Jupiters Ltd v Thirkettle
[1997] IRCA 258
•25 July 1997
DECISION NO:258/97
INDUSTRIAL RELATIONS COURT OF AUSTRALIA
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - VALID REASON - meaning of “valid reason” - whether misconduct amounted to a breach of an essential term of the contract of employment
AWARDS - obligation imposed upon employer that termination of employment shall not be harsh, unjust or unreasonable - employer’s failure to comply with obligation - relevance to whether employer had a valid reason for termination
Workplace Relations Act 1996 (Cth): s 170DE, s 170EDA, s 170EE, s 170HA, s 170HB
Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435
Byrne and Frew v Australian Airlines Ltd (1995) 131 ALR 422
Cosco Holdings Pty Ltd v Van Do and Ors (IRCA, Madgwick J, 30 June 1997)
Fitzgerald v F J Leonhardt Pty Ltd (1997) 71 ALJR 653
George Hudson Ltd v Australian Timber Workers Union (1923) 32 CLR 413
Holman v Johnson (1775) 98 ER 1120
Kerr v Jaroma Pty Ltd (IRCA, Marshall J, 7 October 1996)
Nelson v Nelson (1995) 184 CLR 538
Nettlefold v Kym SmokerPty (1996) 69 IR 370
North v Television Corporation Ltd (1976) 11 ALR 599
Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371
Victoria v Commonwealth (1996) 138 ALR 129
Westen v Union Des Assurances De Paris (IRCA, Madgwick J, 17 December 1996)
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410
George Zdenkowski, Sentencing of Federal and A.C.T. Offenders: Some Reform Proposals, Australian Law Reform Commission, 1986
JUPITERS LTD v STEPHEN THIRKETTLE AND STEVEN McGINNESS
QI 1023, 1024 of 1996
Madgwick J
Sydney
25 July 1997
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
)
)) QI 1023, 1024 of 1996
) QUEENSLAND DISTRICT REGISTRY )
BETWEEN: JUPITERS LTD
ApplicantAND:
AND:
STEPHEN TREVOR THIRKETTLE
RespondentSTEVEN JOHN McGINNESS
Respondent
JUDGE(S): MADGWICK J PLACE: SYDNEY DATED: 25 JULY 1997
REASONS FOR JUDGMENT
HIS HONOUR: The respondents in this application for review of a judicial registrar’s decision, Mr Thirkettle and Mr McGinness, were employed as security officers by the applicant Jupiters Ltd (“the company”), which operates a hotel and casino on the Gold Coast.
On the 7th January 1996, an incident requiring the respondents to evict a disorderly patron from the casino led the company to terminate their employment, on the basis that they had used improper or excessive force. The respondents brought an application under s 170EA and s 170DE of the Workplace Relations Act 1996 (Cth) (“the Act”) on the ground that the termination was unlawful. The application was originally heard by a judicial registrar, who found that the company had a valid reason to terminate the respondent’s employment (s 170DE(1)), but that the termination was harsh, unjust or unreasonable (s 170DE(2)). An order was made that the respondents be re-instated, and that the company pay compensation to the amount equal to the wages that would have been earned if they had continued in employment, less two week’s pay in lieu of notice already received, and in the case of Mr McGinness, less $4000 he had since earned. The company has applied for a review of the judicial registrar’s decision under s 377 of the Act.
The meaning of “valid reason”: s 170DE(1)
After the judicial registrar’s decision was handed down, the High Court delivered its decision in State ofVictoria v The Commonwealth (the “Validity Case”) (1996) 138 ALR 129, in which their Honours found that s 170DE(2) of the Industrial Relations Act 1988 (Cth) (as it was then called) was invalid. This being the case, the employer relied on the judicial registrar’s finding that it had a valid reason to terminate Mr Thirkettle’s and Mr McGinness’s employment, and submits that the orders made for reinstatement and compensation should be set aside. The company further submitted that factors that were considered relevant to s 170DE(2) should not be introduced into the proper construction of s 170DE(1), and that accordingly, the findings of the judicial registrar in relation to the termination being unjust, harsh or unreasonable cannot now be subsumed under s 170DE(1) to find that therefore the applicant did not have a valid reason.
So much was indeed made clear in the High Court’s reasons for decision in the Validity Case (at 171):
“It is this shifting onus in s 170EDA(1) which indicates that the inclusion of the ‘harsh, unjust or unreasonable’ test is an additional ground of unlawful termination that goes beyond the requirement for the reason of termination to be valid. The terms ‘harsh, unjust or unreasonable’ are not merely a synonym for ‘valid’. Had the Parliament recognised the terms as being synonyms, or even the harsh, unjust or unreasonable test as being a subset of grounds that were not ‘valid’, then there would be no reason for changing the onus from employer to employee between pars (a) and (b) of s 170EDA(1).
