Davis v Nissan Motor Company (Australia) Pty Ltd
[2010] VCC 1192
•9 September 2010
| IN THE COUNTY COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE CIVIL DIVISION COMMERCIAL LIST EXPEDITED CASES DIVISION |
Case No. CI-09-03311
| VALERIE PATRICIA DAVIS | Plaintiff |
| v | |
| NISSAN MOTOR COMPANY (AUSTRALIA) PTY LTD | Defendant |
| (ACN 004 663 516 ) |
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| JUDGE: | HIS HONOUR JUDGE GINNANE |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 15-18 March and 12 April 2010 |
| DATE OF JUDGMENT: | 9 September 2010 |
| CASE MAY BE CITED AS: | Davis v Nissan Motor Company (Australia) Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1192 |
REASONS FOR JUDGMENT
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Catchwords: CONTRACT – contract of employment – whether position made redundant – notice required to terminate the contract – meaning of phrase “all other conditions of employment remain unchanged” – mitigation of damages – mutual trust and confidence term.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms S Bingham | Holding Redlich |
| For the Defendant | Mr M Follett | H R Legal |
| HIS HONOUR: |
1 Ms Valerie Davis sues for damages alleging breaches of her contract of employment with Nissan Motor Company (Australia) Pty Ltd.
2 Ms Davis commenced employment with Nissan on 3 November 1976 and remained an employee until 4 March 2009 when, on her sixty-first birthday, her contract was terminated.
3 Ms Davis claims that her employment was terminated on the ground of redundancy and she was entitled to three weeks’ pay for each year of service. The redundancy claim is based on Nissan’s terms and conditions of employment.
4 Secondly, Ms Davis claims payment for reasonable notice or pay in lieu thereof upon termination of her employment.
5 Thirdly, Ms Davis claims damages for breach of an implied mutual trust and confidence term.
6 The issues for determination are therefore:
(a) Was Ms Davis’ employment terminated on the grounds of redundancy? (b) What period of notice or pay in lieu thereof was Ms Davis entitled to in order for Nissan to terminate her contract of employment? (c) Was there a mutual trust and confidence term in Ms Davis’ contract of employment? (d) If yes to (c), was it breached and, if so, did Ms Davis suffer any loss and damage as a result which is recoverable? 7 Before determining these issues, I will detail Ms Davis’ employment history with Nissan and other events leading up to her dismissal.
Employment History of Ms Davis
8 Ms Davis joined Nissan on 3 November 1976 as a typist/clerk. She had completed Year 10 education and a six-month secretarial course at RMIT. She progressed from a clerical role in the Warranty Department to her ultimate role in the Customer Services Department. Her performance was appraised annually and, save for the 1984 appraisal and 2008 (the year before her termination), she met all expectations.
9 In 1981, Ms Davis became a Warranty Administration Supervisor and received a salary increase because she was “an experienced operator” and she became entitled to a salary package, including an entitlement to lease a car. She was advised that her position was “no longer a clerical position” because she was taking a supervisor’s role and, accordingly, resigned her membership at the Federated Clerks’ Union.
10 On the suggestion of Mr J Jelsey, the manager of the Customer Service Department, Ms Davis undertook Australian Institute of Management courses, focussing on communications and human behaviour. After completion of these courses in 1990, Ms Davis was promoted from Customer Services Officer to Customer Service Manager. In that role she was responsible for monitoring and supervising the work of five or six Customer Service officers and ensuring that they had adequate training. The number of staff increased to thirteen in 1992. In 1991, the role of Customer Service Manager was reclassified as an award-free management position.
11 In 1992, a restructure of Nissan occurred and the manufacturing plant ceased operation. Following that restructure, in 1993, Mr D Kelly, Director, Corporate Services, wrote to Ms Davis to confirm her employee conditions. The letter annexed a document entitled “Terms and Conditions of Employment”. It stated that:
“We wish to reconfirm that your continued employment with NMA will be
based on the following.”
12 The letter set out conditions such as salary, superannuation, entitlement to company vehicles and the redundancy policy, the benefits of which have been referred to previously. The document also stated that:
“All previous terms and conditions for employment will continue to apply,
including:
other benefits that you are currently entitled [to] and as set out in
previous correspondence to you.”
13 In response, Ms Davis signed an Acknowledgment and Authorisation prepared by Nissan which stated that:
“I Valerie Davis have read and understood the terms and conditions of my employment by Nissan Motor Company (Australia) Pty Ltd set out in the letter and attachments dated [sic] 1993.
I acknowledge the details of the letter and confirm my support for the New Nissan and agree to abide by the terms and conditions contained in that letter.”
14 In addition to her supervisory role, on occasion Ms Davis represented or arranged representation of Nissan when customers brought proceedings against it in the Victorian Civil and Administrative Tribunal or similar Tribunals in other States. She would attempt to resolve the dispute before it went to the Tribunal, hold discussions with the customer, senior officers within Consumer Affairs and Nissan’s lawyers.
15 Ms Davis was involved in product liability claims against Nissan, including arranging for assessments of claims. She was involved in maintaining Nissan’s Trade Practices Act compliance program and carried out work in connection with a roadside assistance scheme.
