Kenefick v Australian Submarine Corporation Ltd
[1996] IRCA 331
•26 Jul 1996
DECISION NO: 331/96
INDUSTRIAL LAW - Termination of employment - Unlawful termination - Employees terminated because of a redundancy situation - Failure of employer to follow the procedure required by s. 170DC of the Industrial Relations Act - Failure of employer to demonstrate a reason for terminating the employment of these particular employees - Review of Judicial Registrar's decisions - Assessment of compensation - Effect of lack of evidence regarding position since hearing before Judicial Registrar - Significance of fact that retrenchment would have occurred, in any event, within a short time - Selection of retrenched employees made honestly - Relevance of redundancy and workers compensation payments - Whether compensation may be awarded in respect of losses suffered later than six months from termination day.
Industrial Relations Act 1988, s. 170EE(2)(3)
TREVOR KENEFICK AND ANOR v AUSTRALIAN SUBMARINE CORPORATION PTY LTD
No SI 290 of 1994
PETER DIGGLE AND ANOR v AUSTRALIAN SUBMARINE CORPORATION PTY LTD
No SI 292 of 1994
PETER HILL AND ANOR v AUSTRALIAN SUBMARINE CORPORATION PTY LTD
No SI 294 of 1994
BRONTE NAGEL AND ANOR v AUSTRALIAN SUBMARINE CORPORATION PTY LTD
No SI 295 of 1994
CORAM: WILCOX CJ
PLACE: SYDNEY (HEARD BY VIDEO-LINK TO ADELAIDE)
DATE: 26 JULY 1996
IN THE INDUSTRIAL RELATIONS COURT )
OF AUSTRALIA ) No. SI 290 of 1994
SOUTH AUSTRALIAN DISTRICT REGISTRY )
BETWEEN:TREVOR KENEFICK
First Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY (HEARD BY VIDEO-LINK TO ADELAIDE)
DATE: 26 JULY 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
Judgment be entered in favour of the first applicant against the respondent in the sum of two thousand dollars ($2000).
Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.
IN THE INDUSTRIAL RELATIONS COURT )
OF AUSTRALIA ) No. SI 292 of 1994
SOUTH AUSTRALIAN DISTRICT REGISTRY )
BETWEEN:PETER DIGGLE
Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY (HEARD BY VIDEO-LINK TO ADELAIDE)
DATE: 26 JULY 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
Judgment be entered in favour of the first applicant against the respondent in the sum of six thousand dollars ($6000).
Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.
IN THE INDUSTRIAL RELATIONS COURT )
OF AUSTRALIA ) No. SI 294
SOUTH AUSTRALIAN DISTRICT REGISTRY )
BETWEEN:PETER HILL
Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY (HEARD BY VIDEO-LINK TO ADELAIDE)
DATE: 26 JULY 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application be dismissed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.
IN THE INDUSTRIAL RELATIONS COURT )
OF AUSTRALIA ) No. SI 295 of 1994
NEW SOUTH WALES DISTRICT REGISTRY )
BETWEEN:BRONTE NAGEL
First Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY (HEARD BY VIDEO-LINK TO ADELAIDE)
DATE: 26 JULY 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
Judgment be entered in favour of the first applicant against the respondent in the sum of three thousand five hundred and twenty dollars ($3520).
Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.
IN THE INDUSTRIAL RELATIONS COURT )
OF AUSTRALIA ) No. SI 290 of 1994
SOUTH AUSTRALIAN DISTRICT REGISTRY )
BETWEEN: TREVOR KENEFICK
First Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
No. SI 292 of 1994
BETWEEN: PETER DIGGLE
First Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
No. SI 294 of 1994
BETWEEN: PETER HILL
First Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
No SI 295 of 1994
BETWEEN: BRONTE NAGEL
First Applicant
AUTOMOTIVE FOOD METALS & ENGINEERING UNION
Second Applicant
AND:AUSTRALIAN SUBMARINE CORPORATION PTY LTD
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY (HEARD BY VIDEO-LINK TO ADELAIDE)
DATE: 26 JULY 1996
REASONS FOR JUDGMENT ON COMPENSATION
WILCOX CJ: On 11 August 1995 I gave judgment in connection with reviews of decisions of a Judicial Registrar granting compensation to five former employees of the respondent, Australian Submarine Corporation Pty Ltd ("ASC"). The five former employees were Trevor Kenefick, Peter Diggle, Peter Hill and Bronte Nagel, the four continuing applicants, and Ian Cheong, whose claim against ASC has now settled. The Judicial Registrar had held that ASC had terminated the employment of each of the five employees in contravention of Division 3 of Part VIA of the Industrial Relations Act 1988 and had awarded compensation to each of them. On review, I held that the terminations did not constitute a breach of the Act. I set aside the orders made by the Judicial Registrar and, in lieu thereof, ordered that each application be dismissed.