The changing onus in s 170EDA(1) indicated that the harsh, unjust or unreasonable criterion is broader than what otherwise would be the test for validity. This is reinforced by the nature of s 170DE(2) which, in contrast to s 170DE(1) and Art 4 of the Convention, goes not to the reason for termination but to the overall effects of the termination.”
However, this does not mean that those values and factors considered by the judicial registrar to be relevant to deciding whether the respondent’s termination was unjust, harsh or unreasonable will necessarily be irrelevant to deciding whether the company had a valid reason for termination. As I indicated in Westen v Union Des Assurances De Paris (Industrial Relations Court of Australia, 17 December 1996) and Cosco Holdings Pty Ltd v Van Do and Ors (Industrial Relations Court of Australia, 30 June 1997), the invalidity of s 170DE(2) does no more than preclude the Court from considering the effects of the termination on the employee. The High Court should not be taken to have considered whether the phrase “valid reason” might possibly encompass the concepts and values connoted by the individual words “unjust” or “unreasonable”. It can, for example, hardly be said that a termination of employment which may be considered by the Court to be unreasonable or unjust, could be “defensible” or “well founded”, dictionary terms which Northrop J held in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 to be synonymous with “valid”. Selvachandran represents the narrowest expression in this Court of the meaning of “valid”. I nevertheless believe my approach to be in accord with Selvachandran and also Nettlefold v Kym SmokerPty (1996) 69 IR 370 and Kerr v Jaroma Pty Ltd (Industrial Relations Court of Australia, Marshall J, 7 October 1996).
The reason for the termination
At about 3:00 a.m. on Sunday the 7th of January 1996, Mr McGinness, along with security officers Mr Bell and Mr Stewart, were called by the “pit boss” at the two-up game in the casino to remove two patrons who were being disruptive. Mr McGinness approached one of the men and said “There seems to be a bit of a problem here. The pit boss has spoken to you three times regarding your behaviour, and it’s probably time to go. The boss wants you to leave the premises”. The patron asked Mr McGinness “What’s going to happen if I don’t just walk out of here?”, to which Mr McGinness replied “If you don’t walk out, well, you’ll have to be physically removed”. The man became agitated and stated that “You’re going to have to drag me out of here because I’m not going anywhere”. Mr McGinness and Mr Bell then seized the man by the arms and proceeded to escort him outside the casino area towards the fire stairs.
What occurred next was captured by surveillance cameras and the video film was submitted as evidence. I viewed the video several times. It appears that Mr McGinness and Mr Bell had difficulties restraining the patron because of his aggressiveness. On the way out of the casino area, the patron spat at Mr Bell, who reacted by using an open hand to his face.
The video then shows the entrance to the fire stairs on level two of the casino. Inside the stairwell Mr Bell struck the patron with two or three powerful blows to the head while he was being restrained by other security officers. The officers then dragged him through the fire doors where Mr McGinness pinned him to the wall behind the door with his forearm, and then used his elbow to strike him twice in the head. It is important to note that, at the time this was happening, Mr Thirkettle looked up towards the camera, and walked away from the action as if to indicate that he did not want to appear involved.
As Mr McGinness started to move him towards the exit, the second patron pushed his way through the fire door. Mr Thirkettle reacted by grabbing onto his shirt, and then hit him twice in the head. He was then taken under control by two other officers and escorted down the stairs with the first patron.
At the bottom of the stairs, the first patron slipped over and Mr McGinness and Mr Bell attempted to restrain him on the ground. It was alleged by the company that at this stage Mr McGinness kneed him in the head. After some struggling, Mr McGinness and Mr Bell escorted him out the front doors of the casino. However, he managed to break free and punched one officer who fell to the ground. While Mr Joslin and another officer attempted again to restrain him, Mr McGinness kicked towards him, but did not connect. He than ran towards the road.
The disciplinary process
Later in the shift, Mr Joslin, the shift manager, issued a formal warning to Mr McGinness and Mr Thirkettle against the use of excessive force, but informed them that the incident would be reviewed by senior management and that other disciplinary measures could be imposed.
