Ostle v Wilson Mining Pty Ltd
[2022] FedCFamC2G 109
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Ostle v Wilson Mining Pty Ltd [2022] FedCFamC2G 109
File number(s): SYG 1659 of 2020 Judgment of: JUDGE HUMPHREYS Date of judgment: 25 February 2022 Catchwords: INDUSTRIAL LAW – Fair Work Act – whether applicant provided with reasonable notice as to redundancy – whether contravention of s 323 of the Fair Work Act – inadequate notice as to redundancy – s 323 not applicable on the facts – no duty to mitigate. Legislation: Fair Work Act 2009 (Cth) ss 117, 323, 546 Cases cited: Carrabba v PFP (Aust) Pty Ltd [2019] FCCA 2857
Fishlock v The Campaign Palace Pty Ltd [2013] NSWSC 531
Guthrie v News Ltd (2010) 27 VR 196
Heldberg v Rand Transport (1986) Pty Ltd [2018] FCA 1141
Kuczmarski v Ascot Administration Pty Ltd (2016) 259 IR 233
McAlister v Yarra Australia Pty Ltd [2021] FCCA 1409
McGowan v Direct Mail and Marketing Pty Ltd (2016) 262 IR 311
Richards v Nicoletti [2016] WAIRC 00941
Division: Division 2 General Federal Law Number of paragraphs: 53 Date of last submission/s: 15 February 2022 Date of hearing: 14 – 15 February 2022 Place: Parramatta Counsel for the Applicant: Mr Miles Counsel for the Respondent: Mr Mahendra ORDERS
SYG 1659 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MITCHAM OSTLE
Applicant
AND: WILSON MINING PTY LIMITED
Respondent
ORDER MADE BY:
JUDGE HUMPHREYS
DATE OF ORDER:
25 FEBRUARY 2022
THE COURT ORDERS THAT:
1.Within 14 days, the parties are to provide the Court with a short minute of order to give effect to these reasons.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE HUMPHREYS
INTRODUCTION
Wilson Mining Services Pty Ltd (“the respondent”) provides mining products in the black coal mining industry. This included providing specialist products such as explosion resistant sealants, including ROCSIL Foam and a plastic mesh used to prevent rock fall in the roof of mined areas.
In May 1995, the applicant states that he was verbally employed by Mr David Wilson, a principal of the company, in the position of Director Marketing and Sales. It is common ground that the applicant’s employment contract was never reduced to writing. The applicant was further appointed to the Board of the respondent company in July 1995 and as a Company Secretary in April 1996.
The applicant states that he received a separate payment for his role as a Director of the Company, to that of his employed position of Director Sales and Marketing.
Over a period of years, the applicant’s remuneration with the respondent was increased from time to time. From mid-2015, the applicant transitioned to part-time employment of initially four days per week and later to three days per week.
In August 2019, Mastermyne Group Limited signed a conditional agreement for the purchase of all shares in the respondent company. The sale proceeded and, Mr Matthew White was employed as an Integration Manager to oversee the integration of the respondent company into the Mastermyne Group.
A review of the various positions within the respondent company was subsequently undertaken. In October 2019, the applicant was offered a reduction in his work hours to three days per fortnight or to take a redundancy. The applicant elected to take the redundancy offer.
The applicant was subsequently made redundant by the respondent and paid the following: eight weeks’ pay in lieu of notice and a redundancy payment of 12 weeks, calculated at his then rate of remuneration, based on a three day working week. It is again common ground that the termination of the applicant’s employment with the respondent was a true redundancy. No claim is made that the termination of his employment was unlawful.
The applicant contends that it was an implied term in his undocumented contract of employment that reasonable notice in all the circumstances was 12 months. In paying him only eight weeks, the respondent contravened s 323(1) of the Fair Work Act 2009 (Cth) (“the Act”).
