Cowell, Anthony William v Irlmond Pty Ltd

[1997] FCA 1117

FEDERAL COURT OF AUSTRALIA

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Whether employee demonstrated valid reason for termination of employment - Whether demotion consititues termination

Workplace Relations Act 1996

Jackson v Monadelphous Engineering Associate Pty Ltd (unreported, Industrial Relations Court of Australia, 17 October 1997) Referred to

ANTHONY WILLIAM COWELL v IRLMOND PTY LTD
VI 1306 of 1996

MOORE J
SYDNEY (HEARD IN MELBOURNE)
28 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VI 1306 of  1996

BETWEEN:	ANTHONY WILLIAM COWELL APPLICANT
AND:	IRLMOND PTY LTD RESPONDENT
JUDGE:	MOORE J
DATE OF ORDER:	28 OCTOBER 1997
WHERE MADE:	SYDNEY (HEARD IN MELBOURNE)

THE COURT ORDERS THAT:

1. The application for review is dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VI 1306 of 1996

BETWEEN:	ANTHONY WILLIAM COWELL APPLICANT
AND:	IRLMOND PTY LTD RESPONDENT

JUDGE:	MOORE J
DATE:	28 OCTOBER 1997
PLACE:	SYDNEY (HEARD IN MELBOURNE)

REASONS FOR JUDGMENT

This is an application for review of a decision of a Judicial Registrar given on 19 December 1996.  The Judicial Registrar was dealing with an application under s 170EA of the Workplace Relations Act 1996 (“the Act”) relating to the termination of the employment of Mr Anthony Cowell (“Cowell”) with Irlmond Pty Ltd (“Irlmond) on 14 February 1996. Cowell was then employed as the showroom manager of a Mitsubishi motor vehicle retailing business conducted by Irlmond. Cowell contended in his application that the termination of his employment had been in contravention of provisions of Division 3 of Part VIA of the Act.

The Judicial Registrar determined that Irlmond had not demonstrated that it had a valid reason for terminating Cowell’s employment: see s 170EA; and that the termination was in contravention of s 170DC.  These two findings were not put in issue in the review.  The Judicial Registrar awarded Cowell compensation in the gross sum of $6,679.40 pursuant to s 170EE(3).

By agreement the review was conducted by reference to the transcript of the evidence given before the Judicial Registrar and the exhibits tendered.  Counsel for Irlmond accepted that the effect of this agreement was that he could not challenge findings of primary fact made by the Judicial Registrar at least if those findings depended upon an assessment of the credibility and demeanour of witnesses:  see generally Wyndham Lodge Nursing Home Inc v Reader (No 2) (1996) 65 IR 253. It is relatively clear from the reasons for judgment of the Judicial Registrar that she preferred the evidence of Cowell to at least the evidence of Mr Anthony Russo (“Russo”) and possibly that of Mr Anthony Spalla (“Spalla”) who was the managing director of Irlmond. Indeed, the submissions of counsel for Irlmond in the review were based, in substantial part, on the evidence given by Cowell. As the hearing of the review progressed, it became clear that the only issue was whether Cowell’s employment had been terminated at the initiative of Irlmond. It was not in issue that Cowell bore the onus both at first instance and in the review of establishing that his termination had been at the initiative of the employer: see Melide v Rethmann Australia Environmental Services Pty Ltd  (1997) 147 ALR 669.

It is convenient to set out some of the relevant facts by repeating some of the findings made by the Judicial Registrar.  Cowell had two periods of employment with Irlmond.  The Judicial Registrar discussed the first, concluding in September 1993, in the following passage from her reasons:

“[Irlmond]  sells Mitsubishi motor vehicles from its Essendon showroom.  In June 1992 [Irlmond]  employed [Cowell] as a sales manager of its new car division. Cowell is now thirty three of age and married with two children born in 1993 and 1994 respectively.  During the period of his first employment with [Irlmond]  he worked as a sales manager until approximately September 1993 when [Irlmond ] brought in another sales manager, Anthony John Russo (Russo), to replace [Cowell] in his position.

Until joining [Irlmond’s] Essendon operation Russo had worked at its Heidelberg showroom and following a split in the partnership operating the Heidelberg business, [Irlmond] brought Russo to its Essendon showroom and installed him as sales manager.

...I am not satisfied that when [Cowell] lost his position as sales manager in 1993 it was lost because of poor performance.  There was no evidence of any warning given at that time or any discussion of his performance leading to [Irlmond] implementing such a radical change.  Indeed, the evidence is consistent with a change of position brought about by the changes in [Irlmond ’s] ownership arrangements at Heidelberg Mitsubishi and the need and desire to find a position for Mr Russo.

