Kangatheran v Cyberspace Internet Cafe

[1996] IRCA 348

DECISION NO:  348/96 

C A T C H W O R D S

INDUSTRIAL LAW -  TERMINATION OF EMPLOYMENT - claim of UNLAWFUL TERMINATION - whether VALID REASON for termination - whether HARSH, UNJUST OR UNREASONABLE - application dismissed.

Industrial Relations Act 1988 Ss 170DE, 170EA.

Bharathan KANGATHERAN -v- CYBERSPACE INTERNET CAFE 
WI 1112 of 1996

BEFORE:        R. D. FARRELL JR
PLACE:           PERTH
DATE:             2 July 1996

IN THE INDUSTRIAL RELATIONS     )
COURT OF AUSTRALIA  )
WESTERN AUSTRALIA  )
DISTRICT REGISTRY  )         No. WI 1112 of 1996

BETWEEN:  Bharathan KANGATHERAN
  -         Applicant

AND:  CYBERSPACE INTERNET   CAFE
               -         Respondent

MINUTE OF ORDERS

BEFORE:                R. D. FARRELL JR

PLACE:                   PERTH

DATE:  2 July 1996

THE COURT ORDERS THAT:

1.         The application is dismissed.

NOTE:           Settlement and entry of Orders is dealt with by Order 36 of the   Industrial Relations Court Rules

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY

WI 1112 of 1996

BETWEEN:

Bharathan KANGATHERAN
Applicant

AND:

CYBERSPACE INTERNET CAFE
Respondent

REASONS FOR DECISION
(Delivered ex tempore - revised from transcript)
2 July 1996  R. D. FARRELL JR

1. This is an application brought pursuant to section 170EA of the Industrial Relations Act 1988 arising from the alleged unlawful termination of the employment of the applicant, Mr Bharathan Kangatheran (“Mr Kangatheran”), by the respondent, Cyberscape Holdings Pty Ltd (“the Company”).

The Employment History

1. The business in which the Company was engaged was a cafe, a feature of which was the maintenance of computer systems whereby customers could obtain access to the internet. Mr Kangatheran was hired just before the cafe commenced business. The Company had two directors. One of the directors was Dr Munro Neville, who held down a full-time job as a medical practitioner and, apart from some part-time work at the cafe, played only a director's role in the Company. The other director was Mr Michael Hood, who was the manager of the cafe and continued to play a role in the cafe throughout Mr Kangatheran's employment.

1. The terms on which Mr Kangatheran was employed are set out in a written contract. Initially, his duties were primarily in relation to the management and maintenance of the computer network, though he also had responsibilities to interact with staff, provide cafe services and perform other domestic duties relating to the ongoing maintenance of the business. His salary under the contract was $23,004 per annum. He typically worked four shifts per week, each of 10 hours duration. The period of the original contract was 3 months; it was described as a “3 month trial of employment”. The written contract bears the date 10 November 1995, so that the 3 month trial came to an end on 10 February 1996.

1. Unfortunately, the cafe was not an immediate success, and at some point before 10 February, 1996 the employment of one of Mr Kangatheran’s fellow employees, Mr Michael Stanton, was brought to an end. Mr Stanton was advised by the Company that there were insufficient funds to continue to pay his salary.

1. Mr Kangatheran assumed further responsibilities after Mr Stanton left. More significantly, he began to assume greater managerial responsibilities after Christmas as Mr Hood began to play a less active role in the business; Mr Hood explained that he was having to begin to earn income outside the business to maintain the business' position. There is dispute as to whether or not Mr Kangatheran was ever officially given the title of “Manager”, but for the purpose of this decision it suffices to find that he took on some managerial responsibilities.

1. It is clear that a mutual lack of respect developed between Mr Kangatheran and Mr Hood, during Mr Kangatheran’s employment. Mr Kangatheran held a low view of Mr Hood's managerial abilities, and Mr Hood held a less favourable view of Mr Kangatheran's performance than, for example, Dr Neville.

Initial Negotiations to Renew Mr Kangatheran’s Contract

1. By late January, some discussions began between Dr Neville and Mr Kangatheran relating to the impending expiry of Mr Kangatheran’s contract.

