Slattery v Capay Holdings Pty Ltd t/a Cuddles Long Day Care Centre

[1996] IRCA 512

DECISION NO:512/96\

CATCHWORDS

UNLAWFUL TERMINATION of EMPLOYMENT alleged - CONTRACT for FUTURE EMPLOYMENT - whether INDUSTRIAL RELATIONS ACT 1988 (CTH) applies

COMPENSATION FOR UNLAWFUL TERMINATION of EMPLOYMENT - TAXATION ASPECTS - FORM OF ORDER

Industrial Relations Act 1988 (Cth): ss 170ca, 170cb , 170cc, 170de ,170de(1), 170ee, 170ee(2), 170ee(3), Reg 30bc,

APESMA v Skilled Engineering Pty Ltd (1994) 54 IR 236)
Attorney General (NSW) v Perpetual Trustee Co. Ltd (1952) 85 CLR 237
Byrne v Australian Airlines (1995) 131 ALR 422

Golja v Lord (Industrial Relations Court of Australia, Madgwick J, 20 June 1996, unreported)

Mohazab v Dick Smith Electronics Pty LtdNo. 2  (1995) 62 IR 200

Siagian v Sanel Pty Ltd (1994) 54 IR 185

MAREE SLATTERY v CAPAY HOLDINGS PTY LTD TRADING AS CUDDLES LONG DAY CARE CENTRE

NI 1685R of 1995

CORAM:  MADGWICK J
PLACE:     SYDNEY
DATE:      18 OCTOBER 1996

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES
DISTRICT REGISTRY

No. 1685R of 1995

BETWEEN  MAREE SLATTERY
  Applicant

AND  CAPAY HOLDINGS PTY LTD TRADING AS
  CUDDLES LONG DAY CARE CENTRE
  Respondent

CORAM:  MADGWICK J
PLACE:     SYDNEY
DATE:      18 OCTOBER 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. Subject to the following, the orders made by the Judicial Registrar are confirmed. 

2. The respondent is to pay interest on the amount of $13,000 in accordance with the rate prescribed by Order 35 Rule 8 of the Industrial Relations Court Rules.

3. Upon (a) payment within 21 days to the Commission of Taxation of any amounts bona fide believed by Capay to be so payable on account of tax, in respect of the said award of compensation and interest, and the filing and service of evidence thereof, and (b) payment within that period of the balance of the said award into Court (for payment out to Ms Slattery), the Respondent is to have credit against the amounts awarded for such taxation deduction.

4. The application for review is otherwise dismissed.

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES
DISTRICT REGISTRY
  No. 1685R of 1995

BETWEEN  MAREE SLATTERY
  Applicant

AND  CAPAY HOLDINGS PTY LTD TRADING AS
  CUDDLES LONG DAY CARE CENTRE
  Respondent

CORAM:  MADGWICK J
PLACE:     SYDNEY
DATE:      18 OCTOBER 1996

REASONS FOR JUDGMENT

MADGWICK J:

Nature of the case

This is an application to review a decision of a Judicial Registrar which held that the applicant company (Capay) had employed Ms Slattery as an early childhood teacher, and had terminated her employment contrary to s 170de(1) of the Industrial Relations Act 1988 (Cth), and that she was entitled to $13,000 compensation. Capay had protested that it had never employed Ms Slattery; that, if it had, her employment was only of a short-term casual kind beyond the reach of the Act (see s 170cc and Reg 30bc); that it had not terminated any employment, and that in any case she should receive no or little compensation. It was rightly conceded that, if there was a termination of employment, there was no valid reason for it within the meaning of s 170de(1). The key question is whether there was a concluded contract of service between the parties. Regrettably, the arrangements for transcription of the Registrar’s oral reasons for decision failed, and I do not know what those reasons were.

A potential job-change

Capay operated through its directors and agents Ms Booth  (also variously referred to at trial as Ms Goddard and Ms Goddard-Booth) and her daughter Ms Gleeson.  Peering through the thin corporate veil, Ms Booth had in mind to start a child-care business suitable for Ms Gleeson who was pregnant and on maternity leave from the NSW Police Force.  The business was to be known as “Cuddles Child Care Centre” (“the Centre”).  The entrepreneurs had no experience of the field they intended entering and, for various reasons, including to aid compliance with regulatory NSW legislation, they wished to hire a suitably trained teacher, to commence when the doors opened for business.  It had been recommended to them by the relevant government department (“DOCS”) that they engage an “authorised supervisor” (a departmentally approved person in charge of the day-to-day running of the centre) six weeks before opening (T/S 14/8/95 p7).

