Bradshaw v Bob Garnett Real Estate Pty Ltd
[1996] IRCA 275
•02 July 1996
DECISION NO: 275/96
C A T C H W O R D S
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - TERMINATION at initiative of employer - CROSS-CLAIM - whether just and convenient to hear cross-claim at same time as the principal claim - CONTRACT OF EMPLOYMENT - whether purported variation of terms of contract amounts to termination at initiative of employer - VALID REASON - issue not opened on by respondent - failure of respondent to discharge its burden of proof - COMPENSATION - whether or not it was appropriate in all the circumstances to make an order for compensation - consideration of the employee’s conduct both before and subsequent to the alleged termination
Industrial Relations Act 1988 ss. 170DB(4), 170DE(1), 170EE(2), 170EE(5)
Industrial Relations Court Rules Order 5, Rule 9(2)
CASES:Quinn v Jack Chia (1992) 1 VR 567
Hayden v Golden Bowl Sports Centre Pty Ltd (unreported, Millane JR, No. VI 0453 of 1995, 8 May 1995)
Bean & Anor v Milstern Retirement Services Pty Ltd (unreported, Moore J, No. NI 0423 of 1994, 2 June 1995)
GARY ROBERT BRADSHAW v BOB GARNETT REAL ESTATE PTY LTD
No. VI 4771 of 1995
Before: Judicial Registrar Millane
Place: Melbourne
Date: 2 July 1996
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 4771 of 1995
B E T W E E N :
GARY ROBERT BRADSHAW
Applicant
AND
BOB GARNETT REAL ESTATE PTY LTD
Respondent
MINUTES OF ORDERS
Judicial Registrar Millane 2 July 1996
THE COURT DECLARES THAT:
On or about 2 August 1995 the applicant’s employment with the respondent was terminated at the initiative of the respondent.
The termination of the applicant’s employment on or about 2 August 1995 by the respondent contravened section 170DE(1) of the Industrial Relations Act 1988.
The payment of compensation is not appropriate in all the circumstances of this case.
AND THE COURT ORDERS THAT:
The respondent within 21 days of the date of these orders pay to the applicant damages in the sum of $2,995.00 less any sum required to be deducted therefrom by the respondent pursuant to the Income Tax Assessment Act 1936 and actually paid to the Commissioner of Taxation.
There be liberty to each party to apply to the Court on reasonable notice on the amount of damages payable pursuant to order 4 of these orders.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 4771 of 1995
B E T W E E N :
GARY ROBERT BRADSHAW
Applicant
AND
BOB GARNETT REAL ESTATE PTY LTD
Respondent
Before: Judicial Registrar Millane
Place: Melbourne
Date: 2 July 1996
REASONS FOR JUDGMENT
On 11 September 1995 the applicant filed an application in this Court seeking compensation from the respondent, his former employer, as a result of the termination of his employment on 2 August 1995, alleging that the termination contravened Division III Part VIA of the Industrial Relations Act 1988 (the Act).
The issue opened on by the respondent through its counsel, Mr Maher, was that there was no termination at the initiative of the respondent. In his written submissions Mr Maher also argued that the termination, if any, at the initiative of the respondent was in any event justified and not one that should be characterised as harsh, unjust or unreasonable. Because justification and matters relating to the proper characterisation of any termination at the initiative of the employer were not the subject of any opening address, and I have carefully the examined the transcript on this matter, I have concentrated solely on the preliminary issue raised as a defence to the alleged unlawful termination.
By reason of orders made at a Notice of Motion hearing some time prior to the hearing date, the applicant was granted leave to file a Statement of Claim seeking the sum of $3,640.80 for unpaid commissions, $2,995.00 for unpaid annual leave entitlements and $833.30 for an unpaid car allowance.
On 22 April 1996 the respondent filed a Defence and Cross-Claim. The Defence related to the issues relevant to the alleged unlawful termination and the outstanding entitlements claims. It is worth noting at this point that the respondent acknowledged that there was an outstanding entitlement of $2,995.00, however, its case was that this sum includes an annual leave entitlement, plus some commission and the balance of a car allowance payable to the applicant for the period just prior to the cessation of his employment. The sum of $2,995.00 was offered to the applicant under cover of a letter dated 30 August 1995 from the respondent’s solicitors, subject to the applicant executing a document, the effect of which is to release the respondent from all liability to the applicant in consideration of the receipt of the outstanding monies. It was common ground that until the respondent’s solicitor wrote to the applicant there was no claim from the applicant or intimation that he asserted that his employment had been unlawfully terminated. He did not execute the agreement forwarded to him for execution; instead filing his application in this Court on 11 September 1995, some five weeks after the termination.
At hearing the respondent sought to prosecute its Cross-Claim which is made up of alleged breaches of the secrecy provisions contained in the applicant’s contracts of employment, the alleged destruction of one of his employer’s files (the James Street file), and the alleged provision of confidential information to his new employer in respect to fifteen named files. The Cross-Claim seeks an award of damages.