16 In 2000, Nissan assumed the Australian distribution of Renault vehicles. Nissan gave Ms Davis responsibility for setting up the Renault Customer Service Centre.
The Workplace Changes Nissan introduced in 2008
17 In 2008, Nissan introduced a Call Centre for customers. Following conversations with Mr R Hanley, the Manager, Customer Service, Ms Davis understood that the Customer Service Department would continue to operate as it had.
18 In March 2008, Ms J Nightingale commenced with Nissan as Customer Service Delivery Manager. Mr Hanley had suggested that Ms Davis apply for that position, but she decided not to. Ms Nightingale was hired to tighten up procedures in the Customer Service area.
19 Ms Nightingale met with Ms Davis and Mr Hanley. Mr Hanley advised Ms Davis that he wanted the Customer Service role to continue and she was to look after that stream of the business. Ms Nightingale’s role was to manage the Customer Service Centre and make sure that Nissan had metrics to measure its performance. Her role was to improve the performance of the Call Centre and to combine in to it some of the activities of a new Nissan finance company.
20 However, Mr Hanley soon changed departments and Ms Nightingale became Ms Davis’ immediate superior, reporting directly to Mr M Carydias. The Call Centre was placed in the Customer Experience, Design and Delivery Department. As part of improving the Call Centre performance, Ms Nightingale set team targets for individual calls. Job titles were changed to Customer Service Consultant to reflect the fact that the staff did not have a management role.
21 In June 2008, following a request from Ms Nightingale, Customer Service staff informed her of the tasks they performed that were not related to the telephone queuing system. They included a number of customer related issues: including responding to letters and emails, maintaining goodwill, expenditure within budget, completing ACCC reports, improving sales of extended manufacturers’ warranties, handling recall notifications, organising refunds and preparing compliance reports which related to manufacturers’ legal obligations, dealing with outstanding hire vehicles, assisting dealers and responding to customer complaints, and handling buybacks.
22 Ms Nightingale informed the staff in June 2008 that they were part of the Call Centre. They did not respond favourably. She reported weekly to her staff on the Key Performance Indicators relating to incoming telephone calls. She stated that she had frequently told the Customer Service team that they were required to log into a computer frame system to answer waiting or “queued” calls from customers.
23 Staff in the Customer Service Department were told in a series of meetings that metrics and Key Performance Indicators would be applied to the telephone system. Ms Davis did not believe that Key Performance Indicators applied to her position as she had an essentially administrative role handling more complex cases.
24 Some of the staff in the Customer Service Department were contractors. At the end of September 2008, the engagement of three of the contractors was terminated, but they were replaced.
“Project Renaissance” Commences
25 In 2008, Nissan developed a business plan entitled “GT 2012”, containing objectives to be achieved by 2012. Two specific phases followed. The first was a benchmarking of cost management within Nissan. The second phase involved reviewing employees who were not capable of supporting the business and considering a process of terminating non-performers.
26 Mr M Margach, Executive General Manager, Customers Operations and Legal, employed since April 2006 as an expert in change management programs, gave evidence about his development of Project Renaissance. He coined the name “Project Renaissance” to describe the changes to Nissan’s organizational design, which included benchmarking and modelling using local industry benchmarks and benchmarks from the Nissan organization globally. Project Renaissance provided a mechanism by which Nissan commenced to prepare its business for the delivery of the GT 2012 plan.
27 Project Renaissance had three phases. First, modelling the organization. Second, reviewing those employees who would not be capable of supporting the business throughout the GT 2012 period and terminating their employment and retrenching positions that they believed were redundant.[1] The third was recruitment of new staff.
[1] Transcript (“T”) 267
28 Mr Margach instructed Mr S Edwards, National Manager, People, Culture and Legal, and Ms Nightingale to perform a review of employees’ capabilities and performance. He asked Mr Edwards to provide a “high-level sweep” of employees whose performance was not acceptable. He gave evidence that the leadership of Nissan considered every position and the capability of each employee, their current and past performance and their future potential for assisting in achieving the objectives of the GT 2012 plan. Inevitably this process would result in some positions being made redundant and some individuals’ employment terminated because of their performance. The intention was not to replace full-time employees with contractors.
29 In December 2008, Mr Edwards marked a cross on an organizational chart on the names of the employees who, at face value, would not have a role in the newly-fashioned Nissan. The employees identified in this manner included Ms Davis.
30 Mr Edwards and Ms Nightingale made recommendations on the performance and capabilities of employees, and Mr Edwards spoke with Mr Margach about terminating employees or hiring new staff. The review decided to keep the existing number of positions in the Customer Call Centre.
