismissed in early1993 and brought proceeding against Rentohl. Rontokil applied to have the aotionsm¡ok out on the ground tlrat the applicsnt had been anployed by the Fiji companywhile in Fiji and that his eûployûent was govemod by Fiji law. The ErnploymontCor¡¡t held that this was a situation of the secondment of the applicant by theRentokil to the Fiji colneany. Tïe expression "second" in this context was said byJudge Palmer to mean "to transfe¡ an employee to other employment or to anotherpositiod". A secondûent does not, hqwwor, me¿n a severing of ørploynent orcontactual links with the goneral or p¡imary eúployer. In this oaso, notwithstandingthat Clifford was providing señ¡ioes fo¡ the Fiji conpany and was beirig paid by thatcompany, his ernployment relationship with Re¡¡tokil continued. Accordingly, hispersonal grievance had besn coreotly comûre¡ced rmder Now Ze¿land law.Somowhat similar cifcumstances and issres arose in Royds v ITL Royds wasemployed by FAI and, in February 1998, was asked to work in Papua Now Ouine¿ rnan equivalent role for 8n associated company for a th¡ee year tetm. In Septernber,1998, the applicant was given six montbs notice of temrination. The Emplo¡'m.entCou¡t had to determine whether the applicant was €ûtitled to bring a porsonalgrievance in New Ze¿land or rather had to pursuo rernedios unde¡ PNG law on thebasis he bad been errployed by the dofendarit's associated comp¡my, Judge Travishold thst what bad taken place had the "ch¡¡aoteristics of a secorùneút arangernont"(p 832). It therofore followed that the dEfendant remainod tkoughout the plaintif?strue employer and New Zeal¡nd law was applicåble. A key factor in tho Court'sreasoning appeared to be that the centre or, as it might be put, ukir¡¡ate coûkol of thisbusiness reirnined with the New Ze¿land company. Again, as nthe Cliford matter,the arra¡gernents at the timo of the applicant's appointmeût to PNG contemplatedropatriation to and futwe ønployment in New Zealand by the defendant.'

At the e¡rd of the day, the answer to the issue is to be found from an overall view ofthe entire factual matrix but like the evidentiary deficiencies that faced the Court (Finn J) in

Re C&T Grtnter Transpofi Services,I suspect that I may not have all relwant material and

information before me.

That said, I have oomo to the conclusion that Mr Rich's employment with AFGL o¡

AFAL continued during his secondment to Singapore; in other words, it was not severd by

that secondment for the following rea¡¡ons:

His secondmerit w¿¡s offered to him by Mr Stefanovski on behalf of AFGL.

Mr Rich continued to report to Mr Stefanovski during his secondment.

On completion of his semndment, his ernployment was to continue with AFGL on

terms that applied prior to his secondment.

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(r)

(2)

(3)

(4)

(5)

(6)

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It is opern on the evidenc€ to find, and I find, that it was an implied torm of thesecondment agreement that ifhis Singapore employer did not, for any reason, meet itscontraotual obligations to him, AFGL would, including payment of all hisentitlernents.

His leave entitlemøts, other than rong service reave, were 'frozen', for the duration ofhis secondment and long service leave continued to accr e .in line with Australianlegislation'.

It was a term of his ernployment agreement that if it superseded a¡r ea¡lier

ønployment agreement with the Group and service with the Group was r¡nbroken,

past unbroken servioe with the Group would be counted towæds futruc servicê.related

entitlernents unless otherwise stated in the employment agreefüent or the Gmup'spolicies, as varied from time to time.

The Sixth Respondent: Evrn Gallagher

The evidencc supports a ñnding that Mr Gallagher was employed by AFGL or AFALprior to his secondment to Singapore; and that it continued for the duration of that

secondment notwithstanding that he was also employed, first by Allco IMF Limited(subsequently Allco Singapore Limited) and then by Allco Management pte Ltd. AII thedocumentary widence ref€rs to his employment with the singapore companies as being onsecondment from AFG, which I read as being AFGL (see the standæd Terms and conditions

referred to in [169] above), and there is no doubt that his ernployment with AFGL was going

to continue upon the secondment coming to an end.

The extract fiom the Addrtionat rems and conditions of Employment reproduced at

[170] above makes it clear that Mr Gallaghø's employment with AFGL was to continue

during the term ofhis secondment.

