FEDERAL COURT OF AUSTRALIA

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

Citation: Gotha¡d, in the matter of AFG pty Limited (Receivers

and Managøs appointed) (in liq) v Davey
[2010] FCA
I163

Parties: PETERJAMES GOTHARD AND STEVIN JOHN

SHERMANAS RECEIVERS AIìD MANAGERS OF
Eacrr oF AFc pTy LIMTTED (IN LrQ) (AcN 051
982 s60), ALLco FINANCE GROUP LIMITED (IN
LIQ) (ACN 077 721129\, ALLCO FTNANCE
(AUSTRALIA) LTMITED (rN LIQ) (AcN 003 3rs
446) v STEVEN DAVEY, MTCHELLE SEGAERT,
IAI\I GRAYBURN, CHRISTINE BOWEN,
TIMOTIryRICH and EVAN GALLAGIIER
File number: NSD 256 of2009

Judge: EDMONDSJ

Date ofjudgment: 28 October 2010

Catchwords: PRACTICE & PROCEDIJRE-rospondent

r€presentative prccoedings--Order 6 r 13 Federal Court
Rzles (Cth)-whether respondent representative
proceedings are appropriate in the circumstanoes.

CORPORATIONS- whether the ¡espond€nts and the

ifany, they rçresent are employees ofAFG pty
persons,
Limited (Receivers and manage'rs appointed) (in
liquidation) ('AFGPL'), Allm Finance Group Limited
(Receivers and managers appoinred) (in liquidation)
('AFGL') or Allco Finance (Australia) Limired
(Receivers and managers appointed) (in liquidation)
('AFAL') for the purposes ofs 55ó(1)(e) ofthe
Cotporations Act 2001 (Crh) (.the Acr') the
respondents and the persons, if an¡ they -whether
represent, a¡e
priority creditors of AFGP! AFGL o¡ AFAL pr¡rsuant to
s 433(3)(o) of the Act.

Held: Rçresentative proceedings are appropriate in the

circumstances; the respondents are anployees ofAFGL,
or alternatively AFAL for the pu4nses ofs 556(t)(e); the
respondents are priority credito¡s ofAFGL or
altematively AFAL pursuant to s a33(3)(c),
 -2-
Lcgislation: Corporations Act 2001 (Cth\ ss a33(3)(c)' 556(1)(e)
Federal Court Rzles (Cth) O ó r 13

Cases citedr Ackers v Austcorp Interrrational I'td l2OO9l FCA 432

Air Greøt Lalces Pty Ltdv K S Easter (Holdîngs) Pty Ltd
(198s) 2 NSWLR 309
Amann Aviation Pty Ltd v Commonwealth ( I 990) 22 FCR
527
Amos Removals & Storage Pty Ltd v Small ll98ll2
NSWLR 525
Attorney-Generalfor Nøw South'llales v The Perpetual
Trustee Company (Linited) (1952) 85 CLR2}7
Australian Insurdnce Employees Union v WP Insurance
senices Pty Ltd. (1982) 42 ALR 598
Bank of America Nøtio¡øl Trust and Savings Associøtion
v Tdylor 119921L Lloyd's Rep 4E4
Boston Cotnmercial Services Pty Ltd. v GE Cøpital
Finance Australasio Pty Ltd (2006)236 ALR720
Bright v Femcare Ltd (1999) 166 ALR 743
BT Atstrølasiø Pty Ltd v New South lvales ll997lFCA
1553
Carniev Esa¡tda Finance Corp Ltd (1995) 182 CLR 398
Dølgety Førmers Ltd (t/as Grøzcos) v Bruce (1995) 12
NSWCCR 36
Dømøvskîv Giudice (2003) 133 FCR 438
Denman v Midland. Employers Mutual Assurance Ltd
[1e5s] 2 All ER 561
Duke of Bedford v E//rs [901] AC I
EMI Records Ltd v Kudhail ll985l FSR 3ó
Finønce Sector Union of Austalia v Commonwealth
Bank of Australiø 120011 FCA I 61 3
Geelong Wool Combing Ltd v Textile, Clolhing and
Footweø Union ofAustrølia (2003) 130 FCR 447
HJ Lyons & Sando Ltd v Houbon 11963l SASR 29
In the matter of C&T GrÍnter Transport Services Pty Ltd
(In Liquídation) & Grtnkr Transport Pty Ltd (In
Liquidation) (Controller Appoînted) 120041 FCA I 148
Jameson v Professional Investment Senices Pty Ltd
(2009) 72 NSWLR 281
McCluskey v lhragiozis (2002) 120 IR 147
Muhiplu Funds Mønagement Ltdv P Dawson Nominees
Pty Ltd Q007) 164 FCR 275
Nolæs v Doncøster Amalgamøted Collieries Ltd ll940l
AC l0l4
Pitcher v Løngþrd (7997) 23 NSWLR 142
Publíc Trustee v Taylor 11978)VR289
Re North Syd.ney District Rugby League Football Club
(ailmin apptd); Murrøy v Donnelly (2000) 34 ACSR 630
Romero v Auty (2001) 19 206
Ltdl2007l NSWCA 125
Shawv Binda¡ee Beef Pty ^CLC
 -3-
Smith v Bldndþrd Gee Cementation Co [197013 All ER
154
Stacey Brothers Plumbing Pty Ltd v Wøterco Ltd
12009f
FCA 438
Sturesteps v McGrath [2010] NSWSC 169
Textile Footweør and Clothing (Inion of Australiø v
Bellechic Pty Ltd [1998] FCA 1465
Tony Blain Pty Ltd trudíng as Acme Merchandising v
Jørnison (1993) 4l FCR 414
Tony Blain Pty Ltd trading as Acme Merchandisíng v
Jamison (1993) 4t FCR 414
Trustees of the Rontan Cølholic Church
þr the
Archdiocese of Sydney v Ellis (2007) 70 NSWLR 565
Wallr¿r v Citígroup Global Mark¿ts Au,stratiø pty Ltd
(formerly løown as Salomon Smith Bdms! Australia
secuñties Pty Linited.) (2006) 233 ALR 687
Zhang v Minister for Immigrctian, Local Government &
Ethnic Afairs (1993) 45 FCR 384

DC Pearce and RC Geddes, Staturory Interpretation in

Ausualia (6' ed, LexisNexis Butterworths, 2006)
FMB Reyrolds, Bowstead and Reynolds on Agency (18ú
ed, Sweet & Mærwell Ltd,2006)
GE Dal Pont, Zaw of Agency (l"t ed, LexisNexis
Butterworths, 2001)
Sir WR Anson, Zaw of Contrdct (28ù d Oxford
University Press, 2002)

Dates ofhearing: 14 September 2009,29,30 and 31 Ma¡ch 2010, I April

2010, 6 and 7 May 2010. (tast amended originating
process filed I 7 June 20 I 0)

Place: Sydney

Division: GENERALDIVISION

Category: Catohwo¡ds

Number of paragraphs: 2s2

Cor¡nsel for the Applicant: Mr IM Jackman SC with Ms KL Eastnan

Solicitor for the Applicant: Cons Chambers Westgârth

Counsel for the Respondents: M¡ HJ Dixon SC with Ms CL Cochrane

Solicitor for tho Respondents: Harmers Workplace Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT RDGISTRY
GENERALDIVISION NSD256Of2OO9

IN TEEMATTEROT'

AFG PTy LIMTTET¡ (ACN 05r 982 5ó0)

(RECEIVERTT AND MANAGERI¡ APPOINTED) (IN LIQT]IDATION)

ALLCO FTNANCE GRoUP LIn[rTED (ACN 077 72t 129)

(RECEIVERS A¡ID MANAGERS APPOINTED) (IN LIQT]IDATION)

ALLCO FINANCE (AUSTRALIA) LIMITED (aCi\ 003 315 '146

(RECEIVERS A¡ID MANAGERS APPOINTED) (IN LIQIIDATION)

BETTYEEN: PETERJAMES GOTHARD AìID STEVEN JOHN SHERMAN

AS RECEIVERS ATID MAI\AGERS OF EACH OF AFGPTY
LIMITED (IN LIQ) (ACN 051 982 560), ALLCO I.INAI\ICE
GROUP LIMTTEII (rN LIQ) (ACN 077 72r nÐ, ALLCO
FINAICE (AUSTRALIA) LIMITED (IN LIQ) (ACN OO3 315
446)
ApPlicants/Cross-ResPondents

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

MICHELLE SEGAERT
Sccond Respondent/Second Cross-Claimant

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

CHRISTINE BOWEN
Fourth Respondenf,/Fourlh Cross-Claim¡nt

TIMOTITY RICH
Fifth Respondent/Fifth Cross-Cl¡iment

EVAN GALLAGHER
Sixth Respondent/Sixth Cross-Cl¡imsnt

JUDGE: EDMONDSJ
DATE OF ORDER: 28 OCTOBER 2010
WHEREMADE: SYDNEY
 -2-
TIIE COURT ORDERS TIIAT:

The applicants' application be dismissed

THE COURT DECLARES THAT:

2- The first cross-claimant is a priority credito¡ of Allco Finance Group Limited

(Receivers and Managers appointed) (in liquidation) or altornatively Allco Finance
(Australia) Limited (Receivers and managers appointed) (in liquidation) for the
purposes of s a33(3)(c) of tlte Corporutions Act 2001 (Cth).

3. The sccond o¡oss-claimant is a priority creditor of Allco Finance Group Limited

(Reccivers and Managers appointed) (in liquidation) or alternatively Allco Finanoe
(Australia) Limited (Receivers and managers appointed) (in liquidation) for ttre
purposes of s 433(3)(c) of fhe Cotporøtions Act 2001 (Cth).

4. The third cross-claima¡rt is a priority creditor of Allco Finance Group Limited

(Receivers and Managets appointed) (in liquidation) or altematively Altco Finance
(Aushalia) Limited (Reccivøs and managen appoinred) (in liquidation) for the
purposes ofs a33(3)(c) of the Corporations Act 2001 (Cth).

5. The fourth cross-claimant is a priority credito¡ of Allm Finance Group Limited

(Receivers and Managerrs appointed) (in liquidation) or altomatively Allco Finance
(Aushalia) Limited (Receivers and managers appointed) (in liquidarion) for the
pu¡poses of s a33(3)(c) of the Corporations Act 2001 (C+h).

6. The fiffh cross-claimant is a priority creditor of Allco Finance Group Limited

(Receivers and Managas appointed) (in liquidation) or alternatively Allco Finance
(Australia) Limited (Receivers and managen appointed) (in liquidation) for the
purposes ofs 433(3)(c) of tLLe Corporations Act 2001 (Cth).

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

(Receivers and Managers appointed) (in liquidation) or altematively Allco Finance
(Australia) Limited (Receivers and managers appointed) (in liquidation) for the
purposes ofs 433(3)(c) of the Corporations Act 2001 (Cth).

Note: Settlement and entry of o¡ders is de¿lt with in order 36 of the Foderal court Rules.
The text of entered orders ca¡r be located using Federal Law Search on the cour's website.
IN THE FEDERAL COT]RT OT'AUSTRALIA
NEW SOUTH TYALES DISTRICT REGISTRY
GENERALDIVISIoN NSD256of2009

IN THE MATTER OT'

AFG PTY LIMTTED (ACN 051 9t2 560)

(RECEIVERS AND MÄNAGERS APPOINTED) (IN LIQTJIDATION)

ALLCo flNANCE GROUP Ln[rrED (ACN 077 721129)

(RECEIVERS AND MANAGERTI APPOINTED) (IN LIQT]IDATION)

ALLCO FINA]\CE (aUSTRALIA) LIMITED (aCN 003 315 446)

(RECEIVERS AND MANAGERS APPOINTED) (IN LIQT]IDATION)

BETIYEEN: PETERJAMES GOTHARII AIID STEVEN JOIIN SIIERMAN

AS RECEIVERS AND MANAGERS OF EACH OFAFG PIY
LIMITEII (trY LIQ) (ACN 05r 982 560), ALLCO FINANCE
GROUP LrMrrED (IN LIQ) (ACN 077 721 r29), ALLCO
FINANCE (AUSTRALIA) LIMITED (n{ LIQ) (ACN OO3 3T5
446)
Applicants/Cross-Responderts

AIrID: STEVENDAVEY
First RespondenlFirst Cross-Claima¡t

MICHELLE SEGAERT
Second RespondenUSeco¡d Cross-Claim¡nt

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

CIIRISTINE BOVYEN
Fourth RespondenlFourth Cross-Cl¡im¡nt

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

EVANGALLAGHER
Sixth Respondent/Sixth Cross-Cl¡lm¡nt

JUDGE: EDMONDSJ
DATE: 28OCTOBER20I0
PLACE: SYDNEY
 -2-
REASONS FORJUDGMENT

INTRODUCTION

Background

on 4 November 2008, a number of companios in trre Allco Finance group of

companies ('the Allco Finance Group' or 'the Group,) were placed into voluntary
administation and Tony McGrath and Joseph Hayes of the ñmr, McGrath Nicol, were
appointed administators. The companies included:

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

(2) Allco Finanoe Group Limited (AcN 077 7zl r2g) (Reoeivers and Managers
appoinred) (in liquidation) (.AFGL'); and

(3) Allco Finance (Australia) Limited (ACN 003 315 446) (Receivers and Managers
appointed) (in liquidarion) (.AFAL').

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

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

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

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

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

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

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

(4) On 4 July 2006, AFGL changed its narne to .Allco Fina¡rce Group Limited,.
 -3-
The applicants, following their appointuøtt as receivers and managers of AFGPL,
AFGL and AFAL, received a number of claims from current and former employees from
within the Allco Finance Group, including the respondents and the peßons, if any, they
represent. The respondents and the peßoff¡, if any, they r€'present, claim that tley are, or

were, ernployees of AFGL and that they should receivo any outstanding employment
e¡rtitle¡nents as priority creditors of AFGL: see ss a33(3)(c) and 556(l)(e) of the

Corporations Act 2001 (Cth) ('the Act'). The respondents' defence and cross-claim cast their
claims so as to include an altemative finding, namely, that if they are not priority cteditors of
AFGL, they are priorit¡r creditors of AFAL.

In January 2009, the applicants \árote to the current and fomrer ernployees advising
them that they would treat therr claims for employee entitlements âs claims against AFGPL
NOtAFGL,

On 27 Ma¡ch 2009, the applioants commenced this proc€eding under s 424 of the Act
seeking directions tom the Cou¡t as to the identity of the employet of tlree groups which
were broadly representative of the employees. Three persons, Steven Dave% Michelle
Segaert and Ian Grayburn, were identified in the originating process ¿!s conhadictors but not
named as respondents to the proceeding.

On I May 2009, the application was amended to name those three persons as
respondents and seek deolarations ftom the Court æ to the entity of which the employees
were priority creditors. Those persons a¡e the current first, second and thitd respondents,

t0 Subsequørtly, the applicant filed a statement of claim, the respondents fiIed a defènce
and a cross-claim ând the âpplicants filed a defence to the cmss-claim,

ll On 29 Septernber 2009 I made the following ordors:

'1. Ms Christine Bowen be joined as a Respondent and Cross-Claimant to the

prooeodirig and oross+laim NSD 256 of 2009 (the Proceedings) and be
appoi ed ûo rep¡€s€rit herself and the porsons set out in Armexure'LS3' to
the Affidavit oflisa Arua Spence, swom l0 Septeinber 2009.

2. The First Respondent and Closs-Claim¡qt (First Applic¡nt to the Notice of

Motion) be appointed to represent himself and the persorx set out in
A¡mexr¡¡e 'LS4' to the Affidavit of Lisa Anna Spence, swom l0 Septernber
2009 as Respondørt and Cross-Claimant in the Proceedings.
 -4-

3. The Third Respondent a¡d Cross-Claimant (third Applicant to the Notice of

Motion) be appointed to represent himself and the persons set out in
Annexure 'LS5, to the AIñdavit of Lisa Anna Spenoo, swom 10 Septenrber
2009 as Respondent and CYoss{laimant in the proceedings.

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

5. The Applicants pay so much of the Respondens' msts determined by the

Court at the conclusion of the proceedings, not being less tlun the sum
roferred to in Order 6.

6. The Applicants forthwith pay to the Respondørts, solicitors the suû of

$200,000 on account ofthe detormination conternplated by Order 5.,

t2 At the time of hearing the motion on notico thst gave rise to those orders, I indicated
that I would give my ¡easons for making the orders in paras I to 3 inclusive at the time of
giving judgment on thc application and these reasons are set out in
[13] to [3g] below.

Reasons for judgment or the motior

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

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

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

Overvíew

14 This rule facilitates the administ¡ation of justice by ørabling panies who have the
same interest to secrre a determination in one action rather than in separate proceedings. As

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

are 'to be teated as being not a rigid matter of prinoiple but a flexible tool of convenience in
the admini stration ofjustice'.

t5 Before the Cou¡t can exercise its discretion to make a representative order rurder O 6
r l3(2), the require¡nernts of O 6 r 13(l) must be satisfied. There are two requiremørts:

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

 -5-
(2) second, those pffsons must have the 'same interest' in the proceedings.

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

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

Procedure Rules 2005 (NSW) ('UCPR') (and identioal to its pr€decessor Pt 8, r 13 of the
Supreme Court Rules 1970 (NSW)), both rules being originally derived from equivaletrt
provisions in the English Rules of Court, and, ultimately, from the former practices of the
Court of Chancryi Cørnie v Esanda Finance Corp Ltd (1995) 182 CLR 398 ('Carnie') at
415. It is well accçted that, when conshuing a statute, refereûce may be made to statutes in
differørt jurisdictions if those statutes are sufficientþ analogous. This is particularly true of
statutes originating from the same sourco: DC Pearce and RS Geddes, Statutory
Intetpretation in Australiø (6ù ed, IæxisNexis Butteisrorths, 2006) at [3.36].

Pre-condìtìons to the *ercìse ol dßcretÍon

t7 Order 6 r 13(2), rurlike O 6 r 13(1), does not expressly require that, where an applicant

seeks to appoitrt a r€spondent as representing other persons, the respondent and the other
persons must have the'same interest in [the] proceodings'. Nor does it expressly require that

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

New South lfales ll997l FCA 1553 ('BT Australasia'), 'so much seems to be implicit in O 6,
r I3(2), having regard to the terms of ¡ l3(l)'. This view wæ also taken by Waller J on the
equivalerit English rule in Bank of Am.erica Natio¡øl Trust and Savings Association v Tøylor

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

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

thc question for the Court wæ primarily one of discretion.

Dßcrelíonary consìderøtíons

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

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

enabling parties having the s¿rme interest to receive a detednination in one action, rather than
separate âctions: tf lus tralasia. There are a number of facto¡s relevant to the determining
whethe¡ a rçresentative respondents' proceeding is appropriate in these circumstances. I
will address these factors in tum.
 -6-
Ø The nature ofrespondent representøtive proceedings

20 The applicants in their w¡itten submissions made much of the distinotion between the
nah¡ro ofapplicant (or plaintiff¡ represontative actions arid respondent (or rlefendarrt)
representative actions. This Court has recognised the significant distinction between the two:
B'I' Australasia; stacey Brothers Ptumbíng pty Ltd I wøterco Ltd [2oog] FcA 43g (, stacey
Brothers').

