Preston v Fernbran Constructions Pty Ltd
[1997] IRCA 293
•14 November 1997
DECISION NO:293/97
INDUSTRIAL RELATIONS COURT OF AUSTRALIA
INDUSTRIAL LAW - termination of employment - nature of contract of employment - whether probationary employment - whether resignation or termination at the initiative of the employer - compensation - claim for relief in associated jurisdiction
Workplace Relations Act 1996 (Cth) s. 170 EA, s. 430
Trade Practices Act 1974 s 86
Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200
Malco Engineering Pty Ltd v Ferreira & Ors New South Wales Court of Appeal (unreported) 18 March 1994
Vabu v Federal Commissioner of Taxation (1996) 96 ATC 4898 )
Stevens v Brodribb Sawmilling Company Limited (1986) 160 CLR 16
BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 16 ALR 363
John Fitzgerald & Ors v Western Australian Specialty Alloys, (unreported), Madgwick J 31 October 1996
Jupp v Computer Power (1994) 56 IR 81
Fitzroy Motors Pty Ltd v Hyundai Automotive Distributors Australia Pty Ltd (1995) 133 ALR 445
PRESTON v FERNBRAN CONSTRUCTIONS PTY LIMITED
NI 1451 of 1996
TOMLINSON JR
SYDNEY
14 NOVEMBER 1997
IN THE INDUSTRIAL RELATIONS ) ) COURT OF AUSTRALIA ) NI 1451 of 1996 ) NSW DISTRICT REGISTRY )
BETWEEN: Stephen Frederick PRESTON
ApplicantAND:
FERNBRAN CONSTRUCTIONS PTY LIMITED
Respondent
JUDICIAL
REGISTRAR:TOMLINSON
PLACE: SYDNEY DATED: 14 NOVEMBER 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application of Stephen Preston be dismissed.
Note: Settlement and entry of orders is delt with in Order 36 of the Federal Court Rules.
IN THE INDUSTRIAL RELATIONS ) ) COURT OF AUSTRALIA ) NI 1451 of 1996 ) NSW DISTRICT REGISTRY )
BETWEEN: Stephen Frederick PRESTON
ApplicantAND:
FERNBRAN CONSTRUCTIONS PTY LIMITED
Respondent
JUDICIAL
REGISTRAR:TOMLINSON
PLACE: SYDNEY DATED: 14 NOVEMBER 1997
REASONS FOR JUDGMENT
This is an application for compensation brought under the Industrial Relations Act 1988 (now the Workplace Relations Act 1996 (Cth) for compensation for unfair dismissal.
The applicant stated he was a qualified carpenter having completed a 6 year apprenticeship in New Zealand with some 20 years experience in the building industry. In early 1995 he joined Certainteed Products Pty Limited (“Certainteed”) as a sales representative selling PVC double glazed windows and doors and in June of 1995 he attended a commercial display at Darling Harbour demonstrating products on behalf of Certainteed. At that time the applicant met Rod and Bill Miles, two of the directors of the respondent who told him they had a project at Windsor to make certain buildings under the aircraft flight path, noise-proof. A discussion took place wherein the applicant suggested that Certainteed could manufacture its window products at the dis-used factory site of the respondent at Kings Park, and he offered to discuss the matter with Russell Hulse the managing director of Certainteed and to report back to Fernbran.
On 13 June 1995 the applicant received a telephone call from Rod Miles and a meeting took place the next day at the Kings Park premises. The applicant told the court he put forward his idea that the Kings Park site could be used as a site for a general home improvement centre, in the manufacturing of balustrading, windows and doors, and for repair work generally. The applicant noted the equipment there included fork lift trucks, benches, welding equipment and a utility truck. The applicant said Rod Miles approved of his ideas, and requested the applicant supply a written proposal.
The applicant told the court he had had experience with aircraft noise insulation as previously he had been employed by Asset Services, an offshoot of the Federal Government Department of Administrative Services - in the estimation of the cost of achieving noise reduction concerning some 30,000 homes in the Sydney area flight paths. At a further meeting on 14 June 1995 the applicant stated that he referred to his ANIP knowledge and advised Rod Miles “there was a big market out there for sales and insulation.”
On 17 July 1995 the applicant met Rod and Bill Miles at the Kurrajong home of Bill Miles when the applicant’s proposal - exhibit 2 - was discussed. That exhibit was addressed to the Board of Directors of the respondent and stated:
“I have been in this industry for a period of 23 years, specialising in the creation and implementation of all the work I have outlined below. From a trade background to supervision, works management and marketing perspective, I have the necessary qualification to achieve the following proposal.
The proposal is for Fernbran Construction Pty Ltd, to set up a separate division to your company, namely Fernbran Home Improvements who (sic) will specialise in all types of Home Improvements, namely...window and door replacements...glass balustrading...double glazed windows and door replacement(s)...cladding...
To bring this to full potential, I envisage this to be a two to three year project. Depending on the agreed initial working capital, the company would become self funding within twelve months through sales generated....
I foresee the turnover after 12 months to be a conservative $150,000 to $200,000. This would depend upon the amount of sales staff available...
My cost to you may be in the form of a three year management contract which would comprise of (sic) some of the following:-
* a marketing fee payable quarterly...
