Intercultural Management Services P/L v White No. Scgrg-98-1246 Judgment No. S4

[1999] SASC 4

INTERCULTURAL MANAGEMENT SERVICES PTY LTD v WHITE
[1999] SASC 4

Magistrates Appeal

1. WICKS J          This is an appeal by the defendant, Intercultural Management Services Pty Ltd (the appellant), against a judgment of a Magistrate given on 26 August 1998.

2. On 27 March 1998, the plaintiff filed a claim for $14,741.04 in the Magistrates Court at its Adelaide Registry.

3. The claim was for moneys due under a contract of employment under which the appellant employed the respondent for a period of one year commencing on 15 April 1997.  The appellant filed a defence to the claim.

4. A directions hearing took place before a Magistrate on 1 June 1998.  Counsel for the respondent submitted that as the matter before the Court turned on a small issue of interpretation of the contract of employment, it could be resolved expeditiously by way of a short argument.  Counsel for the appellant submitted that he had no instructions in that regard and neither opposed nor consented to an order being made to proceed by way of short argument.  The learned Magistrate ordered that the matter be set down for argument before another Magistrate.  This was done and the following ruling delivered:

   "I am asked to give a preliminary ruling as to the proper interpretation of a contract of employment between the parties.  A copy of the contract is on the court file.  It is dated 9 April 1997.  The circumstances of the case are that the plaintiff commenced her employment on or about 15 April 1997 pursuant to the contract.  Her employment was terminated on or about 5 September 1997.  The plaintiff says that the contract was for a minimum of a year.  The defendant says that it was terminable on one week’s notice.

   The contract says this:

   ‘2..... During the first three months of your employment with the Company, you will be employed on a probationary basis ... During the probationary period this contract of employment may be terminated by either party on not less than 5 days notice in writing.  In the case of notice by the Company, it may, at its election, pay 5 day’s salary in lieu of notice.

   3...... The Employee will be employed for a period of one year from the date of commencement subject to the termination provisions contained in clause 7 below.’

   The salary is expressed to be a salary of $25,000 per annum but is payable in arrears fortnightly.  Clause 7.1 provides:

   ‘If the Employee’s contract of employment is to be terminated by the Company, the following period of notice, or payment in lieu, will be given (the “Notice Period”):

   Employee’s period of continuous   Period of Notice
   service with the Company

   Not more than 1 year  1 week
   More than 1 year but not more than
     3 years  2 weeks
   More than 3 years but not more than
     5 years  3 weeks
   More than 5 years  4 weeks’

   There is a provision for an additional week’s notice if an employee is over the age of 45 years, subject to other conditions, and also a provision for termination without notice if there is an event of serious misconduct.  Neither of those provisions are relevant for the purpose of this case.

   The leave entitlements are set out in clause 8.  Clause 8.1(a) provides:

   ‘The Employee is entitled to 4 weeks’ paid annual leave on the completion of 12 months of service and proportionally less for any lesser period.  This 4 weeks annual leave entitlement is cumulative.’

   Clause 8.2 provides that:

   ‘The Employee is entitled to 38 hours of sick leave per annum.’

   There is a restraining clause applying to Victoria.  The contract is governed by the law of the State of Victoria.  This appears to be a standard form of contract that has been adopted without specific modification.  Clause 14 provides:

   ‘ENTIRE CONTRACT

   This contract of employment supercedes[sic] all prior representations and agreements in connection with your employment.’

   In argument, I suggested that the contract may be ambiguous.  However, I reserved my decision as to whether I could rule in relation to whether the termination was valid.  This depends on whether the contract was for a minimum period of a year.

   The fact that the contract expresses itself to be for a year (subject to clause 7) and provides a probationary period during the first three months with a five days termination period would logically lead to an expectation that after the three month’s[sic] probation is completed, the contract will not be terminated except in the instance of serious misconduct until the year has run.  The period of a year that is mentioned is obviously not a maximum period as the contract anticipates accumulating annual leave and an entitlement to sick leave per year.

