Federal Court of Australia

Farley v MKR Capital Pty Ltd [2025] FCA 1171

ORDERS

THE COURT ORDERS THAT:

1.    The time for the applicant to bring his application for leave to appeal be extended to 15 September 2025.

2.    The application for leave to appeal and the interlocutory injunction be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

PERRAM J

1    The applicant is Mr Farley. Mr Farley commenced employment with the respondent, MKR, on 1 February 2025. His salary was USD $180,000, which was expressed to be inclusive of a component for superannuation of 11.5 percent. His employment was terminated by MKR on 6 April 2025. He has since commenced a proceeding against MKR arising out of that termination in which he alleges inter alia contraventions of the general protections provisions of the Fair Work Act 2009 (Cth) (the ‘FW Act’). That proceeding is currently pending in the Federal Circuit and Family Court of Australia (Division 2).

2    Mr Farley was paid on a monthly basis, and in the short time he was employed by MKR, was paid on three occasions. For the first two months, February and March, MKR omitted to deduct from his salary amounts for income tax and superannuation. After his employment was terminated, MKR made a third and final payment on 10 April 2025. This payment included salary for a few days in April together with a termination payment. However, by this time, MKR had realised that it was obliged to deduct amounts for income tax and superannuation from Mr Farley's salary payments. It sought to rectify its past defaults by deducting the income tax and superannuation it should have deducted in February and March from the final payment it made to Mr Farley on 10 April.

3    MKR's accounting of the payment made on 10 April (in AUD) is as follows:

(a)    $691.53 paid to Mr Farley;

(b)    $8,004.04 paid to Mr Farley's superannuation fund;

(c)    $26,826 paid to the Australian Taxation Office as a PAYG withholding.

4    Mr Farley accepts that MKR was entitled to deduct income tax and superannuation from his salary in April, which was but a few days, and the termination payment, but he denies that MKR had any entitlement to deduct from the payments made in April any amounts which MKR had overlooked deducting from the payments made to him in February and March. In the Federal Circuit and Family Court of Australia proceeding, Mr Farley claims expansive relief including a claim for $3 million and civil penalties. However, for present purposes, what is significant is his claim to be paid the amounts which he says MKR wrongfully deducted from him on 10 April.

5    In the Court below, Mr Farley sought an urgent interim injunction requiring MKR to pay him the amounts he alleged it had wrongfully deducted from his April pay. The primary judge recorded that the sum sought was either $35,961.19 or $35,523.11. These figures vary from MKR's figures set out above, but the precise sums involved do not matter for the purposes of addressing the legal issue which arises. Mr Farley's application for the interim injunction was refused. He now seeks leave to appeal from that dismissal to this Court, and pending the determination of that leave application, an urgent interim injunction requiring MKR to pay him the same amounts. His leave application is slightly out of time, and he has therefore also applied for an extension of time.

6    Mr Farley will be entitled to an interim injunction if he is able to show that he has an arguable case that the deductions of the February and March payments were unlawful and that the balance of convenience favours the grant of interim relief.

Arguable Case

7    The legal wrong identified by Mr Farley is a contravention of s 323 of the FW Act. Subsection‍ 323(1) requires an employer to pay an employee amounts due to the employee for work done in full, in money and at least monthly. But s 324(1)(d) permits an employer to deduct from an amount otherwise payable under s 323(1) any amount the deduction of which is authorised by Commonwealth law.

8    The immediate question is whether the deductions of February and March, which were made in the April pay cycle, were authorised by Commonwealth law. I am prepared to assume in Mr Farley's favour that he has an arguable case that the deductions were not permitted, at least in relation to deductions of income tax. The relevant provisions are ss 16-5 and 16-20 of the Taxation Administration Act 1953 (Cth).