* a consultants retainer payable on a weekly basis...
* a commission
* a percentage over-rider on all sales generated monthly by other
sales staff
* travelling expenses
* the opportunity to obtain share options within the company if after
the initial three year contract my services are to be retained.
All the above points are naturally to be discussed at length at the appropriate time. I look forward to hearing from you...”
The applicant told the court that that the ANIP project was discussed as part of what it was proposed he could to do for Fernbran, in that the applicant suggested the respondent should tap in on the substantial profits to be made. Bill Miles allegedly said that “it all sounded very good.” At the meeting it was mooted that the applicant should be employed as general manager of a separate division of the respondent on the basis of a salary package plus commission. A directorship in the future was discussed. The applicant said he told the respondent he was earning $100,000 per annum with Certainteed.
On 20 July 1995 the applicant was advised by Russell Hulse that an advertisement in the Sydney Morning Herald invited expressions of interest to be submitted to DAS for the ANIP project and he told the court that he telephoned Rod Miles and passed the information on. It was the understanding of the applicant that Rod Miles would attend to the matter.
On 28 July 1995 there was a further meeting a Kings Park between the applicant, Rod Miles and Robert Wilkins the respondent’s licensed builder, who was also a member of the Board. Exhibit 3 was a financial business plan for the period 1995 to 1998 headed “Fernbran Home Improvements” providing inter alia an estimate of the applicant’s income dated 24 July 1995 showing the mark up to be 50%. The applicant was not happy with the figures as presented as the salary for the general manager being shown as $40,000. The applicant said the commission had to be 6% and that he wanted a salary of $60,000. Bill Miles said he would do another set of figures.
Another meeting took place on 3 August 1995 between Robert Wilkins, the applicant and Rod Miles at Kings Park when the applicant showed Mick Jennings, the sales manager for Certainteed, the Fernbran factory premises. On 10 August 1995 the applicant had a further meeting with Rod and Bill Miles and Robert Wilkins. Rod and Bill Miles allegedly told the applicant that there was trouble with the construction side of the business and that they were temporarily strapped for cash. The applicant said he agreed to take a lower income for an initial 6 week period to help out and he agreed to take $1200 per week - on the basis that the respondent pay the applicant’s tax together with 6% of all sales for the first 6 weeks. The applicant said Bill Miles said he would prepare more figures on the basis of the discussions.
Exhibit 4 was a document dated 11 August 1995 being a financial projection for a 3 year period 1995 to 1998 prepared by Bill Miles relating to the new venture entitled “Fernbran Home Improvements”. The salary of the general manager is shown as being $60,000 and the mark up as being 67.50%. On 14 August 1995 the applicant said he had a meeting with Cumberland Newspapers to arrange advertising on behalf of Fernbran. On 15 August the applicant had further conversation with Rod Miles concerning the Fernbran Home Improvements proposal - and the applicant said he was happy to accept the lower figure on the understanding that it was for a 6 week period only. According to the applicant Rod Miles agreed.
Exhibit 5 was the contract of employment signed by the applicant and the respondent with 2 attachments, that were annexed to the contract at the time of signature. The contract of employment was dated 12 August 1995. The letter of offer stated:
“I am pleased to offer you the position of general manager Fernbran Home Improvements a division of Fernbran Constructions Pty limited. In this position you will be directly responsible to me and work with Robert Wilkins who is a Director responsible for our Building division.
I accept your proposal to set up the Fernbran Home Improvements Division who will specialise in all types of Home Improvements and I (?) your proposal to this offer letter so that we both agree (that) the division will develop according to the opportunities (?) as per your proposal.
Initially during the start period ie. during the period that the division takes to become self funding I agree to pay you a Consulting (?fee) equal to $1,200 per week, hopefully this period will be less than 4 weeks.
After the initial period I am pleased to offer the following salary package:
salary $60,000 per year
Sales commission 6% of Total Home
Improvement sales paid
each Month
Travel expenses $1,600 per month
As discussed I would prefer to offer you a profit share rather than a sales commission because as General Manager you should be rewarded for the total results of your division rather than the sales (?) by the division. This we will discuss at a later date.
The above offer is firm for 3 months commencing 9 August 1995 and we will review our progress on 9 November. If the division is proceeding as you have stated then the offer will continue for a (?) of three years with annual reviews to bring the salary up to your performance and or inflation...”
Attached to the contract was a spread sheet prepared by William F. Miles and dated 10 August 1995 showing the mark-up on sales to be 67.50%. Also attached was the document already marked as exhibit 2 signed by the applicant.
Exhibit 8 was a memo dated 21 August 1995 from the applicant to Rod miles as to how the business should be run. The document deals with office minutia in points 1 to 6 and covers such topics as to how the telephone is to be answered. However, point 7 and following notes:
“7. My initial proposal: there appears to be some misunderstanding in relation to this proposal, .ie. Fernbran Constructions P/L had to have the finance to cope with initial costs required for salary package, advertising and promotional costs. There appears to be an impatience to commence ‘self funding’. I am however not prepared to jeopardise any deals for the sake of impatience. This is not a 1 week project, this is a long term project, which I though was both explained by me and understood by you clearly.
