Dee v CFP Management Pty Ltd [2005] QDC 349

DISTRICT COURT OF QUEENSLAND CITATION: Dee v CFP Management Pty Ltd [2005] QDC 349 PARTIES: Hamish Robbie Dee Plaintiff CFP Management Pty Ltd Defendant FILE NO/S: D1368/03 DIVISION: District Court PROCEEDING: Trial ORIGINATING COURT: District Court at Brisbane DELIVERED ON: 2 November 2005 DELIVERED AT: Brisbane HEARING DATE: 29 August 2005 JUDGE: Dick DCJ ORDER: 1. Defendant to pay to the Plaintiff the sum of $18,143.53 2. Defendant to pay the Plaintiff’s costs of and incidental to the proceeding including reserve costs to be assessed on the Magistrates Court scale. CATCHWORDS: COUNSEL: G Beacham for the Plaintiff T Bradley for the Defendant SOLICITORS: Hunt & Hunt Solicitors for the Plaintiff Blake Dawson Waldron Lawyers for the Defendant [1] The Plaintiff’s claim is for payment in respect of annual leave and payment in lieu of notice. [2] The Plaintiff, a stockbroker, was employed by the Defendant under an employment contract dated 29 March 2002. [3] The employment contract contained the following relevant terms: -- 1 of 8 -- 2 1. Positions and Duties You are employed on a full-time basis in the position of [particular position], working in the Brisbane Office. Your State Administration Manager is Bret O’Donovan. Whilst your duties and responsibilities will be discussed in more detail separately, you will at all times be required to comply with the directions given by the senior management of the Challenger Group. … 3. Remuneration 3.1 Total Package Your total package on commencement of employment will be a base salary of [particular figure] per annum plus incentive calculated and paid in accordance with the attached Incentive Calculation Details and Conditions (which is inclusive of superannuation). The Incentive Calculation Details and Conditions form part of your Employment Terms and Conditions. Your remuneration may be taken in cash salary and non-cash benefits, such as additional superannuation contributions and fringe benefits … 3.2 Remuneration Structure The following remuneration structure is effective 01 March 2002. You will be placed on the standard remuneration structure ie. where the incentive ratio on all transactions and fee business to be paid out at 72% (inclusive of the compulsory contribution required by Superannuation Guarantee legislation and after earning gross income of $55,555 assuming a $40,000.00 per annum base salary) after deducting costs as outlined in the Incentive Calculation Details and Conditions. 3.3 Alliance Fee Each adviser is provided with accommodation and services by the Company and in turn will pay the Company a monthly (in advance) Alliance fee…It is intended that the Alliance fee payment be made from pre tax income. Your Alliance fee (Capital City Office) will be $32,000.00 per annum. 3.4 Salary Payment -- 2 of 8 -- 3 Your salary will be paid fortnightly. The cash component (after tax) of your base salary will be deposited to your bank account on a fortnightly basis every second Thursday night. The cash component (after tax) of your incentive will be deposited to your bank account on a monthly basis not later than the 15 th of the following month. … 4.8 Applicable Legislation The terms and conditions of your employment set out in this letter are subject to any contrary mandatory provisions of any award or law which applies to your employment from time to time. 5. Leave Entitlements 5.1 Annual Leave You will be entitled to the annual leave required to be given to you by any applicable award or law…. 5.2 Sick Leave … All sick leave payments are calculated on your base salary only. 5.3 Long Service Leave All employees are entitled to long service leave after completing the number of years of continuous service with Challenger as defined by the relevant State Act listed below: Jurisdiction Period of Leave … QLD (Workplace Relations Act 1979) 13 weeks @ 15 years (13 weeks for each 15 years thereafter) … You are entitled to pro-rata long service leave after 10 years service. The remuneration basis used for calculating long service leave taken whilst employed is your base salary plus incentive and/or bonuses for the past three financial years, or your current base salary, whichever is the greater. -- 3 of 8 -- 4 … 6. Termination on Notice 6.1 Termination on Notice Once your Probationary Period has been completed, either party may terminate the contract by giving one calendar month’s notice in writing. Without limiting Clause 8.2 we may also terminate your employment immediately or by a period of notice shorter than one month by making a payment to you in lieu of notice. … [4] In October 2002, the Plaintiff became aware of suggestion that the Challenger Group was proposing to sell its broking business. Shortly after, Mr Ireland, the Chief Executive Officer of Challenger International addressed staff through a national telephone link up and advised that the broking business was to be sold. [5] In late November or early December, another