Megan Louise Stewart v John N. Pullin ( t/as Warren Village Authorised Newsagency)

[1994] IRCA 70

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA  VI 178 of 1994
VICTORIA DISTRICT REGISTRY

B E T W E E N:

MEGAN LOUISE STEWART

Applicant

A N D

JOHN N. PULLIN
(T/AS WARREN VILLAGE AUTHORISED NEWSAGENCY)
Respondent

Reasons for Judgment

17 October 1994  PARKINSON JR

This proceeding is brought pursuant to S170EA of the Industrial Relations Act 1988 (“the Act”). The applicant alleges that her employment by the respondent was terminated without valid reason and was harsh, unjust and unreasonable for substantive and procedural reasons.

The applicant seeks the following relief pursuant to S170EE of the Act:
(a) a declaration that the termination of her employment contravened Division 3 of Part VI of the Act;
(b)     an order for reinstatement;
(c)     an order for compensation for lost wages since the date of     termination;
(d)     an order for damages for loss of employment, loss of employment opportunity and the costs associated with obtaining or attempting to          obtain alternative employment.
The applicant, in seeking damages in the accrued jurisdiction of this court, is relying upon an alleged breach of an implied duty of good faith in the contract of employment between the respondent and the applicant. 

The following witnesses gave evidence in the proceedings:
Ms. Megan Stewart - The applicant.
Mr. Shaun Tier - Human Resources Consultant.
Mr. Collin Gray - Senior Sergeant of Police -Victoria Police.
Mr. Russell Strange - Drycleaning sub-agent of respondent.

Mr. John Pullin - The respondent.

Background to application:
The applicant was employed by the respondent on 6 June, 1993 in a full time capacity as a shop assistant at the respondent’s newsagency business in Mordialloc. The applicant’s employment was terminated on 7th April, 1994. The respondent contends that the employment was terminated as a result of the dishonesty of the applicant in obtaining on three occasions drycleaning through the employer’s sub-agent, free of charge to herself.
The applicant’s employment was terminated on her return to work from two days absence on sick leave. 

The respondent contends that the items of free drycleaning came to his attention during the period of the applicant’s absence because he was performing functions which ordinarily would be performed by the applicant. It is no part of the evidence in these proceedings that the

applicant was the only person who would, or could, or even did, access the books of account in relation to the drycleaning agency.

On 6th April, 1994 the respondent enquired of the drycleaning sub-agent whether he had authorised the applicant to have drycleaning done free of charge, and was advised this was not the case. However, the respondent was advised by the sub-agent subsequent to the termination of the applicant’s employment, that there had been one occasion where in fact she had been so authorised.

On 7th April, 1994 the applicant was interviewed by the respondent at approximately 9.00am.  At that interview the respondent raised the matter of the free drycleaning with the applicant.  There was no dispute that the applicant had in the course of her employment with the respondent obtained drycleaning free of charge to herself on 23rd November, 1993, 3rd March, 1994 and 16th March, 1994. The items in question were on the first occasion, one dress and jacket, on the second occasion, one jumper and one T-shirt and on the third occasion, one jumper.

The issues in dispute in this case are the question of dishonest conduct on the part of the applicant; authorisation of the applicant’s conduct and knowledge of the applicant as to the appropriateness of obtaining drycleaning for no charge. There is dispute in these proceedings as to the issue of procedural fairness and I will deal with that matter later in this decision.  It is sufficient however to record that as a result of this interview the applicant’s employment with the respondent was terminated.

The respondent contends that he gave the applicant a choice of either resigning or being dismissed from her employment.  The applicant did write a letter of resignation at that time. The respondent therefore contends that this is a case of mere resignation and that this court has no jurisdiction to deal with the matter. The applicant contends that the alleged resignation was not a true resignation and that the circumstances constituted the termination as one of constructive dismissal.   I deal later in this decision with the issue of whether the termination of the employment was as a result of an act of the employer or whether it resulted from the resignation of the applicant, being a resignation in fact rather than constituting constructive dismissal.

