Brennan v Kangaroo Island Council - [2013] SASCFC 151

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
BRENNAN v KANGAROO ISLAND COUNCIL
[2013] SASCFC 151
Judgment of The Full Court
(The Honourable Justice Vanstone, The Honourable Justice Anderson and The Honourable Justice Parker)
20 December 2013
EMPLOYMENT LAW - CONTRACT OF SERVICE - TERMS OF CONTRACT - IMPLIED TERMS
EMPLOYMENT LAW - EFFECT OF INDUSTRIAL AWARDS, AGREEMENTS OR LEGISLATION ON EMPLOYMENT CONTRACT - PARTICULAR CASES
EMPLOYMENT LAW - TERMINATION AND BREACH OF CONTRACT - NOTICE - ADEQUACY, REASONABLENESS ETC
Respondent employed appellant as Deputy Chief Executive Officer. Contract of employment was terminated by respondent for redundancy. Contract of employment made no express reference to termination, whether for redundancy or otherwise. Contract of employment was subject to an award which prescribed a period of notice of termination for redundancy. Respondent made payment, in accordance with the award, to appellant in lieu of the prescribed period of notice.
Trial judge held that appellant had been paid the entitlements due to her from the respondent, save for one extra week's pay to which she was entitled under another provision of the award. Appellant sought orders that the trial judge's order be set aside and that the appellant was entitled to reasonable notice in the amount of 12 months paid at her total remuneration.
Whether the trial judge erred in finding that a term of reasonable notice was not to be implied into the contract of employment. Whether the trial judge erred in finding that the terms of the award in respect of termination excluded the implication of a more generous period of reasonable notice.
Held (Parker J; Vanstone and Anderson JJ agreeing): Appeal dismissed. The implication of an obligation to give reasonable notice was not necessary to give business efficacy to the contract of employment and was not so obvious as to go without saying. The existence of the award provision rendered the employment arrangement effective without any need to imply an obligation to give reasonable notice.
Byrne v Australian Airlines Ltd (1995) 185 CLR 410; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, applied.
Western v Union Des Assurances De Paris (No 2) (1996) 88 IR 268; Logan v Otis Elevator Co Pty Ltd (1999) 94 IR 218, not followed.
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; Brackenridge v Toyota Motor Corporation Australia Ltd (1996) 67 IR 162; Elliott v Kodak Australasia Pty Ltd (2001) 108 IR 23; Australian National Hotels Pty Ltd v Jager (2000) 9 Tas R 153, considered.

BRENNAN v KANGAROO ISLAND COUNCIL
[2013] SASCFC 151
Full Court: Vanstone, Anderson and Parker JJ

VANSTONE J: I agree that the appeal should be dismissed. I agree with the reasons of Parker J and I have nothing to add.
ANDERSON J. I agree that the appeal should be dismissed for the reasons given by Parker J.
PARKER J: This is an appeal against an order of the District Court dated 31 July 2013 concerning the money payable to the appellant following the termination of her employment by the respondent Council on the ground of redundancy. For the reasons that follow, I would dismiss the appeal.
The Council made payment in accordance with a formula based upon age and length of service contained in the relevant industrial award. The trial judge found that the formula had not been correctly applied and ordered payment of an additional one week’s remuneration. While multiple grounds have been advanced in the notice of appeal, in essence the appellant contends that a term ought to have been implied into her contract entitling her to receive reasonable notice and that twelve months notice ought to have been given.
Facts
The relevant facts were not disputed by the parties. The appellant was originally engaged by the respondent as its Human Resources/Occupational Health, Safety and Welfare Manager with effect from 15 September 2008. The terms of that engagement were set out in a detailed written contract. It provided for termination of the appellant’s employment on several discrete grounds but did not refer to redundancy. The total value of the remuneration provided under the initial contract was $96,470 per annum. That increased by $7,000 from December 2008 when the Council provided the appellant with a motor vehicle for her private use.
The appellant was promoted on 19 April 2010 to the position of People Learning and Communications – General Manager. The parties accepted at trial that this promotion was the subject of a new contract of employment. The terms were set out in a letter of offer from the Council dated 19 April 2010. That offer was accepted in writing by the appellant. The letter specified certain terms but made no reference to termination, whether on the ground of redundancy or otherwise. This second contract increased the total value of the appellant’s remuneration package to $120,220 per annum.
