Byrne v Powertrans Pty Ltd & Anor [2006] QIRC 109 (2006) 183 QGIG 537

[Extract from Queensland Government Industrial Gazette, dated 15 September, 2006, Vol. 183, No. 7, pages 537-542] QUEENSLAND INDUSATRIAL RELATIONS COMMISSION Industrial Relations Act 1999 - s.276 - application to vary or void a contract David Bradley Byrne AND Powertrans Pty Ltd and Gulfploy Pty Ltd (B/2005/624) COMMISSIONER BECHLY 6 September 2006 DECISION This matter concerns an application made by David Bradley Byrne pursuant to s. 276 of the Industrial Relations Act 1999 for an amendment to an employment contract to provide for: 1. payments of the sum of $79,600 being twelve months pay-in-lieu of notice; 2. payment of $25,000 for relocation expenses; 3. payment of a sum equivalent to the direct financial loss Mr Byrne sustains if he is required to return to Wagga Wagga and purchase a home (or purchase a home in any other location) in which to raise his family; 4. payment of the sum of $25,000 as education expenses for Mr Byrne’s eldest son; 5. a payment of the maximum liability Mr Byrne may sustain under his then existing residential tenancy agreement. The employment contract was with Gulfploy Pty Ltd (Gulfploy). There were several contracts entered into between Mr Byrne and Gulfploy. Mr Byrne was unemployed when the first contract was offered on 19 February 2004, having ceased employment as General Manager of the Byrne Group, a family business, in late 2003. That business operated at Wagga Wagga, New South Wales. Mr Byrne commenced employment with Gulfploy under the 19 February 2004 employment offer on 1 March 2004. That employment was in Brisbane. The February contract was substantially amended on 30 July 2004 and later, in a minor way in September 2004. The unchanged terms of the first offer of employment remained in place. Mr Byrne was dismissed on 22 February 2005 for reasons stated to be related to his conduct and performance. Business Structure Mr Byrne was employed within what is colloquially known as the Gulf or Cooper group of companies operating generally out of Darwin but with manufacturing premises also in Brisbane. Mr James Wilson Cooper could be said to be the patriarch of the Group. This Group is also known as the Gulf RTA Group and is controlled by Mr Cooper and his family. Gulfploy is the vehicle by which employees working in the variously named entities within the Group are employed. There are two entities of interest in this matter, Powertrans Pty Ltd (Powertrans) and Powerbuilt (Aust) Pty Ltd (Powerbuilt). These entities operate manufacturing businesses in Brisbane building off and on road trailers and road trains. Mr Byrne was offered, and accepted employment as Product Marketing and Support Manager of Powertrans under the first contract. Broadly this role involved the selling of transport equipment manufactured by Powertrans and the monitoring of product after sales. The Contracts Mr Byrne was first offered a contract with the Gulf RTA Group on 19 February 2004. He says that two contracts were offered on that day. The first contract proposed a salary of $85,000 per annum with a three months probationary period. Mr Byrne says that he was not satisfied with the salary proposed and negotiated a salary of $90,000 per annum and a probationary period of six months. He said he was particularly desirous of a six month probationary period to ensure a longer period during which he could be assessed by the respondent with a view to long-term employment. The probationary employment was able to be terminated by either party on one weeks notice. The contract was very basic in form and offered employment as Product Marketing and Support (Manager) for Powertrans as part of the Gulf RTA Group. -- 1 of 6 -- 2 Following negotiations between Mr Byrne and Richard Bund, Group Executive Manager of Gulfploy, who was charged by Mr Cooper to negotiate the employment arrangements with Mr Byrne, a new, more extensive contract was entered into on 30 July 2004 at Mr Byrne's instigation, some four months into the probation period. Mr Byrne retained the position of Product Marketing and Support Manger for Powertrans and remained employed by Gulfploy. His salary remained at $90,000 per annum but his income was added to by way of a $40,000 per annum Trust Distribution paid fortnightly. The contract provided a significant company superannuation contribution and generous relocation, house acquisition costs and living away from home allowance. Other more routine provision were made for a company vehicle, code of conduct and policies, intellectual property requirements and limitations on work other than for Gulfploy. Significantly the contract provided for termination by the giving of one months' notice by either party or immediately in the event of any misconduct as defined in Gulfploy Company Rules. Oddly the contract provided that the employment was deemed abandoned