2t rn stacEt Brothers, Kenny J observed that 'some ca¡e needs to be taken' with regard
to Carnie because it concemed plaintiff representative actions, not defendant rrryresentative
actions.

At [30], her Honour said:

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

(Emphasis in original.)

23 And at [3a], her Honour said:

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

However, their Honours' observations should not be read out of context. Sackville J's
comments were made in light of the Law Reform Commission's report en.utJed Grouped
Proceedings in the Federal Court (Report No 46, 1988). The Commission acknowledged
that, 'la]lthough defendant classes appear to mirror plaintiff classos they differ in several
important respeots'. These differences were identified at para 6 ofthe Report as follows:
 -?-
A dofendsnt rç,presentativo doos not voluntarily take on that role but is
selected to rcprescnt others by the plaintiff

Although a reprcsentative plaintiff who brings proceedings on behalf of a

gtoup exposes group members to the risk of tleir claim being defeatd no
person¿l liability ensues. Proceedings against a represencative defendant on
the other h¿nd exposes defendant group membors to the risk of liability being
found against theor and th¡t they will håve ro pay damages

The i¡stitution of a ft,preseûtative claim preverts the limitation period

running agai¡st I member of the plaintiff group; where I claim is brought
against a re,prosentativo group tho timitation poriod will ce¿se to run in favour
of group meûbers.'

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

against constituting such Focedings. However, the facts at hand differ importantly ûom a
typical respondents' representative proceeding. The applicants in this case are seeking
declarations from the Cou¡t as to the identity of the employer of the respondents to ascertain
whioh entity is liable to pay various entitlements. There is no risk of liability being found
against the representative respondents and them having to pay damages. Nor have the
particular representative respondents been selected by the applicants. As such, it could not be
said in this instance that 'mernbers of a roprosonted group may h¿vo muoh to gain when
r€presented by a plaintiff and ev€rything to lose when represented by a defendarrt.' For this
reason the nature of respondent representative proceedings is not a factor against constituting
such proceedings.

(2) The characþrtsfics of the class ot group

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

Removaß & Storage Pty Ltd v Small [981] 2 NSWLR 525 ('Amos Removals') al 529 - 53O.
The fact that the rçresented group is a fluctuating o¡ indefinite body is not an obstacle to a
represetrtative actio& provided that it can be deterrrined whether or not & particular person

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

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

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

of a particular finn or parties who have errtered into aû ¿rû¡rngeme¡rt with a litigation funder.
No particular significance necessarily attaches to the questton whether the class is defined
exclusively by that partioular description (the 'opt in' procedure) or includes all potentially
 -8-
affected pef,sons (the 'opt out' procedu¡e): see Jømeson v Professional Inyest¡nent Semices
Ptv Ltd (2009) 72 NswLR 28t atl44)- t471, tgsl - tl2ll; MuhþIex Funds Management
Ltd v P Dawson Nominees Pty Ltd (2OO7) 164 FCR 275.

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

concern the individual circumstances ofthe members: Stacey Brothers at
l3gl; Geelong Wool
comhing Ltd v Textile, clothing anà Foofweør (Jnion of Australia (2003) 130 FCR 44?
('Geelong wool') ar l72f; Trustees of the Roman catholic church
þr the Archdiocese of
svdnev v Ellis (2007) 70 NSWLR 565 at [83J. The imposition of a pøralty would be an
example of an essential enquiry specific to an individual: Geelong lloot ar
llzf. A common
interest would also be defeated if the respondents were to rely upon different defenc es: Stacey
Brothers at [391.

The applioants acknowledge that the respondorts a¡e an identifiable group or class;
they have a common interest or community of inte¡est with all other former employees with
respect to the question of identiffing their former employer; the defence filed by the
rospondents is not such that it would defeat a finding of commonality of interest; and the
relief sought is not specific to the r€,presentatives.

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

(3) The suitabilíE of the rcprcsentative

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

community of interest with all other members: amos Removab, However, some mønbers,
and even the representing party, may have separate interests in addition to â common interest:
Ellß at7.

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

proceedings. One requirernent (at 530) was that the person selected as a rqrresontativc must
be in management of the group or class and have cont¡ol of its ñ¡nds. As Kenny J correctly
obserrved in Stacey Brothers at 1371, '[s]ubsequent cases indicate, howwer, that
'Tnanagement" is neither a suffioient nor necessary requirement, although there must be
something that binds the group togcther so as to give rise to a comnonality of interest and
 -9-
¡endef, a rqresentative prooeeding appropriate'. Respondent representative orders have been

made in ci¡cumstances where there has been no manageûrerit and control, although there has
bee¡r some other factor linking the g¡oup: see Tony Blain Pty Ltd trading øs Acme
Merchandßing v Jømßon (1993) 4l FCR 414; EMI Records Ltd v Kudhøil [985] FSR 36.
In these casos, there were factors other than mere managemerit and conftol that supported the
representative order, such as knowledge within the group of the group's menrbers, co-
ordinated action" and common p¡¡rpose.

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

proooedings $,as also thought to be a relevant factor. As Brennan J said at 408, '[t]ho solf
proclaimed carrier of a litigious banner may prove to be an indolent or incompetent champion
of the common cause in the cou¡troom.'

The applicants have made no complaint as to the suitability of the rqnesørtatives, and
nor should they. For the reasons c¿rnvassed above thene is a common interest between the
represeûtatives and their respective cl¿¡sses, Whilst thøe may be no management a¡rd conkol,
other factors such as a co-o¡dinated action and co¡nmon purpose are presEnt. There is
nothing to indicate that the represe,rrtative will not execute the litigation in a way that is
anything less than mmpetent. Moreover, the representative parties and their classes have
retained the same solicitors, Therefore, the classes would not er(ecute the litigation in a

manner any different from their respective represmtatives,

This further demonskatos tho appropriatonoss of representativo proooodings.

(4) The compøralive cost of representølive proceedÌngs

Rule 7.4(4D) of the UCPR roquiros the Court to consider the comparative cost of
representative proc€edings. That rule, which wæ inserted in December 2009, is derived fiom
a similar provision in s 33N of the Federdl Court of Australia Act 1976 (Cth) ('thc Federal
Court Act'). Section 33N relates to rqrresentative proceedings conduct pursuant to Pt IVA of
the Fede'ral Cou¡t Ac{. Order 6 r 13 of the Rules does not contain an equivalent p¡ovision.

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

must include its comparative cost and efficiency. This approach is consistent with the
underlying purpose ofO 6 r 13 as prwiously discussed.
 -10-
37 At the time of making the representative orde¡s there were 49 former ernployees who
u/ere represented by the same ñrm. The benefits to cost and efficiørcy
of three
repres ørtatives is selÊevident.

Conclusion

For these reasons, I am of the view tlrat representative proceedings would facilitate
the administration of justice by allowing persons who have the same interest to secr¡¡e
a
determi¡ration in one action ratherr than in separate proceedings.

The hearing of the applic¡tion

I heard the application (frrrther amended originating process and amended statement
of claim) and c¡oss-claim (amended cross-claim) over six days from 29 March to I April
inclusivo and on 6 and 7 May 201O.

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

4l To reflect the leave granted on the last day of the hearing fo¡ M¡ Rich and Mr
Gallagher to be joined as the fiffå and sixth respondents respectively, subsequent to the
hearing, a second ñ¡rther amended originating process and a ñ¡¡ther amended statement of
claim were filed by the applicants and a further amended defence and a further amended
c¡oss-claim wene ñled by the respondents. The fr¡rther amended statement of claim pteaded
that the first respondont, Steven Davey was representative of himself and the persons listed in
schedule I hereunder; the third respondent, Ian Graybum, was representative of himself and
the persons listed in schedule 2 herounder; and the fourth respondent, christine Bowen, was
rq)resentative of ho¡self and the persons listed in schedule 3 he¡eunder:
Schedule I Schedule 2 Schedule 3
Bronwyn Skinner David Swain Chris Waring
John Pace Deborah Stoddart Gerard Pacheco
Julian Radford Eliza Tong Harmen Fredrikze
Julían Ross Matthew Bangel Jr¡lie Keon

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

Nicola Hanrahan Robert Partos Paul Marando

Ray Fleming Vinay Kolhatkar Peter Manchester

Robert Clow Giorgio Leung Philip Hodgkinson

Tony Wong Sandra l-ai Richa¡d Tebbutt
NeiI B¡own Shirley Cao Suzannah Hogan

Larissa Wong Todd Stanley

Catriona Green (nee Ogilvie) Bernha¡d Voll

Nevell Skuse Tze Masters

Sarah Currie Phillþe Sung

Karen Cuenco WayneHome
Heidi Elliot (nec Pritchard)
Jim Hope Murray

Geoffrey Johnson
Laura Hayos

On the Friday before the hearing commenced, the applicants filed a statement of
agreed facts ('SAF') comprising some 97 paragraphs. At the commencement of the hearing,
the SAF (together with two volumes of documents referred to theroin) were tendered and
admitted into evidenoe: Ex l. After the conclusion of the heanng a supplemertary agreed
statement of facts was filed by the respondents comprising two paragraphs together with
copies of docrune¡rts referred to therein. For the purposes of these reasons, I propose to teat
this suppleÍientary agreed statement as if it were part of Ex I.
 -12-
The rellef sought

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

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

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

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

THE LEGISLATIVE PROVISIONS

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

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

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

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

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

(e) ... n'ages, superannuation oontributions and superannwtion guaranteo oharge

payable by the comp¿rny in rospect of servioes ¡endered to ihe company
Èy
employees before the rolwant date;'

47 Secrion 433(9) of the Acr provides:

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

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

'[A]ñounts payable to or in respect of an ønployee of the company (u,hether the

employee is remunerated by salary, wages, commission or otherwisà) under an
industrial instnrment, including amounts payable by way of allowance o¡
¡eimb'rsement but excruding amounts payable in respect åf leave ofabsence'.
 -13-

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

'(a) a contract of employment; or

(b) a law, award, dgternination or agreeûent relating to te¡ms or conditions of

employment'.

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

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

There was a good deal of argummt as to the proper conskuction of s 556(1)(e) of the
Act and its application to the variety of factual circumstances in this case but, at this stage, I
do not propose to analyse the different argrunents which were ventilated with a view to
coming to conolusions on that issue. For preseot purposes, it suffices to say that, unassisted
by authoriry having regard to the terms of s 556(l)(e), its statutory context, the legislative
policy and purpose as is discernable from its presence in the Act and fiom relevant exbinsic
material as well as the definition of 'wages' in s 9, I am of the view that a porson can only be
a priority creditor of a company under s 556(1)(e) if he o¡ she has been an employee of the
company bofore tho rolovant date, and then only for amomts payable (but not paid) to the
psrson as an employee in respect of services rendered befo¡e the ¡elevant date, in the present
case, before the date of appoíntment of the applicants as receivers. So understood, thc task
and only task is to idørtifr whioh of AFGPL, AFGL o¡ AFAL, if any of thern, was tho
employer ofeaoh of the respondats and the group of pecons, if any, each represents befoÌe
the appointnent of the applicants as receivers on 4 Novernber 2008. On the other hand, the
applicants say that while so much may be necessafy! it is not sufficiernt; they say, that even if
I was to fud that the rospondents, or some of them, were'actually employees' of AFGL or
AFAL, that would not be sufficient to make those respondms priority creditors of AFGL o¡
AFAL in respect of unpaid entitlements, because neither of those companies is liable to pay
those respondmts; only AFGPL hæ that contactual liability. Further, they say, that where
what is payable to those respondants by the entity having that contrach¡al liability was not in
respect of services rørdeted to that entity, but rather in respect of servicæs rendered to another
entity, the second limb or integer ofs 556(l)(e) is not satisfied. Fo¡ reasons which I proûle
below, the applicants' submissions hâve no fouridation in fact or law.
 -14-
IDENTIF"YING AIY EMpLoyER FROM Trvo oR MORE possIBILrrIES: T¡rr,.
RELEVA¡IT PRINCIPLES TO BE APPLIED
unsurprisingl¡ the outcome in cæos which have been mncemed with iderrtifting an
employer of a person or group of pøsons from two or more possibilities, whethen from within
the same group of companies or othenrrise, has tumed on thei¡ own facts and, in consequencq
the case law in this area is of limited assistance. Nevortheless, it is possible to discern ce11ain
general principles that the murts have applied in the identification process. The
courts have
adopted the position that in undertaking this exøcise, they æe entitled to take a wide view
of
the putative relationship, beyond the terrrs of the contractual docurnentation, to examine
how
the parties conducted themselves in practice and whether, where the¡e is conhactual
documentation, the reality of the situation accords with the terms of that documentation
or
whether it points to another entity being the employø.

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

54 rn In the natter of c&T Grintet Transport senices pty Ltd (n Liquidation) &
Grinter Trunsport Pty Ltd (In Liguidation) (controller Appointed) 120041FCA I l4B, Firtll J
at [20] said:

'Í20! The principles ro be applied in rhe ider¡tification of the omployer of an

ernployee s'here there ar€ two or more possible ernployers, are reaiornbly well
settled- For present purposes I \yould note the following:

(1) A contract of serr¡ice cunot be transferred by one einployer to anothel or

novated as between them without the enrployee's consent Nokes v
Doncûster Amalgamated Collieries Ltd Íl94OJ AC 1014; Re Coogi
Nominees Pty Lld (Administrøtors appointed): McCluskey v Karagiosis
(2002) 120 IR 147. Questions of ostoppel apdlii Smith v Blandford Gee
Cementation Co Ltd |970) 3 AII ER 154; the enrployee's consent must bo a
real one whaher express or implied and is .hot to bo raised by operation of
Iaw-": Denham v Midland Employers Mutual Assurance Ltd Ít955JZ eB 437
st 443.

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

(3) Documentation created by one or more of the parties describing or

evidencing an apparent €mployment relationship will be ¡elevant to, but not
necessadly determinative of, the true oharacteT of that relationshi p: pitcher v
 -15-

Langford (1991) 23 NSWLR 142; Møns Fabrics Pty Ltd & Nathan
frtholesale Fabrics Pty Ltd v Whipps (1991) 33 AILR 167. In d*ermining
the identþ of a disputed employer, the Cou¡t is entitled to considor 'Ihe
feality of purported contractuå¡ arrang€rnents": Dalgefi Farmers Ltd t/a
Grazcos v Brzce, NSWCA, 3 August 1995. The documqltation ûny have
bean brougbt into cxistence for other purposes, for example, øx minimisation
or tho rcduction of insu¡ance preûiums, without reflecting the reality of the
pa¡ties relatio¡ship: ibid; Pitcher v Langford,, at 149; Sharrment Pty Ltd v
fficial Trustee in Banbtptcy (1988) I E FCR 4a9 at 454.
(4) Conversiorx and conduot at the time of the alleged engagement of the
employoe is of oonsidef,able significâûce: Romero, at [9] , The beliefs of the
employees as to the idetrtity of their omployer is admissible and is entitled to
weigþt: Pitcher v Langþrd.

(5) In cases ofthe ørgagemart of new srnployeos to work in a business in whioh

a nrunber of separate corporate entities pafticipate other*'ise t}an as partners:

"... itwas opon to those contolling the business to select which

company should be the ernployer provrdod that the selection was
consisteût with tho finanoial aad administative organisation of the
business and was not otherwise a sham-"

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

55 The majority of the NSW Court of Appeal (Basten JA dissenting) made tho following
observation in Shaw v Bindaree Beef Pty Ltd 12007) NSWCA 125 ar [59] regarding the
court's earlier decision in Pircåer v Langford (1991) 23 NSWLR 142:

'The result in .&'¡cå er v Langþrd ltrnad on its own facts, and on the need fo¡ error in
point of l¿w. There is no doubt, ho$'ever, that without going so fa¡ as to find a sham
the 'Teality of purpottod contsctual arrangernents" (per Handley JA) can be
oonsidere4 and the case illustates tbat it can extend to tho identity of a contracting
party and thÂt it can be found thåt a pufpoted conFacting par6r was not in reality
pârty to the contraot wo¡r whcre a written contract gives it as the paly.'

The majority furth€r noted (at [61] - [62]) ttrat determination of the eritity that entered
into a conhact is based upon an objective a¡¡sessmeît of the state of aiïairs bet$,een the
p¿rrties.

57 ln Dalgety Farmers Ltd (t/as Grøzcos) v Bruce (1995) 12 NSWCCR 36, Kirby ACJ
(with whom Cla¡kc and Cole JJA agreed) mâde the following observations;

'Disputes conceming the employmørt of shearers are not uncommon. Specifrcall¡

disputes have quito tequently arisen out of "paper" arrangerrents designed to settle
the assignmed of eñployment to a particular organisation ... There is no alternative
in such cases but to examine the detailcd cr¡idence.
 t6-

In disputes conceming the erdsto¡¡ce of emplo]denr_tlTe arrangements, and the

characterisation of those arrangernents, the prooi of pupä ao"rr-ätutio",'
rclevÐnt, wilt nor necessa¡ily he dcterminatìve ... rriejUcy ¡n ana ganúev jÀî
"tùougtr
Pjtchey ... rrade ir plain that, in determining the idørtity ofa drsputed employer,
the
Coul is entitled to oonsider the reality of thõ purported contrach¡al arrangåú. . . .
[]Jhe ga.ner arranganerits [are] not irrelevant, and should not æ ifrio*J .._ fo
daermining whether a cont¡act of seri/ice has been ente¡ed, and if so wi¡i whom,
ít is
necessary to look to the circumstances of lhe engageiner¡t and to ascertain
who ii was
thSt gfferod ernployment, and whether the worÈer-accepted that
offer. To deterrrino
whether what then e¡sued was indeed employment (in the sonse of a
oontact of
service) it is necessary to look to the whoie óf ths ÈUtionst ip....
Thus tho sea¡ch
which is on is for the essefice of the relationship, not the simple touohstone of actual
control, or the right of control.'

rn Pitcher' at r50, the Nsw cou¡t of Appear observed that estabrishmerit of an

'E
ernployment relationship, where in dispute, will often take a court into a detailed
examination
of the features of the relationship between the parties. This case was recently followed in
sturesteps v McGrath [2010] Nswsc 169, a case involving the identification of the
employer in a corporate group.

59 It is open to persons controlling a business in whioh a group of companies is involved

to seleot an ortity within the corporate group to be the employer. Howevor, as Ryan pointed
J
otrt iî Textile Footwear and clothing union of Ausrrøtia v Bellechí.c pty Ltd l99g]
I FcA
1465, if such a selection is to be made, the arrangement must be consisterit with the ñnancial
and administrative organisation ofthe business in o¡der to be effective.