Again I think it is open on the evidence to find, and I find, that it wæ an implied term

of the secondmerit agreement that if his singapore employer did not, for any reason, meet its

conhaotual obligations to him, AIGL would, including payment of all his entitlements.

That Mr Gzùlagher's employment with AFGL continued fo¡ the duration of his

Singapore secondment is also apparent from the letter dated 14 January 200g he received

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215

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ûom Mr Rich stating that as a result of his secondment coming to an end effective 6 February

2009 and the appointnent of the applicants to AFGL (including AFGPL), it wæ nooessary to

terminate his ernployment agreement with 'Allco Finance Group Pty Limited' effective the

samo date. I ¡ead the reference to 'Allco Finanoo Group Pty Limited' as a ¡oference to

AFGL, but eve,lr if it is intended as a reference to AFGPL, having regard to the findings made

with respect to AFGPL in relation to the first and fourth respondents, and the porsons they

respectively represeût, the reference to AFGPL is møely a reference to the enrployer ofrecord for reportirig pu¡poses. MoÌe importantly, the letter recognises that his employment

agreement with AFGL remained on foot notwithstanding that his secondment had not, at the

date of the letter, come to an end; consequently it (the ernployment agreement with AFGL)

too had to be terminated,

AIALYSIS OF THE APPLICAI\ITS' ARGUMENTS

Both in their r¡ritten and oral submissions the applicants made submissions on two

subjects which need to be separately addressed if only because the fitst is a discrete matter ofstatutory consbuction, namoly, the proper construction of s 556(l)(e) of the Act and its

application to the facts of the casel and the second is a legal argument bæed on alleged facts

which have no fowrdation in the evidence.

Constructlon of s 556(1)(e) of the Act

I alluded to the applicants' arguments in [51] above but declined to deal with them at

that stage.

The fust limb of the argument is that undEr s 556(1Xe) no issue arises about a

relationship of employment. The focus is only on thc contr¡ct of employment and the

identification of the company liable to pay the employee's wages and other entitlements.

Thus, it was said, that even ifl decided that there was no relationship of employnent between

AFGPL and the rospondents, I should find that AFGPL, and not AFGL or AFAL, was

contractually liable to pay the respondents lr/ages and other entitlements and that this was

sufficiørt to engage the fint limb of the section in concluding that the tespondents were

priority credito¡s of AFGPL and not AFGL or AFAL.

The argument is flawed for a numbet of ressons which are detailed below.

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218

219

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First, AFGPL lvas not privy to any conkact of employment with any of theresPondents or the persons, if an¡ they respectively rçresent. It had no contactual liabilityto pay them anything.

Second, it requires one to ¡ead the word .employees' in s 556(l)(e) æ meaning

persons who are onployees ofany company, and not just employees of the company liable to

pay the wages, etc. That would be contuary to the policy and purpose ofthe section.

Third, such a construction flies in the face of the definition of .wages', namely,

'amounts payable to or in respect of an unptoyee of the company ... under [a contuact ofemployment]'. That must mean an employeo of the company having the oontractual liabrlrty

to pay the amounts.

Fourth, in the absence of finding that AFGPL wæ the employer of the respondents

and the persons, if any, they respectively represent, it is difficult to see how a coûtâctu¿l

liability on the part of AFGPL nevertheless subsists towards the respondents. The argument

was not developed to any extent. Indeed, the applicants' outli¡e of submissions and further

outline of submissions in so far as they submitted that AFGPL had a contactual liability to

pay the respondents atrd the persons, if any, they respectively represent, wøe predicated on a

fìnding that AFGPL was their employer. In the absence of that finding, the argument that

AFGPL nevertheless has a contractual liability to pay them must be rejected.

The second limb of the argument is that s 556(l)(o) requires the swvioes, in respect ofwhich wages ¡¡re payable but unpaid at the relevant date, to have been rende¡ed to the

company having the conüactu¿l liability to pay tle wages and not to any other entity. In

other words, if the sen¡ices have been rendered to any eritity other than the company liable to

pay the wages, the employee will not be a priority creditor of the company having that

liability.

