Byrne v Powertrans Pty Ltd and/or Gulfploy Pty Ltd [2006] QIRC 39 (2006) 181 QGIG 388

QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 - s. 276 - power to amend or void contracts David Byrne AND Powertrans Pty Ltd and/or Gulfploy Pty Ltd (B/2005/624) DEPUTY PRESIDENT SWAN 3 March 2006 DECISION The applicant, Mr Byrne has sought relief against the respondent, Powertrans Pty Ltd and/or Gulfploy Pty Ltd (hereafter "the respondent" unless otherwise described) under section 276 "Power to amend or void contract" of the Industrial Relations Act 1990 (the Act). Mr Byrne seeks the amendment of the contract between himself and the respondent. It is not necessary to detail the specific relief sought, as the respondent submits that Mr Byrne's annual wage for the purposes of section 276(6)(b) of the Act exceeds $90,400 which therefore precludes him from relief under this section of the Act. Section 276(6) of the Act provides - "A person cannot make an application under this section if - (a) … (b) `the person - (i) is not a public service officer employed on tenure under the Public Service Act 1996; and (ii) has an annual wage of more than $68,000 or a greater amount stated in, or worked out in a way prescribed under a regulation.". (Commission Note - By way of amendment to the Industrial Relations Regulation 2000, this amount is $90,400 as of 20 August 2004). Mr Byrne is not a public service officer employed on tenure and the respondent says that his annual wage at the time of his termination of employment was $165,800 per annum or at least an amount greater than the statutory limit. The onus is on the respondent to establish that Mr Byrne's annual wages exceed the jurisdictional limit. Mr Byrne was employed by the respondent on 1 March 2004 and his employment was terminated on 22 February 2005. The respondent says that his engagement was initially set out in an e-mail from Mr Richard Bund, Group Executive Manager, on behalf of the respondent dated 19 February 2004. That e-mail states, inter alia, that: "Salary $90,000 per annum, to be review[ed] after six months with annual reviews thereafter Provision of a company owned vehicle Provision of a mobile phone Housing/Travel Allowances during trial period (see comments below) Relocation costs shall be provided to you A company credit card shall be provided to you to ensure reimbursement of all costs borne whilst en route … Trial Period Six (6) months from commencement date (during this period either party may terminate providing one week's notice). We shall need to come to some arrangements with respect to your accommodation requirements whilst in the trial period. We also note the need for some assistance with airfares. Rather than us attempt to make an appropriate allowance for such matters, please contact me to discuss this further. We are sure we can work something out which will be mutually acceptable. Also contact me on the issue of flexibility with incorporating your wife with your remuneration.". Mr Bund gave evidence that if Mr Byrne no longer required a motor vehicle and/or purchased his own home, then the value of the motor vehicle and the rental payments would be paid to him by way of salary or through whatever other legally available structure. The respondent valued the motor vehicle at $15,000 per annum and initially the respondent paid $410 per week to a letting agent for Mr Byrne's accommodation, and also paid other costs associated with that accommodation. By July 2004, the respondent says that the remuneration package was renegotiated to a total package of $165,800 plus superannuation. The parties had agreed to flexibility as to how the total package would be structured. The respondent says that the agreed structure was as follows: "(i) Mr Byrne was paid an annual salary of $90,000 per annum (exclusive of superannuation) -- 1 of 7 -- 2 (ii) Mr Byrne continued to be provided with the same company motor vehicle (iii) The company continued to pay the cost of Mr Byrne's accommodation in Brisbane; (iv) Mr Byrne was paid an amount of $40,000 per annum by way of a trust distribution.". [see attachment "RB2" to Mr Bund's affidavit] It is agreed by both parties that superannuation was paid by the respondent on the amount of $130,000 per annum. The respondent says that the same understandings existed as before with regard to the motor vehicle and the accommodation in that, were they no longer required, Mr Byrne would receive by way of salary the equivalent amounts. In October 2004, the remuneration package for Mr Byrne was again renegotiated. The rental allowance was increased at Mr Byrne's request to an amount of $31,200 per annum and this allowance was paid directly to him rather than to a landlord as had previously occurred. A commensurate decrease in his salary component then occurred. As from 13 October 2004, the respondent says that Mr Byrne's terms of engagement