I declined to entertain the Cross-Claim for a number of reasons. The first was that no leave was sought or obtained from the Court pursuant to Order 5, Rule 9(2) of the Industrial Relations Court Rules to pursue this claim. Clearly, the purposes of the rule include the opportunity for the Court to give directions to the parties so that all appropriate steps are taken before hearing and the further opportunity for the Court to allocate sufficient time to hear all the issues sought to be prosecuted. The Cross-Claim the respondent belatedly sought leave to have heard was one where considerable further evidence needed to be called with more Court time allocated to hearing this claim. Moreover, the oral application for leave to bring the Cross-Claim was not accompanied by any supporting affidavit material establishing a proper basis for the hearing of the additional claim at the same time as the other matters before the Court. In all the circumstances, I determined that it was not just or convenient to proceed with the breach of contract claim which, the employer may litigate elsewhere if it so chooses.
During the two day hearing, having ruled that the Cross-Claim could not be prosecuted, I did, however, permit the respondent to lead evidence and cross-examine on matters relating to the applicant’s conduct vis-a-vis his contractual obligations to the respondent immediately before and subsequent to termination, as this conduct was relevant to the question of remedy, both as to the practicability of reinstatement and the entitlement to compensation in all the circumstances of the case.
The only evidence called was that from the applicant and Robert Friend Garnett (Garnett), the managing director of the respondent company as well as the licensed agent for the company’s real estate sales business.
THE CONTRACTS OF EMPLOYMENT
The applicant and Garnett had a longstanding relationship, the applicant having worked with Garnett at various times in retail employment in the years preceding a chance meeting prior to April 1992 when Garnett invited the applicant to work with him in his real estate business. This led to the applicant being employed as a sub-agent by the respondent from 30 April 1992. At the time he was employed the applicant had no experience in real estate sales but had sufficiently impressed Garnett during their earlier association to be encouraged to enter the business and undertake various courses in order to develop himself in the business. He was not then, nor was he at the date of termination, a licensed real estate agent.
It was common ground that on 30 April 1992 there was a written agreement entered into bearing the title “Letter of Appointment” (see Exhibit A1). That document contained a number of terms pertinent to the particular issues traversed by the parties and set out as follows:
“...
3. If the employer requires the employee to provide a motor vehicle for the use of the employee in the course of his duties which fact is specified in Column 1 of the Sixth Schedule hereto the employee shall provide a suitable motor vehicle for his own use at all times during the course of his employment and the employer shall pay to the employee the locomotion allowance specified in Column 2 of the said Sixth Schedule or such greater locomotion allowance specified from time to time in the Award of the Real Estate Salesmen’s Conciliation and Arbitration Board by the method specified in Column 3 of the said Sixth Schedule at the intervals specified in Column 4 of the said Sixth Schedule the first of such payments being due and payable on the date specified in Column 5 of the said Sixth Schedule.
8. If the employee is entitled to receive any commission and/or incentive payments after the termination of his employment such payments shall be made by the method specified in Clause 1 of the Ninth Schedule hereto at the intervals specified in Clause 2 of the said Ninth Schedule computed from the date of termination of his employment PROVIDED that the employee shall always be entitled to receive a percentage of the commission and/or incentive payments not less than the Award as provided by the Real Estate Salesmen’s Conciliation and Arbitration Board notwithstanding that his employment be terminated prior to the settling of any sale or sales effected by him.
12. In the event of the employment being terminated, the employer shall not be liable to pay and the employee shall not be entitled to receive commission and/or incentive payments except in respect of settled sales where a contract for sale has been made (that is contracts and/or contract notes exchanged) on or before the date of termination of the employment.
13. Notwithstanding any other term or condition, the employer shall not be liable to pay and the employee shall not be entitled to receive any commission and/or incentive payments other than in respect of settled sales.
18. The employee will not at any time hereafter, whether during his employment or after its termination, divulge, make known or use, except in the performance of his duty as an employee, any confidential information belonging to the employer including confidential information concerning the employer’s clients, concerning dealings between the employer and the employer’s clients, and concerning the affairs of the employer and of the employer’s clients acquired during the course of his employment.
19. The employee agrees that all listings, documents and records including lists of clients used in the employer’s business shall remain the property of the employer and that without the consent of the employer he shall not take away or copy any such list, document or record including a list of clients or memorize any such list, document or record, including a list of clients, for the purpose of using the information so memorized in connection with any matter other than the employer’s business.
20. Upon the termination of his employment for any cause the employee shall not at any time or for any purpose:-
(a) ...(b) for a period of twelve months after such termination either on his own account or for any other person, firm or corporation or directly or indirectly and in connection with the business of a real estate agent solicit or endeavour to obtain the custom of any person, firm or corporation which at any time during a period of twelve months before or at such termination was a client of the employer with whom the employee dealt in the course of his employment on behalf of the employer.
