Klingenberg and TWU v IR Cootes Pty Ltd
[1995] IRCA 398
•24 August 1995
CATCHWORDS
INDUSTRIAL LAW - UNLAWFUL TERMINATION - review of JUDICIAL REGISTRAR - quantum of remuneration - power under s170EE Industrial Relations Act 1988 - need for exceptional circumstances to exercise discretion not to order remuneration lost - reduction in remuneration awarded.
Industrial Relations Act 1988, ss 170DC, 170EA, 170EE, 377
Conciliation and Arbitration Act 1904, s5
Bowling v General Motors-Holdens Pty Ltd (1980) 33 ALR 297; 50 FLR 79
Australasian Meat Industry Employees’ Union v Sunland Wholesale Meats (1988) 81 ALR 213, 220
“The Taxation Implications of Statutory Unlawful Termination of Employment” (1994) 7 AJLL 227, 243
Jason Scott Johns v Gunns Limited TI 148R of 1994, 18 May 1994, unreported
No. VI 2421R of 1994
JAMIE KLINGENBERG & TRANSPORT WORKERS’ UNION OF AUSTRALIA v I.R. COOTES PTY LTD
Marshall J
Melbourne
24 August 1995
IN THE INDUSTRIAL RELATIONS COURT )
) )
OF AUSTRALIA )
) No. VI 2421R of 1994
VICTORIA DISTRICT REGISTRY )
BETWEEN: JAMIE KLINGENBERG &
TRANSPORT WORKERS’ UNION OF AUSTRALIA
Applicant
AND: I.R. COOTES PTY LTD
Respondent
JUDGE: Marshall J
PLACE: Melbourne
DATE: 24 August 1995
ORDER
THE COURT ORDERS THAT:
1.The Order of the Court constituted by Judicial Registrar Murphy made on 24 March 1995, and described by him as order 2, that the respondent pay the applicant loss of remuneration in the sum of $24,359.00 within 14 days, is set aside.
2.The other orders of Judicial Registrar Murphy made on 24 March 1995, and described by him as orders 1 and 3, stand.
Note: The applicant was reinstated in accordance with these orders and such reinstatement was not sought to be disturbed upon review.
3.The matter is to be adjourned to the directions list on 18 September 1995 at 10.15 am to enable the parties to calculate the amount of remuneration lost actually payable to the applicant after the deduction of PAYE taxation at the appropriate rate from the gross amount of $813.00.
Note:If agreement is reached, a consent order can be made pursuant to Order 35
rule 10.
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 )
) No. VI 2421R of 1994
VICTORIA DISTRICT REGISTRY )
BETWEEN: JAMIE KLINGENBERG &
TRANSPORT WORKERS’ UNION OF AUSTRALIA
Applicant
AND: I.R. COOTES PTY LTD
Respondent
JUDGE: Marshall J
PLACE: Melbourne
DATE: 24 August 1995
REASONS FOR JUDGMENT
BACKGROUND
On 22 November 1994, the applicant lodged in the Registry an application pursuant to s170EA Industrial Relations Act 1988 (“the Act”) for remedies in respect of the termination of his employment by the respondent. The applicant sought reinstatement and compensation. Prior to his dismissal on 9 November 1994, the applicant had been employed by the respondent as a driver of LPG tankers for about one year on a full time basis and for a period of about four months prior to that on a casual basis.
On 29 January 1995, the District Registrar of the Court referred the matter for conciliation by the Australian Industrial Relations Commission (“the Commission”). The Commission was unable to settle the matter by conciliation and, on 9 January 1995, Vice President McIntyre so certified.
The matter was heard by Judicial Registrar Murphy on 6 March 1995. On 24 March 1995 the Judicial Register ordered as follows:
“1.That the respondent re-employ the applicant in his former position as a LPG tanker driver.
2.That the respondent pay to the applicant loss of remuneration in the sum of $24,359.00 within 14 days.
3.That the period from 9 November 1994 to date be treated for all purposes, including employer superannuation contributions, as continuous employment.”
