Brennan v Kangaroo Island Council - [2013] SADC 99

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
BRENNAN v KANGAROO ISLAND COUNCIL
[2013] SADC 99
Judgment of Her Honour Judge Cole
31 July 2013
EMPLOYMENT LAW - CONTRACT OF SERVICE
Contract of employment terminated by defendant on account of redundancy - plaintiff claims an entitlement to payment in lieu of reasonable notice - application of Award - whether term implied into employment contract - judgment for the plaintiff for one weeks pay plus interest.
Workplace Relations Act 1996 (C'wlth); Fair Work Act 2009 (C'wlth); Fair Work (Commonwealth Powers) Act 2009 (SA), referred to.
Kucks v CSR Limited (1996) 66 IR 182; Byrne and Frew v Australian Airlines Limited (1995) 185 CLR 410; BP Refinery (Westernport) Pty Limited v Hastings Shire Council (1977) 180 CLR 266; Thorpe v South Australian National Football League (1974) 10 SASR 17, considered.

BRENNAN v KANGAROO ISLAND COUNCIL
[2013] SADC 99

Ms Brennan seeks an order for damages against the Kangaroo Island Council (“the Council”) in respect of the termination of her contract of employment with the Council. The Council denies any breach of contract and says that Ms Brennan has no entitlement to damages.
Facts
The facts of the matter are not in dispute. Two large folders of documents were tendered by agreement. Ms Brennan gave evidence in her own case. No witnesses were called in the Council’s case.
Commencement of Employment
Ms Brennan was engaged by the Council in the position of Human Resources/Occupational Health, Safety and Welfare Manager, and her employment commenced on 15 September 2008. A written contract was signed by both parties[1] (“the first employment contract”). The total value of the remuneration package set out in the first employment contract was $96,470 per annum. The first employment contract dealt expressly with summary termination of the employment for cause,[2] termination on notice for poor performance,[3] termination on notice by the employee[4] and termination by mutual agreement.[5] The first employment contract did not expressly address termination on account of redundancy.
[1]    Exhibit P1 Tab 1 - ignoring the handwritten amendments to Schedule 2 to the contract.
[2]    Ibid clause 11.1.
[3]    Ibid clause 11.2.1
[4]    Ibid clause 11.2.2.
[5]    Ibid clause 11.2.3.
The first employment contract, in clause 18, said:
GOVERNING LAW
Subject to the lawful operation of the Award this Agreement shall be governed by, construed and take effect in accordance with the laws of South Australia and the parties hereto irrevocably submit to the jurisdiction of the courts of South Australia.
“Award” was defined, in clause 1 of the Employment Agreement, to mean the Municipal Officers (SA) Award 1998.
The Municipal Officers (SA) Award 1998, an award pursuant to the Workplace Relations Act 1996 (C’wlth), was in force and applied to the plaintiff[6] at the time that the first employment contract commenced.[7] The Municipal Officers (SA) Award 1998 included the following provisions:
[6]    Exhibit P2 at p 264, the MO(SA) Award 1998, clause 1.6.2.
[7]    Ibid p 371, Schedule 5.
4.2.1 Notice of termination by employer
4.2.1(a) In 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
4.2.1(b)In addition to the notice in 4.2.1(a), 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.
4.2.5(c)(i)Severance pay – other than employees of a small employer.[8]
An employee, other than an employee of a small employer as defined in 4.2.5(a), whose employment is terminated by reason of redundancy is entitled to the following amount of severance pay in respect of a period of continuous service:
[8]    Ibid para 4.2.5(a)(iii) Small employer means an employer who employs fewer than 15 employees.
Period of continuous service  Severance pay
Less than 1 year  Nil
1 year and less than 2 years  4 weeks’ pay*
2 years and less than 3 years  6 weeks’ pay
3 years and less than 4 years  7 weeks’ pay
4 years and less than 5 years  8 weeks’ pay
5 years and less than 6 years  10 weeks’ pay
6 years and less than 7 years  11 weeks’ pay
7 years and less than 8 years  13 weeks’ pay
8 years and less than 9 years  14 weeks’ pay
9 years and less than 10 years  16 weeks’ pay
10 years and over  12 weeks’ pay
* Weeks pay is defined in 4.2.5(a).