On 7th April, 1994 and subsequent to the termination of her employment, the applicant consulted a solicitor who contacted her employer on that same day. Conversations were had between the respondent and the applicant’s solicitor in relation to possible legal proceedings, and in relation to the applicant’s entitlements in relation to termination pay. The applicant attended the respondent’s premises on 8th April, 1994 to collect outstanding payments due. On 11th April, 1994 the respondent attended upon the Mordialloc police station and made a complaint to the police in respect of the applicant in relation to the matters which formed the basis for the termination of the applicant’s employment. That complaint was investigated by the police, with the co-operation of the applicant, and no charges were laid against the applicant. 

Valid Reason - S170DE (1)
In these proceedings it is necessary for the respondent to establish that there was a valid reason for terminating the employment of the applicant.
The respondent bears the onus of proof in this regard, and it is for the court to determine whether, objectively and on the balance of probability, the conduct alleged against the applicant and which formed the reason for the termination of the employment was true.  This approach has been the subject of consideration by me in a recent unreported decision, wherein a more detailed consideration of this aspect has been undertaken. (See: AWU-FIME Amalgamated Union & Joseph Patrick Farell v Conagra Wool Pty Ltd, unreported, 15 September 1994 at p. 10-12). 

Notwithstanding that the conduct alleged against the applicant was of a criminal nature, these proceedings are civil proceedings and thus the appropriate burden of proof is the civil onus.

It is necessary initially for the court to decide whether the applicant’s employment was terminated as a result of an alleged dishonesty offence or whether it was terminated because of a failure to comply with processes and procedures required by the respondent. This is because in the event that the former construction was the reason, and only reason for the termination, then a failure of the respondent to prove the truth of the allegation of dishonesty against the applicant would result in a finding that the respondent did not have a valid reason for the termination of the employment.  If the latter were the case, then it would be necessary to consider whether or not in all of the circumstances the termination was harsh, unjust or unreasonable.

I have considered the material before me in this matter, and in particular the respondent’s affidavit filed in these proceedings, his statement made to police on 11th April, 1994 (Exhibit G14), further notes of the respondent (Exhibit R1) and the oral evidence of the respondent in respect of these notes, and have concluded that the reason given and pressed in these proceedings for the termination of the applicant’s employment was that she had acted dishonestly in her employment.  I do not consider that the question of whether, for the purposes of these proceedings, the applicant was or was not dishonest is determined merely by reference to the various legislative provisions relating to obtaining financial advantage by deception. The respondent did not terminate the applicant’s employment on the basis that she had been found guilty of an offence of dishonesty pursuant to any legislation, but rather that he took the view she had behaved dishonestly. 

The fact that the applicant was not charged, or convicted by a court in relation to an offence, may well be relevant to objective determination of whether the respondent had a valid reason for the termination, but it is not determinative of that issue.  It is, however, necessary to determine whether, objectively, the conduct of the applicant was such in the circumstances as to be described as dishonest. I now turn to consider the evidence in this regard.

Findings of fact arising out of the evidence.
Whilst it is not in dispute between that parties that it was the drycleaning issue alone which constituted the reason for the termination of the employment, the assertion that the applicant behaved dishonestly or without authority was disputed by the applicant. 

The applicant contends that she had been authorised by the drycleaning sub-agent to obtain free dry cleaning, and that upon this basis she submitted the drycleaning and marked it in a way as to indicate it was not to be charged. The respondent contends that any such authorisation could only have been given by him or his wife and not by the sub-agent, and that the applicant knew or ought reasonably to have known this, and further that any authorisation which was given by the sub-agent occurred only on the first occasion and was limited to that occasion, and that the applicant was not entitled to rely upon that authorisation to continue to obtain free drycleaning.  The respondent gave evidence that the applicant had been instructed at her initial employment interview that she was not to give discounts to anyone without authority. This latter point was disputed by the applicant.  The court was asked to conclude that even if the free drycleaning occurred as a result of an offer from the sub-agent, the applicant’s conduct in so accepting was dishonest as a result of the alleged instruction. I do not accept this is a conclusion which can be reasonably drawn in the circumstances.  