If you are unhappy with my performance, or do not have the patience to see
this through, or if it is just a case of not being able to pay my fee or the other
payments, which are needed to achieve our final goal, then please let me
know now so that I am able to seek employment else where. otherwise I
request you stand by me...”
The applicant said that as a result of exhibit 8 a meeting took place a few days later and the points he had listed were discussed with himself, Robert Wilkins and Rod Miles. Exhibit 9 was a memo from the applicant to Rod Miles setting out changes to the contract of employment that were sought by the applicant. The memo stated:
"Dear Bill, Brian Rod and Rob,
I am requesting the following changes as at 19th September 1995 and by 22 September 1995 so that I may proceed with the future progress and development of my divisions in a direct, clear and positive manner for the next 3 years.
1. weekly fee of $1,200 clear after tax. The tax to be paid by you.
2. Six percent of total home improvement sales, which includes all window sales, noise insulation projects and new constructions sold by my division.
3. monthly travel expenses $1,600
4. Expense account for dealing with clients
5. marketing allowance
6. mobile phone (digital) paid by company and new office desk, furniture, white board, shelving etc. to enable proper organisation of all further work and meetings.
My responsibilities are increasing constantly and I indeed I look forward to them.
I feel I have proven myself in the short time I have been with the company. Therefore I feel these changes to be fair. If you feel otherwise would you kindly let me know as soon as possible.”
The applicant said there were 2 discussions on that day concerning the memo exhibit 9, and that he sent exhibit 9 for two reasons, first, the 6 week period had passed and secondly the respondent had secured the manufacturing rights for the Rehau windows and he felt he should finalise his position concerning the offer of shares.
In relation to the salary, it could be interpreted that the applicant was seeking a raise to $83,000 per annum. At first in his evidence the applicant agreed with that interpretation and then re-cast his answer to say that in had made a mistake in the written document. The evidence was that Bill Miles was contacted, and instructions given that in future concerning his entitlements the applicant should deal with Bill Miles, but that he should report to Rod Miles concerning the day to day running of the business. The applicant told the court Bill Miles was to fax confirmation of the agreed points through to the applicant - that apparently may never have happened. An issue between the parties was the grading of commission from 6% to zero depending on the profit margin that was earned.
On 20 September 1995 further discussion took place and Rod Miles expressed dissatisfaction that the applicant was in charge of the ANIP project, or that he should get a 6% commission. The applicant said he had not agreed to a scale of commissions payable. The applicant said Robert Wilkins said he had no objection as to what the applicant was asking for. The applicant said he was the general manager and as such was responsible for the running of the home improvements section.
On 21 September 1995 the applicant telephoned the office to request his cheque from Rod Miles for his week’s pay. A conversation ensued with Rod Miles who allegedly said the applicant was no longer employed on the basis that the respondent could not afford him. Later on the applicant told the court that Robert Wilkins told him he was not happy that the applicant was leaving. In cross examination it was put to the applicant that that conversation with Robert Wilkins never occurred, and the applicant maintained that it did.
In his evidence in chief the applicant said that he worked in the capacity of general manager in an informal capacity before the contract was signed by the parties and the formal relationship came into being. That evidence can be substantiated by exhibit 6, referred to earlier.
The applicant said he kept records, of the customers he visited, of his sales and of his appointments, from the quotes he prepared and from the verbal indications he received from potential customers. From the manner in which the applicant presented his case it is to be assumed that reliance was placed upon the applicant’s records to support his claims for compensation. Further, the applicant said he was aware of the costs and outgoings of Fernbran, and of the cheques that were signed by Rod Miles. Exhibit 10 was a document headed “Agreed Employment Statement”, being a document prepared by the applicant that indicated he had an informal start on 9 August 1995, that he had a formal start on 16 August 1995 and that he was dismissed on 21 September 1995. Exhibit 10 - listed under the heading “Confirmed” - there appeared the names that Messrs Silva, Kahler and Brown had “signed contracts”; the parties Slight, Marosszeky, Klajman and Shiel had the word “verbally” inserted in brackets after their names. Exhibit 10 listed a second column of names under the heading “To be finalised”. This group were bracketed together and the words noted “quote given on all”.
The applicant agreed in cross examination he had no formal accounting qualifications. The applicant told the court that before the hearing of the matter before the court he was aware with regard to exhibit 10 that none of the 3 contracts in the “confirmed” column had proceeded and the respondent had returned the cheques. It was argued on behalf of the applicant that at the time of leaving employment the contracts were “confirmed”. There was other evidence that the applicant completed the work for people mentioned in exhibit 10, Mr Khaler, by using Certainteed products. There was evidence that he received a commission from that work. The possibility that the applicant may have sought to place himself in the position of receiving two commissions for the same work - one claimed through his document exhibit 10 and the other he may have received by completing the work with Certainteed products after the end of his employment with the respondent was not fully explored.
The Klajman matter was one where the actual price to be paid by the clients had not been finalised at the date of the cessation of the employment. The accounting standards employed by the respondent as to the classification of capital and equity were not explained but it is common that inherent in ordinary commercial relationships would be the understanding that the respondent would be required to complete certain building works whereupon it would be in a position to pay commission and other benefits to the applicant and so little weight can be accorded to the applicant’s method of accounting.