The Judicial Registrar held that s170DC of the Act had been breached by the respondent. That section provides that:
“An employer must not terminate an employee’s employment for reasons related to the employee’s conduct or performance unless:
(a)the employee has been given the opportunity to defend himself or herself against the allegations made; or
(b)the employer could not reasonably be expected to give the employee that opportunity.”
Judicial Registrar Murphy then considered the question of appropriate remedy pursuant to s170EE of the Act. Section 170EE provides, in so far as is material, that:
“(1) In respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, the Court may make the following orders:
(a) an order requiring the employer to reinstate the employee by:
(i) reappointing the employee to the position in which the employee was employed immediately before the termination; or
(ii) appointing the employee to another position on terms and conditions no less favourable than those on which the employee was employed immediately before the termination; and
(b)if the Court makes an order under paragraph (a):
(i)any order that it thinks necessary to maintain the continuity of the employee’s employment; and
(ii) an order requiring the employer to pay the employee the remuneration lost by the employee because of the termination.
(2) If the Court thinks, in respect of a contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate.
(3) In working out the amount of compensation for the purposes of subsection (2), the Court is to have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment, but the amount of compensation:
(a)must not exceed, in respect of any employee, the amount of the remuneration that would have been received by the employee in respect of the period of 6 months that immediately followed the day on which the termination took effect if the employer had not terminated the employment and the employee had continued to receive remuneration in respect of the employment at the rate at which he or she received remuneration immediately before the termination took effect; and
(b)must not exceed, in respect of an employee who is not employed under award conditions, the applicable amount on the day on which the termination took effect.”
Before the Judicial Registrar the respondent submitted that certain conduct of the applicant should be taken into account on the issue of remedy. That conduct related to the driving record of the applicant at the time he was first employed by the respondent, having regard to his failure to disclose previous accidents in which he was involved. It also related to an allegation that the applicant had made an excessive claim on the respondent in relation to a trip to Horsham.
The Judicial Registrar was “not satisfied that this constitutes conduct which would disqualify him from the primary remedy under the Act” (p11 of the decision of 24 March 1995).
As can be seen from the orders of the Judicial Registrar set out above, orders were made under s170EE(1)(a) of the Act effectively for reinstatement of the applicant and under s170EE(1)(b) for continuity of his employment and payment of “remuneration lost by the employee because of the termination”.
At page 12 of his decision, Judicial Registrar Murphy said:
“The applicant also sought his loss of remuneration as a result of the unlawful termination. He gave evidence that he had earned a total of $3,946.00 in casual employment and that he had made no claim for unemployment benefits. The evidence was that in the twelve months to November 1994 he had earned a total of $75,475.70. This is a monthly average of $6,290.00. The applicant also pointed to the fact that he was entitled to 5% employer’s superannuation contributions. I have calculated his gross loss of remuneration at $28,305.00. The basis of that is the period from the date of termination to date is 4½ months. I have deducted his earnings in the sum of $3,946.00 leaving a net loss of $24,359.00. I propose to make an order for that loss of remuneration and also to order that he be treated for all purposes as being in continuous employment, including his employer superannuation contributions.”
On 7 April 1995 the respondent issued a notice of motion returnable on 1 May 1995. The respondent’s notice of motion sought the following orders:
“1.That the Decision and Order of Judicial Registrar Murphy made on 24 March 1995 be reviewed pursuant to Section 377(1) of the Industrial Relations Act 1988.
2.That the Order of the Judicial Registrar Murphy be stayed until the hearing and determination of the review or until further order.”
On 1 May 1995 Keely J made the following orders by consent:
“1.That the order of Murphy JR of 24/3/95 that the respondent pay the applicant the sum of $24,359.00 be stayed until the hearing and determination of the review or until further order.
2.On or before 8/5/95 the respondent pay to the Registrar of the Industrial Relations Court the sum of $24,359.00 to be held on trust in an interest bearing account until the hearing and determination of the review.
3.The matter be placed in the lists of cases to be fixed for hearing.”
On 14 August 1995 the application to review the Judicial Registrar’s decision came on for hearing before the Court. Mr M. Lester, an elected officer of the Transport Workers’ Union of Australia appeared for the applicant. The respondent was represented by Mr M. McDonald of counsel.