It was common ground that, although [Cowell] was very unhappy with the demotion to floor manager, which occurred in approximately September 1993, he continued the employment relationship and accepted the position; working in that position for a couple of months before resigning and taking a different position with another car dealer.  When [Cowell] left his employment with [Irlmond]  it was an amicable parting and there was certainly no suggestion that his performance as floor manager had been wanting in the period he performed those duties.  The new position as new car sales manager with Kew Mitsubishi continued until about August 1994 when [Cowell] moved to Lane Toyota as a fleet manager.  Within a few months of that move he was contacted by Russo asking him if he would be interested in resuming his former position as floor manager or, as it was sometimes described, showroom manager.”

The Judicial Registrar then went on to discuss her views about the credibility of Cowell and Russo.  As earlier noted, it is plain that she preferred the evidence of Cowell to Russo to the extent that there was any inconsistency.  She then went on to consider events in February 1995 when Cowell was offered a position other than the one of retail floor sales manager which was the position he had been appointed to on 6 February 1995 when he commenced his second period of employment with Irlmond.  Counsel for Irlmond accepted that in February 1996 Cowell was asked to accept a demotion, at least in the sense that he was being offered a position which had a base salary of $100 per week less than the position of retail floor sales manager.  While it was not the subject of an express concession, it appears that the offer of alternative employment also constituted a demotion in the sense that Cowell was being offered alternative employment other than at a managerial level within Irlmond’s Mitsubishi retail sales business.  The Judicial Registrar made the following findings about the nature of the offer of alternative employment:

“[Irlmond] made no formal offer of alternative employment; nor did it outline the effect the standing down and the redeployment would have [on Cowell’s] remuneration.  It simply stood him down and indicated that he could probably move to retail or fleet sales.  There was also an indication from at least Spalla that [Irlmond]  could not afford to keep [Cowell] on his floor manager’s package and it was likely that there may be some change downwards to his remuneration base, although Spalla suggested that if [Cowell] performed well in sales he could exceed the returns he then received as floor manager.

I conclude from the abovementioned evidence that the proposed alteration to [Cowell’s] position in the company involved not only a loss of seniority and the performance of different duties, but also a potential loss of remuneration.

I should deal with one matter that was raised in the appeal.  Prior to the request to accept a demotion within the Mitsubishi dealership, Cowell had, on 7 February 1996, been offered a position of manager at a Daewoo dealership conducted, I infer, by Irlmond.  Cowell declined this offer.  While the evidence is not entirely clear, it appears that at the time that offer was made Irlmond had just appointed a Mr John Morkham to the position of manager of the Daewoo dealership.  While there is a suggestion in the re-examination of Spalla that Cowell was offered the position notwithstanding the fact that Morkham had been just appointed to it, I do not find that the offer the position of manager at that dealership, lessens the effect of the events that shortly followed.  These matters were dealt with by the Judicial Registrar in her reasons in the following passage:

“In the week prior to termination of his employment [Cowell] was asked to manage [Irlmond ’s] Daewoo dealership, which position offered similar remuneration to that already paid to him.  There was no suggestion at the time that if he did not take the offer he may be demoted because of his performance.  He declined the offer.  It was not until evidence was given by Russo that it became apparent that that offer was made after [Cowell] queried why another employee had been offered that position ahead of him.  Within a week or so of this offer, on 14 February 1996 Russo and [Cowell] had further discussions which covered the apparent low morale in the dealership and, more importantly, covered discussion of the change Russo had decided to make to [Cowell’s] position.  Russo told [Cowell] he wanted [Cowell] to stand down from his position as floor manager.  [Cowell’s] evidence was that he was told he was not performing menial tasks quickly enough, he was grumpy and unapproachable until 10.00am or 11.00am in the mornings and the sales were down.  Not surprisingly, [Cowell’s] immediate response was to complain that this was the second time Irlmond  had tried to demote him and in [Cowell’s] view [Irlmond]  was not acting fairly.”