Exhibit 11 was a document prepared by the applicant for the purposes of the litigation headed “Fernbran’s Outgoings”. The document listed various items, including the applicant’s salary being $1,200 x 6, Central Coast Newspaper advertisements, stationary, photographs, signage, “Salmax Pty Ltd”, Monagrans Hardware and Kennards Hire. It is noted the document exhibit 11 was created 12 or so months after the applicant ceased at the respondent’s employment. An issue arose as to the payment of the “Salmax” item of $1,018.00 - it was the applicant’s rationale as the item was unpaid, albeit an invoice had probably been rendered, it could not be classed as a credit in the hands of the respondent as there was no proof the account had been paid nor was there any evidence that the respondent would proceed if necessary to write-off. Accordingly the artificiality of the tender of the exhibit diminishes from the weight of the documents and little weight is accorded to exhibits 10 and 11.
The applicant specifically denied in cross examination that he had a disagreement with his former employer Certainteed about his salary and entitlements. However exhibit A was a letter dated 10 August 1995 signed by the applicant listing all monies allegedly owed by Certainteed to him and clearly indicated a disagreement did occur. The exhibit was directly contrary to the evidence of the applicant. Malco Engineering Pty Ltd v Ferreira & Ors, New South Wales Court of Appeal (unreported), 18 March 1994 is authority for the proposition that where it has been established that an applicant has told deliberate lies to a Court then great care should be taken in accepting the applicant’s evidence as proof of any matter in issue in the proceedings. That case can be distinguished perhaps as there the plaintiff was claiming compensation for alleged physical incapacity, and here the applicant claims compensation arising from the termination of a contract of employment. However, the principle to be applied is the same. Upon consideration of the evidence weight cannot be placed on the evidence of the applicant in regard to the circumstances of his relationship with Certainteed.
It was put to the applicant that ANIP was not discussed by the parties before he commenced work. The applicant again said he disagreed, and that he felt the project came under home improvements. It was put that the applicant made no reference to ANIP in his document, exhibit 2. The reply of the applicant was “my rough proposal did”. Exhibit 13 was a hand-written document, undated, tendered by the applicant as being his rough proposal. No evidence was adduced from the respondent concerning the exhibit, and so full weight cannot be accorded to it.
With regard to the time constraints applicable to the contract of employment the evidence of the applicant was that exhibit 5 was only in force for 6 weeks, and that after that the employment arrangement reverted back to the original arrangement. The applicant agreed the 6 weeks period was not written as a term and condition, but that he and the respondent had “agreed to it orally”.
The evidence of the applicant was confusing regarding the issue of mark up. The applicant agreed that the respondent told the applicant at the Kurrajong meeting that it had a mark up of 15% on items sold. The applicant told the court the respondent found it unbelievable that he could achieve 50% or even a higher percentage mark up. It was put to the applicant that Exhibit 4 and 5 produced by Bill Miles had a mark up of 50%. The response of the applicant was “I do not agree that I said I could achieve a higher mark up - I started with a high mark up and they dragged me down.”
It was put to the applicant that on the document produced 11 August 1995 a mark up of 67.5% was noted because that was the figure he had told the Miles respondent that he could achieve. The answer of the applicant was to the effect that he looked at the paperwork and decided that they were only drafts. The applicant stated that “67.5% was not agreed”. It has to be remembered that that paperwork was annexed to the contract signed by the applicant later on.
It was put to the applicant that it was his proposal that the mark up on the home improvement items he was going to sell was 67.5%. The response of the applicant was “I totally disagree”. It was pointed out that in the schedule attached to exhibit 5 the mark up was noted as 67.5% and that the applicant knew that the respondent could not pay his financial entitlements if the mark up on items he sold was less than 67.5%. The response of the applicant was that he knew it was “OK to start at 35% and he disagreed that if a less mark up was put into place then Fernbran would be losing money.” The applicant also denied that Rod and Bill Miles expressed concern and said they doubted that the applicant could achieve the sort of mark up he indicated. It was the view of the applicant that the profit margin of 20% was applicable “only to new housing”.
On the second day of the hearing in cross examination the applicant stated that at the time of the Kurrajong meeting with the respondent he had not received any of the 3 schedules being financial projections however he agreed that he had been given financial projections on 28 July 1995. The applicant said he “never sat down with Bill Miles on a face to face basis and discussed the financial projections”. In re-examination the applicant said he did not discuss the mark up and projected profit figures at all at the Kurrajong meetings, however overall it is clear that the applicant wished the court to conclude that he provided certain financial information to the respondent prior to the entry into a formal contractual situation.
The evidence of the applicant is confusing as on the one hand it was his evidence that he put a proposal to the respondents concerning the new venture of home improvements and how the venture was to be marketed and managed, and on the other hand wishes it to be understood that he had no input nor involvement with the creation and discussion of financial projections and business plans. In forming that analysis the answer of the applicant in cross examination in relation to the financial schedules was “I knew these were figures Bill put through his computer to justify to himself to see how it could work.” It is hard to see how the applicant can proffer this evidence on the one hand and on the other hand firmly assert that the respondent alone set the mark-up figures. It is clear from the evidence the respondent relied upon the information provided by the applicant to produce a budget for the new home improvement division, that budget being percentage of mark up to be achieved by the applicant in sales.
