Jeavons v Entram Pty Ltd
[2015] FCCA 3457
•24 December 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| JEAVONS v ENTRAM PTY LTD | [2015] FCCA 3457 |
| Catchwords: CONTRACT – Whether summary dismissal was breach of an implied term in a contract of employment as to reasonable notice – whether the employee engaged in serious misconduct. |
| Legislation: Federal Circuit Court of Australia Act 1999 (Cth), s.76 |
| BHP Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (2013) 219 FCR 245;[2013] FCAFC 132 Bibby Financial Services Australia Pty Ltd v Sharma [2014] NSWCA 37 Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66; [1933] HCA 8 Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500; [2012] HCA 32 Briginshaw v Briginshaw (1938) 60 CLR 336;[1938] HCA 34 Byrnes v Treloar and Others (1997) 77 IR 332; [1997] NSWSC 629 Castel Electronics Pte Ltd v Toshiba Singapore Pty Ltd (2011) 192 FCR 445; [2011] FCAFC 55 Cohen v iSoft Group Pty Ltd [2012] FCA 1071 Cohen v iSoft Group Pty Ltd (2013) 298 ALR 516; [2013] FCAFC 49 Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 Concut Pty Ltd v Worrell (2000) 176 ALR 693; [2000] HCA 64 Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (2014) 253 CLR 243; [2014] HCA 41 Construction, Forestry, Mining and Energy Union v Pilbara Iron Company (Services) Pty Ltd (No. 3) [2012] FCA 697 Delooze v Healey [2007] WASCA 157 Devonshire v Magellan Powertronics Pty Ltd (2013) 275 FLR 273; [2013] FMCA 207 Driesen v Edith Cowan University [2012] FMCA 735 Evans v TriLab Pty Ltd [2014] FCCA 2464 Fountain and Another v Alexander and Another (1982) 150 CLR 615; [1982] HCA 16 Fox v Stowe Australia Pty Ltd (2012) 271 FLR 372; [2012] FMCA 976 Fryar v Systems Services Pty Ltd (1996) 137 ALR 321 General Motors-Holden Pty Ltd v Bowling (1976) 51 ALJR 235; (1976) 12 ALR 605 Harrison v In Control Pty Ltd (2013) 273 FLR 190; [2013] FMCA 149 Hill v Compass Ten Pty Ltd (No. 2) [2012] FCA 815 Hodkinson v Commonwealth (2011) 248 FLR 409; [2011] FMCA 171 HP Mercantile Pty Ltd v Commissioner of Taxation (2005) 143 FCR 553; [2005] FCAFC 126 Huntley Management Limited and Another v Timbercorp Securities Ltd and Others (2010) 187 FCR 151; [2010] FCA 576 John Lysaght (Australia) Ltd v Federated Ironworkers; re York (1972) 14 AILR 517 Jones v Queensland Tertiary Admissions Centre Ltd (No. 2) (2010) 186 FCR 22; [2010] FCA 399 Kirk and Another v Industrial Relations Commission of NSW and Another (2010) 239 CLR 531; [2010] HCA 1 McDonald v Parnell Laboratories (Aust) (2007) 168 IR 375; [2007] FCA 1903 Melbourne Stadiums Limited v Sautner (2015) 317 ALR 665; [2015] FCAFC 20 Miller v Sunland Park Pty Ltd & Another [2014] FCCA 89 North v Television Corporation Ltd (1976) 11 ALR 599 O'Grady v Northern Queensland Co Limited (1990) 169 CLR 356; [1990] HCA 16 Pastrycooks, Biscuit Makers & Flour & Sugar Goods Workers Union v Gartrell White (No. 3) (1990) 35 IR 70 R v Industrial Commission of South Australia; Ex parte Adelaide Milk Cooperative (No. 2) (1977) 46 SAIR 1202 Rankin v Marine Power International Pty Ltd (2001) 107 IR 117; [2001] VFC 150 Rogan-Gardiner v Woolworths Limited (No. 2) [2010] WASA 290 Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262 Shea v EnergyAustralia Services Pty Ltd (2014) 242 IR 159; [2014] FCAFC 167 Shea v TruEnergy Services Pty Ltd (No. 1) (2012) 204 FCR 456; [2012] FCA 628 Shea v TRUenergy Services Pty Ltd (No. 6) (2014) 314 ALR 346; [2014] FCA 271 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 11 Unsworth v Tristar Steering & Suspension Australia Ltd (2008) 216 FCR 122; [2008] FCA 1224 |
| Applicant: | MARK RICHARD JEAVONS |
| Respondent: | ENTRAM PTY LTD T/A NIAGARA POOL SUPPLIES ABN 24 059 073 120 |
| File Number: | SYG 2124 of 2012 |
| Judgment of: | Judge Barnes |
| Hearing dates: | 11-13 March 2014; 27 April 2014 |
| Date of Last Submission: | 23 March 2015 |
| Delivered at: | Sydney |
| Delivered on: | 24 December 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Phillips SC Mr Read |
| Solicitors for the Applicant: | Beasley Legal |
| Counsel for the Respondent: | Mr Mahendra |
| Solicitors for the Respondent: | Australian Business Lawyers |
ORDERS
The Respondent pay the Applicant the sum of $30,283.98 in respect of the Applicant’s claim for breach of the implied term as to reasonable notice in his contract of employment.
The parties have liberty to apply for any further or consequential order, including in relation to interest, for the purpose of giving effect to these reasons for judgment.
The Application is otherwise dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2124 of 2012
| MARK RICHARD JEAVONS |
Applicant
And
| ENTRAM PTY LTD T/A NIAGARA POOL SUPPLIES ABN 24 059 073 120 |
Respondent
REASONS FOR JUDGMENT
Background and these proceedings
The Applicant, Mr Mark Richard Jeavons, claimed that the Respondent, Entram Pty Ltd T/A Niagara Pool Supplies ABN 24 059 073 120 (Entram), his former employer, contravened the general protections provisions of the Fair Work Act 2009 (Cth) (the FWA) by dismissing him for a proscribed reason. He also claimed that Entram contravened its obligation to pay him redundancy pay in accordance with s.119 of the FWA. In addition, he contended that by dismissing him summarily Entram breached an implied term in his contract of employment to provide reasonable notice of termination.
Entram denied the asserted contraventions of the FWA and submitted that Mr Jeavons engaged in serious misconduct such as to justify his summary dismissal.
For the reasons that follow I am satisfied that Entram breached an implied contractual term to provide reasonable notice of termination, but that Mr Jeavons’ claims under the FWA are not made out.
Some facts are uncontentious. At all relevant times Entram traded in New South Wales as Niagara Pool Supplies (Niagara), a wholesale supplier of equipment for swimming pools which it sourced from local and overseas manufacturers and onsold to retail shops, pool technicians and builders.
The directors and shareholders in Entram were Mr Denis Baxter and Ms Nelleke Gilhuys (the directors). Mr Baxter was the Managing Director and Ms Gilhuys the Finance Director.
Mr Jeavons commenced employment with Entram on or about 1 July 2001. He was subsequently given the title of technical manager. On or about 29 September 2003 a document entitled Terms and Conditions of Employment was provided to Mr Jeavons which was said to “confirm” his conditions of employment “in note form”.
In or about 2006, at the request of Mr Jeavons, his title was changed to General Manager.
From about 2008 on, Mr Baxter and Ms Gilhuys made retirement plans on the basis of selling the business for a satisfactory price. At one point negotiations were entered into with Mr Jeavons and Mr Paul Zammit for the sale of the business. However the proposed purchase did not proceed.
In or around March 2012, the directors entered into discussions with Pool Systems Pty Ltd (Pool Systems) a competitor of the Niagara business. A terms sheet for the acquisition dated 23 March 2012 was prepared which provided for an assets sale (plant, equipment and goodwill) subject to certain conditions. Pool Systems was not proposing to take over ownership of Entram.
A revised terms sheet dated 7 May 2012 was executed by the directors of Entram on 10 May 2012. The amount to be paid for Niagara’s plant and equipment, goodwill and stock was recalculated and an increased deduction allowed in respect of employee leave entitlements. Under these revised terms of sale Pool Systems was to employ all the existing staff of Entram and Niagara Pool Supplies Queensland Pty Ltd (which was also the subject of the agreement) on the same terms as their current employment and with the same salaries, subject to normal business conditions and the employees’ continued satisfactory performance. Entram was to pay all superannuation and employee entitlements due and payable prior to settlement. The proposed completion date was 2 July 2012. The sale was subject to satisfactory due diligence. It was agreed that the Niagara General Manager (Mr Jeavons) and the Office Manager (Nicole) would be “available” for the purposes of the due diligence.
On or about 4 May 2012, while negotiations were underway, the directors of Entram informed Mr Jeavons of the discussions with Pool Systems and the fact that they had reached an agreement to sell the business to Pool Systems.
As discussed further below, Mr Jeavons claimed that during this meeting with the directors he made inquiries of Mr Baxter about his employment prospects and that of other staff, what would happen if Pool Systems did not require him as General Manager and about the conditions of the transactions.
In May 2012 discussions took place in relation to the proposed sale. Mr Wischer, the Chairman of Pool Systems, asked to meet with Mr Jeavons as part of the due diligence process. On 9 May 2012 Mr Jeavons met with Mr Wischer and two other executives from Pool Systems. On or about 17 May 2012 Mr Wischer again met with Mr Jeavons. The evidence as to what occurred at those meetings is discussed further below.
On or about 21 May 2012 Mr Jeavons sent an email to Mr Wischer outlining his desired terms and conditions for possible employment with Pool Systems. The email attached a document headed “Draft – Proposed Terms of Contract” and Mr Jeavons’ curriculum vitae.
On or about 24 May 2012, Mr Keith Hall, the CEO of Pool Systems visited Niagara’s business premises in Sydney. On 31 May 2012 a due diligence report was provided to Pool Systems by InterFinancial Ltd.
On 6 June 2012 Mr Wischer visited Niagara’s premises. By letter of that date Mr Wischer advised Mr Baxter and Ms Gilhuys that Pool Systems had found a number of issues during due diligence investigations into the proposed acquisition that caused it to withdraw the offer set out in the terms sheet dated 7 May 2012. However the letter also stated that Pool Systems was prepared to renegotiate the acquisition (and to settle on 31 July 2012), but that the issues identified would need to be resolved. Six issues were identified. They related to earnings, capital expenditure, Ms Gilhuys’ involvement, Mark Jeavons, suppliers and stock. As discussed further below, the letter stated that Pool Systems did not want to take Mr Jeavons on.
By email dated 7 June 2012 Mr Wischer forwarded to Ms Gilhuys’ email address a copy of Mr Jeavons’ email to him of 21 May 2012.
On 13 June 2012 Mr Baxter, on behalf of Entram, summarily terminated Mr Jeavons’ employment.
The sale to Pool Systems did not proceed at that time.
As indicated, Mr Jeavons asserted that Entram’s termination of his employment constituted adverse action contrary to the general protections provisions of the FWA, that his summary dismissal was in breach of his contract of employment under which he was entitled to reasonable notice and that Entram had failed to pay him redundancy payments in accordance with s.119 of the FWA. He sought compensation and redundancy pay under the FWA as well as twelve months’ payment in lieu of notice. He also sought that pecuniary penalties be imposed on Entram in respect of the alleged contraventions of the FWA.
The Evidence
Mr Jeavons relied on affidavits sworn by him on 1 February 2013 and 22 March 2013; affidavits sworn by his wife Rebecca Anne Jeavons on 1 February 2013 and 22 March 2013; an affidavit sworn by Paul Zammit on 14 March 2013 and an affidavit sworn by Andrew Stewart sworn on 20 March 2013. Only Mr Jeavons was required for cross-examination.
Entram relied on affidavits affirmed by Denis Baxter on 4 March 2013; Nelleke Gilhuys on 4 March 2013 and Adrian Wischer (a shareholder, director and the chairman of Pool Systems) on 7 March 2013. Each of these witnesses was cross-examined.
The Respondent submitted that the Applicant was not a credible witness on the basis that the overwhelming impression created in cross-examination was that he was inconsistent, elusive and evasive in the way he gave his evidence and that he repeatedly changed his position on key facts without offering acceptable explanations.