31 In February 2009, Nissan sent an email to employees regarding the Global Financial Crisis, stating that Nissan was looking at its position relative to operations and suggesting that there may be changes in the organization. In a meeting with the Customer Service Department, Mr Margach stated that there would be changes within the company and movements of staff. According to Ms Davis, Mr Margach stated: “There are only three people within the company who know who those people are that are going, and I’m one of them that knows all this.”[2]
[2] T98
32 Mr Margach gave evidence that he “validated”, or in plain language approved, the recommendation of Mr Edwards and Ms Nightingale to terminate the employment of Ms Davis on the grounds of performance. He also approved the termination of the employment of Mr L Puche and Mr A Baker, who worked in the Call Centre, on the grounds of performance. Mr Puche remained for about four to six months to maintain some continuity. Both Mr Baker and Mr Puche, who had been assessed as poor performers, were to be given contract work to maintain continuity. He approved the retention of Ms McLachlan.
33 Mr Margach stated that he was aware of many performance concerns relating to Ms Davis. He stated in respect of Ms Davis and Mr Baker:
“I believe that we had through detailed discussions and ongoing processes given Val and Andrew every opportunity to improve their performance to a base line level within the organisation and there was an inherent unwillingness from both Val and Andrew to do so and we were left with no other choice than to terminate their employment.”[3]
[3] T285
34 Mr Margach stated that the Call Centre was factionalised. Staff was resisting the changes that were being introduced and some were refusing to perform inherent requirements of their positions.
35 Ms M Murphy, a recently appointed senior HR consultant at Nissan, attended a meeting to discuss Call Centre terminations. She stated that at that meeting it was agreed that Ms Davis’ performance was not at the required standard and that her employment would be terminated as a result. It was agreed that two other employees’ employment would be made redundant and in addition Mr Baker employment would be terminated as a result of poor performance.
Ms Davis’ Employment is Terminated on 4 March 2009
36 On 4 March 2009, Ms Davis was called to a meeting with Mr Edwards, Mr Carydias and Ms Nightingale. Mr Carydias stated that “the Call Centre performance hasn’t been to expectation and neither has yours and you’re going to be transitioned out of the company”. According to Ms Davis, she then asked Mr Edwards whether she was being made redundant and she believed that Mr Edwards responded “yes” and told her that the company was restructuring and “your job, you’re no longer required to do and we’ve prepared a generous package for you”.[4]
[4] T 101
37 Mr Edwards and Ms Nightingale gave evidence. Mr Carydias was not called as a witness. Mr Edwards and Ms Nightingale gave evidence that Mr Edwards told Ms Davis she was being dismissed on performance grounds, and that redundancy was not mentioned.
38 Different speaking scripts to be used in the termination interviews were prepared for managers – one for a redundancy termination and another for a termination for poor performance.
39 I am not persuaded that Mr Edwards did agree that Ms Davis was being made redundant. He and Ms Nightingale denied that he had. In addition to the oral evidence of the Nissan witnesses, I base this conclusion on the fact that the Nissan executives were reading from a prepared script, and the fact that Ms Davis was not entirely certain about this part of her evidence.
40 Ms Davis left the premises with a Deed of Release and a Statement of Service she was given in the meeting. The Deed of Release provided for the payment of six months’ salary to Ms Davis. She did not feel comfortable signing the Release as she felt the conditions were too restrictive. Ms Davis informed Mr Edwards of her decision by email. As she did not sign the Release she received five weeks’ salary in accordance with the Award. No attempt was made to rely on grounds justifying summary dismissal.
41 Mr Edwards stated that six months’ payment was offered in the Deed of Release because Nissan was aware that it was adopting a high risk strategy. Nissan had not “gone through all the necessary hoops”[5] and he understood that the dismissal could be challenged. All employees of over four years’ standing were offered six months’ pay on condition that they signed the Deed of Release.
[5] T 353
42 Ms Davis commenced proceedings in the Australian Industrial Relations Commission, alleging that her employment had been unlawfully terminated by Nissan. Nissan moved to dismiss the application for want of jurisdiction on the ground that Ms Davis had been dismissed for genuine operational reasons, which was a ground outside the Commission’s jurisdiction.
43 Mr Edwards was referred to jurisdictional objections taken by Nissan in proceedings brought by Ms Davis in the Australian Industrial Relations Commission, which asserted that Ms Davis was dismissed for reasons, including general operational reasons. It was put to him that the objections indicated that Ms Davis was dismissed because of a restructure. The notice detailing the objections stated:
“The employer faced an immediate need to reduce costs and improve productivity due to the severe impact of the global financial crisis on the automotive industry and, more specifically on the Company’s Australian business.
The Respondent faced the economic imperative of rapidly reducing its overall operating costs, including wage costs, and improving productivity and performance. Accordingly, it undertook a major review of its operations, staff performance and potential for restructuring parts of its business. Following this review, this was a factor in the decision to terminate the employee’s employment.”
44 In response, Mr Edwards referred to the Notice of Employer’s Appearance - in which Nissan’s lawyers stated that Ms Davis was dismissed for reasons “including poor performance, misconduct and operational reasons”.
45 Ms Davis did not proceed with the application.
46 She received a Separation Certificate which described the reason for separation as “restructure of company”. The box providing for “unsatisfactory work performance” was not ticked.
Ms Davis obtains New Employment
47 Ms Davis has mitigated her loss by commencing work with an IT and audio- visual company on a part-time basis for two-and-a-half-days per week. Health permitting, she had intended to work until at least the age of sixty-four or sixty- five at Nissan.