The next day Mr Thirkettle was interviewed by Mr Illsley, the Director of Security. When shown the surveillance video tape, Mr Thirkettle pointed out that he had seen the blows struck by Mr Bell and Mr McGinness, and that it was obvious he did not like what was happening. Mr Thirkettle denied that he had punched the second patron, but claimed that he gave the man two open-handed hits to the head in an attempt “to quiet him down”. Mr Thirkettle said that he realised he had done the wrong thing by striking the man, but insisted that he would never do such a thing again if he was given another chance. Mr Illsley said that he would take some time to consider what had been said, but informed Mr Thirkettle the next day that he was of the opinion he could not continue as a security officer with the company. Mr Thirkettle replied that this was unfair, that he was being blamed for a “messy put out” where two other officers had “gone over the top”, and that he had hit the man because he was frightened the man would hit him.
Mr McGinness was also interviewed by Mr Illsley after being shown the video tape. Mr McGinness said that the patron was extremely strong and was probably affected by drugs. He stated that he gave the man a number of elbow blows to the head region to “quiet him”, and because he was fearful that the man was trying to knee him in the groin area. Mr McGinness denied kneeing the patron in the head whilst he was on the floor, claiming that he had used his knee to restrain the man’s arm. He also claimed that his kick towards the man outside the casino was a reactive impulse, as he thought the man was going to attack him. Mr Illsley suspended Mr McGinness until the following Friday in order to speak to other officers about the incident. Mr Illsley concluded that the force used was excessive and that Mr McGinness’s explanation was not a reasonable one. He terminated Mr McGinness’s employment on Friday 12 January.
The proceedings before the judicial registrar
At the hearing before the judicial registrar, Mr McGinness denied that he had deliberately elbowed the man twice in the head, but stated that he was only using his forearm as a restraint and to protect himself from the patron lunging towards him. Mr McGinness denied that it was possible for him to knee the patron in the head while on the floor because he could not accomplish this from the angle at which he was sitting. In relation to the kick, Mr McGinness stated that his purpose was to protect other security officers from being punched.
Mr Thirkettle gave evidence that he hit the second patron because “I was going to try and stop him from getting to his friend because, a lot of times, if they get to their friend whilst . . . under the control of security officers, you run the risk of them hitting one of the security officers”. Mr Thirkettle also stated that he hit the man because he was afraid of being hurt, and “was just looking out for myself”, and in this sense, was acting defensively rather than aggressively in striking him.
Based on the video tape evidence, the judicial registrar did not accept that Mr McGinness was acting in self defence when he used his forearm in the region of the patron’s head. The judicial registrar was unable to find, on the state of the evidence, that Mr McGinness had kneed the patron in the head. In relation to the kick, the judicial registrar did not accept Mr McGinness’s explanation, but stated it was more likely that “by this time Mr McGinness had lost his self-control after what had been a very trying time with a very difficult person”. I have considered these matters independently and I agree with the judicial registrar. The cumulative effect, according to the judicial registrar, was that the company had a valid reason to terminate Mr McGinness’s employment.
The judicial registrar also found that there was not an element of self defence or provocation in Mr Thirkettle’s actions, and in the circumstances there was no justification for his conduct. He held that therefore the company also had a valid reason to terminate his employment.
However, the judicial registrar found that, despite having a valid reason for termination, the termination of Mr Thirkettle’s employment was harsh, unjust or unreasonable, on the basis that after what was a momentary loss of self-control, he was not involved in any further untoward conduct towards either patron. Secondly, the judicial registrar considered Mr Thirkettle’s employment history to be significant, as he had been employed by the company as a security officer for nearly ten years without any other complaint made against him. The judicial registrar considered that the proper course of action might have involved a written warning, and counselling, explanation or re-training if thought necessary, as set out in the security department’s manual. The judicial registrar also found that the termination of Mr McGinness’s employment was harsh, unjust or unreasonable, for the reason that he might have been disciplined in the same manner as Mr Thirkettle. Accordingly, an order was made for the re-instatement of Mr McGinness and Mr Thirkettle, and compensation to be paid (as set out above).
Did the company have a valid reason for termination?
The employees’ submissions as to why the company did not have a valid reason to terminate their employment may be summarised as follows:
both employees had a good record of employment with the company, and until this incident had not shown cause to be reprimanded or disciplined in respect of their behaviour in any other eviction;
both the Director and Manager of Security considered the respondents to be good and trustworthy employees;
the patron’s demeanour was so intimidating that, even though the respondents could have handled the situation better, in these extenuating circumstances the company could and should have taken some other less extreme form of disciplinary action; and
the respondent’s training and instruction was inadequate to deal with this type of situation. Mr McGinness gave evidence that his eviction training had consisted of watching a ten minute video of police holds and one practice of a wrist hold on another security officer, and that he was not provided with any manuals or policy documents explaining procedures for evictions. Mr Thirkettle’s training had consisted of a one hour practice of various holds, a 2-3 hour course conducted by the police, and occasionally watching video tapes of prior evictions and discussing with other officers what was the appropriate course of action.
