Hamilton v Elizabeth College Council Inc trading as Hollydene House
[1996] IRCA 226
•31 May 1996
DECISION NO: 226/96
C A T C H W O R D S
INDUSTRIAL LAW - Termination of Employment - operational requirements - student hostel ceased trading - employment agreement provided for termination of employment if lease of hostel terminated - employee knew hostel in financial difficulty - notice
Industrial Relations Act 1988 ss.170CC, 170DB, 170DE, 170EA
RORY WILLIAM HAMILTON -v- ELIZABETH COLLEGE COUNCIL INC trading as HOLLYDENE HOUSE
No. TI-1324 of 1995
Before: Judicial Registrar Ryan
Place: Melbourne
Date: 31 May 1996
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TI-1324 of 1995
B E T W E E N :
RORY WILLIAM HAMILTON
Applicant
AND
ELIZABETH COLLEGE COUNCIL INC
trading as HOLLYDENE HOUSE
Respondent
MINUTES OF ORDERS
Judicial Registrar Ryan 31 May 1996
THE COURT ORDERS:
That, subject to possible reduction for any amount already paid in lieu of notice, the Respondent pay the Applicant $2,184.00 compensation in lieu of notice.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TI-1324 of 1995
B E T W E E N :
RORY WILLIAM HAMILTON
Applicant
AND
ELIZABETH COLLEGE COUNCIL INC
trading as HOLLYDENE HOUSE
Respondent
Before: Judicial Registrar Ryan
Place: Melbourne
Date: 31 May 1996
REASONS FOR JUDGMENT
THE PRESENT CLAIM
The Applicant claims unlawful termination of employment. He was employed as the Assistant Manager of the student hostel, Hollydene House. The Respondent was responsible for the conduct of Hollydene House until it ceased trading on 1 December 1995.
THE ORIGINAL CLAIMS
On 4 December the Applicant and the Manager of Hollydene House, Ms Sharon Lee Howett, filed separate claims of unlawful termination of employment. The claims were not resolved by the Australian Industrial Relations Commission. Both the Applicant and Ms Howett were represented by Ms Anna Crotty and she and Counsel for the Respondent, Mr Jeffrey Bronstein, agreed that both applications should be heard together.
EMPLOYMENT AGREEMENTS
At the conclusion of the hearing Ms Crotty had tendered unexecuted, unsigned copies of what were said to be Employment Agreements with Ms Howett (Exhibit A11) and the Applicant (Exhibit A12).
The Court directed that executed copies of the Agreements be provided. The Applicant provided a copy of an Agreement made on 4 July 1995 and signed by him. The solicitors for the Respondent provided a copy of an Agreement made on 7 February 1995 and signed by Ms Howett.
NOTICE OF DISCONTINUATION
Recently, well after the conclusion of the hearing, a Notice of Discontinuance was filed on behalf of Ms Howett. Evidence given at the hearing by and on behalf of Ms Howett is no longer of moment except where that evidence impacts on and is relevant to the Applicant’s claim.
THE APPLICANT’S EMPLOYMENT AGREEMENT
The Applicant has now provided an agreement which is different in four respects from the unsigned agreement (Exhibit A12).
The agreement bears three initialled amendments and states that it is:
“made on the fourth day of July 1995 between Hollydene House (hereinafter called the employer) acting on behalf of Elizabeth College Council Inc (hereinafter called the Council), and Rory Hamilton of 55 Campbell Street, Hobart in Tasmania (hereinafter called the employee).”
There are 17 clauses described as “the terms of the agreement”. Clauses 1, 5, 7, 8, 11, 14, 15 and 16 read as follows:
The Employer agrees to employ the Employee and the Employee agrees to serve the Employer as Assistant Manager (Residential) of Hollydene House at 55 Campbell Street Hobart (hereinafter called the Student Residence) until the termination of this agreement as hereinafter provided.
The Employee shall reside in the residential flat provided on the premises and be available after hours in the event of an emergency or temporary absence of other Supervisory staff. These matters notwithstanding, the Employee has the right to go about normal after-hours social or recreational activity which may from time to time necessitate being absent from the premises when not on rostered duty
.
The Employee shall be paid an annual salary of twenty seven thousand dollars.
This agreement shall commence on the 4th day of July 1995 and continue for a period of thirty six months from that date.
The Employer shall provide the Employee with meals on those days in which the Employee is on duty. At other times, meals will be the responsibility of the Employee.
The Employer may terminate this agreement at any time by giving two week’s notice in writing if the Employee shall:
(a)Commit any serious or persistent breach of any of the provisions of this Agreement.
(b)Be guilty of any grave misconduct or wilful neglect in discharge of duties.
(c)Become of unsound mind: become convicted of any criminal offence, become permanently incapacitated, such that the reasonable performance of duties becomes permanently impeded.