9    In Bennett (t/as Fitness Painting & Property Maintenance) v Higgins [2005] WASCA 197; 194 FLR 406 at [36], the Western Australian Industrial Appeal Court held that:

These laws do not require, and do not permit, a payer to withhold from a later payment a PAYG amount that should have been withheld from an earlier payment. The opportunity to withhold is lost once the full amount of the payment is made to the employee.

10    I am also prepared to assume in Mr Farley's favour that the provisions of the Superannuation Guarantee (Administration) Act 1992 (Cth) did not authorise MKR to deduct the February and March amounts from the April payment.

11    I therefore proceed on the basis that Mr Farley has an arguable case that MKR has contravened s 323(1) of the FW Act by making a deduction from his April salary and termination payment which was not authorised by s 324(1)(d).

12    Subsection 545(1) of the FW Act confers power on this Court to grant relief in relation to that contravention, and the power extends to the award of compensation and the grant of injunctive and interim injunctive relief (see subsections (2)(a) (b)).

Balance of Convenience

Income Tax

13    It is not enough for Mr Farley to show that he has an arguable case, he must also demonstrate that the balance of convenience favours the grant of the injunction. I am not satisfied that it does. Subject to one minor matter, to which I will return, there can be no doubt that Mr Farley receives assessable income in each month. When his income for the 2024/2025 year is assessed by the Commissioner of Taxation he will be liable to pay income tax on those amounts. The evidence before the primary judge shows, and I did not understand it now to be disputed, that MKR remitted the amounts of income tax it deducted from the payments it made to Mr Farley to the Australian Taxation Office (‘ATO’). This has three consequences.

14    First, MKR has paid amounts to the ATO which reflect an estimate of Mr Farley's income tax liability for each payment. Secondly, that money is now in the hands of the ATO. Thirdly, when Mr Farley's income tax liabilities are assessed by the Commissioner of Taxation he will be granted a tax credit by the ATO for the amounts which it has received from MKR.

15    The tax credit has a monetary value precisely equal to the amount which has been paid by MKR. Once that is appreciated it becomes apparent that Mr Farley is unlikely to have suffered material losses as a result of the contravention of s 323(1) of the FW Act. All that will have happened is that instead of having to pay the income tax on the receipt of a notice of assessment for the 2024/2025 income year, he has had the same, or at least a similar figure, deducted from his April payment. He has been denied $35,961.19 on 10 April 2025, but this denial will result in him having an identical tax credit when he is assessed for income tax purposes.

16    There are three potential limitations in the above analysis, but I do not think they are material. First, the amount of income tax which Mr Farley will be liable for in the 2024/2025 income year will depend on his assessable income for that year. The amount of PAYG income tax deductions will be a function of his annual salary. If Mr Farley's income for the year turns out to be lower than his annual salary then it is possible that the rate of deduction will have been too high and he may be entitled to obtain a refund.

17    Secondly, Mr Farley may have deductions against his income in the 2024/2025 income year which will have the same effect. The state of the evidence does not permit determination of what these effects are likely to be. However, ordinary experience would suggest that the amounts involved are likely to be modest.

18    Thirdly, it may be accepted that Mr Farley also suffers a loss, which consists of the loss of the use of $35,961.19 for six months, using Mr Farley's figures and the assumptions above. Assuming a generous interest rate of 4 percent this amounts to $719.22.

19    Mr Farley's claim under s 545(2)(a) of the FW Act for compensation for the wrongful deductions from his April payments will be governed by ordinary damages principles. The court will ask what position Mr Farley would have been in had the payments not been deducted from his April pay and will then fashion an award of compensation to put him in that position. For the reasons I have just given, I think it very likely that Mr Farley's eventual compensatory claim in relation to any contravention of s 323(1) is going to be modest and nothing like $35,961.19. It would be unprincipled now to order MKR to pay Mr‍ Farley sums of money which is quite clear he will not be entitled to recover as compensation. If the Court were now to grant him an injunction requiring MKR to pay Mr‍ Farley the amounts deducted from the April payment, it is almost certain that he will have to refund those moneys when it becomes apparent that he has received the benefits of the income tax credits in the 2024/2025 financial year. These matters cannot be ignored.

