David Jack Strachan v Liquorland (Australia) Pty Ltd

[1996] IRCA 48

CATCHWORDS

INDUSTRIAL LAW - termination of employment - review of decision of Judicial Registrar - whether demotion of an employee who remained in employment constituted termination of employment - "termination of employment".

Industrial Relations Act 1988 - ss 170EA and 377

Landsal Pty Ltd (in liquidation) & Ors v REI Building Society (1993) 41 FCR 421
Siagian v Sanel Pty Ltd (1994) 1 IRCR 1
Association of Professional Engineers Scientists and Managers Australia v Skilled Engineering Pty Ltd (1994) 1 IRCR 106.
Turner v K & J Trucks Coffs Harbour Pty Ltd, 10 August 1995, not yet reported, Beazley J.
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344

No. NI 1266R of 1995

DAVID JACK STRACHAN v LIQUORLAND (AUSTRALIA) PTY LTD

MOORE J

SYDNEY

6 February 1996

IN THE INDUSTRIAL RELATIONS      )
  )
COURT OF AUSTRALIA               )     No. NI 1266R of 1995
  )
NEW SOUTH WALES DISTRICT REGISTRY )

BETWEEN:             DAVID JACK STRACHAN

Applicant

AND:      LIQUORLAND (AUSTRALIA) PTY LTD

Respondent

JUDGE:     Moore J

PLACE:     Sydney

DATE: 6 February 1996

REASONS FOR JUDGMENT

Introduction

On 15 February 1995 an application was lodged under s170EA of the Industrial Relations Act 1988 ("the Act") by Mr David Strachan ("the applicant"). While it was not apparent from the terms of the application, the applicant was alleging there had been a termination of his employment by his employer, Liquorland (Australia) Pty Ltd ("Liquorland") in July 1994. The application was heard by a Judicial Registrar who, on 20 July 1995, ordered that the application be dismissed and that the applicant pay Liquorland's costs. An application was made under s377 of the Act seeking a review of the determination of the Judicial Registrar.

The course of proceedings

The original application under s170EA was an unusual one. At the time the application was made the applicant was still an employee of Liquorland. The alleged termination was an incident which resulted in the applicant relinquishing one position with Liquorland and assuming another. The application raises a novel point and it was agreed between the parties that I should address certain preliminary questions without necessarily disposing of the entire application. To enable that to occur the parties have agreed on certain facts and identified issues I should determine at this stage. While no order was made under Order 29 of the Industrial Relations Court Rules, the course agreed upon appeared to me to be both a sensible and practical one. It was akin to the course adopted by the trial judge in Landsal Pty Ltd (in liquidation) & Ors v REI Building Society (1993) 41 FCR 421.

The factual background

The following narrative is an edited version of the facts that have been agreed by the parties.

The applicant was employed by Liquorland as a salesman from 29 October 1979, and was promoted to the position of Store Manager in or about March 1980.  The applicant was promoted to the position of Area Manager in or about February 1986.  As an Area Manager the applicant:

(a)counselled employees as to their performance, taking advice from Liquorland's State Manager Personnel, (NSW);

(b)had power to terminate the employment of employees of Liquorland, generally in consultation with the State Manager, Personnel (NSW);

(c)received written information including copies of the Retail Traders Association Magazine containing updates on federal industrial relations law and in particular unfair termination provisions. This written information did not refer to time limits for the making of an application pursuant to section 170EA of the Act. In addition the applicant attended briefing sessions given by the State Manager, Personnel (NSW) regarding, amongst other things, remedies for employees who had been unfairly dismissed. At relevant times the State Manager, Personnel (NSW) was a Mr O'Hart. He was present at the meetings, but could not recall whether time limits were discussed;

(d)As an Area Manager, the applicant received a salary of $44,000 per annum and was provided with a motor vehicle to enable him to visit the various stores in his area.  It was accepted that the motor vehicle would also be used for private use and in recognition of that fact an amount of $140 per month was paid by the applicant to the respondent.