22. It is hereby declared and agreed between the parties that upon the cessation of this appointment for whatsoever reason all the said employee’s listings (if any) will become the property of the respective Branch office and that said employee will forego any claim for commission pertaining hereto.”
Further, it was common ground that the original letter of appointment was varied by consent on 1 September 1992, 1 January 1993, 12 July 1993 and 7 April 1994. A further written agreement was tendered in evidence (see Exhibit A1) dated 24 October 1994. Although the document tendered in evidence did not bear the applicant’s signature, after sighting the original in Court the applicant agreed that the document had been executed by him. That document also contained a confidentiality clause, as well as recording that the applicant’s position was then that of sales controller. Further, it contained a schedule, clause 1 of which sets out the applicant’s remuneration from the date of the agreement as follows:
“Remuneration is to be determined in the following manner:
(a) Salary of $2,500.00 per month.
(b) Bonus Scheme - see attached schedule and letter of appointment.
(c) Car Allowance of $833.00 per month will be paid for car usage
associated with your employment.(d)If requested by the employee, the employer shall provide a statement
of Bonuses earned within 14 days of the end of each calendar month.”
By further variation entered into in February 1995, but dated 5 January 1995, it was agreed that the applicant’s salary and bonuses would be paid in the following manner:
“Item I Salary will be $20,000 p.a. Paid monthly.
Item II Car Allowance $10,000 p.a. Paid monthly.
Item III Bonus against fees $10,000 p.a. Paid monthly.Item III Bonus against fees will be guaranteed to be paid regardless of fees brought in, however bonuses will be paid on targets (see below) and the $10,000 guaranteed bonuses will be against any bonuses earned (Dr/Cr situation) should the bonuses earned exceed the $10,000, worked out on a quarterly basis.
Over $25,000 to $40,000 per quarter 40% of gross
Over $40,000 50% of grossto be credited when sale becomes unconditional.
The above % will be credited on a 50/50 List/Sell ration less any contribution to the company for supplied leads (P/I).”
It is appropriate to bear in mind that when the applicant commenced his employment with the respondent, he was originally engaged on a debit/credit system of payment, however, from about 1993 the employer adopted what was referred to as the Jenman system and under this system the applicant was initially paid a salary, car allowance and phone allowance with commission on unconditional sales above a quarterly target.
In 1993, when the applicant was made sales controller, his salary was raised to $20,000 per annum, a car allowance of $10,000 per annum and a phone allowance of $650.00 per annum. His base salary by April 1994 was $30,000 per annum with the same car allowance but no telephone allowance. The contract signed on 24 October 1994 qualified the car allowance payment to a monthly payment for “car usage associated with the applicant’s employment”. This last item was relied on by the respondent for saying that not only was the applicant not entitled to be paid a car allowance when he was on leave, but the contract signed on 24 October 1994 made that circumstance abundantly clear because it refers to payments for usage.
It is apparent from the variations agreed to that there were fluctuations in at least the applicant’s base salary rate from time to time so that the base salary of $30,000 in the April 1994 variation and the new contract on 24 October 1994 was reduced to $20,000 per annum in January 1995 with the basis upon which the car allowance was paid being altered to one of usage by October 1994 if that system had not already been adopted beforehand. Garnett’s uncontradicted evidence is that the system for paying the car allowance on a usage basis was already in place.
It was common ground that after the April 1994 variation there was difficulty in achieving targets and, no doubt, there was some pressure to alter the arrangements for the payment of commission. The usual salary package for a sales person was then alleged to be $28,500 inclusive of a motor vehicle allowance. The applicant was, from approximately January 1995, receiving slightly above the usual package and was given the added guarantee of a $10,000 per annum bonus which was really an advance on commission earned over his quarterly target figure of $25,000. This meant that the commissions earned on the quarterly targets were offset against the advanced bonus received each month. If the applicant achieved sales over his target each quarter he received 40% on all the unconditional sales above the target and such commission was paid in the next quarter; presumably after it was first offset against advances or bonuses already paid.
Garnett’s uncontradicted evidence is that the applicant did not achieve his target in a number of quarters preceding the April to June 1995 quarter in which he showed unconditional sales of in excess of $30,000. Some of this figure came about, according to Garnett, as a result of the accumulation of sales from earlier quarters and therefore the thrust of Garnett’s evidence was that the applicant’s performance in the period he was in charge of a small sales team as sales controller was variable and was not as good as it should have been.
I accept Garnett’s evidence that as the licensed agent and the managing director of the company he monitored and oversaw the performance of the team and that involved him in meeting with the applicant from time to time and, in the applicant’s case as is evidenced by the variation documents, the salary and commission schemes were varied to both properly reward the applicant, who was described as a good salesmen, and provide some incentive to obtain an improved sales performance for the company.
