Hand v District Council of Barunga West
[2013] SASC 182
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
HAND v DISTRICT COUNCIL OF BARUNGA WEST
[2013] SASC 182
Judgment of The Honourable Justice David
20 November 2013
EMPLOYMENT LAW - EFFECT OF INDUSTRIAL AWARDS, AGREEMENTS OR LEGISLATION ON EMPLOYMENT CONTRACT - PARTICULAR CASES
EMPLOYMENT LAW - CONTRACT OF SERVICE - TERMS OF CONTRACT - IMPLIED TERMS
EMPLOYMENT LAW - DURATION OF EMPLOYMENT - TERMINABLE ON REASONABLE NOTICE
EMPLOYMENT LAW - TERMINATION AND BREACH OF CONTRACT - NOTICE - ADEQUACY, REASONABLENESS ETC
Mr Hand was employed by the District Council of Barunga West as its CEO from about 1997 pursuant to a verbal contract of indeterminate duration. In mid 2012 Mr Hand announced that the relationship between he and the Mayor had broken down, and that he was proposing to retire at the end of 2013 or 2014. The Council and Mr Hand entered negotiations as to the terms on which he would leave the Council. On 13 November 2012 the Council terminated Mr Hand’s employment, providing him with 9 months’ notice.
Mr Hand claims his termination, and the notice he received, was void for non-compliance with s 97 of the Local Government Act 1999 (SA). Mr Hand seeks reinstatement as the Council’s CEO. Alternatively, he seeks damages. The Council contends that Mr Hand’s employment was terminated in accordance with an award or implied contractual term, and that the termination complies with s 97.
HELD:
(1) Mr Hand's employment was not covered by an award.
(2) An implied term of Mr Hand’s contract of employment was that it was terminable on reasonable notice.
(3) Where a Council CEO's employment contract is terminated pursuant to an implied term, termination will comply with s 97(1)(b) of the Local Government Act 1999 (SA).
(4) The Council was not entitled to summarily dismiss Mr Hand.
(5) The notice period provided to Mr Hand was not reasonable. Mr Hand is entitled to damages for the shortfall of notice, being $27,884.
Local Government Act 1999 (SA) s 3, s 97, s 98, s 99, s 103, s 107, s 110, s 302A; Fair Work Act 2009 (Cth) Part 3-2, s 117, s 382, s 385, s 392, s 545; Fair Work Act 1994 (SA) Part 6, s 90, s 91, s 105A, s 108, s 109, Schedule 8 cl 1; Public Sector Act 2009 (SA) s 25, s 35, s 38, s 48, s 54; Fair Work (Commonwealth Powers) Act 2009 (SA) s 6; Acts Interpretation Act 1915 (SA) s 22; Public Sector Management Act 1995 (SA) s 12; Local Government Act 1934 (SA) s 70, s 71, referred to.
Sydney City Council v Reed (1994) 34 NSWLR 506; Thorpe v South Australian National Football League (1974) 19 SASR 17; Byrne v Australian Airlines Limited (1995) 185 CLR 410; Richardson v Koefod [1969] 3 All ER 1264; Attorney General for South Australia v Bell [2013] SASCFC 88; Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; North v Television Corp Ltd (1976) 11 ALR 599; Gantry Acquisition Corp v Parker & Parsley Petroleum Australia (1994) 123 ALR 29; Melbourne Corp v Barry (1922) 31 CLR 174; Commonwealth v Baume (1905) 2 CLR 405, considered.
HAND v DISTRICT COUNCIL OF BARUNGA WEST
[2013] SASC 182Civil
DAVID J: The plaintiff, Nigel Hand, was employed by the defendant, the District Council of Barunga West, as its Chief Executive Officer (‘CEO’).
In November 2012, the plaintiff received notice that his employment would be terminated on 31 August 2013.
Section 97 of the Local Government Act 1999 (SA) provides:
97—Vacancy in office
(1)A chief executive officer's appointment may be terminated by the council—
(a) on the ground that the chief executive officer—
(i)has been guilty of misconduct; or
(ii)has been convicted of an indictable offence punishable by imprisonment; or
(iii)has become bankrupt or has applied to take the benefit of a law for the relief of insolvent debtors; or
(iv)has, for any other reason, failed to carry out duties of the office satisfactorily or to any performance standards specified by the council or in any contract relating to his or her appointment; or
(v) has breached in any other manner any contract relating to his or her appointment; or
(b) on a ground or in circumstances specified in any contract relating to his or her appointment.
(2) A chief executive officer's appointment is terminated if the chief executive officer—
(a) resigns by notice in writing to the principal member of the council; or
(b) completes a term of office and is not reappointed; or
(c) is sentenced to imprisonment for an offence.
(3) Neither subsection (1)(a)(ii) nor subsection (2)(c) applies until the period for appealing against the conviction has expired or, if there is an appeal, until the appeal is determined.
The plaintiff sues the defendant, seeking a declaration that the notice of termination is void as a breach of s 97. The plaintiff contends that his conduct did not amount to a ground of dismissal under s 97, and that the provision exhaustively states the grounds on which a council CEO may be terminated. The plaintiff seeks an order that he be reinstated as CEO or, as an alternative, damages for breach of s 97.
In the alternative, the plaintiff submits that if the notice of termination is not void, the notice period given to him was not reasonable and, as such, the defendant has breached the employment contract, giving rise to damages.
The defendant submits that an award applies to the plaintiff, pursuant to which the defendant may terminate the plaintiff on notice. The defendant contends that s 97 does not exhaustively state the grounds on which a council CEO may be terminated. A CEO may be terminated, on the defendant’s submission, pursuant to a contractual term or a clause in an award, and this will not be a breach of s 97. The defendant further submits that a breach of s 97 does not give rise to a private cause of action sounding in damages.
Finally, the defendant submits that the conduct of the plaintiff was such that the grounds in s 97 were satisfied.