The Kangaroo Island Council Enterprise Agreement No 5 of 2006 (“the Enterprise Agreement 2006”) was also in force and applicable to the plaintiff at the commencement of the first employment contract. The Enterprise Agreement 2006 provided, in clause 6, that it was to be read in conjunction with the Municipal Officers (SA) Award 1998, but, in the event of any inconsistency, the Enterprise Agreement 2006 was to take precedence over the Award to the extent of the inconsistency. The Enterprise Agreement 2006 provided, in clause 11.2:
For the life of this Agreement there shall be no forced redundancies. This does not include any reduction of the workforce that may occur through natural attrition or the acceptance of voluntary separation packages.
For the period during which the Enterprise Agreement 2006 applied to the first employment contract, Ms Brennan’s position could not be made redundant without her consent.
In evidence, Ms Brennan said that she was provided by the Council with the use of a car in December of 2008, which increased the value of her employment package by $7,000.[9]
[9] Transcript p 17.
Change to Applicable Industrial Law
On 1 January 2010, the Fair Work (State Declarations – employers not to be national system employers) Endorsement 2009 was endorsed by the Minister for Employment and Workplace Relations pursuant to the Fair Work Act 2009 (C’wlth). The Endorsement declared that numerous local government bodies, including the Kangaroo Island Council, were not to be national system employers for the purposes of the Fair Work Act 2009 (C’wlth). For the purposes of this matter, the effect of the Endorsement, together with the Fair Work (Commonwealth Powers) Act 2009 (SA) was that, from 1 January 2010, in South Australia, the employment of local government employees would be subject to the State industrial relations system, rather than the Commonwealth system.
From 1 January 2010, the Municipal Officers (SA) Award 1998 and the Enterprise Agreement 2006 ceased to apply to the employment relationship between the parties, and the South Australian Municipal Salaried Officers Award (“the SAMSO Award”) became applicable.[10] From 4 March 2010 the Kangaroo Island Council Enterprise Bargaining Agreement 2010 (a State agreement) (“the EBA 2010”) came into effect. In her evidence, Ms Brennan said that one of the first tasks she “needed to take on board” when she began her employment with the Council was the renegotiation of the Enterprise Bargaining Agreement.[11] The EBA 2010 must have been the outcome of that process. It is apparent from Ms Brennan’s evidence that she was responsible for the progress of the enterprise bargaining process throughout her employment with the Council.[12] I will discuss the application of the EBA 2010 to the employment relationship between the parties below.
[10] Exhibit P1 Tab 13.
[11] Transcript p 18.
[12] Transcript p 25 and 26.
First Promotion
On 19 April 2010, Ms Brennan was promoted by the Council to the position of “People Learning and Communications – General Manager”. It was common ground between the parties that this promotion constituted a fresh contract of employment between Ms Brennan and the Council (“the second employment contract”). The offer and acceptance of the new position are contained in a letter from the Council to Ms Brennan dated 19 April 2010, which includes a signed endorsement from Ms Brennan accepting the new terms of employment.[13] The salary package was $120,220 per annum. The letter outlined terms of employment relating only to the position title, duties, salary package and future increases in salary. No mention was made of termination, or notice upon termination, including upon redundancy.
[13] Exhibit P1 Tab 2.
The EBA 2010 provided, in its preamble:
This Agreement is made to cover all employees of Kangaroo Island Council excluding 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.
It was common ground between the parties that the EBA 2010 did not, of its own force, apply to Ms Brennan’s employment pursuant to the second employment contract as People, Learning and Communications – General Manager with the Council.[14]
[14] Though the provisions of the EBA 2010 regarding automatic salary increases were specifically made a contractual term of the new contract of employment - see Ibid p 1.