THE EVIDENCE
This is a case where the determination of the preliminary issue largely depends on the credit of the two witnesses and the plausibility of the evidence given.
Having observed the applicant and, having had the opportunity to hear his evidence on oath over a lengthy period, I did not find him to be an impressive witness. This was because he had a tendency to tailor his evidence to support his case and was evasive when giving his answers to questions put to him in cross-examination.
To illustrate my point, the evidence concerning the James Street property file comes to mind. In his evidence-in-chief the applicant sought to give the impression that the James Street file, along with another file and the respondent’s listing book, had been somehow gathered up with his own documents and taken home after he left his employer’s premises on 2 August 1995. He was asked on 3 August 1995 by the employer for the return of its property. The James Street file has never been returned; containing as it did an exclusive authority for the respondent to sell the real estate property. The impression the applicant first sought to convey was that this file had somehow been mislaid or thrown out. With the passage of time the applicant’s evidence shifted to a concession that he had “destroyed” the file; it being apparent then that he is indirectly related to both the proprietor of the premises and the tenants of the premises at that time.
The applicant and Garnett clearly had a longstanding relationship over many years prior to 1992. The relationship was one where the applicant was in some ways professionally nurtured by Garnett and this is evidenced by the understanding between the men that the applicant was being groomed to, and in time, would have the opportunity to take over the business from Garnett. On the evidence I accept that this understanding was subject to the applicant obtaining the appropriate license and the continuing profitability of the business.
When given the opportunity to in the proceeding the applicant sought to play down Garnett’s skill and role in the business; seeking to convey the impression that he, the applicant, was directly responsible for the success of the business because for some reason Garnett lacked management skills. I reject such a conclusion because of the history of the relationship in which Garnett trained and promoted the employee and the direct conflict between this image and the applicant’s written testimonial (see Exhibit R3) praising both Garnett and his skill in the business.
In contrast, Garnett was a more straightforward witness, readily acknowledging the raw skills of his sales controller but pointing to objective evidence of the applicant’s variable performance on his targets, relying on this as a reasonable basis for saying that the applicant’s performance had to be monitored by him because he was the licensed agent and the manager of the business.
The other matter which struck me as being a calculated attempt to tailor the evidence was the applicant’s initial evidence to the effect that he had brought about a meeting with Garnett to discuss staff concerns first thing on 2 August 1995. As it turns out this was simply untrue because he ultimately accepted that, on the evening of 1 August 1995, Garnett telephoned him and, it was during this discussion, that Garnett proposed a meeting the next day to discuss Garnett’s concerns. Preparatory to that meeting the applicant made some handwritten notes which he told the Court he went through with Garnett at the meeting held on the following day (see Exhibit A5). The notes prepared generally indicate to me a concern with matters pertaining to the applicant’s position and alleged outstanding commissions, rather than staff concerns, which the applicant suggested to the Court had compelled him to “grab hold of” Garnett to have the meeting which ensued.
Initially the applicant appeared to recoil from any suggestion that he understood he had contractual obligations both before and after the termination of his employment which, generally speaking, precluded him from taking his employer’s property and clients, as well as requiring him to maintain confidences gained in his employment. Ultimately, he at least conceded he did have continuing obligations after termination although he denied breaching them. Of course, this denial did not include the admission that he had destroyed his employer’s property; namely the James Street file and, it appears, also conversed with the owners of the property shortly after the termination; presumably about the file. An authority to sell the James Street property was given to the applicant’s new employer on 9 August 1995; coincidentally also the applicant’s first day at work with his new real estate sales employer who engaged him on the afternoon of 2 August 1995, the date of termination.
The inference I draw from the evidence generally and the abovementioned matters in particular, is that the destruction of the file was an act of spite motivated by the anger the applicant felt towards Garnett, but also motivated by his desire to economically harm the respondent by destroying evidence of the selling authority obtained on 1 August 1995 with a view to obtaining the authority to sell for his new employer. This amounted to a breach of his continuing contractual obligations, being as it was a direct interference with the respondent’s contractual relationship with a third party property owner.
The applicant also told the Court that the authority to sell he obtained on 1 August 1995 from the owners of the James Street property was a conditional one inasmuch as it was granted on the condition that Garnett not be involved in the sale. This condition came about allegedly as a result of some disaffection between the owner and Garnett. Whether or not this was the case, and I was not convinced that it was, the entering into a conditional authority to sell without authorisation from the respondent was conduct creating a conflict of interest with his employer’s interests and certainly incompatible with the proper performance of his contract of employment. This matter was not known to the employer until after termination.
THE TERMINATION
The circumstances surrounding the applicant’s departure from the employer’s premises are not in great dispute.
