Messervy v Maldoc Pty Ltd
[1995] IRCA 298
•30 Jun 1995
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Claim of UNLAWFUL TERMINATION - Finding by Judicial Registrar of PROCEDURAL UNFAIRNESS and SUBSTANTIVE UNFAIRNESS - Application for review - Reason for termination not specified - No proved valid reason - No opportunity to employees to defend any allegations - COMPENSATION - Actual losses exceeding amount available under statutory formula - Awards of maximum available under statutory formula.
Industrial Relations Act 1988, ss.170DC, 170DE, 170EDA, 170EE and 377.
LESLIE RICHARD MESSERVY v. MALDOC PTY LIMITED ACN 001 091 596 t/as TOONGABBIE HOTEL
No. NI.795 of 1994
AND
MAUREEN NOLA MESSERVY v. MALDOC PTY LIMITED ACN 001 091 596 t/as TOONGABBIE HOTEL
No. NI.882 of 1994
CORAM: WILCOX CJ
PLACE: SYDNEY
DATE: 30 JUNE 1995
IN THE INDUSTRIAL RELATIONS COURT)
OF AUSTRALIA ) No. NI.795 of 1994
NEW SOUTH WALES DISTRICT REGISTRY)
BETWEEN:LESLIE RICHARD MESSERVY
Applicant
AND:MALDOC PTY LIMITED ACN 001 091 596 t/as TOONGABBIE HOTEL
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY
DATE: 30 JUNE 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
The order made by Judicial Registrar Locke on 31 March 1995 be varied so as to substitute for the figure of $15,000 therein contained the figure of $16,914.
The money paid into Court by the respondent, Maldoc Pty Limited, be paid to the applicant, Leslie Richard Messervy, on account of the award of compensation.
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. NI.882 of 1994
NEW SOUTH WALES DISTRICT REGISTRY)
BETWEEN:MAUREEN NOLA MESSERVY
Applicant
AND:MALDOC PTY LIMITED ACN 001 091 596 t/as TOONGABBIE HOTEL
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY
DATE: 30 JUNE 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
The order made by Judicial Registrar Locke on 31 March 1995 be varied so as to substitute for the figure of $11,000 therein contained the figure of $12,530.
The money paid into Court by the respondent, Maldoc Pty Limited, be paid to the applicant, Maureen Nola Messervy, on account of the award of compensation.
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. NI.795 of 1994
NEW SOUTH WALES DISTRICT REGISTRY)
BETWEEN:LESLIE RICHARD MESSERVY
Applicant
AND:MALDOC PTY LIMITED ACN 001 091 596 t/as TOONGABBIE HOTEL
Respondent
AND
No. NI.882 of 1994
BETWEEN:MAUREEN NOLA MESSERVY
Applicant
AND:MALDOC PTY LIMITED ACN 001 091 596 t/as TOONGABBIE HOTEL
Respondent
CORAM: WILCOX CJ
PLACE: SYDNEY
DATE: 30 JUNE 1995
REASONS FOR JUDGMENT
WILCOX CJ: Applications have been made for review by a Judge of decisions made by a Judicial Registrar in relation to two claims of unlawful termination of employment. The applicants before the Judicial Registrar were a husband and wife, Leslie Richard Messervy and Maureen Nola Messervy. The respondent, the applicant for review, was Maldoc Pty Limited.
The hearing before the Judicial Registrar extended over two hearing days. The Judicial Registrar found breaches of both s.170DC (procedural fairness) and s.170DE (substantive fairness) in connection with both employees. She held that reinstatement was impracticable and awarded compensation of $15,000 to Mr Messervy and $11,000 to Mrs Messervy.
When the applications for review were called for hearing, Mr J Hassett, solicitor, announced an appearance for Maldoc and Mr P C Coleman of counsel appeared for Mr and Mrs Messervy. They informed me that no party wished to call evidence additional to that tendered to the Judicial Registrar. They asked me to treat that evidence as evidence on the review and hear submissions as to the appropriate findings and orders.
For several years, Maldoc has operated the Toongabbie Hotel at Toongabbie in western Sydney, a hotel at Five Dock and the Marlborough Motel in Cooma. The person responsible for day-to-day management of the company is Mr Barry Bates, the managing director. But most of the shares in the company are held by Dr Hugh Taylor, a retired medical practitioner, or interests associated with him. As will appear, Dr Taylor took a dominant role in the termination of Mr and Mrs Messervy's employment.