on an absence of more than three consecutive days without notification to the employer and further provided for a disputes settling procedure where either party could refer any matter in dispute to the Australian Industrial Relations Commission for mediation and which required the "parties to continue to work in accordance with normal work practices" in the event of a dispute between them. Of considerable significance in this contract was the gifting to Mr Byrne of a one third ownership of any entity to be set up to fabricate pull trailers, bins and chassis for Powertrans. This entity was given the name Powerbuilt. The contract described this entity as "a fabrication division within Powertrans" where as, in April 2004, some three months earlier, in an email to Mr Findlater, General Manager of Powertrans and copied to other Powertrans staff, including Mr Byrne, Mr Cooper's thoughts as to how Powerbuilt might function were expressed in the following terms: "... (b) Establishing a separate identity for fabrication of all chassis, bodies, etc and manufacturing all pull trailers, dollies, etc. I would see this identity as a component supplier to P/trans and not necessarily owned soley (sic) by P/trans. It would need to be commercial with hands on pull type trailer experience. Obviously this would require another facility hopefully close to existing plant. (c)... (d)...I think the market is right for a professional trailer builder and customised prime mover manufacturer to compliment our own range of product. And we already have or the access to the right people to make this all happen even though we may not have been using them to their full potentials todate.". The contract of 30 July 2004 provided that "the finer details of this component of your remuneration package shall be dealt with by way of a separate agreement to be drawn up specifically for Powerbuilt. To that point, this variation to employment conditions refers to that agreement and includes any relevant provisions herein.". Mr Byrne stated that it was at his insistence that the equity in the new entity be included in this contract as he required the commitment from the respondent before he would finally move his family to Brisbane for what he believed would be a period of long-term employment. Subsequently an entity, Powerbuilt (Aust) Pty Ltd was formed and registered with the Australian Securities and Investments Commission on 24 August 2004 and Mr Byrne was listed as a director and one third owner. Mr Byrne stated that the $40,000 per annum Trust payment was to recompense him for the work performed for the new entity, Powerbuilt. It seems reasonably clear on the material provided that Mr Byrne used as a bargaining chip his particular knowledge of pull-trailer sales and fabrication to negotiate these changes to his contract. No separate agreement was ever drawn up by the respondent specifically to deal with the finer points of the employment arrangements relating to Powerbuilt. However, there were written communications between Mr Byrne and Mr Bund about certain personal financial items proposed by Mr Byrne for payment by Powertrans as an advance against director’s drawings. Another aspect of Mr Byrne’s contract was his role in the General Management of Powerbuilt. There does not appear to be any formal appointment in writing to this position however, it appears from evidence, that Mr Byrne was publicly anointed in this role by Mr Cooper. -- 2 of 6 -- 3 The contract of 30 July 2004 would permit such an appointment. Paragraph 1 of that contract provided for the performance of a broader range of functions and/or movement between functions and work areas. Certainly the contract reference to Powerbuilt envisaged a significant control involvement by Mr Byrne with Powerbuilt. A further amendment to the contract was negotiated in September 2004. This amendment restructured the salary package and enabled Mr Byrne to salary sacrifice an amount towards his living away from home allowance. This was negotiated at Mr Byrne’s instigation. There is nothing in evidence as to the construction of the original contract or subsequent negotiated amendments, that suggests unfairness either in process or content. The arrangements were freely entered into between the parties of reasonably equal bargaining strengths on terms that were beneficial to both parties. What is proposed for the applicant is that it was implicit in the contract between them that the employment was to be one of long duration. It is said that the purpose of the agreement was to secure the applicant’s services in the long-term. There is no doubt that that is so. Mr Byrne was seeking some form of guarantee as to long-term employment before he moved his family and residence from Wagga Wagga where the particular health and education needs of one of his children was being satisfactorily met. On the other hand, Mr Cooper was