The applicant’s account in his evidence-in-chief is that they went into Garnett’s office and after sitting down Garnett suggested that the applicant go through the applicant’s “... points briefly and he’d take notes and we’d discuss them on an individual basis”. This the applicant allegedly did commencing with a particular grievance he had in relation to the outstanding payment of commission on two Frenken Homes transactions. It was the applicant’s belief that the sales were then unconditional sales; thereby entitling him to payment of his commissions. The suggestion was that in some way other staff were unsettled by the proposition that the applicant, as sales controller, was not able to get payment of his entitlement to commissions on these sales. As already indicated I am not satisfied that the other staffs’ concerns, if any, were a motivating force behind the discussions entered into or the payment of commission for these sales.
It was common ground that at that meeting and since then Garnett has denied liability to pay the commissions claimed because, as at 2 August 1995, the sales had not become unconditional in the quarter preceding the July to September quarter. I have perused the building agreement, building contracts and a single certificate of occupancy tendered in evidence by the applicant (see Exhibits A9, A10, A11 and A12). Relying on those documents I have concluded that the two transactions in dispute were more likely than not still conditional sales as at the commencement of July 1995; becoming unconditional during that month. The effect of this finding is that any commission was payable in the October to December quarter subject to the applicant achieving the target figures required in that quarter. This seems to mean that any sales accruing after termination for which commission might be paid would be unlikely to attract a commission because of the unlikelihood of the employee exceeding the target in the quarter succeeding the quarter during which employment ceases.
I was not addressed at all by Mr Niall, the applicant’s counsel, on whether clause 8 of the letter of appointment referred to above applied in any way to show that there was some other basis for allowing for the payment of accrued commissions other than that put to the Court by Garnett. Neither was I addressed on what terms of contract applied following the contract signed in October 1994. In his evidence the applicant appeared to concede the commission payment arrangements only querying the dates on which the sales became unconditional. It follows from what I have said that even though the basis upon which commission was paid seems to work harshly against employees leaving their employment, at the time of the meeting the applicant had no entitlement to press for the payment of the commissions in the relevant quarter and, at the time of the hearing, he failed to discharge the burden of proof he carries of establishing an entitlement to outstanding commissions. Accordingly, his claim on these commissions fails.
It was also common ground that there was some discussion of the different management styles adopted when Garnett and the applicant met. The applicant was critical of what he perceived as Garnett’s “big stick approach”, however, this criticism did not appear to be central to the conflict which erupted during the meeting or the reason for the applicant leaving the meeting.
In his evidence-in-chief the applicant told the Court that he was not able to recall the points he “actually brought up”. He did, however, recall Garnett standing up, taking off his jacket and in the applicant’s words, “turning very nasty” and accusing the applicant of having “abysmal” figures for the previous twelve months. Indeed, because it was Garnett’s uncontradicted evidence that the returns so far as targets were concerned were very poor other than in the quarter immediately preceding the quarter during which the meeting was held, and further because the applicant agreed that he did not always achieve targets, I have no doubt that the consistency and level of the applicant’s overall performance was a matter raised during their last discussion.
The applicant informed the Court that Garnett then said, “... I could - my pay would be reduced forthwith from $40,000 as a package to $28,500 a year total package. That I would have to move from my office to the workstations. That I was no longer the sales controller and I could accept these - and this was a fairly heated exchange, well not exchange, what he said to me was very heated”.
The abovementioned statement was allegedly followed by Garnett saying “... you can accept all these or you can take three weeks in lieu”. In response the applicant told Garnett “it was unfair”; placing his pager and his keys on Garnett’s desk before leaving the room.
Again it was common ground that shortly after the applicant left his office Garnett followed him and told him that he was “making a wrong decision” and had to change his mind. This was an attempt to have the applicant to stop and speak to him. Further I accept that on 3 August 1995 Garnett rang the applicant and apart from seeking the return of the respondent’s property he was conciliatory and asked the applicant if there was any change to his decision, again receiving a negative response.
The applicant was so incensed by what occurred at the meeting that, despite having no professed intention of resigning prior to attending the meeting, he told the Court that he then determined not to remain; going home and arranging what turned out to be a successful job interview with a competitor that very afternoon.
