Eaves, Scott Roy v Bessell, Kerry Lloyd
[1998] TASSC 55
•12 May 1998
54/1998
PARTIES: JAGER, Louie Peter
v
AUSTRALIAN NATIONAL HOTELS PTY LIMITED (ACN 009 477 552)
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 737/1995
DELIVERED: 12 May 1998
HEARING DATE/S: 15, 16, 17, 18, 19 and 30 September 1997
JUDGMENT OF: Slicer J
CATCHWORDS:
Contract - General contractual principles - Construction and interpretation of contracts - Implied terms - Generally - Contract of employment - Effect of statute on implied term - Termination of employment where harsh, unjust or unreasonable.
Byrne v Australian Airlines Limited (1995) 69 ALJR 797, applied.
Federated Mutual Insurance Company of Australia, Limited and Another v Sabine [1920] SALR 284; Meek v Port of London Authority [1918] 2 Ch D 96; Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567; Wynn's Winegrowers Pty Ltd v Foster (1986) 16 IR 381, followed.
Gregory v Phillip Morris Ltd (1988) 80 ALR 455; Wheeler v Phillip Morris Limited (1988) 32 IR 323, considered.
Industrial Relations Act 1984 (Tas), s47.
Aust Dig Contract [105]
Employment Law - The contract of service and rights, duties and liabilities as between employer and employee - Discharge and breach - Generally - Implied duty of mutual trust and confidence in employment contract - Breach of implied term - Damaged or destroyed confidence and trust between employer and employee.
Mahmud and Another v Bank of Credit and Commerce International SA (In Compulsory Liquidation) [1998] AC 20; Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144, considered.
Aust Dig Employment [21]
REPRESENTATION:
Counsel:
Plaintiff: L Kaufman
Defendant: K B Procter
Solicitors:
Plaintiff: Wilson Dowd
Defendant: Murdoch Clarke Cosgrove and Drake
Judgment category classification:
Court Computer Code:
Judgment ID Number: 54/1998
Number of pages: 16
Serial No 54/1998
File No 737/1995
LOUIE PETER JAGER, v AUSTRALIAN NATIONAL HOTELS PTY LIMITED (ACN 009 477 552)
REASONS FOR JUDGMENT SLICER J
12 May 1998
The plaintiff claims damages for breach of an employment contract entered into in February 1973. The essence of the claim is that the defendant was required by the contract to afford reasonable notice of termination and not to terminate harshly, unjustly or unreasonably. The contract was terminated on 15 February 1994. The remedy sought is either for payment in lieu of reasonable notice, or damages flowing from the termination occasioned by the delay in the obtaining of other suitable employment.
History of Employment
Following a three months' training course undertaken with the defendant, the plaintiff commenced employment as a "gaming inspector" for remuneration which was to be varied from time to time. The agreement was oral and there was no reference to any terms governing resignation or termination. Thereafter, the plaintiff continued with a career involving increasing responsibility and status within the corporate structure. In 1979, he became a "pit boss" responsible for the management of a group of gaming activities, being promoted to senior pit boss in 1989, at which time he assumed the additional position of a shift manager, holding the same until 1994. In 1991, as a shift manager, the plaintiff had particular responsibility for keno gambling, but in the course of reorganisation in 1992, transferred his duties to the area of table gaming. In that year, re-organisation resulted in a management structure of two managers and a third shift manager. In 1992 - 1993, the defendant was involved in preparations for possible involvement in a new casino project in Victoria, and, in June 1993, it was suggested by the Tasmanian casino manager to the plaintiff that he might consider transferring, within the defendant's corporate structure, to the Victorian project. He declined the opportunity due to personal circumstances. From time to time he was responsible for some of the functions of the manager and described himself as the casino gaming manager. In the absence of the casino manager, due to his involvement in the Melbourne project, the plaintiff, and two others of similar status jointly performed overall management functions, although it was the plaintiff who acted as manager. At all times during the course of his employment, the plaintiff properly fulfilled his duties, complied with the directions given, displayed loyalty and promoted the interests of his employer. There was some tension within management in late-1993 and early-1994, due in part to an unspoken rivalry between the plaintiff and Ron Hurley, the manager, and on 15 February 1994, the employment of the plaintiff was terminated in a manner either consistent with or a betrayal of modern practice. There existed no subjective reasons for the termination.
Organisation and Restructuring
The defendant conducted a complex organisation and was subject to supervision by and responsibility to the state for the probity of its gaming operations. Like all structures, it was required to respond to social and economic changes and to adjust its internal organisation accordingly. In 1989, the plaintiff acted as a shift manager. The ordinary hours of the casino varied from between 9am and 5am daily, depending on the day and season. It operated on a two shift basis, but the shift manager was required to act during their changeovers and in the absence of either. His general functions and duties were governed by a Staff Policy Manual dated July 1991, although it seems that the terms of the manual had been earlier introduced. In 1991, he was responsible for the operation of keno, but as the nature of the casino's custom began to alter, particular specialist tasks were allotted to the shift managers. Henry Stewart was responsible for training, Michael Gratton for video gaming and the plaintiff for keno, whilst all three remained responsible for the day-to-day operations of table gaming. Each was responsible to the general manager, with Gratton receiving a slightly higher salary. There were other management officers, who, in turn, were responsible for cashiers, attendants, supervisors and the like, whilst the pit bosses, who supervised the dealers, writers, inspectors and supervisors, were responsible to the relevant shift manager. Commencing in 1989, the gross and net returns of the defendant from the differing forms of gambling began to change. It is necessary to consider these returns in some little detail, since much of the restructuring of the organisation was required by the alterations. Between 1985 and 1992, the following alterations occurred in the gross revenue generated and the net contribution to the profits of the defendant in all areas of its operations.