20    Another way of putting the matter is to observe that the granting of the injunction would effectively make MKR make these payments twice, and at the same time, mean that Mr Farley would receive them twice. This was a point well-made by the primary judge. The problem is exacerbated by Mr Farley's submission that he is suffering from financial hardship. He advances that matter as a reason why the interim relief should be granted, that is, to relieve the financial hardship. However, what it actually shows is that if the interim relief is granted, it is quite possible that MKR will never get the money back when, not if, Mr Farley is ordered to repay it.

Superannuation

21    I am prepared to assume in Mr Farley's favour that an analysis of the provisions of the Superannuation Guarantee (Administration) Act 1992 (Cth) would show that, in April 2025, MKR had no lawful entitlement to deduct amounts for superannuation from the April payment. However, as with the income tax analysis, the difficulty Mr Farley confronts is that the payments were made for his benefit. Whilst in the income tax analysis the benefit was deferred for six months and took the form of a tax credit, in the case of the superannuation deduction it takes the form of a beneficial interest to Mr Farley's superannuation fund. The money has simply been moved to a particular location on Mr Farley's own balance sheet.

22    This part of Mr Farley's balance sheet is a hospitable place in which the fund is taxed at a concessional rate of 15 percent during its accumulation phase before eventually being taxed at a rate of zero percent on Mr Farley's retirement. I am not sure that it is entirely correct to describe this as a misfortune. Thus, on the assumption that Mr Farley has shown that he has an arguable case that there has been a contravention of s 323(1) of the FW Act, I do not accept that he has any real prospects of recovering any compensation. For the reasons I have already given, I do not think that the balance of convenience favours the grant of interim relief that Mr Farley claims.

OTHER DISCRETIONARY MATTERS

23    Mr Mahendra of counsel for MKR, in careful and lucid submissions, stressed the balance of convenience considerations, and I accept his submissions about them. He also submitted that damages would be an adequate remedy. Mr Farley's response to that was that damages would not be an adequate remedy because he needs the money now. However, this submission rests upon the assumption that he will succeed in trial in establishing that he will recover the full $35,961.19. For the reasons I have just given, this assumption is at least dubious.

THE TAX STRUCTURE ISSUE

24    During argument, Mr Farley submitted that the initial contract of employment was to have a component to it in which he was to be paid other than as an employee, and further, that this non-employment component would be in a more tax-efficient structure. I am not sure that this advances matters very far for three reasons. First, that the parties intended there to be a more efficient tax structure does not alter the fact that in February, March and April, the person who in fact received the money was Mr Farley. Whilst for the purposes of the compensation suit it will be necessary to construct a counterfactual narrative in which MKR did not deduct the sums from the payment made on 10 April 2025, I can see no reason why the counterfactual narrative would include an entirely different taxpayer receiving the moneys.

25    Secondly, and this flows from the first point, even if that were the case, the person suing here is Mr Farley, and if some other taxpayer receives the income in the counterfactual, inevitably, Mr Farley does not. It would be necessary to join this entity as an applicant. Since the entity does not exist this is not possible, but its non-existence perhaps underscores some of the conceptual problems lurking beneath Mr Farley's submission. Thirdly, even if those problems could be resolved, Mr Farley would then have the problem that the mechanics of his case fall apart because s 323(1) of the FW Act would have no application since on this hypothesis he would not be, at least in part, an employee. It may be that some other parallel argument to s 323(1) can be constructed, but Mr Farley did not nominate one. In any event, I do not think that this alters the analysis.