THE ISSUE AND THE WITNESSES ON THE REVIEW
At the outset of the hearing, Mr McDonald informed the Court that there was “one live issue” in the review. That issue was the quantum of the amount of remuneration lost which should be awarded to the applicant. To assist the Court in the determination of that issue, the parties were agreed that the transcript of the proceedings before the Judicial Registrar and the exhibits tendered before him should be exhibits in the review. Additionally, evidence was called on the review from the applicant and three witnesses were called by the respondent. These witnesses were Mr Lawrie, a manager employed by the respondent; Mr Brundell, a person whose family company had engaged the applicant after his dismissal from employment with the respondent; and Mr Santocono, a supervisor employed in the Demerits Section of the Roads Corporation. Apart from Mr Brundell and Mr Santocono, the other witnesses had given evidence before the Judicial Registrar.
Mr Santocono gave evidence that the applicant’s driver’s licence was suspended for three months with effect from 12 January 1995. Mr Brundell gave evidence that the applicant had been engaged by his family company from 30 November 1994 until about 27 April 1995. The applicant was engaged on the basis of $200 per trip as a “contract driver”. It was agreed between the applicant and Mr Brundell that the $200 payment would be net of tax and that Mr Brundell’s family company (“Jets”) would be liable for any consequent payment to the Australian Taxation Office (“ATO”). The effect of Mr Brundell’s evidence and the documents which were tendered during the course of such evidence, was that the applicant had received more income from Jets than he had disclosed to the Judicial Registrar in the proceedings on 6 March 1995.
In his evidence before the Judicial Registrar, the applicant was asked the following question in his evidence in chief:
“All right, Mr Klingenberg, could you tell me what money you have earned since your date of termination from Cootes Transport?”
The applicant’s answer was:
“No, in total I couldn’t really tell you, no. I know it hasn’t been much at all.”
The applicant’s advocate then tendered an exhibit prepared by the applicant which was described by such advocate as “the advice that he has given us”.
The exhibit was given the description “A4” and consisted of a document in the applicant’s handwriting, the first part of which read:
“10 weeks part-time employment
Jets Transport
$3,000 earnings”
The effect of the evidence on the review is that at the time the applicant was giving evidence, before the Judicial Registrar, he had earned well in excess of $3,000.00 from working for Jets. In fact exhibit 3 on the review, which comprised the payment advice slips concerning the applicant’s engagement by Jets, shows that $7,800 had been paid to the applicant by Jets as at 6 March 1995, the date of the hearing before the Judicial Registrar.
THE RESPONDENT’S PRIMARY SUBMISSION
Mr McDonald’s primary submission was that the Court should rescind the second order of Judicial Registrar Murphy and make no order requiring the respondent to pay money to the applicant for remuneration lost by the applicant because of the termination.
It was submitted that under s170EE of the Act, the Court has a discretion to refuse to make an order for “termination lost” because of an unlawful termination of an employee’s employment. The opening words of the section include the following:
“... the Court may make the following orders:”
In Johns v Gunns Limited, TI 148R of 1994, 18 May 1995, as yet unreported, (“Johns”), Northrop J said at 30-31:
“Under paragraph 170EE(1)(b)(ii) the Court may make an order requiring the employer to pay to Mr Johns the remuneration lost because of the termination.
A first consideration is whether the word “may” is, in its context in subsection 170EE(1) to be construed as mandatory or as conferring a discretion. A similar problem has been considered by a Full Court of the Federal Court of Australia in Bowling. Subsection 5(5) of the Conciliation and Arbitration Act provided:
‘(5) Where an employer has been convicted of an offence against this section the court by which the employer was convicted may order that the employee be reimbursed any wages lost by him and may also direct that the employee be reinstated to his old position or in a similar position.’