On termination of this agreement, the Employee shall move out of the flat.
In the event that the lease of the premises held by the Council shall be terminated for any reason, this employment agreement becomes null and void.
The agreement is stated to be signed for and on behalf of Hollydene House and the employee and bears the signatures of the Applicant as employee and Ms Howett as Manager of Hollydene House.
There is nothing in Ms Howett’s draft employment agreement (Exhibit A11) or the agreement made on 7 February 1995 and signed by her and “on behalf of the Hollydene Hostel Board of Management” (by Robert J Tanner) which suggests that Ms Howett was authorised by “the Hostel Board of Management acting on behalf of the Elizabeth College Council Inc” to hire staff and enter Employment Agreements “on behalf of the Elizabeth College Council”. However, the Respondent concedes that the Applicant was employed by the Hostel Board on behalf of the Council and the Court need not concern itself with whether the Applicant’s Employment Agreement was executed strictly in accordance with the articles and/or rules of the Council as an incorporated association.
It is not necessary to quote the other nine clauses of the Applicant’s Employment Agreement. The Court simply notes that duties are listed, references are made to documents headed, “Student Handbook” and “Parent Handbook”, provision is made for accommodation of the lawful spouse of the employee and for meals for the spouse in certain circumstances. There are also clauses dealing with the consumption of power and private telephone calls and an arbitration clause.
PRELIMINARY ISSUE
Mr Bronstein initially raised the possibility that both Employment Agreements were contracts of employment excluded from the operation of Subdivisions B, C, D and E of Division 3 of Part VIA of the Industrial Relations Act 1988. There is no substance in this submission. Both contracts were entered after 16 November 1994 and for periods in excess of six months.
OPERATIONAL REQUIREMENTS
The Court is satisfied that the Applicant’s employment was terminated for the valid reason of operational requirements. It is not necessary to go into the detailed documentary evidence tendered in support of that proposition. It is abundantly clear that on 30 November 1995 a meeting of the directors or members of the Elizabeth College Council resolved that Hollydene House should cease trading as a hostel. That decision was put into effect on 1 December.
As at 1 December the hostel trading account was in debt in the sum of $58,754.58. The only predicted income in the December 1995/January 1996 period was highly speculative and quite uncertain and represented uncommitted, unconfirmed and perhaps unlikely accommodation revenue alleged to be potentially available from backpackers.
The Council had no assets against which a loan might have been secured. Even if there were such assets, there is no evidence that a loan would have put the hostel in a position in which would have been practicable to attempt to trade out of an untenable financial position. In any event, it was entirely a matter for the Council to determine how it was to best address a substantial and worsening trading deficit.
Evidence given by Ms Howett and by several other witnesses called by Ms Crotty, probably at the instigation of Ms Howett, suggested that an unsecured loan was available from at least two bank sources. This evidence suggests an extraordinary, inherently unlikely and frankly unbelievable position allegedly taken by bank officers who, it was claimed, were prepared to consider an unsecured loan to the hostel. The evidence of such supposed negotiations was never put to the Respondent’s witnesses. There was no documentary evidence of loan applications provided or entered, no letters of confirmation or intent and no supporting evidence from bank sources.
On any balance of objective possibilities, the evidence of a possible unsecured loan is rejected and, like the proposition of a secured loan, is irrelevant.
Once the Council decided on 30 November to take what appears to have been a responsible course and cease trading, Clause 9(b) of the Lease Agreement between the Minister for Education and the Council was activated. The result was that the Lease Agreement for the use of Hollydene House for the purposes of a student hostel absolutely ceased and determined on 1 December. Clause 9(b) reads:
“This Agreement shall absolutely cease and determine if the Lessee ceases to use the Premises for the purpose referred to in clause 4(m) hereof”
Clause 4(m) of the lease reads as follows:
“To use the Premises for the purposes of a student hostel and all purposes reasonably ancillary thereto in accordance with Commonwealth and State Government licences in respect thereof or for such other purposes as the Minister may approve of in writing”
The determination of the lease also activated Clause 16 of the Employment Agreement between the Applicant as employee and the Respondent as employer. Clause 16 reads as follows:
“16.In the event that the lease of the premises held by the Council shall be terminated for any reason, this employment agreement becomes null and void.”
FAIRNESS
The Applicant, through Counsel, submitted that, if the termination of his employment by the Respondent was held to be for a valid reason based on the operational requirements of the Respondent’s undertaking, establishment or service, the termination was nonetheless invalid because, having regard to all the circumstances of the case, including the Respondent’s operational requirements, the termination was harsh, unjust and unreasonable.