There was some inconsistency in Mr Jeavons’ evidence in cross-examination in relation to his satisfaction with his remuneration and position at Entram during his period of employment, his motivation in asking Entram for what he described as a “golden handshake” if the business was sold, his duties as general manager and where his interests lay during the negotiations with Pool Systems. He clearly had a view of the importance of his role that was not shared by the directors. He also demonstrated some confusion about whether his employer was Entram or the “business” of Niagara. However, Mr Jeavons did not “repeatedly” change his position on key facts. His attitude to his remuneration, his view of his position at Entram and his motivation in seeking more money from Entram at various times are not determinative of his claims. I am not persuaded that Mr Jeavons was entirely lacking in credibility. However, particular issues in relation to aspects of his evidence are discussed further below where relevant.
Insofar as there is a direct conflict between the evidence of Mr Jeavons and Mr Wischer, I prefer the evidence of Mr Wischer, who, while a witness for the Respondent, was not a party to these proceedings and gave objective and clear evidence and made appropriate concessions in relation to matters he could not recall. Similarly, where there is a conflict between the evidence of Mr Wischer and either or both of Mr Baxter and Ms Gilhuys, I prefer the evidence of Mr Wischer. Neither party expressed any concern about Mr Wischer’s credit. None is apparent. Where there is a conflict between the evidence of Mr Baxter or Ms Gilhuys and Mr Jeavons, the evidence of Mr Wischer is of significance in resolving such a conflict.
For his part, the Applicant took issue with Mr Baxter’s credibility in and contended that the reasons he gave for the summary dismissal should not be accepted. It was submitted that Mr Baxter had an “inflated” view of his role within Entram and that he could be regarded as an unreliable witness. There were some issues in relation to the accuracy and extent of Mr Baxter’s recollection (some of which he conceded). He also provided answers in cross-examination that were at times in the nature of submissions or mere declarations. However this is a not uncommon practice of a witness confronted with the constraints of responding to questions asked in cross-examination. Mr Baxter’s claim that the visit to Niagara’s premises by Mr Hall (the Pool Systems CEO) on 24 May 2012 was not part of what he regarded as the “formal” due diligence process (criticised by the Applicant) contrasted with Mr Wischer’s evidence in cross-examination that Mr Hall had spoken to Niagara’s personnel and directors as part of the due diligence process and Ms Gilhuys’ evidence that the purpose of the meeting on 24 May 2012 was to answer questions about the business.
I am not persuaded that, as it appeared to be suggested, more weight should be given to the contents of an email from Keith Hall, the CEO of Pool Systems, to other Pool Systems representatives, than to Mr Baxter’s sworn evidence about his role at Entram. Mr Hall did not put on any affidavit evidence in these proceedings and was not available for cross-examination.
It is the case that Mr Hall’s email suggested that Mr Hall may have taken a different view to that of Mr Baxter about Mr Baxter’s importance in the Niagara business. However, notwithstanding the evidence of Mr Baxter’s limited day to day involvement at the relevant time, he was a director and shareholder with ultimate management responsibility (with Ms Gilhuys). In any event his view of his importance and day to day role in the business is not such as to render Mr Baxter an unreliable witness in all respects.
The Applicant also suggested that it was relevant that while Mr Baxter repeatedly claimed that he was not good with dates, he had no difficulty with recalling that 6 June was Mr Jeavons’ birthday and also “D-day”. I do not regard this recollection as indicative of a lack of credibility.
It is the case that, when compared with objective evidence or that of Mr Wischer, Mr Baxter’s recollection was not in all respects reliable, (for example, in relation to the dates of meetings with the Applicant in May 2012 and when he was informed about and received from Mr Wischer a copy of Mr Jeavons’ email of 21 May 2012). There is objective evidence that a copy of Mr Jeavons’ email of 21 May 2012 to Mr Wischer was forwarded to Ms Gilhuys’ email address on 7 June 2012 by Mr Wischer. I prefer that evidence to Mr Baxter’s initial recollection that he first became aware of the 21 May 2012 email on or about 13 June 2012 (the date of the dismissal of Mr Jeavons).
More generally, insofar as there is a lack of clarity or confusion or inconsistency in Mr Baxter’s evidence about the timing of particular events and when he was made aware of particular issues, I prefer the evidence of Mr Wischer. Particular aspects of Mr Baxter’s evidence relevant to the Applicant’s claims are discussed further below where necessary. However he gave clear and consistent evidence in relation to his concerns about Mr Jeavons’ conduct during May 2012. I accept that those views were genuinely held.
The Applicant was also critical of Ms Gilhuys’ credibility. Insofar as this criticism was put on the basis that, according to Mr Hall’s email of 25 May 2012, certain comments were attributed to her, I am not persuaded that weight should be placed on an email from a person who is not a witness in the proceedings in order to support an overall adverse credibility finding against Ms Gilhuys. The email evidence about what Mr Hall said Ms Gilhuys had said is not objective evidence against which her sworn evidence may properly be considered.
Moreover, contrary to the Applicant’s contentions, Ms Gilhuys’ responses to questions about why the proposed sale to Pool Systems did not go ahead after Mr Jeavons’ employment had been terminated, were not such as to raise significant doubt about her credibility. In particular, she explained (consistent with Mr Wischer’s evidence) that she thought that Mr Wischer had indicated that there were issues as explained in the letter of 6 June 2012 and that she did not think that they could be overcome. She also explained that there was an added problem in that the proposed sale had become public knowledge and referred to the issue of the need for formal supply agreements. At the same time Ms Gilhuys conceded that she did not have a clear recollection, having regard to the fact that these events had happened in a two-week period that she found distressing and also that her mother had died at the same time.
However, having regard to this concession and Mr Wischer’s evidence to the contrary, I do not accept Ms Gilhuys’ claim in cross-examination that she and Mr Baxter had decided to dismiss Mr Jeavons on 6 June 2012, that she saw a copy of the email of 21 May 2012 on that day or that at the time Mr Jeavons was dismissed, she did not know that Pool Systems did not wish to take him on. Mr Wischer’s evidence, which I accept, is that he did not send a copy of Mr Jeavons’ letter (and CV and draft proposed terms of contract) to Mr Baxter prior to the meeting on 6 June 2012. He recalled that he sent it later, on what he thought was 7 June 2012. There is evidence that he sent a copy of the email of 21 May 2012 to Ms Gilhuys on 7 June 2012. Insofar as there is a conflict in this aspect of the evidence, I prefer the evidence of Mr Wischer.
The Applicant also submitted that the similarity between the wording of parts of the affidavits of Mr Baxter and Ms Gilhuys was such as to justify an inference that they had colluded in the preparation of their affidavits in such a manner as to render their evidence unreliable in all respects. This is a serious allegation. I am not so persuaded. While there is some similarity, it is not of such a nature or so extensive as to support such an inference.
Issue was taken with the fact that Ms Gilhuys stated (in paragraph [19]) of her affidavit “I therefore believe that the Applicant’s former title of General Manager would more accurately have been characterised as an Operations Manager” while Mr Baxter’s evidence (at paragraph [38]) was that he had agreed to Mr Jeavons’ request to be given the title of General Manager in order to satisfy his ego but that, in his view, “the Applicant would more correctly be characterised as an Operations Manager”. Considered in isolation, this similarity is notable. However, it should be seen in context.
As Ms Gilhuys explained in her affidavit:
The Applicant, the Warehouse Manager, the Account Manager, and more recently the Office Manager all reported to Denis and me. I therefore believe that the Applicant’s former title of General Manager would more accurately have been characterised as an Operations Manager. The title of General Manager was only given to the Applicant to accommodate his request and, as previously stated, did not properly reflect either his duties or his seniority within the Company.
On the other hand, the impugned portion of Mr Baxter’s affidavit followed a detailed discussion of Mr Jeavons’ responsibilities and the circumstances of his transition to the title of “General Manager”. Mr Baxter denied certain aspects of the Applicant’s claims about his duties and in that context stated:
In summary, the Applicant had a number of different duties. Although he was called the General Manager in order to satisfy his requests, the Applicant would more correctly be characterised as an Operations Manager whose position sat alongside the Warehouse Manager and the Office Manager in the Company’s office hierarchy. Each of these managerial positions reported to the Directors. The Applicant did not have supervisory oversight over, or responsibility for, the Office Manager or the Warehouse Manager.
The Applicant also submitted that paragraph [43] of Ms Gilhuys’ affidavit and paragraph [68] of Mr Baxter’s affidavit were in almost identical terms, but for the order of the subparagraphs. It appears that this was intended to be a reference to paragraph [70] of Mr Baxter’s affidavit (as in paragraph [68] he recounted a telephone conversation with Mr Wischer). However the similarity is unexceptional, given that in these paragraphs each of the deponents was summarising his or her understanding of what Mr Jeavons sought from Pool Systems in his email of 21 May 2012. It is also notable that these paragraphs are not in identical terms. The claims made by Mr Jeavons are described differently. For example, Ms Gilhuys attested that he sought “a 3 year guaranteed fixed term of employment” whereas Mr Baxter referred to his desire to “be provided with a 3 year fixed term contract (which he did not currently have)”.
Issue was also taken with the alleged similarity between paragraphs [46] of Ms Gilhuys’ affidavit and [62] of Mr Baxter’s affidavit, in which they each addressed disparaging or critical comments said to have been made by Mr Jeavons in meetings with Mr Wischer of which they had only became aware after his dismissal. It has to be said that these paragraphs read as if drafted with the assistance of legal representation.
Ms Gilhuys said:
Having read the Applicant’s Affidavit, I am also now aware that the Applicant disparaged Denis and I to Mr Wischer on a number of occasions in their meetings. Had we known about this behaviour at the time, Denis and I would have also summarily dismissed the Applicant for serious misconduct for these belittling remarks, and as a separate and independent ground of termination to that was formally provided at the time of termination.
Mr Baxter’s evidence in this respect appears in a paragraph in which he referred to his comments and instructions to Mr Jeavons to make sure that he behaved himself and answered Pools Systems’ questions about the business truthfully. He then stated:
My comments to the Applicant were also not intended to authorise him to use the opportunity to disparage and criticise senior managers of the business, including Nelleke and myself. If we had known of the types of belittling comments he had said to Mr Wischer about Nelleke and me at the time, we would have immediately dismissed him for serious misconduct and as an independent and separate ground of termination.
Clearly there is some commonality here, but it does not go so far as to support the very serious allegation of collusion such as to render either Ms Gilhuys or Mr Baxter totally lacking in credibility. Moreover, the issue of whether any disparaging remarks by Mr Jeavons amounted to serious misconduct justifying summary dismissal is to be assessed objectively, not on the basis of the directors’ subjective opinions.
Thus, while there are issues about aspects of the evidence of each of Mr Jeavons, Mr Baxter and Ms Gilhuys, these issues do not justify general adverse credibility findings. Particular evidentiary issues are discussed further below.
Findings in Relation to Events Leading up to 2012
What occurred in 2012 is to be seen in the context of preceding events.
Mr Jeavons commenced working for Entram as a sub-contractor in 2000. On or about 1 July 2001 he was employed by Entram on a permanent full time basis. He claimed that he was employed in the role of Technical Manager, but conceded that, to the best of his recollection, this was “done retrospectively” during the second half of the 2001 calendar year. I accept that sometime after he commenced employment with Entram Mr Jeavons requested and was given the title of “Technical Manager” (as Mr Baxter acknowledged), notwithstanding that (according to Mr Baxter’s undisputed evidence) Mr Jeavons did not perform a significant number of technical duties at that time. I accept Mr Baxter’s evidence that he agreed to the request because he did not think the job title was a matter of importance. As the company grew, Mr Jeavons took on more responsibilities.
After a fire at Entram’s premises in 2003, Mr Jeavons was given a document entitled “Terms and Conditions of Employment”. This was the first time he was given a document relating to his terms and conditions of employment. It was said to “confirm” his conditions of employment “in note form”. It did not address the issue of notice.
In or around 2006, Mr Jeavons approached the directors and asked that he be given the title of General Manager. Again he was given the title he requested, although I accept that the directors did not consider that the work he performed was that of a general manager.
As Mr Baxter conceded, from about 2008 onwards, the directors were interested in finding a purchaser for Entram’s business. On occasion the Applicant made requests to the directors for salary increases and what he described as a “golden parachute” in the event that the business was sold.