Counsel for the employees relied on North v Television Corporation Ltd (1976) 11 ALR 599 to support the argument that the company did not have a valid reason for termination. In that case, Smithers and Evatt JJ said (at 609):
“For the purposes of the application of the common law principles to the facts of this case, the remarks of the Master of the Rolls in Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285 at 287 & 89 are in point. He said - ‘To my mind the proper conclusion to be drawn from the passages which I have cited and the cases to which we were referred is that, since a contract of service is but an example of contracts in general, so that the general law of contract will be applicable, it follows that, if summary dismissal is claimed to be justifiable, the question must be whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service.’
. . .
‘I do, however, think (following the passages which I have already cited) that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think that one finds in the passages which I have read that the disobedience must at least have the quality that it is ‘wilful’; it does (in other words) connote a deliberate flouting of the essential contractual conditions.’”
At 610 their Honours went on to say:
“If Pemberton deliberately committed a breach of this provision a question would arise as to whether he had thereby repudiated one of the essential conditions of the contract. But in our opinion he committed no breach of this provision of the contract. He committed an act susceptible to criticism as being potentially detrimental to the interest of the respondent. But in committing the act he was acting, as he thought, in a manner calculated to further the interest of the respondent, and not in any way detrimental to it. Having regard to the circumstances this view, even if erroneous, was certainly not a repudiation of his obligations.”
It was submitted that the incidents involved in this case were not wilful in the sense that they amounted to a repudiation of the contract of employment or amounted to a breach of an essential term of the contract of employment. However, I am unable to agree with this submission. Even applying common law standards (and the Act may well have intended a new test, at least where s 170DB(1)(b) is not relied on: “valid reason connected with the employee’s . . . conduct” - see s 170DC), the relevant question is whether Mr McGinness’s and Mr Thirkettle’s conduct was, in the circumstances, “so seriously in breach of the contract that by standards of fairness and justice the employer should not be bound to continue the employment” (North at 608-9). In this country, often an isolated incident of insolence, for example, would not be sufficient to justify dismissal. In this case however, the company had and has a legitimate interest in ensuring that its security staff do not bring the casino into disrepute, given that there is a degree of controversy in the community generally about the operation of casinos. It is vital to the success of the company’s business that it uphold the highest standards of restraint in security, and be seen to be enforcing those standards. It may thus be inferred that it was an essential term of the contract of employment, as a reasonable requirement of the employer, that staff employed as security officers be above suspicion of brutal behaviour.
Having regard to the video tape evidence, it is difficult to come to the conclusion that there was any lawful excuse for the employees’ conduct, or that in reality their actions did not amount to an assault. Although it is obvious that this particular patron was very difficult to control and was doing his level best to resist his eviction, and that the employees were seriously provoked, I can see no reason to find that either employee acted the way that he did out of necessity or self-defence. One of the purposes of employing security officers is to have on hand employees who are able to deal with provocation while scrupulously using no more than reasonable force to evict people from the casino. In the criminal law, it is rightly said that such matters should not be weighed on “golden scales” but, allowing for a degree of common sense and latitude, both employees permitted themselves to go too far. Although there may be some substance in the employees’ suggestion that they lacked proper formal instruction or training in how to deal with difficult patrons in an eviction situation, Mr McGinness had been employed as a security officer with the company for two years, and Mr Thirkettle for eight years. Both employees should have gained sufficient on-the-job experience to know when and where to draw the line.
In my opinion, despite the difficulty of the situation which they faced, their actions not only had the potential of seriously damaging the casino’s reputation, but also of exposing the company to possible legal action being taken by two patrons who had a legitimate complaint. For these reasons, the employees’ actions amounted, in common law terms, to misconduct going to the root of the contract of employment, such that if that were the only consideration, the company would have had a valid reason to terminate their employment in accordance with s 170DE(1) of the Act.
Relevance of alleged breach of the Award
The respondents also submitted that their termination was in contravention of the federal Hospitality Industry-Accommodation, Hotels and Resorts Gaming Award (1995) (“the Award”). The relevant provisions are as follows:
“Clause 18.6: Termination of employment by an employer shall not be harsh, unjust or unreasonable.
Clause 18.6.1: For the purpose of this clause, termination of employment shall include termination with or without notice.”