60 Aspects of the practioal ¡ealities of the relationstrip which have been considered
relevant in the cases referred to above, include a consideration ofthe entity which:

(a) had practical and legal contol a¡rd direction ofthe employees;
(b) made decisions about hiring;

(c) made decisions about disciplinary issues;

(d) made decisions about the level ofremuneration;

(e) actually paid remuneration;

(Ð communicated with ønployees about leave;

(e) mado decisions about termination of employment.

 -17 _

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

ALR 598 at 606, Evatt J held that the fact that Mrs Roberts' salary was paid by WPA and thât
tax group certificates issued to her showed that company æ her employer was not conolusive
evidence of the fact that it was the employor. Evatt J was satisfied th¿t that arrangement was
one of financial convenie¡rce to the Watkins Group, with tho rosult that those facts were
'neutral indicia' in determining the issue which company was her employer in the legal sense
during the relevant period.

ln Textile Footweù and Clothing Union, Ryan J observed that despite the
inhoduction of 'Bellechic Pty Ltd' as the name on the pay slips and group certificates, the
preferable analysis was th¿t they remained ernployees of David Keys Aushalia Pty Ltd, or
Bellhop Pty Ltd as it becarne, aûd that compâny made their services available to Bellechic
Pty Ltd upon the latter agreeing to pay their wages and attend to the tax deductions on behalf
of Bellhop Pty Ltd.

63 ln Romero v Auty (2A01) 19 ACLC 206 ('Romero'), Warren J held that insofar as
documents suoh as pay advice slips, group certificates and superannuation documents may
have referred to a new o¡ diffìererit employer, namel¡ Westbury Joinery Services an implied
assignment does not arise,

ln Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at
330D, the NSW Court of Appeal held actual subjeotivo intention to bo a factor the law takos
into account in determining whether a contract exists.

TÍrr'. EVIDENCE

Before dealing with the evidence specific to each respondent and the group of
persons, if any, each rqrresents, I propose to deal first with the evidence going to the birth
and wolution of A-FGPL ând to then deal with the respective roles and activities of AFGPL,
AFGL and AFAL in the Allco Finance Group, specifically their respective roles and activities
in relation to the employmørt of employees within the group, by reference to business books
and records, financial statements and accounting records, as u,ell as records of repofts to
statutory and regulatory bodies or prepared fo¡ the adminisEators or the applioants as

receivers and rnanagers. There doæ not appear to be any substantivc dispute as to the
findings ofprimary fact this evrdence suppo¡ts; merely differences ofview on the findings or
 -18-
cônclusions of seoondary fact that might be drawn thorefrom and their significance
in
resolving the ultimate issues.

Thc Birth and Evolution of AFGPL

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

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

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

l9l In or around 1995, the NSW Rwenue OfEce conducted a payroll audit ofthe
Allco of companies. As a result of tho audit and the signifrcant duplication of
_group
work for eaoh company, I had discussions with Brian Holrnes, whom I rmãorstood at
the timo was the Direotor - Administratior, about these accounting issuos and said to
him words to the eff€ot of,"it would be ñuch easier fwe have a-central enüry
from
yhilh yte could pay employees," to which Mr Holrnes agreed. It was my viei-tlnt,
by having one central entity as the payroll entity, it wor¡ld streamline the accounting
and reco¡d keeping activities, reduce unnecessary duplication of work and save ã
considerable amorurt of time.

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

l11l It was f¡y vie\r, that AFGPL would be a oompany to fill the role of central
payroll entity for the Allco Group. It was never intended by me or anyone else that
any otåer activitics related to employment be cffried out by AFGpL, but that it
would be an administ¡ative entit% for the purposes of registering for group and
pa¡rroll tax.
 -19-

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

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

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

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

would h¿vo as a 'oental payroll entity' would be to pay employees. Mr Rich resisted making
such a concession saying that it had more to do with steamlining 'the accounting and record
keeping activities' and to 'reduoe unnooessary duplication of work'. The most that Mr Rich
would concede is enrbodied in the following exhact from the t¡anscript of his cross-
examination (T309.28 - 45):
'Yes, Thank you. And then in paragraph 12 you refer to registering AFGPL with tho
tax departmeút as the Allco Gmup øxpayer. Conect?--That's right.

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

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

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

Yes. And in a general sense it includes 1þE ir¡portant task for a payroll e,ntity of
paying ernployees. Correcl?--lt oould h¡vs included that, yes.'
 -20 -

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

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

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

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

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

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

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

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

Whether_ or not. the cash was physioally paid by AFG pty Liñited, it ìyas oetainly
your understanding in January 2003, was it not, that AFGpL was liable to pay your
own remuneration?---ìJVell, I would never have thought of ¡\FGPL as the person
the entity that was paying my salary, no.
-
I see. Ilave a look at this document. And I will hand a copy to your Honour. Do
yot¡ see yow n¿une on the left hand side ofthåt document?--yes. I do.

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

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

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

Cor¡ect?---Yes ,

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

AII right- And, then, do you see a little over half way down there is â section O) to
be compløed by the payer. And do you see at about three quârters of the way down
the page the payer is ¡eferred to âs AFG Pty Limited?--yes.
 -21 -

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

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

Is tløt right?--That's right.

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

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

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

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

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

69 The Directors' Report attached to the financial statements of AFGPL for the year
ended 30 June 1997 recnrd, inter alia, the following:

,2. PRINCIPALACTIVITIES

The principal activity of the company during the yoar was to hold interosts in
partnefships and act as ageût and r¡¡¡¡gcr for a joirt venluxe. There has been no
significant change in the nature ofthose activities du¡ing the ye€r.

3. TRADINGRESI.JLTS

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

70 The Directors' Report attached to the fin¿ncial statements of AIGPL for the year
ended 30 June 1998 rccotd.- ¡ntet alîd, the following:

,2. PRINCIPALACTIVITIES

The principal activity of the company during the year uras to hold interests in
partrerships and act as agent and manager for a joint venture. There has beør no
signiñcant ùange in the nature ofthese activities during the yeâr.
 -22 -

3. TRADINGRËSULTS

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

The Roles snd Activities of AFGpL, AFGL and AFAL

71 In a Questionnaire for Di¡ectors and officers compreted for Ferriø Hodgson and
McGrath Nicol in relation to AFGPL by its directon, Ray Fleming, David coe, David Veal
and Christopher West, they stato , inrer alia, the following:

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

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

(3) AFGPL has been dormant since the møger of Record Investrnents Limited and Allco
Finance Group on I July 2006;
(4) AFGPL remains dormant, has no products or servicos, agerits, customers or suppliers;

(5) AFGPL has no bank aocounts;

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

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

(8) AFGPL has no crcditors;

(9) AFGPL did not pay payroll øx, pAyE and withholding amounts, superarmuation,
fringe børeñts tax, or inoome tax because the company did not trade;

(10) AFGPL does not have any employees.

An earlier report as at 4 November 2008 reco¡ds that no money is owing by AFGpL

for ernployee entitlements.

There has been no accounting for employee liabilities or costs by or in acmunts of

AFGPL since I
July 2000, exc€pt the expense of worker's compensation insurance in the
year ended 30 June 2o02 of $2,250. Ttere is no indication in the financial statemerits,
ledgers or joumals at any time between 2003 and 4 November 2008 of AFGpL that there was
accounting for the obligations that would arise from employment conhaots (such as
 -23 -

obligations for salary, superaruruation, long service leave, annual leave, workers
compensation or payroll tæ<).

tial balance accounts of AFGPL reflecting the accru¿l of

There a¡e no enhies in the
employee entitlemats, liabilities or costs, such as annual leave, long senrice leave,
superamr¡åtion, salaries, bonuses, workers componsation, payroll tax or fringe beneñts tax
for 2001 to 2009 (except the expense of workers compmsation insurance in fhe year ended
30 Jr¡ne 2002 of$2,250).

AFAL was the primary entity for the accounting, funding and seftlement of the Allco
Finance Group ernployment related liabilities and expenses. AFAL reoeived funding from
AFGL for this purpose.

The accounting records indicate that AFGPL had no employees,

AFGPL did not aooowrt for any persons as its employeos.

From I July 2007 to 30 June 2008 eFGPL has had no income and had expørses of
only $200. The only signiñcant balance sheet movement fo¡ AFGPL since 30 lune 2007 was
the closr¡re of the AFGPL bank acoount and the Eansfer of the closing balance to the Allco
Finance (Auskalia) Limited No 2 Account.

In the 2006 Annual Report for AIGL, it was described in the balance sheets as at
30 June 2006 as inourring liability for employee entitlements and as making payments to
suppliers and employees. AFGL's liability for employee entitlements and employee
payments for 2006 and 2005 a¡e the same as tl¡ose of the oonsolidated entit¡ which indicates
that, for intemal accorurting purposes, the employee entitlenent liabilities for the
consolidated group are üeated æ belonging to AFGL.

The 2006 Annual Report for AFGL states that the consolidated financial staterrents
incorporate assets, liabilities and ¡esults ofa list of subsidiaries, AFGPL is not inoluded in
that list. AFGPL is not mentioned in the Annual Rçort at all.

81
-It,e 20Q7 Annual Report for AFGL did not mention AIGPL as having any role in

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

 -24 -
82 AFGPL ìYas not included in the list of significant subsidiaries
in the re,port; nor wa5
AFGPL described as having a role in relation to detennining key management personnel
¡eÍlunef,ation ot other terms of their engagement.

83 The audited financial statements fo¡ AFAL for the years ended 30 June 2003
through
2006 indicate that it accounted for employment related expenses and liabilities
as if it was an
employer during that period.

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

85 AFCPL did not contibute to the Allco Finance Group's profit during the period
covered by the 2002 consolidated statutory aocounts.

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

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

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

(2) the size ofthc investment;

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

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

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

88 AFGPL is not listed as a party to the Alloo Group Deed of Cross Gua¡antee in notes
to the consolidated fi¡rancial statements ofAFGL for year ended 30 Jr¡ne 200g.
l--
I

i
_25 _
I

89 A-FGPL did not contibute to the Allco Finance Group's profit during the period
oovered by the 2008 consolidated statutory accot¡rits.

Atr agreemeot dated 12 May 2008 existed between Automatic Data Processing
Limited ('ADP') and AFAL for provision of payroll services, AFGPL was not a party, nor
was reference made to it. ADP prepared PAYG payment summ¿¡ries (group certiñcates) and
payslips for ernployees, under the agreemørts.

9l From at least 12 May 2008 ADP arrangd for each of the responderrts to be paid their
mont¡ly salary and paid superannuation paynents to each efirployee's nominated
superannuation firnds.

An agrewrent dated 14 Septerrber 2006 between Smart Salary Pty Limited and
AFAL as employor providod for Sma¡t Salary Pty Limited to provide salary packaging
services for employees in the Allco Finance Group. AFGPL was not a party to the
agreement, nor was it roferred to itr the agreernent.

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

An intemal doc¡¡me¡rt entitled 'Employeo Briefing April 2008' described the Group's
intention to exit some of its businesses to reduce debt and an anticipated headcormt reduction
from 620 to 350. The document contained no mention ofAFGPL.

An intemal document entitled 'Business Plans-Communication to Employees

Manager QAA 17 Mæch 2008' described a restructr:ring programme aimed at exiting non-
core activities and shuoturiug oore business differently. The document contained extensive
discussion of the impact on employees including anticipated redundancies, the decisions
about making positions ¡edundant, procedì¡res to be followed and entitlernents on
redundancy. AFGPL is not mentioned in the document.

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

Guidelines (Extract) Effective 5 March 2008' sets out the general approach that the group
wished to take in the event of redundancy. The document dealt with the selection of
 -26 -

employe€s for redundancy and entitlement on t€rmination on the ground of redrmdancy. The
documerit made no mention of AFGpL,

97 The bank statements for AFGpL for the period 5 July 2005 to 22 M,ay 200g, during
which time AFGPL had a bank accor¡nt, show no activity during this three year period apart
from a single deposit on 7 February 2006 of $50,000, which was a distribution to A-FGPL
arising from ajoint vørture a¡¡angement.

98 The bar¡k statements referred to above indicate that the hank account was olosed on
22May 2008.

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

100 The bank statements for AFGPL for the period 5 July 2005 to 22 Ntay 2Q08 show no
paymmts related to ønployee entitlemefits, or payments of any kind.

ì01 Natasha Kent, Belind¿ Casting Lina Marotta, Bevan Jaensch, Mark McGee, Dorma
Hall, Penina Joseph and Deepax Sethuram sigred payment authorisation forms during 2006,
2007 and 2008 which authorised payments from the following accounts with the
Commonwealth Bank of Auskalia to state and federal tax offices for payroll tax and PAYG
withholding ta:< and FBT instalmerits:

(l) Allco Finance (Australia) Limitd - CBA No 2 Account, BSB 062 022, Account
Numbq 10099606; a¡rd

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

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

ryme o{ 'Allco Finance (Australia) Limited No. 2 Account', the aocourt number being
062 022 10099609,

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

104 The documents exhibited to Ms Wagner,s fi¡st affidavit (Ex 4) show it was AFAL
that paid employee's salaries, superannuation contributions and pAyG tax.
 -27 -

supenannuation statements provided to employees note AFGL as the ernployer.

AFGL represented to the ATo that it was the employer in the choice of Superannuation
Funds Standard Choice Forms provided to the ATO by the Allco Finanoe Group.

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

having worked, or the legal entity which is reco¡ded in æsociation with the employee's name
in the payroll records, the money for salaries, tax paymerits and superannuation for all
ernployees was provided by AFAL,

t07 The documents exhibited to Ms Wagner's first affidavit (Ex 4) show it was AFAL
(not AFGPL) that paid the October 2008 salaries and PAYG tax.

r0E The bank staternents fo¡ AFGPL for the period 5 July 2005 to 22 \l[ay 200g show no
paymerits related to employee entiuerrierits, indeed they show no payments of any kind until
22 l:ùfay 2008 when the bank account rr¡as closed.

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

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

AFGPL, Payment of the prerniums for this insurance was mado by AFAL from a bank
account with commonwealth Ba¡¡k of Auskalia Account Name Allco Finance (Austalia)
Limited - CBA No 2 Account BSB 062 022 AccotntNumber I0099606.

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

døailed general ledgers of AFGPL.

112 The board of AFGL created the Human Resou¡ces and Remunenation Committee
(HR&RC). The purpose of the HR&RC wæ to make decisions and/or ¡ecommendations in
relation to rernwreration, human resources matters, and employment policies and practices in
relation to the Allco Finance Group. The HR&RC repoÉed to thc board of AFGL and was
responsible to the boa¡d of AFGL, AFGPL did not have such a oommittoo.
 -28 -

The HR&RC was rosponsible for:

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

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

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

(4) determining the remuneration arrangements of thc Executive chairman and other
executive directors for approval by the board ofAFGL or sha¡eholders ofAFGL;

(5) approving the rem¡ureration ar¡arigements for the other Executive Committee
members and any other individual or class of employee æ requested by the board of
AFGL;

(6) being informcd of and monitoring the remuneration 8¡rangements of other senior
executives or class of ønployee as requested by the board ofAFGL;

(7) providing guidance to the boa¡d of AFGL on evaluating the performance of the
Executive Chairman and other Exeoutive Committee menrbers;

(8) rwiewing and making recommendations to the board of AFGL on the total level of
remuneration of non-executive directors and for individu¿l fees fo¡ non-executive
directors and the Deputy Chairman of the boârd of AFGL, including any additional
fces payable for membership of board of AFGL committees;

(9) reviewing management succession plaruring fo¡ AFGL in general, but specifically in
regard to the CEO of AFGL and Executive Committee meûrbers of AFGL;

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

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

tt4 The HR&RC performed thc above fimctions without roforenoe to AFGPL.

One of applicants gavo evidence with respect to the use of an entity within corporate
groups as an employhg entity; that it is not unusual for a corporate group (of the size and
structural complexity of the Allco Finanoe Group) to have an entity (or a limited number of
entities) set up or allocated as the employers within the corporate group; from an accounting,
 -29 -

financial and gøre'ral administrative porspective, that it minimises costs if the number of
employers within a corporate group is restricted. Some of the administrative and legal
obligations of employers, according to the evidence, includo:

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

nominatod superannuation fund or the employer's default fund;

(2) accrual and payment ofvarious tlpes of leave including annual leave, personaVcarer's
leave, compassionate leavg long service leave and parentål leave;

(3) payment of monthly payroll tax in respect of employee wages to an applicable Office
of State Revenue. In New South Wales, the pøyroll Tax Act 2002 (NSW) provides
that an employer is liable ûo pay payrolt tax on wages and is to be registøed under
that Act;

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

and leased motor vehicles;

(5) registation and withholding of PAYG tax from employees' salaries and the
remittance ofthat tax to the ATO on a quarterly basis;

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

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

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

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

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

(1) As to (l) and (5) - The documents exhibited to Ms Wagrer's first affidavit (Ex 4)
show it tvas AFAL not AFGPL that paid employee's salaries, superannuation
contibutions and PAYG tax. These documents show thât PAYG in respect of each of
the respondents was remitted to the ATO by AFAL.

(2) As to (2) - The bank statements fo¡ AFGPL for the period 5 JuIy 2005 to 22 tr{ay
2008 show no payments ¡elated to employee entitlomonts, indeed thcy show no
 -30-
paymøts of any kind until 22 Nlay 2008 whe¡r the bank ac@unt was closed, AFGpL
never acoor¡nted for employee expenses or liabilities of any kind between 2002 arß. 4
November 2008.

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

(4) As to (6) - No payments in respect of workers' compensation insurance were made by

AFGPL. AII payments were made by AFAL and recorded in the accounts of AFAL.
(5) As to (7) - The minutes of the AFGL Board and the Annual Rçorts show úrat since
I July 2006 AFGL was the company making the decisions about employment matters.
It was from AFGL (rathor than any of the other 867 entities) that en¡ployees received
conespondence in relation to their employment and letter ofoffer.

As indicated at [65] above, and subject to what I have to say in l8] below, the¡e was
[r
no substantive dispute that the evidence supported the findings of primary fact in
[66] to
[l 14] above; merely differrences of view as to findings or conclusions of semndary fact that
might be drawn therefrom and their significance in resolving the ultimate issues. So much is
exemplified in the applicants' reply submissions:

(1) That the Allco Finance Group rçrese,nted ro third parties that AFGPL was the
employing entity for Aushalian employees: tho attachment to the email headed 'Allco
Employing Entities as at 30 June 2008' incorporated as schedule l l to the syndicated
Facilities Agreement dated 7 November 200s (Ex l1); and nothing which represented
that AFAL and AFGL we¡e employing entities.

(2) The accounting widence should be t¡eated with some caution. The accowrting
evidence will not assist the court to answer the questiotr as to which entity had the
liability to pay the respondents' wages and superannuation payme,nts.