However, contrary to any suggestion that Mr Jeavons’ requests were made only in the context of an anticipated sale of the business, his evidence included the fact that on 13 February 2007 he wrote to the directors seeking a salary increase on the basis of what he saw as his significant contribution to the prosperity of the business and the time that had passed since he had a pay increase. Also in evidence are notes he made prior to a meeting about a salary review in April 2007. These notes refer to issues of “accumulation of sick leave” and “golden parachute”. There is no evidence of any proposal for sale of the business in 2007. Indeed, the notes also addressed the directors’ plans for the next five years, succession planning and how the directors saw Mr Jeavons’ role developing.
In 2008 a representative of Pool Systems approached the directors in relation to a possible sale of the business. The sale did not proceed. Mr Jeavons was aware the business was being actively marketed for sale and that the directors wanted to retire. In about July 2008, Mr Jeavons and his wife approached the directors to express an interest in buying the business on the basis that the directors agreed to provide vendor finance. Mr Jeavons’ evidence is that nothing came from this approach. Mr Baxter and Ms Gilhuys understood that Mr and Mrs Jeavons were unable to secure the necessary finance.
Subsequently, Mr Jeavons wrote to the directors on 4 December 2008 in relation to “the issue of money” seeking, amongst other things, a salary increase and changes to his entitlements. He stated: “I also want a document that confirms that I will receive the equivalent of one year’s salary as a bonus in the event that Niagara is sold to an outside entity other than one controlled by myself and Rebecca.” Under the heading “What I want” he raised, in fairly direct terms, issues in relation to his and his wife’s reimbursement and other matters. Mr Jeavons also referred to the need for a new catalogue and asked: “Is Niagara still on the market? The conduct of discussions with Poolstore and Pentair raise doubts about this. How committed are each of you to selling Niagara? Yes, Rebecca and I are still interested in acquiring Niagara, but the acquisition of Poolstore (if it goes ahead) could make it more of a challenge. If the Poolstore and Pentair distribution plans go ahead, I want a share of the action on reasonable terms.”
Mr Jeavons concluded this letter with a suggestion that to “avoid the awkwardness of another discussion like this in September ‘09, I propose and would like confirmation in principle that Rebecca and I will automatically receive a 5% increase in pay effective at the same time that the other staff reviews are made effective in 2009.”
In 2009 Mr Baxter placed an advertisement in the Financial Review seeking a purchaser for the business. He and Mr Jeavons attended a meeting with a potential purchaser (a Mr Mullins). Mr Jeavons told Mr Mullins “You know I am trying to buy this business?” Mr Jeavons conceded that he was effectively “wearing two hats” at this time – as a potential employee and as a potential competitor in relation to the purchase of the business. Mr Jeavons claimed he disclosed his interest out of a desire to ensure that the potential purchaser was fully informed of his conflict of interest and that this was to the potential purchaser’s “benefit”. However on 23 September 2010, in an email to Mr Zammit, he acknowledged that he had “possibly scuttled the interest” from the other potential bidder and suggested that the directors may resent this.
Contrary to the Respondent’s submissions, Mr Jeavons’ subsequent acknowledgment of the possible impact of his 2009 disclosure is not necessarily inconsistent with his statement that at the time he wanted to ensure that the potential purchaser was fully informed of his potential conflict of interest. The potential purchaser subsequently ceased all discussions with Mr Baxter in relation to the sale of the business. However neither of the directors made any comment or raised any concerns with Mr Jeavons about his disclosure to the potential purchaser of his interest in acquiring the business. I accept Mr Baxter’s evidence that while he was “extremely irritated” by Mr Jeavons’ behaviour, he considered it “pointless” to raise his concerns, as the potential purchaser had left and there was “no point labouring on things that had gone wrong”. Instead he decided to focus on Mr Jeavons’ indication that he wished to purchase the business.
During 2010 Mr Jeavons and a friend, Paul Zammit (who gave unchallenged affidavit evidence in these proceedings), approached the directors with a proposal to acquire the business operating as Niagara Pool Supplies. Both Mr Jeavons’ and Mr Zammit’s evidence, which I accept, is that the acquisition did not proceed as they could not raise the capital for the purchase of the business. In the beginning of October 2011 Mr Jeavons committed to another investment. I accept Mr Jeavons’ evidence that thereafter he was not in a position to secure sufficient finance to enable him to acquire the business. He made no further approaches to the directors about possible purchase of the business.
In the meantime, on 26 October 2010 Mr Jeavons again wrote to the directors requesting a salary review – on the basis of what he saw as his increased responsibility and involvement in working for the business and his substantial contribution to the success of the business. Relevantly, he stated (again in very direct terms):
Let me be very clear in stating up front that I do not resent the fact that you make a very good living out of Niagara. You deserve it, having worked hard for many years to build the business up from almost nothing. However, given your present plans for selling the business and the difficulty that Paul and I are having in raising funds, it is quite possible that you may well depart after 20 years of ownership of Niagara with something in the order of $4M in the bank whilst I may finish 10 years of loyal service with nothing and this is what concerns me.
Mr Jeavons also put to the directors his view that he was “significantly under paid (sic) compared with the market” having regard to his role and the turnover of the business. He stated that he would “like to negotiate a written agreement with you which includes some form of bonus for last year’s result and a generous increase for the current year back dated (sic) to 1st July. Also, I would like there to be a golden parachute that provides a bonus to me in the event that Niagara is sold to another party other than Paul and myself.”
Mr Jeavons subsequently received a salary increase, but no written agreement.
In cross-examination Mr Jeavons initially claimed that he had not expressed dissatisfaction with the income he received. However when his letters to the directors were put to him, he conceded this was not the case. He conceded that between October 2010 and 2011 he was “probably” dissatisfied with the level of his income. He ultimately conceded that in his view that his salary at Entram was not commensurate with his contribution to the business. Insofar as he claimed he was getting close to being reasonably remunerated and was satisfied with the level of his income in May 2012, this is not consistent with the evidence of his approaches to Mr Wischer discussed below and the fact that, on his evidence, he had not had a pay rise for two years at that time. I do not accept that Mr Jeavons was “satisfied” with his level of income in May 2012.
Findings in Relation to Events of 2012
In early 2012 the directors entered into negotiations for the sale of Entram’s business to Pool Systems. Pool Systems was both a supplier to and competitor of the Respondent. As evidenced by the Terms Sheet, the proposal was that the sale would proceed by way of an asset sale. Pool Systems was not proposing to take over ownership of Entram itself. Beyond a transitional handover period, the directors’ involvement in the running of the business was to cease.
Mr Wischer approached Mr Baxter to determine whether the purchase would be in Pool Systems’ best interest. He was principally responsible for the negotiations on behalf of Pool Systems. I accept Mr Baxter’s evidence that he told Mr Wischer that it was important to him and Ms Gilhuys that all the staff were offered employment by Pool Systems if the sale went ahead. Although the initial terms of sale dated 23 March 2012 did not incorporate any term in relation to keeping on staff, I accept that Mr Wischer informed Mr Baxter that Pool Systems would agree to employ the staff on their current terms and condition. The revised Terms Sheet dated 7 May 2012 included such a provision, as well as an adjusted proposed price (including an increased deduction from the price in respect of employee entitlements) and a provision that the General Manager (Mr Jeavons) and the Office Manager would be “available” to participate in the due diligence process. Pool Systems disclosed that Mr Wischer, Mr Hall and two other representatives of Pool Systems, as well as a representative of InterFinancial Ltd, would be involved in the due diligence process.
At some time in early May 2012 (prior to 9 May), the directors met with Mr Jeavons. Mr Jeavons attested to a meeting on 4 May 2012. Mr Baxter’s recollection was of a meeting on 7 May 2012 and a further meeting on 9 May 2012. It is clear the meeting was prior to 9 May 2012 when Mr Jeavons met with Pool Systems representatives. References to a meeting of 4 May 2012 are to this meeting. Consistent with the agreement reflected in the revised Terms Sheet, Mr Baxter informed Mr Jeavons that they had reached an agreement with Pool Systems to sell the business, that representatives were coming in the next week and wanted to meet him and Nicole (the Office Manager) but that otherwise the sale was confidential.
During the course of the conversation, Mr Jeavons stated words to the effect “So, where does that leave me?” Mr Baxter told him that Pool Systems had indicated that they wanted to keep him on as manager. Contrary to Mr Jeavons’ recollection, I accept that Mr Jeavons was told that this would be on the same terms and conditions. This is consistent with Mr Wischer’s evidence about the proposal, Ms Gilhuys’ recollection and the objective evidence of the Terms Sheet of 7 May 2012. Mr Jeavons also asked generally “What about the other staff?” Similarly, I accept that Mr Jeavons was also informed that the proposal was to keep other staff on the same terms and conditions.
Mr Jeavons then said words to the effect:
You know as well as I do that that doesn’t stop them changing their minds down the track, so in six months time they might decide that they no longer need a General Manager because they are going to run it from Queensland or downgrading my position to Branch Manager.
I accept that, as both Mr Jeavons and Mr Baxter attested, Mr Jeavons also asked “Is there any chance of some sort of bonus for me in recognition of my 11 years of service and the contribution that I have made to the business?” and that Ms Gilhuys remarked to Mr Baxter “I told you he would ask about that”. Mr Baxter advised Mr Jeavons that there was “not enough money for that”, to which Mr Jeavons responded “Well if you don’t ask you don’t get.”
Whether on that occasion or at another meeting before 9 May 2012, Ms Gilhuys put to Mr Jeavons that the purchase could be a good thing or a positive thing for him and for Niagara and that Pool Systems had the ability to invest more than Entram in the business. She advised him to be “positive about the change” when talking to Pool Systems.
Mr Jeavons’ evidence is that Ms Gilhuys also told him to “answer their questions and just do as they ask.” Ms Gilhuys’ evidence was that she did not say “answer their questions and just do as they ask” as this was not typical of the language she used and that she would never have told the Applicant this. However she acknowledged, and I accept, that she instructed Mr Jeavons to be honest in his answers about the business and communicated to him a direction to be cooperative.
Mr Baxter’s initial recollection was that shortly before Mr Wischer attended the company’s premises he had a further meeting with Mr Jeavons in which he said words to the effect “this could be an opportunity for you Mark. But just make sure you behave yourself, and answer their questions about the business truthfully.” Mr Jeavons denied that he was told to behave himself. I accept that, consistent with Mr Baxter’s evidence in cross-examination, Mr Baxter instructed Mr Jeavons to tell the truth and to cooperate. On balance, I am not satisfied that Mr Baxter, whose recollection of detail was not always reliable, told Mr Jeavons to behave himself. However it is clear that prior to Mr Jeavons’ first meeting with Mr Wischer and other Pool Systems representatives on 9 May 2012, both Ms Gilhuys and Mr Baxter had made remarks to him about the proposed meeting which, as he understood, instructed him to cooperate with Pool Systems and answer their questions about the business honestly. Whether or not this occurred in the same conversation in which the bonus was discussed, or thereafter, is not critical.
Mr Baxter also gave evidence about his intention, the purpose of his comments and instructions to Mr Jeavons, what he meant by his remarks and what he believed would happen. However these matters were not communicated directly to Mr Jeavons at the time. In particular, Mr Baxter did not tell Mr Jeavons not to raise his own concerns and interests with Mr Wischer, notwithstanding an employment relationship in which Mr Jeavons had made frequent and very direct requests for improvements in his remuneration (including in his request for a bonus in the meeting of 4 May 2012).
Mr Jeavons met with Mr Wischer and two other representatives of Pool Systems on 9 May 2012.
Mr Wischer’s affidavit evidence about this meeting was relatively brief. He told Mr Jeavons at the outset that the purpose of the meeting was to get to know him and to understand the role he played in the business and the industry. There was what Mr Wischer regarded as a brief discussion regarding the work Mr Jeavons performed, during which Mr Jeavons claimed that he was responsible for a large variety of matters. Mr Jeavons gave Mr Wischer the “impression that he was responsible for the day to day running of the business”. He stated that “Denis and Nelleke don’t do anything. I run the whole business”. Mr Wischer made it clear to Mr Jeavons that if Pool Systems proceeded with the purchase it would take on the existing employees on their current terms and conditions of employment. Mr Jeavons said: “Well if you want me to stay on, I want a pay rise and a contract of employment”. Mr Wischer considered this amounted to a threat that Mr Jeavons would leave if Pool Systems did not agree to his requests. He reiterated that their position was “that we take the business on as it is”. Mr Wischer’s evidence was that he stopped the meeting “almost immediately after this discussion, as [he] was uncomfortable with [Mr Jeavons’] comments and attitude”.