Deputy CEO
On 11 April 2011, Ms Brennan was informed, by letter from the Chief Executive Officer of the Council, that she had been appointed to the position of Deputy Chief Executive Officer.[15] Ms Brennan’s salary was increased by $10,000 per annum. It was Ms Brennan’s evidence that, in the months leading up to her appointment as the Deputy Chief Executive Officer, she had quite often acted in the position of the Chief Executive Officer, and her promotion to Deputy Chief Executive Officer recognised that fact.[16] The promotion did not involve any change in Ms Brennan’s duties. I determine that it was a variation to the second employment contract, and not a fresh contract.
[15] Exhibit P1 p 15.
[16] Transcript p 21-22.
Redundancy
It was common ground between the parties that Ms Brennan’s position was made redundant by the Council from the close of business on 5 April 2012. This was communicated to her in a letter dated 4 April 2012.[17] By letter dated 20 March 2012, leading up to the redundancy, the Council made an offer to Ms Brennan of “an enhanced severance package”, on certain conditions.[18] Ms Brennan rejected that severance package.
[17] Exhibit P1 p 28.
[18] Ibid Tab 4.
On 10 April 2012, the Council paid $18,581 into Ms Brennan’s bank account and $2,019.95 into her superannuation account. Included in that payment was payment in lieu of three weeks’ notice ($6,870.57) and a severance payment of seven weeks’ salary ($16,031.33).[19]
[19] Ibid Tab 8.
The Claim
Ms Brennan claims an entitlement to a payment in lieu of “reasonable notice” following the redundancy. It was argued, on her behalf, that it was an implied term of her contract of employment that payment for a period of reasonable notice must be given to her in the event of redundancy. It was suggested that a reasonable period of notice should be calculated, with consideration being given to Ms Brennan’s age, which was 54 at the date of redundancy, her length of service, which was about 3 years and 7 months, her experience, her seniority, the regional location of the Council, and the fact that Ms Brennan had relocated from the mainland in order to take up her initial position with the Council, and had purchased a house on Kangaroo Island. It was argued that a period of 12 to 18 months would have constituted reasonable notice.
The Council argued that the redundancy was governed by the relevant provisions of the SAMSO Award, and that the payment out to Ms Brennan was in accordance with that award, except for an underpayment of one weeks’ salary on account of a provision of the award requiring that an extra weeks’ notice be given to an employee who is over the age of 45 years old, which the Council had overlooked.
Discussion
It is clear that the SAMSO Award applied to Ms Brennan’s employment from 1 January 2010. The SAMSO Award was in force at the commencement of the second employment contract on 19 April 2010 when Ms Brennan became the People, Learning and Communications – General Manager, and at the commencement of her time as the Deputy Chief Executive Officer.
From the beginning of the second employment contract on 19 April 2010, it was clear that Ms Brennan’s salary, at $120,220, meant that her position was not covered by the EBA 2010, which had come into effect on 4 March 2010. Given the variation in the first employment contract in December of 2008, when a car was added to her package, it seems to me that Ms Brennan’s employment was never covered by the EBA 2010, as her salary package exceeded the threshold of $100,000 prior to the EBA 2010 coming into effect. The provisions of the EBA 2010 dealing with automatic salary increases were expressly imported into the second employment contract as terms of that contract, but no other provisions of the EBA 2010 had application to the new contract by statutory force or as a contractual term.
A new Enterprise Bargaining Agreement came into force on 1 January 2012 (“the EBA 2012”), but Ms Brennan’s position, again, was excluded from its operation by reference to the salary attached to her position. Obviously, Ms Brennan’s position as Deputy Chief Executive Officer also was not covered by the EBA 2010 or the EBA 2012.
At the date of the redundancy, the SAMSO Award provided[20]:
[20] Exhibit P2 Tab 13.
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.
3.2.1.3Payment in lieu of the prescribed notice in 3.2.1.1 and 3.2.1.2 must be made if the appropriate notice period is not required to be worked. Provided that employment may be terminated by the employee working part of the required period of notice and by the employer making payment for the remainder of the period of notice.
…
3.2.5.4(a)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.
…
3.2.5.4(c)Should be employer fail to give notice of termination as required in 3.2.5.4(a) or (b) the employer must pay to that employee the ordinary rate of pay for a period being the difference between the notice given and that required to be given. The period of notice to be given is deemed to be service with the employer for the purpose of the Long Service Leave Act 1987.
