Hargreaves, Tony v National Safety Council of Australia Ltd

[1997] FCA 763

FEDERAL COURT OF AUSTRALIA

INDUSTRIAL LAW - complaint of unlawful termination - whether employee’s “relevant wages” exceeded the applicable amount under s 170CD Workplace Relations Act  - whether education expenses constituted “relevant wages” - whether necessary to grant extension of time in which to commence application

PRACTICE AND PROCEDURE - decision on separate question

Workplace Relations Act 1996 ss 170CD, 170EA

Ardino v Count Financial Group Pty Limited 1 IRCR 221
Gurran v Tarbrook Pty Ltd  unreported, IRCA, Lee J, 13 September 1996

TONY HARGREAVES v NATIONAL SAFETY COUNCIL OF AUSTRALIA LTD

VI 2870 of 1995

MARSHALL J
MELBOURNE
12 AUGUST 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
VICTORIA  DISTRICT REGISTRY	)  VI 2870 of 1995
)
GENERAL DIVISION	)

BETWEEN:	TONY HARGREAVES Applicant
AND:	NATIONAL SAFETY COUNCIL OF AUSTRALIA LTD Respondent

JUDGE:	MARSHALL J
PLACE:	MELBOURNE
DATED:	12 AUGUST 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The separate questions be answered as follows:

Question 1: Is the application competent having regard to s 170CD(1)(a) of the Workplace Relations Act 1996 (“the Act”)?

Answer:          Yes.

Question 2: Does Mr Hargreaves require an extension of time pursuant to s 170EA(3)(b) of the Act, and if so, should such an extension be granted?

Answer:          No, but if necessary an extension should be granted.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
VICTORIA  DISTRICT REGISTRY	)   VI 2870 of 1995
)
GENERAL DIVISION	)

BETWEEN:	TONY HARGREAVES Applicant
AND:	NATIONAL SAFETY COUNCIL OF AUSTRALIA LTD Respondent

JUDGE:	MARSHALL J
PLACE:	MELBOURNE
DATED:	12 AUGUST 1997

REASONS FOR INTERLOCUTORY JUDGMENT

This matter is an application under s 170EA Workplace Relations Act 1996 (“the Act”) in which the applicant, Tony Hargreaves, has alleged that the respondent, National Safety Council of Australia Ltd (“the Council”) terminated his employment contrary to the provisions of Div 3 of Part VIA of the Act. The proceeding was listed for trial for five days commencing on 16 June 1997. On 12 June 1997 the Council filed a notice of motion seeking a separate trial of certain issues pursuant to Order 29 rule 2 of the Rules of the Industrial Relations Court of Australia (“the IRCA rules”). The IRCA rules apply to this matter as a consequence of Item 67 of Schedule 16 to the Workplace Relations and Other Legislation Amendment Act 1996 (“the Amendment Act”). The proceeding has been transferred to this Court from IRCA as a consequence of Schedule 16 to the Amendment Act.

Ultimately, the parties agreed that the separate questions identified by the Council should be heard and determined in advance of any other issues in the proceeding.  The Court received evidence from the parties on those issues on 19 and 20 June 1997.  The Council filed its written submissions on 4 July 1997.  Mr Hargreaves filed his written submissions on 18 July 1997.  Submissions in reply were filed on 28 July 1997.  Each submission was filed in accordance with a program for written submissions ordered by the Court on 20 June 1997.

THE QUESTIONS

The questions which the Court is to determine prior to other issues falling for determination in the trial are the following:

1.Is the application competent having regard to s 170CD(1)(a) of the Act? (“the relevant wages question”).

2.Does Mr Hargreaves require an extension of time pursuant to s 170EA(3)(b) of the Act, and, if so, should such an extension be granted? (“the extension of time question”).

THE RELEVANT WAGES QUESTION

(a)       The Legislative Context

Section 170CD of the Act at all material times provided as follows:

“170CD(1)     The following Subdivisions do not apply to a termination of employment of an employee who is not employed under award conditions if:

(a)in respect of an employee who was continuously employed by the employer during the period of 12 months immediately before the termination day - on the termination day the employee’s relevant wages exceeded the applicable amount; or

(b)in respect of an employee who was continuously employed by the employer for a period less than 12 months immediately before the termination day - on the termination day the employee’s relevant wages exceeded the amount worked out using the formula:

days employed

x    applicable amount

365

170CD(2)       The applicable amount for the purposes of subsection (1) is:

(a)subject to paragraph (b), $60,000; or

(b)if regulations made in accordance with Subdivision CA prescribe a formula for the annual indexation of the amount referred to in paragraph (a) - the amount worked out using that formula as it applies from time to time.