In contrast, Mr Jeavons gave detailed affidavit evidence about what he said and the issues discussed during this meeting. It is on the basis of this evidence that the Respondent now asserts that Mr Jeavons’ conduct in this meeting involved disparagement constituting serious misconduct such as to warrant his summary dismissal (apart from the reliance on the email Mr Jeavons sent to Mr Wischer on 21 May 2012).
As discussed further below, the context in which conduct occurs is of relevance in a determination of whether it amounts to serious misconduct. Hence it is appropriate to set out in full Mr Jeavons’ evidence about the meeting on 9 May 2012. He attested:
On 9 May 2012, during the afternoon I was summoned to meet with them (Mr Wischer, Mr Cole and Mr Ramsay) in the boardroom by Denis, Denis then left the meeting. At the meeting, I was asked questions by the three Pool Systems representatives, and I addressed the following aspects of the Business including; general operations, staffing, resourcing, the need for a new catalogue, the strengths, weaknesses, opportunities and threats, and where and what improvements could be made in the business, and how we could cement and expand the position of the combined entity in the market. To the best of my ability I answered these questions truthfully and frankly.
I said that Niagara used to be known for having the best catalogue in the industry – it was the industry bible, and updating this was clearly Denis' job, however, the last version was for 2004-2005 and it is now out of date. I said words to the following effect:
MRJ: “You should make sure that getting a new catalogue is part of the deal.”
AW: “I had not at first realised how significant this was when I was talking with Denis and Nelleke, but thanks to Anthony and now your comments as well, I do understand its importance.”
Adrian assured me that it was part of the deal, and then went on to say words to the following effect:
AW: “Pool Systems will be making a final payment to Denis and Nelleke in the 2012-13 year when it is all complete and Denis and Nelleke will be staying around until December 2012 as part of the deal, but we hope to have the new catalogue sometime in September.”
I was asked by Anthony Ramsay about my role as follows:
AR: “So, you are mainly responsible for managing sales. Is that right?”
I was a bit shocked by this question and responded saying words to the following effect:
MRJ: “I am the general manager and I don't think that Niagara would run without me. Denis and Nelleke now do very little in terms of the active day to day management of the business. Nelleke processes all the payments to staff and suppliers etc and does the Group Tax, Payroll Tax and BAS etc’, but when they go on holidays I perform these functions as well except the BAS. I am the one who manages and deals with the customers, does deals with the suppliers and handles all the technical queries.
MRJ: “Denis was the one who found the new warehouse and was very involved in planning and arranging the move, but other than this his main function is the catalogue which has not been done for several years.”
During the course of our discussion, I was asked a range of questions about the business, such as:
AW: “Where is there room for improvement? Are there any problems or issues? What can you tell us about the culture of the organisation?”
MRJ: “Niagara’s reputation for quick delivery and good service to its customers is second to none, none of the other suppliers can match us, but there are areas where things can be improved.”
MRJ: “One of the areas where things can improve is in the work ethic of the staff in the office, but it is hard to change, particularly when they see the owners turning up at 10.30, 11.30 or even 12.30 and then often going home at 4.00. And it is made worse by the fact that when they do turn up the most important question is ‘do we have coffee yet’. The morning coffee is usually collected by one of the young girls when she goes out to get the post. So it is very hard to change the culture when the owners behave in this way. I have raised the work issue with Nelleke and she had a meeting with the girls, but the problem is that I was not present in the meeting so it is very hard for me to follow up on the discussions when I have not been part of the process.
AW: “Yeah. I see.”
During the course of the discussion I was asked about the performance of various individuals in the organisation and their respective functions including the role of Nicole Encinas, who officially has the title of Office Manager.
AR: “Nicole is the office manager, right? So she looks after the office staff.”
MRJ: “Nicole has been with the business for a long time and is very good at what she does, but that title does not accurately fit her role for a number of reasons: Firstly, she works part time, officially from 9.00am to 4.00pm, but usually arrives at about 9.20am, so she is absent for a significant part of the work day including the morning when we are processing orders and getting the drivers packed, and secondly, the fact is that if the girls in the office have a problem, then it is mainly me that they come to for advice or guidance to address it etc, so in this respect Nicole is not managing the staff.”
One of the things I mentioned as part of our discussion was that I do most of the work in generating the Niagara Trade Price List and uploading the new prices into MYOB. There was already a copy of the current price list and old catalogue on the boardroom table during the meeting.
MRJ: I do the bulk of the work to generate the new price list and upload it into MYOB. Nelleke also has input into updating the price list as does Nicole, but I in fact do the lion's share of the work. In terms of the process, I mostly try to obtain spreadsheets from the main suppliers such as Pentair, Davey, Poolrite, Total Eden, Zodiac and Waterco - although I didn't get one from Waterco last year - and that I then write formulas to generate Niagara's selling price based on the varying discounts that we get from the different suppliers on the different products. If you add up all the lines from the majors that provide spreadsheets then this constitutes over half of the total price list of around 8000 SKU's. I then build this into a giant spreadsheet with volume discounts and different price levels and then load it into MYOB including loading it into Queensland. Then I download everything again from MYOB to ultimately generate the price book which is published and distributed to customers. It takes me approximately 40-60 hours work for the whole exercise of which a substantial part occurs out of normal working hours.”
AR: “I can easily see that it would take at least that long.”
During the discussion I made reference to the fact that it seemed a bit unfair that after so many years of service, the Directors of the Respondent would walk away with a truckload of money in the bank whilst I got nothing. I recall the conversation went as follows, or words to the effect:
MRJ: “It seems a bit unfair that after so many years of service, I end up with nothing and Denis and Nelleke walk away with a truck load of money. I did ask Denis and Nelleke for some sort of bonus in recognition of my service to the company etc when they told me about the business potentially being sold, but that they had said, ‘No, there isn't enough money for that’”.
AW: “That has nothing to do with Pool Systems. I can't change the past, so you have to focus on the future and move on.”
Adrian Wischer then said we will be looking at reviewing salaries in six months. I raised the issue of not having a proper employment contract and desiring some sort of review. The following conversation took place, words to the following effect:
MRJ: “Do you realise that none of the staff have had a salary review in the last 12 months, so they will be expecting some sort of pay rise around September October? lf it is delayed until Christmas then they will have gone well over two years without having any increase.”
AW: “What sort of increase do you think they will be expecting?”
MRJ: “I would think something like two times CPI might be a good start because Sydney is the dearest city to live in and the carbon tax and electricity are all pushing up the cost of living.”
AW: “Why are you still at Niagara?”
MRJ: “I have two boys in private schools, so stability is important to me and I still think that Niagara is a good business with lots of potential.”
MRJ: “A prospective business partner and I attempted to buy Niagara around September-October 2010, but we didn't succeed because we couldn't get all the money from the banks and Denis and Nelleke didn't want to wait around to collect it.”
Adrian asked about my interest in acquiring Niagara as follows:
AW: “So, are you still interested in buying Niagara?”
MRJ: “No. My business partner is no longer interested and I have done other things, so therefore we are completely out of the race and not in a position to do anything.”
The question of reporting lines came up as follows:
MRJ: “To whom will I be reporting?”
AW: “I can't tell you. We haven't worked out those details yet.”
MRJ: "My preference is to retain the role of General Manager of the business rather than being Branch Manager.”
We had a brief discussion about the delivery vans as follows:
AW: “Are there any other things that you think we should know?”
MRJ: “Do you realise that there has not been any real money spent on the business for some time so a degree of investment is required? The most obvious example is that all the vans are about 8 years old and are fast approaching or past the 300,000km level in terms of their service.”
AW: “What are their maintenance costs like?”
MRJ: “All things considered, I don't think they are doing too badly. The costs have gone up, but when you consider how much work they have done I think they are doing pretty well. The big problem is that none of the air conditioners work properly and it is prohibitively expensive to fix them which is an issue for the drivers in summer.”
Adrian turned to Rob Cole and said:
AW: “You should make a note of that and we will have to build in some allowance into in our budgets etc to cover getting new vans.”
Anthony Ramsay then entered into the discussion as follows:
AR: “Would you just get the same vans again or would you brands?”
MRJ: “Most of the mechanics bag them, but from what I can tell they all have their drawbacks and I don't think any of them are significantly better than the rest. The more important issue is what we need for the deliveries etc. if we are going to be active in pursuing the pool builder market more aggressively”
AR: “Why? How many vans do you need?”
MRJ: “One of the challenges in getting more business from the pool builders is that they want stuff delivered to site and they want 6m lengths of pipe. We have a bit of an issue with that because at the moment we are flat out delivering to our other customers, and so making on site deliveries for the pool builders is extra work for the drivers and also, at present, we can't very easily deliver 6m lengths of pipe. At the moment we cut it in half so that it fits in the vans. So, one option .for consideration would be to get a dedicated vehicle just for delivering to the pool builders so that we can better handle the pipe and if we are going to do this then we should also consider how we handle the gas heaters because they are very heavy and difficult to unload.”
Most of the rest of the conversation focused on opportunities for growth and improvements in the business and how we could cement and expand the position of the combined entity in the market even to the point where I proffered a couple of ideas for buying opposition businesses.
At the conclusion of the meeting, the other participants thanked me for my time and I shook hands with each of them and said something like:
MRJ: “I look forward to working with you in the future."
No other participants voiced opposition to it.
Mr Wischer agreed in cross-examination that at this meeting Mr Jeavons indicated he wanted an increase in his remuneration if he was to work for Pool Systems and that he said there had been no pay increases for staff since October 2010.
After this meeting Mr Wischer told Mr Baxter about Mr Jeavons’ request for a pay rise and a contract. There is no evidence that either Mr Baxter or Ms Gilhuys raised this issue with Mr Jeavons or that they asked him specific questions about what was discussed in this meeting.
About a week later, Mr Wischer asked Mr Baxter to set up a second meeting with Mr Jeavons. According to Mr Jeavons, on 17 May 2012 he first met with a representative from InterFinancial Ltd and was asked, and answered, a lot of questions about the business, including strengths, weaknesses, opportunities and threats he had previously discussed with Mr Wischer. He and Mr Wischer later met in Mr Baxter’s office. Mr Jeavons stated that the meeting probably only lasted 5-10 minutes and that Mr Wischer did most of the talking. He claimed that towards the end of the conversation Mr Wischer asked him what he was looking for if he was to work for Pool Systems, as follows:
AW: “So tell me what you are looking for?”
MRJ: “I would like to have some time to think about it if that’s Ok?”
AW: “How about you send me an email?”
MRJ: “Can I think about it over the weekend and get back to you next week”
“Would you like me to send you a copy of my resume as well?”
AW: “Yes, that would be good, send it to me by the end of Monday.”
I accept Mr Wischer’s evidence that during this meeting he reiterated to Mr Jeavons that Pool Systems would continue to employ him on his current terms and conditions, but that they would review all salaries within six months in accordance with Pool Systems policy. I accept Mr Wischer’s recollection that Mr Jeavons told him words to the effect:
This is unacceptable. I will not move across under those conditions.
According to Mr Wischer, Mr Jeavons also expressed resentment that the directors were receiving money for selling the business when he had done “all the work.” It is possible (but not critical) that this occurred in the meeting of 9 May 2012. While Mr Jeavons denied that he ever raised the word “resent” and claimed it was not a word he would normally use in this context, on his own evidence he had expressed resentment in the meeting of 9 May 2012 in his complaint to Mr Wischer that it seemed a bit “unfair” that after so many years of service he ended up with nothing and the directors “walk away with a truck load of money.”
Mr Wischer asked Mr Jeavons “Well if that offer is not acceptable, what is?” In his affidavit he stated that Mr Jeavons indicated that he would get back to him and that the meeting ended shortly thereafter.
In cross-examination Mr Wischer agreed that, as he had advised other Pool Systems representatives in an email of 17 May 2012, he had put to Mr Jeavons that Pool Systems’ preferred position was to start everyone on their existing salaries “+ CPI and some” (as they had not had a pay rise since October 2010) which he explained would occur from the start of July 2012.
Mr Wischer also agreed, and I accept, that Mr Jeavons had asked to be General Manager of Niagara and that he was to send him his curriculum vitae. Initially, when asked if he had asked Mr Jeavons to send him the the CV, Mr Wischer said Mr Jeavons had offered to do so, but he clarified immediately (when taken to his email stating that Mr Jeavons was to let him know his “position”) that he was not sure and could not remember “if he offered it or I asked him for it”. The cross-examination of Mr Wischer continued:
… And then in relation to what he wanted to be his terms and conditions of employment, you said to him, “Well, you tell us what you want”?--- Only after he declined our terms.