The respondents sought to distinguish the case of Byrne and Frew v Australian Airlines Ltd (1995) 131 ALR 422, in which the High Court rejected arguments that an action could be brought for damages for breach of contract or breach of statutory duty for contravention of an identical clause, cl. 11(a) of the Transport Workers (Airlines) Award 1988 (the “Airlines Award”). The majority of the Court found that a termination which amounted to a breach of such a clause in an award could not found an action in damages and did not preclude legally effective repudiation of the contract of employment. The respondents submitted that their Honours were influenced by the fact that a provision in the relevant clause referred to a further clause 41, which provided a procedure for the settlement of disputes which might arise under clause 11. The respondents submitted that in the present case, the Award did not require any negotiations to be held in circumstances where the termination of employment may be thought to be harsh, unjust or unreasonable, but only where the termination of employment was due to redundancy. Accordingly, clause 18.6 of the Award amounted to a legal restraint preventing the company from dismissing the respondents where the effect would be harsh, unjust or unreasonable.
In my opinion, that particular submission cannot be sustained. The comments of the various High Court justices in relation to the effect of clause 41 of the Airlines Award were made in furtherance of their primary conclusion that the clause, in itself, will not have the effect of nullifying an unlawful termination of employment. Their Honours first considered the authority of Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, in which the High Court had previously held that a breach of a war-time regulation, which prohibited an employer carrying on a protected undertaking from terminating the employment of a person without the written permission of the relevant Director-General, resulted in the purported dismissal of the employee being null and void. In Byrne, their Honours distinguished Automatic Fire Sprinklers on the basis that at the time that decision was made, the majority felt constrained by English authority that no longer applies either there or in Australia. Their Honours continued (at 433):
“But even if the decision of the majority in Automatic Fire Sprinklers Pty Ltd v Watson be correct, there is sufficient distinction between the regulation in that case and cl 11(a) to reach a different conclusion here. The regulation directly prohibited the termination of the employment without the required permission. Clause 11(a), on the other hand, merely provides that the termination shall not be harsh, unjust or unreasonable. That does not suggest that failure to observe the requirements of the clause renders a de facto termination a nullity. Moreover, cl 11(f) makes cl 41 of the award applicable. Clauses 41 provides a procedure to be followed for the settlement of disputes or claims arising under cl 11. Again, that does not suggest that termination of employment in breach of cl 11(a) is to be regarded as a nullity. In our view, cl 11(a) cannot be read in the way in which the majority in Automatic Fire Sprinklers Pty Ltd v Watson read the regulation in that case, which was to render the termination of employment in breach of its terms a nullity.” (emphasis added)
However, that alone does not mean that clause 18.6 of the Award has no relevant legal effect. Clause 18.6 imposed a legal obligation upon the employer. In considering whether to terminate the employment of each respondent, was the relevant agent of the company obliged to regard it as impermissible to instigate a termination that would be “harsh, unjust or unreasonable”? That is, because of the employer’s legal obligation under the Award, and unlike the ordinary case where there is no law additional to s 170DE(1) which may give colour and context to the application of that sub-section, was the effect of a possible termination upon the particular employee required to be taken into account in judging whether the reason for it was valid? If it would be inconsistent with the employer’s legal obligation originating from the Award to terminate the employment, could a court nevertheless hold that such a termination was “valid” in the sense of being “sound” or “well-founded” (Selvachandran) or “just” (Westen)? So to hold would clearly enough tend to encourage disrespect for a legal obligation. What, if anything, is the legal significance of that?
The question of the effect of the Award’s injunction against “harsh” terminations of employment in a case where the termination is otherwise made for a valid reason does not, in my opinion, permit of a reflex or mechanical answer. The force, by way of analogy, of cases dealing with the enforceability of contracts due to illegality supposedly stemming from a statutory prohibition can hardly be denied. The High Court has considered the effect of illegality on contracts in three cases in recent years: Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410, Nelson v Nelson (1995) 184 CLR 538 (a trust disposition, not a contract, was at issue here, but the relevant principles did not differ) and Fitzgerald v F J Leonhardt Pty Ltd (1997) 71 ALJR 653. I take the law to be this: a contract may be rendered unenforceable pursuant to a statute by what I may call its “direct illegality”, that is, illegality of the contract itself, of what is to be done under it, of the purpose which it would effectuate, or of the manner of its performance. Alternatively, it may be rendered unenforceable because of its “indirect illegality”, that is, its association with the illegal activity of a party to the contract: this is a matter of public policy, that “[n]o Court will lend its aid to a man [sic] who founds his cause of action upon an immoral or an illegal act”: Holman v Johnson (1775) 98 ER 1120 at 1121. The question in such a case is whether the legislative purpose will be fulfilled without treating the contract as void and unenforceable. To answer that question, regard is primarily to be had to the scope and purpose of the statute.