were as follows: "(i) Mr Byrne was paid a salary of $79,600 per annum; (ii) Mr Byrne was paid a living away from home allowance of $1200 per fortnight ($31,200 per annum); (iii) Mr Byrne was provided with (the same) company motor vehicle; (v) Mr Byrne continued to be paid an amount of $40,000 per annum by way of a trust distribution.". Superannuation continued to be paid on the amount of $130,000 per annum. In the respondent's view, continued as well were the original arrangements as per the motor vehicle and the rental assistance. Mr Bund gave evidence that Mr Byrne could direct that the trust distribution could cease and that the amount of that distribution could be paid to him in some other manner. The respondent submits that "Mr Byrne's entitlement was to have paid to him an amount, however properly or lawfully structured, of $165,800 per annum". The applicant says that his annual wage was $90,000. The applicant denies that there was any agreement that he had an entitlement to be paid in lieu of or to direct that a payment be made in lieu of the motor vehicle or rental allowance were he not to require same at any stage. Mr Byrne states that the motor vehicle was "principally for use by [him] professionally" and if the vehicle was to be utilised for private purposes, then that was merely incidental to its primary purpose. Mr Byrne believed that neither the motor vehicle nor the rental allowance constituted wages. Concerning the trust distribution, the applicant stated that this was unconnected to his employment with the respondent, Powertrans. Mr Byrne was a director and shareholder of Powerbuilt, which was a separate and distinct company to Powertrans. When the respondent calculated Mr Byrne's "wages" for the purpose of paying him his entitlements upon termination of employment, the trust distribution was not identified as "wages"'. The applicant says the respondent's position altered after Mr Byrne had filed his application in the Commission. When the initial adjustments were made to Mr Byrne's wages, the respondent believed that Mr Byrne's salary was $79,600. Further, the applicant stated that there was no evidence in Mr Bund's statement or the available contracts to show that Mr Byrne could require the trust distribution to be paid to him as part of his salary. In the alternative, the applicant refers to Mr Bund's description of the trust distribution in his affidavit as "something in the nature of a profit share" and he contended that "an arrangement whereby employees receive a share of profits is not a wage within the ordinary definition of that term or within the definition contained in schedule 5 to the Act". Consideration of the Evidence The issues for the Commission to consider are whether (1) the cost of the motor vehicle, (2) the payments in respect of accommodation and (3) the distribution by the Gulfploy Trust constitute "wages" for the purpose of this application. The parties rely upon the legal principles enunciated in O'Connor v Electroboard Administration Pty Ltd (2001) 168 QGIG 90 where President Hall found that the term "wages" should be given its ordinary and natural meaning. (1) The Motor Vehicle Whether or not the value of the motor vehicle constituted "wages" depended upon whether or not the employee had an ongoing exercisable right, immediately prior to his termination of employment, to be paid the value of the vehicle rather than be provided with the vehicle. (Lepre and State of Queensland (2003) 74 QGIG 90). In the circumstances of this case, there is significant documentary evidence around this point to be considered as well as evidence of oral discussions between the parties. Mr Bund says that much of the agreement reached between himself and Mr Byrne was by way of "oral agreements". Mr Byrne denies this and says that the applicable terms and conditions of employment were contained in the many e-mails passing between the two parties. -- 2 of 7 -- 3 The applicant states that a particular e-mail dated 30 July 2004, represents the terms and conditions of employment which existed between the parties. Through cross-examination of Mr Bund by Counsel for the applicant, it became clear that the determination of a monetary figure to be applied to the motor vehicle was one reached between Mr Cooper (Director of Powertrans Pty Ltd and Gulfploy Pty Ltd - both Powertrans and Gulfploy are part of the Gulf RTA group) and Mr Bund. These negotiations never included Mr Byrne. The e-mail dated 30 July 2004 specifically dealt with the motor vehicle and contained the following detail: "Company Vehicle We realise that your role will include travel, some of this travel may be required to be done by car. Therefore you will have available to you a company vehicle for which you will be required to hold an appropriate current drivers licence. The vehicle is to be housed at your permanent residential address. In