The principal issues in the trial are as follows (with my conclusions in brackets):
1Is the plaintiff governed by an award? (No)
2Does s 97 exhaustively state the grounds on which a council CEO may be terminated? (Not necessary to decide – see 3)
3Has the defendant breached s 97? (No – there is an implied term in the plaintiff’s employment contract permitting termination on notice. The plaintiff’s termination on notice complies with s 97(1)(b))
4If the defendant has breached s 97, what, if any, remedy should the plaintiff receive? (Not necessary to decide)
5If the defendant has not breached s 97, what notice should have been given to the plaintiff? (reasonable notice – in this case, being 12 months’ notice)
6If the notice given was not sufficient, what remedy should the plaintiff receive (Damages for the shortfall in notice)
The evidence
The evidence at trial was largely uncontested. Evidence in chief was given by affidavit. The plaintiff gave evidence. Mr Ward, the acting CEO of the defendant, was called by the defendant. The defendant also called the Mayor and the Deputy Mayor, Mr Rooney.
Background
The plaintiff was 59 years of age when he gave evidence. He lives in Port Broughton, in the mid north of South Australia. Since birth he has been deaf in his left ear and has between 30 per cent and 35 per cent hearing in his right ear.
In December 1973, the plaintiff started working at the Corporation of Prospect. In January 1975, he moved to the District Council of Morgan. In October 1978, he began work with the District Council of Port Broughton. In May 1997, that Council was amalgamated with another, becoming the defendant. After the amalgamation, the plaintiff was appointed as CEO of the defendant, with the title of District Manager. On 10 November 2009 his title was changed to CEO. At no time since his appointment has the plaintiff had a written contract of employment.
From about mid 2010 the plaintiff found it increasingly difficult to work with the Mayor of the Council. The plaintiff was concerned about the Mayor’s involvement in a development application involving a company of which the Mayor’s sister is a director. The Mayor has declared the conflict of interest. In a council meeting, the Mayor moved that an elected member should accompany the plaintiff to meetings concerning the development application. That motion was carried at a later meeting. The motion disappointed the plaintiff, who believes the motion was moved because the Mayor did not trust the plaintiff’s ability to hear what was going on at the development application meetings. The Mayor’s evidence was that the plaintiff would always be accompanied by a councillor to the meetings and that this was not a matter of the plaintiff’s ability to hear.
The plaintiff was also concerned with the Mayor’s references to the plaintiff’s hearing impairment. The plaintiff found these condescending and offensive. In evidence the plaintiff accepted that the Mayor had only twice made reference to his hearing, once being in a vehicle and on another occasion in the plaintiff’s office. The Mayor’s evidence was consistent with this.
The plaintiff said that he had “issues” with the Mayor trying to tell council staff how to do their job. The plaintiff did not believe this was the Mayor’s role.
In cross-examination the plaintiff was asked about his relationship with the Mayor. He accepted that, as CEO, he was required to meet with the Mayor on what was often a daily basis. He accepted that, in a managers’ meeting in early 2012, he had interrupted the Mayor, and said words to the effect of “You are an observer” and “You’re welcome at this meeting but you’re here to listen.”[1] There were three managers at the meeting together with the plaintiff and his personal assistant.
[1] T26.
Mr Ward, the Deputy CEO of the defendant, worked for the defendant between 2003 and 2006, and again from 2011 onwards. During Mr Ward’s first period of employment, he was aware that the plaintiff would get frustrated with the Mayor’s involvement in operational matters. When Mr Ward resumed employment with the defendant in 2011, he observed that the relationship between the plaintiff and the Mayor had deteriorated further, the plaintiff having lost patience with the Mayor.
Mr Ward said that, towards the end of 2011, during a managers’ meeting with himself, the plaintiff, a works manager and the Mayor, there was a discussion of a particular piece of road by the works manager, and the Mayor gave his view as to what should be done. The plaintiff cut the Mayor off, and said words to the effect that the Mayor was an observer in the meeting and could not talk. The Mayor’s evidence was consistent with that of Mr Ward. Although it is not clear, it appears that this was the same occasion mentioned by the plaintiff.
The Mayor said that if a ratepayer had an issue with the council office, he or she would contact the Mayor who would effectively act as a mediator between the council office and the ratepayer. At one stage ratepayers had concerns regarding a particular planner, and the Mayor approached the plaintiff regarding the possible resolution of the concerns. The plaintiff told the Mayor that the Mayor wasn’t supporting council employees.
The Mayor’s evidence was that in early 2012 he was told in a council meeting of an asbestos problem at a council demolition site. The next day the Mayor happened to be driving past the site. He inspected the site, and found it was not secure. He rang the council works supervisor and informed him of the concern. The plaintiff found this frustrating, and told the Mayor that he was interfering. The Mayor denies interfering in the role of the plaintiff.
The Mayor accepted that the plaintiff has never received any warnings for misconduct or poor performance.
The Deputy Mayor, Mr Rooney, said that at one stage he suggested to the plaintiff that a photograph of the Mayor should be put on a wall in the council building, as was custom. The plaintiff responded that he would “rather die” than put a photo of the Mayor on the wall. The plaintiff denied saying this.
The purported dismissal of the plaintiff
At a council meeting on 29 June 2012, the plaintiff proposed that due to a breakdown in the relationship between himself and the Mayor, he retire as CEO. His proposal was that he would take annual and long service leave from December 2012 to June 2013, return to work in July 2013, and work until retirement in November/December 2014. The plaintiff also put an alternate proposal, by which he would take his accrued leave from 1 December 2012 to the end of 2013, and then retire.
At a meeting of the defendant on 4 July 2012, the defendant resolved to offer the plaintiff a voluntary redundancy package of six months’ salary inclusive of superannuation. The offer was contingent upon the plaintiff agreeing to end his employment by 31 July 2012. On 5 July 2012 the offer was communicated to the plaintiff on behalf of the defendant by Mr Wallace, an Industrial Relations Advisor employed at the Local Government Association.
On 6 July 2012, the plaintiff rejected the defendant’s offer and stated that he would continue as CEO until November/December 2014.
On 18 July 2012, the defendant resolved to give the plaintiff 60 days’ notice to commence 39 weeks of long service leave on 16 September 2012. The defendant again offered the plaintiff a six month voluntary redundancy package with an effective termination date of 1 December 2012. If the defendant accepted that package, the direction to take long service leave would be withdrawn. The direction and offer were communicated to the plaintiff by Mr Wallace. At about this time the plaintiff instructed a solicitor.
On 6 August 2012, the plaintiff informed the defendant that he did not accept the defendant’s offer of voluntary redundancy. He requested that, prior to the defendant making any decision in relation to his situation, he be given an opportunity to address the members of the defendant in person.