(3) There are accounting reco¡ds which are consistent with the employees being
employed by AFGPL. AFGPL's name was used for the purpose of rçresenting to
third parties, such as the ATO, workers' oompensation insurers and State payroll tax
offices, which entity was responsible for relevant liabilities: Ex 4, Tab I l. The
wide'nce shows that AFGPL paid the tax component of $1,358,441 from oash in the
AFAL No 2 Account. AFAL provided a treasury function for the AFGpL employees.

(4) AFGPL was not a dormant company within the Allco Finance Group.
l--
-31 -

(5) Mr Rich gave evidence about the reasons for establishing AFGPL and its use as a
payroll ontity: see T309/l - 40. It w¿¡s clear thst AFGPL was set up for the puq)ose
of paying wages and salary, Mr Rioh understood A¡GPL to be paying'your' group
tax: T3l l/41.

(6) Mr Pace, who was employed as an aooountant by AFGPL and working within the
Allco Finance Group, agreed that AFGPL prepared and filed Business Activity
Statements (BAS): T261. It was clea¡ that Mr Pace had a limited understanding of the
role of AFGPL and much of his evidence wâs irrelevant to the issue which properly
arises for determination.

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

vast bulk, if not all, of the salary and wagos of the Allco Finance Group. Those
retums give detail about the salaries and wages consistently with the proposition that
AFGPL was the company that was liable to pay tåeir remrmeration,

(8) The evidence also shows that AIGPL was Eeated ¿¡s a large rernitter fo¡ PAYG
purposes: '1262. It also paid fünge benefits tax: T267 .

(9) The evidence does not support the respondents' contention that AFGPL had no assets
o¡ expenses, specifically in relation to employees. M¡ Pace's evidence he¡e shows it
did, and further th¿t this corresponded with a greator numbs¡ of employees in the
Allco Finance Gtonp: T262, 269,

(10) Furthø, the evidence does not support the respondents' contention that AFGPL had
no employee-related expenses and that AFAL paid all employee-related expenses and
did not reoover any monoy from AFGPL. There is ¡efereûce to AFGPL name or code
which appeared in the AFAL's accounts: see Mt Samuels' evidence at T283/17,
285 I I 4, 286/ 9, 288/ t, 289 I 2t.

(11) This evidence does not sl¡pport a finding that an eûtity othe¡ than AFGPL was
contraotually liable to pay the employees.

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

(r) The payroll sìrmmary report at Ex 4, Tab ll, does not provo that AFGPL paid the
bulk ofthe salaries and the tax that was being paid on those salaries,
 -32-
(2) The mattors referred to at [ll7(3) above, do not prove that AFAL provided a
'treæury firnction' for AFGPL employees, whatwen that means.

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

(4\ Paragraph ul7(S)l: The tanscript atT3lll4l, or ovon thereabouts, does not support
the statement thåt Mr Rich understood AFGpL to be paylng .your' group tax.

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

(6) Paragraph [1I7(8)]: The evidence at T262 does not establish that ArGpL was heated
as a large remitter for PAYG pu{posos; and the evidenc a aT T267 does not establish
that AIGPL paid fringe benefits to<.

(7) Paragraph tllT(9)l; The eviderice at T262, T269 does not establish rhe respondarts,
contention, that AFGPL had no assets or expenses, specifically in ¡el¿tion to
ønployees, to be false,

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

not establish the respondents' contention, that AFGpL had no employee-related
expenses and that AFAL paid all employoe-related expørses and did not recover any
money from AFGPL, to be false,

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

I t9 Each of the persons in this group, reprosented by Mr Stevør Davoy, either originally
made an agreernent with AFGL (when named 'Record lnvestments Limited') or, having
previously made an agreement with AFAL (when named .Allco Finance &oup Limited'),
made a new agreement with AFGL, the terms of which æe analysed below.

t20 By letter dated 3l July 2006, Mr Davey was offered fuIl-time employment with the
Allco Finance Group:
 -33 -

¡t\
ALLCO FINANCE GRO{JP UMITED AB}rsÐ0q,3i5..å
I Lsvs¡ e¡4. Grbtrdy, r Mac{lEri€ Plæ srdhey NslÂ, 20lx)
TeEptone @ 9255 4lCú FGùn¡c m 92{l 2560 $ /*.o1hÞ.Go¡n.Eu

ALLCO
3l July 2006 * 75+

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

Dear steve

EMPLOYMENT AGREEMENT

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

Your total rernun8ration paokage lncludes fhe fofloríng componenls:

'f . a fixed salary compônent of per annuñ¡, inclusive of bese salary,

superannuatlon ând eny salary pack8ged benefitE (including applicabl6 FgT), rÂù¡icf' rnây
be åvaibble lo you ¡n aocorlence wi¡h Allco policy, and

2- a discrutionary annual perfofnìance bonuÊ ¡ncÌu6lÍe of supêrånnuEt¡on of up to 100% of

fsod salary, dependent upon divþlonal and/or Group p€rfomence, tour acÌúeìreîìent of
Egreed key rqsult er€e.6 rKRA6') and yor¡r contihu¡ng eñployment u/ith Altoo, Wì€re
employment commence€ pari tÆy thtuugh lhe financlal yesr, the bonuÊ will be ofrrBd
on a ptg{ãfå basiB prþvidlng you hsrre been emdoyed for a rninimum of 3 months of the
financial yeaç end

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

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

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

Yo¡¡rs sincerely

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

0.i uu i.ls
 ÂI.LCO RNAITCE GROUP UI,IIÍED
P¿96 2 ot rO

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

J,þþb

íi..JiJtì{tll
 -35

ALLCO RHAìICE GROUP U¡IITÊD

Plgâ 3 of t0

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

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

Responclbllltlêa & ObligÊtiona

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

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

Oulslde Work

Dur¡ng rhe brm of ,our omploFrÞnt, you muil not ìviüout the prir writt8n carBent
. parlkrþate in eny aclivltlee (dtec{y or indlrEcty) hât msy r0pt6ent a confrict ol inrerest with
Albn or w¡ü rhe bus¡neEses io wtìlct¡ A[c¡ oper8tes;
. undsrEke any appo¡nuûent or po6lt¡on thot f€ l¡kely to inlßffBle wlth the pllormance of your
rBsponsib¡l¡$æ unde¡ thb Agreemellt o¡
. hâve any dirsct ôr indirBct pecunlary interest that wouìd ¡n.any way cômpmmise the
perfomance ol your duties.

Workihg Houra

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

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

Ramun¿mdon Packegê

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

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

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

Anîual Pcrfolmance Borlus

As pstt dyour tobl rernuneratþn packãge, Nho ney Plovile b you lhe opportunity to parlb¡pate rh
ãn arìnual p€rbnnÉrlõe bonus. t lllefE appllcsblB. lhþ will b€ deb¡l€d ¡n our küsr of ofüt b yÒu- ThB
ãnnùål bonùs petiod @rllrrÊtrc$s Ofi 1 July and condudes on 90 June eadr yeâ¿ EÍgù¡lity b r€ceive
a bonus payrr€nt 'E al lhe d¡scretion of Alþo conEider¡ng Euch fåctors as lh8 schleìr8ment of sp€c¡fic
KRAS as deþmkled by Alþo in con¡uncllon ìyilh your Mañâg6r and buslnes€ perfû.ítance- KR^s $,if

Slêv6 fjrvey
írrrrrrri n K
 -3ó-

ALLCO FINAI¡CE GROuP UUTTO

pege¡l of i0

be s€t annt¡dly ãt lhe commonce¡nont of êach firìânc¡âl year.

Bonus pâymeû6 ere inclùsive o[
su-peË¡nnua¿on and wirr be rnade E¡ rh€ lompþt¡on of eåch
fnanciar yeír once resurc ere fir,ìdis€d.
wherê €mpþymÊnr comrììsrìce9 p€ri rrây rhiogh the anandâiy€aì í¡ì Iåoìrs r¡¡rr ¡e oæred or¡ a
pro-ErrE oasE prbvrd'ng you havÊ bosn €mptoyed lor a mhlrnurif
ol 3 montle ol lie financjEl yۉr-
To be el¡g¡ble to rec'¡ve a bonus payment,
}!u must bo smDroy€d with Atrco at uìe rime rhâ boîus
paynþnas âre mãde. rn the event thãt Abo teminates yo,rerípoymenr,
6r feasofls orhef rhan poor
peúonnance or conducr retEtsd mdteß, ihen Atho may'at bdú"éüon
ilåi"
pâym8nt in åc¿ordance wfh KRAacìievÊm€ntá th€ llme ot termination. "' "
p*.a
oonu"

Supera¡nurl¡on

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

Probal¡oñsry PorIod

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

lf you do not achieve sst¡sfâdory perfomancÊ ôr conducl during or at lhe condus¡on of üe

probatfoiary period, Allco mãy tehinate your employn€ít w¡th one week's not-ce or pâynent in lleu.

Leãvs Ent¡l¡emenb

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

Adíuêl Lc,aye

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

Allco msy observa an €nnual cbse down f¡ør ChriEtmås to Nery yeã.. ot ãt othef t¡rnes f4ay
requ¡r€ anrual leave !o be taken by indlvld¡¡âls andrG groupa. tn lh€ 6vÞñt. of a dosê doli¡n or
oller requ¡reme b take Enôuat tealr€, ststr virll be pr¿vided with at teâsl one nônth,E noti:e
of lhe need to tEkE annual leâve ât thât l¡me.

S¡çX and Ce,rt,r LaÊvo

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

Aflco mSkes prwlôion br bng serv¡ae leave h accordano€ with âppllcable long servlce teave
l6Eblatlon.

Olhet Læve En ømønls

SrcÊ brwy
íidutirÍ.
 -37

AI.LCO FINANCE GROUP T]MIIED

Pass 5 of t0

All other læve eûl¡tleñBnts pR¡r¡ded ln âccorder¡ce with sþlulory r€qutremenls orAllco
pol¡cyr âs \rar¡edfllltlme lo ¡¡me.

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

No Sr¡roking Í¡olby

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

Heahh, Salety & Dbcrlmin¡t¡on

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

lntel¡ectual Proporty

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

You agree that yo¡, qrape elry ¡ro€l rlghb you roay have, bo'ù in any onìstjng aîd ln ellluùre work6
made or dss¡gned by you iî lhe course of yor,í emplDyment. You furlher agree thet yo.J w¡lt G
operaÞ r/ilh Alho ln l€gisÞrlng or olherlxGg pmtiedling eny ¡nt€ll€clual property created duríng your
employmer( ãnd thãt )¡ûu will el(ee4Þ any documenb necêsEâiy to ghr€ effect lo thls-

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

11 ls agreed óât yô.¡ l/vill coñply vrith Alþo's Slañ Finaræbl ProducE Dealiry Pol¡cy, aE vâried lrom

llme lo l¡rne This policy b deslgned to Fovid€ prot€d:rorì to Allco Fhance croup Llm¡led, its relsted
partreE ard ib employees by IesifÈùng d€aüngs by ernplqiees h F¡nancial Products during csrle¡n
times, or $hen elIlploy€es afe ¡n posseÊsion of certa¡n Vpes of lnlomalion.

Cont¡de ntrEll¡y

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

You m¡¡8t ßot whethêr ùJirE emplóyment cr Efier the tenninaliorì oI your employmsnt wilhout lìmit ¡n
time. dl5d08e t0 any perEoh eny coûrdenÛ'at intonnalion of !¡rhìdì you mey poe6e8g ard yDu muEl not
íìake use of arry sN.¡ch coñfdent¡âl lnforÍ¡8t¡on ts ga¡n di€dy or ¡rìdireoüy any lmproper 60\raotâgo to
you orþ a!ìy Oth€f parEoc or blnjur€ or cAæe logs eürer ht€nlbnBlly or un¡ntentioflally dúr$lly or
lnd¡r€dly to Alco or ¡G bßlnessæ.

Cor¡tl¡ct of lntGr¿st

Sllvc D¡vct

li,illî;tZ
 38-

ÂLI.oO FINAI{CÊ GROUP UIUÎIED

paæB of i0

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

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

Othor EmptoFengDirec{orEhlps

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

Rolu¡n of CoûpEqr Propsrty

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

Êus¡ns€5 Tr¿sel

Given the rìaûore of Allcois business it i6 that you ¡,¡nd€rtake lor busine€s puçoses 6uctr
domæt¡c end intemationâl trevel rcqu¡rË.d'€qul€d
lo fu¡f¡ll your duties,

Tãrmlnatioñ of Etnploymenf

Your employmentwith Alloo w¡llterûlnale by your resjgnat-on or by Allco's tErminalion of your

mntr8cl. ln ellher csse, one morth's wrinen noüo8 must b€ gíven by you or AUco,
L,pon recelp( ot yourwritt€¡! not¡ce or upon bsue of notlce io you by Altcô, Allco has the option of
providiìg you t¡vilh one mônth's paymeîl bsEed on your fùed reûìuner€lbn pack3ge Or Þan the€of ¡n
lieu of noflce- Such payment lñay be lr,¡thheld until ltE rgt¡¡m or any conliderìt¡al inlonnetion o. Atlco
pfoperty. (¡ncluding ¡ntElþctúâl property) ln your pos8essìon and until the satbÊctory cúnpþtion oÍ
Allco's exit procedures.

Albo rE6€rv€s üle rþht b tefmlñate your employment w¡lhoul nolice for f€asons wh¡cl \'!ould lust¡ty
sumrnÍy disrnbeal at cornmon laúr, ifÈudlng n¡lt¡bú t¡mìÞtion, ll you:
. coñmit any ser¡ous or peß¡slont Þrgac.h of any of ths pro\r€¡on€ of ltris Agr€€ment:
. are gullty of sny serioue misrondué o¡ willful nâgt6ct iñ üìÐ petfutmarìc€ of yûrtr
empþyment dul¡e6;
. 9re lñ bfeâch of AllcD's policies ând pfwedutÉ &r Ùre lime belng ¡n lorce:
. (br fflSnClaf ãnd leaderehlp postt-ons) b6com€ bankrupl or meke âny anâr€snent or
carnpoelt¡on wÎh your cfÞditdß:
. eß convbted of €ny cnrm¡nãl oftnce olher ü|an eñ ofeíce wlth ¡n lhe leêEonable opinlon of
A¡lco does r¡t atTec-t !'our pciliôn æ an srrployæ; or

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

Gârd6n Lesve

S.cw DaYcl
i.iil¡lr3
 -39-

AI.I-CO FIÑANCE GROIJP UIJIITED

pagG Z ofio

Y.o-urîa,y b€ rÉquùed.byÁtlco dany tirne (inck¡dlng bul not limitÊd to, durlng any notice period or fo¡
the pü¡posr of invesäg8t¡fE any mâüer h wlì¡ch yoü a¡! ¡npflctlBd or lnvolvsdt'nrt to Dfu,lln oi'''
'
dul¡es for A¡co e¡dro¡ a¡end foú vort snd Arcob premieee fGardân Lea¡'"). Thh rÍày abo erÉnd
b comnuniulion ìvih oüìer employsÊÊ, c¡¡6torneÈ, cllenb endor 6uÞpl¡ers.
Dur¡ng lhe Ga¡den Leave. you uüiï be enliüert to reco¡ìß sstery ênd âll cDnlrâdúai benefls (e)(clud¡no
any tBymenl under any bonus 5dlem6 or ho fong term lncÊr ive arlång€menl) ¡n acrco¡üaàce w¡th -
lhe terñìs of h¡E Agr@ment.
pos1 Emplolment RestjatìÉ (only lncludl oa advlcø ol H(¡act ol HR)
You 8re llkely to ob¡ain trede €êcrets ênd conñd€ntÈl inforñalion âboul Alìco and peßônsl knolvledge
of and ¡nñuencê ô\rercuslD ers and sñpoyces ofAtho durhg tll€ course of youiemptm,.eni.
prolect those interests Of Atbo, you âgreê lo b€ bouod by the filov¡¡ng:
iJ-
(a) For â period of up lo sL months aftéf you? lêrrñinatioî dâte, you will not be emf oyed or
sngâged. d¡rectv or Indûecty in any bugness whlclì b Dr is Ebout to be ln coû¡petit¡o; w¡th
Allco or any ol ¡t's relabd br/sheÊ6es. This resfticl¡on ¡s llmlled to eteas of hjs¡ness \¡tEre
you wefÊ personally €ng4ed ¡n fof Alø during lhe previou6 1Z monùs, and

(b) For â p8rbd ol 12 months aller your larmìnallon dstq you wíl nof çEnvass or soticit or
acce9t Þusiness fÍom âly custcmcr of Alao or ant ot lts reÞlEd bùsheÊses whefe. at any
time durlng the lasl trvefve mor¡üls, lbu e¡th€r hed aÉc€6s b corìt¡dent¡âl inforr¡alion ôr
deafngs w¡th lhese cuslom8rs in your capdcity as an Allco employee, aDd

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

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

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

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

You acknorìdedge the! the rBdËdy ot darnag8s et laìl' br U€aclì of thig sgreement would be
inadequsÞ and lh8t ÞñrpoÉry and pêrrñEnent fel¡ef W way of lqiuncdon agâinÊt you may be granted
¡n any proo8ad¡ngs whlch Allco may brifg tD Enþrce arry of lhe proìrlsion of lhig egtclmert, without
necess¡ly af PIoof of acù¡sl da age sufbred by A¡cô.

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

Oúerpalr¡nenLs &
^dvat¡ce6
If t¡ou þave Alloo. any ovel?a!¡¡nsnb of rsmuneratbñ, bgetlrsrslth âny moni€s adrêñoed I'o you on
any BccourlÎ eutorEtically becdne due for FÊymen! You ågtoe tt¡qt Prbr b brmireüon, you wqi sþ n
any cor¡senl al¡tl¡otia!ìg A[co Io dedud any outùnding (þbts or mon€ E owed fo Alho by you frofn

Stc\,c IÈYcy

ii,¡il¡'i'.t.4
 -40-

ALLCO FINANCE GROUP UIITTED

PEg€ 8 of 10

your final,pey (including wilhoui limllation bôth remunerEtron and ußpald

€[eenEEs) o¡t leminalion ot
your employ¡nênt

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

Pereonãl 0elall6

informed of åñy.hanges to yoü personaldetaits during your emptoymed.

I?y T_ust fee 4tts
rnc[¡clßg yolr.adtress, te¡ephone numbef and emergency corìbct deùails. plEase advisê p€yroìl o!
any changes throûghout your erlrptoymeît.

RePr€6entst¡ohs

f hls docum€nt ånd your lsl¡er of offer supersedes and €xclsd€s ãìly pior or cdlãt¿ral negotiatioñ,
undersÞnding. cofirmunical¡on, lerrî ol egßement or olher hbßnáËn prcv¡ded to yorr, -
¡Epresentåt¡ons mâde to you throoghôl,l lhe cor¡rse ôf th€ Selætion pKþess. eiher 6y any membor of
Allco of eíy agent or cmsuttant ui,orkng on bellalt ot Àllco, rhat are ;ot rcflected h th¡s Aôreement.