1. Mr Kangatheran raised two issues he wished to have resolved; the first matter was the definition of his increasing managerial responsibilities and the other was an increase in his base salary. While Dr Neville was prepared to try to resolve the managerial issue, he advised Mr Kangatheran in those negotiations that the Company was not prepared to pay any higher salary. I accept that Dr Neville and Mr Hood decided, as directors of the Company, that it was not prepared to increase Mr Kangatheran’s salary. They contend it was because the company could not afford it. Mr Kangatheran contends it was due to an unreasonable view of his performance. It is not necessary for me to make any finding as to the reasons for that decision.

1. In the course of discussion with Mr Kangatheran, Dr Neville developed a proposition as an alternative to a salary increase, whereby a bonus would be paid to Mr Kangatheran upon the achievement of particular target turnovers. I am satisfied that the details of that proposition were made known to Mr Kangatheran in the course of those discussions.

1. Dr Neville drew up a new written contract of employment which was closely based upon Mr Kangatheran’s original contract of employment. The only differences were the period covered by the contract and the inclusion of an incentive clause in the terms discussed with Mr Kangatheran. At a meeting on Friday, 9 February, 1996, Dr Neville and Mr Hood (“the directors”) agreed that the Company would offer a renegotiated contract to Mr Kangatheran in those terms. They both put their signatures to that contract at that time.

1. When making findings of fact as to the decisions taken by the Company, I have borne in mind that the decisions of the Company are made jointly by both its directors. It is therefore the consensus view adopted by Mr Hood and Dr Neville on behalf of the Company, rather than any individual views they may have, which are relevant.

1. It is agreed that the new contract document was presented to Mr Kangatheran, but there is a dispute as to how it was done. The directors say the contract document was presented to Mr Kangatheran at a meeting at the Continental Hotel on the evening of Sunday, 11 February, the day after the original contract had expired. Mr Kangatheran says the contract document appeared in his in-tray at the cafe at some time before that meeting. There is no dispute that the terms of the proposed contract were discussed at the Continental Hotel at that time and that Mr Kangatheran made it clear that he was not prepared to accept the proposed contract unless his base salary was increased. The directors refused to increase his salary, claiming that the cafe's finances were too poor to afford it. No further progress was made at that meeting.

1. Nothing was said at the meeting as to what would happen following the meeting. It was Dr Neville's expectation that Mr Kangatheran would continue to work for the time being and in fact Mr Kangatheran presented for work on the following Wednesday, 14 February 1996, which was the next occasion he was due to work.

1. The directors say that, if the contract had been accepted by Mr Kangatheran in the form in which they proposed it at the Continental Hotel or indeed at any time prior to the applicant eventually parting ways with the Company, then the applicant would have continued in employment, at least for the foreseeable future.

1. Mr Kangatheran says that he offered the directors the alternative of him continuing to be employed at his original contract salary but as an ordinary employee without managerial responsibilities. He says this may have been at the meeting at the Continental Hotel or in a later discussion with Dr Neville.

Events Leading to Termination: The Company’s Version

1. Dr Neville was of the view that negotiations had broken down, because the directors were emphatic that they were not prepared to increase Mr Kangatheran’s salary. They interpreted Mr Kangatheran’s actions in the ensuing days as attempts to continue to negotiate or shift them from that position.

1. Dr Neville says there were discussions between he and Mr Kangatheran after the meeting at the Continental Hotel. He says that in the course of one of those discussions, Mr Kangatheran asked him whether he should resign. Dr Neville says that he responded by telling Mr Kangatheran that he thought Mr Kangatheran should resign. However, he says that nothing happened after that discussion, and Mr Kangatheran continued to present for work at the cafe.

1. Dr Neville and Mr Hood had discussions on Monday, 19th February or Tuesday, 20 February 1996, as to how they would bring the matter to some resolution. They concluded that Mr Daniel McNamara, one of their other employees who had some computer skills, could take over Mr Kangatheran's role. In further discussion on the Wednesday night, it was resolved that the matter should be brought to a head the next day and settled, by bringing the employment relationship with Mr Kangatheran to an end.

1. According to Mr Hood, about an hour after Mr Kangatheran presented for work on the morning of Thursday 22 February 1996, Mr Hood asked Mr Kangatheran to come outside and have a word with him. Mr Hood says he said to Mr Kangatheran, "I know you are thinking about resigning. Do you think it's fair that we call it quits now?". He says that Mr Kangatheran agreed that that should happen and went and started to collect his things. Mr Hood describes the atmosphere of the parting as “amicable”.