The applicant seeks orders from the Court that the respondent pay the applicant a further 44 weeks’ pay, being 12 months or 52 weeks less the payment already made of eight weeks. The applicant further seeks orders for the payment of interest, together with a declaration of a breach by the respondent of s 323(1) of the Act and that pursuant to s 546(1) of the Act, a penalty be imposed on the respondent payable to the applicant.
The respondents contend that s 117 of the Act excludes or displaces the implied term of reasonable notice, sets a minimum standard or safety net, and leaves the parties to contracts of employment free to agree expressly a greater period of notice should they wish to do so. Further, even if a term of reasonable notice was implied in the contract of employment, the period of reasonable notice was not greater than eight weeks.
THE EVIDENCE
The first witness to give evidence was Mr Mark Levey. In an Affidavit sworn 27 Jan 2022, Mr Levey denied saying to Mr White that the applicant’s role was more accepting sales than going out to clients and selling. Mr Levey stated that the applicant’s best attribute and strength for the respondent company, was his extensive number of contacts which he had developed while working in the mining industry since 1991. In Mr Levey’s opinion, the applicant’s role was certainly critical to the business and was a senior role.
In cross examination, Mr Levy stated that he was first employed by Wilson Mining in 2013 but had known the applicant since 1995. Mr Levey regarded the applicant as a friend but not so much in the last five years. Mr Levey stated that Mr Neil Alsten was employed by Wilson Mining in 2017-2018 as a Business Development Manager but stated that this was a different role to that fulfilled by the applicant. Mr Levey agreed that the applicant had transitioned to a part-time role which finally was on the basis of three days per week, eight hours per day. Part of the reason for this was the downturn in the mining industry at the time. In terms of the conversations with Mr White, while Mr Levey agreed that he had no specific recall of the various conversations not occurring, he felt that if they had occurred he would remember them.
The applicant deposed three Affidavits sworn 13 April 2021, 15 June 2021 and 27 January 2022. In approximately May 1995, the applicant joined the respondent company following a verbal offer of employment by Mr David Wilson, the then Managing Director of the respondent company. The terms and conditions of the employment contract were never reduced to writing. The applicant was also appointed as a Director of the respondent company and Company Secretary in 18 April 1996. The applicant was paid separate remuneration, over and above that of being Director of Marketing and Sales for his role as a Director of the respondent company and Company Secretary.
Mark Levey was employed as the Chief Executive Officer of the respondent in 2013. Mr Levey was not a Director of the company and reported to the Board, of which the applicant was a member. The applicant claims that his “best worth” was carrying out marketing and sales duties and not managing the complete business. Mr Neil Alston was engaged by the respondent as a business development manager in 2017.
Since 1997, the applicant has suffered from Ulcerative Colitis. Due to the chronic nature of the disease over a long period time, it led to bouts of depression which the applicant controlled by medication. Following each bout of the disease, it took longer and longer for recovery to occur and as a result, it was imperative that the applicant maintain a healthy work-life balance.
From time to time, the applicant’s remuneration was increased. From January 2016, the applicant commenced working part-time, eight hours per day four days per week. In mid-January 2018, the applicant reduced his working days from four to three days per week again, for health reasons. The applicant was paid on a pro rata basis of a full-time salary.
On 16 August 2019, Mastermyne Pty Ltd signed a conditional acquisition agreement for the purchase of all shares in the respondent. Prior to that date and subsequent to it, the applicant was not asked to sign a document setting out the terms and conditions of his employment. The applicant resigned as a director of the respondent company.
On 16 October 2019, the applicant deposed a discussion with Mr White where it was stated by Mr White that the respondent company wanted to reduce the applicant’s hours of work to three days per fortnight. Upon the applicant’s return from annual leave, further discussions took place, and it was agreed that the applicant would be made redundant by the respondent company. Later that day, the applicant was given a letter notifying of his termination of employment by reason of redundancy from the respondent company. That letter advised that the applicant would be given an eight week notice period. The applicant stated that since leaving the respondent company, he has been unable to gain any alternative employment.