the case that your address changes, you are to notify Powertrans administration. You will be supplied with a fuel card; you are responsible for the reconciliation of this card and forward all paperwork to the Creditors clerk in Brisbane by the 5th day of the following month. On termination of this employment contract by either party you are to forward the fuel card to Powertrans administration. In the event you are involved in an accident or lose your licence you are to report this immediately or as soon as practicable to General Manger - Powertrans. The carrying of passengers in Company vehicles is to be in accordance with Gulfploy Company Rules.". It is accepted by Mr Bund that at the time of entering into the contractual relationship with Mr Byrne there were never any discussions between them as to the value of the motor vehicle. While Mr Bund says that there had been a discussion with Mr Byrne on the question of a novated lease vehicle, nothing eventuated from those discussions. Those discussions included commentary to the effect that if Mr Byrne no longer required the vehicle, then the respondent would readjust his salary upwards. However, because the proposal of the novated lease vehicle did not eventuate, this issue became academic. It is apparent that all of the terms and conditions of employment for the applicant were contained in the e-mail between the parties dated 30 July 2004. Given the detail provided by the respondent in writing to the applicant concerning the motor vehicle (which does not mention anything about an exercisable right to be paid the value of the vehicle upon termination of employment) and given the absence of involvement of the applicant in any discussions concerning the value of the vehicle, I find that the applicant's vehicle is precluded from consideration as wages. In response to a question from Mr Perry: "So, the offer and acceptance of employment is based upon the terms set out in this e-mail? Mr Bund - That's correct " (see Page 24 - transcript). In saying that, I accept that Mr Bund believed that the content of the e-mail did represent all that was understood between the parties as to the question of the motor vehicle. (2) Payments in respect of accommodation On this issue, the respondent states that the payments directly to the landlord or letting agent of the rental on Mr Byrne's accommodation in Brisbane constitute wages. The respondent further states that "the payment was an amount liable to be paid by the employer company on behalf of Mr Byrne and was not paid by way of reimbursement for any expense incurred by Mr Byrne". As at the time of termination of employment, Mr Byrne was paid a "living away from home allowance" of $31,200 per annum. The history around this issue is as follows: From the commencement of Mr Byrne's employment in October 2004, the respondent paid the rental of Mr Byrne's accommodation. The amount was $410 per week. In or around July 2004 Mr Byrne moved his family to Brisbane at which time he leased a property. Around that time and onwards, Mr Byrne received an amount of $600 per week for the allowance. Mr Byrne stated that the $600 was made up of $400 per week which was paid on the rental accommodation in Brisbane and the increase in rental of $200, when he rented a new property in which the family -- 3 of 7 -- 4 would live. As a consequence of this, Mr Byrne's salary was reduced to $79,000 and Mr Byrne received a non-taxable living away from home allowance of $1200 per fortnight. Initially, the allowance was paid directly to the leasing landlord, but eventually the allowance was paid directly to Mr Byrne. Documented references to the living away from home allowance include: [e-mail sent 19 February 2004 from Mr Bund to Mr Byrne which states, inter alia]: "We shall need to come to some arrangements with respect of your accommodation requirements whilst in the trial period. We also note the need for some assistance with airfares. Rather than us attempt to make an appropriate allowance for such matters, please contact me to discuss this further. We are sure we can work something out which will be mutually acceptable. Also contact me on the issue of flexibility with incorporating your wife with your remuneration."; and [correspondence dated 30 July 2004 from respondent to Mr Byrne "Variation to Ongoing Employment" which states, inter alia]: "Living Away From Home Allowance Powertrans will provide rental assistance to the value of $800.00 per fortnight whilst you have a tenancy agreement. In the event you purchase your own home this allowance will cease.". Mr Byrne signed off on the conditions contained in the correspondence dated 30 July 2004. In mid September 2004, Mr Byrne signed a lease on a residential property for which $600 per week was payable. He states "at my request, Powertrans varied my employment contract to provide for my salary to be reduced