meeting by link up was held. At this time, Mr Ireland announced that the purchaser was Bell Potter Securities. [6] The Plaintiff was then involved in discussions with senior members of Bell Potter Securities. The discussions revolved around the questions of what changes might be made to the business. Effectively he was told that in the short term nothing would change but that no guarantees could be given about the longer term. [7] On 31 January 2003, the Plaintiff delivered a notice of termination by placing it on the desk of the State Manager of CFP. The next day the Plaintiff rang the State Manager and was informed that he was dismissed, effective immediately. [8] It is conceded that the Plaintiff’s summary dismissal entitles to him to payment in lieu of notice. It is the calculation of the amount payable that is in issue. Payment in Lieu of Notice [9] The Plaintiff submits that the payment should be based on his total remuneration package. The Defendant submits that the payment should be based on the base salary component of his remuneration. [10] The employment agreement does not provide a mechanism for assessing how the payment in lieu of notice should be calculated. The clause is in contrast to the clause relating to long service leave which states: “The remuneration basis used for calculating long service leave taken whilst employed is your base salary plus incentive and/or bonuses for the past three financial years, or your current base salary, whichever is the greater.” [11] The Plaintiff argues that the Plaintiff’s remuneration package was commission based in that he was required to reach a “threshold” calculated at 1/12 of the base salary, before any additional commission or incentive amount was earned. Any -- 4 of 8 -- 5 short fall in the “threshold” was added to the next month’s threshold. The Plaintiff argues that the base salary was no more than a minimum target for his commission. Accordingly, the Plaintiff argues that the calculation of the payment in lieu of notice should be calculated on the basis of an averaged rate, based on the total commission earned. [12] The Defendant argues that the payment requires is a payment of the base salary for the notice period foregone. In the alternative, the payment required is a reasonable payment having regard to the financial effect of the immediate termination of the Plaintiff. [13] In relation to the alternative calculation, the Defendant argues that the Plaintiff obtained immediate employment with another stock broking company and, presumably, was able to earn a salary and/or commission during the foregone period. In the Defendant’s submission it is conceded that if the Plaintiff had continued in employment during the notice period, he would have earned his base salary and any incentive/bonus or commission generated by his work. [14] In my judgment, the concept of payment in lieu of notice involves the idea that an employer may choose to terminate without notice which involves the employer making a choice to pay the employee in lieu. To do this, the employer must pay the employee the amount of wages he could have expected to earn had he continued to work during the notice period. That the employee has been fortunate enough to gain other employment during the foregone period does not abrogate from the responsibilities of the employer who has made the choice. [15] In the case of this Plaintiff and in the absence of a clear term in the employment contract, the amount he could have expected to receive was his base salary and commission. Quantum [16] The parties are not in agreement as to the manner in which the sum should be calculated on the basis of my finding above. [17] The evidence concerning the Plaintiff’s commission earnings over the three years preceding the termination of their employment shows a wide variation in commission earnings in a particular quarter and the annual commission earnings. In those circumstances, I am of the opinion that the payment in lieu should be calculated on the basis of the Plaintiff’s commission earnings over the last full financial year preceding the termination of the Plaintiff’s employment. [18] On this basis the Plaintiff has an entitlement of $17,866.76. He was paid $3,333.33 on summary judgment. Under this head I award the sum of $14,533.43 together with interest at 9% per annum from the date of termination of the employment (31 January 2003) until the present time being a sum of $3,610.10. Payment for Annual Leave on Termination of Employment [19] The employment contract provides” “You will be entitled to annual leave required to be given to you by any applicable award or law ….” -- 5 of 8 -- 6 It is common ground that s.14(5) of the Industrial Relations Act 1999 applies. It provides that: 14. Payment for annual leave on termination of employment. … (5) The employer must pay the employee at least the ordinary rate being paid to the employee immediately before the termination unless an industrial