170CD(3)       For the purposes of this section, an employee is taken not to be employed under award conditions if wages and conditions of employment of the employee are not regulated by one or more relevant awards that bind the employer of the employee.

170CD(4)       In this section:

‘days employed’ means the number of days in the period for which the employee was continuously employed by the employer immediately before the termination day;

‘relevant award’, means an award or a State award;

‘relevant wages’, in relation to an employee, means the total amount of the wages that the employee received, or was entitled to receive, from the employer in respect of:

(a)if paragraph (1)(a) applies to the employee - the period of 12 months referred to in that paragraph; or

(b)if paragraph (1)(b) applies to the employee - the lesser period referred to in that paragraph;

but, in relation to an employee whose contract of employment prescribes normal hours for the performance of work (whether by prescribing the number of hours in which, or the times at which, work is normally to be performed in a particular period), does not include any wages, additional to normal wages, in respect of additional hours of work performed or in respect of work performed at other times;

‘termination day’ means the day on which the employer terminated the employee’s employment;

‘termination of employment’ means a termination of employment that occurred before, or occurs after, the commencement of this section, but does not include a termination of employment in respect of which an application was made to the Court before that commencement.”

Mr Hargreaves was not employed under award conditions. On the day of the termination of his employment he had been continuously employed during the period of twelve months immediately before the termination day. The applicable amount of relevant wages for the purposes of s 170CD(2) of the Act was $60,000.

(b)       Termination Day and the Period for Measurement of Relevant   Wages

Mr Hargreaves was the General Manager of the Victorian Safety Council Limited (“the Victorian Council”) until it went into liquidation in September 1993.  At about that time the Council took over the operations of the Victorian Council.  Mr Hargreaves became the Victorian General Manager of the Council in November 1993.  On 7 December 1994, Mr Whiting, the Chief Executive Officer of the Council verbally advised Mr Hargreaves of the termination of his employment.

Mr P Ginnane, counsel for the Council submitted that “the termination day” for the purposes of s 170CD of the Act was 7 December 1994. Mr D Staindl, counsel for Mr Hargreaves, although raising doubts as to the authority of Mr Whiting to terminate Mr Hargreaves’ employment, was content to assume that the termination day was 7 December 1994. In my view, the evidence supports a finding that Mr Whiting terminated Mr Hargreaves’ employment on 7 December 1994 and that 7 December 1994 is “the termination day” for the purposes of s 170CD(4) of the Act. Consequently, the time frame for the measurement of Mr Hargreaves’ relevant wages is 8 December 1993 to 7 December 1994 (“the relevant 12 months”).

(c)       The Termination Package - Total Value

It was agreed between the parties that during the relevant twelve months, Mr Hargreaves received a remuneration package valued at $97265.97.  This figure is arrived at by taking into account an increase in the value of Mr Hargreaves’ remuneration package from the commencement of the 1994 financial year.  Thus, Mr Hargreaves’ remuneration package was worth $96000 per annum from 8 December 1993 to 30 June 1994, and from 1 July 1994 on was worth $98888 per annum.  The figure of $96000 is referred to at cl 1 of a written employment contract (“the contract”) which was entered into between the parties on 1 November 1993.

(d)      Provision of a Motor Vehicle

Clause 2 of the contract provided for the provision to Mr Hargreaves of “a fully-maintained vehicle to the standard of a Ford Falcon Fairmont ‘Ghia’ sedan”. The value of the vehicle was $10378 per annum, $3378 of which was fringe benefits tax. Mr Staindl contended that the value of the motor vehicle should not be included in Mr Hargreaves’ relevant wages. I accept Mr Staindl’s submissions in this regard. Although a benefit to an employee in her or his employment, the value of the provision of a motor vehicle to an employee is a non-pecuniary benefit which does not take the form of “wages”. It was correctly conceded by Mr Ginnane as not forming any part of Mr Hargreaves’ relevant wages for the purposes of s 170CD of the Act. If one were to deduct $10378 from the value of the relevant package, i.e. $97266, one would be left with a sum of $86888, which, if Mr Ginnane’s submissions are to be accepted, was the relevant wages of Mr Hargreaves. However, Mr Staindl submitted that another significant aspect of the remuneration package which did not constitute part of relevant wages, was the education expenses of Mr Hargreaves’ school-age children.

(e)       Education Expenses

Clause 6 of the contract is headed “education expenses”.  It provides that:

“As part of your remuneration package the Company will pay the eduction expenses of your children.  All such claims for payment must be submitted to the Company.  The fees paid on your behalf will be subject to the required Fringe Benefits Tax.”.