REGULAR
$000's 1984/1985 1987/1988 1991/1992 Revenue 10,922 8,805 6,529 Contribution 4,650 2,289 1,206 % 42.6% 26.0% 18.5% PREMIUM
$000's 1985/86 1987/88 1991/92 Revenue 3,217 2,575 3,042 Contribution 1,327 306 349 % 41.2% 11.9% 11.5% KENO
$000's 1984/85 1987/88 1991/92 Revenue 2,821 3,753 3,086 Contribution 1,388 2,002 1,267 % 49.2% 53.3% 41.1% GAMING MACHINES
$000's 1986/87(introduced) 1989/90 1991/92 Revenue 1,630 10,274 16,227 Contribution 1,275 8,073 11,538 % 78.2% 78.6% 71.1%
Those trends, with minor variations, have continued, except that the return for regular gaming has stabilised as the following figures indicate.
$000's 1992/93 1993/94 Revenue 6,274 6,234 Contribution 856 827 % 13.6% 13.3%
Between 1984 and 1994, the gross revenue of the defendant increased from $13,743m to $32,602m, the contribution from $6,038m to $16,739m with a corresponding percentage alteration from 43.9% to 51.3%. The figures illustrate that significant changes were occurring to the operation and that those changes required structural modification. It is the defendant's case that termination of the plaintiff's employment was a necessary consequence of change, whilst the plaintiff maintains that he was a person well qualified to ensure those changes, that the stabilisation of the regular gaming figures required a high level of management responsibility, and that termination was a consequence of rivalry. Hurley, the original manager of the casino, left the operation to take up other positions within the parent corporation and elsewhere, returning as manager in January 1992. Prior to the announcement of his appointment, the plaintiff harboured some expectation that he might be considered for the position. Hurley claims that on his return he had commenced a general restructuring along an American model. The plaintiff contends that restructuring had commenced before Hurley's return, and that the only alteration was that he was confirmed as being primarily responsible for casino gaming, whilst Stewart remained in training, and Gratton became the electronic manager, retaining a salary differential of $1,500 per annum in comparison with the other two. The defendant does not concede the altered status, but an examination of the respective duties, rates of salary and lines of communication, shows such to be the case in practice. That was certainly the understanding of Stewart, an impressive witness with no cause for complaint against either the plaintiff or the defendant. The Court accepts that restructuring had commenced prior to the appointment of Hurley, but that his task as outlined by Greg Farrell, the managing director of the Federal Group, was to continue with, and, if necessary, modify the operation to meet the changing pattern of revenue. The process did not continue smoothly.
The Federal Group was interested in an operation on Christmas Island, and in December 1989, Stewart had been appointed to that position. Eventually the project did not proceed and instead he was seconded to the Victorian project, temporarily retaining his training responsibility and remaining involved in the Tasmanian operation. Hurley likewise became involved in the Victorian project and divided his time and responsibility between the two operations. It was during this time, irrespective of formal status, that the plaintiff assumed more and more responsibility for the operation of the gaming tables, whilst Gratton concentrated on electronic gaming. By mid-1990, Stewart, Gratton and the plaintiff were in receipt of comparable salaries of $81,300 and retained that rate through 1993. The plaintiff had some expectation that Hurley would eventually be appointed to a significant position in Victoria, leaving him with the possibility of advancement. Difficulties arose with the Victorian project, and the defendant, or its parent, decided to proceed in a different form. In October 1993, Hurley left the project team and returned to Tasmania. During a meeting with his managing staff, held at a time about which witnesses differ, but probably in June, Hurley announced that he would no longer be involved in the project because of its internal politics, and would end his career in Tasmania. He left the meeting in little doubt that he intended to stay and that any pretenders could shelve ambition. In a memorandum dated 15 June 1993, doubtless in anticipation of his return to full-time management, Hurley requested the plaintiff to provide a job specification for his current position. The plaintiff replied in a memorandum setting out a lengthy list of tasks performed and signed it as "Casino Shift Manager". There is no evidence that Hurley took any exception to either the list or the title. In evidence given on the trial, Hurley said that he did not agree with the memorandum but conceded that he took no steps to challenge it. It is difficult to accept that, had he believed the job description given by the plaintiff was incorrect, he would have taken no steps to rectify it. It is reasonable to accept that the plaintiff was performing the tasks in a satisfactory manner. Some time later, Hurley left the project team and returned to Tasmania. In September, following the announcement that ANH was to be involved in the Victorian consortium, the plaintiff wrote to Hurley and Cook (another corporate officer) indicating a preparedness to work on the Melbourne project provided that arrangements could be made which accommodated his family commitments in Tasmania and further that:
"Such a move would also need to be financially sound, therefore remuneration would have to be considerably in excess of my current salary at Wrest Point and would need to approach what is being paid for the positions of casino manager at WPC or LCC.
In considering a lower nominal figure, I would expect a very flexible package could be negotiated that would include accommodation, (short term) vehicle lease, travel concessions and expense account."
Nothing came of the proposal. In January 1994, the plaintiff transferred to the day shift management position. No discussion was had with him as to any further restructuring. In that month, Stewart resigned his position and moved to the Victorian project. Stewart recalls no restructuring to the management team before his transfer. On 4 February 1994 Hurley caused a memorandum to be circulated to senior management of the Hobart and Launceston operations concerning review of structure. The memorandum reads in part:
"My personal task was to review the Wrest Point Casino Management structure to ensure that it was both efficient and cost effective.