On 11 April 2011 the title of the position held by the appellant was changed to Deputy Chief Executive Officer. There was no change to her duties. At that time her remuneration package was increased by $10,000 per annum. The trial judge held that this was a variation to her second employment contract and not a fresh contract.[1] That finding was not challenged on appeal. Thus, at the time the appellant’s employment was terminated she was employed under the contract offered on 19 April 2010 as modified on 11 April 2011.
[1] [2013] SADC 99 at [15].
Due to organisational change the appellant’s position with the Council was made redundant from close of business on 5 April 2012. On 20 March 2012 the Council had offered the appellant an “enhanced severance package” subject to certain conditions. She rejected that offer. On 10 April 2012 the Council made to the appellant payment in lieu of three weeks’ notice ($6,870.57) and a severance payment equivalent to seven weeks remuneration ($16,031.33).
Award coverage
It was common ground between the parties that from 1 January 2010 the appellant’s employment by the Council was subject to the South Australian Municipal Salaried Officers Award (“the Award”) made under the Fair Work Act 1994 (SA) (“the Act”). Prior to 1 January 2010 her employment had been subject to the Municipal Officers (SA) Award 1998 made under the Fair Work Act 2009 (Cth).
Clause 3.2.5.4(a) of the Award provided that “if the services of an employee are to be terminated due to redundancy such an employee must be given notice of termination as prescribed by clause 4.3”. In fact, cl 4.3 dealt with the payment of higher duties allowances. Counsel for the appellant submitted at trial that no sense could be made of this provision and thus an obligation to give reasonable notice ought to be implied into her contract. The trial Judge rejected that contention and treated the reference to cl 4.3 as being obviously intended to refer to cl 3.2.1.1.[2] That was not challenged on appeal.
[2] [2013] SADC 99 at [24].
Clause 3.2.1.1 of the Award provided that:
3.2.1.1In order to terminate the employment of an employee the employer must give to the employee the period of notice specified in the table below:
Period of continuous service   Period of notice
1 year or less   1 week
         Over 1 year and up to the completion of 3 years          2 weeks
         Over 3 years and up to the completion of 5 years         3 weeks
Over 5 years of completed service   4 weeks
3.2.1.2In addition to the notice in 3.2.1.1, employees over 45 years of age at the time of the giving of the notice with not less than two years continuous service, are entitled to an additional week’s notice.
Clause 3.2.1.3 provided for payment in lieu of notice.
At the time the appellant’s employment was terminated she had more than three years and less than five years of completed service. On that basis the Council made payment in lieu of three weeks’ notice in accordance with cl 3.2.1.1 of the Award. As the appellant was aged over 45 years and had more than two years continuous service, the trial judge ordered that the Council pay to her a sum in lieu of an additional one week’s notice.[3]
[3] [2013] SADC 99 at [25], [38].
Clause 3.2.5.7 of the Award provided that employees were entitled to severance pay in accordance with the scale set out in that clause. That entitlement was in addition to the period of notice prescribed under cl 3.2.1 and 3.2.5.4. The quantum of severance pay varied in accordance with length of service and whether or not the employer was a “small business”. As the appellant had more than three years and less than four years of completed service she was entitled to severance pay equivalent to seven weeks’ remuneration. That entitlement was paid to her by the Council.
The Enterprise Bargaining Agreements
The Council was party to a series of enterprise bargaining agreements made in 2006, 2010 and 2012.
The Kangaroo Island Council Enterprise Bargaining Agreement 2010 (“the 2010 EBA”) made under the Fair Work Act 1994 came into operation on 4 March 2010.[4] It replaced the 2006 agreement.
[4] Clause A.3 of the 2010 EBA.
A preamble to the 2010 EBA stated that it was intended to cover all employees of the Council “other than the Chief Executive Officer and senior managers on a salary package in excess of $100,000 per annum and appointed to the position after 1 July 2009”. The trial judge held that as the appellant’s salary package had exceeded the threshold of $100,000 prior to the 2010 EBA coming into effect, her employment was never covered by it.[5] That finding was not challenged on appeal.