There are, both as to direct illegality cases, and indirect public policy cases, established exceptions to the illegality rule (Nelson at 604-605, per McHugh J):
“First, the courts will not refuse relief where the claimant was ignorant or mistaken as to the factual circumstances which render an agreement or arrangement illegal. Second, the courts will not refuse relief where the statutory scheme rendering a contract or arrangement illegal was enacted for the benefit of a class of which the claimant is a member. Third, the courts will not refuse relief where an illegal agreement was induced by the defendant’s fraud, oppression or undue influence. Fourth, the courts will not refuse relief where the illegal purpose has not been carried into effect.
Furthermore, in a public policy case (at 613):
“courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: (1) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies.”
The rule against enforcement is not inflexible (at 597 per Toohey J, and see Fitzgerald at 671 per Kirby J):
“Although the public policy in discouraging unlawful acts and refusing them judicial approval is important, it is not the only relevant policy consideration. There is also the consideration of preventing injustice and the enrichment of one party at the expense of the other.
Applying these notions to the present case, the statute in question, the Workplace Relations Act 1996 (sic), authorises in general terms the making of awards which, among many other things, may forbid a harsh termination of employment by an employer. One such award does prohibit the company from so doing. It is the company which asks that a possibly illegal act performed by it should be disregarded by the Court. There is no evidence that the company, by its agents, was ignorant or mistaken as to the factual circumstances which might render the termination illegal. Neither the Award rendering the termination illegal nor the statute authorising it was “enacted” for the benefit of employers, the class of which the company is a member: Byrne.
The purposes of the Act and the Award were essentially public ones: the avoidance of industrial warfare with its usually concomitant depressing effect on the economic activity of the nation or various of its productive sectors: s 3; (see also Byrne, supra, and George Hudson Ltd v Australian Timber Workers’ Union (1923) 32 CLR 413). It is worth quoting the words of Isaacs J at some length, for it is easy in this area of the law to lose sight of the wood for the trees, and his exposition had as much force and validity in 1996 as in 1923 (at 434-435):
“The Commonwealth Conciliation and Arbitration Act is not a penal Act; nor is it at all proper to regard it simply as imposing obligations or impairing rights. To regard it so would be to mistake its real import. It is a statute embodying a great public policy. Its purpose - of which the advantages or disadvantages are quite outside the province of a Court to discuss, since its inscription on the Statute Book is the declared national will - is to encourage and maintain industrial peace in the Commonwealth. To this end it establishes a high public authority, which by conciliation and arbitration may prevent or settle disputes which menace the industries of the Commonwealth. Industrial disputes of course involve wages, hours of labour, safety, sanitation and other incidents of industry. The modification of legal relations between employers and employees in relation to these matters in respect of those subjects is of course involved, and that means alteration of rights and obligations. But that is not the prime purpose of the legislation; it is the necessary means of achieving the great object in view - the elimination of stoppage in industries that serve the people of the Commonwealth as a whole. The interests of the disputants are great; but it is because struggles over their individual interests are detrimental to the great general interests of the Commonwealth that the incidental alteration of legal relations of those engaged in industry is undertaken. What resemblance has an enactment with that vast scope, charged with the welfare of a whole community, to an Act imposing a penalty on an individual, or altering the rights of a bankrupt? The Legislature was well aware that in various industries awards and agreements in the nature of awards had been made and were in operation over vast portions of this continent. . . . Parliament knew that to let some employers escape from the adjusted obligations would or might be grossly unfair to others, both in the same State and in other States, and grossly unfair to the employees who had been led to make an agreement on the assumption that it was as stable as a compulsive award.”
To return to the criteria relevant to unenforceability, there is no question of oppression, etc. by the employees. If the illegal purpose is not foreclosed by the Court, it will have been carried into effect. It cannot be said after Byrne that the statute or the Award discloses an intention that the employer’s rights should be unenforceable in all circumstances.
The essence of the matter, on the public policy aspect (if it be relevant), is whether or not enforcing the employer’s rights is:
disproportionate to the seriousness of its possibly unlawful conduct; and
necessary, having regard to the terms of the statute, to protect its objects or policies; and
whether the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of an award made under the statute or the frustration of the Act’s policies.
One of the express objects of the Act was to provide-
“a framework for the prevention and settlement of industrial disputes which promotes the economic prosperity and welfare of the people of Australia by:
........
(b) providing the means for:
(i)establishing and maintaining an effective framework for protecting wages and conditions of employment through awards” (s 3(a))
Further, although I have cast the discussion so far in terms of the employer’s possible rights, apart from the way they might have been affected by the Award, to permit the enforcement of those non-award rights would be to deny to the employees the benefit of their affirmative rights under the Award.