The wording of that subsection has many similarities to the wording of paragraphs 170EE(1)(a)(i) and (b)(ii) of the Act. In Bowling, the employer was convicted of an offence against section 5 of the Conciliation and Arbitration Act. The question arose whether subsection 5(5) was mandatory in the sense that, upon conviction, the Court must order reinstatement and reimbursement for any wages lost. The Court, at 88-95, considered this matter and concluded that the word “may” was not to be construed as must. The reasons relied on in that passage have much to commend them and with necessary adaptations have equal force to the present legislation. Further this conclusion is supported by reference to subsection 33(2A) of the Acts Interpretation Act 1901 which was in operation when section 170EE was inserted into the Act. That subsection provides:
‘(2A) Where an Act assented to after the commencement of this subsection provides that a person, court or body may do a particular act or thing, and the word “may” is used, the act or thing may be done at the discretion of the person, court or body.’
The policy of the present legislation is to give protection and relief to employees who have been terminated for no valid reason. Where reinstatement is practical, as here, the employee should be reimbursed any wages lost. In Bowling, the Full Court ordered that Mr Bowling ‘be reinstated in his old position, or in a similar position, within seven days after publication of these reasons’. The application for the reinstatement of any wages lost by Mr Bowling had been deferred by the trial Judge see 80-81, and that question did not come before the Full Court.” (emphasis supplied)
The reference to Bowling in the above extract is a reference to Bowling v General Motors-Holden’s Pty Ltd (1980) 50 FLR 79.
Like Northrop J, my view is that the opening words of s170EE(3) confer a discretion upon the Court and that it is open to the Court to refuse to make any order for remuneration lost. It is clear, however, from the emphasised passage in the last paragraph of the above extract from Johns that “remuneration lost” should ordinarily flow from an order for reinstatement.
In Australasian Meat Industry Employees’ Union v Sunland Enterprises Pty Ltd (trading as Sunland Wholesale Meats) (“Sunland”) (1988) 81 ALR 213, 220 - Gray J, said:
“In Bowling v General Motors-Holdens Pty Ltd (1980) 33 ALR 297 at 301; 50 FLR 79 at 90, the Full Court said: ‘There is no cross-appeal against the order made by the trial judge directing partial reimbursement of wages lost by the appellant and so the appeal does not raise directly the meaning of the word “may” when used in relation to an order that an employee be reimbursed wages lost by him, but in all probability the word “may” in that context should be construed as having the same meaning as the word “may” when used later in the same sub-section in the phrase “may also direct”.’
Because this comment was not essential to the reasoning of the Full Court, it is not binding. Nevertheless, there is much sense in the proposition that the word ‘may’, when used more than once in the one sub-section, in the giving of discretions consequent upon the same event, should be construed in the same way. Accordingly, I take the view that the court should order the reimbursement of wages lost by an employee in respect of whom an offence under s 5(1) of the Act has been committed unless exceptional circumstances exist.” (emphasis supplied)
In Sunland the employer submitted that no reimbursement for wages lost should be ordered because of undue delay in the commencement of the proceedings. Gray J rejected that submission for the reasons set out at 220-221.
The exceptional circumstances alleged by the respondent to be present in this case are the following:
1.The fact that the employer has been put to the trouble and expense of seeking the
review because the applicant did not disclose to the Judicial Registrar:-
(a) the correct amount of his post-dismissal earnings or,
(b) the fact that his driver’s licence had been suspended at the time he gave evidence and that it was not due to be returned to him until 12 April 1995.
2.The fact that the applicant gave untruthful evidence on oath before the Judicial Registrar about his post dismissal earnings.
3.The fact that had the licence suspension been revealed to the Judicial Registrar, no reinstatement order would have been made as the applicant was unlicensed at the time his reinstatement was ordered.
I have no doubt that item 1 set out above is correct as a matter of fact. It is not necessary in this context to deal with item 2, other than to say that I am not convinced it is correct. It is a matter I return to later in the context of dealing with a submission by Mr McDonald that I should refer the transcript in the review and before the Judicial Registrar to the relevant authorities with a view to the possibility of perjury charges being laid against the applicant. As to item 3, there was evidence on the review that the applicant would not have been engaged in duties other than driving duties if the fact of the suspension had been known to the employer. The unchallenged evidence of Mr Lawrie suggests that the applicant would have been given leave without pay had his employment continued up to and during the period of licence suspension. If the fact of the licence suspension had been revealed to the Judicial Registrar, it would have been most probable that the evidence now relevant to the question of remuneration lost, would have been given on the question of appropriate compensation in those proceedings. It therefore seems clear that item 3 above is also correct.