The applicants appealed to a Full Court against my decision. The Full Court (Ryan, Beazley and North JJ) handed down judgment on 26 March 1996 allowing each appeal and remitting each proceeding to me for determination of the appropriate amount of compensation. The major point of difference between the Full Court and myself concerned the question whether s. 170DC of the Act applied to a situation where the reason for terminations was that some employees were redundant, but the employer selected those to be retrenched by determining which employees were comparatively less valuable to it. There was also a question whether the employer could satisfy s. 170DE(1) in the absence of proof that there was a valid reason to select a particular person for retrenchment, rather than someone else.
ASC has filed an application for leave to appeal to the High Court of Australia against the Full Court's decision. Despite that fact, the solicitors for the applicants sought an early hearing of the remitted proceedings and an immediate determination of compensation. ASC did not oppose that course. Although I offered an opportunity to do so, no party elected to call additional evidence concerning the quantum of compensation. Each side provided written submissions and participated in a video hearing at which the submissions were discussed.
Determination of compensation in these cases is not an easy task. There are so many unknown factors that it is not possible to do more than make general assessments. It is impossible to demonstrate mathematically the correctness of any particular award.
General considerations
Before dealing with the applicants individually, I wish to make some comments of general application.
First, the evidence stops at 30 March 1995, the last day of the hearing before the Judicial Registrar. This was little more than three months after the date of the terminations. No additional evidence was called on the review - either at the first hearing conducted by me in July 1995 or, as I have said, after remittal. So there is no evidence concerning the circumstances of the applicant later than the first three months after termination. Counsel for ASC argue that, in this situation, the Court is not entitled to allow anything by way of loss after 30 March 1995. They say the applicants have the burden of proof of any continuing loss after that day, they had the opportunity to discharge it, but neglected to do so.
I do not think the Court is precluded, as a matter of law, from allowing compensation in respect of the period after 30 March. The Court has to look at the evidence as it is. If the evidence before the Court shows a possibility of loss after 30 March 1995, that possibility must be taken into account. If any applicant has prejudiced his case by neglecting to bring the evidence up to date, this may be because he could have established that something that appeared, at 30 March 1995, to be only a possibility actually happened.
Second, it is common ground that, in the absence of orders for new submarines - none of which were received by 30 March 1995 - ASC's work would eventually have run out. All the applicants were employed as welders in the hull shop. A workforce projection graph tendered to the Judicial Registrar showed that, prior to the relevant retrenchments, ASC envisaged that its welding workforce of 55 would fall to about 45 by July 1995 and then drop away to less than 10 in June 1996. In the absence of new orders, very little welding work would be available after June 1996. The Judicial Registrar approached the assessment of compensation on the basis that the applicants would have been made redundant by June 1996 in any event. In argument before me, counsel for the applicants acknowledged that she was entitled to take that view. Considering the matter for myself, having regard to the projection, I conclude that it is highly probable that all the applicants would have been retrenched by June 1996, if they had not been retrenched in December 1994 or at some time in between those dates.
Third, as I understand the evidence, the reduction in welders postulated by the graph for July 1995 is the reduction that occurred in December 1994. The retrenchments were brought forward because of the government's announcement that it would not order additional submarines and ASC's desire to retain a reasonable level of overtime. This is not a case where there would not have been a termination at all, but for conduct of the employer contravening the Act; as, for example, where an employee is dismissed for alleged misconduct which turns out never to have occurred. Even if ASC had punctiliously complied with the Act, it would have terminated the employment of about the number of welders who were terminated, at about the time when the terminations took place.
Fourth, the applicants' cases were conducted on the basis that Mr Bews, who made the final decision as to which hull shop welders should be selected for redundancy, and the senior officers who advised him about that matter, made honest judgments as to which welders were least valuable to the company. In making those judgments, they did not follow the course prescribed by s. 170DC. Had they done so, they may have selected different people. But this cannot be assumed. The welding workforce was relatively small. The people who advised Mr Bews knew all the welders. It is not possible to say what would have been the fate of any applicant, if the s. 170DC procedure had been followed. But it is possible to say that ASC's failure to follow the s. 170DC procedure deprived each applicant of the chance, rather than the certainty, of successfully arguing that his name should be deleted from the list of those selected for retrenchment. It is necessary, in each case, to assess the value of that chance.