This was an appropriate time to be doing this due to staff losses to Crown Casino.
I will be talking to each of you over the next week to ten days confirming the outcome of this review."
If a significant reason for review was the loss of key staff to the Victorian project, the termination of the employment of a highly competent and loyal manager within eleven days does not fit comfortably with Hurley's assertion, given in evidence, that he did not regard the plaintiff as having the necessary attributes for a management position. One would expect retention of existing staff skilled in the operation of the company. On 15 February 1994, the contract of employment was terminated by the defendant through its manager Hurley. The plaintiff, doubtless with a foreboding, made a tape-recording of the meeting. A transcription (incomplete) was tendered on the trial. The decipherable portions do not make edifying reading. The opening statement is to the point:
"... (inaudible) ... to let you know, I have been doing a lot, Ahh ... beside all the other activities Greg and the company have given me, affairs in restructuring both the hotel and casino in different areas, and one of the parts of that was to restructure the management of the casino, aaannd (sic) ... I've done that now, and there's no easy way to say this to you Lou but in that restructuring you haven't got a position."
Some advice was provided:
"... you can think of two ways of, going from now on. From going down two different paths, your initial reaction, cause I know mine was at the time, will be that your (sic) angry and upset and you'll want to think about taking legal advice and God knows what else ..."
But the consequences of anything but a quiet departure were pointed out:
"Don't make any hasty decisions because ahh ... if you still want to stay in this industry, you know as well as I do the grapevine is fairly horrific, and ahh ... its (sic) in your interest, I think that you ... ahh ... do the right thing by the Company and go along with out situation where we would say that you'd resigned because you, whatever you don't ahh ... there's a lot of policy happening going on at Wrest Point and you don't necessarily with emm etcetera, etcetera, or whatever ... the point is I can help you, the company can help you ... ahmm ... annd (sic) ... you can help yourself. But if you go down the other path you could well put yourself out of this business for a long time. There's one or two cases I've seen in the past."
The plaintiff was given six months' salary in lieu of notice after twenty-one years' service to the company. He received the obligatory and perfunctionary reference. In evidence, Hurley claimed that the restructuring involved a reduction to two shift managers and required someone with greater proficiency in the area of industrial relations. He said that he did not believe the plaintiff to be the correct person for the position, nor that he possessed the attributes necessary to eventually replace Hurley. He further stated that, at the time, he believed that Stewart might remain. The latter is not credible, since everyone, including Stewart, was aware that Stewart would transfer. Following the departure of the plaintiff and Stewart, a reorganisation of sorts occurred. The organisation chart shows that a new training manager was appointed on a salary considerably less than that paid to Stewart. A former "pit boss" was appointed table gaming manager with "a salary some $15,000 per annum less than previously paid to the plaintiff." Gratton remained as electronic manager. Further organisational changes made between June 1994 and June 1995 did not affect the position of table gaming manager, except that the salary was increased by some $6,000. The number of pit bosses responsible for table gaming was reduced by one, whilst three new pit bosses were appointed for electronic gaming. Given that the gross return from table gaming remained reasonably constant, it is a reasonable inference that the restructuring involved the performance of the same tasks by the same manager, but at a lower salary. An indication of the policy of the company might lie in the exchange between the plaintiff and Hurley in the termination meeting of 15 February. In response to a query by the plaintiff as to why he was chosen for termination, Hurley replied:
"... it's not necessarily you in particular ahh ..., I would say Mike Gratton would almost certainly move into, out of this company, into the out, ahh casino, ahh outdoor, ahh ... door, or what ever they call it ... lots of changes, probably would have been Harry too. That's another reason why I couldn't act last year, anyway straight away. The company wasn't going to pay out money to someone who would probably get another job anyway."
Following the departure of the plaintiff, the defendant caused to be circulated and published nationally a job vacancy advertisement setting out qualifications for and requirements of the table gaming manager. It accorded with some, but not all, of the duties previously carried out by the plaintiff. On 22 June 1994, the plaintiff applied to the executive officer, Greg Farrell, for that position. The application was rejected. On 4 November 1994, a job vacancy bulletin was circulated, inviting applications for the position of "casino swing shift manager", an exhibit which belies the claim by Hurley, given in evidence on the trial, that he intended as of February 1994 to reduce the number of shift managers to two. The plaintiff applied for that position through his solicitors on 8 November. The defendant replied through its solicitors on 23 November in the following terms:
"We are instructed that the position of Swing Shift Manager is no longer available. It has been determined, following a recommendation from middle management, that the duties of the Swing Shift Manager will be undertaken by Pit Bosses. Therefore, our client is unable to comply with your client's request."