In cross examination, the applicant agreed that he commenced part-time employment in 2015 partly in response to a downturn in the mining industry. The applicant stated that the employment of Mr Alston was on the basis that he had a number of technical skills which helped the company make better presentations. The applicant did not have any direct reports in his position, however, he denied that Mr Alston took over many of the duties that he had previously performed.
The applicant disagreed that by the time Mastermyne bought out the respondent company that his role had changed significantly and that his work was being predominantly done by Mr Alston.
The respondent’s case consisted of one witness, Mr Matthew White, who swore two Affidavits, the first on 18 May 2021, and the second on 21 December 2021. Mr White deposed that following the purchase of the respondent company by Mastermyne, he was appointed as the Integration Manager of the company in August 2019. Mr White’s role was to lead and build an effective management team to integrate the business into Mastermyne. Mr White deposed that following the purchase, Wilson mining was in a difficult financial situation and had been incurring losses. Mr White’s role was to drive a turnaround plan for the Wilson Mining business.
During a review of the business, Mr White formed a view that the role held by the applicant was no longer key to the business. Mr White asserted that the role performed by the applicant was no longer the high grade within the business. Business development, sales and product development were being managed by Mr Alston. In October 2019, Mr White deposes that the applicant was offered a choice to either work three days per fortnight in a new role or take a redundancy. Following the applicant returning from leave, it was agreed that the applicant wanted to take a redundancy. Mr Wilson states that much of the work that may have previously been performed by the applicant was now being performed by others. Mr White was unable to identify that the applicant had performed any product identification worked between 1995 and 2011. Mr White was unaware of the health problems suffered by the applicant. In his view, Mr White believed that the applicant was entitled to award severance and retrenchment pay. Notwithstanding that the applicant was working three days a week, it was apparently decided his redundancy would be paid on the basis of four days per week. When the applicant was provided with his final redundancy calculation, he did not raise the severance and retrenchment policy but only whether eight weeks with sufficient notice given his length of service.
In cross examination, it was put to Mr White that he had no notes of the meeting on 5 September 2019. Mr White had no involvement in the company at all prior to August 2019. Mr White agreed that Mastermyne had conducted a due diligence process prior to the acquisition of the company and that his knowledge was limited to the period between August 2019 took 5 October 2019. The applicant’s Counsel put to Mr White that the letter sent to the applicant on 5 November 2019 was incorrect because it described his role as a manager rather than as a director. It was put to Mr White that his evidence in many cases was incorrect and that he was tailoring his evidence to suit the case of his employer. Mr White denied he was prepared to say anything to support the interests of the respondent company.
To a large extent, much of the evidence is uncontested. Interestingly, Mr Wilson, who initially employed the applicant, was not called by either party to give evidence. The Court accepts the evidence of the applicant and that of Mr Levey. Mr Wilson’s evidence was extremely limited based on the fact that he was only with the company for a very limited period of time, until it was agreed that the applicant would be made redundant from the firm.
Based on the Court’s assessment of the totality of the evidence, the Court is reasonably satisfied, as a fact, that the applicant was employed in 1995 via an oral contract which at no time had its terms reduced to writing. The Court is satisfied, as a fact, that the role of the applicant did not change significantly over the course of his employment with the respondent company except and insofar as the applicant reduced his work from full-time to part-time initially four days per week and then later three days per week. The applicant’s remuneration was also increased from time to time, however this was only a variation to the existing oral contract of employment and did not constitute a new contract.
The Court is not satisfied that at any point of time the applicant entered into a new contract of employment, and that the initial oral contract of employment continued until the time of the termination of his employment with the respondent company in 2019.
The Court is satisfied that the oral contract of employment included an implied term, that either party could terminate the contract on reasonable notice. What had constituted reasonable notice was not agreed to in the oral contract of employment.
THE LAW
Section 117 of the Act provides as follows:
(1) An employer must not terminate an employee's employment unless the employer has given the employee written notice of the day of the termination (which cannot be before the day the notice is given).