Fifth, all the people who were retrenched in December 1994, including the applicants, received redundancy payments calculated in accordance with the relevant award. After some discussion, it became common ground between counsel that I should ignore these payments. The reason is that it is clear that all welders not retrenched in December 1994 would eventually be retrenched, unless they earlier resigned or were dismissed for another reason, and would then receive redundancy payments. If the redundancy payments received by the applicants were taken into account in reduction of their losses, it would be necessary also to take account of the fact that they lost the value of their later entitlement. It is true that a cash payment received at a particular point of time has a higher value than the same amount to be received at a later date. The nominal value of a delayed payment must be discounted to allow for the recipient's inability to use it in the meantime. The greater the assumed rate of inflation in the period before the delayed payment, the greater the discount. However, any adjustment of the value of the redundancy payments to allow for that factor would have to be counterbalanced against the circumstance that a later redundancy payment would be based upon the wages payable at that time. The greater the assumed rate of inflation in the meantime, the more allowance must be made for increased wages. There being imponderables on both sides, but both being affected in the same way by any given assumption about inflation, the sensible course is to ignore the redundancy payments altogether.
Finally, in Brown v Power (19 April 1996, not yet reported) Moore J made two observations about the computation of compensation under s. 170EE(2) and (3) of the Act that are presently relevant. The first observation was that it was appropriate to take into account post-termination workers' compensation payments. I agree with this. As Moore J pointed out, payments under workers compensation legislation stand in a different position to payments made by a person having no connection with the employer; for example, by the Commonwealth Government under the Social Security Act 1991. The observation I made in Mullany v Active Concrete (3 May 1995, not reported), quoted by his Honour, was not intended to refer to workers compensation payments.
Moore J's second observation concerned the ability of the Court to award compensation in respect of losses incurred after the expiration of six months from termination of the employee's employment. It may have been appropriate in Brown, as an exercise of judgment in relation to a factual matter, not to allow anything in respect of that period. I say nothing about that. However, if his Honour meant to say that the Court is precluded, as a matter of law, from taking into account any loss suffered, or likely to be suffered, after the first six months, I must respectfully disagree. It seems to me that the only significance of the reference to six months is s. 170EE(3)(a) of the Act is that it provides a mechanism for calculating the maximum sum of money that may be awarded to an employee.
The individual cases
Mr Kenefick was born in June 1953. He commenced employment with ASC on 1 July 1992. On 3 November 1993, he suffered an injury at work affecting his lower back. He took two days leave but then returned to work, doing light work such as welding brackets. He initially worked up to six hours per day but this had been reduced to about 1.5 to 3 hours per day by the date of his retrenchment. During this time he apparently continued to receive his ordinary pay of $607.50 per week. After he was terminated, he received WorkCover payments of $578 per week. On that basis, his immediate financial loss seems small; but I think this comparison understates the position. Mr Kenefick's evidence was that WorkCover payments amount to 80% of normal gross wages. Applying that yardstick, his normal gross wage, which would presumably include regular overtime, would amount to $722.50. However, a schedule prepared by ASC, and tendered without objection by counsel for the applicants, shows the amount earned by employees comparable to Mr Kenefick after the date of his termination to be $680.45 per week. The difference between this figure and $722.50 may be attributable to a reduction in overtime. In the circumstances, it seems fair to assume that Mr Kenefick suffered a loss of about $100 per week as a result of his termination. This loss was continuing at 30 March 1995.
There is no evidence as to Mr Kenefick's medical condition at 30 March 1995 or his work prospects at that time. For all I know, he may still be on WorkCover. On the other hand, his WorkCover payments may have ceased and he may be unemployed. I do not know. This may be a case where an applicant's case has suffered by his failure to bring the evidence up to date. As I have no evidence on the subject, I have no reason to assume that Mr Kenefick's medical condition has progressed to the point where WorkCover payments have been terminated. So I think I must approach the case on the basis that, if he had not been terminated, his earnings over the 18 months to June 1996 would have been about $100 per week more than they were in fact. That would dictate a maximum award of $7800.
However, an award of $7800 would make no allowance for the contingency of Mr Kenefick being selected, after proper process, for one of the redundancy positions that would certainly have occurred in December 1994 or, at the latest, early 1995. Given his medical condition, there was surely a strong possibility - indeed, I think a high probability - that his name would have bene placed on any list of "least valuable" employees, even after a full s. 170DC procedure. If that is correct, he suffered only a small loss from ASC's failure to follow the appropriate procedure in making the December 1994 selections. However, there can be no certainty about the situation. So I should allow more than a nominal sum. As it seems to me, on the scanty evidence I have, I would err in his favour if I assessed his financial loss from termination at $2000. I propose to award this sum.
Mr Diggle was born in April 1957. He was employed by ASC from June 1993 until his retrenchment in December 1994. During the first three months on the job, there were problems about the quality of his work. A number of repairs had to be made and he received an oral warning. Mr Diggle said that, following the warning, the number of required repairs reduced dramatically. He did not receive any other warning, or suffer other disciplinary action, until his retrenchment. However, there were three occasions in 1994 (one as late as August) when his supervisor asked him to redo unsatisfactory work. In September or October 1994, he became the first person in the hull shop to qualify as a MIG welder.