Liquorland's General Manager (NSW), Mr Hill, and its Regional Manager (South) had a meeting towards the end of June 1994.  It was determined that Liquorland would need to transfer the applicant out of area management and that it would be most appropriate to transfer him into a store.  A couple of days prior to 4 July 1994, Mr Hill asked Mr O'Hart to prepare a letter.  It was prepared by Mr O'Hart as a starting point for discussions with the applicant.  The letter was pre-signed by Mr O'Hart and dated 4 July 1994.  It offered the applicant employment as a Store Manager.

On 4 July 1994 the applicant was requested to attend a meeting with Mr Hill and the Regional Manager (South).  At that meeting the applicant's performance was discussed.  The applicant was informed that he was to be transferred to the position of Store Manager at Ingleburn, because he had failed to meet the expectations of Mr Hill and the Regional Manager (South).  At the meeting the applicant was given a letter dated 4 July 1994.  It read:

"4th July 1994

Mr David Strachan

Dear David,

This is confirmation of our offer of appointment as Store Manager on the following terms:-

Position:Store Manager

Location:Ingleburn, #3472

Remuneration:        Your salary will be Grade 12, $36435.35 per annum which includes payment for any overtime, weekends and public holidays worked.  Holiday loading of 17 1/2% and an allowance for being a holder of a Liquor Licence is also included.  The position is of managerial status and is not based on any award.  Your employment is of a weekly tenure.

This contract will be reviewed in 12 months, 1st August, 1995.  At that stage your remuneration may be adjusted in accordance with the current Store Managers remuneration policy based on the store you are in at the time.  This will be discussed with you at the time.

Managers Bonus Scheme:  You are eligible for the Managers Bonus Scheme paid half yearly.  You will receive notification at the commencement of each half year.

Superannuation:       You are already a member of the Coles Myer Superannuation Fund, which has a direct financial benefit for members.  Your contributions are salary sacrificed (tax effective) and the Company's contribution is currently 2.4 times.  It also offers a substantial death and disablement benefit.

Benefits:You are currently receiving a further executive discount benefit of 5% which operates on Grace Bros/Myer card purchases.

This arrangement will remain.

General

Employment Conditions:  Employment may be terminated by either party by giving one week's notice, except in the case of misconduct justifying instant dismissal.

Hours of Work:       You will be required to work a managerial roster depending on your store location.  Rosters are subject to change from time to time as trading conditions demand.

Annual Leave:        Annual Leave is accrued at the rate of four weeks per annum and long service leave is as provided by state legislation.  Annual Leave entitlement cannot be accrued and must be taken as soon as possible after the end of the qualifying year.

Sick Leave:You will be entitled to 5 days sick leave for the first year of employment and 8 days for any subsequent year.

Medical Benefits:     We are able to make available to you a special MBF package of health insurance.  Regular contributions may be made directly from your salary.  Brochures are available with full details.

Commencement Date:    1st August, 1994.

Please sign the attached copy indicating your acceptance of this offer and return to Personnel Department.

........ ........ ........ .        ........ ........ ........ .

Shane O'Hart                   David Strachan

Personnel Manager               Employee

Date:  4/7/94                  Date:  ..../..../...."

Following that meeting, the applicant was transferred to the position at the Ingleburn store.

The applicant requested time to consider the offer of employment as Store Manager and to discuss it with his family.  He was due to take one week's leave commencing 5 July and at his request he was given another week in addition.  On or about 8 July 1994, in a telephone conversation between the applicant and Mr Hill, the applicant requested a salary for the Store Manager's position of $40,000 rather than the $36,435.35 salary set out in the 4 July 1994 letter.  Mr Hill agreed to increase the salary by $2,285 per annum in exchange for the applicant working an additional three hours per week as Store Manager effective 1 August 1994.  This was confirmed in a letter dated 18 July 1994 from Mr Hill to the applicant, which read:

"18th July 1994

Mr David Strachan

INGLEBURN, #3472

Dear David,

This memo confirms our recent conversation.

Your salary will be amended to $38, 285.00 per annum effective 1st August 1994.

As agreed you will be rostered for 46.5 hours per week and these additional three hours must be balanced by a corresponding reduction from the current structure.