(2) The employer must not terminate the employee's employment unless:
(a) the time between giving the notice and the day of the termination is at least the period (the minimum period of notice ) worked out under subsection (3); or
(b)the employer has paid to the employee (or to another person on the employee's behalf) payment in lieu of notice of at least the amount the employer would have been liable to pay to the employee (or to another person on the employee's behalf) at the full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum period of notice.
(3) Work out the minimum period of notice as follows:
(a) first, work out the period using the following table:
Period
Employee’s period of continuous service with the employer at the end of the day the notice is given
Period
1
Not more than 1 year
1 week
2
More than 1 year but not more than 3 years
2 weeks
3
More than 3 years but not more than 5 years
3 weeks
4
More than 5 years
4 weeks
(b)then increase the period by 1 week if the employee is over 45 years old and has completed at least 2 years of continuous service with the employer at the end of the day the notice is given.
(4) A reference in this section to continuous service with the employer does not include periods of employment as a casual employee of the employer.
Using s 117 of the Act as a guide, noting that the applicant was employed for more than five years, he was entitled to four weeks’ notice under s 117(3)(a) of the Act and a further one week under s 117(3)(b) of the Act given he was over the age of 45 years, making a total of five weeks’ notice. For reasons not explained to the Court, the respondent company paid the applicant a total of eight weeks’ pay in lieu of notice. Counsel for the respondent company suggested that it could be due to generosity.
In terms of the impact of the common law on s 117 of the Act, the learned authors of “Fair Work Legislation 2021-22”, published by Thomson Reuters have the following to say at p 200 (some citations omitted):
Since the introduction of s 117 of the Act, it has been unclear what role the common law implied term of reasonable notice plays. A number of cases have held that the statutory prescription, albeit of minimum notice periods of “at least” (see s 117(2)(a)) the periods in subsection (3) , does not leave room for the implication of an implied term requiring reasonable notice, notwithstanding that the express terms of the employment contract are silent as to notice: (e.g. see; Kuczmarski v Ascot Administration Pty Ltd (2016) 259 IR 233). In McGowan v Direct Mail and Marketing Pty Ltd (2016) 262 IR 311; {2016} FCCA 2227, Judge McNab noted that there was some uncertainty as to whether s 117 had excluded the implied term. His Honour concluded at [85] that the “better view” was that the section does not exclude the term as the National Employment Standards establish minimum periods only, not mandates regarding the actual periods of notice (applying the reasoning of Kaye J in Guthrie v News Ltd (2010) 27 VR 196 (“Guthrie”)). This leaves the door open for dismissed employees to argue for a greater term of notice in circumstances where there is no express term in their contract regarding notice.
The conflicting cases just mentioned were analysed in some detail by the Full Bench of the Western Australian Industrial Relations Commission in Richards v Nicoletti [2016] WAIRC 00941. In that decision, Smith AP (at [129]-[131]) preferred the approach of Kaye J and Judge McNab, while Scott CC (at [151]-[156]) and Kenner ASC (at [178]-[180]) preferred the alternative exclusionary approach exemplified by the decision in Kuczmarski v Ascot Administration Pty Ltd (2016) 259 IR 233 at [55]-62] (Auxillary Judge Clayton).
In Heldberg v Rand Transport (1986) Pty Ltd [2018] FCA 1141 White J at [104]-[106] (“Heldberg”), canvassed in obiter dicta, without deciding on the point, stating that consideration “should be deferred, until it is necessary for the issue to be determined” (at [1061]). A number of reasons were given to prefer the former approach (allowing for the implication of implied reasonable notice despite the statutory provision) rather than the latter.
In Carrabba v PFP (Aust) Pty Ltd [2019] FCCA 2857, Judge Lucev preferred the exclusionary approach, however, the case was heard in 2017 prior to the decision in Heldberg.
This controversy awaits an authoritative decision by an Appeal Court.