The evidence of Andrew Eakins, the group administrative manager, was that he had made enquiry of the human resources manager and was advised that the position was no longer available. He had no independent memory of any reason and his evidence was only of a general nature. His evidence did not establish that the position was withdrawn for reasons other than those associated with the plaintiff's application. It is reasonable to conclude that the withdrawal of the position was designed to enhance the defendant's position that the termination of the plaintiff's employment was a consequence of a structural need to reduce the number of shift managers from three to two. There was evidence that, in 1993, the plaintiff harboured an expectation that he would advance his career within the company and did not welcome Hurley's return, and failed to hide his disappointment. There is evidence that Hurley, himself a victim of corporate politics, did not wish the tensions caused by a pretender. There was evidence that the defendant was interested in overhead reduction. The congruence of those two pressures resulted in the termination of the plaintiff's employment. The subsequent structure of the company, its conduct in relation to the plaintiff, and the skills and loyalty of the plaintiff, warrant the conclusion that termination was not a result of management restructuring. Termination was made without proper commercial reason. The sum of salaries paid to management at the time of the plaintiff's termination amounted to $580,500, a sum which had risen to $620,500 within six months, albeit with a lesser sum payable to the "table gaming manager" who remained responsible for an operation which returned a relatively static return. The finding, in itself, does not resolve the issues of whether the termination was either harsh or unfair, or the notice unreasonable.
Implied Term
The original contract of employment contained no provision as to the terms of termination. The agreement was varied from time to time as the plaintiff advanced through the corporate structure, and the contract modified accordingly. The plaintiff contends that absent express agreement, there ought to be implied, by conduct or law, into the contract a term that any termination (without fault) be accompanied by reasonable notice and ought not be terminated harshly or unreasonably. The issue of term implied by law will be dealt with separately since it involves considerations of the Industrial Relations Act 1984 ("the Act"), s47. The pleadings also claim that the terms were express but the evidence does not permit certainty or definition which in any way addresses the circumstances of this case. The claim, based on the existence of an express term, is rejected.
Term Implied by Conduct
Two terms are claimed, the first relating to notice and the second relating to unreasonable termination. The relevant pleadings state:
"7It was an implied term of the agreement as varied from time to time that the Defendant be entitled to terminate same upon giving the Plaintiff reasonable notice or payment in lieu of notice.
PARTICULARS
(i) The term is implied by law.
(ii) The term is just and equitable.
(iii) The term does not contradict any express term of the contract.
(iv) The term would have been obvious to both parties.
(v) The term was necessary to give business efficacy to the agreement.
...
9Further, or in the alternative, it was an implied term of the agreement that the Plaintiff's employment would not be terminated harshly and/or unjustly and/or unreasonably.
PARTICULARS
(a)The term is just and equitable.
(b)The term does not contradict an express term of the contract.
(c)The term would have been obvious to the parties.
(d)The term was necessary to give business efficacy to the agreement.
(e)By the Defendant's Staff Policy Manual the Defendant represented that employment with the Defendant 'should not be terminated wrongly'. The said Manual had been in existence since approximately 1984 and was used by personnel in management at the Casino for the day to day operation of staff management. The Plaintiff was required to have and did have a thorough working knowledge of its contents. The Plaintiff was there by led to believe that the provisions of the Manual generally applied to persons in employment with the Defendant."
There can be little doubt that as the plaintiff advanced through the corporate hierarchy, the contract was determined more by performance, commitment and results. There was a mutuality of responsibility, undefined, but inherent to the contractual relationship. No job description of the defendant could define the qualities of judgment or prescience, yet they are qualities most valued by management. Performance can be assessed by objective standards but do not take into account timing or luck. A competent management may hold a company together during bad times, whilst the performance figures show loss. An incompetent one may show good return because of the timing of a change in consumer demand. It is impossible to reduce those qualities or characteristics into a precise contractual form. Conversely, it is impossible to define "good faith" or "adequate terms" where an employer seeks, without cause, to terminate employment for reasons of corporate harmony or other goals unrelated to the performance of an individual. Mutuality is essential whilst its precise translation into legal terms is complex and often impossible. In the case of the defendant, it attempted to achieve resolution of some of those indefinable terms by the completion of a "staff training manual" dated July 1991 (P1.1). There is some doubt as to whether it replaced an earlier document, although it does show amendments dated 1989, but it matters not since the Court is satisfied that it formed part of the contract of employment between the plaintiff and defendant as of 15 February 1994. The relevant portions of the document state:
"17 TERMINATION
Employment is a contract governed by legislation and industrial awards and agreements.
Common law has always insisted that employment should not be terminated wrongly eg without reasonable notice, except in the case of misconduct which warrants summary dismissal.
17.1Redundancy
When termination of employment occurs because of redundancy the award provides for severance pay, the amount of which is linked to the employees period of service.
...
17.4Payment on termination
The Personnel Department will be advised of the resignation or dismissal of the employee by the department head. The department will then prepare a staff termination form for the Pay Office. Termination pay will be calculated in accordance with the relevant award provisions."
The payment, in lieu of notice, afforded to the plaintiff was determined by an officer of the defendant and had not been a matter of discussion. The promotions of the plaintiff and the role assigned to him in the absence of Hurley, warrant the conclusion that the contract of employment was varied so as to contain terms objectively appropriate to the new relationship (Federated Mutual Insurance Company of Australia, Limited and Another v Sabine [1920] SALR 284, Meek v Port of London Authority [1918] 2 Ch D 96). In such a case, any term concerning notice ought be defined in accordance with the relationship of the parties as of the date of termination. Its existence and extent ought be implied by reference to the role and standing of the employee within the organisational structure (Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 557). The determination of the Court is that the agreement, cl 17, is a term from which it can be implied that the plaintiff was entitled to 'reasonable notice to be determined by agreement or otherwise in accordance with the status, length of service and contribution to the interests of the employer.'
