Bullivant and Secretary, Attorney-General's Department [2020] AATA 2047 (1 July 2020)

Last Updated: 2 July 2020

Bullivant and Secretary, Attorney-General's Department [2020] AATA 2047 (1 July 2020)

Division: GENERAL DIVISION

File Number: 2019/3020

Re: Belinda Bullivant

APPLICANT

And Secretary, Attorney-General's Department

RESPONDENT

DECISION

Tribunal: Emeritus Professor P A Fairall, Senior Member

Date: 1 July 2020

Place: Sydney

The reviewable decision dated 6 May 2019 is set aside and remitted to the Secretary with the Direction that the applicant is entitled to an advance for redundancy pay calculated in accordance with section 119(2) of the FWA.

.......[sgd].................................................................

Emeritus Professor P A Fairall, Senior Member

CATCHWORDS

FAIR ENTITLEMENTS GUARANTEE – small business employer – redundancy – whether the applicant has a statutory entitlement to a FEG advance in respect of redundancy pay – governing instrument for employment – inducement – contractual obligations – decision under review set aside and remitted

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)
Fair Work Act 2009 (Cth)
Financial Entitlements Guarantee Act 2012 (Cth)

CASES

Beezley v Repatriation Commission [2015] FCAFC 165
Gayed and Secretary, Department of Jobs and Small Business [2019] AATA 1132
Kable and Secretary, Attorney-General’s Department [2019] AATA 3963
Litster v Forth Dry Dock and Engineering Co Ltd (In Receivership) [1990] 1 AC 546
Mi and Secretary, Department of Employment [2016] AATA 419
Yeo and Secretary, Attorney-General’s Department [2020] AATA 117

SECONDARY MATERIALS

National Employment Standards

REASONS FOR DECISION

Emeritus Professor P A Fairall, Senior Member



1 July 2020

INTRODUCTION

1. The Financial Entitlements Guarantee Act 2012 (Cth) (“the FEG Act”) provides financial assistance from the Commonwealth to employees who have lost their employment because of the insolvency or bankruptcy of their employer, and who are owed employee entitlements which are not able to be paid by their employer or from other sources. The applicant is such a person.
2. On 1 June 2011, the applicant commenced employment with Kimberley Metals Limited. On 28 November 2011, the company changed its name to KBL Mining Limited (“the Company”).
3. On 8 September 2016, the Company was placed into administration. On 19 September 2016, Receivers and Managers were appointed and on 22 June 2018, Liquidators were appointed.
4. On 28 November 2018, the applicant submitted a claim form for an advance under the FEG Act.^[1] The applicant claimed amounts in respect of unpaid wages, annual leave, payment in lieu of notice, redundancy pay and long service leave.
5. On 19 December 2018, the Department of Jobs and Small Business (“the Department”) advised the applicant that she was entitled to a FEG advance of $19,380.94 gross for wages, annual leave, payments in lieu of notice, and long service leave;^[2] however, because her employer was a small business employer (“SBE”) she was not entitled to an advance in respect of redundancy pay (“FEG decision”). The decision-maker explained as follows:

Section 121(1) of the FW Act provides that the redundancy entitlement outlined in section 119 of the FW Act do not apply if, immediately before the time of the termination, or at the time when the person was given notice of termination, whichever occurs first, the employer was a small business employer.
Section 23 of the FW Act provides that a small business employer is an employer that has fewer than 15 employees.
Information available to the department indicates the employer may have been a large employer at one time. However, the employer had fewer than 15 employees when the claimant’s employment was terminated on 31 October 2016, and as such, the claimant is not entitled to redundancy pay.^[3]

6. On 11 January 2019, the applicant asked for an internal review of the FEG decision under section 38 of the FEG Act.^[4] She provided the following reason:

Please be aware that at the time of calling of the Administration by the Directors (and subsequent receivership by the major creditors) the employer KBL Mining Limited was NOT a small business employer, having some 60 employees.
Following the Administrators appointment, they actioned the major redundancy program which resulted in the company having less than 15 employees, however I was asked to stay on for a short while to assist the administration and receivership and redundancy process. I was made redundant soon after.
Given that it was a redundancy program that led to the company having less than 15 people and given my ongoing role to the point of my redundancy was to primarily assist the administration of that redundancy process, I don’t believe your decision is fair.^[5]