Pfiv¡cy

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

D€allng w¡tfi thê Mêd¡E

You ¡hust nôt without prior cons€nl ol Allco commun¡câte lyith or diGctosê to sny rêprasenlal¡ve ol lh6
media Êny lnflnnal¡oî ol any naUJre úatsosver relating þ A[co, ís dlsnts of cu6lomBls-

Transmlss¡of of Suslness

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

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

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

Fof tne purposes of thls dause, ùarìsmlssion hcludes:

. sale. tsansrn¡Esio:ì. æs¡gnmedt orf¿nsÞr oi büslness (or part ol a brAtn€ss) by Alloo tô â

relâlôd body corporste or to Any third F y;
. 6ale, lransmisslrô, asslgnñent or dlspos€l oú Bny , âï assets of AIco:
. change fn Allco'S narno:
. outsourc¡ng by Allco; or
. â cÐmblnation of a¡y ôl ti€ abve.

RelationÊh¡p bctween th€ Parl¡e6

The pan|e8 spooncally sgree that thie Agreeñì€nt consüutas the relâtionsh¡p of employer snd
empþy6e. Thb Agdg8rnent is pel3onal to the pa¡1¡e6 and ll ¡s not capgb{e of being assigne<L This
Agreemgñl sup€rgedes Eûy eâdiBÍ agreemeñt between üæ pa¡iÞs, títrether oral or h rvfting.

/¿
StcTG D¡vcJ'

';.:¡.lti'if'
I

-41

ALLOO FINÂ}ICE GROUP LIUfIÊD

ÞâSo I of 10

yvlBr8 lfiis A.greem€rìt sr¡pels€de5 a brmer Empþymeflt

A€rGerngrrt wnÀ Allco and sewiæ with Allcô
ís unbfokeft, pâât unDroì€n gerv¡c€ ì'riüì Allco $rlfl be coutrþd tqwâ¡d8 future 6eNic€ rElated
enl¡tlern€n!9 unless othBrwi8e strted in tñe âgreement or A¡roo's policieÊ, as vafied fþm llmE to t¡me.

Agêncy

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

Gen€ra!

Th-Is AgreemeDt ¡s cqldltbnal upon !,ou havlng tegâl authõrity to v/ork in îìe A¡sùatia-
Solh Fñ¡es sgr€e fñEl lh¡s Agreement and the covene¡ s, obllgatbns and restrict¡ons contained in it
are rÊssonâblB iE alllhe cifcumsbnces-

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

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

s.cr? D¡vay

üdr/üiö
 -42-

ALLCO FINAT{CE GROUP U¡T¡TED

Pege 10 o{ 10

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

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

;i ,J ili ii 7
 _43_

t21 There is no evidence of any privity of oonhact betwoon AFGpL and Mr Dave¡ nor
any evidence that AFGL eritered into the agreement with Mr Davey on behalf of AFGpL. In
particular, Jim Hope Murray sought the authorisation of Michael Stefanovski to make th€
letter of offer to Steven Davey. Michael Stefanovski was a director of AFGL from 9 June
2005 and a di¡ector ofAFAL from 5 July 2005, but never a di¡ecror ofAFGpL.

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

(1) The offer wæ made by AFGL;

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

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

(4) the letter of offer mntained esseritial terms of ernploymerit, rnmely, salary, bonus and
inoentives, the position to be occupied and the person to whom the prospective
employee would be reporting - a person employed in the business of AFGL;

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

(6) the lette,r of offe¡ stipulated that to accept the offer (outlined in the letter) the
ernployee was required to sign both copies of the letter and initial each page of.our
standard tenns and conditions of ernployment';

(7) the signature of the employee was required at the bottom of the letter to record the
understanding and acceptance of the tenns and conditio¡ls of 'this offer, of
employment with Atlco.

123 The following featu¡es of the standard terms and mnditions of employment which
were attached to the lener of offer a¡e ¡elevant:

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

'You will be fomrally ønployed by AFc pty Limited'

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

employed be AFG Limited, ABN 51 051 982 560'. The Allco Finance Group does
not include a company called 'AFG Limited,. The ABN is AFGpL's ABN.
 _44_

(2) it is providod that rosponsibilities and obligations of the prospective employee are
those outlined in his or her position description in the letter of offer, or as othenx¡ise
explained;

(3) it is provided that working hours muld be agreed with .your manager'
- the only
¡easonable interpretation is that the manager is the one referred to in the AFGL tetter
ofoffer;
(4) it provides that superannuation will be paid by Allco (defined as Allco Finance Group
in the letter);

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

(6) the temination provisions relate to termination of .employmmt with Allco, (as
defined in the letter);

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

'The parties specifically agee that rhis Agreement constitutes the

rolationship of ernployer and aryloyee. This Agreemear is personal to the
parties and is not oapable ofbeing assigned .._

Where this Agreoment supersedes a formor Employer Agreeineot with Allm

and service with Allco is unbrokco. past unbroken servioe with Allco will be
counted towa¡ds future service ¡elated entitlements unless otherwise stated in
the Agreerrent or Allco's policies, as va¡ied f¡om time to time.'

(8) 'The parties' referred to must be AFGL and Mr Davey

- they are agreeing that 'this
agreerrent constitutes the relationship of employer and ernployee and that it is
personal to the parties and is not capable ofbeing æsigned'.

AFGPL was not a paxty to the employment agreernent.

Second Respondent

t25 Ms Segaert was recruited in 2005 fiom a position with a fi¡r¡ncial advisory firm to
work in a role which was described to her by the legal recruitnent agericy as 'a legal position
at Allco Finance Group'.

t26 Ms Segaert was interrviewed for the position by Mr Frank Tearle who, at the time
ocoupied the position of general cor¡nsel at AFAL.
 -45_

121 There was no disolosu¡e !o Ms Segaert prior to, ûr at tho time she was offe¡ed
employment of an arrangement whereby she would be providing services to AFAL but be
employed by AFGPL. AFGPL was not mentioned to Ms Segaert at any time during the
interviews and discussions which led to hø employm.ent.

Documentary Evidence

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

(1) By letter dated 20 July 2005 on letterhead showing AFAL's thør company name and
company number ûom F¡ank Tea¡le (Ge,neral Counsel), the second respondent was
ofrered 'full time employment with Allco Finance Group Ltd (the Company)'. The
letter states: 'Please find attached or¡r Terms & Conditions of Employment for you to
review and sign'. The letter is signod and dated 5 August 2005 under the statement: .I
understand and accept the terms and conditions of this offer of employnent with
Allco Finance Group Limited' (i.e., AFAL). Attached is a document entitled .Terms
& Conditions of Employmørt', which ¡efers to .the Company' and defines
'Company' as 'Allco Finance Group Limited [AFAL], its associated businesses a¡rd
arry other Related Body Corporate and any joint venturg hust, partnership or other
associâtion in [whictr] Allco Finance Crroup Limited holds an interest or is a
participant, either ornøtly or in the futr¡re'.

(2) By letters darod,2g Septembø 2006,21 August 2007, 12 Ocrober 2007 and 7 July
2008, the first trvo and the last of which were signed by Tom lænnox, the second
respondent was given information about bonus paym€rits, the Allco Defer¡ed Share
Plan and the Allco Executive Option Plan and/or salary review, each of which was on
letterhead showing AFGL's company name and number. When she had concems
about the conterrt of this conespondence, she discussed those concerns with
r€presentatives of AFGL.

There is no mention at all of AIGPL.

Olhet ùtal:terc

130 During the course of Ms Segaert's €rnplolment she was made aware of a nunber of
employment policies and procedures. Thsse included: the Allco Code of P¡ofossional
Conduot, the Related Party Transaction and Conflicts of Interest Policy, the Privaoy Policy
 -46-

and the Employee Handbook. These documents referred to the Allco Finance Group in the
role of employer and contained no reference to AFGpL in any capacþ.

131 During the cou¡se of her employment, Ms Segaert did not receive any communication
from AFGPL in relation to her eÍiploymeût.

132 During the course of hø employment, decisions about Ms Segaert's level of

remuneration were made by Frank Tea¡le in about August 2005 and Tom Lennox from 2006
in their capacity as General Cor¡nsel of AFAL and AFGL respectively, and Michael
Stefanovski in his capacity as Chief Operating Officer of AFGL. Mic,hael Stefanovski was a
director of AFGL from 9 June 2006 and a di¡ector of AFAL from 5 July 2005, but never a
director of AFGPL. These decisions were made in acco¡dance with a framework determined
by the HR&RC.

r33 Following termination of her employment Ms Sogaort rocoived a certificate of service

from AFGL describing her as having been employed by AFGL.

r34 Ms Segeart also received correspondence from AMP Superannuation Limited in

relation to hø suporaruruation, which described hø ønployer as AFGL and desoribed
employer payments as having been received from AFGL.

Third Respondent Group: Documentary Evidence

135 Each employee in this group represented by Mr Ian Grayburn was initially employed
by Rubicon Asset Managern€nt Limited (ACN 095 433 720),

t36 In respect of the thi¡d responden! Mr Grayburn, his ønploymørt with Rubicon is
evidenced by a letter of offer dated S_O_cto'b_er
?99_9,
frf: yl: 19
tg{o*:9 i1 hi1 letter of
offer to any company within the Allco Finance Group.

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

19 Dece¡nber 2007, aach employee in the thi¡d respondent's $oup mâde aû agreement in
January 2008 with AFGL.
 -47 -

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

'Change ofEmployer

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

As from 1 February 2008, we propose to transfor your errploynent from Rubioon

Asset Ivlanagement Limited to Allco Fi¡ance Gtoup Linited (the Company). As
you loow, both of theso oompanies a¡e mombe¡s of the Allco finance Groui. fne
reason for tùis charge ls thrt you be emptoyed by the srme coDpanlt as the
other employees ofthe Allco Fln¡nce Group.' (Emphasis added.)

t39 Tho statemeût by AFGL in the læt sentence of course has relevance to the position of
all the groups representd in these proceedings; the inference being that all other employees
were similarly employed by AFGL.

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

a signature under the following notation:

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

t4l Each of the ønployees in this group acknowledged the change of employer in thc
terms set out in [40] above.

Accordingly, by express offer by AFGL and acceptånce by the employees, AFGL

became the employer of each of the employees in this group to whom services were to be
¡endered with effect from I February 2008 (on the basis that their servioe would rernain
continuous and AFGL would be responsible fo¡ all service-related entitlerrents).

It is common ground that a conhact of service cannot be transfered o¡ novated ftom

one employer to another without the consent of the employee. The mployee's consent must
be the ¡eal consent of the employee and not a constructive mnsent raised by operation of law:
Re C&T Grinter Trdnsport Services; lulcCluskey v Karøgiozß (2002) lZ0 lR 147; Finance
Sector Union of Austrølia v Commonweahh Bank of Ausbalíø l20}1l FCA 1613; Romero;
Textile Footweør and clothing union; smith v Blandþrd Gee cementation co [19701 3 All
ER 154; Denn an v Midlønd Employers Mutuøl Assutance Ltd 1L955) 2 All ER 561: Nokes v
Doncaster Amalgamated Collieries Ltd U9401AC 1014.
 -48-
It can be seen from [138] and [140] above tlrat the conse¡rt of the third respondent to
the transfe¡ of his employme¡lt was obtained on the basis that his new
employer was to be
AFGL' Alleged and undisolosed arrangerner¡ts with other ernployers were not the basis on
which he consented to the ha¡lsfer of his employment.

145 Following the termination of their employment each of the employees in this group
received a certificate of service ûom AFGL naming the employee and describing
the
employee as having been employed by AFGL,

Fourth Respondent Group: Documentary Evldence

146 Each of the persons in this group, repres€nted by Ms christine Bowen, either made an
agreeme¡rt with AFAL (wherr it
was called 'Allco Finance Group Limrted'), or, having
previously made an agreomerit with AFGL (when it was called .Record Investnents
Limited') made a new agreemøt with AFAL, or having previously made an agreement with
AFAL made a new agreemerit with AFGL.

The dooumentæy ovidence of the fourth respondent's group is in a simila¡ form to the
documentary evidence of the first respondent,s group.

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

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

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

Under the heading 'Employer' on the first page ofthe accompanying ,Allco Finance
Group Employment Terms and Conditions,, the following appears:

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

The rurderlined description of AFGPL's ¡ole in the Group doos not appear in the tefins and
conditions attached to the letter of offsr to the first responderrt, but their presence does
provide a context for the purpose of mnstuing the words 'formally employed', even where
this description of AFGPL's role in the Group is absent. This is dealt with fi¡rther below.
 _49 -

Fifth Respondent

Documentøry Evidence

t50 On 16 June 2004 the fiflh respondent, Mr Timothy Rich, accepted oonditions of
employment confifmed in a letter dated I I June 2004 on the letterhead of AFAL (then
known as 'Allco Finance Group Limited') which relevantly provided:

'Dear Tim,

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

Posidon ¡nd efrective d¡tc:

You will continue as an Executive Di¡ector - Allm Frmds Managernent Limited

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

t5l On 10 April 2006 Mr Rich accepted variations to tho terms and conditions of his
'appointnent as an Allco Executive Director employed by AFG Pty Limited (Allco)', The
variatio¡rs are embodied in a lefter dated 10 April 2006 on the letterhoad of AFAL sigred by
Mr David Coe in anticipation of the mergø between AFAL and Recorrd Investncnts Limited.

Conditional on the merger taking place, on the same date Mr Rich ente¡ed into a
Rest¡aint Deed with AFGL (then known as 'Reco¡d Inveshrents Limited') restraining his
activity for various altemative periods other than, inter ølia, as an employee of AFGL or any
'Related Body Corporate'. There is no specific mention of AFGPL.

r53 By letter dated 29 November 2007 on the letterhead of AFGL, Lina Marotta, the
Payroll Managø of AFGL confirmed that Mr Rich wæ a 'full.time employee' of AFGL.

154 Mr Rich received a lett€r dated I August 2008 on the letterhead of Allco (Singapore)
Limited signed by Mr Nicholas McGtath, Chief Executive Officer, for and on behalf of Allco
(Singapore) Limited, The letter read in part:

'Dear Tim

CHANGE OF EMPIOYER

1, As you are awar€, all of the issued shares in your curnnt ecployer, Allco
(Singapore) Limited ("ASL"), ¡rç tho subjeot of a sato and purohaso
 -50-

agreement betweø inter alia Allco Finance Group Limited and Frasers
Centropoint Limited (. FCL) (.SpA,). Upon corryletion unds the SpA,
ASL will be owned by FCL and Allco Managønent pte. Ltd. (.AMPL')
will become the operating company for tho ranaining Allco group of
companies in Singaporc.

2. As the SPA requires your eûployment to bg novated from ASL to anothgr

Allco group oomp¿¡ny prior to oompletion urder the SpA, AMpL will take
over as your employer from ASL. Your employrnent with AMpL will begin
from 5 August 200E ("Effective Datc").

155 Mr Rich acknowledged receipt of the letter and his agreemerrt to its terms by signing
and retuming a duplicate copy ofthe letter.

156 On 7 August 2008 Mr Rich ¡eceived an email from the Executive Assistant to M¡
Stefanovski attaching a letter on the letterhead of AFGL from Mr Stefanovski dated
26 February 2008 entitled 'Secondmerit Agroement'. M¡ Rich had not pieviously been
provided this letter. lt read in pârt:

.SECONDMENT ACREEMENT

I am pleased to oonfinn our offer ro you of full time employment with Allco
(Singapore) Limited f'Alloo") in the position of Counry Head, Singapore (tho dotails
of whioh are enolosed in the position description attached to this letter or as othenvise
e><plained to you), or any other sirnilar position that may be required by Allco ftom
time to time in aocordance with its business needs.

Reporting to me, your position is based in Singapore and is a short term socondûeût
that s¡ill oornmence on 19 Janua¡r 2008 and conclude at the close of business on
19 January 2009. As disoussed, this secondment may conoludo at an earlier date or
be extended for up to five months at Allco's disc¡etion.

Upon completion of your secondment, you will be repatiated back to Sydney in

accordance with the repatriation barefits outlined in this Agreement. On retum to
Sydney your ernployment will continue with Allco Finance Gmup Limited on the
terms that applied prior to your secondment as outlined in your Appoiûtnedt Iætter
dated 11 Jrme 2004, and the Amendment to the Appointment Letter dated 10 April
2006.'

t57 The terms and conditions of his ernploymefit were attached to the letter and were
simila¡ to those sent to the first and fou¡th respondents save that under the heading
' Employer', it provided:

'You will be formally eoployed by Allco (SingaporQ Linited.'

 -51 -

158 By ernail of the same date! Ivfr Rich rejected the tqrns of the secondment Agfeement
as reflecting the tcrms of the agreernent that he had with Mr stefanovski conceming his
secondment ûo Allco (Singapore) Limited.

ls9 By letter dated 27 March2oog the applicants wrote to Mr Ricå in the following terms:

'Dear Sir

Allco Fln¡nce Group Limited ¡nd fhe ¡tt¡ched Asßoci¡ted Compsnles (Att
Receivers and Managert Appointed) (All Adniuistratorc Appoi¡ted) (.the
Companies")

Ws refer to our appointment as Receivers & Managers of the Companies on

4 Novomber 2008.

We understand th¡t s.ince early 2008 you have been anployed by the Companies'
Singaporean ope¡ations, most receúrtly by Allco Maoagemørt Pte Ltd i¡ the role of
Country Head. We r¡nderstand that after a temporary oxteßion, your employment
with Alloo Maoagement Pto Ltd oonoluded yestøday, 26 March 2009.

The currcnt status of the receivoships is that the operetions of the Companies are
berng wound down. In those citcumstaûces, therc is no longer a position for you to
retun to with your formø enrployor AFG Pty Ltd (Reoeivef,s and Managors
Appointed) (Adûi¡istators Appornted) (.AFGPU), or n'ith aûy other oompany to
which we are appointod. In light of the cürcnt status of ttre receivorships, neither
AFGPL or any other company to which we are appointed, is in a position to onter
into a nen, contract of emplolment with you.'

Other Møfrerc

t60 M¡ Rich's evidence was that he a¡rived in Singapore on 19 January 2008 and that
ovet the following months he had a number of discussions with Mr Stefanovski regardirg the
finalisation of his secondment agreeûient.