from $90,000 to $79,000 per year. This enabled me to salary sacrifice $200 per week and apply the money towards rent. I continued to receive the living away from home allowance of $400 per week.". The respondent submits that the nature of this payment ceased to be a living away from home allowance once the applicant's family moved to Brisbane and established a home base. Theoretically, that is practical observation. However, the applicant did not purchase his own home (as per the e-mail dated 28 February 04) and he has continued to receive the allowance in its original form. There is nothing in any of the documentation which shows that the allowance was a component of the applicant's wages. The payment of the allowance had an end date (i.e. at the time of purchase of his own home), but there is nothing to show that, had the applicant bought his own home, then the amount of the allowance would be added to his wages (save for a readjustment of his wages because of the salary sacrifice component back to the earlier cited amount of $90,000). What is documented is that were a house to be purchased by the applicant, then the allowance would cease. In all, I am not satisfied that the allowance formed part of the applicant's wages. Trust Distribution At the time when Mr Byrne was employed by Powertrans, a new company was established in August 2004. This company was Powerbuilt (Aust) Pty Ltd. The directors of the company were Mr Cooper, Mr Murray and the applicant. Around September 2004, Mr Byrne says that from then until the time of his termination of employment, he was working up to 80 hours per week for both entities. Mr Byrne's evidence is that Powertrans and Powerbuilt are two separate entities. Mr Byrne was employed by Powertrans, and he was also a director and shareholder of Powerbuilt (Aust) Pty Ltd. Mr Byrne worked as both an employee of Powertrans and, as he says, also worked in his capacity as a director of Powerbuilt. The Trust is the Gulfploy Trust. The Gulfploy group of companies was controlled by Mr Cooper and his wife. Mr Byrne says that, because of his excessive workload, Mr Bund accepted that his work at Powerbuilt was to be remunerated by way of a shareholding and also by way of remuneration relating to Mr Byrne's work with Powerbuilt. Mr Byrne states that discussions were held between himself and Mr Bund on 6 and 7 November 2004 concerning methods of payment for performance of these dual roles. In an e-mail to Mr Byrne, Mr Bund stated: "Byrne's time needs to be remunerated for his time working in the [Powerbuilt] business (because if he wasn't doing it then we would have to pay someone to do it) and then at another level because as a business owner, in the way of -- 4 of 7 -- 5 profits. To achieve this, we apportion his current wage to fairly reflect the effort. (which after talking to Jim [Cooper] he thought 2/3rd Pbuilt and 1/3 Ptrans so that was my mistake, sorry. Although if you believe 50/50 is an accurate reflection, then no worries).". (point 37 of Statement of David Bradley Byrne] The respondent claims that this apportionment never occurred. Mr Byrne further stated that: "After we commenced the Powerbuilt venture, my working hours increased to (on average 70-80 hours per week). This is particularly because I was working both for Powertrans and performing my duties as director of Powerbuilt. That is why it was structured as a trust distribution rather than salary. In essence I received a salary of $90,000.00 for the work I performed for Powertrans and a trust distribution of $40,000 was payable in respect of the work I performed for Powerbuilt.". [Paragraph 34 - Statement of David Bradley Byrne] The respondent says that the extra remuneration related solely to the applicant's work for Powertrans. The respondent claims that the "vehicle of a trust was chosen to meet Mr Byrne's requirement that his renegotiated wage of $130,000 should be paid to him in as tax effective a way as possible". The respondent says that this decision was made in July 2004. The respondent claims that the actual discussions referred to above occurred in November 2004, showing that the wage readjustment had occurred without any consideration of the work that the applicant was performing at the time. There is little doubt that the applicant was looking at ways of arranging his taxation payments to best benefit himself (e.g. his accommodation payment arrangements). The respondent says that the amount of $40,000 was actually paid to Mr Byrne by Powertrans (and not by Powerbuilt) in equal instalments fortnightly into the same bank account into which the salary of $90,000 was paid. It is also the case that superannuation was paid by Powertrans to Mr Byrne on the amount of $130,000 per annum. Somewhat late in these proceedings, the applicant sought, and was granted, leave to produce further evidence to the Commission around the issue