7. On 6 May 2019, an internal reviewer, acting under section 39 of the FEG Act, affirmed the original decision (“the reviewable decision”).^[6]
8. On 31 May 2019, the applicant applied to the General Division of the Administrative Appeals Tribunal (“the Tribunal”) seeking a review of the reviewable decision. She stated:

My right to a redundancy payment had vested well before the point when the company had fewer than 15 employees. On this basis, the fact that the number of employees fell below 15 following actions of the administrators should not affect my vested redundancy rights.
I don’t believe the decision is correct. ^[7]

9. The Tribunal is required to determine whether the applicant has a statutory entitlement to a FEG advance in respect of redundancy pay.

THE HEARING

10. The evidence before the Tribunal consisted of the materials submitted in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (Cth), (“the T documents”); together with supplementary materials (“the Supplementary T documents”) consisting of:
    • EFEG Case Task report; and
    • Letters dated 23 August 2019 and 26 August 2019.
11. The applicant was the only person to give evidence to the Tribunal. She did not provide a witness statement or written submissions. She was represented by a friend, Mr Lonergan.
12. On oath, she stated she believed that she was entitled to a FEG payment for redundancy pay because of an agreement between herself and the insolvency practitioners. They asked her to stay on in order to assist with the company administration and promised her an attractive redundancy package if she did so.
13. She referred to a letter dated 19 September 2018, received from the liquidator Mr Matthew Woods.^[8] He was appointed Administrator on 8 September 2016; and Liquidator on 22 June 2018. In writing to the applicant, he indicated that she was entitled to redundancy pay equivalent to 10.0 weeks’ pay, valued at $15,769.22.
14. The applicant says that this letter supports her claim that she was promised a redundancy payment. The letter certainly confirms that the administrator considered her to be so entitled, but it does not confirm the existence of any specific agreement between the applicant and the Company. The letter also states: ‘the... information is subject to a full review by the FEG who will make their own determination as to the entitlements owing to you...’^[9]
15. I also note a letter the applicant wrote to the Tribunal dated 16 October 2019, in which she argued that her entitlement to an advance in respect of redundancy pay arose as a matter of contract and prior to her termination. In this letter she stated that she was told informally by the insolvency practitioners that ‘if she remained and was made redundant, she would receive an attractive redundancy payment’.^[10]
16. At the hearing she was pressed for details of the informal agreement. She said it was too long ago to remember specific details, such as with whom she met, and exactly when. It was however, she said, after the appointment of the administrator and well before 31 October 2016, when she was told that she would be terminated. She asserted firmly that she (and other individuals) were told that her entitlements would be met and that they would receive ‘an attractive’ redundancy package if they stayed on to help. She did not remember having a one of one with anyone, and she tended to talk in the plural, about the things she said; “we” were promised.
17. The respondent provided a Statement of Facts, Issues and Contentions, together with a supplementary submission on the Fair Work Act 2009 (Cth) (“the FWA”), prepared at the request of the Tribunal.
18. The respondent’s solicitor argued that because the applicant’s contract of employment was silent on redundancy pay, the relevant governing instrument was the FWA, and that her entitlement to receive an advance for redundancy pay was therefore abrogated by section 121(1)(b) of the FWA. The respondent rejected the suggestion that she had entered into a separate and distinct agreement relating to her redundancy pay entitlements.
19. With regard to the letter of 19 September 2018, the respondent argued that the liquidator was simply mistaken as to the applicant’s entitlements under the FEG Act. He noted that the letter was written well after the events in question, and was intended to assist the applicant, should she wish to lodge a claim for outstanding entitlements under the FEG scheme. He also noted that the spreadsheet in the letter contained an important caveat: ‘Amounts are calculated with reference to source documents and subject to a full and final review by the FEG.’ He argued that if the applicant was misled by the insolvency practitioners as to her entitlements, this would have no bearing on her FEG claim.