With that background, and bearing in mind the broad public purposes of the Act to which I have referred, for an employer intentionally to disobey an award prescription regarding a condition of employment as important as a right not to have the employment harshly, unjustly or unreasonably terminated must be seen as a very serious matter. There will be no disproportion if the response of the Court is to decline to absolve the employer from compliance with that prescription.
Not to do so would be to invite employers for a price never exceeding $5,000 and usually not exceeding $500 (s 178) to ignore their award obligation. Regrettably, a good many employers would think the price cheap. The history of industrial relations shows few issues to be more capable of setting off industrial conflict than a perception by employees that they or one or more of their fellow employees have been harshly dismissed. Equally, few issues so fire the passions of employers as a contrary view taken about an employee’s dismissal - most employers give anxious consideration to such matters and act only in what they regard as clear or vital cases. In other words, to protect the express objects and policies of the Act, it is necessary not to permit an employer to profit from illegal disobedience of an award.
Nor, in my opinion, does the Act disclose an intention that its express sanctions and remedies are to be the only legal consequence of an award breach or of the frustration of the Act. Byrne did not so decide, for that question was not before the High Court in that case. Having regard to what is set out above as to the important public purposes of the Act, insofar as it deals with awards, and the actual industrial setting in which it has operated, it would be strange if Parliament had intended that breaches of this Act should be regarded as being as confined in their legal effects as, say, the unlicensed performance of competent but unlicensed domestic building work.
Certainly, nothing in the Termination of Employment Division (Div. 3 of Part VIA - ss 170CA-170HB) of the Act discloses such an intention. Indeed the indications are to the contrary, in my opinion. The Division consists of beneficial legislation for the protection of employees and is, of course, to be interpreted liberally in accordance with that purpose. The onus is on the employer to prove there was a valid reason for a termination: s 170EDA. Section 170HB provides that the Division is not intended to limit “any right that a person or trade union may otherwise have” to appeal against, or secure relief in respect of, a termination of employment. Section 170HA provides:
“. . . any award . . . that is inconsistent with the requirements of [the Termination of Employment] Convention does not have effect to the extent of the inconsistency”.
The Convention provides:
“ Article 3
For the purpose of this Convention the terms ‘termination’ and ‘termination of employment’ mean termination of employment at the initiative of the employer.PART II STANDARDS OF GENERAL APPLICATION
DIVISION A JUSTIFICATION FOR TERMINATION
Article 4
The employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking, establishment or service.”
Plainly the purpose and effect of the Convention are to limit an employer’s rights, not to enhance them. It is not inconsistent with such a limitation of rights for an award otherwise to limit them. Section 170HB specifically preserves certain ways in which that might be done. In its context, what s 170HA intends is that any award provision which would confer upon an employer a right inconsistent with Article 4 is rendered ineffectual. In this case, cl 18.6 of the Award is not inconsistent with Article 4, even if it goes beyond it. What cl 18.6 does is to provide specific criteria against which, among other criteria, the validity of the reason for a termination may be judged.
So far as can be done, the Act should be read as a harmonious whole, notwithstanding the treaty origins of the termination of employment provisions. In my view, it is a more coherent interpretation to view the decision to be made under s 170EE as to whether s 170DE(1) has been contravened, as requiring account to be taken of whether other provisions of the Act (s 149 - providing for the “binding” effect of awards; and s 178 - providing for a penalty for breach of an award by a person bound by it) have also been contravened.
There is otherwise, in my view, no injustice in regarding a possible breach of an award by the employer as relevant to whether there was a valid reason for the terminations. On the contrary, it would be wrong and unjust to permit an employer to have the benefit that might flow from such a breach.
I have not overlooked that, in Byrne, Mason J’s suggestion in Yango of a limited role for statutory obligations, for which enforcement by way merely of penalty was provided, was regarded (at 433) as having “much to be said” for it (c.f. McHugh and Gummow JJ in Fitzgerald (at 659). But, as ever, regard must be had to the context in which, and the evident purpose for which, remarks in judgments are made. In Byrne, the context was whether a breach of an award provision about unjust termination of employment could found an action for damages for breach of a statutory duty. The purpose of the remarks was to point out that Parliament appeared to have intended a limited kind of remedy for failure to meet standards of conduct established by awards.
The present context and purpose of my consideration of the standard of conduct established by the Award are quite different. The context is whether conduct falling foul of that standard could be regarded by a court as having been undertaken for a “valid”, i.e. “defensible” reason. The purpose is to examine whether a statutory obligation as to the quality of terminations of employment, falling for direct enforcement by other and, comparatively speaking, not especially serious means, ought to be held to be of relevance to the determination of legal “validity” for the purpose of other provisions in the same statute also concerning the quality of terminations.