Mr Messervy commenced employment with Maldoc on 7 September 1985. In 1988 he was appointed licensee of the Toongabbie Hotel. At that time Mrs Messervy was appointed licensee of the hotel's bottle shop. They continued in those positions until after the termination of their employments on 26 August 1994.
It was common ground at the hearing before the Judicial Registrar that there was a good relationship between Mr and Mrs Messervy, on the one hand, and Dr Taylor and Mr Bates, on the other, until mid-1993. Maldoc purchased the Five Dock hotel in June 1992 and Dr Taylor offered Mr Messervy the position of licensee of that hotel. However, Mr and Mrs Messervy decided not to move to Five Dock, apparently because they were not satisfied with the accommodation there. Despite requests from Dr Taylor to reconsider, they adhered to that decision. Their refusal to go to Five Dock seems to have irked Dr Taylor - he kept bringing the matter up in conversation - and may have affected his attitude to them.
Dr Taylor gave evidence that, from mid-1993, he noticed a gradual deterioration in Mr Messervy's performance as licensee at Toongabbie. He said that, between July and September, he told Mr Messervy of reports that "the beer was off the other night", but Mr Messervy denied that there was anything wrong with the beer. It does not appear that Dr Taylor tried the beer himself during that period. There is no evidence that the beer was "off" during that period.
Dr Taylor says that in the period September-October 1993 he noticed a fall in takings. So he decided to set up a regular hotel management meeting, involving the Five Dock licensee, Mr Graham Geering, as well as Mr Messervy. He deposed to discussions at these meetings, which were usually held at Toongabbie. It seems that Dr Taylor complained of the falling turnover. Mr Messervy put this down to the hotel's need of a major renovation and the competition it was suffering from nearby registered clubs. There were also conversations regarding the quality of the hotel's food.
It seems that, at one stage, Mr Messervy inspected other food outlets but no agreement was reached as to what changes (if any) should be made to the hotel's food. In regard to renovations, Dr Taylor arranged for an architect to inspect the premises and Mr Messervy worked with him in preparing renovation plans. These were submitted to Dr Taylor but nothing was done. So far as the evidence shows, Dr Taylor did not approve the plans. In short, although many meetings were held, little was done to reverse the hotel's declining turnover.
The hotel's profitability was also in decline. The financial statements that are in evidence attest to this. However, even on Dr Taylor's evidence, it is not clear that Mr Messervy was to blame for this. Dr Taylor's affidavit is long on accounts of conversations but short on evidence of the nature and extent of the hotel's problems; and even more so in relation to their causes. The only evidence about a particular problem relates to beer quality. This evidence comes from Mr Jack Odgers, a hotel refrigeration expert who was asked to investigate the hotel's beer operations in April 1994. He found that "pull off" beer was not being immediately put back into the kegs or kept refrigerated, so it went off. This bad practice was a matter for which Mr Messervy bore ultimate responsibility. Mr Odgers found that the beer lines were dirty. He arranged for them to be cleaned. He said that, by May, the hotel's distribution system was producing wholesome beer.
In June 1994 Dr Taylor formed the opinion that the hotel was "in a tired staff". The staff "manifested a grumpy attitude". He had a conversation with Mr Messervy in which he suggested that "the whole place needs to be revitalised". He asked Mr Messervy whether he would take on the management of the Cooma motel; a suggestion he had made previously but Mr Messervy had rejected. Mr Messervy replied: "I don't think I want to go there". Dr Taylor asked him to think seriously about the proposal and discuss it with Mr Bates. In July there was a similar conversation, but no resolution of the issue.
On 15 August Dr Taylor had a further conversation with Mr Messervy when he again asked him to consider the Cooma position. During the course of this conversation, he put some complaints to Mr Messervy:
"... As you know Les, I have been worried about your position here for the last year or so. Your health worries me, I think there is something in the hotel environment which aggravates your condition. Your voice is very hoarse and I think you should see a Macquarie Street specialist. I can organise this for you if you like. But basically Les, you have been here 9 years and you are sick of the place and I think the customers are sick of you. You are just in a cushy job, you've got everyone else doing all the work and you are not really interested anymore. The takings have been falling. Meg hates the place. Even though Meg was supposed to add a feminine touch, she's long since give up appearing or helping in any way. You no longer have any ideas for the place, you don't put any promotion in, the beer is off all too often and I hear around the traps that you're thinking of returning to New Zealand."