These circumstances come close to matching the description of “exceptional circumstances” referred to by Gray J in Sunland. However, it cannot be assumed that the respondent would necessarily have confined its case on the review to the issue of remuneration lost when it issued its notice of motion. The first the Court heard of the confinement of the issues on review was when Mr McDonald opened his case. Additionally, if the licence suspension had been revealed, the applicant would have most likely been awarded some compensation by the Judicial Registrar in lieu of reinstatement and remuneration lost.
THE RESPONDENT’S ALTERNATIVE SUBMISSION
Mr McDonald submitted that should I exercise my discretion to order remuneration lost to the applicant, I should alter downwards the sum of money ordered by the Judicial Registrar to be paid to the applicant. I have no doubt that I should accept that submission. The applicant should not be compensated for any period after 12 January 1995, for the simple reason that from that time until the date of the hearing before Judicial Registrar Murphy and even beyond the decision of the Judicial Registrar, the applicant would not have earned any income from the respondent had he remained in its employ and had the suspension of his driver’s licence been disclosed. Additionally, the sum of money which the applicant had earned in his engagements with Jets up to the date of his reinstatement should be deducted from his remuneration lost. It was a sum earned during the period prior to reinstatement which did not represent a sum higher than the wages that the applicant would have earned from the respondent in the same period if he had continued to work for it. It was intermittent work and on the evidence work carried out pursuant to a contact or contracts for services.
Mr McDonald submitted that should I decide as I have in the preceding paragraph, I should treat as the starting point of my calculations the figure of $12,580.00, representing payment for two months. I agree for the reasons expressed above that I should award no higher figure than $12,580.00. I am fortified in that view by evidence that superannuation contributions were paid on behalf of the applicant into the company’s superannuation fund up to and including 4 April 1995.
The question then to consider is what, if anything, should be deducted from the figure of $12,580.00. I am not prepared to deduct amounts referrable to annual leave and annual leave loading payments. There is no evidence before me that entitlements covering the precise period in respect of which leave payments were made at the time of the unlawful termination were paid to the applicant when he was made redundant by the respondent immediately after his reinstatement. It appears from Mr Lawrie’s evidence that some amount, unspecified, was paid in respect of such items at the time of the redundancy, however, Mr McDonald told the Court that he did not know the details of the final payment.
I am most reluctant to deprive an employee of annual leave and annual leave loading entitlements relating to work already performed. In Johns, Northrop J, at 32, deducted such entitlements but in that case the employee had not been reinstated by the Judicial Registrar and would not as a result of Northrop J’s decision lose any leave entitlements which had properly accrued to him.
As indicated above I believe that the money which had been earned by the applicant in working for Jets up to his reinstatement should be deducted from the sum of $12,580.00. The sum to be so deducted is $9,365.00. This reduces the compensation lost to $3,215.00. I should also deduct the $946.00 which the applicant earned as a crowd controller. This further reduces the remuneration to $2,269.00. Given the fact that reinstatement actually occurred, I also deduct two weeks in lieu of notice provided to the applicant at the time of his dismissal. This means that the further sum of $1,456.00 (being the figure supplied by Mr McDonald and not disputed by Mr Lester) should also be deducted, leaving a final sum of $813.00.
I have considered Mr Lester’s submission that I should disregard the fact that the applicant was suspended from driving for three months and include the period from 12 January 1995 until his reinstatement as a relevant period for the payment of lost remuneration. I reject this submission. I do not believe that the applicant in fact suffered any remuneration lost during that period as a result of the termination. He would not have been able to work for the respondent legally during that period in any event. To have regard to the possibility that the applicant may have worked illegally for the respondent but for the dismissal (as he worked illegally for Jets) would, in my view, involve the Court in condoning the conduct of the applicant in driving unlicensed and failing to disclose that fact to the Judicial Registrar. I will do no such thing. To do so would be to bring the Court into disrepute.