On 17 August 2012, the defendant informed the plaintiff that, given the plaintiff’s response of 6 August 2012, any further discussion of voluntary redundancy was moot.
On 16 September 2012, the plaintiff commenced 39 weeks of long service leave as directed by the defendant.
On 13 November 2012, the defendant resolved to provide the plaintiff with notice of termination. Termination was to take effect on 31 August 2013.
On 14 November 2012, the plaintiff was given notice of termination as per the resolution of the previous day. The plaintiff was informed that the reasons for his termination would be discussed on his return from leave.
On 5 December 2012 and again on 21 December 2012, the plaintiff’s solicitor wrote to Mr Wallace requesting a copy of the minutes of the meeting on 13 November 2012 and written reasons for the plaintiff’s termination.
On 28 December 2012, Mr Wallace wrote to the plaintiff informing him that the defendant had terminated his employment due to the breakdown in the relationship between he and the Mayor.
The plaintiff’s leave
Having given the plaintiff notice of termination, the defendant commenced an investigation into the plaintiff’s leave entitlements and working hours.
In cross-examination the plaintiff accepted that in mid 2012 he was under the impression he had only ever taken two weeks’ long service leave in over 39 years of service. The plaintiff said this impression was based on his pay slip records. In a letter dated 6 July 2012, Mr Wallace noted that the plaintiff “has apparently never taken” long service leave.[2]
[2] P1 exhibit NAH5.
The plaintiff had an agreement with the defendant whereby he could take long service leave as cash if agreed to in writing. The plaintiff recalled that he took 76 hours long service leave as cash between 1999 and 2000. The plaintiff was taken to leave records held by the defendant. He could not explain why the records showed 152 hours to have been taken in the 1999/2000 financial year. He said that a notation to this effect in a council meeting minute in September 1999 was incorrect.
The plaintiff was shown additional payroll records which indicated that he had cashed 76 hours of long service leave in August 1999 and 152 hours in November 1999. He accepted that he was mistaken in his initial impression that he had only taken two weeks’ long service leave. He denied that he had deliberately misled the defendant. The plaintiff accepted that in May 2004 he took 76 hours of leave as cash, in October 2005 he took 76 hours of leave as cash, and in September 2007 he took another 38 hours of leave as cash.
The defendant’s policy of allowing long service leave to be taken as cash was passed at an August 1999 meeting. At a September 1999 meeting, the plaintiff was given approval to take 76 hours of long service leave as cash. This appears to be approval for the leave taken as cash in August 1999. As such, by the time of approval the leave had already been cashed. The plaintiff said that whenever he took long service leave as cash he would have had the approval of the defendant to do so. In July 1999 the plaintiff had prepared a report for the defendant on long service leave, noting that at least one employee had cashed out leave without the defendant’s approval. The plaintiff accepted that in July/August 1999 the question of the necessity to record leave was fresh in his mind. The plaintiff accepted that there was no approval for the 152 hours of leave taken in November 1999. There are no records of approval for the leave taken after 2000.
The plaintiff accepted that council policies regarding the recording of leave had not been followed. He added that the defendant employs a finance manager and a payroll officer who are responsible for maintaining computer systems and documentation.
Mr Ward conducted an audit of the plaintiff’s leave records. It is not clear what date was used in this audit as the start date of the plaintiff’s employment. In any case, Mr Ward’s audit was not based on complete records.
The plaintiff said that in 2011 he booked a holiday on a cruise ship. Prior to departure he went to his doctor to get medication for stress-related asthma. The doctor gave the plaintiff a doctor’s certificate enabling him to take two weeks’ sick leave. The doctor told the plaintiff that the cruise would be good for his condition. In February 2012 the plaintiff took sick leave and went on the cruise. It appears that the cruise was for only one week of the plaintiff’s two weeks of sick leave.
The plaintiff accepted that on some occasions he would take a lunch break in excess of the half hour which he would always record in his timesheets. The plaintiff added that he would often work overtime which, for the most part, he was not paid for. Mr Ward agreed that employees of the defendant would often work overtime, which is unpaid.
The plaintiff denied an allegation that although he was paid to work on Fridays, he often would not do so. The plaintiff said he was often at meetings on Fridays. Mr Ward gave evidence that the plaintiff would attend meetings on two Fridays per quarter.
Termination of the plaintiff after trial
On 31 August 2013, after this trial had concluded, the plaintiff was terminated by the defendant as per the notice given on 14 November 2012.
Dismissal statutes
The dispute in this case has centred on the correct interpretation of s 97 of the Local Government Act 1999 (SA). Section 97 is far from the only provision on the statute books dealing with the dismissal of employees. While this is not a case of unfair dismissal or similar statutory causes of action, it is necessary to consider the statutory context to the Local Government Act 1999 (SA).
The primary statutory route for pursuing a claim that a dismissal was wrongful is the unfair dismissal regime set out in Part 3-2 of the Fair Work Act 2009 (Cth). Under this scheme, an employee must fit a number of eligibility criteria. One of these is that the person is covered by a modern award, an enterprise agreement applies to them, or their earnings fall below a high income threshold prescribed by regulation.[3] For a finding of unfair dismissal to be made, the Fair Work Commission must be satisfied that the dismissal was “harsh, unjust or unreasonable.”[4] Where this is established, remedies of reinstatement or compensation may be ordered. Compensation is capped at the lesser of 26 weeks’ wages or half the high income threshold.[5] There are also provisions which prohibit an employer from taking adverse action against an employee who engages in certain specified conduct, for example, seeking to invoke his or her rights under the Act. “Adverse action” includes dismissal, such that the provisions[6] could be said to prohibit dismissal on those grounds. Contravening those provisions primarily attracts civil penalties, although an employee may also be compensated for loss arising from the contravention.[7]
[3] Fair Work Act 2009 (Cth) s 382(b).
[4] Fair Work Act 2009 (Cth) s 385.
[5] Fair Work Act 2009 (Cth) s 392.
[6] Which are found in Part 3-1 of the Fair Work Act 2009 (Cth).
[7] Fair Work Act 2009 (Cth) s 545(2)(b).
In 2009, South Australia referred constitutional powers to the Commonwealth so as to facilitate the enactment of the Fair Work Act 2009 (Cth). The State did not refer matters relating to the public sector[8] or local government.[9] As a result, most[10] of the protections in the Fair Work Act 2009 (Cth), including the unfair dismissal regime, do not apply to the public sector or local government employees.[11] For the most part, both public sector employment and local government employment are regulated by the Fair Work Act 1994 (SA).