The plaintiff was not afforded reasonable notice. The manner and form of termination of contract was deplorable and the arrogant assumption by the defendant that some unnamed, non-responsible officer within the corporate structure could best determine a payment in lieu of notice is contrary to the mutuality of the contractual relationship. The action by Hurley in stating the amount of payment in lieu of notice is itself an acknowledgment that the defendant was in breach of its own term and had itself quantified the amount of damages payable with respect to such breach. The cause of action is made out.
Term Implied by Law
The plaintiff made answer in interrogatories that the terms of his employment were not prescribed by any state or federal Act, or any award or agreement having effect under such legislation, and further, that his wages were paid monthly. The Act 1984, s46, makes provision for such circumstance and s47 further provides:
"(2) Subject to subsection (3), a term or period of service of employment to which this Division applies that is of indefinite duration is terminable by either party by —
(a) a week's notice, if the wages are payable weekly;
(b) a fortnight's notice, if the wages are payable fortnightly; or
(c) a month's notice in any other case."
Given that the plaintiff commenced employment in 1972, the defendant relies upon the provisions of earlier enactments of the Industrial Relations Act 1976 and the Master and Servant Act 1856, which contain comparable provisions. The plaintiff contends that the Act, s47, is not a term of the contract of employment and relies on the authority of Byrne v Australian Airlines Limited (1995) 69 ALJR 797, in support of the proposition that there is an implied term in the contract of employment that reasonable notice ought be provided before termination and that such is not affected by the Act, s47. The plaintiff's case is that the Act, s47, does not constitute a term of the contract of employment and that since the actual contract is silent, a term is implied by law that any termination ought be one affording reasonable notice. In Byrne, employees, who had been dismissed for acts of theft, sought relief claiming that their dismissal was harsh, unjust or unreasonable, relying on a breach of a clause of the Transport Workers (Airlines) Award 1988. The court declined to import the clause into the contract of employment or to convert statutory rights into such contract. In their joint judgment, Brennan CJ, Dawson and Toohey JJ recognised the distinction between an obligation created by statute and one arising from a contract. A statutory term may become a term of the contract by agreement between the parties (True v Amalgamated Collieries of W A Limited [1940] AC 537) and a person may not contract out of rights and obligations imposed by statute (Josephson v Walker (1914) 18 CLR 691). But the existence of a statutory provision does not become "crystallised custom" (Byrne at 801). To that extent, the authority of Byrne does not advance the plaintiff's case insofar as it depends on a term implied by law. However, the authority does not preclude the finding that a term can be implied by virtue of the conduct of the parties and that if such a term can be found it is not vitiated by the Act, s47. The parties may, by express agreement, provide for a period longer than that provided by statute, and if such a term can be implied by conduct, the same applies. If neither are present, then the Act provides the statutory right and precludes any other term from being implied by law. This approach is not inconsistent with that taken by Wright J in Hutt v The Cascade Brewery Company Limited A99/1991, although in that case the court was not required to consider the question of term arising by conduct.
The conclusion is that the Act, s47, precludes a finding that there ought be implied by law a term in the contract that reasonable notice ought be given which exceeded one month, or that the word "reasonable" ought be construed as a period exceeding one month. On either approach, the plaintiff ought not succeed on this ground. However, the Act, s47, does not preclude the existence of an implied term arising from conduct.
Implied Term and Unreasonable Termination
There is no doubt that the mutuality of contractual interest involved a term that neither party would act capriciously or actively to the detriment of the other. An example will suffice. In the event that the plaintiff had frequently and publicly denigrated the conduct of the operation of the defendant, such conduct, even if not defamatory, would provide cause for termination. Conversely, if the presence of an employee impacted on the harmony of a management team, then the employer ought be entitled to protect its own interests by replacing the cause of concern. A corporate body ought not be permitted to act capriciously or in unreasoned vengeance, nor ought it be required (absent industrial award) to maintain a contractual relationship which it perceives to be contrary to its long-term interest. In this case, the contract was one of indefinite duration, not permanency (Caulfield v Broken Hill City Council (1995) 60 IR 221). The findings of fact already made illustrate the tensions existing between the above propositions. The termination of the contract of employment was designed to remove a possible contender with the ensuing distraction within management, and the plaintiff's replacement with a more grateful subordinate, and had, as a secondary benefit, wage reduction. It was not as a consequence of a necessary restructuring of the management team. As such, from the perspective of the plaintiff, the dismissal was unreasonable and harsh. But it does not follow that the previous conduct of the parties warrants the conclusion that there existed an implied term that no dismissal ought be unreasonable or harsh. Mutuality did not involve an acceptance by the defendant that it would not terminate because of lack of cohesion within management. To find the existence of the term requires evidence that both parties, by words or conduct, agreed that all dismissals would be fair. The conduct of the defendant through Hurley was both unfair and shabby and if a term ought be imputed by law or conduct, the plaintiff ought succeed. But there is no evidence that the defendant agreed to abide by a concept of fairness in its shaping of management teams. It accepted a special responsibility in its training manual which related to notice, but not otherwise. The evidence of Farrell was that he required results and consultation before approving strategy, but left implementation to his chosen manager. The inference from this evidence is that if Hurley believed he could achieve better results with an altered management, then the company permitted such strategy. Farrell's evidence does not support the proposition that the defendant at any time accepted, as a term of the contract, obligations of fairness in its treatment of senior management. The Staff Policy Manual, cl 19, refers to employment as a contract governed by legislation, industrial awards and agreements, and "should not be terminated wrongly, eg without reasonable notice, except in the case of misconduct which warrants summary dismissal." The interpretation apposite to that term is that the company could dismiss without reason, provided that appropriate notice was given. The evidence does not establish that a term prohibiting summary dismissal exists by reason of agreement between the parties or arises by virtue of their conduct.
