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Associated Entity Case summaries

Associated entities
See also Small business employer & Subsidiary companies (issues concerning) for further case summaries
[2010] FWA 5374 Qld Adams v Condamine Catchment … Corp. Ltd (A contended that R had associated entities – namely the Landcare Group, such that it was not a small business employer – s50AAA(3) & (6) of the Corporations Act considered – no control or shareholdings – the Landcare Group not associated)

[2010] FWA 9329 NSW Ho v Horizon Iris P/L (the A’s employment as a duty manager at the Forbes hotel was terminated after eight months – A “maintained that the real employer was Iris Group Management Pty Ltd, a company which owns and operates a number of other hotels [and that R was therefore not a ‘small employer]. He submitted that the Corporations Act 2001’s definition of ‘associated entities’ was satisfied in that Iris Group Management Pty Ltd (the Principal) controls the associated entity and/or a third entity controls both the Principal and the associate … [R] claimed that Iris Group Management Pty Ltd is a ‘banner’ consultancy company which strengthens the buying power for the Group. It does not own or operate anything” @5-6 – “the entity known as Iris Group Management Pty Ltd is a payroll / administration company which pays all of the employees at the Forbes Hotel from monies which are remitted to it from the operators of the Forbes Hotel, being the shareholders of the company known as Horizon Iris Pty Ltd. As its very name suggests, it is a management company of a Group … I do not accept the characterisation of such a payroll/administration company as controlling the operations of Horizon Iris Pty Ltd, or employing its employees” @25 – R found to be a ‘small employer’ pursuant to s23)

[2011] FWA 7925 NSW Myburgh v Variety NSW the Children’s Charity (whether R and Variety Australia Ltd (VAL) associated entities – A “relied on the presence of a common web site, shared publicity material and information sharing as the basis to establish an association of the various entities of the Respondent” @19 – found, however, that they were not associated entities as their relationship was one of goodwill and cooperation – there was no ‘control’ exercised as such is defined by s50AA of the Corporations Act)

[2012] FWA 4982 SA Bakker v Xenophon & Co. Lawyers (the R law firm and Mr Xenophon’s electoral offices determined not to be associated entities pursuant to s23(3) – nor were the parliamentary offices regarded as ‘entities’ pursuant to s64A of the Corporations Act – Mr Xenophon not the employer either of parliamentary staff as “a Member of Parliament acts in the capacity of an agent of the Commonwealth in relation to the employment of staff in parliamentary offices” @15 – they are public sector employees – Appeal dismissed [2012] FWAFB 8518)

[2013] FWC 1002 Qld Gravolin v Master Accident Repair Centre (“That some employees of the Respondent transferred to Pay No Excess Pty Ltd does not result in the two entities being associated entities as defined in s50AAA of the Corporations Act 2001. A transfer of employment may occur between non-associated entities” @21)

[2013] FWC 1299 NSW Noronha v Dept. of Veterans’ Affairs (Commonwealth Government departments not considered to be ‘associated entities’- “However, against an examination of the Corporations Act 2001, the Commonwealth Government may, in the terms of s50AAA(7) be a ‘the third entity’ controlling both the principal (DVA) and the associate (another Commonwealth Government department). If this is the case then the dismissal of a Commonwealth Government employee in one department may not be a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within another Commonwealth Government department” @78)

[2013] FWC 3302 Qld Jones v QinetiQ … Australia (the A had worked for a UK company of the same name for many years – the issue was “whether Mr Jones’ service with QinetiQ Limited … [was] continuous with his service with QinetiQ Australia so that he has completed the minimum employment period in accordance with s382(a) of the Act” @5 – “the fact that QinetiQ Australia and QinetiQ Limited may be related bodies corporate and would meet the definition of related entities, is not sufficient to establish a transfer of employment” @52 – A was not transferred from the UK firm to work with R, and the UK firm was not a national system employer – hence A’s service with the UK firm did not count toward A’s period of employment)