CONSIDERATION

20. The parties accept that the applicant satisfied the basic conditions of eligibility, was not excluded from eligibility, and made an effective claim.^[11] The Secretary was therefore required to decide whether the claimant is eligible for the advance.^[12]
21. Redundancy pay is included in the definition of “employer entitlement” under the FEG Act. A person’s redundancy pay entitlement is the amount of redundancy pay the person is entitled to under the governing instrument from the employer for termination of employment.^[13]
22. The parties accept that the applicant was employed under a written contract of employment dated 1 June 2011, and that the written contract did not contain a provision dealing with redundancy pay.
23. Under section 5 of the FEG Act, the governing instrument for employment means any of the following that governs the employment:

(a) a written law of the Commonwealth, a State or a Territory;

(b) an award, determination or order that is made or recorded in writing;

(c) a written instrument;

(d) an agreement (whether a contract or not).^[14]

24. There was no suggestion that the applicant’s employment was governed by an award or written instrument.^[15]
25. The applicant contends that an agreement between the applicant and the insolvency practitioners to the effect that, if she remained with the company she would receive redundancy pay, could be regarded as the governing instrument for employment and that such an agreement in fact existed.
26. The respondent’s solicitor denies that any such agreement exists or can be implied from the circumstances. He says that because her contract of employment is silent on the matter of redundancy, the governing instrument for employment is the FWA.
27. He contends that the Tribunal should find, as a primary fact, that on 17 October 2016, the employer became a SBE; and at all times between 18 October 2016 and 1 November 2016, when the applicant’s termination took effect, it was a SBE.
28. Evidence filed by the respondent shows that as of 5 October 2016, the company had 15 employees. On 17 October 2016, a termination caused the staffing complement to fall to 14. On 31 October 2016, staffing levels reduced from 14 to 13 and the applicant’s termination, effective from 1 November 2016 reduced the staffing level to 12. The accuracy of this information was not challenged by the parties during the hearing.
29. I find that at all times between 17 October 2016 and 1 November 2016 the Company employed fewer than 15 employees and was therefore, throughout that period, a SBE as defined by section 23 of the FWA.
30. Section 121(1)(b) of the FWA states that, if the employer is a SBE immediately before, either the time of termination, or the time when an employee was given notice of termination, whichever is earlier, the employee is not eligible to receive redundancy pay.
31. The respondent referred to a number of authorities where the term “immediately before” had been considered: see Mi and Secretary, Department of Employment [2016] AATA 419 at [18]- [19] and the authorities cited: Kable and Secretary, Attorney-General’s Department [2019] AATA 3963; Yeo and Secretary, Attorney-General’s Department [2020] AATA 117, at [16]; where the concept of immediacy formulated by Lord Oliver in Litster v Forth Dry Dock and Engineering Co Ltd (In Receivership) [1990] 1 AC 546 at 569 was applied. His Lordship considered that in its ordinary sense “immediately before” meant that there is ‘no intervening space, lapse or time or event of significance’ between two relevant events.
32. In the present circumstances, the fortnight that elapsed between the two critical events could not be written off as insignificant.
33. I find, on the basis of the authorities cited by the respondent, that the applicant was employed by a SBE immediately before she was terminated on 31 October 2016.
34. Therefore, the case turns on the identification of the relevant governing instrument. If it is the FWA, the decision must be affirmed. This raises two questions:
    • First, did the insolvency practitioners make an agreement with the applicant that, if she stayed on to assist with the administration, her redundancy entitlements would be met?
    • Secondly, would such an agreement necessarily be subject to the small business exclusion rule in section 121(1)(b) of the FWA?
35. Taking the second point first, I accept Mr Lonergan’s submission, for the applicant, that a SBE may enter into an agreement with its employees for redundancy pay. Any such agreement would need to specify the rate or means by which redundancy pay could be calculated. It could, for example, incorporate the Schedule contained in section 119(2) of the FWA. Merely referencing the formula contained in section 119(2) would not automatically attract the SBE exclusion in section 121(1)(b).
36. Where such an agreement is entered into, the governing instrument for calculating the redundancy would be the agreement rather than the FWA; and 121(1)(b) would not automatically prevent the payment of a FEG advance. Logically, an agreement between a SBE and its employees would necessarily exclude the small business exclusion; otherwise the employer would be giving nothing of value.
37. Section 121(1)(b) has the effect that redundancy pay is not part of the National Employment Standards (NES) in respect of SBEs; but does not operate at large so as to preclude a SBE from agreeing with an employee that he or she is entitled to redundancy pay in the event of termination due to liquidation or bankruptcy.