Mr. Strange gave evidence that he had told the applicant that the drycleaning the subject of the docket dated 23rd November, 1993 (Exhibit MFI 1) would be free of charge.  There is some dispute as to whether the applicant was told this prior to or after the drycleaning. I do not consider the issue of timing as being of real consequence in determining this matter, however, in so far as it arises, I am satisfied having regard to the inability of  Mr. Strange to remember a number of significant details as to the circumstances, that the applicant’s recollection of the events is accurate, and that the applicant was invited to submit the drycleaning by Mr. Strange and was informed by him that the work would be done at no charge, prior to it being submitted.

It was this incident and invitation on the part of Mr. Strange that the applicant relied upon as founding the basis for her belief that she was authorised by Mr. Strange to submit all of her drycleaning for free.  

The applicant’s case was that she had not appreciated there to be a need for express authorisation of her employer in addition to that of Mr. Strange. I accept that this is the case. The applicant’s evidence was that she had, in respect of the garment which was the item drycleaned on the second occasion, ( MFI 2 ) a discussion with Strange as to a stain on a garment prior to it being sent off for him to clean. Mr. Strange could not recall such a conversation taking place and when shown the item in question was not further assisted in recollecting. Having regard to the evidence of the applicant and the witness Strange, I am satisfied that such conversation did in fact occur.

The applicant’s evidence was also that she had not considered whether by having the drycleaning done free of charge she was depriving the respondent from income as a result of his percentage of the drycleaning charge. It is apparent from the evidence that the applicant was responsible for performing various clerical functions in relation to the sub-agency agreement between the respondent and Strange.  The fact that these tasks were being undertaken ought to have led a reasonable person to conclude that there was some benefit of a financial nature to the respondent arising out of the arrangement.  But this conclusion is a long way from finding that the applicant acted in any way dishonestly, as was contended by the respondent. 

The decision of the respondent to dismiss, it is contended, was based upon the alleged dishonesty of the applicant in relation to the drycleaning.  The respondent alleged in his affidavit filed in these proceedings that the applicant was dishonest and had admitted to being dishonest. Paragraph 3 (a) of the respondent’s affidavit states:

“ Upon being questioned by me the Applicant acknowledged that      she had dishonestly, without the permission of the Respondent            made false entries in the drycleaning docket book so as to obtain a
            financial benefit for herself.”

This affidavit material is consistent with the statement made by the respondent to the police in relation to the complaint of alleged dishonesty (Exhibit G14).  It is not, however, in accord with the evidence in the proceedings before me. The evidence of the respondent was that the applicant said that she had been given permission by Russell (Mr. Strange) in relation to the first occasion and had assumed it would be all right in relation to the other two occasions. This was also the evidence of the applicant. On the evidence in these proceedings, I am satisfied that the applicant did not acknowledge that she had acted dishonestly; this was her evidence in these proceedings and what was said in the police interview by her.  Rather it was the respondent who indicated that he considered her to be dishonest. 

This view of the applicant as to the probity of her conduct and her explanation as to her conduct as given to the respondent, the police and to this court is very relevant to the determination of the question of whether in fact the applicant was dishonest in her employment.  It is clear to me that the applicant concluded whether rightly or wrongly,  reasonably or unreasonably, that she had been given permission by the sub-agent Strange to have her drycleaning done for free. The applicant has been consistent in her explanation as to her conduct. Whilst she did not deny that on the last occasion of 16th March, 1994 she had not spoken to the sub-agent Strange about the garment in question before submitting it, or that she had not subsequent to the first instance obtained express advice of Strange that there would be no charge, her evidence in these proceedings and her statements prior to these proceedings was that she had assumed she had been given ongoing permission by the sub-agent.

In considering this aspect of the evidence, it is significant that the evidence of the respondent is that when first questioned as to the drycleaning by the respondent, Mr. Strange denied ever giving the applicant permission to have drycleaning done free of charge. The respondent’s evidence was that Mr. Strange, in answer to his question as to whether he had ever given the applicant permission to have dry-cleaning at no charge, said “No”.   Subsequently however it appears that Mr. Strange acknowledged that he had in November, 1993 advised the applicant that there would be no charge.  The respondent’s affidavit and police statement both indicate that the respondent was not informed of this fact prior to the dismissal and had been operating on the assumption that Mr. Strange’s original advice that he had not given the applicant permission for free drycleaning was accurate.