What did you put to him?--- That he comes across on the same conditions that he’s on.
I see. And then you said, “Well, you tell us what you want”?---Correct.
And then you asked him to send to you a proposed contract?---Well, the terms, not the contract, yes.
Given this evidence and the fact that Mr Jeavons’ positive affidavit evidence on this issue was not the subject of cross-examination, I accept that Mr Jeavons sent the email of 21 May 2012 to Mr Wischer in response to Mr Wischer’s request. Consistent with this, when confronted by Mr Baxter on 13 June 2012 about his behaviour in sending the email, Mr Jeavons told Mr Baxter that Mr Wischer had asked him for the email on the day he met him in Mr Baxter’s office (which was 17 May 2012). Further, when criticised by Mr Baxter for having gone behind the directors’ backs by not telling them about it first, Mr Jeavons had defended himself on the basis that they (the directors) had asked him to cooperate with Pool Systems and do what they wanted.
I accept Mr Wischer’s evidence that after the conclusion of this meeting of 17 May 2012 he decided he did not like dealing with Mr Jeavons or his attitude and was of the view that Pool Systems could purchase Niagara without offering employment to Mr Jeavons. Mr Wischer confirmed in cross-examination that he had also formed the view that the role performed by Mr Jeavons was not needed by Pool Systems and that they could instead have a branch manager. His recollection was that he did not tell Mr Baxter of these views until the meeting of 6 June 2012.
On or about 21 May 2012 Mr Jeavons sent Mr Wischer an email letter dated 21 May 2012 in which he thanked him for the discussion and attached a curriculum vitae and what he described as “draft terms for a proposed contract of employment, for your consideration”. Mr Jeavons also indicated that he would like to discuss possible employment arrangements for his wife, suggested that there were significant opportunities in amalgamating Niagara and Pool Systems and indicated that he looked forward to contributing to the journey and sharing it with Mr Wischer.
The first document attached to the email was headed “Draft – Proposed Terms of Contract” for Mr Jeavons as General Manager of Niagara Pool Supplies. Among other things, Mr Jeavons proposed that he receive a three year fixed-term contract from 1 July 2012 with recognition of prior service that was renewable or variable by agreement; that in the event that a further offer of employment was not made he would receive three months’ notice or payment in lieu thereof and severance payment in accordance with provisions of the National Employment Standards; that he would carry forward his leave entitlements; and that he would receive a 10 per cent increase in his salary and a review of salary within 12 months (including discussion of potential share ownership and/or provision of bonuses according to met-KPIs with a minimum agreed annual increase equal to CPI). He also sought salary packaging and ongoing superannuation payments.
In addition, Mr Jeavons suggested in this document that integration of the two businesses needed to be “top priority” that would take considerable time. He proposed that he should receive an additional payment based on an hourly rate for specified additional work required to integrate the two business. He suggested $5,000 a month for 15 hours a week for 6 months.
Mr Jeavons also attached his curriculum vitae, in which he made claims about his role and achievements in the Niagara business, including a claim that he was “[i]nvolved in all facets of the business” (which he listed).
On 22 May 2012 Mr Wischer sent an email to other Pool Systems personnel attaching Mr Jeavons’ email and attachments and stating “We have serious problem. Mark Jeavons’ demand is attached. There are numerous issues with it, including the disconnect with what we have seen at Niagara and what his CV says – an MBA no less. Even if his CV is real, to have these demands placed on an acquirer is unacceptable. Mr Wischer sought a conference call with the other Pool Systems representatives to discuss their options.
On 24 May 2012 Mr Hall, the CEO of Pool Systems, visited the Respondent’s premises. While Mr Baxter did not see that visit as necessarily part of the due diligence, it had been made clear by Mr Wischer that Mr Hall was one of the personnel who was to take part in due diligence for Pool Systems.
A copy of an email of 25 May 2012 from Mr Hall to other Pool Systems representatives (including Mr Wischer) was tendered by the Applicant. However, insofar as the Applicant sought to rely on this email as evidence of what occurred when Mr Hall visited Pool Systems on 24 May 2012 or in preference to evidence from any of the witnesses in these proceedings, I give it little weight in circumstances where Mr Hall was not a witness and was not available for cross-examination. Relevantly, however, Mr Hall expressed the view in the email that they should proceed with the planned acquisition, that Mr Jeavons was not critical to the business, and that Niagara releasing Mark prior to an acquisition should be included as a requirement in a revised terms sheet. These views were reflected in the letter to the Entram directors of 6 June 2012.
It appears that Mr Wischer did not respond to Mr Jeavons’ email of 21 May 2012. On 29 May 2012 Mr Jeavons sent a copy of his email and attachments to Mr Wischer. Mr Wischer replied that he had been busy and would respond.
Mr Wischer’s affidavit evidence did not address events after 22 May 2012.
In the course of the hearing it emerged that during Mr Wischer’s visit to the Respondent’s premises on 6 June 2012 he told the directors that issues had been identified during the due diligence process. His concerns were set out in the letter dated 6 June 2012 given to the directors that day.
Neither Mr Baxter nor Ms Gilhuys made any reference in affidavit evidence to a letter of 6 June 2012 from Pool Systems or to a meeting with Mr Wischer on that day.
The letter of 6 June 2012 (which was tendered) stated that Pool Systems had found “a number of issues” during the due diligence investigations that had caused it to withdraw the offer as set out in the Terms Sheet dated 7 May 2012 and signed on 10 May 2012. However it continued: “We are prepared to re-negotiate the acquisition, but the issues that we have identified will need to be resolved”. The letter listed and discussed 6 issues:
· a 13 per cent variation in the adjusted earnings identified by InterFinancial;
· the need for capital expenditure in circumstances where there had been little investment in the business in recent years;
· the fact that Pool Systems’ understanding of Ms Gilhuys’ role had not been matched by what they had identified during their investigations and that Ms Gilhuys was: “far more involved than we thought. We believe that there needs to be a more comprehensive hand-over than we had contemplated and [Ms Gilhuys] will need to remain involved for 3 months after settlement”;
· the issue of delays in response to a requirement that suppliers approve the change of ownership. It was said to be necessary for the top five suppliers to consent formally to the sale and enter into supply agreements with Pool Systems (which had not been the case with Entram);
· under the heading “Mark Jeavons” the letter stated:
Mark’s attitude has been surprising, to say the least. He has requested a 3 year contract with a 10% pay rise, as well as unfettered management control. His actual role is unclear, certainly he does not operate as a normal General Manager. His activity seems to be predominantly technical advice to customers. We do not wish to take him on. We will appoint a Branch Manager, so Mark’s position will be made redundant in your Company unless you have another role for him. We would not absorb this cost. In addition, we would centralise the debt collection function in Brisbane so would not require Rebecca Jeavons.
The letter continued:
Considering the matters above, we are unable to settle on 2 July, but could settle on Tuesday 31 July at 5 pm.
At the meeting of 6 June 2012 Mr Wischer went through the matters raised in the letter. He did not recall specifically what was said about Mr Jeavons, but did not believe that Mr Baxter or Ms Gilhuys had responded to the concerns raised about Mr Jeavons. He explained, and I accept, that by that stage it was “a pretty frosty meeting” given that he had explained that Pool Systems was not going to pay the price in the Terms Sheet. He agreed that the price reduction proposed was in the order of half a million dollars out of two and a half million dollars. His recollection, which I accept, was that the Entram directors addressed financial issues and indicated they were not going to renegotiate the price. The meeting then “went pretty quiet” and “went pretty pear shaped.” In his view the price reduction proposed was probably the biggest sticking point.
Relevantly, I accept that neither Mr Baxter nor Ms Gilhuys indicated to Mr Wischer any agreement (or disagreement) with the issue raised about Mr Jeavons.
Mr Baxter told Mr Wischer that “he had sacked Mr Jeavons after it had occurred.” Mr Wischer did not accept the suggestion in cross-examination that he was told this because it addressed one of the problems raised in the meeting of 6 June 2012, indicating that he did not think there was any further due diligence, such as further stocktaking or negotiations about the proposed sale, after the meeting of 6 June 2012. As he put it “The deal had fallen apart.”
Consistent with this recollection, in cross-examination Ms Gilhuys did not recall exactly when sale negotiations ceased, but expressed the view that the negotiations had “dwindled” having regard to the document stating there were problems. She recalled receiving the letter of 6 June 2012. Her evidence was that nothing happened after the meeting of 6 June 2012, that they did not agree to the proposed 31 July 2012 settlement on the terms proposed by Pool Systems and that it just did not go any further.
She acknowledged they “got rid of Mr Jeavons,” but started that it was “not because Mr Wischer wanted us to.” However insofar as Ms Gilhuys expressed a belief that she and Mr Baxter spoke about letting Mr Jeavons go before they saw Mr Wischer or received the letter of 6 June 2012 I do not accept this evidence. Ms Gilhuys’ initial recollection was that on or about 6 June 2012 (before the meeting with Mr Wischer) Mr Baxter had said to her that Mr Jeavons had gone behind their back and sent an email to Mr Wischer “without our permission. He has said some outrageous things in this email. I don’t know how we can keep him on. I can’t trust Mark at all after this” and that he had provided her with a copy of the email. I do not accept that this occurred, given Mr Wischer’s evidence and the fact that the only documentary evidence about a copy of the email being sent to Entram is the evidence that this occurred on 7 June 2012.
For his part, Mr Baxter initially claimed that on or about 13 June 2012 Mr Wischer called him and indicated that Pool Systems was withdrawing its offer to purchase Niagara. Mr Baxter claimed that when he asked why, Mr Wischer said “We don’t want anything to do with your General Manager, he is a piece of work” and that when he asked Mr Wischer what he meant, he said “We got this document from him. It’s pretty outrageous”. Mr Baxter claimed he then asked to see the document, that Mr Wischer said that he would email it and that shortly thereafter he received an email from Mr Wischer attaching a copy of Mr Jeavons’ letter and attachments dated 21 May 2012. I do not accept this evidence. It is not consistent with Mr Wischer’s evidence about the reasons the sale did not proceed or with the evidence about when he sent a copy of the email to Entram.
There is documentary evidence (consistent with Mr Wischer’s recollection) that Mr Wischer sent a copy of Mr Jeavons’ emails of 21 May 2012 to Ms Gilhuys’ email address on 7 June 2012. Insofar as Mr Baxter or Ms Gilhuys suggested that this occurred on some other date or that they made the decision to dismiss Mr Jeavons before the meeting on 6 June 2012 I do not accept this. This is of concern but, as discussed below, it does not necessarily follow that their motivation in dismissing Mr Jeavons was the content of the letter of 6 June 2012.
On 13 June 2012 Mr Baxter summarily dismissed Mr Jeavons. Mr Baxter’s recollection was to the effect that he informed Mr Jeavons that it had come to their attention that he had been “communicating with Pool Systems behind [their] backs and without [their] authorisation, about his own terms and conditions instead of facilitating the sale as [they] had instructed him to do”, that he had seen the email Mr Jeavons had sent and that they thought that he had been trying to scuttle the sale of the business. Mr Jeavons denied this motivation and queried why he would do so. Mr Baxter indicated that he thought that this was so that Mr Jeavons could buy the business at a cheaper price later on and asserted that he had gone behind their backs and sought to make a gain for himself without speaking to the directors about this.
Mr Jeavons had a more detailed recollection of the conversation, but it was to the similar effect, except that he did not recall Mr Baxter referring to any instruction to “facilitate the sale.” Nor did Mr Baxter refer to having given such an instruction in his evidence about what he told Mr Jeavons before the meeting of 9 May 2012. Rather he stated that he “believed” that the Applicant “would act in the best interests of the company and help to facilitate the sale.” There is a distinction between Mr Baxter’s evidence about what he intended by his words and what he actually said to Mr Jeavons (as to which see [70] above). Relevantly, I am not satisfied that Mr Baxter instructed Mr Jeavons to “facilitate the sale”. Mr Jeavons agreed that Mr Baxter accused him of communicating with Pool Systems “behind their backs” by sending Mr Wischer the email of 21 May 2012 in an attempt to scuttle the sale of the business so he could buy it at a cheaper price later on and that he denied that this was his motivation.