Ms Slattery was well qualified in the field, having experience as a teacher/director at two child-care facilities and having lectured for several years at an institute of technology (“the TAFE college”) in relevant fields.  In early January 1995, while out walking, Ms Slattery saw a sign inviting inquiries at the site where the centre was being built.  She telephoned Ms Gleeson and had a long discussion about possible employment. 

The crucial conversations

In due course, on 20 January, she attended for an interview with Ms Booth and Ms Gleeson at the latter’s house.  The parties evidently suited each other.  According to Ms Gleeson, Ms Slattery was asked, among other things, “If you were successful in this application, how much notice would you require us to give you to give TAFE?”, to which Ms Slattery replied “About two weeks”, but indicated that she would prefer four (T/S 15/8/95 p162).  Ms Slattery was told, as to salary, that “all employees would be paid the State award” (T/S 29/9/95 p15); at the end of the conversation, Ms Gleeson told Ms Slattery, “ Thank you very much for coming, Maree.  We will talk about it and let you know what our decision is”.  The next day, Ms Gleeson conveyed their decision to Ms Slattery: “Mum and I have discussed things and ... we would like you to take the position as teacher in the child-care centre.”  Ms Booth volunteered in evidence that “we did offer her a job and say she was successful” (T/S 29/9/95 p38).  Ms Gleeson indicated that Ms Slattery “would commence when the centre opened” (ibid p16).  Ms Slattery indicated that she accepted that offer (ibid p14).  Ms Gleeson then expected that the centre would open about mid-March.  It would defy the probabilities if Ms Slattery had not been made aware of such an estimate of the likely time-frame.

Thus, if one accepts Ms Gleeson’s account, it is highly likely that both parties contemplated that Ms Slattery would, if she accepted the offer, commence work not before two weeks after 21 January and not later than within a reasonable period after mid-March.  It was common ground that the State award referred to was the Teachers (Non Government Early Childhood Service Centre other than pre-schools) State Award ("the Award") and that it was applicable to the employment.  It was obvious to all concerned that the post would be a full-time one.

In the result, as at 21 January, all that needed to be agreed was, on Ms Gleeson’s own account, agreed.

Smooth sailing

Thereafter, and in further demonstration of the point just made, for several weeks everyone behaved as if all had agreed that Ms Slattery would be working at the centre when it opened.  Ms Gleeson and Ms Slattery together interviewed several applicants for other less skilled positions on the Centre’s intended staff;  Ms Slattery advised the Capay directors to obtain the relevant awards for the other intended staff and gave them a copy of the award applicable to her own employment; she advised them that all staff, herself included, would need to be given a formal letter of appointment; on 31 January she gave notice to TAFE of her withdrawal from her previously arranged, part-time teaching commitment for the forthcoming session (on the same day Ms Booth advised DOCS: “we are looking at opening our centre on March the 6th”); she contented herself thereafter with picking up irregular, casual TAFE work and receipt of various government benefits for the jobless;  Ms Booth proposed Ms Slattery to DOCS for approval as the “authorised supervisor for a child care service”, and described her as one of  “[m]y supervisory staff”;  Mss(?) Booth and Gleeson suffered Ms Slattery to deal with DOCS on Capay’s behalf, and dealings with DOCS were, of course, of great importance to the Capay directors; Ms Gleeson and Ms Slattery together saw to the selection of various supplies for the centre; Ms Slattery arranged the attendance of some suppliers; Ms Slattery drafted an advertising pamphlet and an information booklet for intended parent-customers of the centre; Ms Slattery herself purchased certain goods for the Centre using cheques, one of them blank, given to her  by Ms Booth; Ms Slattery spent two days (8 and 10 March) interviewing potential customers of the business, the parents of small children (this was the only time of Ms Slattery’s for which she was paid anything, and the timing of this is significant, as will appear); despite delay in the opening of the centre, Ms Slattery renewed her first-aid qualification to enable Capay to comply with DOCS requirements. 