In relation to the claim by the applicant for loss of commission on the ANIP work for the period 26 April 1996 until 12 November 1996 it is noted the affidavit of the applicant attached to his form 132 for relief states that he negotiated on behalf of the respondent with the ANIP project. That affidavit was marked exhibit F and stated:
“During the period of my employment with Fernbran, I negotiated on behalf of Fernbran and Fernbran was awarded a contract to undertake noise insulation of residential homes affected by flight paths of planes arriving and leaving from Kingsford Smith Airport, by the Airport Noise Insulation Project. All sales made in relation to the above contract would have been from the Home Improvements Division.”
In his oral evidence the applicant maintained he was involved actively with the project and to that end listed his involvement as five specific incidents, namely taking a phone call from ANIP and passing on a message to Bill Miles, connecting the respondent Fernbran to Certainteed, arranging newspaper advertisements, placing a phone call to the respondent advising the advertisement of applications for tender and advising Bill Miles that Rehau was open to offers for sale.
By no means can those incidents be construed to place the ANIP project in the Home Improvements division, as first there was no evidence that all but the second task could have been performed by other people, and that it was simply fortuitous that the applicant performed them. With regard to the second task, the evidence before the court was that all suppliers and sub-contractors to the ANIP work had to be accredited before ANIP would grant approval for work, and Certainteed did not have that necessary approval. When questioned as to Certainteed’s accreditation, the applicant said “they were going through approval.” The claim of the applicant cannot be supported by this evidence alone, as it is both denied by the respondent and not supported elsewhere.
In cross examination the applicant agreed with the suggestion that the respondent had no experience in selling PVC windows but stated that in addition to other products it was intended that he sell such items as cladding, wall panels, pergolas and bathrooms.
On behalf of the respondent the court heard from Mr Robert Wilkins who said he had been the building manager for 4 years with the respondent. Exhibit G was a copy of the board minutes for the meeting held 31 July 1995. Present was Bill Miles, A Taylor, Rob Miles and Robert Wilkins. Paragraph 7 of that exhibit read:
“ Fernbran Home Improvements: WFM and RWM met Stephen Preston at the recent Home Show and discussed double glazed windows and home improvements. He stated he would like to start a home improvements operation and would submit a proposal to Fernbran Constructions P/L. The proposal was tabled at the meeting. After much discussion it was decided that because of the margins that Stephen believed he could obtain for example 80% compared to current margins in the building of 15% that the proposal was extremely optimistic and therefore we were not prepared to employ S. Preston on a continuing basis until his proposal was proven or at a minimum self funding. The Managing Director was authorised to negotiate a temporary deal with S. Preston in order that both parties could separate if the S. Preston proposal did not meet his financial commitment.”
The exhibit was dated 28 August 1995 and was signed by Bob Miles.
Mr Robert Wilkins told the court he was a qualified builder and held a building licence, a clerk of works certificate and authority to be a building inspector, whereas the applicant only possessed qualifications as a carpenter. In relation to exhibit 9 Mr Wilkins said Rod Miles showed it to him and discussed it with him, and that it was his understanding that the applicant’s project was only ever to be self-funded. Exhibit H was exhibit 9 with hand-written notations on it where it was identified that Rod Miles had written in the sum of $83,200.00.
Mr Wilkins said that after exhibit 9 was received, a meeting was held with the applicant in order to get him to change his demands. Mr Wilkins said that at that meeting the applicant stated that he thought he was “worth $83,200 a year” and that he called the applicant “a greedy bastard” - and in the end the applicant simply walked out.
On behalf of the respondent the court heard from Mr Rod Miles the managing director of the respondent company who told the court the respondent was building townhouses under the Richmond airport flight path and as such needed sound proof windows with the mandatory STC rating of 40 or more. Rod Miles met the applicant at the building show, and one week later the applicant came to the Kings Park premises of the respondent and collected the plans of the townhouses. Rod Miles said the applicant said he had a lot of projects that he was selling Certainteed windows to and that work was just “going begging”.
Rod Miles told the court that on 15 June 1995 he went to an exhibition run by the government to meet the government departments involved with the ANIP project, and in that regard he said the applicant came a second time to the factory to deliver quotes from Certainteed to supply the noise proof windows for the projects under the flight path, and that the respondent obtained quotes from other builders. Rod Miles denied the applicant had advised him of an advertisement in the Sydney Morning Herald inviting expressions of interest were to be submitted to DAS for the ANIP project, and he further stated that at this time the applicant showed a willingness to start a home improvements division of Fernbran as Russell Hulse wanted to re-locate to Brisbane. Rod Miles said that the applicant told him that the Certainteed work was very profitable and that the figures quoted made “our building division look very sick”.
Further meetings took place between the parties the applicant produced exhibit 2. That document was the basis of discussions for the Kurrajong meeting. Both father and son thought the proposal excellent, and put the suggestions into table form in order that financial planning and estimated profit could be assessed. Exhibit 3 was one of the draft financial plans produced by the respondent.