The plaintiff further contends that a term ought be implied by virtue of the modern law of contracts of employment. But Australian cases concerning such a term depended, before Byrne, on a provision existing in an award being imported into the contract. That such was necessary affords a strong basis for concluding that no such general term exists outside of agreement or statute. However, those cases still provide some assistance in the definition of what form of conduct can be regarded as harsh or unjust. In Gregory v Phillip Morris Ltd (1988) 80 ALR 455, the appellant was dismissed after being expelled from a trade union, membership of which was a condition of his employment. It was held that an award clause prohibiting dismissals which were harsh, unjust or unreasonable was incorporated into the contract of employment between the parties (per Wilcox and Ryan JJ at 469). Their Honours discussed, at 471, the circumstances which were relevant to the question of whether the appellant's dismissal had been harsh, unjust, or unreasonable, including the conduct of the appellant, his age and personal circumstances, likelihood of re-employment and other consequences of dismissal. Also relevant was the fact that the employer had failed to explore with the appellant alternatives to termination, such as suspension with pay. Gregory v Phillip Morris was followed in Wheeler v Phillip Morris Limited (1988) 32 IR 323, and in Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20. In Gorgevski it was found that an award clause forbidding "harsh unjust or unreasonable termination" formed part of the contract of employment between the appellant and respondent. In consequence, dismissal of the appellant for smoking was held to be harsh, unjust or unreasonable, despite the company's strict no-smoking policy. As to the meaning of the term "harsh, unjust or unreasonable", Sheppard and Heerey JJ stated at 28:
"These are ordinary non-technical words which are intended to apply to an infinite variety of situations where employment is terminated. We do not think any redefinition or paraphrase of the expression is desirable. We agree with the learned trial judge's view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual employee is clearly relevant but of course not conclusive. Other matters have to be considered such as the gravity of the employee's misconduct."
Although dependent upon a statutory provision (the Industrial Conciliation and Arbitration Act 1972 (SA)) the case of Wynn's Winegrowers Pty Ltd v Foster (1986) 16 IR 381, approved by von Doussa J in Fryar v System Services Pty Ltd (1996) 137 ALR 321 at 327, provides a useful statement of the terms harsh, unjust or unreasonable. The Full Commission of the South Australian Industrial Commission stated at 384:
"We entertain no doubt that, pursuant to s 31, even where there is a genuine need for redundancy, the dismissal may be properly characterised as harsh, unjust or unreasonable for many reasons. Without necessarily being exhaustive of those reasons it seems to us that, in a given case, the dismissal might fall within the statutory criteria because the employee should not have been the person selected for redundancy, or because the employee could perhaps have been offered a suitable alternative position in the company's employment, or because the method of dismissal adopted might conceivably be considered harsh, or unreasonable, or because the length of notice given might be totally inadequate, or because the redundancy payment was, in all the circumstances, totally inadequate."
The conclusion reached in these cases, other than Wynn (that the award clause becomes part of the contract of employment regardless of the intention of the parties), has since been overturned by the decision of the High Court in Byrne. However, in the light of those authorities, I am prepared to conclude that the dismissal was harsh and unjust. But given the import of Byrne, and the above authorities, the determination is that no term is to be implied by law.
Confidence and Trust
During the course of the trial, the plaintiff was afforded leave to amend his statement of claim so as to plead:
"11A Further, or in the alternative, the said dismissal was in breach of the agreement in that the Defendant by its servant or agent Mr Ronald Hurley, conducted itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between it.
PARTICULARS
The plaintiff refers to and repeats the Particulars subscribed to paragraph 11 above."
Paragraph 11 states:
"11 Further, or in the alternative, the said dismissal was in breach of the agreement in that it was harsh and/or unjust and/or unreasonable.
PARTICULARS
(a)The Defendant purported to terminate the Plaintiff's employment on the alleged basis of 'redundancy' and/or 'restructuring of management positions' without bona fide grounds for doing so.
(b)The Defendant failed to take into account the duration of the Plaintiff's employment with the Defendant, his work record and his service to the Defendant.
(c)The Defendant terminated the Plaintiff's employment for invalid reasons in that such reasons were not related to the Plaintiff's ability to perform the duties of his employment. Mr Hurley terminated the Plaintiff's employment for political reasons in that he had resolved to take steps to establish his position in the management hierarchy at the casino. He decided to remove the plaintiff thereby eliminating a possible challenger to his own position.
(d)The Defendant was improperly motivated in deciding to terminate the Plaintiff's employment and terminated the employment for reasons other than those given. Mr Hurley had purported to terminate the Plaintiff's employment on the basis that as part of management restructuring the Plaintiff's position had become redundant and that no position existed for the Plaintiff following that restructure. Such reasons were invalid and/or improperly motivated in that:
(i)The real reasons were as set ut in paragraph (c) hereof;
(ii)The purported redundancy was not calculated in accordance with prevailing industrial standards;
(iii)The management restructuring was not an exercise based on valid economic or budget-related reasons but was a relabelling and shuffling of positions for political reasons as aforesaid;
(iv)The Plaintiff's position had not been abolished but continued to exist under the new title of Table Gaming Manager which position involved the same responsibilities and shift duties as the Plaintiff's former position;
(v)The total number of casino floor management positions did not change following the restructuring. The assertion that Plaintiff was not an appropriate appointee for any such positions was incorrect in that the Plaintiff had and would have excelled in any such positions;
(vi)Mr Hurley was fully aware of all the matters as aforesaid."