Garnett’s evidence was that after going through the applicant’s unsatisfactory performance he determined to relieve him of the role of sales controller and resume that position himself. He pointed out that during the meeting the applicant conceded that he had been looking elsewhere for employment but did not want to leave the respondent’s employ. Exhibit R2 is a copy facsimile dated 27 May 1995 from the applicant to the Jenman Group in Sydney seeking employment. The applicant conceded in evidence that this was his facsimile and he had made enquiries seeking alternative employment. According to Garnett he was reluctant to continue to pay the bonus in advance, as required by the 1 January 1995 variation, to an employee who admitted that he was seeking employment elsewhere. This, he said, was one reason for withdrawing the payment in advance. Another reason was his concern over the viability of the business because of the variable performance of the applicant; Garnett’s desire being to resume control of the sales performance as sales controller. He denied any intention or desire to terminate the applicant’s employment, stating that he definitely wanted the applicant to stay, not only because of their longstanding relationship, but because he felt that the applicant was a talented salesmen when he concentrated on sales. It seems that before he became sales controller with responsibility for other sales staff, his performance was more consistent. If the applicant had accepted Garnett’s offer to continue to talk and reconsider his position, Garnett claims that he was prepared to make concessions to ensure the applicant stayed. The difficulty with this lastmentioned claim is that it does not sit comfortably alongside an ultimatum given after the applicant told him he could not touch his money to the effect that “... your alternatives are that you can resign, you can give me three weeks notice or accept and lets continue to talk, something along those lines were the words”.
I accept that once the applicant left the office there was no attempt on his part to communicate with Garnett or respond to the number of overtures made by Garnett to get the applicant to return and discuss his employment.
A number of other matters occurring at the meeting were conceded by Garnett. One was that he indicated to the applicant that he did not think the applicant had the ability to take on the business, touching upon it seems the applicant’s belief that he would one day share in, if not own, the business. I do not accept the applicant’s claim that he had been led by Garnett to believe that he would take over the business in due course without paying for it. If nothing else, such an assertion demonstrated to me an ignorance of the value of the business asset to the respondent bordering on commercial naivete. Garnett also conceded that he told the applicant that he could not trust him. This appears to have been caused by the applicant’s admission that he had been searching for other employment at least since critical comments about his performance were made by Garnett in about April 1995.
Garnett challenged the applicant’s allegation that his salary package had, as a result of the discussion, been reduced from $40,000 per annum to $28,500 per annum. He did so by relying on the January 1995 variation which, taken with the car allowance (if paid for twelve months), amounted to $30,000 per annum and a $10,000 advance against the applicant’s bonuses on commission. If both men are correct in their estimate of the applicant’s ability to achieve the targets as a salesperson, then the applicant would have earned a bonus; albeit on a quarterly basis paid in the quarter following the sale becoming unconditional, so long as he continued to perform above the target requirement. The debit/credit system applicable to the bonus payable in advance under the January 1995 variation would still mean that under that system he may not necessarily earn a greater commission than that payable where there is no advance payments of a bonus against commissions earned. I am satisfied that the applicant’s claim that his salary was reduced from $40,000 to $28,500 is an exaggeration. What he lost was the opportunity to be paid $10,000 throughout the year as bonus in advance and possibly another $1,500 on the base salary and car allowance component for the year if he had a claim for car usage over twelve months. When Garnett proposed the change to the applicant’s salary and commission, it is his evidence the applicant screamed out words to the effect that he, Garnett, was not to touch the applicant’s money. The proposal included a loss of title and position as sales controller but not, according to Garnett, the loss of the applicant’s office. However, I am satisfied that what precipitated the applicant’s departure was the proposed variation to his salary and the receipt of commissions yet again, with some possible reduction to the salary package as well as the less advantageous method of receiving the payments of commission entitlements.
TERMINATION AT THE INITIATIVE OF THE EMPLOYER
One of the questions to be resolved in order to determine whether there has been termination at the initiative of the employer is whether the purported variation to the contract of employment amounted to a termination of that contract, supplanting the old contract with a new contract or, whether it was a variation only of the contract, in this case the most recent one being that of 24 October 1994 as varied on 5 January 1995?
In his decision in Quinn v Jack Chia (1992) 1 VR 567, His Honour Justice Ashley spent some time examining in detail the authorities on this question, concluding at pages 577 to 578 of his decision that “... the change to the plaintiff’s situation in August 1985 was exceptional, far reaching, not within the original contemplation of the parties and not comprehended by the contract initially made between them; and that it did give rise to the institution of a fresh contract of service between the plaintiff and the defendant rather than merely a variation of that earlier agreement”.
As can be seen from his conclusions His Honour accepted as valid the proposition that an agreement that profoundly alters the employee’s duties or responsibilities should more readily lead to a finding that a new contract has replaced the old one or at the very least the old contract, as varied contained terms objectively appropriate to the new relationship created. In other words, the written, oral or implied terms of the “old” contract should, objectively speaking, allow for the variations alleged.
It was argued by the respondent that variations to the terms of the contract of employment were an accepted practice between the applicant and the respondent, particularly with regard to the adjustment of his base salary upwards or downwards and the manner in which commission entitlements were calculated and paid. Whilst there were no express terms to this effect in either the letter of appointment or the contract signed on 24 October 1994, the variations agreed to do indicate that this course of conduct was well established prior to 24 October 1994 and continued after October 1994. Moreover in cross-examination the applicant conceded that he was prepared to make whatever changes Garnett sought to assist the business.