[8] Fair Work (Commonwealth Powers) Act 2009 (SA), s 6(b).
[9] Fair Work (Commonwealth Powers) Act 2009 (SA), 6(h).
[10] See, for example Fair Work Act 2009 (Cth) s 117, which applies to public sector and local government employees.
[11] By s 380 of the Fair Work Act 2009 (Cth), for the purposes of Part 3-2, “employer” means “national system employer”. By s 302A of the Local Government Act 1999 (SA), a council is not a “national system employer.”
The Fair Work Act 1994 (SA) contains no provisions prohibiting the dismissal of employees on particular grounds. Part 6 of the Fair Work Act 1994 (SA) creates an unfair dismissal cause of action. Like the federal scheme, eligibility criteria apply. For example, the scheme will not apply to a person who is both not covered by an award and whose remuneration before dismissal was above $100,322 (indexed) per annum.[12] As with the federal scheme, a dismissal under the South Australian Act will be unfair if it is harsh, unjust or unreasonable.[13] In determining whether a dismissal is harsh, unjust or unreasonable, the Industrial Relations Commission will have regard to the rules and procedures for dismissal outlined in Schedule 8 of the Act.[14] Clause 1 of the Schedule provides:[15]
[12] Fair Work Act 1994 (SA) s 105A(1)(a).
[13] Fair Work Act 1994 (SA) s 108(1).
[14] Fair Work Act 1994 (SA) s 108(2)(b).
[15] Note that s 117 of the Fair Work Act 2009 (Cth), which applies to local government employees, is in broadly similar terms.
1—Employee to be given notice of termination
(1)An employer must not terminate an employee's employment unless—
(a) the employee has been given either the period of notice required by subsection (2) or compensation instead of notice; or
(b) the employee is guilty of serious misconduct, that is, misconduct of a kind that makes it unreasonable to require the employer to continue the employment during the notice period.
(2) The required period of notice is worked out as follows—
(a) if the employee's period of continuous service with the employer is not more than 1 year—the period of notice is at least 1 week; and
(b) if the employee's period of continuous service with the employer is more than 1 year but not more than 3 years—the period of notice is at least 2 weeks; and
(c) if the employee's period of continuous service with the employer is more than 3 years but not more than 5 years—the period of notice is at least 3 weeks; and
(d) if the employee's period of continuous service with the employer is more than 5 years—the period of notice is at least 4 weeks,
but if the employee is over 45 years old and has completed at least 2 years continuous service with the employer, the period of notice is increased by 1 week.
Compensation for unfair dismissal under the Fair Work Act 1994 (SA) is limited to six months’ remuneration or $33,100, whichever is greater.[16]
[16] Fair Work Act 1994 (SA) s 109(3).
Where they apply, the Public Sector Act 2009 (SA) and the Local Government Act 1999 (SA) further regulate the employment relationship. Section 38 of the Public Sector Act 2009 (SA) provides:
38—Termination of chief executive's employment
(1) The Premier may, by notice in writing, terminate the employment of a chief executive of an administrative unit—
(a) on the ground that the chief executive has become bankrupt or has applied to take the benefit of a law for the relief of insolvent debtors; or
(b) on any ground on which the employment of an employee of a public sector agency may be terminated under Part 7 Division 3.
(2) The Premier may, by notice in writing, terminate the employment of a chief executive of an administrative unit without specifying any grounds.
(3) Subject to the contract relating to the chief executive's employment, if a chief executive's employment is terminated by the Premier by notice under subsection (2), the chief executive is entitled to a termination payment of an amount equal to 4 months remuneration (at the rate determined for the purposes of this subsection under the chief executive's contract) for each uncompleted year of the chief executive's employment (with a pro rata adjustment in relation to part of a year) up to a maximum of 16 months remuneration.
(4) The period of notice under subsection (2) must be at least 4 months except where the chief executive is compensated by payment of an amount equal to the remuneration that would have been payable during the balance of the period of 4 months (at the rate determined for the purposes of this subsection under the chief executive's contract).
A chief executive is required to be on a five year contract, and such a contract must include a term requiring the chief executive to meet performance objectives as set by the Premier and Minister.[17] The chief executive’s contract may modify any of the provisions of the Act.[18]
[17] Public Sector Act 2009 (SA), s 35(2).
[18] Public Sector Act 2009 (SA), s 35(3).
Section 44(1) of the Act allows an executive employee to be terminated on notice with specifying any grounds. Where a public sector employee is not an executive,[19] s 54 applies:
[19] Public Sector Act 2009 (SA), s 45(1).
54—Termination
(1) A public sector agency may terminate the employment of an employee of the agency on any of the following grounds:
(a) the employee is excess to the requirements of the agency;
(b) the employee's physical or mental incapacity to perform his or her duties satisfactorily;
(c) the employee's unsatisfactory performance of his or her duties;
(d) the employee's misconduct;
(e) the employee's lack of an essential qualification for performing his or her duties.
(2) The employment of an employee may not be terminated under subsection (1)(a) or (b) unless the public sector agency has made reasonable endeavours to find, but has failed to find, other suitable duties in the agency, or other public sector employment (to which this Part applies), to which the employee might be assigned or transferred on conditions that maintain the employee's substantive remuneration level.
(3) A public sector agency may not terminate the employment of an employee under subsection (1) on any ground unless the agency—
(a) has informed the Commissioner of the grounds on which it is proposed to terminate the employment of the employee and the processes leading up to the proposal to terminate; and
(b) has considered any advice given by the Commissioner within 14 days about the adequacy of the processes.
By s 25(1) of the Public Sector Act 2009 (SA), all persons employed “by or on behalf of the Crown” are employed by the Public Service for the purposes of the Act. Neither of the parties contended that the employment relationship was governed by the Public Sector Act 2009 (SA). The plaintiff, as an employee of a local government, is not employed by the Crown.[20]
[20] See Sydney City Council v Reed (1994) 34 NSWLR 506.
The Award
The defendant contends that the plaintiff’s employment is regulated by the South Australian Municipal Salaried Officers Award (‘the Award’), such that the plaintiff may be terminated in accordance with the notice provisions stated therein.