looking for someone with the knowledge and skills necessary to establish and develop, over the long-term, a trailer fabrication business which would complement other entities under his control. However Mr Byrne's contentions go beyond that concept. The effect of Mr Byrne's proposal is that the contract, together with the part ownership and directorship of Powerbuilt gave him some form of tenure which should not be terminated on the one months' notice provided in the contract. Included as a basis of this concept was his family and residential situation. Mr Byrne's wife owned the family house in Wagga Wagga. One of their children suffered an illness which required very close schooling support. He was settled into a school which could provide the support and Mrs Byrne was reluctant to move him to Brisbane unless long-term employment was assured, hence the request by Mr Byrne for a long probation period. Mr Byrne states that Mr Cooper was aware of his family situation, it having been the subject of conversation when he met Mr and Mrs Cooper at a Brisbane Hotel prior to his employment. Mr Byrne states that this occurred when he met Mr Cooper in Brisbane so that he could look over the activities of Powertrans. The family circumstances appear not to have been raised during the inspection of the plant. On the evening of that day Mr and Mrs Cooper had arranged to dine with two friends, and Mr Byrne joined them. He was staying at the same hotel. Mr Byrne states that he discussed his son's condition during the course of the evening. Mrs Cooper recalls a social exchange about each others family, including each others children's illnesses. Mr Cooper recalls a passing discussion about the illness of one of Mr Byrne's children. The contract negotiations were between Mr Byrne and Mr Bund. Mr Byrne advised Mr Bund that one of his children had special needs but, according to Mr Bund there was no elaboration beyond that. There is nothing on the record to suggest that the arrangements entered into were anything beyond what could be considered to be a normal or usual process of family visitation arrangements prior to relocation and later full relocation of family goods and chattels to Brisbane. The respondent did arrange for transport for Mrs Byrne to travel to Brisbane with the child to attend an open day with a special school and to look at Brisbane in general and meet real estate people. Mr Byrne referred to this in an email of 18 March 2004 as "It's only Sam coming down to meet with a school for Harry...". It was only after the contract of 30 July 2004 that the family moved to Brisbane after finding suitable schooling for their son. A two year lease was taken on a house at a rental of $600 per week. Mr Byrne had been in receipt of a living away from home allowance of $400 per week which he continued to receive after moving into the new rental accommodation. He later arranged to salary sacrifice a further $200 per week which was applied to the balance of the rent. The family home in Wagga Wagga was sold. The housing circumstance of Mr Byrne was clearly a part of the contract consideration. This would not be an unusual consideration when appointing a person from outside the business locality. However the respondent, both Mr Cooper and Mr Bund, reject that any acceptance that the family and residential circumstances of Mr Byrne provided any explicit or implicit condition of long-term employment. While Mr Cooper rejects the proposition that he gave any commitment as to long-term employment, the gifting of one third of the Powerbuilt business to Mr Byrne clearly suggests that a long-term arrangement was envisaged. However, the mere fact that that contract came to an end in the short term does not make it an unfair contract simply because it came to an end at the behest of one of the parties. Each party was required to perform in a way which advanced their respective contractual entitlements and responsibilities. -- 3 of 6 -- 4 It is not clear as to precisely what proportion of time Mr Byrne spent over the period between his responsibilities with Powertrans and Powerbuilt, but what seems to be clear from his evidence is that he was adequately funded both as a payment of salary and as to business expenses for Powerbuilt to enable him to carry out his contractual responsibilities with respect to Powertrans and Powerbuilt. He was provided with appropriate advice with respect to setting up of accounts for Powerbuilt. He was able to negotiate the sale of several millions of dollars of road trains etc. He was provided with premises by Powertrans to construct the road trailers etc. He was provided with labour to do the fabrication work. He had access to engineering design facilities. He was able to sub-contract out such work as he felt necessary to meet contractual commitments. In all of this there was an intermixing of his responsibilities to both Powertrans