The issue was further considered in McAlister v Yarra Australia Pty Ltd [2021] FCCA 1409 (“McAlister”) by Judge Obradovic of this Court. In, with respect, a very well researched and reasoned judgement that canvasses the relevant principles and decisions, Judge Obradovic concludes at [205]-[207] the following:
[205] The Court respectfully agrees with the comments in McGowan and Guthrie, that it is doubtful that Parliament intended that employees who served vastly different periods, such as 5 years as opposed to 20 years, would, by the enactment of s.117(2) be confined to receiving the exact same period of notice of termination, despite their widely different circumstances. (See also for example Stewart v Nickles [1999] FCA 888 where it was held that the then equivalent of s.117 (albeit couched in different terms) did not displace the more generous express contractual provision for termination by notice, nor an implied contractual provision for termination by reasonable notice. The Industrial Relations Court of Australia had expressed a similar view in Westen v Union des Assurances De Paris (1996) 88 IR 259 (“Westen”) although it had ultimately not decided the matter).
[206] White J’s analysis of this issue in Heldberg at [95]-[106], in particular [105], is with respect, the correct approach to the question of how s.117 ought to be interpreted and the approach which this Court adopts. Respectfully, the Court herein does not agree with the analysis of s.117 in Kuczmarksi for the reasons identified in Heldberg at [105]. The Court respectfully declines to follow Carrabba for similar reasons.
[207] As such, s.117 of the FWA does not displace the common law term of reasonable notice, such term being implied by law.
The Court has considered each of the separate approaches, but is of the view, for the reasons outlined McAlister, that the Court should follow that line of authority in preference to that in Cabbara. Accordingly, s 117 of the Act did not replace the implied condition of reasonable notice in the oral contract of employment between the applicant and the respondent. Rather, s 117 of the Act is a safety net for contractual employment and creates a minimum entitlement under the Act.
HOW MUCH REASONABLE NOTICE SHOULD HAVE BEEN GIVEN TO THE APPLICANT?
In McAlister, Judge Obradovich at [221]–[224] sets out the objectives required for the giving of reasonable notice. The length of the required notice in any case is a question of fact to be decided in light of the objective circumstances as they exist at the time notice is given.
Considerations which may be relevant to the termination of the period of reasonableness are as follows;
•the length of service of the employee;
•the professional standing of the employee;
•the employee’s age;
•the employee’s qualifications and experience
•her or his degree of job mobility
•expected period of time it would take the employee to obtain alternative employment
•the period it was likely, apart from the dismissal, that the employee would have continued in the employment
•what the employee gave to come to the present employer (for example, a secure long-standing job);
•the employee’s prospective pension or other rights.
On behalf the applicant, it was submitted that he was a person who had been a Director for some 24 years with the respondent company and also held a senior management position. The applicant’s salary was high, being 75% of the salary of the Chief Executive Officer, Mr Levy. Due to his health, the applicant needed to work on a part-time basis and there would be few other opportunities at his level of seniority to work part-time. It was submitted that the minimum period of notice for a person in the applicant’s position should be six months and there were factors that suggested slightly less than 12 months would be appropriate. It was conceded, that the respondent company was not a top 100 or 200 ASX listed company, but that this was not critical in determining a lengthier period of notice.
On behalf the respondent company, it was submitted that the period of reasonable notice should not be greater than eight weeks. The period paid was in excess of the minimum required under s 117 of the Act, which was five weeks. It was submitted that the applicant’s role within the company had changed considerably and that he was no longer occupying a senior position and did not lead a team nor did he have anyone reporting to him. It was submitted that the applicant did not conduct any employee management functions. It was submitted that the applicant’s role was now neither senior nor important in the overall business of the respondent company rather, he was in a well-paid sales role with little to no managerial responsibilities and therefore not demanding of a long period of notice. It was submitted that in this case, the Court could not ignore the fact that the applicant was paid totalled 20 weeks’ pay, including severance. Although the severance payment was not subject to mitigation, it was submitted that it was clear that the damages arising from the alleged breach of the contract would be. Even if the applicant was entitled to reasonable notice of greater than eight weeks pay, which was denied, it was submitted that any period of reasonable notice could not possibly exceed 20 weeks.