On the applicants' own submissions, this would mean that the first and fourth

respondents, and the persons they respectively represerit, are not only not prioriSr creditors ofAFGL or AFAL - because even ifone ofthese companies is the ønployer, neither according

to the applicant has a liability to pay them, only AFGPL has that liability - but they would

also not qualifo as priority creditors of AFGPL, because it is common gfoì¡nd that none of the

221

222

respondents rendered any señ¡ices to AFGPL. Such a result would defeat the whole purpose

of the legislation.

Again, the argument is flawed for the reasons det¿ilcd below.

First, the argument is predicated on the basis that s 55ó(lxe) establishes a twoJimbed

or two-pronged requircment both of which must be found to exist before an employee can

qualifu as a priority øeditor of a company -

( I ) The company must have a contactùâl liability to pay the employee; and

(2) the contactual liability to pay must be in respect of services rendered to the company

having the cont'actual liability.

In my view, s 556(l)(e) does not raise or impose a two-pronged requirement of that kind. Itmerely fequires a finding that the company is the employer of tho errployee and that the

servioe in respect of which the wages etc are payable wøe rendered before the relevant date,

Such a finding satisfies the tetms of the section because:

amounts 'payablo by the company' will only be 'wages' (æ defined) if they are

'amorurts payable to or in respect ofany employee ofthe company'; and

the wonds 'in respect of serr¡ices rendered to the company by employees before the

relevant date' only impose a tenrporal fequirement, namel¡ that tho sqr"ices in

respect of which the wages etc are payable were reridered before the relwant date, not

a substantive requfuem€nt over and above a finding that the company is the employer

of the employee.

Second, that the words 'in respect of sorvices r€r¡dered to the company by employees

before the relevant date' only impose a temporal requirement a¡rd not a substaûtial

requirernørt over and above a ñnding that the company is the employer of the employee,

recognises that an employee in the course of his onployment, and consistent with his

conhacû¡al obligations, may provide services to his employer by performing work that

benefits a third party and may provide servioes ûo a thi¡d party by performing work that

benefits Ns employer. Neither is inconsistent with the ernployment relationship. In this day

and age of large corporate groups of companies, ønployees ofone oompany in the group willfrequørtly provide services to other mmpanies in the group. Provided this is not inconsistent

(3)

(4)

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with the terms of their employment, the provision of their sorvices, and consequential

benefits, to other companies in the group will, at one and the same time, involve the provisionof services and benefits to the employer company. So much wæ recognised by Kitto J inAttorney-General þr New south llales v The perpetuøl Trustee compøny (Línited) (1952)85 CLR 237 at 299 - 300:

'[T]he widening ofthe range of private eaterprise meant that the link bstweeû rrÞnykinds of servants and the housoholds of their m¡sters became ettenuated and ce¡seãto have any reality; but the relation has ¡emained in the raw as one whioh enabres aman in the conduct ofhis private affairs to avail himself of the services of others whowill onte¡ into the appropriate relationship with him for tbat püposo . ..

ìt ìÃ'ill be seon that three slements a¡e involved: fr¡st, the relationship must e¡rtail, onthe part of the servant, obedienoe to o¡ders; secondly, the obediarce to orders that isrequired is obedienoo to orders in doing work; and, thirdly, thc doing of the workmust be for the benefit of the master, tlEt is, it must relate to his own affain . . . As tothe third element, the st¡temetrt that the doing of tùe work m¡¡st be for thebenefit of the master do€s rot De¡& of course, th¡t the direct benefit from thervork itself must necessarily accrue to the m¡ster; he may, without altering therelatlonship, direct his servaut to do work which witl benefrt rnothcr.'

(Emphasis added.)

The Agency ând Indemnity Arguments

With a view to overcoming the privity 'hurdle'(seg for examplg [lZ1] and [219]above), that is, that AFGPL was not a party to any contact of employment with any of the

respondents, the applicants' 'simple and obvious answer' (the words of their senio¡ counsel)

was that the offe¡s contained in the offer letters from AIGL or AIAL, were made by each as

agent for AFGPL as principal. That was as it was put in op€ning, but a fi¡rther a¡gument was

dweloped in add¡ess as outlined in [229] below.