Mr Messervy denied all these allegations, except that his wife hated the place and turnover was falling. But he said that the takings had recently started to turn around. He asked Dr Taylor whether he wanted him to resign. Dr Taylor said he did not. He said he would like Mr Messervy "to inspect the Marlborough motel in Cooma with Meg in a few weeks time". Mr Messervy did not give a clear answer one way or the other.
Two days later Dr Taylor wrote a letter to Mr and Mrs Messervy enclosing a note of the conversation of 15 August. The letter went on:
"... I have told Barry that I really insist on him taking both (and I mean both) you & Meg down to Cooma in 3 or 4 weeks time. Only when you see the place can you truly judge it & the surroundings and the town. Don't make a silly mistake like you did when offered Five Dock & you refused - but later learned Meg would have been happy.
We will keep each other informed." [Original emphasis]
On the following Thursday, 25 August, Dr Taylor again visited the hotel. After discussion about other matters, Dr Taylor said he wanted Mr Messervy to visit Cooma on the following Monday, 29 August. Mr Messervy agreed to go and the two men discussed the detail of the trip. However, on the very next day, Friday, 26 August, Dr Taylor returned to the hotel and had a further conversation with Mr Messervy in which he terminated his, and his wife's, employment. According to Dr Taylor's own account, the conversation was to this effect:
"HT:'If I had had my car I would have turned back yesterday, but both Barry and I were so dumbfounded by your about-face regarding Cooma and Frank, we didn't get over the shock until the toll gates, I have come to tell you it is no use your going to Cooma now, you are too late'.
LM:'You asked me to go in the next few weeks'.
HT:'That is right, however you were told on Monday by Barry Bates that he could not wait any longer and had to make the appointment of the couple he has been talking to, or risk losing them. It is not fair to Barry Bates that you decide to go and have a look once the position is no longer open. Therefore I now take up your offer to resign and I am prepared to allow 8 weeks for you to get sorted out'.
[There is no evidence of a conversation between Mr Bates and Mr Messervy along the lines stated by Dr Taylor.]
LM:'I won't resign, you'll have to sack me'.
HT:'I want you out of the place so I now confirm your appointment is terminated with 8 weeks notice'.
LM:'You've done me in, haven't I always been an honest and reliable employee'.
HT:'Yes you have'.
LM:'Well, why when I have given 9 years to the place, 6 years as licensee are you are taking it out on me. [Sic]. I've been shafted. You are now going to do the place up, when I asked repeatedly for things to be done but you would not listen'.
HT:'I'm not going to argue with you Les. You refused Five Dock and you refused to go down to Cooma'.
LM:'I never refused Five Dock. I said I'd take it when the flat was done up. You have shafted me'.
HT:'Les we offered to do up the flat'.
LM:'I wanted it done before we moved'.
HT:'I'm not going to argue with you. I'm offering 8 weeks notice from today to allow you to get organised and get set up. You should also be aware that Barry reckons your long service will be $10,000.00 plus and as you have hardly taken any holidays we reckon your holiday and termination pay will be another $10,000.00, so you will have $20,000.00 before tax. If you want to leave earlier it would be O.K. with us, if it took a little longer we could also extend your time by mutual agreement'".
There was discussion about superannuation payments and notifying the staff. Dr Taylor maintained his position that it was too late for Mr and Mrs Messervy to inspect the Cooma motel and they were terminated on eight weeks' notice. In fact, after five weeks, they were asked to cease work because another licensee had been found. They were paid for the unworked three weeks.
At the trial before the Judicial Registrar, Mr Coleman asked Mr Taylor why he terminated the applicants' employment. He gave a lengthy, non-responsive reply. The question was put again. Dr Taylor referred to Mr Messervy's change of mind about visiting Cooma. The evidence went on:
"So, Dr Taylor, you are saying, are you, that you terminated their employment because they refused your offer of the job in Cooma?---No, I'm not saying that, I'm saying that the situation had reached a point where not only had he suddenly changed his mind on that but he'd suddenly changed his mind on a whole lot of other things and apart from that, his obstinacy in taking direction. The general, the general drop off in relationship. We'd reached a point where it was - the situation was untenable. It was with great regret and I might add, sir, I might add - - -
THE JUDICIAL REGISTRAR: Just take it easily?---Sorry, ma'am, I get a bit heated about these things.