The South Australian Fair Work Commission may make an award about remuneration and other industrial matters.[21] Section 91 of the Fair Work Act 1994 (SA) provides that an award is binding on all persons expressed to be bound by the award.
[21] Fair Work Act 1994 (SA) s 90(1).
Clause 1.4.5 of the Award states:
Employee shall mean an employee who is remunerated by salary and whose duties, responsibilities and work description are contained within the terms of this Award.
Clause 1.4.8 provides:
Officer shall have the same meaning as employee.
Clause 1.6.1 of the Award provides:
This Award is binding on the industry of the occupations of:
All salaried officers employed by any municipal corporation or any corporation or district council in the State of South Australia including subsidiaries or regional subsidiaries established pursuant to the Local Government Act, or any Animal or Plant Control Board in a:
Clerical
Administrative
Professional
Managerial....
capacity whose duties, responsibilities and work description are contained within the terms of this Award.
Clearly the plaintiff was employed in a managerial capacity. To determine whether the plaintiff is bound by the Award, it is necessary to consider whether the duties, responsibilities and work description of a CEO are contained within the terms of the Award.
Clause 1.2.2 of Schedule 1 of the Award provides that CEOs are graded in accordance with the determination of a Local Government Classification Committee. Such determinations are made in a manner which reflects the particular council’s revenue, population and staffing. Clause 1.2.2.5 provides a minimum wage for council CEOs. Clause 1.2.3 outlines that senior officers of a council will fall within one of four bands of seniority. The bands at any particular council are calculated by reference to the salary of the council’s CEO. The most senior of senior officers, that is, those in “band 4”, will be remunerated at either two or three levels below the level afforded to the CEO.
Schedule 2 of the Award outlines the duties and responsibilities of the nine levels of general officers under the Award. Schedule 3 outlines the duties, functions, skills and responsibilities of the four bands of senior officers under the Award. In each band, the senior officer may or will report to the CEO. It is clear from this, and the fact that the remuneration applicable to each of the bands is calculated by reference to levels below the CEO, that the CEO is not included in any of the bands of senior officers under the Award. The duties, responsibilities and work description of the CEO are not contained within the terms of the Award. The Award does not cover a council CEO and thus does not cover the plaintiff.
The fact the Award does not cover the plaintiff has two relevant consequences. First, the defendant’s contention that the plaintiff may be terminated in accordance with the notice provisions in the Award must fail. Secondly, in conjunction with the fact the plaintiff’s remuneration at termination was above $100,322 (indexed) per annum, the plaintiff is not eligible to bring a claim for unfair dismissal under Part 6 of the Fair Work Act 1994 (SA). I note this for context, the plaintiff’s case is not one of unfair dismissal.
An implied term
The defendant submits that where a contract of employment is silent as to duration, a term is implied at common law that the contract is terminable by reasonable notice. In Thorpe v South Australian National Football League,[22] Jacobs J followed Richardson v Koefod, where Lord Denning observed:[23]
The time has now come to state explicitly that there is no presumption of yearly hiring. In the absence of express stipulation, the rule is that every contract of service is determinable by reasonable notice. The length of notice depends on the circumstances of the case.
[22] (1974) 19 SASR 17.
[23] [1969] 3 All ER 1264, quoted in Thorpe v South Australian National Football League (1974) 19 SASR 17, 29.
In Byrne v Australian Airlines Limited, Brennan CJ, Dawson and Toohey JJ observed:[24]
...In the absence of anything to the contrary and putting to one side the provision in the award for notice, at common law a contract of employment for no set term is to be regarded as containing an implied term that the employer give reasonable notice of termination except in circumstances justifying summary dismissal.
[24] (1995) 185 CLR 410, 429. See also Creighton and Stewart Labour Law (5th Ed.), [18.07].
The implied term can be displaced by the terms of the contract, or by legislation.
The initial term and s 97 of the Local Government Act 1999 (SA)
On the defendant’s case, the implied term can operate in conjunction with the grounds in s 97, since s 97 is not “exhaustive.” Alternatively, the defendant submits that the implied term of termination on notice is a circumstance specified in a contract relating to the defendant’s employment, such that the term fits within s 97(1)(b).
The primary argument at trial was whether the matters in s 97 were “exhaustive” of the grounds or circumstances in which an employment contract could be terminated. This argument was couched in terms of a power to terminate arising out of the Award. Putting to one side the defendant’s argument that it had grounds to dismiss the plaintiff under s 97(1)(a), the only additional legal justification for the termination of the plaintiff was said to be the implied term. Section 97(1)(b) provides that a CEO may be terminated “on a ground or in circumstances specified in any contract relating to his or her appointment.” It is clear that the legislature has attempted to capture, within that subsection, all grounds for, and circumstances of, termination which arise from an employment contract. A contractual provision which did not fit within s 97(1)(b) could not then justify termination by reason of the grounds in s 97 being not “exhaustive.” The correct enquiry then is whether the implied term fits within s 97(1)(b).
The plaintiff submits that s 97(1)(b) does not apply to implied terms because it is limited to grounds or circumstances specified in the contract. Further, the plaintiff submits that to read s 97(1)(b) as permitting an implied term of termination on notice would leave the remainder of the provision with “no work to do.” The submission is that if an implied term of termination on notice is sufficient to satisfy s 97, then s 97(1)(a), which is said to contain restrictions on the grounds for termination, is left with little effect.
It is necessary to consider s 97 so as to determine what is meant by the term “specified” in s 97(1)(b), and thus whether the implied term of termination on notice is excluded by the provision. The question of the “work” which s 97 has to do will also turn on the proper construction of s 97.
The purpose of the Act and s 97
Where more than one construction of a provision is reasonably open, a construction that promotes the purpose of the Act is to be preferred.[25] The stated objects of the Local Government Act 1999 (SA) include “to provide a legislative framework for an effective, efficient and accountable system of local government in South Australia.”[26]
[25] Acts Interpretation Act 1915 (SA), s 22.
[26] Local Government Act 1999 (SA), s 3(c).
The Act provides that a council must appoint a CEO following a process of advertising and assessment by a selection panel.[27] The role of the CEO is set out in s 99. The CEO is responsible for appointing, managing, suspending and dismissing the other employees of the council.[28] In doing so, she or he must comply with the relevant Act, award or industrial agreement.[29] The CEO must ensure that sound principles of human resource management are applied to council staff.[30] Section 107(2) of the Act sets out some particular principles of human resource management, which the CEO must ensure are followed. A council must also adopt a code of conduct to be followed by employees.[31] The CEO, as an employee of the council, will be subject to the code of conduct.