With a view to overcoming the further 'hwdle' that it wæ an agreed fact that AFALpâtd the employees' wages and other entitlemerits, as well as the taxes and charges referrable

thereto, and that it was common grormd that no part of this cost w¿rs charged out to AFGPL,

only to other companies in the Group, it was said that AFGL and AFAL requested (the

request being implied from the cifcumstances) AFGPL to entef, into all the contracts ofcmploymørt (through them as agent for AFGPL) and that in oonsequonce of AFGpL

agreoing to do this for the benefit of AFGL or AFAL, AFGpL was entitled to an implied

indemnity from AFGL or AFAL to meet AFGPL's contractual obligations to employoes

(Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCP. 527 at 540 per Davies J; at 573

))o

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per Burchett J). That indønnity was discharged when AFAL (presunably on behalf of itself

and AFGL) paid the ønployees' wages etc; in other words, rather than have AFGL and

AFAL pay AFGPL r¡nder the indemnity 8ûd then have AFGPL pay wages to the oaployees,

AFAL paid the amounts to the ernployees direct, thus discharging the implied indemnity to

AFGPL at the s¿lme time âs disdrarging AFGPL'S liability to the employees for their wages.

If there were factual foundations for the argurnents, they might have some resonance,

but neither argument has any factual foundation. For a start, the indemnity argument does

not explain the allooation of the cost of such wages by AFAL to companies in the Group

other than AFGL. But there a¡e more fi¡ndamental difñculties with the arguments.

The Agengt Argument

The basic ot generâl principle is that 'if a man signs a written conhact, he is to be

considered as the contracting party, unless it clearly appears that he executes it as agent only':

Aclcers v Austcorp International Ltd [2009] FCA 432 at 11481 (Rares J) and the authorities

oited therein.

To avoid liability under the contact the agernt must establish it had authority to act so

as to bind and entitle his principal: FMB Reynolds, Bowsteød and Reltnolds on Agency (78th

ed, SweEt & Maxwell Ltd, 2006) atÍ8-072). The relationship ofprincipal and agent may be

constituted in two ways, ftst, by agreoment, whether contractual or not, b€f\reen principal

and agent, which may bo exprer¡s, or implied from the conduct or situation ofthe parties and,

secondly, refrospectively, by subsequent ratiñcation by tle principal of acts done on his

behalf, Importantly, howwer, it ha.s been held that the doctine of ¡atification does not apply

to undisclosed principalsi FMB Reynolds, Bows teød ønd Reynolds on Agency (18ù ed, Sweet

& Maxwell Ltd,2006) allS-0721, citngKeighley, Møxsted & Co v Durunt [1901] AC 240.

On no view have the applicsrits esøblished that an agreement existed between AFAL

or AFGL, on the one hand, and AFGPL on the other, by which AFAL or AFGL had authority

to bind AFGPL to employment contracts.

Agreements aro trot to be implied lightly. The relationship of principal and agont

cannot be constituted simply by the fact that AFGPL is the wholly owned subsidiary ofAFGL. This alone does not establish the existence ofan agreement. To imply the existence

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of such an agreement simply from the fact that AFGL is the parent company of ArGpLwould be to ignore the laws of corporate govemanc€, The business of a company is to be

managed by or under the direction of the directors, who owe duties to act in the best interests

ofAFGPL (notAFGL).

There is no eeidence of AFGPL having conferred authority upon either AFGL orAFAL to aot as its agent in respect of employmmt conhacts or otherr¡yise and there is no

evidence of any subsequort ratification by AFGpL of any such conduct.

In order to escape personal liability the agent must do more than disclose the identity

of the principal, he (or it) must make it clear that he is conhacting on thc principal's behalf

and not on his (or its) owr:. HJ Lyons & sando Ltd v Houlson [1963] SASR 29 at 31. Th¿t

cannot be thc preseart case in ligþt of the contractual terms agreed upon by AFAL or AFGL,particularly those set out under the heading 'Relationship botween the Parties'. The cases

range from situations wherre the tlird party has no knowledge of the involvement of any

principal to cases where the third party is aware of the involvement of thc princþal but is not

clcar as to his exact relationship with the agent. Accordin g to Bowstead and. Reynolds, tn alltlese cases the first requisite is that the agent is personally liable as the contracting party:

otherwise the transaction would lack certainty. kr addition, many cases suggest or imply that

a third party dealing with ari apparent prinoipal has no duty of inquiry as to \ryhother that

person has anyone behind him; that he need not establish that he had no knowledge of aprincipal's existence; and that oonsüuctive notice of it is not to be attributed to him:

FMB Reynolds, Bowstead and Reynolds on Agency (2006) (l8tt'ed.) at [3-075] a¡rd the

authorities citod therein, particularly Public Trustee v Taylor t19781 VR 289. See also,

GE Dal Pont, Zaw oJ Agency (2001) (lsted,) at [23.1]

ln my view, the correct conctusion to draw from the objective evidence is that a

reasonablc observer of the communications that led to the entering of the conhact, together

with the background facts known to the parties, would conclude that the parties intended that

the contracts of ønployment would be with 'Allco Finance Group Limited'. That is, AFAL

and AFGL e¡rterod into the ¡elevant employment conkacts as principals, No wrifte¡r offers ofemployment were serit to prospective employeos on the lotterhead of AFGPL. Instoad, they

wef,e on the 'Allco Finanoe Group Limited' letterhead. AFAL and A-FGL a¡e the only

companies referred to in thc individually tailored terms. There is no evidence of any agency

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relationship having been disclosed at or befo¡e the time of conhacting. The statement: 'youwill be formally employed by AFG Pty Ltd' in the st¡nda¡d terrns and conditions ca¡not

absolve 'Allco Finance Crroup Limited' from liability under the conhacts of employmart. Itis not a disclaimerr of liability, being a cleæ statement thst'Allco Finance Group Limited' is

not contracting on its own behalf. It is not even a clear statement that this contract inparticulâr is being entered into on behalf of AFGPL; the staterrent is expressed in the future

tensg in circumstances where the othe¡ terms are expressed in the present tense and it fails to

expressly identifu AFGPL as being the principal on whose behalf this particular conhact is

being signed.

Finally, the onus is on AFAL and AFGL to show there âro circumstances, including

suoh knowledge, sufficient to displace the prima facie inference that they are the ones liable

on the conkacts. This onus hæ not been disoharged.

For these feasotrs, the applicants' contention mnc€,ming agency is no answer to the

fact that A-FGPL is not a party to tho coDtracts of employmøtt.

The Indemnity Argument

On any view of the widence, an act by the directo¡s of AFGPL that caused AFGPL to

ass"nre liability for salaries afid as an errrployer generally, for e:<ample under the anti-

disodmination and occupational health and safety legislatio& would have caused AFGPL to

become insolvent. AFGPL had no assets. There is no widence AFGL offered an express

indemnity for these liabilities. There is no evidence of a direct request from AFGL that

AFGPL assume such liabilities or that the directo¡s of AFGPL accepted any such request.

Un7íke Eugenie Holdings Pty Ltd v St':qford (:rrtreported, 12 November 1991, Suprerne Court

of NSW, Giles J), there is no factual bæis for the Cou¡t to make a finding that AFGPL had an

implied indemnity from AFGL in respect of these liabilities. There is no evidence that

AFGPL assumed the liability or performed any act which could give rise to a consequential

indarmity against AFAL or AIGL. There is no evidonoe in the financial ¡ecords which in

any way (over a lengthy period) reflects the existence of such an indemnity or that AFAL or

AFGL were discharging a liability as indemnifier in favow of AFGPL. There is no widence

the di¡eoto¡s of AFGPL were cognisant in any way that the very substantial liabilities

assumed by AFGPL (on the applicant's case) could be oi were being discharged as alleged.

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The minutes of the Board of AFGPL show employees and qnployment issues were nevor

considered.

There is a material difference between a request to AFGpL to act as a rqrcrting entity,

in respect of which role it would not incur any liabitity as employer of record, and a request

to act as ernployer with all the conhactuål and statutory obligations arising from that role.

That AFGPL never assumed or performed the role of ernployer is cleæ ûom the evidence. Inaddition, AFGPL did not moet any of the criteria relied upon by the receivers to determine

whether it was an employer service company.

The existenoe of such an agreement is not capable of being infer¡ed from the mere

existence ofa term in the standa¡d terms and conditions annexed to the offers of anployment

that says: 'You will be formally employed by AFGPL'. First, this inference would be

contrary to the bala¡rce of the evidenoe. The minutes of the Boæd of AFGPL show

employees and employment issues were never considered. None of the minutes relating to

the parent company acknowledge the existence of such an agreemefit. Seoond, there is no

evidonoe the standard terms and conditions were shown to, let alone ¡atified, by the directors

of AFGPL. Third, the phrase speaks of future events. Fourth, the phrase 'formally

employed' is consistent with the limited role AFGPL in fact performed in the C;roup, being

the company that lent its name to be the reporting entity in respect of employee tax matters

and workers compensation.