In any case, in Yango Mason J was not proposing disregard of statutory illegality attended only by the imposition of a civil penalty: he considered only that the “rule(role?) of the common law in determining the legal consequences of commission of the offence” would be thereby “diminished” (429), not ended or reduced to insignificance. That this point is not merely a semantic one seems clear from what shortly followed the dictum referred to. His Honour said (at 429):
“However, in the present case Parliament has provided a penalty which is a measure of the deterrent which it intends to operate in respect of non-compliance with s. 8. In this case it is not for the court to hold that further consequences should flow, consequences which in financial terms could well far exceed the prescribed penalty and could even conceivably lead the plaintiff to insolvency with resultant loss to innocent lenders or investors. In saying this I am mindful that there could be a case where the facts disclose that the plaintiff stands to gain by enforcement of rights gained through an illegal activity far more than the prescribed penalty”. (emphasis added)
The present kind of case, if the Court shut its eyes to a harsh but otherwise valid termination, would be, as I have indicated, a good example of a case where a party might very well stand to gain “far more than the prescribed penalty”.
All of the above discussion has proceeded upon the assumption that it is or may be appropriate to assimilate common law principles of statutory illegality as bearing on the enforceability of contracts to the interpretation of s 170DE(1), so far as ss 149 and 178 dealing with the binding force of awards are concerned. In the course of it, however, I have sufficiently indicated why my conclusion would not be different if s 170DE(1) were interpreted without regard to those considerations.
I also add, because advocates so often seem to think it useful when a meaning of “valid reason” other than the most rigidly narrow is canvassed, to suggest that their opponents (or even the Court) are trying “to get around” the Validity Case and to resurrect s 170DE(2) considerations, that my approach represents, of course, no such thing. In the Validity Case it was held that it was beyond power for Parliament to legislate directly against harsh, unjust or unreasonable terminations of employment, since such a direct prohibition was not within the scope of a fair implementation of the Convention pursuant to the external affairs power. The Validity Case did not at all touch upon whether an admittedly constitutionally-authorised prohibition of such a termination would be a relevant factor to the determination of whether under s 170DE(1) the termination could be said to be “for a valid reason”.
Was the Award breached?
The factual question then arises: was the termination of either employee by the company “harsh, unjust or unreasonable” within the meaning of the Award? The employees should be regarded as bearing the onus on this question. I have given this matter anxious consideration but, on balance, I am satisfied that there was a breach of the Award: the termination of each employee was, in my opinion, harsh. My reasons for this conclusion are principally these: the period of employment for each employee was not short; each was well-regarded; this incident occurred with greater provocation than usual; its duration was brief; the contract of employment very sensibly, especially in this employment, allowed for a graduated range of disciplinary responses by the employer, and it will still be open to the employer, if the employees are re-instated, to take such reasonable measures from among that range as it wishes. I would add that, even in the criminal law, with its high purpose of protection of the lives and physical safety, as well as the property, of citizens, there are doubts felt in some respectable quarters about the moral justification for sentencing on a policy of “general deterrence” as distinct from individual deterrence: see, for example, George Zdenkowski, Sentencing of Federal and A.C.T. Offenders: Some Reform Proposals, Australian Law Reform Commission, 1986. The same kinds of reservations would indicate that it would ordinarily be somewhat harsh to punish one employee to deter others, at least in the case of “first offenders” who were severely provoked.
Conclusion
In summary, therefore, if not for clause 18.6 of the Award, the company would have a valid reason to terminate the employment of Mr McGinness and Mr Thirkettle for the reasons I have set out above, and any harshness of the termination would not be relevant to its decision: Validity Case. However, as the Award imposed a legal obligation upon the employer to refrain from effectuating a harsh termination upon an employee, a failure to act according to that legal obligation means that the employer could not be said to have a valid reason for the terminations. There was a failure so to act, because each termination was harsh. There was, therefore, no valid reason for each termination.
Each employee sought re-instatement, and I am minded to order it, but there may have been some relevant change in circumstances. I will ask for draft orders accompanied by short submissions to be submitted by the parties by facsimile to my Associate within 7 days.
I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment of the Honourable Justice Madgwick.
Associate:
Dated:
Counsel for the Applicant: Mr R Traves Solicitor for the Applicant: Allen Allen and Hemsley Counsel for the Respondent: Mr R Jones Solicitor for the Respondent: Goss Downey Carne Date of hearing: 4 October 1996
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