I6t In cross-examination, Mr Rich said that whilst in Singapore he still regarded himself
as employed by AFGL; that ât all relwant times he h¡d two employers: one in Singapore
-
first, Allco (Singapore) Limited and then, Allco Management Pte Ltd; and one in Australia -
AFGL,

t62 In response to questions I put to him, Mr Rioh said that whilst in Singapore, he was
paid in Singapore by the Singapore emplolng entity paying Singspore dollars into his
Singapore bank account.
 -52-

Sixth Respondent

Docurnentøry Egidence

163 Mr Gallagþer was employed by RentWorks Limited at the time its acquisirion by the
Allco Finance Group in about 2004. Reritworks Limited became known as Alleasing
Finance Auskalia Limited. By letter dated 221trrre2005 Mr Gallagh€r was offered ongoing
employment with Alleasing Pty Limited undø the same tenns and conditions as he then held
with Rentworks Limited: 'Atleæing Pty Ltd will regard all continuous serr¡ice with
Rentworks Limited as service with Alleasing Pty Ltd for all employee entitlements'. M¡
Gallagher accepted this offer on 30 June 2005

t64 On or about I
July 2005, Mr Gallagþø received a letter of offer of fr¡ll-time
ernploymørt with Allco IMF Limited (subsequently Allco Singapore Limited) reporting to
Mike Dwyer, Managing Director of Allco IMF Limited.

ró5 On or about 2 July 2005, Mr Gallagher received a letter from Chris West, Director, on
the letterhead of AFAL (then Alloo Finance Gtoup Limited) confirming the arrangements
that were to apply during his semndment to Allco IMF Limited. Relevantly, the last
paragraph of this letter reads:

'Upon the conclusion of your secondment, a suitable ørployment opportunity rvill be

nrade available to you
withi¡ the Allco Firnnce Group.'

On 12 Junc 2008 Mr Gallagher ¡eceived an email from Lee Burrows, Human

Resources Manager oftho Allco Finance Group, which reads:

'Good ûo talk to you. I've attached your secondûeút letter and your curent cont'act
(and have discussed thom with Beli¡da for my own education having only been ín the
business 2 wooks!)

What I can relay here (some of which is drroct from Belinda) is that:

I You arc oû secondment from AFG to Singapore and for tho ú¡ration of that
secondment your employer is the Singapore entity as per the attached contract - t¡is
says Allco IMF but I understand this may have wolved into another ønployer since.

2 Belinda was kecn to reassu¡e tbat whilst (as I understand it) many roles in
Singapore are likely to nove as part ofa salo proooss, you would have a totally open
choicc about wheth€r you wanted to move o¡ not
 -53-
3 Furtherrrorg your sooondment ¡ettef cleå¡ly sÞtes tbåt a suitabte
emplolment oppo¡tunity will be nrade availabre to you within the Allco Firnnce
Group.

unlgrstanA (naving spoken with Belinds) lro¡.u potential neúousnoss at the moment,
I
but it's clear that whilst technically you are not employed by AFG for the du¡ation oi
the secondment only, your futu¡e with the business is sprotested' and AFG would
indeed become your omployer again should your secondment eod.

Let me loow what more you need from us h€re to give you the cla¡ity / reassu¡ance
if I've actually addressed your conooms and questions)
you need (and

Kind regards

Lee'

r67 By lettet dat.d. 22 July 2008 addressed to Mr Gallagþer, d- Ä,[co Manageorent pte
Ltd, and on the letterhead of that company, Mr Neil Brown, the Head of Funds Management,
wlote:

'Dear Evan

EMPLOYMENT AOREEMENT

I am pleased to confi¡m ou¡ offer to you of full time employmørt with Allco
Man¿gem€rit Pte Ltd ("Allco') in the position of Head of Distribution, Asia and the
Middle East, the det¿ils of whioh are enclosed in tho position description attåched to
this letter or as othorwise explained to you. Reporting to mg your position is based
in Singapore and as r€questcd by you, is for a period of at lesst I ye¿f on secondment
corunarcing on a date to be agrod. Upon completion of the secondmont, you will
be repatriated to Sydney (as per the bonofits outlined under Additional Ter¡ns and
Conditions of Errployment) to continuo in your role as Head of Dist¡ibution, Asia
and the Middle East.

Please find attached ou¡ t€rms & conditions of eoployment for you to review and
sigrr. To acc€pt the offer, please sign both copies of this letter and initial each page
of ttre te¡ms & conditions of ønployment, to signifu your understanding and
acceptanoo ofthe t€rûs and retum to me prior to yow commencement.'

Mr Gallagher signed the endorse¡nent on the second page of this letter on 23 July
2008, which readsl

'I understånd and accept the terms and conditions of this offer of ernploymont with
Allco Managemørt Pte Ltd.'
 -54-
169 The attached Sta¡rda¡d Terms and Conditions of Employnent commonoed:

'Employer

You will be fomrally employed (on a secondnent b¡sis from Allco Finance Group
Limited) by A]lco Manageinart pte Ltd.'

170 The attached Additional Te¡ms and conditions of Employment contained the
following;

'Termination of Employment

Al]co reserves the right to te¡rninate the Secondment and the host country
Employment Agreernent upon 2 month's written notice or payment in lieu.
Notwithstending ttrls, you will rem¡i¡ an employee of the home coutrtry untll
such time as Allco provides writteu notice or p¡ymcnt i¡ lieu that it htãnds to
termitrate your primary employment i¡ the hone country. In this situatio¡¡. dl
normal termination rights and obligations ofthe home oountry will appty.'

(Emphasis added.)

r7l By letter deted l4 January 2009 from Mr Rich on the letterhead of Allco Managerient
Pte Ltd, Mr Gallagher was informed:

'Termin¡tion of Secondment and Notice of Redundancy

Following ou¡ disoussion øday, I am u,riting to confirm that as result of your

sooondment with Allco Managernent Pto Ltd coming to an end effectivo 6 February
2009, and tÏe appointment of Receivers t6 fts6 fi¡¡n¡s Group Limited (rncludi¡g
AFG Pty Limited), it will bo necessary to terminlto your Emplo]¿ment agreement
\r,ith Allco Finance Group Pty Limited offective 6 Feb¡r¡ary 20O9 (Termination
Dotò.

The terms and conditions of your employment / secondmor¡t with Alloo Mâñâgement
Pte Limited will continue until the Terrnination Date.,

Other M¡tters

172 Mr Gallagher gave widence in chief by affrdavit affi¡med on 13 Novemb s 2O09

(Ex O)- He was not cross-ex{ùnired. I upheld a number of objectrons to the afûdavit as
affirmed and a nr¡mber of othor paragraphs were not read or pr€ssed.

Mr Gallagher took up his secondment in Singapore on or about 7 July 2006.

174 I¡ ¡elation to the lette¡ in [ 71] above, Mr Gallagher said he never had an employment
agreement with a company called Allco Finance Group Pty Limited or AFG Pty Limited.
 -55-
t75 Mr Gallagþer deposed that, in 2008, Allco IMF Limited became Allco Singapore
Limited. AFGL decided to se|l the real estate management business in Singapore to Fras€f,
and Neave. As a ¡esult of the sale, he had a choice to stay with Fraser and Neave and end his
secondment or accept another secondment role that would have him remain with AFGL. He
decided to accept the role offered by Neil Brown (see [167] above).

FII\DINGS OR CONCLUSIONS OF SECOITDARY FACT

The Second Respondent: Michellc Segaert

176 The applicants acoept that the second respondent's conhact of emplo¡rm.ent was with
AFAL; that AFAL was hø ernployer and that AFGPL had no contracrual liability to pay her
anything. Nevertheless, the applicants say that the second respondent is not a priority
creditor of AFAL for the purposes of s 433(3)(c) of the Act because, consisterir with their
twoJimbed constmction oontended for s 556(l)(e) (see [51] above), the socond respondent
rendered her serr¡ices to AFGL, the parent company, not AIAL, I deat with this latter aspect
below, If suffices for present purposes to note the applicants' ooncession that the second
respondørt is not a priority creditor ofAFGPL for the purposes of s a33(3)(c) of the Act.

The Third Respondert: Ian Graybura

t77 The applicants accqrt that the third respondent's conkact of employment (and the
cont¡acts of employmørt of the persons he represents) was (were) with AFGL; that AFGL
was his (their) employer and that AFGPL had no conEacrual liability to pay him (them)
anything, It was not submitted that the third respondørt, and the persons he rçresents,
re'nderod his (their) services to ar €ûtity oth€f, than AFGL so that, even on the applicants' two
limbed oonskuction of s 556(l)(e), the applicants' concession is not only that the third
respondøt, and the persons he represents, is not a (are not) priority creditor(s) ofAFGpL, but
that the third respondmt, and the persons he represernts, is a (are) priority crerlito(s) of
AFGL. I agree that this concession was properly made.

The First (Sæven Davey) ¡nd Fourtù (Christine Bowen) Respondents

In the caso of both these respondents, the standard ten¡ns and conditions of
employment att¿ched to their employment offer lEtters contained a similar statement under
the heading 'Employer'. In the case ofthe first respondent, the statemerit read:
 -56-

'You will be formally omployed by AFG pty Limitod.'

In the case of the fourth respondent, the stateñent read:

'You will be formally employed by AFG pty Liñited, the Allco payroll entity. '

t79 These statements, if not totally, then very substantially, form the foundation of the
applicants' case that AFGPL was the employer of the first and fourth respondents, and the
persons they respectively represent; and even absent that finding, form the foundation of the

applicants' case that AIGPL was contractually liable to pay the first and fourth respondents,
and the persons they respectively represent, so as to satisfl the fust limb of the two-limbed
constuction of 556(t)(e) contended for by the applicants in qualifoing them as priority
s

creditors of AFGPL.

180 I use the words 'if not totally' deliberately because the applioants' case is also
founded on other material suoh as:

(1) For the financial years onded 30 June 2006, 2007 and 2008, Mr Davey lodged income
tax retums recording that his occupation was .InvesEne¡rt Banker' and his anployer
was recorded as AFGPL;

(2) for the financial yoars endcd 30 June 2006, 2007 and 2008, Ms Bowen lodged income
tax reh¡ms re@rding AFGPL as her employer;

(3) Mr Davey's pay slips referred to AFGPL;

(4) Mr Davey's group certificate for the year ended 30 June 2008 stated that the payer of
tax was AFGPL;

(s) Ms Bowen's goup certificâte for the year ended 30 June 2008 stated the payer's
narne as AFGPL.

In respect of this other material, the following observations are rolwant:

(1) The income tax reh¡ms of Mr Davey and Ms Bowen for the financial years ended
30 June 2006, 2007 and 2008 did not record AFGPL as thoir omployer; morely as the
payer of their salary/wages and it is co¡nmon grorurd that eva fhat w&s not factually
cor¡ect; it wa¡¡ common ground that AFAL was the payer even if it onward oharged
the amourt to AFGL or some other entity in the Gtoup, not including AFGPL;
 -57 -

(2) The reference to AFGPL on Mr Davey's pay slips, in so far as it is a ¡eferrence to the
payer ofhis salary, is factually inconect for tle same reason;

(3) Mr Davey's group certiñcate for the fina¡rcial year errded 30 June 200g is factually
incorrect for the same reason; and

(4) Ms Bowen's group cøtificate for the same year is factually inconect for the same
rea¡¡on.

t82 which leaves us with the fi'*t of the standard terms and conditions of Mr Davoy's and
Ms Bowen's contracts of employment: .You will be formally employed by AFG pty
Limited', and in Ms Bowen's casg with additional words: '... the Allco payroll entity' as the
foundation of the applicants' case that, AFGPL was ttreir employer, but even if it was not,
AFGPL was conhactually liable to pay them, and the pøsons they respectively rçresent.

I am firmly of the view th¿t there is no subst¡nce to either limb of this case for the
reasons set out below.

AFGPL as Employet

lE4 Having regard to the evidence of Mr Ricþ both in chief and in cross-examination, as
to the purposo uderllng the incorporation of AFGPL and its wolution in relation to
employees of the Allco Finance Group, it is clear that its ¡ole was always eovisaged, and in
fact confined, to be a payroll entity for the Group, an employer of remrd for the purpose of
reporting to the relevant authorities the obligations of companies in the Group in relation to
employees in respoct of group or PAYE tax, payroll tax, fringe benefits tax, superannuation
lsvies or charges, workers' compensation insuranoe and other cmployee-based levies. At or
prior to its incorporation, Ml Rich's widence was that it may have beø envisaged that its
role might extend to paying ernployees in the Group and to paylng the ¡elwant taxes and
levies imposed by reference to their employment, but thete wæ no ovidencc that it did any of
those things; quite the conh8ry,it was common ground that they were all done by AFAL.
Thus, its role was confined to that of a rçorting entity for the Group; reporting as the
employer of reco¡d. The words, 'you will be formally employed by AFG pty Limited', have
to be construed in that context and, so conskued, they do not elevate AFGpL to the status ofa
common law employer ofthe first and fourth respondents, and the persons they respectively
rqrresent,
 _s8_

Such a construction is undoubtedly assisted by the additional words ,tho

Allco payroll
entity' in Ms Bowen's standa¡d terms and mnditions. Moreover, it arso assisted by the
payslips, group certificates and income tax retums for, in respect
of, or ofthe first and fo¡¡rth
respondents ¡eferred to in [lB0] and tlgll above, in the face of the fact that
it was common
ground that AFAL paid all relevant sala¡ies, taxes and charges.

186 Such a construction is the mo¡e mmpelling in the face of tho facts that:

(t) Ms Segaerts' (the second respondent's) gnrup cøtifioate for the year ended 30 June
2008 also states that the payer oftax wæ AFGpL and her income tax returns for the
years ended 30 June 2006,2007 and 2008 all record AFGpL's ABN as rhe .payer's

business number', despite the fact that it is now conceded she was not an employee of
AFGPL;

(2) Mr Graybum's (the third respondøt's) payslips referred ro AFGPL and his group
certificate for the year ending 30 Jr¡ne 2008 states that the payor of tax was AFGPL
despite the fact that it is now conceded that he was not an ønployee ofAFGpL, but of
AFGL;

(3) when, in Febru¡ry 2008, Mr Graybum requested a letter f¡om 'personnel' to support
his application to lease a property, Ms Hall, the Human Resources Administator,
prepared a letter dated 21 Febnrary 2008 addressed to .whom it may ooncem'
confirming that Mr Grayburn 'is o'rrently employed with AFG pty Limited', despite
the fact that it is now conceded he wâs not an ønployee ofAFGpL, but ofAFGL;

(4) AFGL is reco¡ded as being the first and fourth respondents' ernployer in cenificates
of serr¡ice roceived in 2008 and in supøaruruation documents; and

(5) AFGL is reco¡ded as being the first respondent's ernployer in his ¡edu¡rdancy letter
dated l0 March 2008 and the Allco HIT Limited Annual Report.

t8? Finally on this issue of whether the provision: .you will be formally employed by
AFG Pty Limited', in the standard terms and conditions of the offer by AFGL to the first and
fourth rcspondents made them, upon acceptânce, or at some later time, employees of AFGpL,
the respondents made the following submissions which I accopt and adopt.

188 First, the Full Court and the High Court have made it clear th¿t where (in a case such
as this) there are clauses of a oonEact specially framed with the individuat circumstanoos in
 _s9_

mind, togethü with standard forrr clauses, it will normally be appropriate to give greater
weight to the specially negotiated clauses: Wølkzr v Citigroup Global Markets Ar/str¡lia Pty
Ltd (þrmerly bzown as salomon smith Børney Australia seatríties pty Linited) (2006) 233
ALR 687 al [77], aitng inter dlia, Hume Steel Limited v Attorn¿y-General (Vic) (1927) 39
CLR 455 per Isaacs J at 462 - 463, Higgins J zÅ.465; Godecke v Kirwan (1973) 129 CLF. 629
per Walsh J af 637. See also Boston Commerciøl Services Pty Ltd v GE Capitat Finance
Australasiø Pty LtdQ006)236 ALR720 at [28] (Rares J).

189 In any event, it is significant that the term upon which the applicants rely (.You will
be formally employed by AFG Pty Ltd') speaks of frrh¡re srents.

Moreover, it requi¡es that attention be given to the phræe 'formally employed'. The
word 'formally' may have various meanings, including 'in outwæd appeârance, seemingly';
or 'ir the ordinary proper way'; 'e>rplicitly, expressly'; 'with the formalities required to give
validity or definiteness to the action': O{ord Englßh Dictionary Onlîne 2010. If the first
definition is adopted, formal employment in that sense by AFGPL will not alter the tn¡e
position. If the latter deñnitions are adopted, the formalities wae clearly not ørtered into.

On no visw could such a term create an employment relationship between the

employee and AFGPL, In substanoe and effect, the term contemplated the eorployee's ernk¡r
into a fon¡al employment relationship with AFGPL at an rurspecified time in the future.
Until the¡r, the person would be ernployed by AFGL. This is clear on the face of the letter of
offer and the standard terms and conditions attadred. It is made even clearer by consideration
of the surrounding ciromstances at formation, being the active role AFGL and AFAL were
performing in employment related matte¡s, as distinct from the dorma¡rt status of AFGPL and
its inoapacity to perform an employer rolo. Seo Re North Sydney District Rugby League
Football Club (admin øpptQ; Murray v Donnelly (2000) 34 ACSR 630 þer Bryson J) at [5],

lzsl.

That fi¡rlher steps and fonnalitie,s were required to achieve the outcome of becoming
'formally employed by AFG Pty Ltd' can be illustatod by the letter of offer dated 22 Octobsr
2003 from AFL to Mr Jim Hope Murra¡ who is part of the fourth responde,nt's group. The
letter offers him employment as executive director, Allco Securitisation Limited with effect
 -60-
fiom I
January 2003 (that is, retrospectively), but states that the company he .will be
ønployed by is AFG Pry Limited', Employment wirh AFGpL never occur¡ed.

In the absence of any written o¡ oral offa of ønproyment by AFGpL that was
accepted by the respondents in these groups, it is necessary to consider whether
the¡e was a
contract which oould be implied to exist based on the conduct of the parties.