instrument states otherwise.” [20] It is also common ground that the Oxford English Dictionary defines “ordinary” as “Regular, normal, customary, usual.” [21] The Plaintiff agues that the ordinary rate of pay includes commission because the future salary was commission based with the base salary being “nothing more than a minimum target.” Accordingly, annual leave payments ought to be based on the Plaintiff’s average commission payments. [22] The Plaintiff relies on Kezich v Leighton Contractors Pty Ltd (1974) 131 CLR 362, a case which deals with “ordinary hours”. To my mind, the idea of “ordinary hours” is different to “ordinary rates”. I will return to that case later. [23] The Plaintiff argues that the statute must be construed as a whole and points to s.13 which provides: “13. Payment for Annual Leave …. (2) The employer must pay for the leave … (a) at the ordinary rate being paid to the employee immediately before the leave is taken; or (b) if, immediately before taking the leave the employee is being paid at a higher rate … at the higher rate. (3) If an employee is entitled to receive an amount representing commission in the employee’s annual leave payment, the employer must pay the default average commission unless .. (a) a relevant industrial instrument or contract between the employer otherwise provides; or (b) the commission, on application, considers that the default average commission would not represent a fair amount in the circumstances. [24] The Plaintiff argues that this provides a compelling indication that the statute did contemplate that commission could be part of an employee’s “ordinary rate” payable during annual leave. -- 6 of 8 -- 7 [25] The Defendant argues that commission is transaction related rather than time-related and that Schedule 5 of the Act provides that: “’ordinary rate’ for an employee under an industrial instrument means the rate that the instrument says is payable for ordinary time” [26] Kezich’s case was concerned with a claim by a work who was engaged to work on the basis he would normally work sixty hours per week. He was hurt and applied for Workers Compensation. The majority of the Full Court of the Supreme Court of Western Australia held he was not entitled to an award at a higher rate than the pay he would have received if he had worked forty hours per week. He appealed. [27] The Workers’ Compensation Act, 1912-1973 (WA) provided that the amount of compensation payable was “an amount equal to the weekly earnings of the worker computed in accordance with clause 2 of the Schedule” which provided” “For the purposes of this Act, ‘weekly earnings’ means the amount of the ordinary wage or salary (including any over award payment) the worker would have received for the ordinary hours he would have worked, if he were not incapacitated for work as the result of injury.” [28] The High Court found in favour of the Applicant. Gibbs J found that “a man’s ‘ordinary hours’ of work are the hours during which it is usual for him to work. There is nothing in the expression ‘ordinary hours’ that payment at any particular rate and to understand the words as meaning ‘hours during which work is done for which overtime is not paid’ would be to place upon them a meaning which they simply do not bear.” [29] In the judgment of Mason J, he pointed out that the judgment of the Full Court required a construction that the compensation pay was referable to “the ordinary (standard) rate of pay for the ordinary (not overtime) hours of work in the particular occupation ….”. [30] Mason J rejected that construction pointing out that clause 2 referred to the amount of “ordinary wage or salary” and made no reference to ordinary rates of pay which lay at the foundation of the respondent’s argument” (my emphasis). [31] In this matter, the issue concerns the ordinary rate being paid to the employee – not the ordinary wage or the ordinary hours. [32] I accept the Defendant’s argument that in s.14(5) of the Act, ‘ordinary rate’ means the usual rate of pay for a period of working time, before any allowances, loadings or bonus payments. I note that the records of annual leave payments for the 2000, 2001 and 2002 financial years indicate that the Plaintiff’s annual leave was paid at the rate of his base salary. This would suggest that the Plaintiff’s entitlement for payment for annual leave did not fall within s.13(3) in that he did not, nor was entitled to receive an amount representing commission in his annual leave payment and was only entitled to receive a payment at the “ordinary rate”. [33] The Plaintiff was paid annual leave for 36.3333 days on his base salary of $40,000.00 – a sum of $5,589.73. I make no further award under this head. [34] I order that the Defendant pay to the Plaintiff the sum of $18,143.53. -- 7 of 8 -- 8 [35] I further order that the Defendant pay the Plaintiff’s costs of and incidental to the proceeding including reserve costs to be assessed on the Magistrates Court scale. -- 8 of 8 --