The Court found the Applicant an open, direct and truthful witness. The Court also found the witnesses called by the Respondent (Messrs Milton and Wilson) were witnesses of truth. The Court was less impressed with the evidence of the other witnesses (Adams, Briscoe and Howett). There evidence was often vague and imprecise and a number of allegations were made which were never put to the Respondent witnesses. Wherever there was a conflict in the relevant evidence of the Applicant, Milton and Wilson on the one hand and that of Adams, Briscoe and Howett on the other, the evidence of the Applicant and Messrs Milton and Wilson is preferred.
There is no real inconsistency or major conflict between the evidence of the Applicant and Messrs Milton and Wilson.
The Applicant was not consulted before the Council meeting of 30 November when the decision to cease trading at Hollydene House was made. The Applicant was not consulted before he was advised of his termination on 1 December.
However, the Applicant openly conceded in evidence in chief that he read Clause 16 before he signed the Employment Agreement. He stated that he endeavoured to ascertain whether the business was likely to cease operating and whether Clause 16 might be used and that advice from Ms Howett and Mr Wilson was to the effect that “this was not going to occur”. The Court assumes that the Applicant is claiming that both Ms Howett and Mr Wilson in effect advised him that the business would not cease trading and that therefore the lease would not terminate.
Firstly, this claim by the Applicant was never put to Mr Wilson, or for that matter, in any direct form, to Ms Howett. In the circumstances, the Court puts no real weight on that claim.
Secondly, even assuming that the Applicant received advice from either or both Ms Howett and Mr Wilson to the effect that there was no real likelihood of a termination of employment under Clause 16, the fact remains that he read the Clause. He understood it and he states he made inquiries about it. He also entered into the Employment Agreement knowing and understanding the effect of Clause 16.
Again, the Applicant was refreshingly open and frank in his evidence which included statements to the following effect:
“I knew the likelihood of closure...I was counselling (students) and it was quite obvious that there were diminishing resources...I continued counselling (the students) for at least a month because they were accustomed to a level of service....towards the end there were obvious difficulties in maintaining the level of service....I was present 24 hours a day while Sharon (Ms Howett) was on holidays...I had to be honest with the students. We all knew what was happening but not how or when it would finish up...I told them (the students) that this place could shut down in a week’s time...I was communicating what was happening.”
In this case, given the Applicant’s knowledge of the deteriorating situation, and his open concessions of recognition of the reality of what was happening, which was a reality which Messrs Adams and Briscoe and Ms Howett seemed unwilling to recognise or accept, and given the Applicant’s acknowledgment of the existence and meaning of Clause 16 of his Employment Agreement, the termination, in all the circumstances in which it occurred, was not harsh, unjust or unreasonable in terms of S170DE(2).
REASONABLE NOTICE
Having said that, I am not aware of the Applicant being given any notice or payment in lieu of notice. The terms of the Lease and of Clause 16 of the Employment Agreement do not override S170DB which places the Respondent under an obligation to provide a period of notice of at least one week. Furthermore, the Employment Agreement was silent on notice except that Clause 14 provides:
The Employer may terminate this agreement at any time by giving two week’s notice in writing if the Employee shall:
(a)Commit any serious or persistent breach of any of the provisions of this Agreement.
(b)Be guilty of any grave misconduct or wilful neglect in discharge of duties.
(c)Become of unsound mind: become convicted of any criminal offence, become permanently incapacitated, such that the reasonable performance of duties becomes permanently impeded.
The Applicant’s conduct and performance were the subject of no complaint. He did nothing which would allow termination with two week’s written notice pursuant to Clause 14. In my view, reasonable notice in the circumstances would be four weeks. It is not clear to me (determining the matter in Melbourne without access to the file in Hobart) whether the Applicant was paid any sum at all in lieu of notice.
I propose to order that the Applicant be paid a sum equivalent to four weeks salary as at 1 December 1995 with interest at an annual rate of 10% for the six months from 1 December 1995 to 31 May 1996 and that that amount be discounted by the payment (if any) already made in lieu of notice.
Subject to possible reduction for any amount already paid in lieu of notice, I order the Respondent to pay the Applicant $2,184 compensation in lieu of notice.
The sum is calculated as follows:
4 weeks salary at $27,000 pa is $2,076.92 say $2,080
Interest at 10% for 6 months is $104.00 - total $2,184.00.
MINUTES OF ORDERS
THE COURT ORDERS:
That, subject to possible reduction for any amount already paid in lieu of notice the Respondent pay the Applicant $2,184.00 compensation in lieu of notice.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding 7 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.
Associate:
Dated: 31 May 1996
Solicitors for the Applicant: Anna Crotty
Counsel for the Applicant: Ms Anna Crotty
Solicitors for the Respondent: Finlay Watchorn
Counsel for the Respondent: Mr Jeffrey Bronstein
Date of hearing: (Hobart) 12 and 15 March 1996
Date of judgment: (Melbourne) 31 May 1996
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