Both counsel submitted that the applicable statement of law as to what constitutes “relevant wages” for the purposes of s 170CD of the Act was to be found in the judgment of Wilcox CJ in Ardino v Count Financial Group Pty Limited 1 IRCR 221, 228-229. At that part of his judgment his Honour said:

“I agree with counsel that the definition of ‘relevant wages’ is concerned only with payments that are wages, strictly so-called.  I do not think it includes payments made by an employer on behalf of an employee pursuant to a binding antecedent obligation, whether statutory or contractual.  It is now commonplace for employers to make payments to a superannuation fund in respect of individual employees.   This is usually because of a statutory obligation to that effect, sometimes because of a binding contractual obligation.  If the situation is that the employer never had any option but to pay particular moneys to a superannuation fund, as distinct from making it available to the employee, the payment cannot properly be described as ‘wages’.

Counsel for the respondent drew attention to a decision of the United Kingdom Court of Appeal, Adams v Liverpool Corporation (1927) 137 LT 396, containing discussion of the meaning of the term ‘full salary or wages’ in a council resolution designed to encourage council employees to join the armed services during the First World War. Bankes LJ, with whom Scrutton LJ and Romer J agreed, said at 397 ‘where the word used is “salary” or “pay” or “wages”, you are entitled to interpret that language as meaning something to which a person is contractually entitled’. A payment made by the employer, that the employee was never contractually entitled to receive, cannot be regarded as ‘wages’. It is not sufficient that the payment arose out of the contract of employment.

I appreciate, of course, that an employer’s obligation to make a payment that the employee was never contractually entitled to receive may have arisen out of negotiations between the employer and the employee as to the terms and conditions of employment.  Ordinarily, I suppose, these negotiations will have preceded the commencement of the employment; but sometimes terms and conditions of employment are renegotiated during the course of the employment.  The parties may agree that the employer will provide non-pecuniary benefits, such as use of a car or overseas travel, or make payments to someone else, such as for superannuation or school fees.  The effect of that agreement may be to diminish the periodical payments made directly to the employee.  Part of what might have been available to the employee as salary is diverted elsewhere.  I do not think any of this matters.  The question is not the genesis of the obligation but its nature.

In relation to non-pecuniary benefits, I cannot see how they can ever be regarded as ‘wages’ for the purpose of the definition.  The word ‘wages’ is not defined by the Industrial Relations Act, so in s 170CD it bears its ordinary meaning. The Shorter Oxford Dictionary defines ‘wage’ as:

‘A payment to a person for service rendered; no esp the amount paid periodically for the labour or service of a workman or servant.  Freq pl.’

The Macquarie Dictionary gives the primary meaning of ‘wage’, noting that it is often plural, as ‘that which is paid for work or services, as by the day or week; hire; pay’.  I think these definitions’ emphasis on payment makes it difficult to argue that benefits that do not take the form of money payments are ‘wages’.”

Mr Ginnane submitted that “the central rationale” of Ardino “is whether there existed the freedom within the employment to take the monetary value of benefits otherwise paid to third parties”.  I do not accept that submission.  On the contrary, in Ardino at 228, Wilcox CJ listed a series of non-pecuniary benefits, being “use of a car or overseas travel, or ... payments to someone else, such as superannuation or school fees” (emphasis supplied).  His Honour went on to say that he could not see how such non-pecuniary benefits “can ever be regarded as ‘wages’ for the purposes of the definition”.  In any event, I do not accept the fundamental premise behind Mr Ginnane’s submission.  The Council had an obligation under the contract to pay the education expenses of Mr Hargreaves’ children.  Mr Hargreaves was not entitled under the contract to have paid to himself, instead of the relevant schools, money equivalent to such education expenses.  It is not to the point that the amount of money which would be directed from the salary package to education expenses would vary from year to year depending on the age of the children.  Any ability in Mr Hargreaves to redesign his salary package would necessarily be affected by the level of education expenses which were required to be met in any one year.  In any event, during the year to 7 December 1994, education expenses were paid directly to the relevant schools by the Council in respect of expenses actually incurred.  These expenses were agreed as between the parties to be $22880.35 plus $11039.77 by way of fringe benefits tax, thereby totalling $33920.12.  When that amount is deducted from the amount of $86888 referred to earlier in these reasons, it is seen that Mr Hargreaves’ relevant wages did not exceed $60000.  It is not necessary, therefore, to explore whether other parts of Mr Hargreaves’ salary package were not within the concept of “relevant wages”.

I am fortified in my conclusion on this issue by the observations of Lee J in Gurran v Tarbook Pty Ltd (IRCA, 13 September 1996, unreported).  I agree with the following salient points made by his Honour:

• The removal by s 170CD of the Act of the right previously given by the Legislature to employees to seek redress under the Act irrespective of the amount of their wages must be effected by clear words: Esber v Commonwealth (1992) 174 CLR 430.

