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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] SASCFC 151
Decision Date: 20 December 2013

CaseChat Overview and Summary

The appeal concerned a dispute between Ms Brennan and the Kangaroo Island Council regarding the termination of her employment. Ms Brennan contended that her contract of employment should have included an implied term entitling her to reasonable notice of termination, arguing that twelve months' notice should have been provided. The Council, on the other hand, had made payments based on a formula stipulated in the relevant industrial award, which calculated severance based on age and length of service. The trial judge had found that this formula was not correctly applied and ordered additional payment equivalent to one week's remuneration. The appeal was heard by Vanstone, Anderson, and Parker JJ of the court.

The central legal issue before the court was whether a term requiring reasonable notice of termination could be implied into Ms Brennan's contract of employment, notwithstanding that the applicable industrial award provided a specific mechanism for calculating notice or severance payments. This involved considering whether such an implied term was necessary for business efficacy or so obvious as to go without saying, particularly in light of the existing award provisions which operated independently of the contract. The court also had to determine if there was sufficient evidence to establish a custom and practice in local government that would support the implication of such a term.

The court reasoned that an implied term must be reasonable and equitable, necessary for business efficacy, obvious, capable of clear expression, and not contradict express terms. It found that the implication of a reasonable notice term was not necessary to give business efficacy to the contract because the employment arrangement was already effective due to the existence of the award provisions. Furthermore, the presence of the award provision meant that implying a term for reasonable notice was not so obvious as to "go without saying" for the contracting parties. The court also noted that no evidence was led to establish a custom and practice supporting such an implication. Consequently, the appeal was dismissed.

Orders

Orders of the court

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Background

Background to the litigation

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).

Evidence

Evidence Before The Court

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Decision

Reasons for decision

ANDERSON J (dissent)

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.

Ratio Decidendi

Legal Principle Established

Established by:

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.