1. According to the directors, Mr Kangatheran never indicated to them that he had accepted, nor indeed that he was prepared to accept, the proposed renegotiated contract, which he had earlier rejected at the meeting at the Continental Hotel.

1. After the conversation outside the cafe, Mr Hood agreed that Mr Kangatheran could remove his things. Mr Kangatheran went through his document tray which was kept in the back section of the cafe. Mr Hood says Mr Kangatheran also went through Mr Hood's tray, and removed various items. Mr Hood was in the back section at the time making a chicken foccacia, and was not paying close attention to what was going on.

1. I also heard evidence from Mr McNamara. He was at the door of the back section of the cafe at the time, speaking to Mr Kangatheran, and was watching what Mr Kangatheran was doing as they spoke. He noted that Mr Kangatheran had removed a document from Mr Hood's tray which he recognised as the renegotiated contract. Mr McNamara had seen the contract document for the first time the previous night, when he was going through the tray for another purpose. He had noted at that time that the contract was unsigned by Mr Kangatheran. His evidence was that he recalled that it was signed by Dr Neville and his recollection was that that was the only signature.

1. The contract document tendered in evidence bears Mr Kangatheran’s signature.

Events Leading to Termination: Mr Kangatheran's Version

1. Mr Kangatheran says that he first saw the proposed renegotiated contract document when he found it in his tray, where he presumes it was left for him. On his version of events, a copy of the contract document remained in his possession throughout the negotiations. On the directors’ version of events, the relevant copy of the contract document was in Mr Hood's possession, and was ultimately left in Mr Hood’s tray, from which they say it was taken.

1. Mr Kangatheran agrees that there were some discussions with Dr Neville following the meeting at the Continental Hotel. Mr Kangatheran was still hoping to be able to convince the directors to agree to a salary increase and, at least initially, he therefore remained unwilling to accept the proposed renegotiated contract. He did not accept that the cafe's finances were as poor as the directors were maintaining.

1. Mr Kangatheran concedes that at some stage he may have mentioned resigning to Dr Neville, but denies that he ever considered leaving the cafe completely. He says that what he was considering, and what he may have proposed to Dr Neville, was that he resign from the "manager's role", and continue on as an ordinary employee on his existing salary. Mr Kangatheran says that Dr Neville would have known he couldn’t afford  to leave the cafe completely.

1. However, Mr Kangatheran says there was another discussion with Dr Neville, on a night in the week after the meeting at the Continental Hotel, during which they left the cafe to walk the streets of Claremont, the locality in which the cafe is situated. In the course of that conversation they discussed the business, and Mr Kangatheran says he told Dr Neville that he “would not let him down”.

1. Mr Kangatheran says that, as a result of that discussion, when he returned to the cafe he signed a copy of the proposed renegotiated contract document which had been left for him in his tray. He says that after signing the document, he initially left the original for Mr Hood in Mr Hood’s tray, but thought better of it; he had never been given a copy of his original contract. He decided instead to make a copy of the signed contract using the Company's fax machine. He says he left the copy in Mr Hood's tray, and retained the original.

1. Mr Kangatheran agrees that he did not ever say anything about having accepted the contract to Dr Neville or to Mr Hood. Having given the copy to Mr Hood, he may have assumed that the copy of the signed contract document would speak for itself.

1. Mr Kangatheran agrees that about an hour after he presented for work on Thursday 22 February 1996, Mr Hood asked Mr Kangatheran to talk with him outside the cafe. Mr Kangatheran says that Mr Hood told him that the Company was not able to afford Mr Kangatheran's salary and, therefore, they would have to let him go. Mr Kangatheran notes that this was similar to the reason given to Mr Stanton.

1. Mr Kangatheran doubts that Dr Neville was consulted by Mr Hood before Mr Hood acted. He says that he left a couple of notes for Mr Hood in the till which Mr Hood would have found on the Thursday morning. The notes complained about Mr Hood's failure to do various things, and Mr Kangatheran believes it prompted Mr Hood to act in anger by terminating his employment.

1. Mr Kangatheran says that, while he was devastated, he tried to put up a brave face. His evidence as to his reaction is not inconsistent with Mr Hood’s perception that the parting was amicable. There was no indication at the time that Mr Kangatheran thought that the decision was unfair or that he was contesting the decision.