Evidence of an agreement regarding redundancy pay

38. The decisive question in this case is whether such an agreement was entered into; indeed, whether an agreement can properly be inferred from the evidence before the Tribunal. The respondent’s solicitor contends that there is simply no evidence, or insufficient evidence, of any such agreement; and that the governing instrument of the applicant’s employment entitlements is the FWA.
39. I note in passing that clause 12.2 of the applicant’s Employment Contract provides:

[The] terms and conditions constitute the entire agreement between the parties and supersede all prior understandings agreements or representations made by or agreed between the parties in connection with your employment.

40. I accept that clause 12.2 speaks to the exhaustiveness of the agreement at the time of entering into the contract; it does not preclude the parties from agreeing during the term of the agreement to amend it in some way.
41. I am mindful of the strictures contained in the observations of the Full Court in Beezley v Repatriation Commission [2015] FCAFC 165. North, Tracey and Mortimer JJ stated:

In any case before a merits review tribunal (or a first instance decision-maker), a decision can only be made on the basis of relevant and probative material. The material must be probative of the matters for which the statute provides: see Minister for Immigration and Ethnic Affairs v Pochi [1980] FCA 85; 44 FLR 41 per Deane J. If an applicant does not provide evidence and information sufficient to meet the statutory requirements, an applicant is unlikely to have the statutory power exercised in her or his favour. And unless and until a decision-maker is satisfied, or persuaded, that the requirements are met, then no occasion to exercise the power in favour of an applicant arises. In that sense, as a practical matter, it is not incorrect to say that a person “must satisfy” the requirements in the statute. To say that is not to impose an onus of proof on an applicant, but rather to recognise the operation of the legislative scheme under which the person seeks a benefit or interest... (authorities omitted).

42. It is important to bear in mind the requirement that a decision can only be made on the basis of relevant and probative material.
43. With that exhortation in mind, I make the following observations on the material before the Tribunal.
44. It is clear that on 8 September 2016, when administrators were appointed to the Company, it was not a SBE.^[16] It had over 50 employees. At that point, the applicant had an undoubted right, if terminated by reason of an insolvency event, to make a claim for a FEG advance in respect of redundancy pay. Given that her contract was silent on redundancy pay, her entitlement to redundancy pay was governed by the FWA.
45. I am prepared to accept, on the basis of the applicant’s evidence, that discussions took place with the insolvency practitioners shortly after they were appointed on 8 September 2016.
46. Unfortunately, none of the insolvency practitioners gave evidence about the nature of relevant discussions with employees during the critical period.
47. The applicant’s recollection was imprecise. She could not say with whom she met or when, or indeed, exactly what was discussed. She was vague on matters of details. She did not diarise the discussions or make any note about them.
48. It is permissible for the Tribunal to consider all the circumstances of the case in forming a judgment about what understanding, if any, the parties reached in September or October of 2016.
49. On the basis of the applicant’s evidence, I accept that the applicant was encouraged to stay on, and reassured that her entitlements would be met.
50. There is nothing in the applicant’s evidence to suggest that the potential impact of section 121(1)(b) was explicitly raised or discussed. But the insolvency practitioners would have known, as an elementary matter, that if an employer is a SBE immediately before an employee receives a notice of termination, then section 121(1)(b) of the FWA will generally defeat a FEG redundancy claim. It does not matter if the employer was once a large employer and became an SBE during the course of administration.
51. I note that, until 17 October 2016, when the Company became a SBE, the applicant had a clear right under the FEG to claim an advance on account of redundancy pay if she was terminated by reason of an insolvency event. There is no evidence that, in the discussions about “staying on”, either the applicant or the insolvency practitioners referred explicitly to what the position would be if the company became a SBE by reason of a drop off of staffing levels. The applicant did not recall any such conversation. But given that any discussion about future staffing took place within the context of a staffing reduction program, it is open to infer that this was within the contemplation of the insolvency practitioners.