   I turn now to paragraph 7.  I note with some bemusement that the draftsman, having defined the period of notice to be called ‘Notice Period’, then reverts back to ‘period of notice’ for the purpose of the heading.  However, the only way to give the clause meaning is to assume that ‘period of notice’ and ‘Notice Period’ are used interchangeably.  The provision of longer periods of notice once more than a year has been served, then three years and more then five years, clearly anticipates that the contract may run for many years.  Therefore the period of one year is not a maximum.  This leads inferentially to the conclusion that the period of one year is a minimum.  The thing against this in the contract is the provision of a period of notice of one week with respect to an employee’s period of continuous service with the company of not more than one year.  This needs to be given a meaning.  For the defendant to win, it would be given the meaning of ‘less than one year and a day’.  However, that meaning then makes a nonsense of the provision of a probationary period for three months during which the employee can be dismissed on five day’s[sic] notice.  To give the clause that meaning, the probationary period is a period where five day’s[sic] notice of termination applies and then, for the following nine months, one week’s notice applies.  I ask rhetorically: If you can dismiss on one week’s notice, why have a probationary period at all?  The meaning which gives the best meaning to clause 7 is that ‘not more than one year’ means what it precisely says, namely one year.  I would interpret the contract in this way.  This is the way that best sits with the statement that it is a contract for one year, and the clauses anticipating it may be in force for several years.  Therefore I rule that a termination after the probationary period but before a year, which is not a termination consequent upon an act of serious misconduct, was not a valid termination.

   I will publish this ruling to the parties and call them back on 31 July at 11 a.m. for formal delivery of this and consequential orders."

1. On 31 July 1998 on the application of the respondent the Court struck out certain paragraphs of the appellant’s defence in consequence of the ruling which had been made.

2. On 31 July 1998 the matter was listed for trial on the issue of whether the plaintiff had mitigated her loss.  Evidence on the matter was taken on 26 August 1998 and judgment delivered that day.

3. There would appear to be no difficulty with the procedure adopted in this case in the light of r12 of the Magistrates Court (Civil) Rules 1992.  Sub-rules (2) and (3) of that Rule provide as follows:

   "(2).... Where at any time the Court considers it necessary or expedient for the speedy administration of justice or the saving of costs, it may -

   (a)     on its own initiative or on application of a party;

   or

   (b)    with the consent of the parties,

   ......... by order modify or dispense with the practice and procedure of the Court prescribed by these rules or give directions as to the practice and procedure to be adopted in respect of any action or proceeding.

   (3)... The Court may make an order or do any other act or thing (even if such order, act or thing is not specifically referred to in these rules) if the Court thinks that it is necessary or expedient to give proper effect to the act, any other act, or these rules and the justice of the case so requires."

1. It seems to me that this rule is a sufficient mandate to enable the Court to adopt the practice of the kind adopted on this occasion to make a ruling on a substantial issue where to do so would involve a significant saving in time and cost.  Of course, a procedure of this kind should not generally be adopted in relation to an issue where there is a substantial dispute between the parties as to the facts.

2. The material clauses of the contract of employment would appear to be set out in the learned Magistrate’s preliminary ruling.  Clause 2 of the contract contains a heading “Probationary Period”.  It is clearly designed to make special provision for the three months probationary period and in my view, because of its limited nature, this clause would override more general clauses referred to below as to term, salary and termination.  Under this clause, each party has a right of termination provided five days’ notice in writing is given.  Where the appellant gives the notice, it may at its election pay five days’ salary in lieu of notice.  This clause is to be contrasted with the remainder of the document where no right is given to the respondent to terminate the contract before its term expires.

3. Once the probationary period expires, clause 3, dealing with the term of the contract, applies.  The clause provides for employment for a period of one year subject only to the termination provisions contained in clause 7. 

4. The drafting of clause 7 is not particularly elegant.  It is headed “Termination by Company” and refers to the termination by the appellant of the respondent’s contract of employment.  It does not declare that the appellant, as employer, has a right of termination of the contract of employment on appropriate notice; it merely assumes that such a right exists.  As a matter of construction, I consider clause 7 is clear enough in its terms to afford the appellant as the employer in this case, a right of termination on one week’s notice or one week’s salary in lieu of notice.  In the circumstances of this case, the true meaning of the clause can be ascertained as a matter of construction and without recourse to extrinsic evidence: Meagher Gummow and Lehane, Equity Doctrines and Remedies  3rd Ed par2608.  In my view, clause 7 of the contract enables the appellant to terminate the contract on notice or on payment in lieu of notice.  There is plainly nothing in the clause which gives a corresponding right of termination to the respondent or implies that such a right exists.

5. If the contract is terminated by the appellant, then various periods of notice are given depending on the respondent’s continuous service with the appellant.  The respondent commenced her employment on 15 April 1997 and her employment was terminated on or about 5 September 1997.  She was employed by the Company for more than three months but less than 12 months in which case she is entitled to one week’s notice or one week’s pay in lieu of notice.

6. While there may be some features of this contract which appear rather odd in the present circumstances, it seems to me to be a standard form which is intended to be adapted with a minimum of alteration to a number of situations.  Seen in that light, I do not believe that the contract is ambiguous or difficult to correctly interpret.

7. In the circumstances, I would allow the appeal, set aside the judgment in the court below, including the orders for interest and costs, and set aside the ruling of the learned Magistrate made on 31 July 1998..  I will hear counsel as to what further orders should be made in the circumstances.