After his retrenchment, Mr Diggle sought other jobs. Apparently he was unsuccessful in obtaining work before 30 March. However, according to ASC's schedule, he had earned $1,670 by the date of the hearing before me. If he had continued at ASC, earning at the rate of $680.45 per week, Mr Diggle would have earned wages of $17,692 in the six months immediately following his termination. His counsel argues that I should take a figure of $51,036, being 18 months wages at $680.45 per week, and conclude that any proper compensation award would well exceed the statutory maximum ($17,692); and therefore allow that figure, or a figure close to it.
The difficulty about this approach is that it requires an assumption, on the basis of evidence stopping at 30 March 1995, that Mr Diggle would not find work before June 1996. For all I know, that may have turned out to be the case; but it is another matter to say this appeared to be likely at 30 March 1995. Mr Diggle was a well qualified welder and only 37 years of age. He had not been successful in the work applications he made prior to 30 March 1995; but I think that anybody evaluating his position on that day would have concluded that he was likely to obtain work before long. I think it would be fair to assess Mr Diggle's case on the basis that the evidence at 30 March 1995 justified a prediction that he would probably suffer a loss of about six months' wages, from termination date, before finding suitable permanent employment. That means a starting point of $17,692; but, once again, it is necessary to discount that figure in order to take account of the contingency that he would have been selected for retrenchment notwithstanding a s. 170DC procedure.
I find it difficult to assess the possibility that a s. 170DC procedure would have enabled Mr Diggle to persuade ASC to omit him from the retrenchment list. On the one hand, he was well-qualified, young and physically fit; on the other, there had been several recent occasions on which he had been asked to re-do work. Although it is apparent that his work was not so deficient as ordinarily to justify his termination, in a situation where he was competing against others to avoid retrenchment, those incidents may have sealed his fate. I think it is appropriate to concede him a one-third chance of avoiding retrenchment and to award compensation of $6,000.
Mr Hill was born in 1951. He worked as a qualified boilermaker-welder for about 20 years before commencing with ASC in August 1992. In September 1994, shortly before he was retrenched, Mr Hill reached the top classification in his area of employment. Apparently he was on WorkCover benefits at the time of his termination but there is no evidence about the reason for this. What does appear is that Mr Hill suffered no financial loss from retrenchment. It was put to him in cross-examination before the Judicial Registrar that, since he had left ASC, he was making more money than when he was there. He replied: "Probably comparable. I don't think it's either more or less at this stage". Counsel asked: "You are not suffering any loss?" He replied: "Not at this stage, I'm not suffering any financial loss because I've found myself quite reasonable employment". Having regard to this evidence, and bearing in mind the virtual certainty that Mr Hill would in any event have lost his job with ASC by June 1996, there is no justification for a finding of wages loss. No other type of loss is claimed or proved. The purpose of compensation under s. 170EE(2) of the Industrial Relations Act is to compensate a terminated employee for the loss the employee has suffered by reason of the employer's unlawful act; not to punish the employer for that act. If no loss is proved, there can be no award of compensation. I make no award in Mr Hill's case. His application will be dismissed.
The final applicant, Mr Nagel, was born in May 1962. He was employed by ASC from May 1991 until his retrenchment in December 1994. During that time, he had some health problems: a sinus infection which involved him taking "a significant amount of time off work" and a broken finger which put him off work for about three weeks. Mr Nagel acknowledged that he received some written warnings about absences from work. He denied receiving any complaints about the quality of his work and he said he was one of two welders selected to prepare a manual to assist other welders. Between the date of his retrenchment and the hearing before the Judicial Registrar, Mr Nagel had a number of casual jobs that earned him a total of about $4,500. Taking a period of 15 weeks at an agreed comparable rate figure of $658.17 per week, if he had remained at ASC he would have earned $9,872 during this period. So his loss to 30 March was a loss of about $4,400. It is reasonable to assume that he would have continued to suffer a loss of this order for the next three months; making a gross figure, before any discount for contingencies, of $8,800. As to the appropriate contingency, once again this is very difficult to determine. Mr Nagel was young, well-qualified and apparently well-regarded. On the other hand, he had suffered health problems leading to considerable loss of time from work. In a competition about retrenchment and notwithstanding a s. 170DC procedure, these absences would probably have been fatal to his chances of avoiding retrenchment. I think it would be fair to apply a 60% discount and assess his compensation as $3,520.
I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment of his Honour Chief Justice Wilcox.
Associate:
Dated:
APPEARANCES
Counsel for the Applicant: P A Heywood Smith
Solicitor for the Applicant: S Blewitt
Counsel for the Respondent: S Walsh QC
C Kourakis
Solicitor for the Respondent: Ward & Partners
Dates of hearing: 12 July 1996
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