'Effective control' allowed directors to be joined to claim against company

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'Effective control' allowed directors to be joined to claim against company

The SA Industrial Relations Court has agreed to join two company directors to an employee's claim for $62,523 against the directors' company after the court agreed they had 'effective control' over him.

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The SA Industrial Relations Court has agreed to join two company directors to an employee's claim for $62,523 against the directors' company after the court agreed they had 'effective control' over him.

The employee was concerned the company would not have enough assets to cover his claim should a judgement be made in his favour and so he initiated proceedings under s182 of the SA Industrial and Employees Relations Act. The section allows the court to join persons with 'effective control' of companies to claims for monies owed by a business. Judgement can then be given against either or both defendants.

The company argued the employee's application was flawed in that it was based on the suggestion that 'effective control' simply meant management, whereas it said s182 was 'about getting to the real employer'.

Hearing the case on appeal, Industrial Magistrate Ardlie found that while the contract of employment was between the employee and the respondent company, there was clear evidence that the 'effective control' of the company was at all material times vested in the two working directors. He said that if s182 was to be construed as the company would have it then 'the work left for s182 to do would be too limited given the wording'.

Background

The employee claimed he was owed $62,523 and that the company only had realisable assets to the value of $74,500. Consequently he was concerned that the company might not be in a position to meet any judgement debt. The employee claimed that at all times during his employment he was under the direction of company directors George and Christina Swierczewski.

Industrial Magistrate Gun initially heard the case. He refused to join the company directors as defendants pursuant to s182 and dismissed the application.

His decision was then appealed and heard by Senior Judge Jennings who allowed the appeal and sent it back to be reheard by a different Industrial Magistrate.

Findings

The company acknowledged that Mr and Mrs Swierczewski were both working directors and shareholders, but submitted there was a flaw in the employee's application in that it was based on the suggestion that 'effective control' simply meant management whereas it said 's182 is about getting to the real employer'.

Industrial Magistrate Ardlie found that while the contract of employment was between the employee and the respondent company, there was clear evidence that the 'effective control' of the company was at all material times vested in the Swierczewskis. He said that if s182 was to be construed as the company would have it then 'the work left for s182 to do would be too limited given the wording'.

See: Ross v Torsone Pty Ltd [2002] SAIRC 52 - Industrial Relations Court (SA) - Ardlie IM - 27 November 2002.

 
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