[27] Local Government Act 1999 (SA), s 98.
[28] Local Government Act 1999 (SA), s 103(1).
[29] Local Government Act 1999 (SA), s 103(3).
[30] Local Government Act 1999 (SA), s 107(1).
[31] Local Government Act 1999 (SA), s 110.
It is clear from the above that the Act has some involvement in the regulation of the employment relationships of council staff. However, the provisions are aspirational in nature and govern the work environment. When it comes to the law of appointment and termination, the Act defers to awards and other legislation. The Act does not prohibit termination of staff on particular grounds.
Section 97(1)(b) allows any contract to stipulate grounds or circumstances in which a CEO may be terminated. It follows that section 97(1)(a) does not provide the only grounds on which a council CEO may be terminated. Section 97(1)(b) allows a CEO to be terminated “in circumstances specified in any contract.” Thus a CEO may be terminated without any grounds. That s 97 allows termination without any grounds is confirmed by s 97(2)(b), which permits termination, regardless of whether grounds for it exist, where a contract term expires and the CEO is not reappointed. The grounds listed in s 97(1)(a) are expansive in nature. For example, s 97(1)(a)(v) permits termination where a CEO has breached, in any manner, any contract relating to her or his employment.
The effect of s 97(1)(b) is that, in a sense, the contract is given primacy over the grounds in s 97(1)(a), because a CEO can be terminated on the grounds or in the circumstances stipulated in the contract, despite the grounds in s 97(1)(a) not being satisfied. Thus the grounds in s 97(1)(a) operate as a “fall back” position, permitting termination on those grounds and preventing a contract from providing that those grounds are insufficient for termination.
The usual contractual “circumstance” allowing for an appointment to be terminated in accordance with s 97(1)(b) would be where reasonable notice of termination has been given. Section 97 is silent as to the notice period necessary. As such, the section allows the parties to agree the amount of notice necessary for termination.
Where there is no clear meaning of a provision on a construction of the text itself, a court may have regard to extrinsic materials in order to determine the mischief which a provision is aimed at addressing.[32] A court is entitled to have regard to the history of a legislative scheme in order to determine what the legislation was intended to achieve.[33]
[32] See generally Attorney General for South Australia v Bell [2013] SASCFC 88.
[33] See, for example, Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249, 256 – 260.
It appears that s 97 was drafted from s 12 of the repealed Public Sector Management Act 1995 (SA). That provision provided:
Termination of Chief Executive’s appointment
(1)A Chief Executive’s appointment may be terminated by the Governor—
(a) on the ground that the Chief Executive—
(i)has been guilty of misconduct; or
(ii)has been convicted of an offence punishable by imprisonment; or
(iii) has engaged in any remunerative employment, occupation or business outside the duties of the position without the consent of the Minister responsible for the administrative unit; or
(iv) has become bankrupt or has applied to take the benefit of a law for the relief of insolvent debtors; or
(v) has, because of mental or physical incapacity, failed to carry out duties of the position satisfactorily or to the performance standards specified in the contract relating to his or her appointment; or
(vi) has, for any other reason, in the opinion of the Premier and the Minister responsible for the administrative unit, failed to carry out duties of the position satisfactorily or to the performance standards specified in the contract relating to his or her appointment; or
(b) by not less than three months notice in writing to the Chief Executive.
(2) Chief Executive’s appointment is terminated if the Chief Executive—
(a) becomes a member, or a candidate for election as a member, of the Parliament of the State or the Commonwealth; or
(b) is sentenced to imprisonment for an offence.
(3) A Chief Executive may resign from the position by not less than three months notice in writing to the Minister responsible for the administrative unit (unless notice of a shorter period is accepted by that Minister).
(4) Subject to this section and any provision in the contract relating to the Chief Executive’s appointment, if a Chief Executive’s appointment is terminated by the Governor by notice under subsection (1)(b), the Chief Executive is entitled to a termination payment of an amount equal to three months remuneration (as determined for the purposes of this subsection under the contract) for each uncompleted year of the term of appointment (with a pro rata adjustment in relation to part of a year) up to a maximum of 12 months remuneration (as so determined).
(5) A Chief Executive is not entitled to a termination payment if the Chief Executive is appointed to some other position in the Public Service in accordance with the contract relating to his or her appointment.
That provision was part of a different Act to that being considered, and has clearly been amended to form s 97. It can provide only limited assistance in the interpretation of s 97. What is immediately apparent in s 12, from a reading of s 12(1)(b), is that s 12(1)(a) confers grounds for summary dismissal. This provides some limited support for an argument that the grounds in s 97(1)(a) are grounds for summary dismissal.
The fact that that s 97 does not expressly require a council to give notice suggests that the grounds in s 97(1)(a) are intended to justify summary dismissal. At common law, summary dismissal is an example of the general right of any contracting party to treat certain breaches as bringing the agreement to an end.[34] The grounds in s 97(1)(a)(i) and (ii) would, in some circumstances, satisfy this test. The grounds in s 97(1)(a)(iii) to (v) would not ordinarily do so. As such, if the provision were read as being as to summary dismissal, then the powers of dismissal of the council are expanded by it.
[34] North v Television Corp Ltd (1976) 11 ALR 599, 608-609.
In the circumstances, it is not necessary to decide whether s 97 relates to summary dismissal. It is sufficient to assume that it does not noting that, if the provision was read in this way, the result would be that it operates to expand the grounds for dismissal.
The plaintiff was appointed as CEO of the defendant in 1997. At that time, the Local Government Act 1934 (SA) dealt with the employment of council CEOs. Section 70 provided:
Salary, etc.
70. Subject to the provisions of any relevant Act, award or industrial agreement, the salary or wages and other conditions of service of an officer or employee of a council will be as determined by the council.
Section 71 provided:
Power to suspend or dismiss
71.(1) A council may, subject to the provisions of any relevant Act, award or industrial agreement, suspend or dismiss an officer or employee of the council.
(2) Suspension of an officer or employee under subsection (1) does not affect a right to remuneration in respect of the period of suspension.
These provisions show that the previous Act made no interference whatsoever in the employment relationship between a council and its employees.