Importantly, contracts a¡e not to be implied ligþtly: see Damevski v Giudice

e0e3)
133 FcR 438 at [82] (per Marshall l) ('Damevski
),
citing Brambles Holdings Ltd v Bathurst
city council (2Q01) 53 NSWLR 153, Air Great ra.trcs pty Ltdv KS Easter (Holdings) pty Ltd
(1985) 2 NSWLR 309 ('Air Great Lakes), Btacþool and Fylde Aero club Ltd v Blacþoot
Borough council All ER 25 at 3l per Bingharn l) a¡d, orion Insurance co plc v
9901 3
Sphere Dralce Insurance Plc tl990l I Lloyd's Rep 465 ar492-494perHirstJ.

is admissible on the question of whether a conkact was

Post-conhaotual conduct
formed See Totnko v Palasty 12007) NswcA 258 at [63] [67] (Einstein J, with whom
-
Mason P agreed)' citíngPethybrtdge v stedikas Hotdings pty Ltdlz}}TlNSwcA t5a at [59]
and [2] (campbell JA, Beazley and Basten JJA agreeing), Film Bars pty Ltd v paciJìc Film
Laboratoie-s Pty Ltd (1979) BPR 9251
^t9254
-92ss ¿¡ró. Brambles Hold.ings Ltd v Bathurst
citv council (per Heydon JA) (also øtrng Howard smith & co Ltd e varawø (1907) 5 cLP.
68at77;BarrierwharfsLtdvúTScouFelt&coLtil (190s)5 cr,R 647 at668,669,672.
B Sepppelt &Sons Ltdv CommßsionerforMøinRoads (1975) I BpR9,l47 u.tg,l4g,g,l54_
91,156). In particular, it is necessary to look at the whole relationship and not only at what
was said and done when the relationship was fi¡st formed: Integrated computer services pty
Ltd v Digital Equipment Corp (Aust) pry Ld (tgSS) 5 BpR l1,ll0 ar II,ll7 - ll,1l8,
McHugb JA (Hope JA and Mahoney JA concurring), The following observation of McHugh
JA in Integrated 99An_11y9, p9.1"_i9as al I 1,1 17 is apposite:

'The question in this class of case is whother the conduct of the palies viewed in the
light of the surrounding circumstances shows a taoit understanding or agfeeûrent.
The oonduct of the parties, however, must be oapable of províng all the essential
elements of an express contract ...'

t96 ln Dømevski, Marshall J (with whom Wilcox J agreed) considered, first, the
dooumentary evidenoe by reference to general law principles regarding the formation of
contracts (at [30j - [78]) and, secondl¡ given the perceived ambiguity, the e¡rtire factual
 -61 -

mahix to detetmine whethen, consideting all relevant evidence, whether there was a contrac{
which could be implied to exist based on the oonduct ofthe parties (at [79] - tl02l).

197 As to the intention on the part ofAFCPL and the employees to create legal relations,
the evidence does not support suoh a conclusion. I¡ Damevski,Mtshall J referred to the
following disorssion in Anson's, Law of Contrøa (28ù ed, Oxford University press, 2002) at
71 as to the test of intention in relation to the creation of legal relations:

'The test of aû intetrtion to effect legal relations is an objective one. It may be that
the promisor never antioipated that the promise would give rise to any legal
obligation, but if a ¡easonable porson would consider there was an inteûtior so to
oontract, then the promisor will bo bound.'

See also Austrølian Broadcasting Corp v XIYth Commonwealth Games Ltd (1988) 18
NSWLR 540; Air Great l¿kes Pty Ltd: Blacþool and Fylde Aero Club Ltd and Toyota
Motor Corp Australid Ltd v Ken Morgøn Motors Pty Ltd ll994l 2 VR 106 176 pet
^t
Tadgell J.

On no view could it be said a contact could be implied to exist between AFGPL and
either of the first or fourth respondents, or those they have been appointed to represent, b¿lsed
on the parties' conduct.

Adopting the anal5ais of Marshall J in Damevski y Giudice at [91], the facts indicate
that no conside¡ation passed between each of the first or fourth respondents and AFGPL.

(l) Each ofthose respondents provided services to AFGL, not AFGPL.

(2) AFGL, not AFGPL, determined the rate it would pay for thoss services. This is
reflected in the documentary evidence and the fact that the Board of AFGL created
and oversaw the HR&RC, rvhose purpose $,as to make decisions a¡rd/or
recoûrmendations in relation to ¡emuneration, human tosolüces matters, and
employment policies and practices in relation to AFGL.

(3) Wages were paid to employees ûom a bank account in AFAL'S company name.

(4) AFAL was a party to the agfeement wíth Autoûratic Data Processing Limited for the
provision of payroll services dated 12 May 2008. From at least 12 May 2008, ADP
arrangd for each of the respondørts to be paid their monthly salary and paid
superannuation payments to each of their nominated superannuation funds.
 -62-

Further, the¡e was no conhol or di¡ection exercised by AFGPL over any of the
respondents or those they have been appointed to represent. contol and direction was by
persons as directors and er(ecutive offic€rs of AFAL or AFGL and was not simply by those
persons acting as an employee of AFGPL: cf, Austrøliøn ltuurance Employees llnion v Wp
Insurance Services Pty Ltd (1982) I lR2l2at2l6-217.

AFGL: A contrøctuøl liobiliE to pøy notwìthstanding

The applicants submitted that eve¡r if I was to find that AFGpL was not the employer
of the respondents, nwertheless, AFGPL had a contractual liability to pay them, or at least
those respondents, other than the second and third respondents and, in the latter case, the
persons he rep¡eserits, and that this was sufñcient to satisfu the first limb o¡ integer of
s 556(l)(e) of the Act according to the two limbed conskuction for which the applicants
contended.

I deal with this argument below when analysing the conshuction of s 556(1)(e)
contendcd for by the applicants.

The Fifth Respondent: Timothy Rich

Prio¡ to his short tsnn secondment to Singapore commencing 19 January 2008, Mr

Rich's position was the same as the fourth respondent, and the persons she reprosented.

Where an employee is seconded by his employer to work for another ontþ an issue
can arise as to whethe,Í he becomes an ernployee of that errtity or remains an ernployee of the
seconding entity. This was an issue which came befo¡e Moore I in Finance Sector Union of
Australia v Commonweøhh Bank of Awtralia (2001) I I t IR 241. In that case the issue was

whether certain employees of the Conmonwealth Bank of Aust¡alia whose services the Bank
had seconded to a comþariy in which the Bank had a shaieholding ('EDSA'), became
employees of that company or remained employees of the Bank,

Moo¡e J approached the issue by applying what might be called the traditional general
princþles for determining who is the errployer of an employce whe¡e there might be two or
more possible employers as set out in [5a] to [6a] above. At [59] to [64], his Honou¡ said:
 -63-
'59 It is oonvenient, at this poirÍ, to deel u¡ith aû issue to deal with an issue raised
by the applicants though it was raised as part of a subsidiary o¡ alternative argument.
It was contended that fiom l0 October 1997 the seconded ønployees were omployed
by EDSA and not the Bank. If this is correct, it may bave ¡naieri¿l bearing ìn the
oporation of tïe Award. If thc employrrent of the seconded "employees with tire Bank
was terminated on 10 October 1997, the only (or at least principal) question that
wor¡ld then arise conceming the operation of the Award would be whetler tho
termi¡ations oocu¡red in ci¡cumstanoes that co¡stituted "retenchner¡t,' fo¡ the
purposes ofthe Award.

60 The issue of who is tho ernployer of an omployee, when there might be two
(or more) possible ornployøs, can arise in va¡ious legal oonte><ts including who is
li{lf !o pay workers compertsation benefirs: see Pitcher v Langþrd (lggl) 23
NSWLR 142 a\d. Dalgety Farmers Ltd t/a Gruzcos v Bruce [1996] AILR 4,352; who
is liablc to pay redundancy payments: see Marrs Fabrics pty Ltd & Nathan
llholesale Fabrics Pty Lrd v Whipps (199t\ 33 AILR !f167; whother a proof of dobt
can be rnintained: see Romero v Auty (2001) 19 ACLC 206; and whøher a person is
liable under occupational hoatth and safety legisladon: sæ lïorkCoyer )uthortty
(NSfrr) v Swift Placements Pty Ltd (I999) 88 IR 53.

61 In many of the recent Australian cases in whic,h this issue has ariser¡ the
Court has adopted the apprcach of døerrnining which of two possible einployers is
tho employer by applying the principles dweloped for døerrnining whether a penon
was an ernployer at all. That is, the principles applied to determi¡e whether the¡e was
an emplo)rment relatioDship between an individual and a puøtive employer could
also be applied to detefiriine which of two putative employors employed an
individual. A oomparatively recent decision of the NSW Court of Appeal, pitcher v
Løngford, is ofte¡r cited in suppon of this approach. In thât ma$er the various
members of the Court of Appeal proceeded on the basis tb¿t the analysis of Mason J
in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24 conceming
when an employment rolationship existed, was apt to apply in ascertaining which of
two possible employers, was the ernployer. In Stevens v Brodribb Sawmilting Co pty
Lld, Mason J acceptod that the right of control over the work of a person (togaher
with the ex€rcise of that right) was an important indicia of the sxistence of an
employment relationship. However his Honour indicated that other indicia can also
be releyant such as ñode of remuneration the provision and mainternnco of
equipm€nt, the obligation to work the hours of work and pmvision for holidays, the
deduction of inoome tax aûd the delegation of work by the putative employee.

62 In the presørt matter, it is clear tbat the day-today control of the work of the
seconded employeos was exercised by EDSA. It is an agroed fact (see 33(e) and (f)
above at par 5) that tho seconded eorployees worked at the direction ofEDSA though
it is also an agfeed fact that they did so at the dircction ofthe Baûk. I co¡¡sidor that
the bettø view of the evideace as a wholo is that while the Bank purported to reserve
to itself the ultir¡ate right to contol the work of the secûûded employees it
effectively rolinquished rbar right to EDSA. It musr be aoo€pted that there was some
widence of the Bank aotu¿lly exercising contÌol over the secondod employees by
directi''g them to relocate and through involvement with somo other eûployment
issuos concerning tÀe seconded employees. Howwer this evidence can be contrasted
with the more general positiur conceming the contol sxef,cised by EDSA.
Nonetholess regard must be had to the fact tlrat the seconded €ûiployees continued to
be paid by the Bank, retained theü staff number, g¡ade and classification level and
were afforded benefits available to Ba¡k erriployees but rrot available to ernployees of
EDSA.
 -64-
63 These various mattcrs do not provide a crear answer one rvay or the
other to
the question of whether the seconded omployees beoame employees of EDSA.
Ultimately, however, tho answer emerges, in my opinion, fiom a consideration of the
intentions of the parties and, rn paniorlar, tne
iosition adopted by the seconded
anployees themselves. It was neithor the Bank;s nor EDSÀ's i¡tenrion th¿t the
secondod ernployees would cease to be of the Bank and become
employees of EDSA. In addition saoh of the"mnloyees
sooonded ønployees rq'ected the offer
of EDSd which the Bank e,trcouraged th€rn to acc€pt, io úecomé employees of
EDSA. Whilc the employees rvho rejected the offer were in the difEcult position of
not knowing whethcr the¡r werc, in the cirçunrstances, er¡titled to ."r",orrcê paym"ot.
and also of not krowing wheth€r thoy would projudice any such entidå.rlnt by
accepting ernploynent with EDSA they nonetheless elected to reject employment
withEDSA_

64 It is a settted principle that there cannot be an assignment of a contâct of

ernployment without thg consatt of the employee: see lvo&ds v Doncaster
Amalgamated Collieries Ltd [1940] AC l0l4_ This principle was applied by Ryan J
in Textile Footwear and clothing unìon of Arctralia v ge echic (vwqo¡ted, Federal
Co¡¡rt of Australia, 19 November t99S) and by Warren ! in Romero v Auty in
determining whether the¡e had been a tansf€r of ø4loyrrerrt (or an assig¡ná of
the contract of employment) fiom one coúpany to 8l¡othcr. In each instance the
court conoluded tìero had beø. no transfer or assignment booause the errployeos had
not coDsented. It is diffioult to avoid, in my opinion, the conclusion that the seconded
ernployees did not beoome employees of EDSA baving regard to the explioit
rejection of the offer of employmøt with that compaûy by each of them. Not only
did each not conserit to the transfor but cach consciously elected not to take ul
employment u¡ith EDSA . . .'

In the preselrt case, Mr Rich conceded in cross-examination that upon his secondment
to Singapore ho took up a new employment, first with A]lco (singapore Limited, and then
with Allco Management Pte Ltd. The issue which arises, and which I\ioore J in Finance
section union of Austrølia did not have to consider, is whether in taking up a new
anployment with the singaporean company, Mr Rich relinquished or terminated any existing
ernployment with AFGL or AFAL. He did not think so and while that is not irrelevant, it is
certainìy not decisive.

The terms of his secondment agreement did not expressly termirute any existing
employment agreement although such a terrnination might be implied from those very same
terms or from the conduct of the parties.

208 ln an artícle entitled 'The seconded or hansfer¡ed employee' by Graham Rossiter of

Massey university published in the New Zealand Law Joumal, Augrrst 2007 at 265, roference
is made to two New Zealand cases: Clîford v Rentokil Ltd tl995l I ERNZ 407 and Royds v
FAI (NZ) General Insurance Co Ltd ll99ll 1 ERNZ 820. The leamed autho¡ writes:
 -65-
'In Cliford v Rentokil ¿ø, the applicâtrt was employed by Ratokil as ân afe¡¡
m'nâger'. In 1991, ho agreed to gû to Füi and take on the task of re-sruotruing a Fiji
company. Rentokil and tho second rcspordent were both subsidiaries of the same
parent company. The applicant claimed he was oonstructively dismissed in early
1993 and brought proceeding against Rentohl. Rontokil applied to have the aotion
sm¡ok out on the ground tlrat the applicsnt had been anployed by the Fiji company
while in Fiji and that his eûployûent was govemod by Fiji law. The Ernploymont
Cor¡¡t held that this was a situation of the secondment of the applicant by the
Rentokil to the Fiji colneany. Tïe expression "second" in this context was said by
Judge Palmer to mean "to transfe¡ an employee to other employment or to another
positiod". A secondûent does not, hqwwor, me¿n a severing of ørploynent or
contactual links with the goneral or p¡imary eúployer. In this oaso, notwithstanding
that Clifford was providing señ¡ioes fo¡ the Fiji conpany and was beirig paid by that
company, his ernployment relationship with Re¡¡tokil continued. Accordingly, his
personal grievance had besn coreotly comûre¡ced rmder Now Ze¿land law.
Somowhat similar cifcumstances and issres arose in Royds v ITL Royds was
employed by FAI and, in February 1998, was asked to work in Papua Now Ouine¿ rn
an equivalent role for 8n associated company for a th¡ee year tetm. In Septernber,
1998, the applicant was given six montbs notice of temrination. The Emplo¡'m.ent
Cou¡t had to determine whether the applicant was €ûtitled to bring a porsonal
grievance in New Ze¿land or rather had to pursuo rernedios unde¡ PNG law on the
basis he bad been errployed by the dofendarit's associated comp¡my, Judge Travis
hold thst what bad taken place had the "ch¡¡aoteristics of a secorùneút arangernont"
(p 832). It therofore followed that the dEfendant remainod tkoughout the plaintif?s
true employer and New Zeal¡nd law was applicåble. A key factor in tho Court's
reasoning appeared to be that the centre or, as it might be put, ukir¡¡ate coûkol of this
business reirnined with the New Ze¿land company. Again, as nthe Cliford matter,
the arra¡gernents at the timo of the applicant's appointmeût to PNG contemplated
ropatriation to and futwe ønployment in New Zealand by the defendant.'

209 At the e¡rd of the day, the answer to the issue is to be found from an overall view of
the entire factual matrix but like the evidentiary deficiencies that faced the Court (Finn J) in
Re C&T Grtnter Transpofi Services,I suspect that I may not have all relwant material and
information before me.

210 That said, I have oomo to the conclusion that Mr Rich's employment with AFGL o¡
AFAL continued during his secondment to Singapore; in other words, it was not severd by
that secondment for the following rea¡¡ons:

(r) His secondmerit w¿¡s offered to him by Mr Stefanovski on behalf of AFGL.

(2) Mr Rich continued to report to Mr Stefanovski during his secondment.

(3) On completion of his semndment, his ernployment was to continue with AFGL on
terms that applied prior to his secondment.
 -66-
(4) It is opern on the evidenc€ to find, and I find, that it was an implied torm of the
secondment agreement that ifhis Singapore employer did not, for any reason, meet its
contraotual obligations to him, AFGL would, including payment of all his
entitlernents.

(5) His leave entitlemøts, other than rong service reave, were 'frozen', for the duration of
his secondment and long service leave continued to accr e .in line with Australian
legislation'.

(6) Itwas a term of his ernployment agreement that if it superseded a¡r ea¡lier
ønployment agreement with the Group and service with the Group was r¡nbroken,
past unbroken servioe with the Group would be counted towæds futruc
servicê.related
entitlernents unless otherwise stated in the employment agreefüent or the Gmup's
policies, as varied from time to time.

The Sixth Respondent: Evrn Gallagher

The evidencc supports a ñnding that Mr Gallagher was employed by AFGL or AFAL
prior to his secondment to Singapore; and that it continued for the duration of that
secondment notwithstanding that he was also employed, first by Allco IMF Limited
(subsequently Allco Singapore Limited) and then by Allco Management pte Ltd. AII the
documentary widence ref€rs to his employment with the singapore companies as being on
secondment from AFG, which I read as being AFGL (see the standæd Terms and conditions
referred to in [169] above), and there is no doubt that his ernployment with AFGL was going
to continue upon the secondment coming to an end.

z12 The extract fiom the Addrtionat rems and conditions of Employment reproduced at

[170] above makes it clear that Mr Gallaghø's employment with AFGL was to continue
during the term ofhis secondment.

2r1 Again I think it is open on the evidence to find, and I find, that it wæ an implied term
of the secondmerit agreement that if his singapore employer did not, for any reason, meet its
conhaotual obligations to him, AIGL would, including payment of all his entitlements.

214 That Mr Gzùlagher's employment with AFGL continued fo¡ the duration of his
Singapore secondment is also apparent from the letter dated 14 January 200g he received
 -67 -

ûom Mr Rich stating that as a result of his secondment coming to an end effective 6 February
2009 and the appointnent of the applicants to AFGL (including AFGPL), it wæ nooessary to
terminate his ernployment agreement with 'Allco Finance Group Pty Limited' effective the
samo date. I ¡ead the reference to 'Allco Finanoo Group Pty Limited' as a ¡oference to
AFGL, but eve,lr if it is intended as a reference to AFGPL, having regard to the findings made

with respect to AFGPL in relation to the first and fourth respondents, and the porsons they
respectively represeût, the reference to AFGPL is møely a reference to the enrployer of
record for reportirig pu¡poses. MoÌe importantly, the letter recognises that his employment
agreement with AFGL remained on foot notwithstanding that his secondment had not, at the
date of the letter, come to an end; consequently it (the ernployment agreement with AFGL)
too had to be terminated,

AIALYSIS OF THE APPLICAI\ITS' ARGUMENTS

215 Both in their r¡ritten and oral submissions the applicants made submissions on two
subjects which need to be separately addressed if only because the fitst is a discrete matter of
statutory consbuction, namoly, the proper construction of s 556(l)(e) of the Act and its
application to the facts of the casel and the second is a legal argument bæed on alleged facts
which have no fowrdation in the evidence.

Constructlon of s 556(1)(e) of the Act

216 I alluded to the applicants' arguments in [51] above but declined to deal with them at
that stage.

2t't The fust limb of the argument is that undEr s 556(1Xe) no issue arises about a

relationship of employment. The focus is only on thc contr¡ct of employment and the
identification of the company liable to pay the employee's wages and other entitlements.
Thus, it was said, that even ifl decided that there was no relationship of employnent between

AFGPL and the rospondents, I should find that AFGPL, and not AFGL or AFAL, was
contractually liable to pay the respondents lr/ages and other entitlements and that this was
sufficiørt to engage the fint limb of the section in concluding that the tespondents were
priority credito¡s of AFGPL and not AFGL or AFAL.