Yours faithfully,

Peter Hill

General Manager

LIQUORLAND N.S.W.

cc:Shane O'Hart"

As a Store Manager, the applicant was required to return the motor vehicle.  Accordingly he ceased to pay $140 per month for the private use of the motor vehicle.  From or about 13 July 1994 the applicant commenced working at the Ingleburn store as the Store Manager and did so without protest at that time.  The applicant accepted the offer as he felt he had no choice but to accept it.  The applicant knew at the time he had the conversation with Mr Hill about the salary for the position of Store Manager, he could have pursued the matter further at that time if he had wanted to.

The applicant in accepting the offer of employment as a Store Manager did not wish to jeopardise 15 years service with the company by resigning at his own initiative as he was due for long service leave on 22 October 1994.  He made no mention of this to Liquorland and made a conscious decision not to pursue the matter any further at that time.  After October 1994, the applicant knew that he could have pursued the matter further then, without prejudicing his entitlement to long service leave, and he did nothing.

The applicant's former position as Area Manager was filled by Liquorland on 1 August 1994, a fact of which the applicant was aware at the time.  The applicant was at all times aware that Liquorland regarded him as having accepted the position of Store Manager from July 1994.

In November 1994 the applicant indicated in a performance appraisal that, in his view, over "the past five months I have coped considerably well considering the stress, humiliation, loss of remuneration that I have been put through by some executives".  Liquorland's Area Manager, Mr McFarland, witnessed this performance appraisal and sent it to the personnel department of Liquorland's head office.  Mr McFarland thought that the comment that the applicant had made in his performance appraisal referred to him being as "Area Manager demoted back to a Store Manager".  Mr McFarland drew the comments of the applicant to the attention of Liquorland's State Manager, Dushan Djukic, because he was concerned about the comments.  Mr McFarland left it to the Mr Djukic to speak to personnel about it.

The applicant sought legal advice for the first time from Smith Kerrison Foster, Solicitors, on 6 January 1995 when he saw Mr Rod Smith of that firm. His matter was allocated to Miss Foster to whom he spoke for the first time on 24 January 1995, as a result of her having been on annual leave. The applicant conferred with Miss Foster on 31 January 1995. The applicant subsequently received advice from Miss Foster to institute proceedings under section 170EA of the Act.

The application under s170EA was dated 13 February 1995 and filed on 15 February 1995. The applicant sought, in the application, leave to file his application out of time, an order for reinstatement, an order for compensation and damages in the accrued jurisdiction of the Court pursuant to s430 of the Act.

The applicant remains employed by Liquorland as its Store Manager at Ingleburn.

Issues

The following are the agreed issues to be determined by reference to the agreed facts:

1. Whether there was a termination of the applicant's employment on or about 4 July 1994 within the meaning of the Act;

1. If there was a termination of employment within the meaning of the Act, whether the applicant received written notice of the termination of the type referred to in s170EA (3)(a) of the Act;

1. If the applicant did receive written notice of the termination of the type referred to in s170EA (3)(a) whether the application for an extension of time ought be granted pursuant to Section 170EA (3)(b) of the Act.

1. Did the applicant institute proceedings No. NI 1266 of 1995 vexatiously or without reasonable cause.

Whether demotion constitutes termination

The first, and critical question, is whether there was, in the circumstances, a termination of the applicant's employment in July 1994. The jurisdiction of the Court conferred by Division 3 of Part VIA of the Act is to hear and determine applications concerning the termination of an employee's employment. The expression "termination of employment" is not defined in the Act. However s170CB requires expressions in Division 3 of Part VIA to be given the same meaning as they have in the 1982 Convention concerning Termination of Employment at the Initiative of the Employer ("the Convention") and the Recommendation concerning Termination of Employment at the Initiative of the Employer ("the Recommendation"). The Convention and Recommendation are Schedules 10 and 11 of the Act respectively. Both define "termination" and "termination of employment" as meaning termination of employment at the initiative of the employer.