and Powerbuilt. However there were problems. Problems to the extent that Mr Cooper engaged the services of a consultant to investigate and report. The problems leading to this can be briefly related as follows:-  serious clash between Mr Linklater, the General Manager of Powertrans and Mr Byrne. These issues were discussed with Mr Byrne at the time and the reporting structure was reorganised;  difficulties experienced with Mr Byrne about the pricing for a contract with Brambles. It appears that Mr Byrne had not factored in certain costs associated with supply of the product and had priced the job on estimates from a sub-contractor, not firm quoted prices. A loss in the order of $800,000 was projected on this project after beneficial modifications were negotiated subsequent to Mr Byrne's departure;  further problems in the relationship between Mr Linklater and Mr Byrne all said to be the result of Mr Byrne inappropriately interfering in the general management of the Powertrans operation. This matter was again raised with Mr Byrne by Mr Cooper;  a deterioration in relationships with production staff said to be the result of Mr Byrne’s management style;  spending beyond authorised limits on capital equipment;  rework costing $750,000 on products manufactured the result of directions by Mr Byrne to alter production specifications;  use of company funds to pay personal expenses. This last matter had been the subject of communication between Mr Byrne and Mr Bund. The applicant characterised the matter as simply taking an advance against director’s drawings and as having been approved by Mr Bund. The difficulty with this is that there has never been a director’s meeting where such drawings might have received some form of approval. Mr Cooper states that the matter was never discussed with him and states that he would never have given approval particularly as he (through his family business) was funding Powerbuilt. In the circumstances about the third shareholder (which will be dealt with later) it is obvious that withdrawals against future director’s drawings was never discussed with that shareholder. As to the alleged approval by Mr Bund, I would not, on the evidence, consider the communication tendered as being an approval. That communication (exhibit RB8 at 9) refers to the differentiation between business taxable deductions and personal expenses. It does not amount to an approval to charge personal expenses against the business. Mr Byrne challenges the capacity of the respondent to dismiss him from Powertrans over issues concerning Powerbuilt. Mr Byrne was first contracted in March 2004 to Gulfploy to provide services as Product Marketing and Support Manager for Powertrans on a base salary of $90,000 per annum plus other benefits. He then negotiated a variation to that contract to include, in addition to existing responsibilities, General Managership responsibilities for Powerbuilt with an associated additional remuneration of $40,000 per annum paid from the Gulfploy Trust. Thus Mr Byrne was employed under one contract to provide services to two separate entities. It was proposed for Mr Byrne that Powerbuilt was a separate, independent entity from Powertrans and Gulfploy and that Mr Byrne, as a director, was entitled to use the entities funds for personal expense in the form of a loan against future director's fees or entitlements. A significant difficulty with this approach is that the contract proposed that Powerbuilt would be a fabrication division within Powertrans and that its purpose was to manufacture all tow trailers, bins and chassis work for Powertrans and ultimately provide Powertrans client base with a full transportation package. The contract described Mr Byrne as being "integral to this fabrication division" and goes on to offer him one third of the business in whatever form it might take. -- 4 of 6 -- 5 Powerbuilt appears to have been, at that stage of its life, totally, or almost totally dependent upon Powertrans and funding from Mr Cooper, through his various entities, for its existence. There were not two separate contracts, but one contract to remunerate Mr Byrne for work performed, of an intermixed nature, for the two entities. That contract was terminated by the respondent. Powerbuilt Shareholding Powerbuilt was registered with the Australian Securities and Investment Commission (ASIC) on 24 August 2004. There were three shareholders, these being Mr D. Byrne, Mr M. Murray, who operated an engineering business in Darwin and Mr J. Cooper. During the course of Mr Byrne’s employment it appears that some arrangement was made to remove Mr Murray as a shareholder and split the shareholding equally between Mr Byrne and Mr Cooper. Who instigated this proposal and how it was to be effected is uncertain. Mr Murray stated that he knew nothing about this. Mr Cooper stated that he knew nothing about it either but, peculiarly, does