ULTIMATE FINDINGS

For the foregoing reasons, I find that:

At all ¡elevant times prior to the appoinünent of the applicants as receivers and

managers of AFGPL, AFGL and AFAL on 4 November 2009, the first respondent,

and the persons he represents, were cmployees of AFGL oç if not, AFAL, and not

employees ofAFGPL;

At all relevant times prior to tho appoinhrent of the applicants as ¡eceivers and

managers ofAFGPL, AFGL and AFAL on 4 November 2009, the second respondent

was an employee of AFGL or, if not, AFAL, and not an employee of AFGPL;

(l)

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(3) At all relevant timos prior to the appointnent of the applicants as rocoivers and

ma¡râgeß of AFGPL, AFGL and AFAL on 4 Novernber 2009, the third respondent,

and the persons he reprosonts, were enrployees of AFGL or, if not, AFAL, and not

employees ofAFGPL;

(4) At all relwant times prior to the appointnent of the applicants as receivers and

manager¡¡ of AFGPL, AFGL and AFAL on 4 November 2009, the fourth respondent,

and the persons she repres€nts, were ernployees of AFGL or, if not, AFAL, and not

employees ofAFGPL;

(5) At all relevant times prior to the appointnent of the applicants as ¡eceivers and

managers of AFGPL, AFGL and AFAL on 4 Novernber 2009, the fiffà respondent

was an ernployee of AFGL or, if not, AFAL, and not an employee of AFGPL;

(6) From 19 January 2008 until 4 November 2008 ttre fifth respondent was also an

employee of Allco (Singapore) Limited and then Allm Management Pte Ltd;

(7) At all relevant times prior to the appointnent of the applicants as receivers and

managers of AFGPL, AFGL and AFAL on 4 November 2009, the sixth respondent

was an employee of AFGL or, ifnot, AFAL, and not an employee of AFGPL; and

(8) From 7 July 2006 until 4 November 2008 the sixth respondent was also an ernployee

of Allco (Singaporo) Limited and then Allco Management pte Ltd.

CONCLUSIONS

244 The first respondeût, and the persons he represents, were priority creditors of AFGL

or, ifnot, AFAL, for the purposes ofs 433(3)(c) ofthe Act.

z4s The second respondont is a priority c,îeditor of AFGL or, if not, AFAL, for the

purposes ofs a33(3)(c) of the Act.

246 The third respondent, and the persons he rrepresents, are priority øediton ofAIGL o¡ifnot, AFAL, for the purposes ofs a33(3)(c) ofthe Aot.

247 The fourth rospondent, and the pe,rsons she rcpresents, are priority creditors ofAFGLoç ifnot, AFAL, for the purposes ofs 433(3)(c) ofthe Act.

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The fifth respondernt is a priority c¡editor of AFGL or, if not, AFAL, for the p'rposesofs 433(3)(c) ofthe Act.

The sixth respondent is a priority creditor of AFGL or, if not, A-FAL, for the purposes

ofs 433(3)(c) ofthe Act.

I¡ the case of the fiffh and sixth respondents, their respective claims as prioritycreditors of AFGL or, if not, AFAL, for the purposes ofs 433(3)(c) wiil not extend to wages

and other amounts specified therein payable by Allm (Singapore) Limited o¡ AllcoManagernent Pte Ltd in respect ofservice rendered to those companies.

ORDERS

In the face of these conclusions the applicants' second further amended originatingprocess must be dismissed and the decla¡ations sought in the cross-claimants' fi.uther

amended cross-claim be made.

cosTs

During the course of the hearing senior counsel for the respondearts handed up a draftnotice of motion dealing with the subjoct of costs. He did not seek to file it in court but onthe next day indicated that his inshuotions were not to file and move on it r¡ntil aften Idelivered judgnent in the proceeding, In the circumstances, I do not propose to make any

order as to costs but will hear the parties at a mutually convenient time.

I certifu that the preceding twohundred urd fifry-two QsZ)numbered paragraphs ¿rre a true copyof the Reasons for Judgment hereinof the Honourable Justice Edrnonds.

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