Deregistration no barrier to determining unfair dismissal

The Fair Work Commission has recently determined that a company’s deregistration was neither a barrier to determining an unfair dismissal claim, nor to referring the company to the Australian Tax Office and the Department of Home Affairs for “questionable practices”. 

 Background

In Yuening Fan v Integrated Pest Management Systems (Canberra) Pty Ltd [2020] FC 2957, Ms Fan, a former Integrated Pest Management Systems employee, made an application to the Commission claiming that her employer terminated her employment without valid reason or notice in November 2018. 

Ms Fan had been employed by Integrated Pest Management Systems (the Company) since 13 October 2014.  In her application, she stated that she had learned of her dismissal via a text message on 26 November 2018, when she had requested to collect some belongings from the workplace to which the Company responded, that they had discarded those belongings because she was no longer employed by the Company.

The Company’s position was that Ms Fan was terminated in October by letter sent to her home address for using the Company’s confidential and protected information without a reasonable basis for doing so, and interfering with the Company’s intellectual property

Hearing

The hearing was conducted by telephone due to visa issues preventing Ms Fan returning to Australia from China.  At the hearing, Mr Smith from the Company attended by telephone, but did not formally enter an appearance in the proceedings.  Mr Smith introduced himself to the Commission as being a former director of the Company.  He told the Commission that the Company had been deregistered by ASIC on 11 February 2019 due to non-payment of annual fees.  He said he was no longer a director of the Company and as such, he could not enter an appearance in the proceedings. 

Mr Smith told the Commission that he was formally withdrawing from the matter, but continued to sit in on the proceedings and “just out of interest”, made a number of comments in response to Ms Fan’s submissions. 

A particular comment made by Mr Smith was that the application could not proceed in circumstances where the Company had been deregistered.  He sought an order that the application be struck out.

Commission’s decision

As a preliminary issue, the Commission considered whether there was a barrier to the Commission determining Ms Fan’s unfair dismissal application as a result of the Company having been deregistered by ASIC.

Section 601AD of the Corporations Act1 sets out the effect of deregistration of a company.  The Commission noted that, unlike s500(2) of the Corporations Act, under which no action can proceed against a company being voluntarily wound up without leave, s601AD "does not refer to civil proceedings against a deregistered company". 

The Commission further observed that the legislative note at s601AD(1) of the Corporations Act provides that “officers of the company may still be liable for things done before the company was deregistered", which suggested that “legal proceedings against a deregistered entity are possible”.

The Commission then found that there was nothing in s601AD of the Corporations Act which explicitly precluded litigation or action against a deregistered entity, or provided that any such litigation or action was automatically struck out as a result of deregistration.

As a result, the Commission found that it could determine Ms Fan’s unfair dismissal application despite the Company’s deregistration. 

The Commission ultimately held that Ms Fan’s dismissal was not unfair in the circumstances of the case.  However, in response to the application by Ms Fan, the Company had produced self-incriminating evidence of “undoubtedly questionable practices/arrangements having been adopted and/or agreed by the parties in this case in an effort to assist Ms Fan secure permanent residence in Australia”.  The Deputy President therefore referred the circumstances of the case to the ATO and the Department of Home Affairs.

Lavan comment

The Commission’s decision raises three ancillary issues.

Firstly, the Commission may decide to hear an application even when the applicant is overseas and outside the Commission’s jurisdiction.  In this case, the applicant, Ms Fan, was in China. 

Secondly, there are practical difficulties likely to be encountered by any applicant in enforcing an order made by the Commission against a deregistered company, such as an order for reinstatement. 

Thirdly, the former director’s decision in this case to participate in the process on behalf of a deregistered company, by filing documents and informally appearing during the proceedings, created a presence for a company that did not exist.  By being present, the former director raised issues and put a spotlight on the Company’s “questionable practices” that may not otherwise have occurred.

If you have any questions about this topic, please contact Lavan’s Employment and Education team.