of Mr Byrne and his relationship with Powerbuilt. Two documents were produced (Exhibit 9 – "Powertrans and Powerbuilt Issues" and Exhibit 10 "Powerbuilt" ). In essence, the documents show that certain payments initially made by Mr Byrne were reimbursed to him by Powerbuilt. The applicant (through Counsel) says that the documents show that there was a "significant divergence" (transcript page 94) between Mr Bund and a Ms Saunders (Financial Controller of Gulf RTA Group) as to "what items of expenditure might or might not be paid by Powerbuilt to Mr Byrne" (transcript page 94). Exhibit 10 is a document produced by the applicant under the heading "Powerbuilt". The document has a number of sub-headings ("Travel and Accom; Parking Fees; Staff Xmas Gifts; Airfares; Entertainment; Taxi's & Hire Cars; Office Plant & Equipment; Personal Drawings; Stock; Computer Costs; Telephone; GST Paid"). Queries are then raised under these sub-headings with their apportioned monetary expenditure, for example: "Which staff members was this wine for?; What was the purpose of this trip to Sydney. Who did you meet with? Number of Days? Who did you have dinner with? Linked to the purpose of the trip? …". Mr Bund explains the documents in the following manner: Ms Saunders was the financial controller of the Gulf RTA Group. Ms Saunders was asked by Mr Cooper to reconstruct and "basically tidy up" the affairs of Powerbuilt. Ms Saunders had no prior dealings with Powerbuilt or Powertrans. Her office was based in Darwin and she dealt with the Gulf RTA business. Mr Bund says that he had not seen the documents until after the termination of the applicant's employment. The amounts referred to were "all amounts paid to David Byrne's personal credit cards. There was no company credit card for Powerbuilt so when David was incurring expenses which he thought should be attributable to the business of Powerbuilt he would put them on his personal credit card and, you know, along with whatever other items were of his own business on that credit card and then the - the whole amount was reimbursed." [transcript page 92]. Mr Bund stressed that the payments to the credit card of Mr Byrne were not related to any "employment" with Powertrans. Mr Bund confirmed that Ms Saunders had been asked by Mr Cooper to prepare these documents and, at that time, Ms Saunders had access to both Mr and Mrs Cooper and Mr Bund for assistance. On the first two components of this case, I have been able to determine the issues largely based on the documentation before me and the evidence of the witnesses. However, in considering this particular component of the claim, I find that -- 5 of 7 -- 6 the respondent's failure to call Mr Cooper leaves me little option other than to draw the adverse inference that Mr Cooper's evidence would not have helped the respondent (Jones and Dunkle (1959) 101 CLR 298 at 299). This is particularly so as it relates to what may have underpinned any decisions purportedly made by Mr Cooper and carried out by Mr Bund. Gulfploy Pty Ltd was controlled by Mr Cooper and his wife and played an integral role in the structures of both Powerbuilt and Powertrans. I am unable to accept representations made by Mr Bund on Mr Cooper's behalf. I have been given no plausible reason as to why Mr Cooper was not called to give evidence in this matter. I have considered the direct evidence given by Mr Bund and have not considered the "hearsay" element of his evidence. I have also considered whatever documentary evidence has been produced by the applicant. The e-mail to which earlier reference has been made (Point 37 of Mr Byrne's statement) has largely persuaded me that Mr Byrne was employed by Powerbuilt and it was intended that he be "renumerated" by them for the work he performed because, in Bund's words, "if he wasn't doing it then we would have to pay someone to do it". While I accept that the apportionment previously mentioned did not occur, there is no acceptable evidence before me to show that the underlying belief that Mr Byrne was performing work for Powerbuilt for which he should be renumerated had altered. The "monetary amount" he received for this work, however fashioned, was clearly intended to be remuneration for the work performed for Powerbuilt. Ms Saunders was also not called to give evidence, although I am unsure as to whether she has continued in her employment with Gulfploy Pty Ltd. In any event, no explanation was given by the respondent as to why she could not provide evidence to the Commission. The evidence around how or why she produced such documents is hearsay. It has been difficult to determine this point. This is partly because I have accepted that at the initial discussions around the question of the payment of $130,000, the question of the discretionary trust had not occurred. However, upon the creation of Powerbuilt, it appears to be clear that the