Shortly after the commencement of Division 3 of Part VIA the meaning of "termination" was considered by Wilcox CJ in Siagian v Sanel Pty Ltd (1994) 1 IRCR 1 and Gray J in Association of Professional Engineers Scientists and Managers Australia v Skilled Engineering Pty Ltd (1991) 1 IRCR 106. Wilcox CJ viewed "termination of ... employment" in Division 3 "as including any act that brings to an end the employer-employee relationship, whether or not the act, or any acceptance of it, also brings to an end the contract of employment": see Siagan (supra) at 19. Plainly the word "including" qualifies the conclusion and suggests his Honour may not have viewed the termination of the employer-employee relationship as the only circumstance constituting a termination for the purposes of Division 3. Nonetheless the conclusion tends to support the view that in the present case, where the relationship of employer-employee between the applicant and Liquorland, endured the events of July 1994, there had been no termination of the applicant's employment.

The approach adopted by Gray J in Skilled Engineering (supra) was different and his Honour concluded that termination concerned the act of an employer terminating or purporting to terminate the employment: Skilled Engineering (supra) at 116, whether or not, as a consequence, the contract of employment was terminated.  His Honour's approach was that the employment relationship and the contract of employment are not to be viewed as distinct or separate.  There is either a subsisting contract of employment, and thus employment, or there is not.  It would appear to follow from this approach that if an act of the employer lead to a termination of the contract of employment, and thus the employment, in circumstances where a new contract was entered into, that act could constitute "a termination" for the purposes of the Division 3.  Approached this way his Honour's conclusion supports the view, in the present case, that there has been a termination in July 1994 if, at common law, Liquorland's act led to the termination of the subsisting contract of employment between it and the applicant.

However neither Wilcox CJ nor Gray J were directly addressing the issue raised in these proceedings and it is plainly necessary to review the Convention, the Recommendation and Division 3 to determine what is comprehended by the expression "termination of employment" for present purposes.

Many of the provisions of the Convention and the Recommendation would have a rational operation if the expression "termination of employment" was treated as comprehending a situation where an employee was, in essence, required to accept employment in a position materially different to the one then occupied at a materially lower salary. If the Convention as a whole and the Recommendation as a whole would sustain such a construction of the expression "termination of employment" then it would give its provisions, as imported into Division 3 of Part VIA of the Act, a wide operation. It would be a construction giving the legislation a broad beneficial effect: see Grout v Gunnedah Shire Council (1994) 1 IRCR 143 at 160.

However both the Convention and Recommendation contain provisions that suggest that the expression "termination of employment" has no application to such situations.  The first is Article 12 of the Convention which provides that an employee whose employment has been terminated shall be entitled to a severance allowance or other separation benefits or benefits from unemployment insurance subject to certain qualifications in clause 2 of the Article.  The Article is expressed in language of general application, that is, it relates to any employee whose employment has been terminated.  Both the language and subject matter of this provision are consistent with termination that has brought to an end the employment relationship.  While perhaps it might be theoretically possible to have schemes for the provision of severance allowances or separation benefits for employees who are demoted, it is plain, in my opinion, that this is not what Article 12 is concerned with.  It deals with payments to employees whose source of income is lost as a result of the termination of their employment.  That is, employees who are no longer in employment.

The Recommendation deals with the same matter in paragraph 18 in essentially the same terms.  However the Recommendation also contains paragraphs 19 to 26 which deal, in more detail than the Convention, with terminations of employment for economic, technological structural or similar reasons.  Paragraph 21 provides:

"The measures which should be considered with a view to averting or minimising terminations of employment for reasons of an economic, technological, structural or similar nature might include, inter alia, restriction of hiring, spreading the workforce reduction over a certain period of time to permit natural reduction of the workforce, internal transfers, training and retraining, voluntary early retirement with appropriate income protection, restriction of overtime and reduction of normal hours of work."

The reference to "workforce reduction" is a reference to the reduction in the aggregate number of employees of the employer and is consistent with "termination of employment" referring to the conclusion of the employment relationship.  Some of the measures identified as one to be adopted to avoid terminations are internal transfers, training and retraining and the reduction of normal hours of work.  It is unlikely, in my view, that those matters are identified as measures to avoid terminations if "termination" can include the appointment of a person to another position (even on a reduced salary) rather than the conclusion of the employment relationship itself.  The reference in paragraph 24 to "rehiring" employees whose employment has been terminated is similarly suggestive of "termination" referring to the conclusion of the employment relationship itself.