When the 1999 Act was read a second time in the Legislative Council, it contained a proposed s 96 which required council CEOs to be on a fixed-term contract not exceeding five years. The explanatory note for clause 97 said “A contract may be terminated on various grounds specified under the clause or in the contract.”[35]
[35] Hansard SA, Legislative Council 23 March 1999, 988.
In debate on the second reading it was put that councils, especially country councils, wanted the flexibility to choose whether to appoint their CEOs on a fixed-term contract or on some other contract. An amendment was proposed, resulting in the current wording of s 97.[36]
[36] Hansard SA, Legislative Council 29 July 1999, 1818.
When s 97 is read in the context of the Act, and regard is had to the purposes of the provision and the Act, the preferable interpretation is that the provision is facilitative and allows the parties flexibility in contracting. The provision is not restrictive. A CEO may be terminated on the grounds in s 97(1)(a), or on any other grounds, or in any circumstance, specified in their contract. Primacy is given to the contract over the grounds in s 97(1)(a).
“Specified”
The term “specified” invokes a degree of precision and expression which is largely inconsistent with an implied contractual term. However, like any other word in an enactment, the term will take its meaning from its context. As Burchett J observed in Gantry Acquisition Corp v Parker & Parsley Petroleum Australia, concerning different legislation:[37]
The word chosen by the legislature for use in cl 20(2) of s 750 is ‘specify’, a word which signifies precision. Even such a word must yield to context, since no word has a meaning which remains rigidly fixed, however it is used. A word is not a locked box with static contents; it is more like a living cell, changing as it responds to the environment, which is its context...
[37] (1994) 123 ALR 29, 43.
In this case, the plaintiff submits that the word “specified” in s 97(1)(b) excludes the operation of the implied term of termination on notice. The implied term is deemed necessary at common law. If s 97 were to exclude the implied term, it would need to do so by express words or necessary implication. If the provision is capable of being interpreted in a manner which does not interfere with the common law, then this interpretation should be preferred.[38]
[38] See, for example, Melbourne Corp v Barry (1922) 31 CLR 174, 206.
If the plaintiff’s submission was accepted, a CEO whose contract is indefinite and does not stipulate for termination on notice would achieve life tenure subject to the grounds in s 97(1)(a) or the other grounds or circumstances in their contract. This is an extraordinary result which one would expect the legislature to have addressed more explicitly if that was the intention.
The plaintiff’s interpretation of “specified” is inconsistent with the conclusion that s 97 is facilitative rather than restrictive. The practical effect of the plaintiff’s interpretation is inconsistent with a purpose of the provision, being to give councils flexibility in terminating their CEO. It is inconsistent with a general purpose of the Act, being to provide a legislative framework for an effective, efficient and accountable system of local government. Such an interpretation is inconsistent with the balance of the Act which, rather than imposing binding restrictions on the termination of council staff, defers such matters to other legislation and awards. It is relevant that when one looks to those statutes, there is no restriction on the grounds or circumstances on which a council CEO may be terminated. The primary protection of employees is not available to the plaintiff due to his not being covered by an award and his high income. High income earners have greater bargaining power and greater opportunity to protect themselves by way of their employment contract.
I read the term “specified” in s 97(1)(b) such that it catches relevant implied terms in employment contracts, and specifically, the implied term that an indeterminate contract may be terminated with reasonable notice. The result of this is that s 97 does not exclude the implied term, and termination on reasonable notice will comply with s 97.
The role of s 97
The plaintiff submits that the interpretation which I prefer leaves s 97 with no “work to do.” Australian courts have maintained that words in a statute must prima facie be given some meaning and effect.[39]
[39] Commonwealth v Baume (1905) 2 CLR 405, 414.
The short answer to this submission is that s 97(1)(b) allows for the termination of a CEO on grounds or in circumstances stipulated in the contract. There is no limitation on what may be stipulated, and many such terms would effectively nullify s 97(1)(a). The statute permits s 97(1)(a) to be given no effect where a contractual term so provides. As I have found, it would be inconsistent with the purposes of the provision to limit this outcome to where express terms so provide.
The practical effect of the construction which I prefer is that, where a contract is for an indefinite term and is silent as to notice, the grounds in s 97(1)(a) are unlikely to be invoked, and if they are invoked, it would be on the basis that those grounds justify summary dismissal.
Section 97(1)(a) will still have “work to do” in other instances. For example, if a contract stipulated that it could not be terminated on notice, then s 97(1)(a) would allow for termination if a ground stipulated therein was established. Alternatively, if a contract stipulated that it could be terminated but only on a number of grounds, and those in s 97(1)(a) were not stated, then the effect of the provision would be to extend the grounds of termination. Another example is if the contract stipulated that it could not be terminated on the grounds in s 97(1)(a). In this case, the contract would be in direct conflict with the provision and the provision would prevail to the extent of the inconsistency.
Summary dismissal
As noted above, there is a question as to whether the grounds in s 97(1)(a) permit summary dismissal of a council CEO. If summary dismissal was justified in this case, either in accordance with s 97(1)(a) or by the common law right to summary dismissal, then the notice given by the defendant would be in excess of that required by law, and there would be no question as to the reasonableness of that notice.
The defendant submitted that the plaintiff’s conduct amounted to grounds to dismiss under s 97(1)(a). It was submitted that the plaintiff failed to carry out his duties satisfactorily. The defendant relied on the plaintiff’s own admission that on numerous occasions he took long service leave as cash and did not adequately record this. This, it is said, is a breach of a number of the plaintiff’s duties, including the duty to ensure that records required under the Local Government Act 1999 (SA), or any other Act, are properly kept and maintained. The defendant further submitted that the plaintiff was guilty of misconduct justifying dismissal, due to his misrepresentations as to the amount of long service leave which he had taken. The defendant contended that the plaintiff had breached duties of fidelity and good faith in providing time sheets which he knew to be false. This assertion related specifically to the lunch breaks which the plaintiff took and his attendance or otherwise at work on Fridays.
In order to justify dismissal under s 97(1)(a), the defendant must establish the misconduct of the plaintiff, that he has failed to carry out his duties satisfactorily, has failed to meet performance standards, or has breached his employment contract in any other matter. At common law, the defendant would have to establish a breach of the employment contract which is sufficiently serious that the plaintiff can treat it as bringing the contract to an end.[40]
[40] See North v Television Corp Ltd (1976) 11 ALR 599, 608-609.