Mr Jeavons was given the opportunity to resign, effective immediately, but after he indicated that he thought he should get advice before signing a proposed letter of resignation, his employment was terminated immediately “for serious misconduct”.
Mr Jeavons’ role with Entram
Mr Jeavons became an employee of Entram on or about 1 July 2001. Initially his work including assisting with technical queries from Niagara customers and answering phone calls and taking orders as well as liaising with a particular supplier (for whom Niagara was a warranty agent and repairer) in relation to technical issues, advising and recommending products to customers and doing warranty and other repairs in the workshop. From time to time he assisted in the warehouse and made deliveries. While he was later given the title of Technical Manager, Mr Baxter and Ms Gilhuys were both of the view that he did not generally perform technical duties. Mr Baxter nonetheless acceded to the Applicant’s request to be called the Technical Manager (as he did not consider the title was a matter of importance). Ms Gilhuys’ evidence was that the required level of expertise for Mr Jeavons’ role at that time was “really quite minimal”, that the issues Mr Jeavons dealt with “were generally fairly simple” and that he “very much learned on the job”.
Nonetheless, it is not in dispute that Mr Jeavons’ responsibilities grew over time, to include being one of the employees who had keys to open and close the premises, handling cash, more direct dealings and interaction with suppliers and clients, and involvement in pricing products for sale and expanding the product range.
Mr Jeavons claimed that by September 2006 his responsibilities and “involvement in the running and the management” of the business had grown substantially and that he had much greater freedom to add new product lines and to negotiate with suppliers. He asked Mr Baxter to make him General Manager. He claimed that this more accurately reflected his responsibilities and duties.
Mr Baxter’s evidence is that while he agreed that Mr Jeavons be called General Manager to satisfy his request, he did not consider him to be a general manager as he did not have overall supervision of the company’s operations.
Ms Gilhuys was initially opposed to this title, on the basis that Mr Jeavons’ “responsibilities in no way reflected this position”. However she eventually agreed with Mr Baxter that Mr Jeavons should be given this title, although she was of the view that there was “no need” for a general manager while the directors were there. Her evidence, which I accept, was that she and Mr Baxter “effectively undertook” the role of general manager as directors working in and operating the business, that all staff reported to them and that they made the main decisions. At that time Mr Baxter’s son (who was working in the business) kept an eye on things when they were away. Ms Gilhuys’ evidence is that Mr Jeavons’ responsibilities did not change markedly after he was given the new title and that it could not be said he was responsible for the main increases in turnover as the business expanded (and that in fact turnover had decreased in real terms and failed to match CPI in the subsequent period).
Entram (and the associated Queensland company) employed about 20 staff in total by 2013. According to Mr Jeavons, prior to his dismissal his duties as General Manager included sales and management of sales staff, general staff management and approving special pricing deals for customers, coordinating and putting together marketing and advertising materials and campaigns; purchasing stock, including negotiating deals with suppliers and adding new products to the range; oversight and management of the accounts receivable “manager” (his wife who worked for Entram from September 2008); management of potential bad debts and drafting new account application forms and terms and conditions of sale; staff management including day to day supervision of warehouse staff, delivery drivers and operations management; management and oversight of the “workshop and warranty repair person” including liaising with customers and suppliers concerning warranty claims; active involvement in the management and administration of general supply contracts (including telephone, insurance, freight carriers and vehicle maintenance); providing technical back up to other staff and customers; logging in to the bank account online to print off statements of customer receipts; increased responsibility for updating the price list in MYOB and hard copy; and, when the directors travelled overseas, checking and paying suppliers and staff (through access to the company bank accounts and internet banking facilities) and calculating and paying liabilities such as payroll tax. Mr Jeavons’ evidence was that staff, such as the Warehouse Manager, drivers and office staff, initially approached him in relation to work issues and for guidance.
Mr Jeavons claimed he generally did more and more in the business as the directors (particularly Mr Baxter) gradually wound back their involvement in active, daily hands-on management of the business, although there was “never really” a formal handover of tasks or responsibilities to him. While I accept his day-to-day role increased, it was not to the extent claimed. For example, while he claimed to be responsible for management of the sales staff, he conceded in cross-examination that there were only 2 external sales representatives under his direct supervision. While he claimed he had staff management duties including day to day supervision of the warehouse staff, in cross-examination he conceded he had no formal delegation of management duties and that the warehouse manager and office manager reported directly to the directors, as did he. Mr Jeavons also conceded that he did not conduct performance reviews or salary negotiations with any of Entram’s employees or have responsibility for hiring or firing staff. The directors performed these duties (although he did employ one person when the directors were overseas). He denied that his responsibility for ensuring that suppliers and staff were paid when the directors were away was shared with the office manager. However his claim was that the office manager was not involved in paying staff.
I am satisfied that Mr Jeavons was not responsible for warehouse staff (who were supervised by the Warehouse Manager, who reported to Mr Baxter) and that he was not responsible for banking (which Ms Gilhuys generally did). Nor did Mr Jeavons have substantial responsibility for determining the price lists (although he did a proportion of this work). It was acknowledged that Mr Jeavons had a level of supervision over his wife, albeit Mr Baxter described her as the accounts receivables “clerk”. Mr Baxter acknowledged that Mr Jeavons held casual sales meetings with two other staff once a week, but he was not responsible for their overall performance (and did not conduct their performance or salary reviews). Mr Baxter agreed that Mr Jeavons co-ordinated marketing and advertising materials and campaigns – but this was subject to Mr Baxter’s approval. Mr Jeavons was also responsible for management and oversight of the workshop and warranty repair person. He was involved in management and administration of general supply contracts (excluding telephones) and provided technical back up to staff dealing with products. Mr Baxter acknowledged that Mr Jeavons was responsible for about a third of the work of collating the price list and that when he and Ms Gilhuys were on holidays, Mr Jeavons (together with the Office Manager) were responsible for ensuring suppliers and staff were appropriately paid.
According to Mr Baxter, Mr Jeavons’ role would more correctly be characterised as an Operations Manager role, alongside the positions of Warehouse Manager and the Office Manager each of whom reported to the directors. Mr Jeavons did not have supervisory oversight or responsibility in relation to the other two managers.
Ms Gilhuys also took issue with Mr Jeavons’ claims about his responsibilities and duties. She explained that some were only performed when the directors were away (as Mr Jeavons conceded in cross-examination) and that some were done by others. She conceded that Mr Jeavons had done a large part of the price list in the last 2-3 years, but confirmed that in her view his title would more accurately have been characterised as an Operations Manager and that Mr Jeavons, the Warehouse Manager, the Account Manager and the Office Manager all reported to the directors.
Having regard to Mr Jeavons’ concessions, I accept that his duties were more accurately described by Mr Baxter and Ms Gilhuys and, in particular, that he did not have overall supervision of the company’s operations.
I had regard to the contention that Mr Jeavons’ conduct was destructive of the relationship of mutual trust and confidence between him and his employer, Entram. The Respondent submitted that the Applicant had engaged in self-interested conduct by disparaging and mocking the directors to Mr Wischer, overstating his own role and importance and by telling Mr Wischer that he resented the directors receiving money for selling the business (as well as by sending Mr Wischer the email outlining his demands of future employment with Pool Systems in circumstances where the directors had told him that he would be employed on the same terms and conditions) without the consent of the directors, for personal gain.
I accept that Mr Jeavons was concerned with what he could get out of the transaction between the Respondent and Pool Systems, but this does not necessarily mean that his actions were contrary to the Respondent’s interests in selling the business.
As indicated, in essence, in the meeting with Mr Wischer Mr Jeavons overstated his own importance in the interests of seeking better pay and conditions as a condition of becoming an employee of the proposed purchaser of the business. He also engaged in a degree of disparagement of the directors, who were, however, the vendors rather than proposed ongoing participants in the business. Their role was not critical in relation to whether the sale went ahead.
Had Mr Jeavons’ role been critical to the continued effective operation of the business, his disparagement of the directors and overstatement of his own importance and role may have been reasonably inferred to be intended to impede or even scuttle the sale unless he achieved his desired benefits. However the evidence does not support such an inference. Nor am I satisfied that his conduct was the reason the sale did not proceed. Pool Systems decided they did not need a General Manager and also that they did not want to employ Mr Jeavons. However, as discussed above, the evidence is that, in essence, the sale did not proceed because of financial differences between the parties.
It has not been established that Mr Jeavons’ conduct warranted summary dismissal on the basis that he engaged in conduct that was in his own best interests rather than the Respondent’s best interests (which were said to be in a sale of the business and the preservation of its reputation within the industry).
As indicated, I accept that the gratuitous disparagement of the directors and Mr Jeavons’ claim that he did all the work (and the extent to which he misrepresented his role in the business) and his requests for better remuneration raised in a due diligence meeting with a potential purchaser amounted to misconduct. However, on balance, I am not satisfied that of its nature such conduct struck at the heart of the trust relationship between Mr Jeavons and his employer. Mr Jeavons, did not, in my view, deliberately disobey any instruction of his employer in his exchanges with Mr Wischer at the meeting. Having regard to the context in which Mr Jeavons made those comments (which also included positive and constructive remarks about the business), his apparent belief in his own importance to the business and the particular comments that he made, I am not persuaded that this conduct was wilful dishonesty or gross disloyalty or otherwise such as to amount to a sufficiently serious breach of his obligation to his employer as to strike at the heart of the trust relationship between himself and Entram. On balance, and bearing in mind the nature of an allegation of serious misconduct I am not satisfied that Mr Jeavons’ conduct in the meeting of 9 May 2012 amounted to serious misconduct warranting summary dismissal.
The other aspect of Mr Jeavons’ conduct relied upon by the respondent to justify the summary dismissal was his action in sending to Mr Wischer the email of 21 May 2012 that outlined his desires for terms and conditions of future employment with Pool Systems, in circumstances where both the directors and Mr Wischer had informed him that Pool Systems had agreed to take on all employees, including Mr Jeavons, on their current terms and conditions. It was suggested that this was done “behind the back” of the Respondent’s directors at Mr Jeavons’ volition, that he was motivated by a desire to advance his own interests, that he failed to act in the Respondent’s interests and acted in a manner aimed at scuttling the sale of the business.
The sending of this email is to be seen in context. In particular, Mr Wischer had informed Mr Baxter after the meeting of 9 May 2012 that Mr Jeavons sought a pay rise and a change in his contractual conditions. Notwithstanding this, Mr Baxter authorised Mr Jeavons to meet again with Mr Wischer and Pool Systems’ representatives and did not raise any concern about such conduct. To this extent Mr Jeavons’ subsequent conduct in raising these issues can be seen as having been condoned.
It is the case that in the course of his discussions with Mr Wischer, Mr Jeavons made enquiries about his future employment with Pool Systems and he sent him the email of 21 May 2012 in which he requested the opportunity to discuss possible employment arrangements for his wife, enclosed his resume (which included a degree of overstatement of his and his wife’s roles) and proposed “some draft terms for a proposed contract of employment” between Pool Systems and himself which went beyond the matters raised in the meeting of 9 May 2012. However this action has not been shown to be a direct breach of any direction given by Mr Baxter. I am satisfied on the evidence before the Court that, as Mr Jeavons attested and Mr Wischer ultimately did not dispute, while Mr Jeavons raised the issue of a change in his employment conditions, he sent his CV and email to Mr Wischer at Mr Wischer’s request. Mr Wischer requested the Applicant to provide him with this information (albeit that this was in response to Mr Jeavons raising the issue in discussions in May 2012).
Insofar as an issue arises as to whether such an email amounted to a repudiation of the contract, the “test of repudiation is not a subjective one” and “intention is to be judged from what the other party would reasonably infer from the acts or words of the renouncing party” (Byrnes). However in Byrnes the Executive Director of the employer had required the employee to provide evidence to support her allegations that he had “made unwarranted, unfounded and personal attacks on [her]”. The employee did not respond to this request. Her “failure to obey a lawful instruction went to the root or foundation of the contract of employment” and was found to be “a direct challenge to the management of the association”. However in this case, the fact that Mr Jeavons provided Mr Wischer with requested information in relation to his and his wife’s possible future employment with Pool Systems would not have led to the Respondent reasonably inferring that Mr Jeavons was repudiating his contract of employment with Entram. The Applicant’s “course of conduct” during his employment, including his unsuccessful attempts to purchase the business, his behaviour in the course of dealing with a different potential purchaser in 2008 and his requests of Entram that he receive a “golden handshake”, including upon sale of the business, are not such as to lead to a reasonable inference that he was attempting to scuttle the sale of the business to Pool Systems for his benefit or to prevent the directors of the Respondent from profiting from the sale. Mr Jeavons’ conduct related to potential future employment with Pool Systems.