Yes, well, do not, just keep going?---I beg your pardon.
He has changed his mind about everything. What else did you say after that?---I'd said that he had not - we'd reached the point that it was untenable.
In what way?---In all forms of management.
Well, focus on that word and say how you say it was untenable?---Well, ma'am, we'd - for - I guess going back something like 14 months or 15 months, we had been trying to get Les to look at the hotel in an objective light and improve the trading and he certainly was obstinate in his attitude. We tried, pleaded, we had meetings. We involved meetings with the other licensee in trying to stimulate his thinking. The situation over the months just gradually deteriorated. The final straw being the fact that obviously he wasn't going to do anything, anything that we asked. Mr Bates had tried for months to protect Les in every way possible. He and I - because we work in the same office and we run other companies - saw each other every day. Mr Bates would come back and say, 'Look, I can't talk to him'.
...
MR COLEMAN: So, Dr Taylor, in summary you say that you dismissed - you terminated the employment of the applicants because Mr Messervy had become obstinate?---Obstinate. The position had become untenable and he had shown a complete and utter - well, I mean, if you're offered two jobs and each time you're offered two jobs and after you've missed them or for some reason you say you'd like them, well, there's something wrong isn't there?'"
Later in his cross-examination, Dr Taylor said that part of the reason for the termination of employment was "stubbornness and insubordination". He added "and disobedience".
It is an understatement to say that Dr Taylor's grounds for termination lacked specificity. There are two other problems about them. First, those grounds were never put to either Mr and Mrs Messervy, so as to enable them to offer a defence. There was a clear breach of s.170DC. Second, there is no evidence to support them. As I have said, Dr Taylor's affidavit is notable for its lack of hard evidence of the nature of the problem at Toongabbie and of Mr and Mrs Messervy's contributions (if any) to these problems. Although Mr Bates, the person with day-to-day management responsibility for the hotel, swore an affidavit, he did not repair this omission. The only substantial evidence in his affidavit was that turnover fell during 1993, the reason not being stated, and that there were problems about beer quality in late 1993 and April 1994. Mr Geering, the Five Dock manager, regularly visited Toongabbie for hotel management meetings. But his affidavit only refers to an occasion on 18 August 1995 when he was given a middy of beer which he thought sour.
I find it difficult to believe that even Dr Taylor thought that Mr and Mrs Messervy were bad managers. Dr Taylor described the Cooma motel as "the second best motel in New South Wales". There may be an element of exaggeration in that description. But it is a large motel with a licensed restaurant. The evidence does not reveal its value or turnover but both are obviously substantial. It is inconceivable that, if Mr and Mrs Messervy had been such poor managers as not to be retained at Toongabbie, close to the oversight of both Mr Bates and Dr Taylor, they would have been pressed to take on the motel, some 400kms from supervision. It is worth noting that, after the terminations, Dr Taylor gave Mr Messervy a glowing reference that included the following:
"He has managed the Hotel in an exemplary manner. Staff have been well trained and wages strictly controlled. General housekeeping has been of the highest order.
His paperwork and reporting have been accurate and his honesty is beyond question."
It is not easy to see why Dr Taylor decided to terminate the employment of Mr and Mrs Messervy. On 15 August he asked Mr Messervy to visit Cooma. Mr Messervy did not give a definite answer. Two days later Dr Taylor wrote a letter insisting that Mr and Mrs Messervy make a visit "in 3 or 4 weeks time". One week later, Mr Messervy agreed to go on the following Monday. Before he could do so, he was dismissed.
Whatever the faults of Mr and Mrs Messervy, there is no evidence of any new act or omission between 15 August and 26 August, or even of a further decline in the hotel's fortunes during that period.
Section 170EDA of the Industrial Relations Act casts on the employer the onus of establishing that there was a valid reason or reasons for the termination, being a reason or reasons connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service. Maldoc has not discharged this onus. I agree with the Judicial Registrar that the terminations also breached s.170DE of the Act.