In cross examination much was made of the point that the mark up was the nomination of the respondent. However it is noted that exhibit I pre-dates exhibit 3 and so it can be concluded that right from the start the applicant had high expectations as to what the mark up and associated profit margin would be, and that in an effort to be conservative the respondent placed 50% mark up in exhibit 3. Rod Miles told the court the applicant was taken point by point through the items in exhibit 3, and in that regard I prefer that evidence to the evidence of the applicant, who denied the allegation. Rod Miles told the court that the applicant’s figures were dropped from 70% to 50% and that 20% was more than double the existing profit. Rod Miles said the applicant was very confident in stating what he could achieve in sales, and “was happy with what we put down”. Rod Miles gave evidence to the effect that it was understood between the parties that if the applicant could not achieve a mark up of 50% then the respondent would not be able to pay him. Rod Miles said that the changes made to exhibit 3 resulted in exhibit 4, and that these changes were made at the request of the applicant prior to the start of work.
Exhibit 8 was discussed by the parties, according to Rod Miles, but the issues concerning self funding do not appear to have been clarified at that time.
Rod Miles told the court the applicant had no meetings with ANIP, and that exhibit 9 was a request by the applicant to change his contract from $60,000 to $80,000 per year. At the meeting when exhibit 9 was discussed was the first time the applicant mentioned the ANIP project. In his evidence Rod Miles stated that at the time of the meeting discussing exhibit 9 the applicant was quoting below the mark up figure, and that on that basis the respondent could not afford to employ him and that the hand-written notes on exhibit 9 were the additions made by Rod Miles in an attempt to put together a salary package for the applicant. Rod Miles stated that his father Bill Miles prepared an answer for the applicant on 19 September 1995, and that it was provided to the applicant.
Rod Miles said that at a meeting on 19 September he went through the revised salary package with the applicant, who did not accept it, and simply walked out. On 21 September 1995 Rod Miles said he telephoned the applicant and asked him to come in and talk things over. That meeting occurred on 22 September 1995 with Robert Wilkins present. Rod Miles said that at that time the respondent had recently completed the purchase of equipment from “Live ‘N’ Leisure” and that the applicant’s knowledge with double glazing was needed by the respondent, however agreement could not be reached on the condition by the applicant that he receive $1200 a week net. In essence the evidence of Rod Miles was that the applicant was asking that the ANIP project to become part of his division and that he wanted 6% commission but that the applicant lacked the knowledge to be involved with the project. Rod Miles said he never discussed the ANIP project with the applicant and that the respondent was not awarded a place in the scheme until after the applicant left. Certainteed windows never gained approval to become suppliers of double glazed windows for the ANIP project.
On behalf of the respondent the court heard from Ms Corelle Watkin, the secretary of the respondent. Ms Watkin told the court she heard the applicant walk out on 22 September 1995 and that she was aware a meeting had taken place, obviously about money, in that she heard Robert Wilkins call the applicant “a greedy bastard”.
On behalf of the respondent the Court heard from Bill Miles, the chairman of the respondent company with extensive business and father of Rod Miles. Bill Miles had his first meeting with the applicant in early June 1995, and that as a result of figures provided by the applicant Bill Miles prepared exhibit 3. Bill Miles said that the applicant told him he could achieve a mark up of 70% but that in the respondent’s business the mark up was 18 - 20%. Bill Miles said he was the author of exhibit 5, and that the applicant signed it. Further, that a 3 month trial was negotiated. At Kurrajong Bill Miles said that self-funding was discussed, in that when the loss was zero the project would be supporting itself .
Bill Miles told the court he had independent knowledge of the Rehau project in that in early September he had talked with Michael Brooks of “Live ‘N’ Leisure” and that he did not learn of the availability of the Rehau equipment through the applicant.
CONCLUSION
In his Amended Statement of Claim the applicant alleged the contract of employment was partly express and partly implied, that it was for a fixed period of three years commencing 9 August 1995 and that an express term of the written contract was that the applicant would be paid $1,200 per week for the first four weeks of the agreement and thereafter until the respondent’s Home Improvements Division became self funding.
The applicant also alleged that it was an express term of the written contract that he would be paid 6% commission on all sales during the first four weeks of the agreement and until the Home Improvements Division became self funding. The applicant claimed an implied term of the agreement that his employment would not be terminated within the three year period unless he was appointed to the Board of the respondent and that if the employment was terminated wrongfully the applicant would be entitled to the remuneration he otherwise would have received.
The applicant claimed loss of salary of $60,000 per year for three years (less the amount paid), loss of commission on total home improvement sales and car expenses of $1,600 per week for six weeks together with the shortfall of repossession of his two motor vehicles. Additionally, the applicant claimed damages as by making certain representations the respondent engaged in conduct which was misleading and deceptive and a contravention of Section 52 of the Trade Practices Act 1974. The applicant claimed inter alia loss of commission on Commonwealth Air Noise Insulation Project (“ANIP”) contracts for the period 26 April 1996 to 12 November 1996 and loss of commission entitlements on sales that would have been generated had the plaintiff remained in employment with Certainteed Pty Limited. In all the applicant claimed $248,052.00, damages pursuant to Section 82 of the Trade Practices Act and interest under section 94 of the Supreme Court Act.
Mr Brogan on behalf of the applicant submitted in addition to determining the nature of the contract the second question to be decided was whether the applicant was dismissed or whether he voluntarily left his employment. In relation to the first issue it was submitted that it was agreed that the applicant would be employed for three years as general manager at the remuneration “which is specified in the contract document.”