Mr Strange informed the court that the respondent showed him the docket book entries, all three of them, in the docket book, and the docket book only. The respondent’s evidence was that Mr. Strange was shown only the March no-charge entries on the statement of account. The evidence of Mr. Strange was that he was asked by the respondent as to why there was no charge.  He responded that he thought that the name Stewart in the docket book referred to the respondent’s son.  However he gave no evidence that he had so thought at the time of drycleaning, and nor was there any evidence that any other person had so thought. He subsequently informed the court that, in any event, he did not go by the docket books but by the numbers, when dealing with the garments. 

There was issue taken in the proceedings as to the manner in which the applicant identified and tagged her drycleaning.  There is no dispute that, on each of the three occasions, the applicant wrote up the drycleaning in the relevant docket books and tagged the drycleaning in the usual manner, save for the endorsement of the letters “n/c” indicating no charge.  There is no evidence to suggest that she did not submit her items for drycleaning in the ordinary manner.

It was suggested in the proceeding that the applicant had attempted to disguise the fact that she was the person for whom the drycleaning was being done at no charge by the use of her surname Stewart, that also being the name of the respondent’s adult son, instead of the name Megan.  This allegation, which was sought to be relied upon to establish that the applicant contrived to deceive the respondent and the sub-agent Strange, formed no part of any material prior to these proceedings.  Such allegation was not made to the police in the statement made by the respondent (Exhibit G14), nor was it expressed in the respondent’s affidavit in these proceedings.  I have listened to the tape recording of the police interview with the applicant (Exhibit G12) and at no time was it put to the applicant that such an allegation was made by the respondent.  In fact, the affidavit of the respondent and his statement to the police  point to the contrary, in that they allege that the applicant was involved in a “nice little scheme” on the basis that she merely assumed no one other than herself would look at the drycleaning books.  Further, the evidence in the proceedings revealed that the appropriate procedure to be adopted in writing up names was the recording of surnames, and not christian names.

The evidence of the respondent witness Mr. Strange as to what he subsequently concluded from the docket, even if accepted by the court , is not of itself sufficient to show on balance that this was the intention to be imputed to the applicant.  There was no evidence before the court that the respondent’s son had drycleaning done in his own christian name rather than his surname, nor was there any other material which may have formed a basis for imputing such conduct to the applicant. Further, I did not find the evidence of Mr. Strange helpful in these proceedings as it was apparent that he had little recollection of the incidents or the events in which he participated, and which founded the basis for the dismissal of the applicant. 

There was no attempt at any time by the applicant to hide the drycleaning she was sending at no charge.  She on each occasion wrote the items and her name in the dry-cleaning docket book, which book was kept under the counter and available to the respondent and his wife for inspection at any time. The items were also recorded individually on the monthly statements provided by the drycleaning sub-agent to the respondent. I do not accept the proposition put by the respondent that as the applicant was responsible for the checking of invoice totals she concluded that she would not be detected if she “ran a nice little scheme”.  The books, statements and docket books were not the exclusive domain of the applicant. The scrupulous recording of the items in the records of the respondent by the applicant points not to an attempt to deceive, but rather to the opposite.

The applicant was frank at all times in these proceedings about not having specific advice or permission on each occasion that the garments would be cleaned for no charge. Her evidence was firm in relation to the incidents leading to the drycleaning being submitted. I find the applicant to be a reliable and truthful witness and I prefer the evidence of the applicant as to the events and circumstances surrounding the drycleaning being submitted, to that of Mr. Strange.

Having regard to the above matters, on balance I am not satisfied that the applicant contrived to deceive, or behaved dishonestly in relation to the drycleaning which she submitted marked at no charge. At worst for the applicant, she was genuinely mistaken as to the sub-agent Strange’s intention and entitlement to make such offers.  Consequently, I find that the respondent did not have a valid reason for the termination of the applicant’s employment on 7th April, 1994.