Having considered all these matters carefully I am inclined to the view that the demotion from sales controller to sales person represented a change not contemplated by the terms of the contract of employment. The October 1994 contract of employment by its terms confirmed the applicant’s status as a sales controller and a change if it had taken place, would have amounted to a profound alteration to the applicant’s duties and responsibilities.
Because of my findings on the variation of the terms of the contract it follows that it was open to the applicant to accept the repudiation of his contract of employment implicit in Garnett’s declaration to him on 2 August 1995, which he did and immediately left. The suggestion that he resigned is not one that need be canvassed here because any so-called resignation or act of resignation was preceded by the employer’s act of repudiation which may not have been designed to bring about the departure of the employee but created, perhaps unwittingly, an environment in which it was open to the applicant to accept the repudiation and leave.
The failure to open on the question of justification of any termination and matters I have already commented on in my judgment, means that the respondent did not and has not discharged the onus of proof it carries to establish a sound, defensible or well-founded reason for termination; that is to say a valid reason for termination. Accordingly, I find that the termination which occurred on 2 August 1995 was not only at the initiative of the respondent but was one that was in contravention of section 170DE(1) of the Act.
REMEDY
Reinstatement was not sought. Because of the continuing legal disputes affecting the parties, both as to the respondent’s Cross-Claim and matters yet to be arbitrated by the Real Estate Institute of Victoria; and, in particular, the conduct of the applicant shortly after termination of his employment, my finding is that reinstatement is not practicable.
So far as compensation is concerned section 170EE(2) of the Act as amended provides:
“(2) If the Court thinks, in respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may, if the Court considers it appropriate in all the circumstances of the case, make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate.”
In Bean & Anor v Milstern Retirement Services Pty Ltd (unreported, Moore J, No. NI 0423 of 1994, 2 June 1995) His Honour had occasion to consider the payment of compensation under the Act at a time when subsection 170EE(2) did not include the words “if the court considers it appropriate in all the circumstances of the case.” For the purposes of that decision His Honour assumed that the remedy of compensation is a discretionary one. This assumption is reinforced by the amendments to the section enacted since January 1996 because circumstances may exist where it would be inappropriate to order the payment of compensation despite a finding that the termination was unlawful as the result of a contravention of Division III Part VIA of the Act.
In my view the amendment to the abovementioned section permits the Court to take account of the reasonableness or otherwise of the behaviour of the parties at and subsequent to termination. It also appears to encompass matters which in the employment law jurisdiction have commonly been referred to as after-acquired information where the employer ascertains matters post termination which may have justified an earlier termination or at least disciplinary action had those matters been brought to the employer’s attention beforehand (see my decision in Hayden v Golden Bowl Sports Centre Pty Ltd (unreported, No. VI 0453 of 1995, 8 May 1995) for general discussion of this issue).
Apart from the abovementioned considerations any compensation payable must necessarily be payable in respect to a loss suffered by reason of the termination; that is to say, the cause of the loss should be the termination, not some other circumstance.
This is a case in which it seems to me that in all the circumstances of the case no order for compensation should be made pursuant to the provisions of the Act.
In arriving at the abovementioned conclusion I have considered a number of matters. The first is that the applicant’s conduct prior to termination in effecting at least one sales authority, purportedly conditional upon the managing director not being involved in the sale, was incompatible with the proper performance of his contract of employment and may have been justification for the termination of his contract of employment for misconduct, or at the very least, disciplinary action. It also suggests that the longterm viability of his employment must be doubted if he then had such a poor understanding of the need to avoid any conflict between his own interests and those of the employer.
Next I am troubled by the conduct of the applicant in destroying the James Street file which, apart from breaching his continuing obligations to his former employer, was deplorable conduct that should not be rewarded. Insofar as this conduct forms a basis for saying that reinstatement is now impracticable, it also provides a basis for saying that an award of compensation is inappropriate. It was a deliberate act of the employee inimical to any reinstatement of his employment and his future employment prospects.
Further, I was troubled by the applicant’s failure to respond to Garnett’s immediate overtures to him to reconsider his decision not to remain and discuss the terms of his employment; where I accept that Garnett clearly signalled that there was scope for discussion and desired to retain his services. This conduct in my mind raises issue of whether his own conduct was the principal cause of his loss, not because as a general rule to be entitled to compensation every employee should accede to the employer’s overtures to further discuss matters after the employer has acted to repudiate the contract of employment and that repudiation has been accepted, but because the applicant’s evidence shows that on this occasion he was not prepared to discuss his salary and commission payments at all when these matters had commonly been the subject of variation in response to the business’ needs and his performance. I am satisfied that there was some heat and acrimony generated by the discussion and the applicant left in anger. Because of this and his mistaken belief that he was entitled to the further commission payments, he decided not to return or discuss the matters any further and now relies on the employer’s breach of the contract of employment in trying to vary the contract as being the cause of his remunerative loss.