Jurisdiction - probationary employment
A preliminary question to be determined is whether the applicant at the time of ceasing employment with the respondent was a probationary employee. The applicant argued there was no agreed probationary period of six weeks as that period did not stand up with the written material as a whole nor the associated conversations. In that regard the evidence of Rod Miles was relied upon. The applicant submitted that clause 3 of the contract as stated in exhibit 5 was simply a reflection of an understanding about how the remuneration was to be dealt with in the early stages and an expression of hope in that the project would become self-funding within the period specified. Mr Burley on behalf of the respondent submitted that paragraph 6 of the contract contained a probationary or qualifying period within the meaning ascribed to those terms in regulation 30B of the Industrial Relations Act, such period not having expired at the time of the alleged termination.
In relation to the determination of a probationary period of employment, Nicolson v Heaven & Earth Gallery Pty Ltd,1 IRCR 199; is authority for the proposition that the term of a probationary period are to be both unambiguous and reasonable. The arrangements between the parties were not clear and unambiguous, and it is arguable that the probationary period could last until the project became self-funding. That period of time was not capable of definition from the evidence. No evidence was presented concerning the applicant’s clear understanding as to the precise meaning of self-funding: a discrepancy occurred as to his meaning of “within 12 months” and “at the expiration of 12 months”. Also, the actual contract referred to a specific but different length of time. In contrast, the evidence of Bill Miles was that self-funding of the Home Improvement Division meant zero contribution by the respondent, and yet there is reference in exhibit 1 to how much capital the respondent was prepared to inject into the project, a theme repeated by the applicant in subsequent correspondence (exhibit 8). Accordingly it has to be a conclusion that the applicant could not be a probationary employee at the time of ceasing to be employed.
The applicant submitted that the reason for the insertion of clause 3 by the respondents was an attempt to have the applicant leave Certainteed, to come over to them, and as soon as the ANIP project was in place to then dismiss him. It is a conclusion that that argument does not stand up as the evidence demonstrated that the respondent had just purchased specialist window-making equipment from Rehau and relied upon the knowledge the applicant said he had in that regard. It is further noted the applicant told the court he was aware of the lack of knowledge of the respondent in the selling of such items.
Whether employee or independent contractor
The respondent argued the applicant was not an employee and that relevant test is set out in Vabu v Federal Commissioner of Taxation, 1996 96 ATC 4898; and also in Stevens v Brodribb Sawmilling (1986) 160 CLR 16 at 24. The court was urged to have regard to the totality of the relationship between the applicant and the respondent and that the factors indicated, as the parties intended, that the relationship was one of independent contractor and contractors. The evidence was that during the course of the employment the applicant paid his own tax, that he arranged his own appointments, provided his own motor vehicle and generally was not subject to the direction of the employer. It is likely from the indicia that Mr Preston could be classed as an independent contractor, however it is arguable first that for operational purposes and that secondly that the intention of the parties was that he be an employee in the interim stages.
The termination
Most importantly for determination is whether the applicant resigned or whether he was dismissed. The applicant argued that he was dismissed by Rod Miles over the telephone. The respondent argued that the applicant terminated the contract by walking out of the meeting when he could not get the respondent to agree to increase his remuneration. The evidence of the parties and the credibility of the parties has to be considered in order to determine what precisely happened.
In that regard exhibit 9 is of significance. Bearing in mind the importance of the document and that the issue involved was money, it is unlikely that the applicant did make a mistake as he sought to suggest in his evidence and his bona fides in that regard are doubted. The applicant said he did not recall any discussion concerning wages that allegedly took place between himself and Rod Miles on 21 September 1995. From exhibit 9 it cannot be concluded that the parties agreed that the requests put by the applicant were agreed upon by the parties and that view is reinforced by the last line of the applicant’s memo - that is “If you feel otherwise would you kindly let me know as soon as possible.” It was put to the applicant in cross examination that the last paragraph of exhibit 9 was in fact a threat that he would leave unless his terms and conditions were met. The applicant denied the suggestion but it is the view of the Tribunal that those words certainly are open to that interpretation, and no other explanation was offered by the applicant. It was also put that at the time the applicant wrote the letter he was aware the respondent had negotiated to buy expensive equipment for the home renovations business, and that if he in fact left the employ of the respondent, he would in effect have left them in the lurch. The applicant did not agree with the suggestion.
Exhibit 9 was preceded by exhibit 8, and was dated 21 August 1995. In paragraph 8 of that exhibit the applicant clearly stated he would seek employment elsewhere if his requirements were not met. At the meeting at the end of September 1995 the evidence of Rod Miles and Robert Wilkins was that the requirements of the applicant were not met and the evidence of Rod Miles and Corelle Watkin the applicant left the office. From August onwards, the respondent has demonstrated the applicant evinced the intention to leave if his demands were not met. It also is noted that the respondent had recently purchased equipment for the manufacture of special windows, and at the time he left work the applicant both knew that fact, and also knew the respondent had no experience in selling PVC windows. It can be concluded the respondent would not have been keen to dismiss the applicant at that particular time.
The previous issue of exhibit A - the letter dated 10 August 1995 signed by the applicant to his previous employer Certainteed tendered in light of the applicant’s denial concerning the circumstances of his leaving that company - has been dealt with elsewhere in these reasons and a conclusion reached. That conclusion has been taken into consideration when reaching the final decision, as has the evidence concerning the applicant’s evidence that he negotiated on behalf of Fernbran for the ANIP project, which is similarly discarded.