Harsh, Unjust or Unreasonable.
It is not strictly necessary for me to deal with this aspect of the applicant’s claim in view of my finding in relation to S170DE (1) herein.  However, it ought be said that were the conduct of the applicant to be regarded as a failure to follow an instruction of the respondent in relation to discounts on items, that failure in these circumstances ought reasonably be seen as arising out of a misunderstanding as to the nature of the relationship with the drycleaning sub-agent and his authority to provide free-drycleaning to her at any time.

Having regard to the fact that the applicant had a good work performance record, that there had been no complaints about her in any other respect by the respondent, and the fact that there was an explanation for her actions which, even on the recollection of Mr. Strange, was partly corroborated, the action of the respondent in summarily terminating the applicant’s employment was in my view harsh, unjust and unreasonable and I so find.

The procedural aspect of the termination was also said by the applicant to have been unfair.   Failure by the employer to investigate adequately the applicant’s explanation that she had been given permission by the sub-agent brought about a situation where the respondent in terminating the applicant’s employment did not have regard to the possibility that the applicant may have unwittingly acted inappropriately. It is also apparent that the respondent accepted without question the information given to him by the sub-agent, notwithstanding the explanation of authorisation given by the applicant.  Consequently this failure to properly investigate the explanation of the applicant constituted the termination harsh, unjust and unreasonable and I so find. 

Whether termination of employment at the initiative of the employer or resignation.
I have concluded that the termination of the employment in this case came about as a result of the action of the employer.  For there to be a resignation on the part of the employee it must be apparent that there was a real choice on the part of the employee to be exercised.  In this case there was no such choice.  The applicant was told her choice was to resign or she would have to be dismissed. It was not disputed that this was the option expressly put by the respondent to the applicant. I have considered the various authorities submitted by counsel for the parties in relation to constructive dismissal. In the circumstances I am satisfied that the actions of the employer resulted in a constructive dismissal of the applicant consistent with concepts discussed in R v Prince Alfred College 46 SAIR (Pt.1) 598 and Weller v Transport Superannuation Board (1991) 4 V.I.R.

In my view the relevant question in determining this issue is whether the applicant would have written the resignation letter but for the expression by the employer of the intention to terminate her employment if she did not.  I find that she would not have written the resignation letter and consequently I find that the termination of the applicant’s employment was brought about at the initiative of the employer.

S418 of the Act, the Accrued Jurisdiction of the Court and Implied Duty of Good Faith.
It was contended for the applicant that the court is invested with the power to determine a claim of breach of implied contractual duty, both pursuant to S418 of the Act and arising out of the accrued jurisdiction of the court.
Counsel for the respondent, Mr. Ginnane provided a comprehensive analysis of the authorities relating to the exercise of the accrued jurisdiction of this court. I accept that such jurisdiction exists, however Mr. Ginnane conceded that the contractual duty upon which the applicant relied and sought to enforce in the accrued jurisdiction of this court, was not one which had found authoritative judicial recognition in Australia. 

It is clear that such an implied term has been accepted as existing in relation to employment contracts in the United Kingdom and New Zealand, however it is equally apparent that at this point in the development of the law of employment in this country such a term is not one which is implied as a matter of course and generally in employment contracts.   Mr. Ginnane in his submissions apparently relied upon a general implication of such a term rather than any specific circumstances in this case which would found the basis for this court to imply such a term, having regard to the criteria established in BP Refinery (Westernport) Pty.Ltd. v Hastings Shire Council (1977) 16 ALR 363.

In Byrne & Frew v Australian Airlines (1994) 120 ALR 274, the issue of an implied term of this nature was considered by the Chief Justice of the Federal Court. In that decision His Honour (at page 286.10) in determining that there had been no specific argument directed to that point also referred to the fact that there had not been any precise formulation of the suggested implied term of general application. This is also the case in these proceedings. This issue was considered during the course of the decision of Gray J. (at 335) wherein His Honour in considering the decision of Dillon L.J. in Bliss v South East Thames Regional Health Authority [1987] ICR 700 at 714 said:

“I note in passing that the term was not implied by the application of
           the principles in BP Refinery but was imposed on the parties (and
           presumably on the parties to all other contracts of employment as a
           result of a policy decision), in an attempt to equalise the
           relationship between employer and employee. The courts in New
           Zealand and South Africa have developed the law so as to protect
           employees from unfair dismissal.”