While he engaged in this conduct in his own interests, it did not go so far as to amount to a direct challenge to the management of the Respondent that was so repugnant to the employment relationship or the relationship of trust or such a serious breach of the contract as to constitute a repudiation and/or amount to serious misconduct.
On Mr Wischer’s evidence, he had decided he did not want to employ Mr Jeavons after the meeting on 17 May 2012. However I am not satisfied that the subsequent email dissuaded Pool Systems from purchasing the business. The email may have reinforced Pool Systems’ view that they neither needed nor wanted Mr Jeavons as an employee, but having regard to Mr Wischer’s evidence (discussed above) and the issues raised in the letter of 6 June 2012, I am not satisfied Mr Jeavons’ conduct was a factor that dissuaded Pool Systems from purchasing Entram’s business as contended.
I have borne in mind that the Applicant sought an improvement in his conditions in relation to his prospective employment. He did so for his own benefit, but, given that he was not as critical to the business as he thought he was (and Pool Systems was well aware of this, having decided that they did not need a general manager, let alone someone with Mr Jeavons’ skills and duties, in order to purchase the business), and given that Mr Jeavons clearly saw the sale as possibly being for his benefit, it cannot be said that he acted in a manner aimed at scuttling the sale of the business. Moreover it has not been established that he was “only” concerned with what he could get out of the transaction. Beyond the impugned aspect of his conversation with Mr Wischer on 9 May 2012, he cooperated and responded, at times constructively, to requests for information about the business.
Insofar as it was submitted that, objectively, the Respondent could perceive that in sending the email Mr Jeavons acted to scuttle the sale for his own benefit, that is contrary to all the evidence. Mr Jeavons was not in a financial position to purchase the business. This was well-known to the Respondent. Nor is the evidence such as to support an inference that Mr Jeavons sought improved pay and conditions to scuttle the sale because he did not want the directors profiting from the sale of the business when he was receiving nothing out of it. Rather, Mr Jeavons sought to benefit from the proposed sale.
It was also contended that Mr Jeavons’ conduct in sending the email of 21 May 2012 warranted summary dismissal on the basis that he acted in his own interests rather than the Respondent’s interests, which were said to be in the sale of the business and the preservation of its reputation within the industry. It was submitted that his conduct was destructive of the relationship of mutual trust and confidence between himself and his employer Entram. In particular, it was submitted that Mr Jeavons’ conduct in pressing for better terms and conditions of employment demonstrated that his focus was on what he could obtain out of the sale as opposed to the interests of his employer.
It is the case that Mr Jeavons had not sought the prior consent of his employer to ask Pool Systems for an improvement in his terms and conditions, including sending the email and did not initially admit to communicating with Pool Systems behind Entram’s back when confronted by Mr Baxter. His actions in that respect while open to criticism and such as to amount to misconduct given his role in the due diligence process, did not amount to the failure to obey a lawful instruction. I am not satisfied that such conduct went to the foundation of the contract of employment or relationship of trust with his employer or that it was otherwise of such seriousness as to amount to serious misconduct warranting summary dismissal.
As indicated, insofar as the context and the entire course of employment is relevant in this regard, Mr Jeavons’ previous unsuccessful attempts to purchase the business, his behaviour in the course of dealing with a different potential purchaser in 2008, and his earlier requests of Entram that he receive a golden handshake, including upon a sale of the business, are not such as to lead to a reasonable inference that in sending the email to Mr Wischer he was attempting to scuttle the sale of the business to Pool Systems, either for his benefit or to prevent the directors from profiting from the sale.
I have considered all of Mr Jeavons’ conduct cumulatively. Aspects of that conduct can be categorised as misconduct. However in all the circumstances it did not go so far as to amount to a direct challenge to the management of the Respondent that was so repugnant to the employment relationship or such a serious breach of the contract or had such a serious impact on the relationship as to amount to serious misconduct.
Mr Jeavons participated in the due diligence process in meeting with Mr Wischer. At the same time, he clearly had a personal interest in negotiating the terms of any future employment with Pool Systems. Both Pool Systems and Entram were aware of this interest. His conduct in negotiating for better terms in any future employment, and, in that context, embellishing his and his wife’s role and importance to the business (and denigrating the directors) in the meetings as well as his claims in his email and attachments related to his potential future employment. However in all the circumstances I am not satisfied that they were not so contrary to the interests of the respondent in selling the business as to involve a significant conflict of interest or a real or substantial possibly of such a conflict.
Again, in this respect it is of significance that Mr Jeavons was not critical to the sale. Had he been, his conduct, seen objectively, may well have had a significant impact on the sale of the business. It did not have such an impact in the particular circumstances of this case. His conduct in making requests and inquiries about his possible future employment with Pool Systems was not inconsistent with Entram’s interests in the sale proceeding.
On balance, I am not satisfied that the Respondent has proved to the requisite standard that the individual or cumulative actions of Mr Jeavons had such an impact on the relationship of trust between himself and Entram or were otherwise such that his conduct amounted to serious misconduct justifying summary dismissal.
As serious misconduct justifying summary dismissal has not been established, the Respondent has breached the implied term of the employment contract that the Applicant be provided with a reasonable period of notice prior to termination of his contract of employment.
The Period of Notice
The Applicant submitted that 12 months’ notice constituted reasonable notice. The Respondent contended that if the Court were to find that Mr Jeavons was entitled to reasonable notice, such notice would not be greater than three months. The parties agreed on the calculation of the amount of notice, depending on the Court’s determination as to the period of reasonable notice and whether a redundancy payment was to be included.
As the Applicant submitted, factors that may be taken into account in determining what amounts to reasonable notice would include the length of service, standing, age, experience, job mobility of the employee and his prospects of alternative employment, the importance of the position, the salary and the nature of the employment of the employee in question (see Miller v Sunland Park Pty Ltd & Another [2014] FCCA 89 at [219]-[220]).
The Applicant submitted that it was relevant that he was the General Manager of the business and that from at least 2008 his role and responsibility had increased substantially due to the directors’ desire to sell the business and the directors (in particular Mr Baxter), taking a back seat. It was said that it had been identified during Pool Systems’ due diligence process that he was a key person within the business who maintained the relationship with a key supplier. It was pointed out that the Respondent had not pleaded that the Applicant had failed to mitigate his loss and he was not cross-examined on that point. While it was pleaded (paragraph [29] of the Amended SoC) that the “geographic area and the state of the labour market were also relevant factors” there was no evidence in this respect.
It was contended that Mr Jeavons was entitled to payment of reasonable notice in the amount of 12 months’ salary, superannuation and payment for loss of use of a private vehicle.
Entram acknowledged that Mr Jeavons had held a reasonably senior role in its business. However it was pointed out that he had only two people reporting to him, and submitted that he had job mobility as while he had been employed for 11 years in the Pool industry, he had a very broad level of experience and qualifications (not limited to the pool supplies industry). It was suggested that he had a relatively low salary (in the sense that he would not be considered a senior executive employee). On this basis it was submitted that reasonable notice would not be greater than three months. In support of this proposition reference was made to Rogan-Gardiner v Woolworths Limited (No. 2) [2010] WASA 290 and Cohen v iSoft Group Pty Ltd [2012] FCA 1071) (reversed on appeal for reason unrelated to the discussion by Flick J of principles in relation to a reasonable period of notice: see Cohen v iSoft Group Pty Ltd (2013) 298 ALR 516; [2013] FCAFC 49).
The object of a requirement of reasonable notice is to enable the parties to bring a relationship to an end in an orderly way (Cohen per Flick J at [120]), in particular to enable the employee to obtain new employment of a similar nature (Rankin at [220]). In assessing the reasonableness of the period, regard is to be had to the circumstances existing at the time the notice is given.
A number of factors have generally been regarded as relevant, including in relation to the particular job and the particular employee. As pointed out by Flick J in Cohen at [122] (by reference to Macken’s Law of Employment (7th ed. 2001 at 289-291)) factors related to the nature of the position may include the grade of the appointment, the importance of the salary and the nature of the employment. Factors relating to the particular employee may include the length of service, professional standing, age, qualifications and experience and degree of job mobility of the employee as well as the expected time it would take the employee to obtain alternative employment and the period it was likely, apart from the dismissal, that the employee would have continued in the employment, what the employee gave up to work for the employer in question and any prospective pension or other rights.
While such a list of factors is a useful summary of potentially relevant considerations, relevant factors vary according to the circumstances. It is a question of fact to be determined having regard to all the relevant circumstances on the evidence before the court.
Mr Jeavons’ skill set is broad and applicable to a range of positions. Although he was employed by the Respondent for almost 11 years, on his own evidence he had other work experience. His role did change substantially over this time. He was able to adapt to a variety of roles within the Respondent’s business. His skills related to management of business in general and were not confined to the pool supplies industry. This indicates that his skills and experience were varied in nature such that he enjoyed a high level of job mobility, as well as prospects of alternative employment. There is no suggestion that his age was an obstacle in this respect.
Although Mr Jeavons’ title at Entram was General Manager, the nature and relatively small size of the business were such that his position was not that of a senior manager of high standing. He held a position of trust, had some key responsibilities, and maintained a relationship with one of the suppliers. However, importantly, he was not responsible for the overall management of the company in all aspects of its business. Mr Jeavons could not be called an expert or leader within the pool supplies industry. He, and two other managers, reported to the directors. His role did not involve high-level decision-making. He had only two people reporting to him. His annual remuneration was $131,340 (consisting of a salary of $121,340 and a car allowance of $10,000) plus superannuation.
I am satisfied that Mr Jeavons should have been afforded notice of termination of his employment beyond what may be seen as a “standard” one month. However, having regard to all the circumstances, in particular the nature of the position and Mr Jeavons’ skills and experience, I am not persuaded that twelve months would be appropriate. In my view a reasonable period of notice at the time of termination having regard to all circumstances, would have been three months. Mr Jeavons is entitled to damages reflecting Entram’s failure to give him such notice.
Redundancy
The Applicant claimed that he had a statutory entitlement to redundancy pay under s.119 of the FWA that was separate from and in addition to any entitlement to reasonable notice. It was contended that the amount of redundancy pay to which the Applicant was entitled, calculated in accordance with s.119(2) of the FWA, was 12 weeks as his period of service had been at least 10 years.
Section 119(1) of the FWA provides:
(1) An employee is entitled to be paid redundancy pay by the employer if the employee's employment is terminated:
(a) at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
It appears that reliance was intended to be placed on s.119(1)(a) of the FWA. As pleaded, the Applicant relied on a claim that since he was summarily dismissed his position had vanished and its functions and duties divided up amongst other employees and alleged that in accordance with s.119 this could properly be characterised as a redundancy. In pre-hearing submissions the Applicant claimed that his termination was a redundancy and that the Respondent had summarily dismissed him “in order to avoid its obligations to pay severance” to him under s.119 of the FWA in circumstances where his position had not been replaced and his former duties were divided amongst other employees.
Counsel for Mr Jeavons confirmed that it was claimed that redundancy pay was an entitlement under the National Employment Standards under the FWA, and submitted that the Applicant’s role had vanished and that the evidence would show that what happened to his role was a true redundancy. It was also contended that the overwhelming inference was that the Respondent had acted in its interests to rid itself of one of the issues raised by the proposed purchaser which was stopping the sale of the business, insofar as it was said that a requirement of Pool Systems was that if the sale was to proceed Mr Jeavons was not to be part of the business and that he should be made redundant at the cost of the Respondent.
As clarified in post-hearing submissions, the Applicant’s case in relation to redundancy pay appeared to focus on the contention that in dismissing Mr Jeavons summarily the Respondent did so to “avoid” its obligation to pay redundancy pay pursuant to s.119 of the FWA and that his termination was because of information conveyed by Pool Systems (the intended purchaser of Entram’s business) that when the business was sold the Applicant’s position would cease to exist and that Pool Systems did not want him. It was submitted that, in accordance with Pools Systems’ “instruction” to the Respondent, the Applicant’s position had been made redundant. It was pointed out that in R v Industrial Commission of South Australia; Ex parte Adelaide Milk Cooperative (No. 2) (1977) 46 SAIR 1202, at 1205 Bray CJ had defined redundancy as follows “a job becomes redundant when the employer no longer desires to have it performed by anyone” and that such definition had been endorsed by a Full Bench of the Australian Conciliation and Arbitration Commission in the Termination Change & Redundancy Case (1984) 8 IR 34 at 55 – 56. It was contended that the Applicant was entitled to a redundancy payment on the basis that an employer must give an employee proper notice of termination on redundancy (Fryar v Systems Services Pty Ltd (1996) 137 ALR 321 at 330 per von Doussa J).