Issue 1: Did Nissan Dismiss Ms Davis on the Ground of Redundancy?
48 In Jones v Department of Energy and Minerals,[6] Ryan J stated that what was critical for the purpose of identifying a redundancy was whether the holder of the former position has, after the reorganisation, any duties left to discharge.
[6] (1995) 60 IR 304 at 308
49 In Finance Sector Union of Australia v Commonwealth Bank of Australia,[7] Moore J stated:
“…the notion of an employee becoming redundant can arise when there is, in prospect, the termination of an employee's employment event though the duties of the employee will still be undertaken (either by that employee or another employee) for the ultimate benefit of the original employer but in employment with another employer and for the immediate benefit of that other employer. … .”
[7] (2001) 111 IR 241 at [81]
The Reasons Why Ms Davis’ Employment was Terminated
Nissan’s Case - Issues with Ms Davis’ Performance
50 Nissan argued that Ms Davis’ position was not redundant and that she was dismissed because of her performance.
51 Ms Nightingale stated that Ms Davis showed a resistance to change and was not willing to work towards the Key Performance Indicators. She displayed animosity towards her and ignored her when she spoke to her. Ms Nightingale sought Mr Margach’s and Mr Edward’s help in dealing with the situation. Ms Davis did not accept that these criticisms were legitimate.
52 Ms Nightingale stated that Ms Davis’ phone records showed a very high auto logout, which meant that she was not in a position to answer customers’ calls. She stated that Ms Davis made a lot more direct outgoing calls than other staff, but answered a lower number of the queued calls. On occasions Ms Davis met the Key Performance Indicators.
53 She stated that Ms Davis’ role was no different to any other of the Call Centre staff. She disputed that Ms Davis had any significant role in respect of VCAT hearings and was not aware that she had an involvement with trade practices and product liability issues, or supervision of customer service consultants.
54 On 20 June 2008, Mr Edwards and Ms Nightingale signed and sent to Ms Davis a letter containing a first written warning. It was based on her failure to log onto the phone system at the commencement of her shift and to remain logged on throughout her shift.
55 Ms Davis sent a detailed response to the letter disputing the bases of the letter. She stated that she had not been personally advised that her job function required her to be logged into the phone system at all times, and explained that her other duties meant that sometimes she was unable to respond to an incoming call.
56 Ms Davis’ letter provides a detailed statement of her position on these issues. She stated that:
“My role at Nissan is Manager- Customer Service which means I lead a team of customer service operators who perform those inherent requirements as stated above. My role is primarily to deal with difficult and lengthy customer enquiries and complaints. At no time did I believe that it was an inherent requirement of my role to be logged in at all times as it never has been a key function of my role.”
57 In December 2008, Ms Davis received a half-year appraisal as “below expectations”, which was the lowest appraisal that could be provided save for the assessment of “too early to appraise”. Ms Nightingale referred to “resistance to change and reluctance to accept metrics and KPIs when implemented”. In her response, Ms Davis referred to the need for “a better understanding of, and clearer direction from management” and indicated that if these were provided, she was confident that she would “continue to ensure customer satisfaction towards the future”.
58 Ms Davis considered that Ms Nightingale did not understand the extent of her other duties, including her duty to advise contractors or to advise dealers. She also disputed that the number of customer calls that she took were below the required level.
The Audio File Incident
59 One matter of significance was the “audio file incident”. Ms Davis took a call from an extremely angry and agitated customer on holidays in Western Australia, complaining about a lack of spare parts in Perth. She put the call on speaker and recorded it, as was the norm in her department. She emailed the audio file to Mr Margach as he had previously told Ms Davis’ group that if there were any customer problems he would be happy to help. She sent the email to inform Mr Margach of the level of anger and frustration customers were feeling and the frustration of staff in not being able to resolve problems quickly. The caller’s husband later rang and apologised for his wife’s behaviour.
60 Mr Margach called Ms Davis into a meeting. Ms Nightingale and Mr Edwards were also present. Mr Margach expressed concern about Ms Davis’ behaviour and stated that he did not believe that she was genuine about trying to solve the customer’s problems. According to Ms Davis, Mr Margach stated that if he heard there were other similar issues she would be responsible for other staff losing their jobs, because he would close the department.
61 Mr Margach gave evidence that a few weeks prior to the audio file incident, Ms Davis had told Ms Nightingale that he needed to spend more time sitting with the Call Centre staff listening to issues received in the Call Centre. He expressed the view that the manner in which Ms Davis handled the angry customer was an absolute disgrace. She should not have let the customer be worked up to such a state. His impression was that Ms Davis deliberately used the call as a mechanism to agitate the customer, record their conversation and send that to him as a shock factor, or as a standard of the kind of call that was being received.
Submissions about the Reasons for Ms Davis’ Dismissal
Ms Davis’ submission
62 Counsel for Ms Davis submitted that the terms and conditions of her employment made it clear that the right to a redundancy payment would apply in circumstances where the dismissal was caused by restructuring.