Counsel for Irlmond referred me to a number of passages in the evidence of Cowell.  The salient points in this evidence was that it was being made clear to Cowell that Irlmond did not wish him to leave its employment.  It also revealed that upon being told of the prospect of demotion, Cowell obtained legal advice which he discussed with Spalla.  The written advice was in evidence and, I must say, is in fairly strident terms about Cowell’s rights and his prospects in any litigation.  It is clear from the evidence that Cowell was concerned that the events in mid February 1996 constituted the second occasion on which he was being demoted in his employment with Irlmond.  This matter was noted in the passage from the reasons of the Judicial Registrar that I have most recently set out.  Counsel for Irlmond also referred to evidence that Cowell had taken up employment within days of his departure from his employment with Irlmond with another Mitsubishi dealer. That new employment involved selling cars which was employment of the type he may have had to take up as a consequence of the offer by Irlmond effectively demoting him.

As noted earlier, the issue raised in the review by counsel for Irlmond was whether there had been a demotion of Cowell which resulted in the termination of his employment at the initiative of the employer.  Reference was made to the decision of the Full Court in Brackenridge v Toyota Motor Corporation Australia Ltd (1996) 142 ALR 99, Strachan v Liquorland (Australia) Pty Ltd (unreported, Industrial Relations Court of Australia, 6 February 1996, Moore J), Reinberger v Huxley Marketing Pty Ltd (1996) 67 IR 154, Jackson v Elmerside Pty Ltd (unreported, Industrial Relations Court of Australia, 3 February 1996, Farrell JR), and Wood v Bayfield Newport Hotel Pty Ltd (unreported, Industrial Relations Court of Australia, 13 March 1997, Moore J).  While authorities such as these discuss the relevant principles and illustrate their application, the ultimate conclusion reached in each depended upon the particular facts. As I recently said in Jackson v Monadelphous Engineering Associates Pty Ltd (unreported, Industrial Relations Court of Australia, 17 October 1997):

“Drawing on another area of the law, whether the conduct of Monadelphous caused the termination of Jackson’s employment involves a practical common sense concept:  see  Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 and March v Stramare (E &MH) Pty Ltd (1991) 171 CLR 506. In my opinion there is a direct casual link between the conduct of Monadelphous and the termination of Jackson’s employment. Its conduct commenced the process that led to and caused the termination of the employment. Jackson’s employment was terminated at the initiative of Monadelphous.”

In the present case the factor which precipitated the termination of Cowell’s employment was the decision that was taken to demote him.  It is also, in my opinion, the event which caused the termination of his employment.  Counsel for Irlmond sought to characterise Cowell’s response as an emotional if not an idiosyncratic one.  I disagree.  He was being offered a position at a lower base salary with no certainty about sustaining or maintaining the income he was then enjoying as a retail floor sales manager.  It was a less senior position.  Those factors alone would justify a conclusion that the employment of Cowell was terminated at the initiative of Irlmond when Cowell refused to accept the demotion.  However that conclusion is reinforced by the fact that it was the second occasion on which Cowell was being demoted in employment with the same employer.  He was being pressed to relinquish the position which he had earlier been invited to assume at the instigation of Irlmond, having left its employment on one earlier occasion. Cowell was, in my opinion, reasonably entitled to take the view that Irlmond was not an employer that sufficiently valued him as an employee and was prepared to act comparatively capriciously in relation to his employment notwithstanding the exhortations of the management of Irlmond.

At one point counsel for Irlmond sought to argue that it could not have been Parliament’s intention that the demotion or likely demotion of an employee in these circumstances could constitute a termination at the initiative of the employer.  It was submitted that if this was so it would effectively stifle or unreasonably limit an employer’s capacity to reorganise its work- force in a way that was dictated by the prevailing circumstances of the business.  I do not accept this submission as correct and I apprehend that this was ultimately accepted by counsel for Irlmond.  Plainly the legislative scheme reflected in Division 3 of Part VIA would have permitted an employer to lawfully demote an employee if the exigencies of the business required it even though the demotion led directly to the termination of the employment.  Even if that termination might then be viewed as at the initiative of the employer if litigation ensued,  it would be open to the employer to demonstrate that it had a valid reason for the termination having regard to the operational requirements of its business: see s 170DE.  Thus the employer could demonstrate that even though there had been a termination at its initiative flowing from a proposed demotion, the demotion was one that was warranted having regard to the circumstances of the employer’s business.  Thus the employer could establish that the termination was a lawful one even though at its initiative.

I order that the application for review is dismissed.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore

Associate:

Dated:            28 October 1997

Counsel for the Applicant:	Mr G Watkins
Solicitor for the Applicant:	Coltmans Price Brent
Counsel for the Respondent:	Mr G D Cullen
Solicitor for the Respondent:	Jerrard & Stuk
Date of Hearing:	16 October 1997
Date of Judgment:	28 October 1997