In effect, the Applicant’s contention was that on the evidence an inference could be drawn that his summary dismissal by Entram was to avoid a possible future obligation to pay both reasonable notice and redundancy pay, having regard to the fact that Pool Systems had made a definite decision communicated to Entram in the letter of 6 June 2012 that the role of general manager would not be required if the sale proceeded and that it did not wish to take on Mr Jeavons so that that Pool Systems would not bear the costs of his redundancy if the sale went ahead.
The Applicant submitted that the evidence relied on in support of the general protections claim supported an inference that the summary dismissal was to avoid Entram’s obligations to pay notice in accordance with an implied term of the contract and also redundancy pay. It was pointed out that the evidence was that both directors had a general understanding of the Fair Work legislation and the obligation to pay redundancy pay to an employee whose position was no longer required to be performed by anyone and that Mr Baxter had acknowledged that he knew that if the Applicant resigned or if he dismissed him summarily he would not have to pay redundancy pay if and when the sale went through.
It was also said to be relevant that Entram had not filled the position previously occupied by the Applicant and that at the time of the hearing, some two years later, had still not done so.
The Respondent did not dispute that reasonable notice and statutory redundancy payments were separate and distinct entitlements, but denied that the Applicant’s position was made redundant and/or that it was liable for any redundancy payment under s.119 of the FWA on the basis that the Applicant was dismissed because Mr Baxter believed he had engaged in serious misconduct. The Respondent submitted that the question of entitlement to redundancy pay under s.119 did not arise because the Applicant was dismissed for serious misconduct and that it could be said that the fact that the Respondent had not yet replaced the Applicant’s role was irrelevant, as what was in issue was the reason for the dismissal. It was said to be clear on the evidence that redundancy did not play any role in the decision-making process and that the Applicant was dismissed because of his actual or perceived serious misconduct. In any event, it was pointed out that Mr Baxter’s affidavit evidence was that following Mr Jeavons’ termination he was of the firm view that the company would need to promptly replace him with a new General Manager, but as time passed they had managed to incorporate some of his duties into the existing workforce on a temporary basis. His evidence was that they were “currently” looking at replacing Mr Jeavons with a new employee, although he did not yet know whether the employee would be precisely at the same level as Mr Jeavons or at a different level.
The Respondent submitted that notwithstanding the cross-examination of Mr Baxter, Ms Gilhuys and Mr Wischer had focused substantially on demonstrating that the reason the Applicant was dismissed was an operational one (namely to allow Pool Systems to purchase the Respondent’s business without employing him), in fact the evidence (discussed above) showed that the directors of the Respondent maintained that the cause of the dismissal related to the letter the Applicant had sent to Pool Systems on 21 May 2012. There was said to be no basis to infer that Mr Jeavons was dismissed in order to facilitate the sale of the Respondent’s business to Pool Systems. Such a suggestion had been rejected outright by the Respondent’s witnesses and was contrary to all the evidence. In particular, it was said to be clear as at 6 June 2012 that the sale would not proceed in circumstances where, critically, Pool Systems and the Respondent were unable to agree on fundamental issues affecting the price. It was submitted that to suggest that the sale could continue regardless of such stalemate in respect of price negotiations was “fanciful” and that the court would not draw the inference the Applicant sought in circumstances where a more probable and innocent explanation existed (Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262), namely that the Respondent dismissed the Applicant for what he perceived to be serious misconduct.
However the parties did not address the specific elements of s.119(1) except insofar as it was acknowledged that there were situations in which an employee does not have this entitlement (see ss.121-123 of the FWA) and reference was made to s.122 of the FWA. However the circumstances are not within the transfer of employment situation addressed in s.122 of the FWA. There was no transfer of employment in this case. The fact that Mr Jeavons may have become entitled to redundancy pay if the transfer of employment had gone ahead (and if he rejected an offer of employment made by a new employer that was on terms and conditions substantially similar to and no less favourably than his existing terms and conditions of employment) does not in itself answer the question of whether or not he was entitled to redundancy pay in the circumstances in which his employment was terminated by Entram.
Consideration
The FWA provides in s.123(1)(b) that Division 11 of Part 2-2 (which contains s.119) does not apply to “an employee whose employment is terminated because of serious misconduct.” Under s.12 of the FWA “serious misconduct” has the meaning prescribed by Fair Work Regulations 2009 (the Regulations).
Reg. 1.07 is as follows:
Meaning of serious misconduct
(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.
(2) For subregulation (1), conduct that is serious misconduct includes both of the following:
(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;
(b) conduct that causes serious and imminent risk to:
(i) the health or safety of a person; or
(ii) the reputation, viability or profitability of the employer's business.
(3) For subregulation (1), conduct that is serious misconduct includes each of the following:
(a) the employee, in the course of the employee's employment, engaging in:
(i) theft; or
(ii) fraud; or
(iii) assault;
(b) the employee being intoxicated at work;
(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.
(4) Subregulation (3) does not apply if the employee is able to show that, in the circumstances, the conduct engaged in by the employee was not conduct that made employment in the period of notice unreasonable.
(5) For paragraph (3)(b), an employee is taken to be intoxicated if the employee's faculties are, by reason of the employee being under the influence of intoxicating liquor or a drug (except a drug administered by, or taken in accordance with the directions of, a person lawfully authorised to administer the drug), so impaired that the employee is unfit to be entrusted with the employee's duties or with any duty that the employee may be called upon to perform.
I did not have the benefit of submissions in relation to the meaning of serious misconduct for the purposes of the FWA. However, as drafted, the definition in reg.1.07 is not exhaustive. I have had regard to the ordinary meaning of this concept (consistent with reg.1.07(1)) and have proceeded on the basis that it is necessary to consider not only the motivation of the employer but also whether the employee in fact engaged in serious misconduct. Hence, having regard to my findings that Mr Jeavons’ conduct did not amount to serious misconduct, the limitation on the entitlement to redundancy pay in s.123(1)(b) of the FWA is not applicable as it has not been established that Mr Jeavons’ employment was terminated because of serious misconduct (as distinct from the perception that he engaged in serious misconduct). However that does not in itself mean that the requirements of s.119(1) of the FWA are met.
The onus is on the Applicant to establish his entitlement to redundancy pay under s.119 of the FWA. On this basis it is for the Applicant to establish that his employment was terminated at the employer’s initiative “because” the employer no longer required the job to be done by anyone. This is a more restrictive test than the common law concept of redundancy relied on by the Applicant. In particular, the focus of s.119(1) is on the reason for the “termination”.
The subsequent failure to replace Mr Jeavons and consequential reorganisation is a factor that points towards a redundancy in general terms. Indeed, I do not find Mr Baxter’s evidence of an intention to replace Mr Jeavons persuasive, given the time that passed without that occurring. In some circumstances such subsequent conduct may be such that it could be inferred that the termination was “because” the employer no longer required the job done by the employee to be done by anyone. However in this case there are factors to the contrary, in particular the fact that, as discussed above in relation to the general protections claim, I am satisfied that the immediate and operative reason for the termination of Mr Jeavons’ employment on 13 June 2012 was his perceived misconduct. Mr Jeavons was dismissed because of considerations peculiar to him. That is so notwithstanding that I am also satisfied that Mr Jeavons’ conduct did not in fact amount to serious misconduct warranting summary dismissal.
I was not assisted by submissions in relation to the approach to be taken to determination of the reason (or reasons) for termination of employment in the context of s.119 of the Act. In these circumstances, it would seem appropriate to have regard to the approach taken by the High Court in Barclay in relation to the expression “because” in the FWA (which was addressed by the parties in relation to the general protections claim). There has been no suggestion that s.119(1) warrants treating the expression “because” “as requiring only an objective enquiry into [an] employer’s reason, including any unconscious reason” for terminating an employee’s employment. Such an approach was rejected in relation to s.361 of the FWA in Barclay (see French CJ and Crennan J at [44]).
A comparable approach seems apt in the context of s.119. On this basis, the question of the reason for termination is a question of fact to be answered in light of all the facts, including any evidence of the decision-maker as to why he or she terminated the employment, as well as any contradictory evidence (Ibid at [45]).
Mr Baxter and Ms Gilhuys maintained (including in cross-examination) that from their perspective Mr Jeavons was dismissed because of his letter of 21 May 2012, not because of anything Mr Wischer might have wanted. In other words, it was not to facilitate the sale of the Respondent’s business to Pool Systems by removing one of the impediments to the sale in circumstances where, had the sale proceeded, Pool Systems saw no need for a general manager and did not want to take on Mr Jeavons. Moreover Pool Systems did not “instruct” Entram that Mr Jeavons’ position should be made redundant. That was not the effect of the letter of 6 June 2012 and there is no evidence of any such “instruction”.
The fact that Entram was made aware that Mr Jeavons would not be wanted by Pool Systems if the sale went ahead and that he was subsequently dismissed does not of itself mean that Pool Systems’ wishes must have had something to do with the reason for the termination (see General Motors-Holden Pty Ltd v Bowling (1976) 51 ALJR 235; (1976) 12 ALR 605 per Gibbs J and also per Mason J as discussed in Barclay).
I have borne in mind that by dismissing Mr Jeavons, Entram had removed one of the obstacles to the sale going ahead, having regard to the matters listed in the letter of 6 June 2012. However, as discussed above, I accept Mr Wischer’s evidence that, as had been made apparent to Mr Baxter and Ms Gilhuys on 6 June 2012, there were other significant, and at that time apparently insurmountable, financial obstacles to the sale going ahead. It was clear that, at the time of the termination, the sale would not proceed in circumstances where Pool Systems and the Respondent were unable to agree on fundamental issues affecting the price, whether or not Mr Jeavons remained an employee of Entram.
The fact that Pool Systems had advised Entram on 6 June 2012 that it did not want to take Mr Jeavons as an employee if the sale went ahead does not lead to an inference that at the time of the termination he was dismissed because Entram no longer desired his role to be performed by anyone (particularly given that at the time of the dismissal there appeared to be little prospect of the sale proceeding given the financial obstacles outlined in the letter of 6 June 2012 that were quite separate to the issues of Mr Jeavons).
The circumstances are not such as to warrant the drawing of an inference that the “termination” was for the reason that Entram no longer required the job of general manger to be done by anyone having regard to the evidence that the Respondent dismissed the Applicant for what it perceived to be serious misconduct. The evidence does not support a conclusion that the termination was in anticipation of an imminent sale to Pool Systems after which Mr Jeavons’ position may not be required.
In any event s.119(1) is expressed quite narrowly. It has not been established that it would encompass circumstances in which a termination of employment was to avoid a possible future liability to pay redundancy pay (as may have arisen had the sale to Pool Systems proceeded).
It has not been established that Mr Jeavons’ employment was terminated at Entram’s initiative because it no longer required the job done by him to be done by anyone within s.119(1) of the FWA. Hence it has not been established that Mr Jeavons had an entitlement to redundancy pay under s.119 of the FWA. This aspect of Mr Jeavons’ claim is not made out.
Conclusion
Mr Jeavons should have judgment in an amount equivalent to three months’ notice (which the parties agreed was to be calculated in accordance with the figures provided in Annexure A to the affidavit of Mr Beasley sworn on 24 July 2014 taking into account the fact that on termination he had been paid two weeks in advance). On this basis the damages for the failure to provide three months’ notice (including superannuation and a component reflecting an allowance in lieu of a car, but excluding any redundancy component) would be the amount of $30,283.98. I will make an order for payment of this amount. There has been no application for pre-judgment interest (see s.76 of the Federal Circuit Court of Australia Act 1999 (Cth). I propose to given the parties liberty to apply for any further or consequential order, including in relation to interest, for the purpose of giving effect to these reasons for judgment.
Mr Jeavons has not succeeded in any aspect of his claim based on the FWA and accordingly his application should otherwise be dismissed.
I certify that the preceding four hundred and five (405) paragraphs are a true copy of the reasons for judgment of Judge Barnes
Associate:
Date: 24 December 2015
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