Ms Slattery was neither family nor friend to the Capay directors.  It is very unlikely that anyone in Ms Slattery’s position would do all that unpaid work and otherwise behave as she did unless she believed that she had the job with Capay.  Moreover, there is nothing to suggest that she was sufficiently incautious about her own interests as to form such a belief capriciously.  Ms Gleeson and Ms Booth would have the Court accept that they are honourable people.  No honourable business operators would suffer someone in Ms Slattery’s position to do so much unpaid work as she did and otherwise to behave as she did, unless they had promised her paid and ongoing work to commence in the reasonably near future.

A catspaw on the water

The first indication of possible trouble came on 4 March.  In the context of a discussion of industrial relations matters to do with other proposed staff, Ms Booth told Ms Slattery that she had spoken to her solicitor; she then suggested that a month or a three-month probation period might apply to Ms Slattery’s employment.  Ms Slattery said that she would consult her union, and did so.  On 6 March she told Ms Booth over the telephone that the Award did not provide for probationary periods and the union opposed them.  She also apologised for not calling in personally, and said that, as she had been without an income following her “resignation” from TAFE, she needed to take two hours' emergency relief work there that she had been offered.  Ms Booth said “Take the work, I don’t know when we will open”. 

Ms Booth saw Mr White, an industrial relations adviser, on 7 March, having spoken to him on the 4th or 5th.  On 8 March, Ms Booth indicated that she had a written contract for Ms Slattery to read and that she wished her to attend a meeting with herself and Mr White. 

On that same day, as indicated above, Ms Slattery had carried out “parent interviews”, and she did so again on 10 March; on that latter day, after they finished,  Ms Booth asked Ms Slattery how much she was owed.  Ms Slattery suggested that, as she did not know the rate, the two days’ pay be added to her “regular wages”.  Ms Booth insisted on paying her that day “because she wanted all the staff to start off together”.  Ms Slattery then proposed and was paid $200.

Shipwreck

By the start of March, and until about the 9th, the hope and intention of Capay's directors was to open the Centre on Monday 13 March.  Bad weather delayed the building work, however, and the opening was postponed.  On 14 March Ms Booth informed Ms Slattery by telephone that she had a draft contract.  Arrangements were subsequently made for a meeting on 20 March between  Ms Booth and Mr White, on the one side, and Ms Slattery and an organiser of her union, Ms Willems, on the other.  Immediately before the meeting, Ms Slattery and the Capay directors again met the DOCS representative at the Centre about the licensing requirements. 

In the course of the meeting a proposed contract was presented to Ms Slattery, and it was explained to her that it provided for a three months probationary period and for a fixed term of employment of twelve months.  Mr White’s evidence was that it became apparent to him that both Ms Slattery and Ms Willems “were under the impression that Ms Slattery was employed by [Capay]”.  But his instructions from Ms Booth and Ms Gleeson were to the “absolute contrary” of Ms Gleeson’s having made Ms Slattery an offer of employment on 21 January.  He therefore said that no formal offer of employment had previously been made.  Ms Booth did not correct this, despite her evidence (TS 29/9 p56):  “I’ve never denied an offer of employment”.  As well she might, Ms Slattery reacted with surprise, hurt and some recrimination.   

All of this conduct by Capay’s agents, including Ms Booth’s tacit adoption of the position being asserted by Mr White, amounted to the demonstration, on behalf of Capay, to Ms Slattery of an intention that Capay not be bound by what had previously been offered and agreed.  She was accordingly entitled to treat the contract to employ her as having been repudiated by Capay.  It was Capay’s initiative that thus put an end to the parties’ contractual relations.  So, unless Capay was not, within the meaning of Division 3 of Part VIA of the Act, Ms Slattery’s employer, there was a termination of the employment at the initiative of the employer.

Did the Act apply?

The question is whether, in the case of a contract of employment which contemplates full-time work, s 170de(1) applies before such work actually commences. That subsection is in the following terms:

170de.(1) An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service.

It is clearly contemplated that there will be an employer,  an employee and an “employment”.  But that only restates the problem: “employment” in the present context is simply a short way of saying “state of being employed” (see the Macquarie Dictionary, 2nd ed.)