63 Ms Davis submitted that Nissan no longer required the work of a Customer Service Manager to be performed by an employee. The reality was that Nissan reduced the number of full-time employees in Ms Davis’ area by three. The decision to move to contract labour for Customer Service Managers was made well before terminating Ms Davis’ employment.
64 Counsel for Ms Davis submitted that Nissan’s argument that she was dismissed because of her performance was a sham and that she was dismissed because of an organisational restructure and, accordingly, her position was redundant. Nissan had no performance policies and a redundancy could still occur when a company wished to reduce staff but adopted performance as the criteria.
65 Ms Davis pointed to the fact that her dismissal occurred when an organisational restructure was occurring. She also referred to the terms of the February 2009 announcement, which stated that changes would occur in the workplace. She referred to the terms of her Separation Certificate. She submitted that Nissan did not require her job being performed by full-time employees. She gave evidence that Mr Edwards told her that she was being dismissed on the grounds of redundancy.
66 Counsel for Ms Davis also pointed to the failure of Nissan to call relevant witnesses, especially Mr Handley and Ms Comeford, and the outplacement adviser. I do not consider that that evidence was likely to have been critical. At the most I can conclude that it would not have assisted Nissan, but Nissan called a number of the decision makers involved in Ms Davis’ dismissal.
Nissan’s Submission
67 Nissan contends that Ms Davis’ job still exists and that another person was specifically engaged to perform her role. No decision was made to reduce the headcount of the Call Centre. In January 2009, there was Ms Nightingale and six customer relations consultants, and after Ms Davis’ departure there was Ms Nightingale, a senior customer relations consultant and five customer relations consultants. Ms Comeford took over Ms Davis’ position, and her title, duties and position in the structure were identical. While Ms Comeford was a contractor and cost Nissan less than an employee, the mere change from employment contract to contract labour did not establish that a position was redundant.
68 Mr Margach ultimately made the decision to dismiss Ms Davis and his evidence was that she was dismissed because of poor performance. There was no evidence that the change from direct to contract labour was part of a plan. It had only been decided on after Ms Davis’ dismissal. Ms Davis’ position could not be redundant if no decision was made to either remove it altogether, or replace it with external labour.
69 Nissan submitted that termination of employment following organizational restructure did not establish a redundancy and that an employee had the onus of establishing that they were dismissed on the grounds of redundancy.[8]
[8] Fosters Group Ltd v Wing (2005) 148 IR 224 and Encyclopaedia Britannica Australia Ltd v Campbell [2009] NSWCA 286
70 Ms Davis was not terminated because her position became redundant. Her position was held open as the company sought to recruit. In fact, Nissan engaged contractors to fill the positions formerly occupied by Ms Davis and Mr Baker. However, the decision to hire contractors had nothing to do with the decision to terminate Ms Davis.
The Significance of the Introduction of Contractors
71 Mr Margach agreed under cross-examination that one of the purposes of Project Renaissance was restructure, and one of its objectives was to reduce labour costs. He stated that if the three employees had performed, they would not have been terminated. He agreed that the organizational reworking chart for April 2009 showed that Nissan’s intention for the staffing of the Customer Call Centre was to have one senior customer relations consultant as the only full-time employee other than Ms Nightingale. The other positions were all to be filled by contractors.
72 Where a full-time employee is dismissed and the duties they performed are thereafter performed by a contractor, it may be possible to conclude that the employer no longer requires those duties to be performed by an employee. In that event, there is much to be said for the view that the previous position has been made redundant. Moore J so concluded in Finance Sector Union of Australia v Commonwealth Bank of Australia.9 His Honour’s judgment was reversed on appeal, where the Full Court held that the question to be determined was whether the work of the holder of the position, in the sense of the actual duties to be performed by the holder of the position, remained to be performed.[10] However, in each case the requirement will be to identify the reason for the termination of employment.
[10] Commonwealth Bank of Australia v Finance Sector Union of Australia Ltd (2002) 125 FCR 9
Decision on the First Issue
73 Ms Davis must establish that her employment was terminated on the ground of redundancy. I do not consider that she has succeeded in establishing that she was dismissed for that reason.
74 The evidence demonstrates that Ms Davis was not dismissed on the ground of redundancy. Nissan has established that it had concerns about Ms Davis’ performance. This was the evidence of three Nissan witnesses and it was substantiated by documents, including the written warning and the half-yearly appraisal. The latter document reflected Ms Nightingale’s views. I do not consider that those views were manufactured.
75 All of this evidence points to the conclusion that Ms Davis was dismissed on performance grounds.
76 The aspects of Ms Davis’ performance which caused Nissan concern appear to have been created, at least in part, by the lack of recognition given to Ms Davis’ role when change was introduced in the Customer Service Department. This led to employee resistance.
77 I accept that Nissan was seeking to reduce labour costs and that the use of contractors achieved that aim. Ms Davis was dismissed at a moment of restructure and she was replaced by a contractor.
78 Nevertheless, even when those matters are given due consideration, the fact remains that there is significant evidence before the Court, both oral and documentary, which requires the conclusion that Nissan dismissed Ms Davis on the ground of performance and not redundancy.