[5] [2013] SADC 99 at [21].
From 1 January 2012 the 2010 EBA was replaced by the Kangaroo Island Council Enterprise Bargaining Agreement 2012 (“the 2012 EBA”) made under the Fair Work Act 1994.[6] The preamble to the 2012 EBA was identical to that in the 2010 EBA. Thus, the employment of the appellant continued not to be subject to any enterprise bargaining agreement.
[6] Clause A.3 of the 2012 EBA.
Thus, the only relevance of the 2010 and 2012 EBAs to the appellant’s employment was that her remuneration was to be adjusted annually in accordance with those agreements. That was a term of the letter of offer dated 19 April 2010.
The Appellant’s Contentions
Counsel for the appellant submitted that in the absence of specific provision to the contrary, an obligation to give reasonable notice of termination will be implied into any employment contract that does not make provision for termination without cause. It could not be said that the Award dealt fully with the obligation of the employer to give notice of termination as the Award only set a minimum standard. There was no express term in the contract which could conflict with an implied term and an award provision could not conflict with an implied term. Any such conflict needed to be found in an express term of the contract. A term might also be implied on the basis of industrial custom and practice if a matter was not expressly dealt with in the contract of employment.
Counsel for the appellant also referred to s 94 of the Fair Work Act which provides that an award prevails over a contract of employment to the extent that it is more beneficial to the employee than the contract. He also referred to s 3(fa) which provides that an object of the Act is “to establish and maintain an effective safety net of fairer and enforceable conditions for the performance of work by employees (including fair wages)”.
Counsel also drew the Court’s attention to a number of other provisions in the Fair Work Act that either set or provide for the setting of minimum standards for specified employment conditions.[7] He also referred to Sch 8 which sets out, amongst other matters relating to termination of employment, the minimum notice required. The notice requirement under Sch 8 is identical to that contained in cl 3.2.1.1 of the Award.
[7] Ie s 69 (remuneration); s 70 (sick leave/carers leave); s 70A (bereavement leave); s 71 (annual leave); s 72 (parental leave); s 72B (severance payments upon redundancy).
Thus, as I understand counsel’s argument, because the Fair Work Act and awards made under that Act, merely set minimum standards for employment that should not preclude the implication of more generous terms into a contract.
In that context counsel referred to the decision of the former Industrial Relations Court of Australia in Westen v Union Des Assurances De Paris (No 2) (1996) 88 IR 268. Madgwick J held that it was “unnecessary to venture into the doctrinal difficulties apparently seen as possible in Byrne v Australian Airlines[8]” and found that an obligation to accord reasonable notice could be implied into an employment contract notwithstanding that the relevant industrial award specified a period of notice.
[8] (1995) 185 CLR 410.
The operation of the Award and the Fair Work Act 1994
Unless employer and employee agree that it should occur, an award or a provision in an award is not incorporated into a contract of employment. In the absence of such agreement, the rights and obligations under the award operate separately from the contract and derive their force from the Act under which the award is made,[9] in this case the Fair Work Act 1994.
[9] Byrne v Australian Airlines Ltd (1995) 185 CLR 410.
The Fair Work Act, and awards made under that Act set minimum employment standards. An employer and employee can agree upon contractual terms more generous to the employee than those fixed by or under the Act. The issue in this appeal is whether such a term may be implied into a contract in the absence of clear agreement.
Whether reasonable notice could be implied
While counsel for the appellant suggested that a requirement to give reasonable notice of termination might be implied on the basis of custom and practice, no supporting evidence was led at trial. A term may only be implied based on custom and practice if the evidence establishes that the custom relied upon is so well-known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract.[10] Any such evidence would need to have established that, even where an employment contract was silent on the point, it was the well recognised custom and practice for local government councils to give senior staff reasonable notice of termination notwithstanding that the Award provided a formula to calculate the length of notice.
[10] Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 236; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 423 (Brennan CJ, Dawson and Toohey JJ), 441 (McHugh and Gummow JJ).
An implied term must be based upon the presumed or imputed intention of the parties.[11] The relevant principles were succinctly stated by the majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283:
(1)     [the implication] must be reasonable and equitable;
(2)it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3)     it must be so obvious that ‘it goes without saying’;
(4)     it must be capable of clear expression;
(5)     it must not contradict any express term of the contract.