While these provisions form only a comparatively small part of the Convention and Recommendation they provide, in my opinion, a relatively clear indication of the intended scope of these international instruments in their entirety. They concern the loss of employment by an employee. They are not intended to relate to the demotion of an employee who remains in employment with the same employer. There is nothing in the Act that I can discern which suggests the expression should have some other meaning in the Act, and in s170EA in particular, notwithstanding the provisions of s170CB.

To this point I have not dealt with submissions made by the applicant concerning the effect, at common law, of the events of July 1994 and whether they led to a termination of the subsisting contract of employment:  see Quinn v Jack Chia (Australia) Ltd (1992) VR 567 at 575-577 and the cases discussed by Ashley J. In view of the conclusion I have reached about the meaning, in context, of the expression "termination of employment" it is unnecessary for me to do so. It is also unnecessary to address the second and third of the agreed issues given that they are conditioned on the Court concluding there had been a termination. However the fourth issue may nonetheless involve a consideration of whether the applicant had any real prospect of obtaining an extension of time if he was able to persuade the Court there had been a termination of his employment or that arguably there had been. Thus the fourth issue indirectly raises for consideration the second and third issues.

Notice of termination

Assuming, for present purposes, that the transfer of the applicant to the position of Store Manager in July 1994 constituted a termination of his employment within the meaning of s170EA, then, in my opinion, the letter of 4 July 1994 constituted written notice of that termination of the type referred to in s170EA(3)(a). While the letter itself is in conditional language in that it speaks of an "offer of appointment", an agreed fact was that the applicant was told at the meeting at which he was given the letter that he was to be transferred to the new position. Thus the letter would have been understood to have been notice of the terms upon which that would occur. While those terms were varied subsequently the letter was, in the circumstances, a clear indication of what the employer intended and the terms upon which it would occur. If that transfer was to constitute a termination then the letter was written notice of it.

Extension of time and whether proceedings brought vexatiously or without reasonable cause

This then leads to a consideration of the application for an extension of time.  In my view it would have been apparent at the time the application was filed in February 1995 that firstly it was likely that an extension of time would be necessary and secondly there were no real prospects of obtaining an extension.  The purported termination took place in July 1994.  The time by which the application should have been lodged was fourteen days from 4 July 1994.  It was lodged on 15 February 1995.  Between July 1994 and November 1994 the applicant made no complaint to Liquorland about his transfer and did so consciously, I infer, so as not to prejudice his entitlement to long service leave accruing October 1994.  It was not till January 1995 that the applicant sought legal advice.

Against this background I am to consider the principles concerning the extension of time discussed by Beazley J in Turner v K & J Trucks Coffs Harbour Pty Ltd unreported, 10 August 1995 which in turn involved an application of the principles discussed by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344. The starting point in considering an application for an extension of time is that special circumstances must be shown for time to be extended and that the applicant can demonstrate an acceptable explanation for the delay. In this case there is, in my opinion, no acceptable explanation. The delay was a combination of the tardiness of the applicant in getting legal advice after he decided to ventilate the issue and his deliberate decision to do nothing about the matter at all till his entitlement to long service leave arose in October 1994. Either viewed in isolation or together they do not constitute, even arguably, an acceptable explanation. It should have been apparent at the time the application was filed in February 1995 that it was likely an extension of time would be necessary and that there was no real prospect of an extension being granted.

Accordingly, the answer to the question posed in the fourth issue is that the proceedings were instituted without reasonable cause as it should have been apparent from the outset that the applicant had no real prospect of securing an extension of time which was likely to be the necessary first step in prosecuting his claim.  This conclusion does not depend upon what I earlier described as the novel point concerning what is comprehended by the expression "termination of employment" as that is at least arguable.

If, having the benefit of these reasons, the parties can agree on orders disposing of the review, I will make them.  Otherwise I will list the application for further directions upon application.

I certify that this and the preceding seventeen (17) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Moore.

Associate:  ........ ........ ......
Dated:    6 February 1996

APPEARANCES

Counsel for the Applicant:          Mr A Moses

Solicitor for the Applicant:              Smith Kerrison Foster

Counsel for the Respondent:               Mr R Goote

Solicitor for the Respondent:             Blake Dawson Waldron

Dates of Hearing:  11 December 1995

Date of Judgment:  6 February 1996