In Mohazab v Dick Smith Electronics Pty Ltd, (1995) 62 IR 200; the court dealt with the issues of constructive dismissal. In considering the issue as to whether the applicant resigned or was terminated having regard to the phrase “termination at the initiative of the employer” as being the expression “central to the operation of Division 3 of Part VIA of the Act”, the court stated:
“...industrial tribunals and courts have long accepted that an employee who resigns from his or her employment can and should be treated as having been dismissed by the employer if the dismissal is one where the employee did not resign willingly and, in effect, was forced to do so by the conduct of the employer.”
There was no evidence to suggest the applicant was forced to resign by the conduct of the employer, nor that he acted in any way other than willingly. From the evidence available to the court reliance is placed upon the witnesses of the respondent. Accordingly it is a finding of the court that the applicant resigned, in that he simply withdrew from the employment after his request for a raise in remuneration was denied and that there has been no termination at the initiative of the respondent.
Claim for breach of contract
The applicant claimed damages for breach of contract on the basis that he had a contract to run for three years on and from 15 August 1995. In paragraphs 13 and 17 of the Statement of Claim the applicant pleadings implied terms that the employment of the plaintiff would not be terminated within the three year period unless the plaintiff (sic) was appointed to the board of the defendant company and that it was agreed that the plaintiff would be entitled to the commission on total home improvement sales independently of his, the plaintiff’s (sic), continued employment with the defendant (sic). No evidence was provided in support of the claim. In light of clause 3 of the contract of employment, the lack of clarity as to the meaning of the term “self funding” prevents the duration of the contract being capable of determination. it is correct for the respondent to submit that there was no evidence to support the contention that the respondent agreed at any time to the applicant being able to tender for the ANIP project. The applicant’s proposal, exhibit 2, does not mention the ANIP project and the parole evidence of the applicant was not supported by the respondent. The contract signed by the parties does not mention the ANIP project, nor does exhibit 8 nor 9 which were documents created by the applicant at the time the respondent was actively pursuing the ANIP project and it is logical to expect the applicant would have dealt with that issue in either of those documents. It is noted the respondent did not obtain approval to be part of the ANIP scheme until after the applicant left the employ of the respondent. The respondent correctly submitted that there is no legal or evidentiary basis for the implications sought; BP Refinery (Westernport) Pty Limited v Shire of Hastings, (1977) 16 ALR 363.
Claim under the Trade Practices Act, 1974
The evidence was that the applicant he left Certainteed on 4 August 1995 as a result of an argument with his employer, before a contract had been agreed with the respondent, and the argument was the immediate cause of the applicant’s departure from Certainteed. The respondent correctly has submitted that the applicant is unable to point to any representations made by it to the applicant as particularised in paragraph 22 of the Statement of Claim. No oral evidence was placed before the court of such representations. There simply was no evidence of a statement or warranty made by the respondent, even if it had been shown to be misleading to some degree, that it was relied upon by the applicant when he made his decision to either sever his Certainteed contract of employment or enter into employment with the respondent. The issue of the credibility of the applicant is relevant in relation to the circumstances of his departure from Certainteed, as is the evidence relating to the affidavit sworn by the applicant, exhibit F.
Associated jurisdiction
In Fitzgerald & Ors v Western Australian Speciality Alloys, (unreported), Madgwick J, 31 October 1996. There was alleged to have been a representation by the respondent capable of being conduct likely to mislead and further it was argued that the matters arising under the Fair Trading Act arose out of the same substratum of fact as the justiciable federal matter relied on. Madgwick J held the matters to be quite separate controversies, and despite some small area of overlap, did not arise out of the same substratum of fact. That is the case with Mr Preston. Specifically in relation to the applicant’s claim under the Trade Practices Act 1974 it was stated in Jupp v Computer Power (1994) 56 IR 81 that in circumstances similar to Mr Preston by reason of s. 86 of the Trade Practices Act 1974, the Court did not have jurisdiction to deal with matters arising under the Act.
In Fitzroy Motors Pty Ltd v Hyundai Automotive Distributions Australia Pty Ltd (1995) 133 ALR 445) it was held for the associated jurisdiction to arise, the primary claim must be genuine in that it must not be a sham claim for the purpose of fabricating a jurisdiction that would not otherwise exist. The court there went on and held that accordingly, where the primary claim is unarguable, but the applicant persuades the court that it was not fabricated, the court will not lack jurisdiction to determine the associated claim. In the case of Mr Preston it was not argued that the primary claim was a sham, nor could it be found to be so.
For the reasons outlined above, the application of Mr Preston is dismissed.
I certify that this and the preceding Fourteen
(14) pages are a true copy of the reasons
for Judgment herein of Judicial Registrar Tomlinson
Associate:
Dated: 14 November 1997
Counsel for the Applicant: Mr D Brogan
Solicitors for the Applicant: Ledlin Partners
Counsel for the Respondent: Mr S Burley
Solicitors for the Respondent: Gates Moffitt
Dates of Hearing: 5,6, 26 & 27 August & 15 October 1997
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