rationale for the payment of the discretionary trust which may have been initially to minimise Mr Byrne's taxation obligations became a convenient way to compensate him for the work he performed for Powerbuilt. The applicant also submits that the Commission should consider Mr Bund's evidence where he states that the discretionary trust was "something in the nature of a profit share". Were this to be so, then the applicant states that it would not fit within the ordinary definition of wages within schedule 5 of the Act. I agree with this submission. Although there were no detailed submissions around this point, it would seem to be that a discretionary trust is one in which the entitlement of the beneficiaries to income (in this case) is not immediately ascertainable. Rather any entitlement is determined by the trustee (or some other person) exercising their discretion from time to time or at the maturity of the trust (Gartside v Inland Revenue Commissioners [1968] AC 553 at 606). Because I have accepted that it was the respondent's intention to have Mr Byrne perform work related duties for Powerbuilt, the fact that the respondent used the vehicle of the discretionary trust to make relevant payments to Mr Byrne does not destroy the submission that the $40,000 represented payment for such work performed. However designed, the $40,000 represents payment for work performed by Mr Byrne for Powerbuilt. It may well be the case that legally the use of a discretionary fund as a vehicle for payment of "wages" is questionable, but in this case, it was as such a vehicle. In any event, one way or the other, I do not accept that it formed part of Mr Byrne's remuneration for work performed by Powertrans. Correspondence which passed between both parties after the termination of Mr Byrne's employment show that the respondent's instructions at that time were that Mr Byrne was in receipt of a salary of $79,600 and the respondent had not classified the trust distribution as "wages". According to the applicant, a reclassification of Mr Byrne's "wages" occurred only after the applicant had lodged his application with the Commission. The correspondence passing between the parties confirms this point. General Commentary I am left to consider the superannuation question. Superannuation was paid on an amount of $130,000 by Powertrans. I have considered whether on its face it is an impediment to Mr Byrne's claim that he was separately employed by both Powertrans and Powerbuilt and that he was not in receipt of wages of $130,000 from Powertrans. It was the case that it was Powertrans which was the vehicle for payment to Mr Byrne of all the monies he had received. Given the finding I have made with regard to Powertrans and Powerbuilt, I accept that the payment of superannuation on the amount of $130,000 was as a consequence of Mr Byrne having received two amounts of money from separate entities, upon which a joint superannuation amount appears to have been paid. As was the case with all monies paid to him, this amount was paid through Powertrans. It is not surprising that the relevant superannuation payments were also paid through this body. Whether or not this arrangement satisfies the requirements of superannuation and/or taxation legislation has not been put to me and it is not for me to determine. -- 6 of 7 -- 7 I have weighed all matters in this case and, whilst acknowledging that the superannuation question is problematical, on balance I have accepted the applicant's claim. It must be said that the financial arrangements made between these parties were complex, often appearing to have been made quickly, and generally with the purpose of minimising one's taxation obligations. That, in itself, is unexceptional, but it is hardly surprising that when push came to shove, the parties have ended up in this situation. Primarily, the indicia (both documentary and by way of evidence) points to the applicant having been under a particular employment contract with Powertrans and that his remuneration for work performed for that entity was within the Statutory requirements to have this application considered by the Commission. The onus was on the respondent to prove its claim and in this discrete area, as with the other areas for consideration, it has failed to do so. I have formed the view that the application can proceed before the Commission and that the challenge mounted on the question of "wages" has failed. The parties will be advised by the Registrar in due course as to the progression of this matter. Order accordingly. D.A. SWAN, Deputy President. Appearances: Hearing Details: 2005 1 August, 11 and 22 November Mr R. Perry SC (instructed by Mr J. Sneddon of Shand Taylor Lawyers) on behalf of Mr D. Byrne. Mr J. Murdoch SC (instructed by Ms A.J. Coulthard of Franklin Athanasellis) on behalf of Powertrans Pty Ltd. Released: 3 March 2006 -- 7 of 7 --