[11] Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422.
In Byrne v Australian Airlines Ltd (1995) 185 CLR 410 the High Court considered whether a provision contained in an award could be implied into a contract of employment. The issue was whether an award provision requiring that a termination of employment not be harsh, unjust or unreasonable could be implied into a contract.
After referring to the remarks of the majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings, Brennan CJ, Dawson and Toohey JJ held that such a term could not be implied into the contract:[12]
... the answer must be that it is not necessary to imply a term in the form of cl 11(a) for the reasonable or effective operation of the contract of employment in all the circumstances. In the absence of any provision in the award and of any express provision in the contract of employment the law would regard it as a legal incident of the contract that it should be terminable upon reasonable notice or summarily for serious breach. Clause 11(a) may alter that position, but there is no reason to presume that any alteration was intended by the parties to form a term of their contract, nor any reason to impute such an intention to them ... The argument that clause 11(a) constituted an implied term of the contract of employment should be rejected.
[12] (1977) 180 CLR 266 at 422 – 423.
McHugh and Gummow JJ published separate reasons concurring with Brennan CJ, Dawson and Toohey JJ. Their Honours noted that it could not be said that the implication of the award term would have been accepted by the contracting parties as a matter so obvious that it “would go without saying”.[13] Furthermore, despite the lack of “... formality and detailed specificity in the contract” it could not be said that the implication of the award provision into the contract would be necessary for its reasonable or effective operation as there was “no gap which it was necessary to fill”.[14]
[13] Ibid at 446.
[14] Ibid.
The decision in Westen v Union Des Assurances De Paris (No 2) is inconsistent with that of the High Court in Byrne v Australian Airlines Ltd and with other authorities referred to below. I take the same view of the decision of the Full Court of the Industrial Relations Court of Australia in Logan v Otis Elevator Co Pty Ltd (1999) 94 IR 218. There the Full Court held that the fact that the relevant industrial award specified a period of notice did not preclude an obligation to give reasonable notice being implied into the contract of employment. However, counsel for the defendant in that case had submitted that the award provision was merely a matter that ought to be taken into account in determining what constituted reasonable notice. That submission appears to have been based on a misunderstanding of an obiter comment by Brennan CJ, Dawson and Toohey JJ in Byrne v Australian Airlines Ltd[15] where their Honours referred to what might have been the situation if the relevant award had not provided for termination upon notice.
[15] Ibid at 429.
Counsel for the respondent referred to other cases where, consistently with Byrne v Australian Airlines Ltd, a court has refused to imply an obligation to give reasonable notice in circumstances where an award specifies a period of notice, ie Brackenridge v Toyota Motor Corporation Australia Ltd (1996) 67 IR 162 and Elliott v Kodak Australasia Pty Ltd (2001) 108 IR 23. Counsel also referred to the decision of the Full Court of the Supreme Court of Tasmania in Australian National Hotels Pty Ltd v Jager (2000) 9 Tas R 153. The Full Court refused to imply an obligation to give reasonable notice as the Industrial Relations Act 1984 (Tas) specified a period of notice. The High Court refused special leave to appeal.[16]
[16] See Elliott v Kodak Australasia Pty Ltd (2001) 108 IR 23 at 38.
Conclusion
I find that the implication of an obligation to give reasonable notice was not necessary to give business efficacy to the appellant’s employment contract. The existence of the award provision, albeit that it operated outside the contract, had the result that the employment arrangement was effective without any need to imply an obligation to give reasonable notice, ie there was no gap that needed to be filled. Furthermore, because of the existence of the award provision it could not be said that implication of such a term would have been accepted by the contracting parties as a matter so obvious as to “go without saying”.

The trial judge noted that if reasonable notice had been required, that obligation would have been met by the giving of six months notice.[17] Her Honour took into account the fact that the appellant was aged 54 years at the date of dismissal, she had been employed by the Council for three years and seven months, held a senior position and had moved to a relatively remote location to take up the position. In that light, while six months may have been towards the lower end of the scale of reasonable notice, I do not consider that her Honour fell into error.
[17] [2013] SADC 99 at [35].
I would dismiss the appeal.