[2013] FWC 4947 SA Roburg … v FGP … (in liq.) & Szymanik v FGP… (in liq.) (applications as they relate to A’s employer FGP stayed as per s500(2) of Corporations Act – A’s claimed “that FGP and Steelworks are related companies and that the liquidation of FGP is part of a ‘phoenix’ arrangement. It is alleged that the operations of FGP were in effect transferred to Steelworks and this involved the ‘new’ company continuing operations, the engagement of all former employees (except for the applicants) and with the same management. It has also been contended that the phoenix arrangements have been undertaken to avoid the payment of entitlements to the applicants and to effectively remove them from their employment. The applicants have indicated that if successful, they will be seeking ‘reinstatement’ with Steelworks as contemplated by s391(1A)” @4-5 – “There are real connections between FGP and Steelworks including the business sale agreement, the probable transmission of the business between them, and the common directorships. It is also evident that FGP has made the decision to dismiss the applicants in consequence of decisions made by Steelworks as to which employees would be retained within the business. Amongst other potential implications of this conduct, it would be very difficult to find the necessary intention by Steelworks to enter into a contract with the applicants” @47 – “It is probable that a transfer of business has occurred in this case, by virtue of s311(1) and (3) of the Act. However, it is evident that the transfer of business does not mean that the employees of the old employer (in this case FGP) are automatically transferred to the new employer (Steelworks). The Act itself expressly contemplates the circumstances of employees who may transfer with the business and those who may not. Further, most of the necessary elements of a contract do not exist between the applicants and Steelworks. The law also recognises that employees cannot generally be novated as between two employers or transmitted to a different employer without their express or implied consent. Given all of the above, there would appear to be little basis in the facts to establish that Steelworks and the applicants entered into employment contracts in any conventional sense.” @51-53 – piercing of corporate veil considered – “The establishment of Steelworks and its purchase of the business of FGP was not a sham … It was designed to be legally and practically effective in quarantining the debts of FGP and allowing the business to continue. However questionable this may be from a moral perspective, the corporate arrangements were not a sham” @80 – “The effect of the corporate arrangements was that the debts of FGP, including the entitlements of the applicants, remained the responsibility of FGP, which was then subject to voluntary administration. Importantly, Steelworks apparently paid an independently assessed value for the assets of FGP. The dismissal of the applicants was not the result of the corporate arrangements but rather the consequence of the decision by Steelworks not to offer employment to all of the FGP employees. It is the case that the corporate arrangements, and the subsequent liquidation of FGP, has meant that the putative employer of the applicants and the evident respondent to the unfair dismissal proceedings, FGP, is subject to the protection of s500 of the Corporations Act and in any event is in no position to meet any remedy determined by the Commission” @82-83)
[2014] FWC 4565 Qld Collie v Metropolitan Caloundra Surf Life Saving Club Inc. (“the Club and the Supporters Club are associated entities as defined in s50AAA of the Corporations Act 2001 – “the Club is the principal and … it controls the Supporters Club as an associate. The Supporters Club is an Auxiliary Organisation accepted as such in accordance with the rules of the Club. The legal and practical effect of this relationship is that by virtue of the Constitution of the Club, the Supporters Club can be an auxiliary organisation only on the basis that it subscribes to the constitution of the club, and is bound by that constitution and the by-laws. The Supporters Club is established to conduct activities in support of the Club. That is the reason for its existence” @44-45)
[2014] FWC 6325 Vic Nittos v Mitchbiz Nominees (“The mere fact that the two companies operate under the same trading name, and share resources does not mean that one company controls the other. There were no formal arrangements between the two companies” @18)
[2015] FWC 296 Vic Idelman v Baccarra-Geva (Australia) (R only had 5 employees in Australia and argued it was a small business employer despite admitting “that Baccara Geva Israel would satisfy the definition of associated entity pursuant to the Corporations Act” @7 – BG Israel had no employees in Australia – A submitted “if the legislature intended to exclude employees of associated entities employed outside of Australia it could have achieved that outcome by clear words. It did not do so” @9 – “as BG Israel employs in excess of 15 employees, the Respondent is not a small business pursuant to s23 of the Act” @11 – on appeal 25/3/15 in [2015] FWCFB 1957 argued that “as the FW Act cannot and does not extend to regulating the activities of a foreign corporation which does not have any presence or conduct any activity in Australia, it must follow that an associated entity that is a foreign company with no Australian activities is not caught by the FW Act and its employees cannot be included in the calculation of the number of employees of a national system employer that is an associated entity of the foreign company” @9 – permission to appeal granted – proper construction of s23 to be considered)

[2015] FWC 1620 NSW Tudball v Marvarela (the A “presented no evidence to demonstrate that Elders Limited, as franchisor of the respondent’s real estate business, is an associated entity, within any of the criteria set out in s50AAA of the Corporations Act 2001. … [T]he fact the respondent is a franchisee of Elders Limited should not lead to a finding that the respondent and Elders Limited are to be considered as associated entities for the purposes of the Act” @18)
[2015] FWC 5021 NSW Cincotta v Coffee Management & Solutions (two companies owned by the same sole shareholder and sharing the same principal place of business were associated entities)