The claimed cause of action is said to arise from the decision of the House of Lords in Mahmud and Another v Bank of Credit and Commerce International SA (In Compulsory Liquidation) [1998] AC 20. In that case, employees of an international bank were made redundant. The bank had operated its business dishonestly and corruptly. As Lord Nichols observed at 34:
"... this was not a case where one or two individuals, however senior, were behaving dishonestly. Matters had gone beyond this. They had reached the point where the bank itself could properly be identified with the dishonesty."
The employees claimed damages for breach of contract. In his speech, Lord Nichols found that there had been a breach and his analysis, stated at 34, was:
"Two points can be noted here. First, as a matter of legal analysis, the innocent employee's entitlement to leave at once must derive from the bank being in breach of a term of the contract of employment which the employee is entitled to treat as a repudiation by the bank of its contractual obligations. That is the source of his right to step away from the contract forthwith.
In other words, and this is the necessary corollary of the employee's right to leave at once, the bank was under an implied obligation to its employees not to conduct a dishonest or corrupt business. This implied obligation is no more than one particular aspect of the portmanteau, general obligation not to engage in conduct likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract implicitly envisages. Second, I do not accept the liquidators' submission that the conduct of which complaint is made must be targeted in some way at the employee or a group of employees. No doubt that will often be the position, perhaps usually so. But there is no reason in principle why this must always be so. The trust and confidence required in the employment relationship can be undermined by an employer, or indeed an employee, in many different ways. I can see no justification for the law giving the employee a remedy if the unjustified trust-destroying conduct occurs in some ways but refusing a remedy if it occurs in others. The conduct must, of course, impinge on the relationship in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer."
It is the wider point of a general obligation not to undermine trust and confidence upon which the plaintiff relies. In Mahmud (supra) the employees were affected by the opprobrium which had attached to the bank making future employment difficult. Lord Steyn likewise found there exists an implied term of mutual trust and confidence in a contract of employment. In his view, expressed at 45, the implied term:
"It imposes reciprocal duties on the employer and employee. Given that this case is concerned with alleged obligations of an employer I will concentrate on its effect on the position of employers. For convenience I will set out the term again. It is expressed to impose an obligation that the employer shall not:
'without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee:' see Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666, 670 (Browne-Wilkinson J), approved in Lewis v Motorworld Garages Ltd [1986] ICR 157 and Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589.'"
In holding that an employee was entitled to damages, both Law Lords considered the implications of an earlier decision of Addis v Gramaphone Company, Limited [1909] AC 488, a case said to have decided that any loss suffered by the adverse impact in an employee's chances of obtaining alternative employment is to be excluded from an assessment of damages for wrongful dismissal. The general import of the authority is said to be that:
"... an employee cannot recover damages for the manner in which the wrongful dismissal took place, for injured feelings or for any loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment." (At 38)
Lord Steyn, at 51, distinguished Addis in the following manner:
"I would accept, however, that Lord Loreburn LC and the other Law Lords in the majority apparently thought they were applying a special rule applicable to awards of damages for wrongful dismissal. It is, however, far from clear how far the ratio of Addis's case extends. It certainly enunciated the principle that an employee cannot recover exemplary or aggravated damages for wrongful dismissal. That is still sound law. The actual decision is only concerned with wrongful dismissal. It is therefore arguable that as a matter of precedent the ratio is so restricted. But it seems to me unrealistic not to acknowledge that Addis's case is authority for a wider principle. There is a common proposition in the speeches of the majority. That proposition is that damages for breach of contract may only be awarded for breach of contract, and not for loss caused by the manner of the breach. No Law Lord said that an employee may not recover financial loss for damage to his employment prospects caused by a breach of contract. And no Law Lord said that in breach of contract cases compensation for loss of reputation can never be awarded, or that it can only be awarded in cases falling in certain defined categories. Addis's case simply decided that the loss of reputation in that particular case could not be compensated because it was not caused by a breach of contract: Nelson Enonchong, 'Contract Damages for Injury to Reputation' (1996) 59 MLR 592, 593. So analysed Addis's case does not bar the claims put forward in the present case."
In doing so, he expressly overruled a decision of the Court of Appeal in Withers v General Theatre Corporation, Limited [1933] 2 KB 536.
There is some support for the proposition that the existence of an implied term of trust and confidence in contracts of employment has been accepted in Australia. In Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144, the appellant's employment had been terminated in circumstances giving rise to humiliation and distress. She pleaded an implied contractual term:
"... that the respondent would not without reasonable cause, conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee ..."
The Full Court of the Federal Court accepted that such an implied term existed. However, it did not find it necessary to decide whether breach of such a term could give rise to damages, as damages were awarded to the appellant under another head.
In New Zealand, the doctrine finds expression in the Employment Contracts Act 1991, s401(c)(i), which provides as remedies for a personal grievance:
"(c)The payment to the employee of compensation by the employee's employer, including compensation for —
(i) Humiliation, loss of dignity, and injury to the feelings of the employee ..."
In Brighouse Ltd v Bilderbeck [1995] 1 NZLR 158, the New Zealand Court of Appeal had to consider whether personal grievance procedure applied to cases of redundancy. Cooke P stated at 164:
"The results arrived at by the Employment Court in Hale, and by both that Court and the Employment Tribunal in the present case were an application of the principle that there is implied in a contract of employment a term that the employers will not, without reasonable and probable cause, conduct themselves in a manner calculated to destroy or seriously damage the relationship of trust and confidence between employer and employee."