218 The argument is flawed for a numbet of ressons which are detailed below.
 -68-
219 First, AFGPL lvas not privy to any conkact of employment with any of the
resPondents or the persons, if an¡ they respectively rçresent. It had no contactual liability
to pay them anything.

Second, it requires one to ¡ead the word .employees' in s 556(l)(e) æ meaning

persons who are onployees ofany company, and not just employees of the company liable to
pay the wages, etc. That would be contuary to the policy and purpose ofthe section.

221 Third, such a construction flies in the face of the definition of .wages', namely,
'amounts payable to or in respect of an unptoyee of the company ... under
[a contuact of
employment]'. That must mean an employeo of the company having the oontractual liabrlrty
to pay the amounts.

222 Fourth, in the absence of finding that AFGPL wæ the employer of the respondents
and the persons, if any, they respectively represent, it is difficult to see how a coûtâctu¿l
liability on the part of AFGPL nevertheless subsists towards the respondents. The argument
was not developed to any extent. Indeed, the applicants' outli¡e of submissions and further
outline of submissions in so far as they submitted that AFGPL had a contactual liability to
pay the respondents atrd the persons, if any, they respectively represent, wøe predicated on a
fìnding that AFGPL was their employer. In the absence of that finding, the argument that
AFGPL nevertheless has a contractual liability to pay them must be rejected.

The second limb of the argument is that s 556(l)(o) requires the swvioes, in respect of
which wages ¡¡re payable but unpaid at the relevant date, to have been rende¡ed to the
company having the conüactu¿l liability to pay tle wages and not to any other entity. In
other words, if the sen¡ices have been rendered to any eritity other than the company liable to
pay the wages, the employee will not be a priority creditor of the company having that
liability.

On the applicants' own submissions, this would mean that the first and fourth
respondents, and the persons they respectively represerit, are not only not prioriSr creditors of
AFGL or AFAL - because even ifone ofthese companies is the ønployer, neither according
to the applicant has a liability to pay them, only AFGPL has that liability - but they would
also not qualifo as priority creditors of AFGPL, because it is common gfoì¡nd that none of the
respondents rendered any señ¡ices to AFGPL. Such a result would defeat the whole purpose
of the legislation.

Again, the argument is flawed for the reasons det¿ilcd below.

First, the argument is predicated on the basis that s 55ó(lxe) establishes a twoJimbed
or two-pronged requircment both of which must be found to exist before an employee can
qualifu as a priority øeditor of a company -

)
(I The company must have a contactùâl liability to pay the employee; and

(2) the contactual liability to pay must be in respect of services rendered to the company
having the cont'actual liability.

In my view, s 556(l)(e) does not raise or impose a two-pronged requirement of that kind. It
merely fequires a finding that the company is the employer of tho errployee and that the
servioe in respect of which the wages etc are payable wøe rendered before the relevant date,
Such a finding satisfies the tetms of the section because:

(3) amounts 'payablo by the company' will only be 'wages' (æ defined) if they are
'amorurts payable to or in respect ofany employee ofthe company'; and

(4) the wonds 'in respect of serr¡ices rendered to the company by employees before the
relevant date' only impose a tenrporal fequirement, namel¡ that tho sqr"ices in
respect of which the wages etc are payable were reridered before the relwant date, not
a substantive requfuem€nt over and above a finding that the company is the employer

of the employee.

Second, that the words 'in respect of sorvices r€r¡dered to the company by employees
before the relevant date' only impose a temporal requirement a¡rd not a substaûtial
requirernørt over and above a ñnding that the company is the employer of the employee,
recognises that an employee in the course of his onployment, and consistent with his
conhacû¡al obligations, may provide services to his employer by performing work that
benefits a third party and may provide servioes ûo a thi¡d party by performing work that
benefits Ns employer. Neither is inconsistent with the ernployment relationship. In this day
and age of large corporate groups of companies, ønployees ofone oompany in the group will
frequørtly provide services to other mmpanies in the group. Provided this is not inconsistent
 -70 -

with the terms of their employment, the provision of their sorvices, and consequential
benefits, to other companies in the group will, at one and the same time, involve the provision
of services and benefits to the employer company. So much wæ recognised by Kitto J in
Attorney-General þr New south llales v The perpetuøl Trustee compøny (Línited) (1952)
85 CLR 237 at 299 - 300:

'[T]he widening ofthe range of private eaterprise meant that the link bstweeû rrÞny
kinds of servants and the housoholds of their m¡sters became ettenuated and ce¡seã
to have any reality; but the relation has ¡emained in the raw as one whioh enabres a
man in the conduct ofhis private affairs to avail himself of the services of others who
will onte¡ into the appropriate relationship with him for tbat püposo . ..

ìt ìÃ'ill be seon that three slements a¡e involved: fr¡st, the relationship must e¡rtail, on
the part of the servant, obedienoe to o¡ders; secondly, the obediarce to orders that is
required is obedienoo to orders in doing work; and, thirdly, thc doing of the work
must be for the benefit of the master, tlEt is, it must relate to his own affain . . . As to
the third element, the st¡temetrt that the doing of tùe work m¡¡st be for the
benefit of the master do€s rot De¡& of course, th¡t the direct benefit from the
rvork itself must necessarily accrue to the m¡ster; he may, without altering the
relatlonship, direct his servaut to do work which witl benefrt rnothcr.'

(Emphasis added.)

The Agency ând Indemnity Arguments

228 With a view to overcoming the privity 'hurdle'(seg for examplg [lZ1] and [219]
above), that is, that AFGPL was not a party to any contact of employment with any of the
respondents, the applicants' 'simple and obvious answer' (the words of their senio¡ counsel)
was that the offe¡s contained in the offer letters from AIGL or AIAL, were made by each as
agent for AFGPL as principal. That was as it was put in op€ning, but a fi¡rther a¡gument was
dweloped in add¡ess as outlined in [229] below.

))o With a view to overcoming the further 'hwdle' that it wæ an agreed fact that AFAL
pâtd the employees' wages and other entitlemerits, as well as the taxes and charges referrable
thereto, and that it was common grormd that no part of this cost w¿rs charged out to AFGPL,
only to other companies in the Group, it was said that AFGL and AFAL requested (the
request being implied from the cifcumstances) AFGPL to entef, into all the contracts of
cmploymørt (through them as agent for AFGPL) and that in oonsequonce of AFGpL
agreoing to do this for the benefit of AFGL or AFAL, AFGpL was entitled to an implied
indemnity from AFGL or AFAL to meet AFGPL's contractual obligations to employoes
(Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCP. 527 at 540 per Davies J; at 573
 -71 -

per Burchett J). That indønnity was discharged when AFAL (presunably on behalf of itself
and AFGL) paid the ønployees' wages etc; in other words, rather than have AFGL and
AFAL pay AFGPL r¡nder the indemnity 8ûd then have AFGPL pay wages to the oaployees,

AFAL paid the amounts to the ernployees direct, thus discharging the implied indemnity to
AFGPL at the s¿lme time âs disdrarging AFGPL'S liability to the employees for their wages.

If there were factual foundations for the argurnents, they might have some resonance,
but neither argument has any factual foundation. For a start, the indemnity argument does
not explain the allooation of the cost of such wages by AFAL to companies in the Group
other than AFGL. But there a¡e more fi¡ndamental difñculties with the arguments.

The Agengt Argument

231 The basic ot generâl principle is that 'if a man signs a written conhact, he is to be
considered as the contracting party, unless it clearly appears that he executes it as agent only':
Aclcers v Austcorp International Ltd [2009] FCA 432 at 11481 (Rares J) and the authorities
oited therein.

To avoid liability under the contact the agernt must establish it had authority to act so

as to bind and entitle his principal: FMB Reynolds, Bowsteød and Reltnolds on Agency (78th
ed, SweEt & Maxwell Ltd, 2006) atÍ8-072). The relationship ofprincipal and agent may be
constituted in two ways, ftst, by agreoment, whether contractual or not, b€f\reen principal
and agent, which may bo exprer¡s, or implied from the conduct or situation ofthe parties and,
secondly, refrospectively, by subsequent ratiñcation by tle principal of acts done on his
behalf, Importantly, howwer, it ha.s been held that the doctine of ¡atification does not apply
to undisclosed principalsi FMB Reynolds, Bows teød ønd Reynolds on Agency (18ù ed, Sweet
& Maxwell Ltd,2006) allS-0721, citngKeighley, Møxsted & Co v Durunt [1901] AC 240.

On no view have the applicsrits esøblished that an agreement existed between AFAL
or AFGL, on the one hand, and AFGPL on the other, by which AFAL or AFGL had authority
to bind AFGPL to employment contracts.

234 Agreements aro trot to be implied lightly. The relationship of principal and agont
cannot be constituted simply by the fact that AFGPL is the wholly owned subsidiary of
AFGL. This alone does not establish the existence ofan agreement. To imply the existence
 -72 -

of such an agreement simply from the fact that AFGL is the parent company of ArGpL
would be to ignore the laws of corporate govemanc€, The business of a company is to be
managed by or under the direction of the directors, who owe duties to act in the best interests
ofAFGPL (notAFGL).

There is no eeidence of AFGPL having conferred authority upon either AFGL or

AFAL to aot as its agent in respect of employmmt conhacts or otherr¡yise and there is no
evidence of any subsequort ratification by AFGpL of any such conduct.

In order to escape personal liability the agent must do more than disclose the identity
of the principal, he (or it) must make it clear that he is conhacting on thc principal's behalf
and not on his (or its) owr:. HJ Lyons & sando Ltd v Houlson [1963] SASR 29 at 31. Th¿t

cannot be thc preseart case in ligþt of the contractual terms agreed upon by AFAL or AFGL,
particularly those set out under the heading 'Relationship botween the Parties'. The cases
range from situations wherre the tlird party has no knowledge of the involvement of any
principal to cases where the third party is aware of the involvement of thc princþal but is not
clcar as to his exact relationship with the agent. Accordin g to Bowstead and. Reynolds, tn all
tlese cases the first requisite is that the agent is personally liable as the contracting party:
otherwise the transaction would lack certainty. kr addition, many cases suggest or imply that
a third party dealing with ari apparent prinoipal has no duty of inquiry as to \ryhother that
person has anyone behind him; that he need not establish that he had no knowledge of a
principal's existence; and that oonsüuctive notice of it is not to be attributed to him:
FMB Reynolds, Bowstead and Reynolds on Agency (2006) (l8tt'ed.) at [3-075] a¡rd the
authorities citod therein, particularly Public Trustee v Taylor t19781 VR 289. See also,
GE Dal Pont, Zaw oJ Agency (2001) (lsted,) at [23.1]

ln my view, the correct conctusion to draw from the objective evidence is that a
reasonablc observer of the communications that led to the entering of the conhact, together
with the background facts known to the parties, would conclude that the parties intended that
the contracts of ønployment would be with 'Allco Finance Group Limited'. That is, AFAL
and AFGL e¡rterod into the ¡elevant employment conkacts as principals, No wrifte¡r offers of
employment were serit to prospective employeos on the lotterhead of AFGPL. Instoad, they
wef,e on the 'Allco Finanoe Group Limited' letterhead. AFAL and A-FGL a¡e the only
companies referred to in thc individually tailored terms. There is no evidence of any agency
 -73 -

relationship having been disclosed at or befo¡e the time of conhacting. The statement: 'you
will be formally employed by AFG Pty Ltd' in the st¡nda¡d terrns and conditions ca¡not
absolve 'Allco Finance Crroup Limited' from liability under the conhacts of employmart. It
is not a disclaimerr of liability, being a cleæ statement thst'Allco Finance Group Limited' is
not contracting on its own behalf. It is not even a clear statement that this contract in
particulâr is being entered into on behalf of AFGPL; the staterrent is expressed in the future
tensg in circumstances where the othe¡ terms are expressed in the present tense and it fails to
expressly identifu AFGPL as being the principal on whose behalf this particular conhact is
being signed.

Finally, the onus is on AFAL and AFGL to show there âro circumstances, including
suoh knowledge, sufficient to displace the prima facie inference that they are the ones liable
on the conkacts. This onus hæ not been disoharged.

For these feasotrs, the applicants' contention mnc€,ming agency is no answer to the
fact that A-FGPL is not a party to tho coDtracts of employmøtt.

The Indemnity Argument

On any view of the widence, an act by the directo¡s of AFGPL that caused AFGPL to
ass"nre liability for salaries afid as an errrployer generally, for e:<ample under the anti-
disodmination and occupational health and safety legislatio& would have caused AFGPL to
become insolvent. AFGPL had no assets. There is no widence AFGL offered an express
indemnity for these liabilities. There is no evidence of a direct request from AFGL that
AFGPL assume such liabilities or that the directo¡s of AFGPL accepted any such request.
Un7íke Eugenie Holdings Pty Ltd v St':qford (:rrtreported, 12 November 1991, Suprerne Court
of NSW, Giles J), there is no factual bæis for the Cou¡t to make a finding that AFGPL had an
implied indemnity from AFGL in respect of these liabilities. There is no evidence that
AFGPL assumed the liability or performed any act which could give rise to a consequential
indarmity against AFAL or AIGL. There is no evidonoe in the financial ¡ecords which in
any way (over a lengthy period) reflects the existence of such an indemnity or that AFAL or
AFGL were discharging a liability as indemnifier in favow of AFGPL. There is no widence
the di¡eoto¡s of AFGPL were cognisant in any way that the very substantial liabilities
assumed by AFGPL (on the applicant's case) could be oi were being discharged as alleged.
 -74-
The minutes of the Board of AFGPL show employees and qnployment issues were nevor
considered.

241 There is a material difference between a request to AFGpL to act as a rqrcrting entity,
in respect of which role it would not incur any liabitity as employer of record, and a request
to act as ernployer with all the conhactuål and statutory obligations arising from that role.
That AFGPL never assumed or performed the role of ernployer is cleæ ûom the evidence. In
addition, AFGPL did not moet any of the criteria relied upon by the receivers to determine
whether it was an employer service company.

The existenoe of such an agreement is not capable of being infer¡ed from the mere
existence ofa term in the standa¡d terms and conditions annexed to the offers of anployment
that says: 'You will be formally employed by AFGPL'. First, this inference would be
contrary to the bala¡rce of the evidenoe. The minutes of the Boæd of AFGPL show
employees and employment issues were never considered. None of the minutes relating to
the parent company acknowledge the existence of such an agreemefit. Seoond, there is no
evidonoe the standard terms and conditions were shown to, let alone ¡atified, by the directors
of AFGPL. Third, the phrase speaks of future events. Fourth, the phrase 'formally
employed' is consistent with the limited role AFGPL in fact performed in the C;roup, being
the company that lent its name to be the reporting entity in respect of employee tax matters
and workers compensation.

ULTIMATE FINDINGS
For the foregoing reasons, I find that:

(l) At all ¡elevant times prior to the appoinünent of the applicants as receivers and
managers of AFGPL, AFGL and AFAL on 4 November 2009, the first respondent,
and the persons he represents, were cmployees of AFGL oç if not, AFAL, and not
employees ofAFGPL;

Q) At all relevant times prior to tho appoinhrent of the applicants as ¡eceivers and
managers ofAFGPL, AFGL and AFAL on 4 November 2009, the second respondent
was an employee of AFGL or, if not, AFAL, and not an employee of AFGPL;
 -75 -

(3) At all relevant timos prior to the appointnent of the applicants as rocoivers and
ma¡râgeß of AFGPL, AFGL and AFAL on 4 Novernber 2009, the third respondent,
and the persons he reprosonts, were enrployees of AFGL or, if not, AFAL, and not
employees ofAFGPL;

(4) At all relwant times prior to the appointnent of the applicants as receivers and
manager¡¡ of AFGPL, AFGL and AFAL on 4 November 2009, the fourth respondent,
and the persons she repres€nts, were ernployees of AFGL or, if not, AFAL, and not
employees ofAFGPL;

(5) At all relevant times prior to the appointnent of the applicants as ¡eceivers and
managers of AFGPL, AFGL and AFAL on 4 Novernber 2009, the fiffà respondent
was an ernployee of AFGL or, if not, AFAL, and not an employee of AFGPL;

(6) From 19 January 2008 until 4 November 2008 ttre fifth respondent was also an
employee of Allco (Singapore) Limited and then Allm Management Pte Ltd;

(7) At all relevant times prior to the appointnent of the applicants as receivers and
managers of AFGPL, AFGL and AFAL on 4 November 2009, the sixth respondent
was an employee of AFGL or, ifnot, AFAL, and not an employee of AFGPL; and

(8) From 7 July 2006 until 4 November 2008 the sixth respondent was also an ernployee
of Allco (Singaporo) Limited and then Allco Management pte Ltd.

CONCLUSIONS

244 The first respondeût, and the persons he represents, were priority creditors of AFGL
or, ifnot, AFAL, for the purposes ofs 433(3)(c) ofthe Act.

z4s The second respondont is a priority c,îeditor of AFGL or, if not, AFAL, for the
purposes ofs a33(3)(c) of the Act.

246 The third respondent, and the persons he rrepresents, are priority øediton ofAIGL o¡
ifnot, AFAL, for the purposes ofs a33(3)(c) ofthe Aot.

247 The fourth rospondent, and the pe,rsons she rcpresents, are priority creditors ofAFGL
oç ifnot, AFAL, for the purposes ofs 433(3)(c) ofthe Act.
 -76-
248 The fifth respondernt is a priority c¡editor of AFGL or, if not, AFAL, for the p'rposes
ofs 433(3)(c) ofthe Act.

The sixth respondent is a priority creditor of AFGL or, if not, A-FAL, for the purposes
ofs 433(3)(c) ofthe Act.

2s0 I¡
the case of the fiffh and sixth respondents, their respective claims as priority
creditors of AFGL or, if not, AFAL, for the purposes ofs 433(3)(c) wiil not extend to wages
and other amounts specified therein payable by Allm (Singapore) Limited o¡ Allco
Managernent Pte Ltd in respect ofservice rendered to those companies.

ORDERS

251 In the face of these conclusions the applicants' second further amended originating
process must be dismissed and the decla¡ations sought in the cross-claimants' fi.uther
amended cross-claim be made.

cosTs
2s2 During the course of the hearing senior counsel for the respondearts handed up a draft
notice of motion dealing with the subjoct of costs. He did not seek to file it in court but on
the next day indicated that his inshuotions were not to file and move on it r¡ntil aften I
delivered judgnent in the proceeding, In the circumstances, I do not propose to make any
order as to costs but will hear the parties at a mutually convenient time.

I certifu that the preceding two

hundred urd fifry-two QsZ)
numbered paragraphs ¿rre a true copy
of the Reasons for Judgment herein
of the Honourable Justice Edrnonds.

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