The principal argument advanced by the respondent throughout the proceeding was that there was resignation not termination at the initiative of the employer. That argument was really directed at the applicant’s decision to leave when it was apparent that the employer wanted him to remain. There is now an unresolved dispute between the respondent and the current employer regarding at least the St James Street property and that dispute is yet to be arbitrated by the REIV. It was conceded by the applicant that in the arbitration proceeding his current employer sent a letter to the REIV on 11 September 1995 (Exhibit R4), which, coincidentally is the date of the filing of the application in this proceeding, stating amongst the things that the applicant had resigned from his employment with the respondent on 2 August 1995. Whilst I accept Mr Niall’s submission that the letter cannot be tendered as proof of the truth of its contents without calling the author, it is admissable for other purposes. The applicant told the Court that he had provided his current employer with “sketchy” information concerning the termination of his employment with the respondent and this was part of the information given to assist in writing the letter to the REIV. The applicant also conceded that he had, at the very, least read the letter after it came back from the REIV. However, he denied telling his current employer that he had resigned suggesting that his comments had been misinterpreted. Nevertheless, he agreed that on seeing the letter he took no steps to correct what he said was not true. The inference I draw from this conduct is that it is more likely than not that it suited the applicant’s purposes to allow the impression to be conveyed to the REIV, not to mention his current employer, that he had resigned and had not been terminated. Apart from any other consideration this behaviour is consistent with a belief on the applicant’s part that he had made the decision not to return to work with the respondent understanding when he did this that the employer had not intended to, nor did it want to bring the employment relationship to an end.
I view the abovementioned behaviour as being unreasonable in all the circumstances of this case.
The applicant did go out and obtain employment immediately at a rate of income he now claims is $26,115.00 per annum and is less than that received from the respondent, or for that matter offered by the respondent on 2 August 1995. To my mind the way his current income and his claim is calculated is quite inaccurate because first it is arithmetically inaccurate and secondly it presupposes a $40,000 plus per annum base salary. If he did not achieve a quarterly target in the four quarters of the financial year the clear inference is that the $10,000 bonus paid in advance would be adjusted and debited in the employer’s favour at some stage. Rather than work with Garnett again, the applicant decided to go elsewhere earning $500 per week, with $115 per week car allowance which I calculate to be an annual income of $31,980.00 together with commissions paid on a debit/credit basis. I accept that it was open to him to make this choice if he felt some antipathy about working with Garnett in the future, however, in the circumstances it was a choice which was more likely than not responsible for any loss of income in the future and was not necessarily a reasonable choice in all the circumstances described to the Court.
The abovementioned matters have persuaded me that there should be no order as to compensation in all the circumstances.
ACCRUED JURISDICTION CLAIM
On this claim the applicant is entitled to the $2,995.00 conceded by the respondent as being owing on the evidence. This amount included annual leave, some commission and some car allowance to 2 August 1995. The applicant was unable to give evidence on what his entitlements actually were at termination, however, the employer has satisfied me that, because the evidence was not really contradicted, the car allowance was tied to usage and therefore the claim for $833.30 must also fail. As already indicated, the applicant has not established on the balance of probabilities that the entitlement to unconditional commission arose prior to termination or was payable in the quarter he was terminated and therefore that claim also fails.
SECTION 170DB(4) - COMPENSATION IN LIEU OF NOTICE
The applicant did not open on the question of notice or compensation in lieu of notice under the Act and no submission or evidence was forthcoming on this matter. Accordingly, I have refrained from making any order for damages pursuant to section 170EE(5) of the Act.
MINUTES OF ORDERS
THE COURT DECLARES THAT:
On or about 2 August 1995 the applicant’s employment with the respondent was terminated at the initiative of the respondent.
The termination of the applicant’s employment on or about 2 August 1995 by the respondent contravened section 170DE(1) of the Industrial Relations Act 1988.
The payment of compensation is not appropriate in all the circumstances of this case.
AND THE COURT ORDERS THAT:
The respondent within 21 days of the date of these orders pay to the applicant damages in the sum of $2,995.00 less any sum required to be deducted therefrom by the respondent pursuant to the Income Tax Assessment Act 1936 and actually paid to the Commissioner of Taxation.
There be liberty to each party to apply to the Court on reasonable notice on the amount of damages payable pursuant to order 4 of these orders.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding twenty-three (23) pages are a true copy of the reasons for judgment of Judicial Registrar Millane.
Associate:
Dated: 2 July 1996
Solicitors for the Applicant: Slater & Gordon
Counsel for the Applicant: Mr R. Niall
Solicitors for the Respondent: Welsh Major
Counsel for the Respondent: Mr L. Maher
Date of hearing: 1 & 2 May 1996
Date of judgment: 2 July 1996
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