• “wages” must be used in its accepted sense, i.e.: regular payments made by an employer to a worker (emphasis supplied) for labour provided.

• “wages” includes salary.

• “wages” is not the same as “remuneration” or “emoluments”.

The answer to the first question raised for the Court’s determination:
“Is the application competent having regard to s 170CD(1)(a) of the Act?” is “Yes”.

THE EXTENSION OF TIME QUESTION

(a)       Is an extension of time required?

S 170EA(3) of the Act provided at all material times that:

“An application must be made:

(a)within 14 days after the employee receives written notice of the termination; or

(b)within such further period as the Court allows on an application made during or after those 14 days”

Mr Hargreaves did not receive either written or verbal notice of his termination.  He was summarily terminated on 7 December 1994 by Mr Whiting, when Mr Whiting told him that his employment was terminated.  On 19 December 1994 Mr Whiting wrote to Mr Hargreaves advising him that his employment had been terminated on 7 December 1994.  In my view the letter cannot sensibly be said to constitute “notice” of anything since it merely confirmed an event which occurred some twelve days previously.  The Shorter Oxford English Dictionary relevantly defines notice as:

“An announcement by one of the parties to an agreement (esp. concerning a tenancy or employment) that it is to terminate at a specified time.”

The giving of notice is a well understood concept in contemporary Australian industrial relations.  It signifies the giving of advance information by one party to the employment relationship to the other that the relationship will cease at some specified time in the future.

As Mr Hargreaves did not receive written notice of his termination, he does not require an extension of time within which to make application under the Act. In the event that I am in error as to whether an extension of time is required, it is desirable that I indicate my views as to whether I would have granted such an extension in this case.

(b)       Would an extension of time have been granted?

The relevant principles to guide the discretion of the Court on the question of an extension of time to make application in respect of an alleged unlawful termination of employment are well established.  A Full Court of IRCA in Coyne v Ansett Transport Industries (24 September 1996, unreported) endorsed the principles referred to in Brodie-Hanns v MTV Publishing Ltd (1995) 67 IR 298. Below I consider the application of some of those principles which are ones of relevance in the circumstances of this case.

(i)        Was there an acceptable explanation for the delay?

The application was filed on 15 May 1995, in excess of five months after the termination.  Mr Hargreaves’ reaction to his termination on 7 December 1994 was to question the authority of Mr Whiting to effect the termination.  In the second week after his termination, Mr Hargreaves was contacted by a member of the Board of the Council, a Mr Caine, who told Mr Hargreaves that he “was authorised to seek a meeting ... to discuss (the) termination and an offer ...”.  Those discussions continued into the early months of 1995.  By early May 1995, Mr Hargreaves came to the view that he was unlikely to be reinstated by the Council by agreement.  His application was filed soon thereafter.  In the circumstances I find that there was an acceptable explanation for the delay in bringing the application.

(ii)Action taken by Mr Hargreaves to contest the termination.

Mr Hargreaves made it plain to the Council from the time his employment was terminated that he contested the validity of the termination.  He engaged in negotiations designed to remedy the situation from his point of view.  He had recourse to IRCA when it appeared that a settlement would not be achieved.  The Council cannot have been in any doubt that its decision to terminate Mr Hargreaves’ employment was actively contested from the time the decision was communicated to Mr Hargreaves verbally by Mr Whiting.

(iii)Prejudice to the respondent.

The respondent will suffer some prejudice as a consequence of the cost and inconvenience associated with defending the application.   However, in the circumstances the interests of justice dictate that such prejudice on its own not prevent the exercise of the Court’s discretion to extend time if other countervailing factors so dictate.  If it were otherwise, very few, if any, extensions would ever be granted given that cost and inconvenience for an employer is associated with almost every application an employer has to defend.

I find the other principles referred to in Brodie-Hanns of no assistance in the circumstances of this case.  For example, I have had no regard to the merits of this matter in coming to my views on this issue, as issues relevant to the merits are yet to be tried and the separate questions were agreed to be tried in advance of those issues.  Further, considerations of fairness as between the applicant and other persons in a like position is not a particularly helpful criterion in this case given the special factual circumstances of this matter, especially having regard to the lengthy negotiations which the parties entered into in an attempt to resolve the matter before proceedings were commenced.

I answer the extension of time question in the negative, but had it been necessary to grant an extension I would have done so.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall

Associate:

Dated:            

Counsel for the Applicant:	D Staindl
Solicitor for the Applicant:	Holding Redlich
Counsel for the Respondent:	P Ginnane
Solicitor for the Respondent:	Arthur Robinson & Hedderwicks
Date of Hearings:	19 & 20 July 1997
Date of Judgment:	12 August 1997