The Judicial Registrar did not explain how she computed the amounts of compensation awarded to Mr and Mrs Messervy. However, it seems from the figures awarded that she accepted Mr Coleman's calculation of the remuneration that each of the applicants would have earned in the six months after termination, if they had not been dismissed, and reduced the resultant figures to allow for contingencies. If this was her approach, it was erroneous; as I will explain later.
Mr Hassett submitted that the compensation awards were excessive, Mr Coleman that they were inadequate. Mr Hassett said that, having regard to Dr Taylor's dissatisfaction with Mr and Mrs Messervy, they would not long have retained their employment, in any event. I do not agree with this. Although I am puzzled by Dr Taylor's sudden change of position, it is obvious that he thought highly of Mr and Mrs Messervy right up till then. His decision to terminate their employment seems to have been an impulsive one. If he had put his concerns to Mr and Mrs Messervy openly and permitted discussion of them, they could probably have been met.
Mr Messervy was aged 58 years at the time of termination, Mrs Messervy 52. Between the date of their terminations and the hearing before the Judicial Registrar, on 1 February and 31 March 1994, neither of them succeeded in obtaining permanent employment; only short-term, part-time work. It is probable that, at their ages, each will experience difficulty in obtaining permanent employment. Each has suffered a loss that, in my judgment, far exceeds the maximum sum the Act permits me to award. Section 170EE(3) limits the Court to an amount not exceeding the amount of remuneration that the employee would have earned in the six months immediately following the termination, if termination had not occurred. Contrary to the submission of Mr Hassett, this formula does not set the top of a range of appropriate compensation that must be adjusted downwards to allow for contingencies. It is simply an arbitrary cap on the amount that may be awarded. I agree with what Moore J said in Perrin v Des Taylor Pty Ltd (10 March 1995, not reported:)
"I do not accept the submission of counsel for the respondent that the statutory limits found in s170EE(3) and (4) on the amount that the Court might award by way of compensation indicates a range where the statutory limit is to be seen as the maximum amount to be awarded only in the most grievous or serious contravention of a provision in Div3. The purpose of those provisions is no more than to limit the jurisdiction of the Court so as to preclude awards of compensation in excess of those amounts. That view is consistent with the legislative history of s170EE which was enacted by the Industrial Relations Reform Act 1993 containing no limit on the amount of compensation that might be awarded but was amended to introduce the limit found in s170EE(3) and (4) by the Industrial Relations Amendment Act (No.2) of 1994."
This view was reaffirmed by Moore J in Bean v Milstern Retirement Services Pty Ltd (2 June 1995, not reported) and adopted by von Doussa J in Cox v South Australian Meat Corporation (13 June 1995). Its effect is that the proper approach is to assess the appropriate amount of compensation in the light of all relevant circumstances, including the remuneration that the employee would have received, or have been likely to have received, if the employer had not terminated the employment and, if that amount exceeds the permissible figure, reduce the compensation to that figure. This is what von Doussa J did in Cox.
Group Certificates issued by Maldoc show that the gross salary of Mr Messervy in the financial year ended 30 June 1994 was $26,969 and that of Mrs Messervy was $18,200. In addition, they had the benefit of board and lodging which Mr Coleman estimated, on the basis of the evidence and without dispute by Mr Hassett, to be worth $6,860 per annum for each of them. This benefit may be regarded as "remuneration" for the purposes of s.170EE(3). Accordingly, in the 1994 financial year Mr Messervy's total remuneration came to $33,829 and Mrs Messervy's to $25,060. On the basis of these figures, the maximum amounts I can award are $16,914 and $12,530. As these amounts are below the amounts of compensation that I would have awarded, in the absence of the caps imposed by s.170EE(3), the appropriate course for me is to vary the orders of the Judicial Registrar so as to substitute those amounts. I will take that course.
I certify that this and the preceding fourteen (14) pages
are a true copy of the Reasons for Judgment of his
Honour Chief Justice Wilcox.
Associate:
Dated: 30 June 1995
APPEARANCES
Counsel for the Applicant: P C Coleman
Solicitor for the Applicant: Champion & Partners
Solicitor for the Respondent: J Hassett
Date of hearing: 14 June 1995
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