79 I do not attempt a finding on the merits of the arguments about Ms Davis’ performance. But I do find that Nissan genuinely held the views expressed by its witnesses about her performance.
80 I therefore do not accept the redundancy claim.
Issue 2: What period of notice or pay in lieu thereof was Ms Davis entitled to in order for Nissan to terminate her contract of employment?
81 Nissan provided Ms Davis with five weeks’ pay at the time of her termination plus unpaid entitlements.
Significance of the phrase “all other conditions of employment remain unchanged”
82 The first question is as to the meaning of the phrase that recurs throughout the letters notifying Ms Davis of alterations in her employment: that all other conditions of employment remained unchanged.
83 Nissan’s argument is based on the history of Ms Davis’ employment, some of which has already been identified. Upon commencement, Ms Davis’ employment was governed by the Nissan Australia Clerks’ Award 1979, which was a federal industrial award. That Award contained an employee grading system, through which Ms Davis progressed as her seniority grew and her duties expanded. No separate letters of appointment or contracts of employment were produced.
84 In November 1982, Ms Davis was promoted to Warranty Process Supervisor and remained in that role until 1989. She progressed through the grading system of the Award until 11 September 1985, when she was classified as a Grade 5 clerk under the Award. Her salary level was adjusted to $22,713 per annum and written notations at the bottom of the review stated that the rational for the review is for “recognition of re-classification to an award-free points band”.
85 In a letter from the Salary Administrator addressed to Ms Davis in October 1985 headed “Position Evaluation”, reference is made to Ms Davis’ position being assessed as falling within the “325 points band”. In the same month, Ms Davis requested the cessation of the deduction of union fees from her salary. On 1 November 1985, shortly after the Nissan Australia Clerks Award 1985 came into effect, Ms Davis had her salary reviewed and increased. A letter headed “Award-Free Salary Adjustment” dated 1 November 1985 confirmed the increase and provided the level of adjustment, the date it was to come into effect and stated that “all other conditions of employment remain unchanged”. Letters of a similar nature and containing the phrase “all other conditions of employment remain unchanged” were sent to Ms Davis on 5 May 1986, 26 October 1987 and 19 July 1988.
86 In early 1989, Ms Davis temporarily filled a position in the Customer Service Department division for four weeks while a colleague took annual leave. Based on her success in that temporary role, in 1990 Ms Davis was asked to join the division as a Customer Service Manager on a permanent basis. Ms Davis’ salary continued to be reviewed and adjusted, and letters notifying her of the adjustment dated 1 May 1989 and 1 May 1990 were sent to her. They contained the phrase that “all other conditions of employment remain unchanged”.
87 In a letter dated 12 April 1991, Ms Davis was informed that she was confirmed as Manager, Customer Services. The promotion resulted in a reclassification of her salary to reflect a change of duties. The letter confirmed a salary adjustment and stated that “all other conditions remain unchanged”.
88 In 1993, Ms Davis signed the Terms and Conditions of Employment document, which has been referred to previously.
89 Ms Davis’ salary continued to be reviewed on an annual basis. After the reviews, a letter headed “Award-Free Salary Adjustment” was sent to confirm the adjustment and again included the statement that “all other conditions of employment remain unchanged”. The last of those letters were sent on 3 June 2008. None of them contained any express term regulating the termination of Ms Davis’ employment.
90 Ms Davis submitted that the notice provision in the Award was not incorporated into the contract. Alternatively, the change in her duties between 1976 and 1990 constituted a determination of her contract of employment as it stood in 1976, with new terms and conditions supplanting the old, alternatively, a variation to the terms and conditions contained in the contract as it stood.
91 Nissan argued that the terms of the Award deprived the contract of an implied term as to termination and that there was no room for such a term. Ms Davis remained subject to the Award terms as to notice. While Ms Davis moved out of the Award regime in about 1985 or 1986, her contract provided that all her existing terms and conditions of employment “remained unchanged”. The subsequent salary review letters contained similar statements.
92 Because of this express term, the Court could not imply or add a term regarding reasonable notice.
Consideration of the submissions concerning the phrase “all other conditions of employment remain unchanged”
93 The terms of an industrial award cannot be implied into a contract of employment unless it is necessary for the reasonable and effective operation of the contract.[11] The terms of industrial awards are normally given force by operation of industrial statutes. They operate as a statutory minima in respect of terms and conditions of employment. Employers and employees are always free to exceed the benefits that they confer. The parties to a contract of employment can expressly incorporate the terms of an industrial award into a contract of employment, just as they can expressly incorporate any other document.[12]
[11] Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410
[12] Amalgamated Collieries of WA Ltd v True (1938) 59 CLR 417 and on appeal [1940] AC 537 and Australian Workers’ Union v BHP Iron-Ore Pty Ltd (2000) 106 FCR 482, 552
94 In order for the terms of the Award pertaining to notice to apply to Ms Davis either she would have to be covered by the award or, it would need to be shown that the parties expressly incorporated it.