DISPOSITION

26    I would grant Mr Farley the extension of time he seeks. The parties were content for me to resolve the question of leave to appeal at the same time as the injunction. I do not think this is an appropriate case for a grant of leave. The primary judge's reasoning was essentially the same as mine, and I perceive no error in his Honour's conclusion that the grant of the interim relief created a real risk of double payment for MKR. Further, for the reasons I have already given, this is a case where the appropriate remedy is clearly damages and clearly is not an interim injunction. Although Mr Farley's proposed notice of appeal raises another ground concerned with the confidentiality order, Mr Farley made no submissions about it and I take it not to have been pressed.

27    The orders I will make are these:

(1)    the time for the applicant to bring his application for leave to appeal be extended to 15‍ September 2025.

(2)    the application for leave to appeal and the interlocutory injunction be dismissed.

POSTSCRIPT

28    After the above reasons were given and orders pronounced, my Associate received an email from Mr Farley later that day requesting that entry of the orders be deferred and that the matter be listed for a further short mention to consider ‘a limited variation directed to the balance of convenience’. Upon receipt of Mr Farley’s email, I directed that the orders not be entered. As such, the Court retains the power to vary or set aside the orders. Although Mr Farley has not filed an interlocutory application seeking an order under r 39.04 of the Federal Court Rules 2011 (Cth) I propose to treat his email to my chambers as being, in effect, such an application.

29    The power to vary or set aside an order which has not been entered is not ordinarily exercised to permit a general re-opening of the case: Smith v NSW Bar Association [1992] HCA 36; 176 CLR 256 at 265 per Brennan, Dawson, Toohey and Gaudron JJ. Mr Farley does not seek a general re-opening. Indeed, in his email he is clear that he does not wish to ‘seek to re-argue the application on the merits’ (although, as will become apparent, that is precisely what he seeks to do). Rather, he submits that he wishes to correct three internal inconsistencies he identified in the oral reasons I delivered on 22 September 2025.

30    Except that there is no further appeal from the orders I made on 22 September 2025, I would have rejected Mr Farley’s application out of hand. However, given that there is no further appeal, I have thought it appropriate to explain why I do not accept his submissions. Although Mr Farley has sought an opportunity for a further oral hearing, I do not propose to accede to that request.

31    The first matter he wishes to raise is that it was erroneous for me to consider the balance of convenience for s 545(2) of the FW Act does not mention the balance of convenience. I do not accept this submission. The granting of interim relief by a court always involves an assessment of the balance of convenience. Section 545(2) does not speak to how the powers it mentions are to be exercised but only as to their existence. The use of the expression ‘interim injunction’ involves the use by the Parliament of a technical legal term with a long understood meaning. Its meaning must, of course, be moulded by the statute in which it appears: Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 at [29] per Gaudron, McHugh, Gummow and Callinan JJ. But there is nothing in the terms of the FW Act which suggests that Parliament intended that the interim injunction in s 545(2)(a) was a procedurally unprecedented and novel remedy which could be granted without reference to the balance of convenience.

32    The second matter was that the balance of convenience analysis proceeded on the premise that the ‘later third-party PAYG / superannuation remittance were materially equivalent to the timely money payments’ required by s 323(1). I do not agree. The point I made above was not that these sums were necessarily identical, it was that that the likely loss to Mr Farley was small. Although Mr Farley mentioned the concept of set-off from time to time, this is not an informing concept. The informing concept is his claim for compensation. When his compensation is calculated the benefits he has received must also be brought to account. That process colours any analysis of the balance of convenience.

33    The third matter was that I had read the later payments to the ATO and Mr Farley’s superannuation fund as being made for his benefit whereas this was not true. However, it is true. The payment made to the ATO results in a tax credit to Mr Farley and the amounts paid to his superannuation fund are amounts in which he holds a complete albeit deferred beneficial interest.  Put another way, it is not anyone else’s superannuation.

34    In those circumstances, I do not propose to set aside or vary the orders under r 39.04 of the Federal Court Rules 2011 (Cth). The matter is closed.

Associate:

Dated:    25 September 2025