He went on to state at 167:
"... it must be open to an employee to establish that a dismissal for redundancy has been carried out in an inconsiderate manner, inconsistent with and amounting to a repudiation of the relationship of confidence and trust; or that in the particular circumstances some special notice or payment in lieu thereof would be given by a reasonable employer."
For the purpose of this judgment, the existence of an implied term of trust and confidence in contracts of employment will be accepted as one recognised in Australia. But acceptance does not avail the plaintiff's case. There is no evidence that the manner of termination affected the employment prospects of the plaintiff. He remains employed within the industry, albeit at a lesser salary. But such is a result of availability rather than reputation. There is no evidence that the defendant engaged in conduct likely to undermine trust and confidence. As Lord Steyn concluded at 116, the remedy is circumscribed:
"Earlier, I drew attention to the fact that the implied mutual obligation of trust and confidence applies only where there is 'no reasonable and proper cause' for the employers conduct, and then only if the conduct is calculated to destroy or seriously damage the relationship of trust and confidence. That circumscribes the potential reach and scope of the implied obligation. Moreover, even if the employee can establish a breach of this obligation, it does not follow that he will be able to recover damages for injury to his employment prospects. The Law Commission has pointed out that loss of reputation is inherently difficult to prove: Consultation Paper No 132 on Aggravated, Exemplary and Restitutionary Damages, p22, para 2.15. It is, therefore, improbable that many employees would be able to prove 'stigma compensation'. The limiting principles of causation, remoteness and mitigation present formidable practical obstacles to such claims succeeding."
The plaintiff has not established any of the above pre-conditions and this cause of action must fail.
Damages for Breach of Implied Term of Reasonable Notice
The plaintiff was paid six months in lieu of notice. No explanation was provided to him or the Court as to how that period was calculated. Farrell said that Hurley had made no recommendation as to length and it appears that the calculation was made by some officer within the parent company. The plaintiff had been a good and loyal employee of the company for some twenty-one years. The assessment by Stewart as to the plaintiff's competence and dedication is preferred to that given by Hurley on the trial. The position held by the plaintiff was at the top of the managerial hierarchy. The industry is specialised and the defendant holds a monopoly within Tasmania. Hurley was aware that family commitments would make it difficult for the plaintiff to seek comparable employment out of Tasmania. The plaintiff eventually obtained employment with Crown Casino in Melbourne on 13 July 1995, at a salary significantly less than that previously paid. It is significant that Hurley claimed to the plaintiff and the Court that it had been within his power to help the plaintiff obtain suitable employment. He gave no convincing reason for not doing so. Farrell stated in evidence that the company had no individual contracts with executives, but it did provide remuneration packages made in accordance with corporate policy. It is likely that had the plaintiff not advanced "through the ranks" he might have been in receipt of such a package. Given his status, length and quality of service, and the reasons and manner of termination, mutuality of obligation warrants greater notice than that afforded by the defendant. The calculation made by the defendant does not accord with a period of two weeks for each year of service, the period stated by the plaintiff in his meeting with Hurley on 15 February. That calculation would permit a period in excess of ten months' notice. In the absence of a term precluding reasonable termination, the defendant was required in the case of a harsh and unreasonable dismissal to pay regard to the particular characteristics of the employee and the mutuality of obligation which existed between the parties. It had a monopoly of casino operations within Tasmania and knew of the familial constraints of the plaintiff. It did nothing to mitigate loss after termination by its refusal to consider the plaintiff for alternative employment. It acted in its own interests, or at least that of its manager, without regard to the position of a person with whom it was engaged in a contract of mutual interest. A provision of four weeks for each year of service and paid leave component is not an unreasonable provision. It is a figure far less generous than senior executives often award themselves. In the circumstances, a period of two years is not unreasonable. Such period overlaps with the commencement of employment in Victoria and the salary differential will be allowed. On that basis, the appropriate calculation is:
Salary for two years @ $81,300 per annum $162,600 Superannuation component @ 5% $8,130 TOTAL $170,730 LESS
Payment made
$40,650
Remuneration and superannuation
Crown Casino 13 July 1995 - 15 February 1996$32,307 TOTAL
$72,957
$97,773
However, counsel has addressed in general terms concerning the length of notice and requested that the quantification of damages be deferred until the determination as to liability has been made. Counsel will be afforded an opportunity to make further submissions on this issue.
Damages for Implied Term of Unreasonable Dismissal
In the event that the determination concerning unreasonable dismissal is incorrect, then damages referable to this cause of action would be assessed on a basis different to that referable to notice. As a consequence of his dismissal, the plaintiff was obliged to seek employment in Victoria, but because of family commitments, known to the defendant, continued to reside in Tasmania. He commuted every eleven days and incurred additional accommodation and transportation costs. He seeks to project his losses into a ten year period, but the Court is not satisfied that the evidence warrants such a basis of assessment. The statement of claim states that his financial loss amounts to:
Extra Rental $5,720 per annum
Airfares $5,954 per annum
Transport and Parking $4,446 per annum
TOTAL $16,120
which amounts to the sum of $310 per week.
However, during the course of the closing addresses, counsel suggested that any calculation of this head of damage be deferred until the question of liability has been determined. In the light of the determination, such a course might not be necessary, but counsel will be afforded the opportunity of making further submissions on this question.
Order
That judgment be entered for the plaintiff with damages to be assessed.
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