[2015] FWC 8589 Vic Garner v Redmako RTO (“The Corporations Act does not expressly address whether a company that is incorporated in a foreign jurisdiction falls within the definition of an associated entity. The FW Act is silent on the point. However, there are a number of decisions of the Australian Industrial Relations Commission which have confirmed that foreign companies can fall within the definition of related body corporate for the purposes of the former “100 employees or fewer” exclusion that applied under the former legislation. Those decisions remain apposite today” @29 – there were common directorships between R and the foreign entity People Partners BPO – People Partners found to be an associated entity)

[2016] FWC 2503 SA Pretorius v Gardens of Italy (taking into account the employees of a related, but overseas corporation, the R was not a small business)

[2016] FWC 6958 Vic Patel v AAA Tools (the A’s “fundamental argument is that the two businesses Total Tools Hoppers Crossing and Total Tools Mornington were associated entities because she performed work for both businesses; because she was subject to direction by Mrs Giulia Jones, who had an involvement with both businesses; and because she saw Mr Jones to have involvement with both businesses” @24 – “There is no evidence that either is a holding company or subsidiary of the other. With the exception of Mr Jones and his control of Total Tools Hoppers Crossing, which appears readily apparent, I am also not satisfied that, for the purposes of either subsection (3) or (4) [of s50AAA] that one of Total Tools Hoppers Crossing and Total Tools Mornington controls the other, or that the operations, resources or affairs of one is material to the other. Similarly … Mr Jones, in his capacity as an entity, does not meet the requirements specified in the two subsections in relation to Total Tools Mornington” @30 – “the involvement either of Total Tools Hoppers Crossing or Mr Jones in Total Tools Mornington is more arm’s-length than would be expected by the two subsections [s50AAA(5) & (6)]” @31 – “while Mr Jones is a common investor, through a trustee company, and Director, it does not lead to a finding that he controls both Total Tools Hoppers Crossing and Total Tools Mornington. Instead … there is a more diffuse relationship between him and Total Tools Mornington. While he certainly is an investor and Director in the business … the decisions about that business are made by Mr Kelly” @32 – not associated entities)

[2016] FWC 7490 NSW Lau v Nelson (Australia) J A Pty Ltd (“offshore incorporation of the associated entity is not a constraint on finding that the employees of the associated entity are to be counted for the purpose of deciding whether an employer is a small business employer” @17)

[2016] FWC 8838 Qld MacInnes v Gladstone CC P/L (FWC found that “4 corporate entities are associated entities on the basis of the common ownership, directorship, and capacity to control the outcome of decisions” @41)

[2017] FWC 4893 NT van Dreven v Safey Xpress Unit Trust (two companies shared a director and premises – there was some sharing of tools in the warehouse – “Mr van Dreven may have worked for both companies at the same time, [but] he was paid separately by each of them … It is not unusual for employees to work for more than one employer, particularly so when the work is not full time. In any event working for both entities ceased when Mr van Dreven commenced full time work for Safety Xpress (although an employee working full time for one company and part time for another would not make the companies associated entities)” @35 – Safety Xpress and Durasafe not associated entities)

[2018] FWC 892 Qld Johnstone v EPFS Holdings (EPFS employed nine people including the A – A claimed EP was an associated entity – Mr Ellingsen was the sole director of both entities – “The sole shareholder of EPFS is a trust, The Kybe Family Trust. Mr Ellingsen and his wife are the trustees of the trust. … The shareholders of EP consist of Mr Ellingsen (25%) and The Lydbell Family Trust (75%). Mr Ellingsen and his wife are the trustees of the trust” @10-11 – “Mr Ellingsen has the capacity to determine the outcome of decisions about EP’s financial and operating policies … He is the sole Director with relevant responsibilities in that role. While he does not attend the business and operate within it on a day-to-day basis, he ultimately is responsible for the business, including if it trades solvent. Mr Ellingsen has the capacity to manage the Practice Manager, determine salary for the role, and ultimately dismiss the Practice Manager if Mr Ellingsen so wishes” @18-19 – “Mr Ellingsen’s shareholding is relevant to the consideration necessary to the test at s.50AAA(7)(b). I determine that the operations, resources or affairs of EPFS and EP are both material to Mr Ellingsen” @21 – EP is an associated entity)