refer to Mr Byrne being a 50 percent shareholder in correspondence initiated by him and tendered during the proceedings. It is not clear whether he participated in any decision to oust Mr Murray or was simply informed of the proposed changes but I consider it to be somewhat strange that a person in his position in the organisation would not have a clearer recollection of this matter. Mr Bund also refers to Mr Murray being removed as a shareholder in correspondence but can recall little about the matter, notwithstanding that he issued instructions to that effect to lawyers. Those instructions were never carried out. There are proceedings in another Court to determine what interest Mr Byrne may have in Powerbuilt. Findings Mr Byrne was an employee of Gulfploy. Under his final amended contract he was employed to provide services to both Powertrans and Powerbuilt. His evidence is that he was paid a salary of $90,000 per annum to provide services to Powertrans and an amount of $40,000 to provide services to Powerbuilt. There is nothing in the process of formulation of the various contracts which is unfair. Mr Byrne contends that the contract conditions providing for one months' notice of termination is unfair because inherent in the negotiations about the contract and the giving of a one third ownership of Powerbuilt was a guarantee of long-term employment. Added to this is the proposition that the special needs circumstances of Mr Byrne's eldest son should be recognised as creating an entitlement for a longer term notice period because of the difficulties in finding suitable schooling in the short term. The respondent denies any guarantee of long-term employment. It further denies that any special consideration was intended, by either party in any of the contract negotiations with respect to the educational need of Mr Byrne's son. Without doubt there was intent by both parties, as is usually the case in employment contracts, that the employment would be of a long-term nature. What goes hand in hand with that intent is that each party is required to perform their respective obligations under the contract in a manner which enables the contract to remain in place. There is no evidence that the respondent, either Gulfploy or the other entities being Powertrans, Powerbuilt or any other entity within what is colloquially known as the Gulf Group of Companies, did not comply with the obligation upon them to provide that which was necessary to enable Mr Byrne to carry out his obligations. Unfortunately, Mr Byrne was not able to meet the management obligations imposed upon him by the contract he freely entered into. While there was some question as to the extent of losses incurred arising from decisions made by him, the amount was considerable. The lack of propriety in charging personal expenses exceeding $20,000 to the Powerbuilt funds in the absence of directors' approval to do so is obvious. The fact that he adopted such practices with respect to personal expenses when he was a director of his own family business is totally irrelevant. I have given a great deal of consideration to the material about the educational need of Mr Byrne's son and the effect that this has, or was intended to have, on the contract. There is no doubt that the son's educational needs were foremost in Mrs Byrne's mind. She placed her son's needs first as she was not prepared to move from Wagga Wagga unless there was some certainty about tenure of her husband in the job. This is a perfectly reasonable position to adopt. -- 5 of 6 -- 6 While Mr Byrne did secure a reasonable degree or expectancy of long-term employment, the long-term nature was not related to his son's educational needs or the process of relocating from Wagga Wagga to Brisbane That move was a necessity in whatever role he took up whether in Brisbane or any other place. He clearly informed the respondent that he intended to move from Wagga Wagga. The long-term security was dependent upon his capacity to meet the commercial requirement of the roles he occupied. This he was unable to satisfactorily do. I can find nothing in the relocation arrangements, other than what involved normal or usual arrangements, which could be taken as imposing an obligation upon the respondent to provide the redress sought by the applicant. The contract is not unfair. Mr Cooper bought Mr Byrne’s contract to an end. He did so summarily. The matter before me is not one for judgment under Chapter 3 of the Act. The application is dismissed. R.E. BECHLY, Commissioner. Hearing Details: 2005 1 August 11, 22 November 2006 15 May 31 July 1, 2, 3, 4, 14, 17 August Appearances: Mr R. Perry S.C. instructed by Shand Taylor Lawyers for the applicant. Mr J. Murdoch S.C. instructed by Franklin Athanasellis Solicitors for the respondent. Released: 6 September 2006 Government Printer, Queensland The State of Queensland 2006. -- 6 of 6 --