The conduct of the plaintiff on which the defendant relies must be seen in context. The defendant has been an employee of the plaintiff for many years. The evidence does not establish that the plaintiff knowingly misrepresented the amount of leave he had taken. His evidence was that he relied upon his payroll records. He said that it was the duty of other employees to manage long service and leave entitlements. The plaintiff’s conduct, in failing to adequately record the taking of leave as cash was, in the circumstances, trifling. This is especially so when one considers the fact that the recording procedures of the defendant have changed over the period the plaintiff has been CEO. Indeed, for the purposes of this trial, employees of the defendant were required to attempt to collect the plaintiff’s leave records, a process which proved difficult due to the defendant’s recording procedures. The complaint that the plaintiff had taken extended lunch breaks on some occasions is trivial. The plaintiff’s evidence was that although he occasionally took longer lunch breaks than that noted in his timesheets, he made up for this time. The complaint that the plaintiff was not always present at the council premises on Fridays is also trivial. There was evidence that the plaintiff attended meetings on Fridays. In any case, the conduct of the plaintiff as to his lunch breaks and work on Fridays, if it were serious, would have been apparent to the defendant. The plaintiff has never received any warnings, nor had the defendant ever required the plaintiff to engage in any other disciplinary procedures.
The defendant has failed to establish that the plaintiff has engaged in misconduct. The defendant has failed to establish that the plaintiff failed to satisfactorily carry out his duties, failed to meet performance standards, or breached his contract. Thus, even if the grounds in s 97(1)(a) justify summary dismissal, those grounds have not been made out. The common law right to summary dismissal requires more serious conduct by the employee than that required by s 97(1)(a). It follows that the common law right did not arise in this case.
Since summary dismissal was not justified in this case, it is necessary to consider whether the notice given to the plaintiff was reasonable.
Does s 97 confer a private right for breach?
Before considering whether the notice given in this case was reasonable, it worth noting my view on a matter which, due to my finding as to s 97(1)(b), has not arisen.
If I found that the implied term of termination on notice was excluded by s 97, and that the grounds for termination under s 97(1)(a) had not been established, this would not be sufficient to establish an entitlement to damages for breach of s 97. Considering the Local Government Act 1999 (SA) as a whole, and the legislative scheme which surrounds it, I doubt that the legislative intention behind s 97 was to confer a private right of action for its breach.[41] Thus the plaintiff could not recover damages for a breach of s 97.
[41] See Byrne v Australian Airlines Limited (1995) 185 CLR 410.
Reasonable notice
The plaintiff submitted at trial that the notice given was defective as in breach of s 97 and thus was not effective at common law. I have found that the defendant has complied with s 97, as a result of the implied contractual term of termination on reasonable notice. Even if this were not so, I see no reason to hold that the notice served upon the plaintiff was defective at common law.
The plaintiff has submitted that, since the defendant cited the breakdown in the relationship between he and the Mayor as a reason for the plaintiff’s termination, the defendant terminated the plaintiff for cause in breach of s 97 and cannot now assert that termination was by reasonable notice. Contrary to this submission, the notice period given to the plaintiff clearly indicates that he was being terminated on notice and not dismissed for cause. The fact that some reasons for the termination were provided to the plaintiff does not alter the conclusion that the plaintiff’s termination was by notice rather than for cause. Indeed, even if the plaintiff had been wrongly terminated for cause, in order to extend his damages beyond payment in lieu of notice, he would have to establish that the defendant may not have terminated him on notice at the time he was dismissed for cause.[42]
[42] Ramsey v Annesley College [2013] SASC 72, [390] – [412].
The plaintiff submits that the notice period which he received, nine and a half months, was not reasonable. The defendant submitted that the notice period given was reasonable at common law.
In Labour Law, Creighton and Stewart observe:[43]
...[S]ome employees are entitled to ‘reasonable’ notice of termination, usually by reason of an implied term in their contract. What is reasonable in any case will be determined by reference to the circumstances as at the date of termination. It will depend on factors such as the employee’s age, length of service and qualifications; the nature of their responsibilities and how highly they are paid; any standards in the relevant industry; anything given up by the employee to undertake the position (for example, secure employment elsewhere); and the anticipated duration of the employment. As a general rule, the longer the employee has worked for the employer and the more senior and important a position they occupy, the longer their entitlement. The periods in question may range from a few weeks in the case of a blue collar worker, up to periods of between 6 and 12 months in the case of a ‘senior executive with a large corporation in anticipated long-term employment’. Senior managers can generally expect at least six months’ notice, even when they have been in their job for only a short time. That can often rise to 12 months for those with longer service. At the other end of the scale, a lower paid clerical worker might expect only a few weeks. In effect, the principle seems to be that to those who have, shall more be given!
[Footnotes omitted]
[43] (5th ed.) [18.18].
While the defendant contends that the notice given was reasonable, it accepts that the plaintiff’s age, his length of service, and his seniority indicate a longer rather than a shorter period of notice would be reasonable.
The plaintiff was 59 when he gave evidence. He has worked for the defendant for in excess of 30 years. He held the most senior staff position at the defendant.
The plaintiff has expressed an intention to retire at the end of 2014. He has settled in a regional area. The plaintiff would have great difficulty finding a new job, particularly one at the level of seniority which he had at the defendant.
I conclude that a reasonable period of notice of termination to the plaintiff would be 12 months. The nine and a half month notice period given by the defendant was a breach of the parties’ implied term of reasonable notice. The plaintiff is entitled to two and a half months’ wages as damages for the breach. Added to this will be a further week of damages to account for the annual and long service leave which the plaintiff could have accrued during the two and a half months.[44] In the circumstances, it is not necessary to reduce that figure on account of the chance that the plaintiff would take leave during the period and thus not accrue it.
[44] The plaintiff accrues annual leave at 20 days per annum, being one and two thirds days per month, thus about 4 days in two and a half months. The plaintiff accrues 6.5 days long service leave per annum, being about half a day per month, thus about 1 day in two and a half months.
The plaintiff’s salary is $124,283 per annum. There will be judgment for the plaintiff for the sum equating to two months and 3 weeks wages, being $27,884.[45]
[45] The plaintiff earns $10,357 a month; $2,390 a week.
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