[2018] FWC 1475 Qld Ward v TRG Administration P/L (the A was employed by TRG Admin as a Manager – “TRG Admin is a business which provides administrative support to The River Group of Companies” @1 – “Mr Hill [director of companies in the River Group] and other employees of The River Group or its various entities were managing Ms Ward and overseeing the work that she performed. The language of Mr Hill’s statements to the Commission referencing ‘our COO’ combined with the fact that Ms Ward was answerable, in her position at TRG Admin, to the director and COO of The River Group lend weight to the conclusion that TRG Admin is an associated entity of The River Group. Further Mr Hill’s own document in the form of a tax invoice from TRG Admin to the River Group supports Ms Ward’s evidence that TRG Admin was merely an entity established for payroll purposes” @16-17 – TRG Admin is an associated entity)
[2018] FWC 2473 ACT von Erkel v Solar Station Alpha P/L (“in circumstances where Mrs Wilson owned all the shares in the Respondent (i.e. the principal), was a Director of the Respondent (the principal), was one of two Directors in Arvio (i.e. the associate) with the other Director, Mr Hartog, describing himself as a silent Director who as a Director was not actively involved in the running of the company, [found] that she controlled both the Principal and the associate at the time of Mr von Erkel’s dismissal. This in turn supports a finding that s.50AAA(7) of the Corporations Act is satisfied on the basis that Mrs Wilson is an entity for the purposes of the Provision” @47)

[2018] FWC 2924 Qld Wilson v AMN Challenge P/L (“The issue of control as defined in s50AA is a central consideration. Given CCG was in administration at the time of Ms Wilson becoming employed for a second time by AMN, can it be said that Mr Loftus had control over the affairs of CCG at that time? The answer must be no and therefore CCG and AMN were not associated entities on 4 December 2017 when Ms Wilson commenced employment with AMN for the second time … Given s22(7)(a)(ii) requires that CCG and AMN were associated entities ‘when the employee becomes employed by the second employer’, ss22(7)(a) does not apply in this case for the purpose of Ms Wilson being able to rely on that service with CCG to satisfy s.383” @70-72 – “The evidence does not disclose any arrangement made between CCG and AMN involving a transfer of assets as contemplated by s311(3)” @79 – also held there was no transfer of business between CCG and AMN – A did not complete the minimum employment period)

[2018] FWC 3244 Vic Taverna v 3 Keys Global (“the evidence paints a picture of Donna Italia and 3 Keys Global as two entities in a group of small businesses operated by Mr Cohen and Mr Yadin, each trading under the banner of 3 Keys. … Mr Cohen and Mr Yadin control 3 Keys Global and Donna Italia. They do so together in circumstances where the operations, resources and affairs of those entities are material to both Mr Cohen and Mr Yadin as directors and shareholders in each case. … Mr Cohen and Mr Yadin have the capacity to determine the outcome of decisions about the financial and operating policies of 3 Keys Global and Donna Italia. They are ‘associated entities’” @29)

[2018] FWC 3499 Qld Westblad v Jaktomat P/L (“Mr Hains … as a matter of practice or pattern of behaviour … had no history of exercising control over Lawlogic. However the evidence is Mr Hains holds the practical influence of being one of … only two directors of Lawlogic and is a qualifying shareholder giving him the capacity to exert control. The fact that he appears not to be in the habit of doing so does not alter the fact that he holds the capacity to exert such influence. As one of only two directors of Lawlogic Mr Hains had wide powers to exercise all of the powers of the Company, and is also subject to the duties of a director of Lawlogic. If he did not wish to hold such power he could have elected to remain a minority shareholder and to not assume to the role of director as part of the arrangement in establishing Lawlogic” @38 – the exemption in s50AA(4) doesn’t apply “because his directorship and shareholding in Lawlogic is separate from his directorship and shareholding in Jaktomat” @40 – Jaktomat and Lawlogic are associated entities)