…
3.2.5.7(a)Employees are entitled to severance pay as prescribed below in addition to the period of notice prescribed in termination in 3.2.1 and 3.2.5.4.
…
3.2.5.7(c)Severance pay – other than employees of a small business
An employee, other than an employee of a small business as defined in 3.2.5.1, whose employment is terminated by reason of redundancy, is entitled to the following amount of severance pay in respect of a period of continuous service:
Period of continuous service  Severance pay
Less than 1 year  Nil
1 year and less than 2 years  4 weeks pay*
2 years and less than 3 years  6 weeks pay
3 years and less than 4 years  7 weeks pay
4 years and less than 5 years  8 weeks pay
5 years and less than 6 years  10 weeks pay
6 years and less than 7 years  11 weeks pay
7 years and over  12 weeks pay
3.2.5.7(e)Continuity of service will be calculated in the manner prescribed by clause 4.5.
There is an error in clause 3.2.5.4(a). It refers to “notice of termination as prescribed by clause 4.3”, but clause 4.3 of the SAMSO Award does not deal with notice of termination, it deals with higher duties. The only provision of the award which deals with notice of termination is clause 3.2.1. There is also an error in clause 3.2.5.7(e). It provides for continuity of service to be calculated in the manner prescribed in clause 4.5. Clause 4.5 does not deal with the calculation of continuity of service, it deals with safety net adjustments to rates of pay, but clause 7.5 does deal with the calculation of continuity of service, in considerable detail.
The Council applied the provisions of the SAMSO Award by reading the reference to clause 4.3 in clause 3.2.5.4(a) as if it were a reference to clause 3.2.1. With 3 years and 7 months continuous service, it was determined that Ms Brennan was entitled to 3 weeks payment in lieu of notice pursuant to clause 3.2.1.1, plus 7 weeks’ severance pay pursuant to clause 3.2.5.7(c). It was conceded on behalf of the Council that clause 3.2.1.2 had been overlooked in the calculation of Ms Brennan’s entitlements, and that a further one weeks pay was owing on account of payment in lieu of notice of termination.
Mr Manuel, for the Council, argued that, because of the reference to clause 4.3 in clause 3.2.5.4(a) of the SAMSO Award, no sense could be made of the provision in relation to the notice of termination to be given on a redundancy. Mr Manuel argued that there was therefore no applicable provision of an industrial instrument in relation to Ms Brennan’s redundancy. Mr Manuel argued that it was necessary to imply a term into the second employment contract entitling Ms Brennan to payment in lieu of reasonable notice in the event of redundancy.
In the alternative, I understood Mr Manuel to be arguing that, even if clause 3.2.5.4(a) applied to the redundancy of Ms Brennan’s position, the SAMSO Award provided only for a minimum standard, and there should be implied into the second employment contract a higher standard in all of the circumstances.
It is clear that the provisions of an award have effect by force of statute,[21] in this case the Fair Work Act 1994 (SA). The terms of an award are not imported as contractual terms into the contracts of employment between the parties to whom the award applies unless the parties, by agreement, adopt those terms as contractual terms.
[21] Byrne and Frew v Australian Airlines Limited (1995) 185 CLR 410 at 421,422 and 429.
In Kucks v CSR Limited[22] Madgwick J, sitting as the Industrial Relations Court of Australia, said:[23]
It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.
But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.
[22] (1996) 66 IR 182
[23] Ibid p 184

The difficulty in interpreting clause 3.2.5.4(a) of the SAMSO Award is readily overcome if “clause 4.3” is read as “clause 3.2.1”. Clause 3.2.1 is the only clause in the SAMSO Award to which clause 3.2.5.4(a) could possibly have been intended to refer, because it is the only clause in the award which deals with notice of termination. I determine that the reference in clause 3.2.5.4(a) of the SAMSO Award to clause 4.3 was intended to be a reference to clause 3.2.1 of that Award, and I interpret the provision accordingly. The SAMSO Award therefore prescribes a minimum standard for the period of notice of termination on the redundancy of the Deputy Chief Executive Officer of the Council.