95 Ms Davis’ employment had ceased to be covered by an award in the mid- 1980s. As stated on 11 September 1985, a reclassification into an award-free points band occurred and Ms Davis was no longer regarded as a graded employee within the meaning of the Award.
96 I do not accept Nissan’s argument about the significance of the phrase “all other conditions of employment remain unchanged” for the following reasons. First, the terms of an industrial award are not conditions of an employment contract. They have to be expressly incorporated or implied to have that status. There is no evidence that either alternative is applicable. The words “all other conditions remain unchanged” are insufficient to achieve that incorporation.
97 Second, it is improbable that the parties’ intention, objectively ascertained, was to continue to apply minimum award conditions when Ms Davis had long since departed the coverage of the Award. The evidence suggests that the parties intended to move Ms Davis’ employment out of the Award regime in 1985 when she was promoted to a Warranty Process Supervisor. At that point her conditions of employment were not expressed to be governed by an Award. From that point a term of reasonable notice to terminate the contract or pay in lieu thereof was implied.
98 I also consider that a new contract of employment was formed between Ms Davis and Nissan either in 1985, when she ceased to be covered by the award or in 1991 when she became Customer Service Manager or, on both occasions.
99 On both occasions and particularly on the second, the profound alteration in Ms Davis’ duties and responsibilities justifies the conclusion that the previous contract had been terminated and a new contract made. The reasoning given in Quinn v Jack Chia (Australia) Ltd[13] governs the situation. The repetition of the phrase “all other conditions of employment remain unchanged” did not prevent the changes that did occur to Ms Davis’ employment having the effect of creating a new employment contract. The new contract was no longer award-regulated and required the implication of a term as to termination providing for either the provision of reasonable notice or pay in lieu thereof.
[13] [1992] 1 VR 567
100 Third, the Terms and Conditions of Employment document of May 1993 make no reference to award conditions. Whilst they state that previous benefits will continue to apply, they do not incorporate award terms.
101 The consequence of this conclusion is that Ms Davis’ contract of employment contained no express term providing for the notice required to terminate it. This is a common occurrence in which usually the law implies a term in an employment contract that the employer or employee can only terminate the employment contract by giving the other reasonable notice, or payment in lieu thereof. Such an implied term in this case satisfies the five tests established in B.P. Refinery (Westernport) Pty Ltd v Shire of Hastings.[14]
What Period of Reasonable Notice or Payment in Lieu was Ms Davis entitled to?
[14] (1977) 180 CLR 266
102 Having found that Ms Davis was entitled to reasonable notice or payment in lieu, it is necessary to determine what that entailed in this case.
103 This question is to be determined at the time notice is given. The notice is intended to enable the employee to obtain new employment of a similar nature. A range of factors must be balanced; no one factor is more conclusive than others.[15] Some of them are job-related factors; other factors pertain to the employee. Particular factors relating to Ms Davis are her extensive length of service. Secondly, her age and the fact that she would likely have continued with Nissan until the age of sixty- five. Thirdly, the size of her salary and the other benefits that she received.
[15] See Rankin v Marine Power International Pty Ltd (2001) 107 IR 117 at 139; Howard v Pilkington (Australia) Ltd [2008] VSC 491; Guthrie v News Limited [2010] VSC 196; and ‘Macken’s Law of Employment’ (6th ed.) by Sappideen, O’Grady and Warburton, p266 ff.
104 Nissan submits that Ms Davis’ position at the time of her termination was an entry level position and that her high salary reflected her long period of service and Nissan’s practice of reviewing salaries annually. I do not accept that that approach is an appropriate analysis of Ms Davis’ situation for the purposes of the determination of the quantum of reasonable notice or pay in lieu thereof. In fact, it reflects a lack of corporate memory on Nissan’s part of the significant contribution made by Ms Davis, which was reflected in her salary level.
105 The circumstances of this case are unusual. In my opinion, a consideration of the relevant circumstances leads to the conclusion that Ms Davis was entitled to nine months’ notice, or pay in lieu thereof. There is no point in placing great weight on other cases as each depends on its own circumstances.
106 Ms Davis was a relatively low-level employee but had given Nissan long and valued service. She had carried out her duties well and diligently. Her value to her employer was reflected in her high remuneration, which had been earned for performance over many years. She earned significantly more than her colleagues in the Customer Service Centre and this supports the contention that her role for many years had involved more complex duties and a higher level of responsibility than that of a call centre operator. Her age meant that she would have difficulties re-entering the job market in comparable employment. She intended to work for only a few further years and then retire. I do not accept that her job skills gave her a high degree of mobility.
107 The contribution that she made to Nissan over thirty-two years of service and the difficulty faced by older candidates in the job market required that Nissan provide Ms Davis with a period of notice, or pay in lieu thereof of nine months.
Mitigation of Damages
108 Ms Davis obtained other part-time employment in April 2009.
109 Ms Davis’ counsel argued that those earnings should not be deducted from the amount that I have awarded her, because that amount was really in the nature of a debt. This argument was based on the proposition that the amount of nine months’ salary was due to her as a debt as she was contractually entitled to notice rather than pay in lieu of notice.[16] I consider that the applicable implied term enabled payment to be provided in lieu of notice.