[2018] FWC 6154 Vic Jackman v Lek Supply P/L (Lek Ssupply dismissed Ms Jackman – “Lek Supply is wholly owned by Skycomms Investments … Ms Chea is the sole director of Skycomms Investments. Skycomms Investments is trustee for the Skycomms Discretionary Trust, of which Mr Lek and Ms Chea are beneficiaries. As well as being Chief Executive Officer of Lek Supply, Mr Lek is Chief Executive Officer of Sky Communications. According to Mr Lek, it is a separate business that is unrelated to Lek Supply. It is currently in liquidation. It is in a different industry, has different shareholders and is owned by Skycomms Holdings Pty Ltd … Sky Communications is neither a holding nor subsidiary company of Lek Supply. There is no evidence Sky Communications controls Lek Supply or that the reverse is true. The evidence is that the two businesses are separate and distinct. There is no evidence of any material qualifying investment by one in the other” @15-17 – ‘control’ in s50AAA of the Corporations Act “means having the ‘capacity to determine the outcome of decisions about financial and operating policies’ of the relevant entity. Capacity is determined by reference to the practical influence one can exert over the other, taking into account any practice or pattern of behaviour affecting the financial or operating policies of the entity said to be under control. It is not enough to hold joint control over an entity. It is also not sufficient if the capacity to influence decisions arises in the context of a legal obligation to act beneficially for someone other than one’s own shareholders” @19 – as its sole director, Ms Chea controls Lek Supply and … she does so ultimately as the director of a trust operating for the benefit of both herself and Mr Lek … As Chief Executive Officer of both entities, Mr Lek clearly has a degree of practical influence over Lek Supply and Sky Communications” @20 – this does not amount to control for the purposes of s50AAA – Lek Supply was not an associated entity of Sky Communications at the time of dismissal)

[2018] FWC 6558 Vic O’Bryan v Leading Edge Maintenance (an ‘entity’ may include ‘a natural person’ – “Mr Pearson may be a ‘third entity’ for the purpose of establishing whether s 50AAA (7) of the Corporations Act is satisfied, if it can be established that he controls both Leading Edge and one or more other of the companies that he is identified as having a shareholding in” @31 – Whilst Mr Pearson was the CEO of TVSA, he did not control the company having only a 20% shareholding – the “financial and operational decisions of the Company were the remit of the shareholders, of which he was a minority shareholder. There was no evidence as to the practical influence he was able to exercise, notwithstanding his minority shareholding” @33 – Mr Pearson and TVSA not associated entities)
[2019] FWC 473 NSW Beckett v Australian Barbecue Events (companies found to be associated entities where one person controlled both companies)

[2019] FWC 976 Qld Cohen v Consolidated Insurances P/L (one entity found to be an associated entity, another wasn’t – “Key to this matter is whether there was a capacity, in accordance with the definition in section 50AA(1), for William Paull, one of two directors of the Respondent, to determine the outcome of decisions of CICQ. The evidence establishes he had a 50 per cent stake in CICQ … Mr Paull was capable of influencing CICQ’s financial and operational policies. Mr Paull is a qualifying shareholder giving him the capacity to exert control over CICQ” @18-19 – however there was no “satisfactory evidence to show that the Respondent had control over Consolidated Insurances Sunshine Coast Pty Ltd. There needs to be more evidence than that of a family relationship to show the Respondent had practical influence over CISC for the purpose of s50AA” @47)

[2019] FWC 1560 Qld Sutton v Solar & Batteries Direct P/L (where there was a sole director of two entities which A was employed by the entities were found to be associated entities)

[2019] FWC 4911 Vic O’Brien v Soltaro P/L (“Soltaro and Citisolar … work closely together and are run and managed by persons related to each other. Soltaro and Citisolar share resources, including payroll and office space and, it appears, personnel. There also appears to be an intermingling of their respective businesses. However, that does not establish that they are associated entities for the purposes of section 50AAA. Most significantly, Soltaro and Citisolar do not have any common shareholdings or directorships. Nor are they related bodies corporate. There is no evidence … Soltaro controls or influences Citisolar or that Citisolar controls or influences Soltaro. Mr Coles is the Managing Director of both entities. … [H]e takes direction from Mr Collie in relation to Soltaro’s activities and from Mr Kyranides in relation to Citisolar’s activities. Accordingly … none of the subsections of section 50AAA of the Corporations Act are enlivened such that Solator and Citisolar may be considered associated entities for the purposes of that section and therefore section 23(3)” @37 – “Ms Coles may be a ‘third entity’ for the purposes of section 50 AAA (7), if it can be established that she controls both Soltaro and Soltaro Limited. There is no evidence … to suggest that Ms Coles was involved in the day to day management of Soltaro. However, it is the case that she is the majority shareholder of Soltaro and … Ms Coles is also the sole owner and shareholder of Soltaro Limited. Further … Ms Coles has the ability to control both Soltaro and Soltaro Limited. … Ms Coles has the capacity to jointly determine the outcome of decisions about Soltaro Limited and Soltaro’s financial and operating policies … Soltaro and Soltaro Limited are associated entities for the purposes of s 23(3)” @40-41)

[2019] FWC 4571 Qld Lilwall v The Trustee for Smollen Family Trust (franchisees not associated entities)