1. Mr Kangatheran agrees that he went and removed various things that were his personal items from at least his own tray. However, he denies emphatically that he removed the contract document. He contends that he had already signed the contract document on a previous night, so that there was no unsigned contract to be removed. He also says that he has in his possession an envelope with his name on it in the handwriting of one of the directors. He says that the contract was kept in that envelope, so that Mr McNamara could not have seen whether it was signed or not, had it been in the tray on the Thursday morning, as Mr McNamara claimed. He did not have the envelope with him, but said he had it at home if necessary.

Whether Termination at the Initiative of the Employer.

1. Based even on the respondent’s version of events, I am satisfied that there was a termination at the initiative of the employer, even though Mr Hood says that he used the language of resignation, asking Mr Kangatheran, “Do you think it's fair that we call it quits?”

1. It is clear that Mr Kangatheran was, as far as the directors knew, going to be turning up for work for the foreseeable future, notwithstanding that they say he was talking about resigning. It was their decision to bring the matter to a head and bring the employment to a close then, rather than at some later time. It was therefore a termination at their initiative.

Implied Agreement to Extend Employment Contract

1. The original contract expired on 10 February, 1996. The proposed renegotiated contract was rejected by Mr Kangatheran on 11 February 1996 at the Continental Hotel. Nevertheless, Mr Kangatheran continued working. I find that Mr Kangatheran continued working on the basis of an implied agreement between the directors and Mr Kangatheran that he remain employed on the original terms pending negotiation of a new contract. The employment could have then been terminated by either party on the giving of reasonable notice.

1. Mr Kangatheran had only been employed for 3 months. The extension of the employment occurred in the context of negotiations about whether and on what basis the employment relationship would continue; Mr Kangatheran, on his version of events, felt able to accept the proposed renegotiated contract about a week after the meeting at the Continental Hotel, which indicates that he believed negotiations were ongoing. In these circumstances, I find that notice of one week would be reasonable notice. I am satisfied on the evidence before me that Mr Kangatheran received a week's pay in lieu of notice. I find there was therefore no breach of his contractual entitlements.

Whether Valid Reason for Termination

1. The directors contend that there was a valid reason for termination related to the operational requirements of the business. They had been unable to achieve a satisfactory renegotiation of the contract; they say there was no indication that the terms they were offering were acceptable to the applicant. They contend, given that they were not prepared to give the applicant the salary increase he demanded, that it was necessary to bring the negotiations to an end and enable the business to proceed on the basis of certainty.

1. I accept that that could be a valid reason for dismissal, connected with the operational requirements of the cafe. In determining whether the facts support the directors’ contention, I note that the onus is on the directors to satisfy me that it is more probable than not that the relevant facts accorded with their version of events, rather than as Mr Kangatheran says they happened.

Findings of Fact

1. There are a number of points of divergence in the different versions of events. The acceptance by the Court of one version of events over the other on one of those points of divergence will often have implications for the resolution of the other points of divergence.

1. I must base my findings solely on the evidence before me. None of the witnesses appeared to me to be obviously unreliable. There was nothing in the manner in which any of the witnesses gave their evidence which led me to the view that I would be more inclined to disbelieve them where they were contradicted by somebody else. I am left in a position therefore of considering the evidence as it was presented and deciding what I consider was the more inherently probable version of events.

1. The first point of divergence is the question of how the proposed renegotiated contract document was presented. Whether it was found in Mr Kangatheran’s tray or presented to him at the Continental Hotel, there is nothing inherently improbable in either contention. While Mr Kangatheran was contending that it was found in his tray, both directors contended that it was presented at the Continental Hotel.

1. The next point of difference is whether Mr Kangatheran offered to resign to Dr Neville. One possibility is that there was a misunderstanding. Mr Kangatheran may have been thinking in terms of merely resigning from his "manager's role", but what he actually said may have been understood by Dr Neville as a suggestion that he might be resigning from the job completely.

1. However, I note in this context an earlier undated facsimile sent by Dr Neville to Mr Kangatheran which referred to Mr Kangatheran potentially “leaving” the cafe if he took up his studies. The facsimile suggests that Mr Kangatheran had been open to the idea of leaving the cafe completely, rather than needing to stay on as an employee for economic reasons, as he suggested in his evidence.

1. The final issue, which embraces a number of points of divergence, is whether Mr Kangatheran signed the contract before his termination or whether he took away the contract unsigned.