The evidentiary significance of the liquidator’s letter of 19 September 2018

52. Is the letter evidence of an agreement of the kind suggested by the applicant, formed in the week’s prior to her termination on 31 October 2016? On one hand, it suggests no more than this, that the liquidator, looking back, simply assumed that the applicant’s entitlements were governed by the FWA, and did not consider the implications of section 121(1)(b) of the FWA. In essence, this is the proposition put by the respondent’ solicitor in written submissions.^[17]
53. However, it does not follow from this that the insolvency practitioners, at the time they discussed the possibility of staying on with the applicant, and with other employees, overlooked a matter as vital to the applicant as the status of the employer company. I would be reluctant to make such a finding.
54. Where an insolvency practitioner undertakes to specific employees that, in return for ongoing service their entitlements to redundancy pay will be protected (whether or not the employer becomes a SBE), section 121(1)(b) of the FWA is necessarily excluded from the agreement. Otherwise, a promise along such lines would be dishonest or at the very least negligent. If the Company is, or becomes, an SBE, and the governing instrument for employee entitlements is the FWA, then such an undertaking would be worthless.
55. To the extent that the applicant did respond to some inducement from the insolvency practitioners, it was on the footing that she would be protected if she was terminated after the company fell below the 15 staff threshold. This would have been an additional benefit not provided for under her existing contract of employment, which simply incorporated the FWA provisions, including the SBE exclusion.
56. The evidence is sufficient to support the applicant’s claim that the insolvency practitioners gave to the applicant an undertaking to protect her redundancy entitlements if she stayed on.
57. If the promise was given before 17 October 2016, the present issue does not arise, because the company was not a SBE. If the undertaking was given on or after 17 October 2016, then a fortiori, the promise made would and could not be subject to the small business exclusion. In either case, the governing instrument for determining redundancy pay is the undertaking giving rise to an agreement within section 5 of the FEG Act, and not the FWA.
58. Although her memory of events was somewhat tainted by the passage of time, the applicant was overall a credible and sincere witness. I accept her evidence that she was promised by the insolvency practitioners that if she remained with the company, she would receive her redundancy pay entitlements. I accept that in the circumstances of this particular case, the agreement provides the basis for a FEG advance in respect of redundancy pay. The basis for calculating that redundancy pay is in accordance with section 119(2) of the FWA, as set out in the Liquidator’s letter of 19 September 2018.

DECISION

59. The correct or preferable decision is to set aside the reviewable decision made on 6 May 2019, and to remit the matter to the Secretary with the Direction that the applicant is entitled to an advance for redundancy pay calculated in accordance with section 119(2) of the FWA.

I certify that the preceding 59 (fifty-nine) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member

...........[sgd].............................................................
Associate

Dated: 1 July 2020

Date of hearing:	2 March 2020
Date final submissions received:	19 March 2020
Advocate for the Applicant:	Mr Steve Lonergan
Solicitors for the Respondent:	HWL Ebsworth Lawyers

---

^[1] T12, p 417.

^[2] T13, pp 453 and 456.

^[3] T13, p 461.

^[4] T14, p 467.

^[5] T14, p 469.

^[6] T17. Note, the original decision was communicated by departmental letter dated 19 December 2018: T13, p 454. The reviewer refers to the decision date as 10 December 2018: T17, p 490.

^[7] T1, p 1.

^[8] T12, p 427.

^[9] T12, p 428.

^[10] Letter dated 16 October 2019, Ms Bullivant to AAT Registry.

^[11] T13, pp 455 and 457.

^[12] FEG Act, s 15.

^[13] FEG Act, s 6(5).

^[14] FEG Act, s 5.

^[15] Unlike Gayed and Secretary, Department of Jobs and Small Business [2019] AATA 1132, where there was a dispute as to whether the applicant was employed under an award or under the FWA.

^[16] T12, p 427.

^[17] Statement of Facts, Issues and Contentions, para 66.