The next question is whether, against that background, a term should be implied into the second employment contract requiring that the Council give “reasonable notice” to Ms Brennan in the event of her position becoming redundant.
From time to time in his submissions, Mr Manuel seemed to be suggesting that a term requiring that reasonable notice be given in the event of a redundancy was an implied term of all employment contracts which did not contain an express term dealing with notice, or payment in lieu of notice, on redundancy. I reject that argument. It amounts to an argument that the term is implied as a matter of custom, and there is no evidence before me of such a custom presently existing.[24]
[24] See Thorpe v South Australian National Football League (1974) 10 SASR 17 at 29.
At common law, a term may be implied into a contract only where the matters set out in BP Refinery (Westernport) Pty Limited v Hastings Shire Council[25] by the Privy Council are present:[26]
Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it 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.[27]
[25] (1977) 180 CLR 266.
[26] Ibid at p 282.
[27] This statement has been repeatedly endorsed by the High Court. See N Seddon R Bigwood M Ellinghaus Cheshire & Fifoot Law of Contract Lexis Nexis Butterworths Australia 10th edition 2012 at p 486 n.557.
I have determined that the provisions in the SAMSO Award in relation to notice on termination applied to the second employment contract by force of the Fair Work Act 1994 (SA). In those circumstances, there is no need to imply a term requiring that reasonable notice, or a payment in lieu of reasonable notice, be given to Ms Brennan in the event that her position were to become redundant. The situation was covered by the SAMSO Award from the formation of the contract. The implication of a term is not required to give business efficacy to the contract of employment. Neither is the implication of the term so obvious that “it goes without saying”. The absence in the letter of 19 April 2010 of specific provision for a great many elements of the contract of employment is readily explicable if the intention was to leave much of the relationship between employer and employee to be regulated by the terms of the Award.
Had the SAMSO Award not applied to the second employment contract, then the result would have been different. In those circumstances, there would have been no applicable way of calculating Ms Brennan’s entitlements upon redundancy without the implication of a contractual term, and all five of the requirements for an implied term would have been present. Had the SAMSO Award not applied to the contract of employment, then, in all of the circumstances, including Ms Brennan’s age of 54 years old at the date of redundancy, her service to the Council of 3 years and 7 months, her experience, her seniority, the regional location of the Council and the fact that Ms Brennan and her husband relocated to Kangaroo Island in order for Ms Brennan to take up the initial position with the Council, I would have determined that it was an implied term of the second employment contract that Ms Brennan be given 6 months notice of termination upon redundancy, or payment in lieu of notice. Mr Manuel argued for a longer period, but it seems to me that his argument placed too little weight upon the length of Ms Brennan’s period of employment with the Council, which, at approximately three years and seven months, was not lengthy.
Ms Brennan gave evidence that, upon her position with the Council becoming redundant, she remained on Kangaroo Island for some time, and began a consultancy business while she explored employment opportunities. It became apparent to her that the consultancy business would not be viable, for a number of reasons. It was Ms Brennan’s evidence that the consultancy business did not yield an income[28]. In November 2012, Ms Brennan was successful in securing a position as a senior advisor in Safety and Workers Compensation Services for the Australian Industry Group, working in Melbourne.[29] I am satisfied that Ms Brennan took all possible steps to try to mitigate her loss.
[28] Transcript p 28.
[29] Transcript p 28-30.
Summary and Conclusion
The employment relationship between Ms Brennan and the Council, which was terminated on account of redundancy on 5 April 2012, was subject to the operation of the SAMSO Award. The SAMSO Award made provision for notice of termination and for a severance payment in the event of redundancy. The test for the implication into the contract of employment of a term requiring the giving of reasonable notice of redundancy by the employer has not been satisfied[30]. The implication of the term is not required to give business efficacy to the employment contract and it is not so obvious that “it goes without saying”.
[30] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 @ 282
The plaintiff has been paid the entitlements due to her from the Council, except for one weeks pay for which the Council is liable under clause 3.2.1.2 of the SAMSO Award.
There will be judgment for the plaintiff in the sum of $2,290.10 plus interest from 5 April 2012.
I will hear the parties as to costs.