1. With regard to Mr Kangatheran’s contention that a faxed copy of the signed contract was left by him earlier in Mr Hood’s tray, I have considered the possibility that Mr Hood could have found the copy of the signed contract, reached a personal decision that the terms of that contract had no longer been open to acceptance, and never conveyed to Dr Neville that Mr Kangatheran had purported to accept the contract.

1. However, there is also the evidence of Mr McNamara. Mr McNamara has since assumed Mr Kangatheran’s position and is still employed with the cafe. One must always bear in mind that on-going employees might have a natural inclination to support the position of their employers either through fear or through a vested interest in maintaining their position, particularly if the continued viability of the cafe were in doubt if compensation were to be ordered, as the directors claim in this case. However, I was impressed by the manner in which Mr McNamara gave his evidence and I am satisfied that he was doing his best to give his honest recollection of events.

1. Mr McNamara’s recollection was not flawless. I am satisfied that at the time he saw the contract, it would have borne the signature of both the directors and not merely the signature of Dr Neville, and I accept that his evidence to the contrary reflected a failure of recollection. However, he was emphatic that at the time he saw the document on the Wednesday night  before Mr Kangatheran’s termination, it was not signed by Mr Kangatheran. This is not consistent with Mr Kangatheran's version of events. Mr McNamara was also confident that it remained unsigned by Mr Kangatheran the next morning at the time Mr Kangatheran took it from the tray. In perusing the document, one would expect Mr McNamara to be interested in whether the document was a concluded contract or merely a draft. He would have been interested therefore to see whether it had been signed by both parties. It is understandable that he might not recall whether it were signed by both directors or merely one. It is however more likely that Mr McNamara would recall whether or not the document was signed by Mr Kangatheran, because without Mr Kangatheran’s signature, it was not a contract.

1. I observe at this point that, even had an envelope been produced, there is no way of independently establishing that the contract was inside the envelope. The envelope could have been attached to the contract or part of the general bundle of papers that Mr Kangatheran took with him.

1. Viewing the various points of divergence together, Mr Kangatheran’s evidence is in conflict with that of Mr Hood and Dr Neville, sometimes jointly, and sometimes as individuals. It is also in conflict with the evidence of Mr McNamara. It is also, on a relatively minor point, contradicted by documentary evidence, in relation to whether he was considering leaving. On that basis, I find that it was more probable than not that, at the time the employment was brought to an end on the Thursday, the contract had not been signed by Mr Kangatheran, and that that was why nothing had been conveyed to the directors to suggest that the salary that was on offer had been accepted.

1. As I have already indicated, in circumstances where the directors were proceeding on the basis that the new contract that they had offered had not been accepted and was not acceptable to the applicant, then I am satisfied that it was a decision for a valid reason in relation to the operational requirements of the business to bring the uncertainty arising from the negotiation period to an end and to act to secure the end of Mr Kangatheran’s employment.

Whether the Dismissal was Harsh, Unjust or Unreasonable

1. The only other matter to be considered is whether, given that there was a valid reason, the dismissal was harsh, unjust or unreasonable. In making that assessment I have to look at all the circumstances of the case.

1. If the dismissal had not have occurred in the context of negotiations for the renewal of the contract, then the employer would have been required to canvass with the employee all the options that were available to them and one of the options would have been that he continue on the current terms. However, it seems to me that in the circumstances of this case, that was exactly what the negotiations were about. The renegotiated contract provided that Mr Kangatheran would have continued on much the same terms, and I have found, on the balance of probabilities, that that offer was not taken up because Mr Kangatheran was not prepared to agree to continue on those terms.

1. In considering whether the employer should have formally put the offer one last time before bringing about the termination, I accept that Mr Hood’s language, proposing that it might be a good idea for them to “call it quits”, implicitly invited a response to the contrary from the applicant in any event.

Conclusion

I am satisfied that the termination was not harsh, unjust or unreasonable. On that basis, the application under section 170EA fails and I make an order that the application be dismissed.

I certify that this and the preceding (14) pages
are a true copy of the reasons for decision of
Judicial Registrar R.D. Farrell.

Associate:
Dated:

APPEARANCES

The applicant appeared in person.

The respondent represented itself.       

Dates of Hearing:  1 and 2 July 1996

Date of Judgment:  2 July 1996