[16] Cf Reilly v Praxa Ltd [2004] ACTSC 41 at [25], [32]; and ‘Macken’s Law of Employment’ pps 284-285.
110 I consider that Ms Davis is entitled to damages for breach of contract rather than a debt for work which she was not permitted to perform.[17] Her case is pleaded as an action for damages and is to be contrasted with cases where a debt is being sought. She must bring into account the sums that she has earned in the nine months following 4 March 2009.
Amounts to which Ms Davis is entitled
[17] Delaney v Staples [1992] 1 AC 687
111 Ms Davis is entitled to judgment in a sum reflecting the difference between the amount that Nissan paid her on termination, which was based on five weeks’ salary and nine months’ salary in lieu of notice, plus the nine per cent employer’s superannuation contribution, less the amounts that she earned during the nine months following 4 March 2009. She is also entitled to payment in respect of the leave that she would have received during that nine months. Interest will need to be added to the net sum so ascertained.
112 There is also the question of the loss that Ms Davis has suffered through having to relinquish the lease of two motor vehicles, which had been leased through a Nissan plan, which had enabled employees to lease cars on favourable terms. In addition, she was obliged to return the Nissan vehicle assigned to her for work purposes. Ms Davis used part of her long service leave payment to purchase a replacement car. As at February 2009, the sums of $261 and $289 respectively were deducted from her monthly after tax salary for two vehicles, one of which was used by family members. There was no evidence before the Court about the quantum of the financial benefit that these leases conferred on Ms Davis, in comparison with a standard commercial lease. Nor was there evidence about the value of the car assigned to her for work or the extent to which she could use it for private purposes. In any event, the loss of such benefits are difficult to assess as damages.[18] Counsel for Ms Davis submitted that the Court should award general damages for this loss. Although the exercise is imprecise, the Court should place some value on the loss of the vehicles. Taking into account the amount that Ms Davis paid in leasing charges, and assuming that those sums were less than commercial rates, I consider that it is appropriate to award Ms Davis the sum of $2,700 for nine months or $300 per month for the loss of the use of the three vehicles.
[18] Kilburn v Enzed Precision Products (Australia) Pty Ltd [1988] 4 VIR 31, per O’Bryan J
Issue 3: Was there a Mutual Trust and Confidence Term Implied in Ms Davis’
Contract?113 Ms Davis relied on a third claim – that there was term of her contract that neither she nor Nissan would conduct themselves in a manner calculated or likely to undermine or destroy the relationship of trust and confidence existing between them as employer and employee. There is significant, although not unanimous Australian authority supporting the implication of such a term in appropriate instances.[19]
[19] See ‘Macken’s Law of Employment’ p.176; Quinn v Gray (2009) 184 IR 279; cf State of South Australia v Mc Donald [2009] SASC 219 and Van Efferen v CMA Corp Ltd (2009) 183 IR 319
114 Nissan submitted that no such term existed, but I accept that the mutual trust and confidence term was implied into Ms Davis’ contract on the basis of the reasoning contained in the cases cited in the previous paragraph.
115 Ms Davis argued five breaches of the term. The first to fourth deal with benefits that she would have received if she had worked out her notice. They are matters, which are subsumed by Nissan’s breach of contract in failing to provide reasonable notice or pay in lieu thereof and are compensated by the damages awarded because Nissan did not provide the pay in lieu of notice required by the contract. In any event those breaches, even if proved, may be covered by what is known as the Johnson Exclusion Zone[20] because of their connection with the termination of Ms Davis’ employment.
[20] Johnson v Unisys Ltd [2003] 1 AC 518
116 The fifth breach of the implied term alleged by Ms Davis was the denial to her of the opportunity to find alternative employment while working out her notice period. This is a loss of a chance or opportunity claim. I am not persuaded on the evidence that any loss of opportunity has been established by Ms Davis. She commenced part time work soon after her contract was terminated. There was no evidence called to establish the probability that she would have obtained different employment if she had been permitted to work out nine months’ notice.
117 In ay event, I consider that an implied term of the contract permitted both parties to terminate the contract by notice or payment in lieu thereof. In this case any damage has been suffered by the fifth breach alleged of the implied term of mutual trust and confidence has been compensated by the award of damages for failure to provide reasonable notice or pay in lieu thereof.
118 The result is that no breach of the term of mutual trust and confidence has been established. In the alternative, the damages for any breach that has occurred are the same as the damages that I have awarded in respect of the failure of Nissan to provide the required measure of pay in lieu of notice.
119 It is therefore unnecessary to consider separately Issue 4.
Conclusion
120 Nissan should have paid Ms Davis nine months’ pay and associated benefits, including superannuation and holiday pay, to terminate her contract of employment. She is entitled to the sum of $2700 in respect of the loss of the use of the motor vehicles. She must bring into account the five weeks’ salary that she was paid by Nissan and the amount that she has earned in the nine months after 4 March 2009.
121 I will hear the parties about the quantum of these amounts, interest and costs.
122 Ms Davis’ other claims have not been established.
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(2001) 111 IR 214
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