The Court is of the view that any period of notice, is a separate and distinct issue to the payment of redundancy pay. Any entitlement to redundancy pay is separate and apart from an entitlement to reasonable notice and one does not affect the other.
The applicant was some 59 years of age when his employment was terminated, and had been at the company for approximately 25 years. The applicant’s salary was significant even by comparison to other employees of the company.
The applicant’s employment was in a narrow area which was not necessarily transferable to other employment. There is no evidence before the Court to indicate that the applicant had acted in any way other than in the best interests of the company and there is no evidence of any alleged shortcomings or lack of performance on his behalf.
In the exercise of the Court’s discretion, and taking into account relevant and comparable authorities, including those set out in [233] of McAlister, the Court determines that the reasonable period of notice which was implied into the old contract of employment between the respondent and the applicant is a period of six months or 26 weeks. Noting that the applicant has already been paid eight weeks, he is therefore entitled to be paid an additional 18 weeks salary in lieu of notice. That amount is to be paid within 28 days of the date of this decision.
IS THERE A DUTY ON THE APPLICANT TO MITIGATE ANY DAMAGE WHERE A PAYMENT MADE IN LIEU OF NOTICE?
The Court rejects the assertion made on behalf the respondent company that the applicant was under duty to mitigate any loss where he was paid in lieu of notice. It is well accepted that in the case of an employer who has elected to pay salary in lieu of notice, the employee is able to immediately commence other employment and is not obliged to repay any money received in lieu of notice. As the payment was received immediately upon termination, there is nothing the employee can do to mitigate that loss: (see; Fishlock v The Campaign Palace Pty Ltd [2013] NSWSC 531 at [280]).
WAS THERE A CONTRAVENTION OF S 323 OF THE FAIR WORK ACT?
Although contained in the Statement of Claim filed with the Court, the claim that the applicant breached s 323(1) of the Act was not the subject of any substantive submissions by either party.
Section 323(1) of the Act provides as follows:
(1) An employer must pay an employee amounts payable to the employee in relation to the performance of work:
(a)in full (except as provided by section 324); and
(b)in money by one, or a combination, of the methods referred to in subsection (2); and
(c)at least monthly.
Note 1: This subsection is a civil remedy provision (see Part 4-1).
Note 2: Amounts referred to in this subsection include the following if they become payable during a relevant period:
(a)incentive-based payments and bonuses;
(b)loadings;
(c)monetary allowances;
(d)overtime or penalty rates;
(e)leave payments.
(2) The methods are as follows:
(a) cash;
(b) cheque, money order, postal order or similar order, payable to the employee;
(c) the use of an electronic funds transfer system to credit an account held by the employee;
(d) a method authorised under a modern award or an enterprise agreement.
(3) Despite paragraph (1)(b), if a modern award or an enterprise agreement specifies a particular method by which the money must be paid, then the employer must pay the money by that method.
Note: This subsection is a civil remedy provision (see Part 4-1).
The rationale of the section is to ensure that employees are paid on a regular basis in full for work performed by one of the approved method at least on a monthly basis.
The dispute in this case did not revolve around whether the applicant was paid on a regular basis for work done. It was entirely around the lawful quantum of any pay in lieu of notice.
The Court is not satisfied in the facts as it found there was not any breach of
s 323(1) of the Act and that aspect of the statement of claim is dismissed.
THE CLAIM FOR INTEREST
Given that the Court has found in favour of the applicant, in that he is entitled to a further 18 weeks’ salary in lieu of Notice, appropriate interest on that amount should be paid.
COSTS
Costs are reserved. The parties are invited to make any costs application they may wish to noting the provisions of s 570 of the Act and the limitations in subsection 570(2) on the capacity of the Court to make a costs order.
ORDERS.
Within 14 days, the parties are to provide the Court with a short minute of order to give effect to these reasons.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Humphreys. Deputy Associate:
Dated: 25 February 2022
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