It is apparent from the decision of Byrne & Frew v Australian Airlines that such approach has been rejected by the majority in that court.  The evidence before me in these proceedings does not enable me to make any decision as to whether such a term ought be implied into the individual contract of the applicant in accordance with B.P. Westernport principles. 
This part of the application is refused.

Remedy:
The applicant is 22 years of age and her entire working experience has been in the retail trading area.  Evidence given by a Human Resources Consultant in these proceedings established that the applicant would have real difficulty obtaining further employment in that field having regard to her lack of qualifications and the allegations of dishonesty made against her.  Her opportunity for employment in other areas was limited by reference to the applicant’s lack of formal training. The applicant had not obtained alternative employment during the course of the proceedings in this matter.

The remedies available to the court pursuant to S170EE of the Act include reinstatement and the awarding of compensation. The applicant has sought through her counsel an order for reinstatement and remuneration lost during the period, or alternatively compensation.

It is apparent by reference to S170EE (1) of the Act that the principle remedy is reinstatement. The remedy of compensation ought be granted in circumstances where an order for reinstatement would be impracticable.
In determining whether reinstatement is impracticable I have had regard to the express wishes of the applicant in this regard that she be reinstated and in particular to the evidence as to the difficulty she would face obtaining alternative employment in view of the allegations made which formed the basis of the decision by the respondent to terminate her employment.

Whilst I have also considered the nature of the employer’s business, its size, the close working relationship between the applicant, the respondent and the respondent’s wife, the allegations which formed the basis of the decision to dismiss the applicant and the involvement by the employer of the police in the matter, it is my view that the principal question to be addressed is whether the order for reinstatement would be impracticable in its impact upon the applicant, not merely upon the respondent.

I agree with the submissions of the applicant that the respondent ought not be entitled to rely upon the very matters which founded the termination unlawful to avoid an order for reinstatement. Nor should it be assumed that merely because there is a close or personal working relationship between a respondent and applicant that this fact alone will militate against reinstatement.  In this case the applicant has indicated that she understood what seeking an order for reinstatement would mean. Her evidence was however that she “supposed she would go back because she had no luck so far.”   There is marked ambivalence apparent in this response of the applicant. Whilst the applicant displayed no hostility towards the respondent during the course of her evidence, I consider that the circumstances of this case are such that from the applicant’s point of view an order for reinstatement would be impracticable. 

I note in this context that in the circumstances of this case an award of compensation pursuant to S170EE(2) as an alternative to reinstatement is a lesser remedy than that available pursuant to S170EE (1) when one has regard to the provisions of S170EE (3)(a) and (b) of that section limiting the court to an award of compensation not exceeding an amount of six months remuneration. The applicant has already been out of employment for a period in excess of six months. I have had regard to the various factors set out by Gray J. in Wheeler v Phillip Morris Ltd. (1989) 97 ALR 282 and the Full Court of the Federal Court in Bostik (Australia) v Gorgevski (No 1) (1992) 36 FCR 20 which I consider are also relevant matters to be taken into account in determining the amount of compensation to be awarded to the applicant pursuant to S170EE of the Act.

I have determined that in this circumstance, having regard to the amount of remuneration the applicant has lost in the period since the termination of her employment and the difficulty the applicant has and is likely to experience in obtaining alternative employment, the applicant is entitled to compensation in the amount of $10,021.20. This amount represents a total of 6 months remuneration between the period 7th April, 1994 and 7th October, 1994, that sum being the maximum amount which may be ordered by this court pursuant to S170EE(3) of the Act.

I certify that this and the preceding nineteen (19) pages
are a true copy of the Reasons for Judgment of Judicial
Registrar Parkinson.

Associate:
Dated:  17 October 1994

Solicitor for the Applicant:  Alan J. McDonald
Counsel appearing for the applicant:                  Mr. P. Ginnane

Solicitor for the Respondent:  Michael P. Rahilly
Solicitor appearing for the respondent:     Michael P. Rahilly

Dates of hearing:  9, 12, 26 September 1994
Date of judgment:  17 October 1994