Mr McDonald submitted that as the money the applicant received from Jets was net of taxation, that I should deduct a further percentage loading of 30%. In view of the fact that the applicant’s engagement with Jets was, on the evidence, one of an independent contractual nature, it appears that about 15% would be the more appropriate loading, having regard to ATO’s prescribed payments system (“PPS”). However, I have some reluctance in increasing the amount to be taken from the money to be ordered to be paid by the respondent having regard to taxation liabilities. The concept of inflating an amount earned in order to assess appropriate tax consequences is not one that the Court should be eager to embark upon. It is really a matter between ATO, Jets and the applicant. The Court should not be required to set PPS rates which may be at variance with the views of ATO.
GROSS OR NET AMOUNT
I have decided to make an order, for the above reasons, requiring the respondent to pay to the applicant the sum of $813.00 by way of remuneration lost by the applicant because of the termination of the applicant’s employment by the respondent in breach of s170DC of the Act.
Mr McDonald submitted that I should order that the respondent pay to the applicant of any sum of money, that sum should have taxation extracted at the appropriate rate and that such smaller sum should be remitted to ATO by the respondent.
In Johns (supra), at 33, Northrop J said:
“Both counsel contended that the amount to be ordered to be paid should be based on the gross wage lost by Mr Johns.
In my opinion, this is not the correct approach. The amount ordered to be paid is the remuneration lost in circumstances where the employment is deemed to have been continued as if there had been no termination. On this basis of deeming continuity of employment, the appropriate approach is to determine what wages, excluding any overtime, Mr Johns would have received between 2 August 1994 and the date of reinstatement.”
I have no reason to disagree with this aspect of Northrop J’s decision in Johns. Different considerations would arise if the Court had been requested to ensure that payments net of taxation would apply to an order for compensation under s170EE(3) rather than remuneration lost under s170EE(1). See Richard Mitchell and John Telfer, “The Taxation Implications of Statutory Unlawful Termination of Employment” (1994) 7 AJLL 227, 243.
REFERRAL OF THE TRANSCRIPT
I have earlier in this judgment referred to a submission by Mr McDonald that I should refer the transcript before the Judicial Registrar and before me to the appropriate authorities for them to consider laying perjury charges against the applicant. I refuse to do so. I am not convinced that the applicant deliberately understated his earnings with Jets to Judicial Registrar Murphy. In his evidence before the Judicial Registrar he also referred to his marital problems and the anxiety caused by his dismissal. It appears that his recollection may have been clouded by the surrounding circumstances. It would also have been difficult for him to keep a reliable record of his payments from Jets as they were variously, on the evidence of Mr Brundell, paid to the applicant:
(a) in cash;
(b) into a bank account, or
(c) into a TAB Corp telephone account.
Whilst I have some doubts about the veracity of the applicant’s evidence before the Court, I am not convinced that he deliberately lied on oath.
For the reasons referred to above, I make the following orders:
1.The Order of the Court constituted by Judicial Registrar Murphy made on 24 March 1995, and described by him as order 2, that the respondent pay the applicant loss of remuneration in the sum of $24,359.00 within 14 days, is set aside.
2.The other orders of Judicial Registrar Murphy made on 24 March 1995, and described by him as orders 1 and 3, stand.
Note: The applicant was reinstated in accordance with these orders and such reinstatement was not sought to be disturbed upon review.
3.The matter is to be adjourned to the directions list on 18 September 1995 at 10.15 am to enable the parties to calculate the amount of remuneration lost actually payable to the applicant after the deduction of PAYE taxation at the appropriate rate from the gross amount of $813.00.
Note:If agreement is reached, a consent order can be made pursuant to Order 35
rule 10.
I certify that this and the preceding 13 pages are a true copy of the Reasons for Judgment herein of his Honour Justice Marshall.
Associate:
Date: 24 August 1995
Advocate for the Applicant: Mr M. Lester of The Transport Workers’ Union of Australia
Counsel for the Respondent: Mr M. McDonald
Solicitor for the Respondent: Minter Ellison
Date of hearing: 14 August 1995
Date of judgment: 24 August 1995
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