The Division gives effect to the Termination of Employment Convention (“the Convention”) of the ILO: s 170ca and expressions in the Division have the same meaning as in the Convention (s 170cb).  The Convention is intended to have a broad operation generally:

Article 2

1. This Convention applies to all branches of economic activity and to all employed persons.

It is clear that, among other things, the Convention aims to protect employees against termination of employment which is arbitrary (Art 4 - mirrored in s 170de), on account of participation in a union (Art 5(a)), discriminatory on racist, sexist, religious or political grounds (Art 5(d)), or on account of temporary health-related absence from work (Art 6).  In relation to such protections, the needs, interests and capacities for exploitation of people who have agreed to do work as an employee and have begun to do it are scarcely different from those of people who have so agreed but have not so begun.  Neither is there any evident policy consideration why the values and principles which inform the notions of such protection would not be equally applicable to those two categories of people.  The Convention is clearly intended to be remedial in the interests of employees.  In any case it is, as a treaty, to be interpreted in no narrow fashion (see Mohazab v Dick Smith Electronics Pty LtdNo. 2 (1995) 62 IR 200):

“The approach to be adopted in construing a convention was discussed by von Doussa J in Andersen v Umbakumba Community Council (1994) 56 IR 102 at 104-105; 1 IRCR 457 at 461 in the following passage:

"The rules which govern a national court when construing an International Convention which has been enacted into Australian domestic law are more liberal those than traditional cannons of construction of the English common law.  In Commonwealth v Tasmania (the Franklin Dam case) ( 1983) 158 CLR 1; 46 ALR 625, Gibbs CJ at CLR 93 and Brennan J at CLR 222-223 considered that the relevant rules of interpretation are to be found in Art 31, paras 1 and 2 and Art 32 of the Vienna Convention on the Law of Treaties, and Murphy J at CLR 177 assumed that the interpretation principles in these Articles applied.  See also Thiel v

FCT (1990) 171 CLR 338 at 349, 356; 94 ALR 647 and Victrawl Pty Ltd v Aotc Ltd (1993) 117 ALR 347 at 350. The Vienna Convention was in force before the Termination of Employment Convention was adopted by the General Conference of the International Labour Organisation on 22 June 1982."

The general rules of interpretation by the Vienna Convention are:

"Article 31

1.      A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2.      The context for the purpose of the interpretation of the treaty shall comprise, in addition to the text, including its preamble and annexes:

(a)any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;

(b)any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

Article 32 provides:

“Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a)     leaves the meaning ambiguous or obscure; or

(b)leads to a result which is manifestly absurd or unreasonable."

Apart from the rule of interpretation laid down in the Vienna Convention, Mason and Wilson JJ in Shipping Corp of India Ltd v Gamlen Chemical Co. (A'Asia) Pty Ltd (1980) 147 CLR 142 at 159 (with whose judgment Gibbs and Aicken JJ agreed) said:

"It has been recognised that a national court, in the interests of uniformity, should construe rules formulated by an international convention, especially rules formulated for the purpose of governing international transactions such as the carriage of goods by sea, 'in a normal manner, appropriate for the interpretation of an

international convention, unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation', to repeat the words of Lord Wilberforce in James Buchanan & Co Ltd v. Babco Forwarding & Shipping (UK) Ltd [1978] AC 141 at 152; see also Stag Line Ltd v. Foscolo, Mango & Co Ltd [1932] AC 328 at 350. "”

In my opinion, a construction of the Convention, and hence of the Act, which includes within its protection the employee who has not yet begun work, as well as the one who has, is both available and preferable.

It was argued that the Act did not apply because there was no employment relationship pending Ms Slattery's commencing her projected full-time duties, even if there was a concluded contract that she would in due course be employed.  Inherent in this was reliance on the view that, as there can be an employment relationship without a contract, so too can there be no relationship even though there is a contract.  Assuming that the doctrinal controversy as to whether at common law there can be a “relationship” of employer and employee without an extant contract of employment has been settled in favour of the affirmative position (Byrne v Australian Airlines (1995) 131 ALR 422 and Siagian v Sanel Pty Ltd (1994) 54 IR 185; cf. APESMA v Skilled Engineering Pty Ltd (1994) 54 IR 236), in my view, that is of no assistance here. Among other things, the Convention was written not only by common lawyers. Nor is the present inquiry being undertaken for the examination of any common law doctrine of employment - the question is not whether at common law the parties would properly be called employer and employee (although I think they would), but whether they would be so called under the Convention.

It is at least arguable that such controversy has not been so settled, upon the basis that the remarks of the majority in Byrne were obiter dicta (and see the reservations of McHugh and Gummow JJ at 452-454). If that be so, and if the matter is relevant, with respect to those of a contrary opinion, I favour the view that without a subsisting contract there is no subsisting relationship of employer-employee. It seems to me that this follows from the assimilation in modern times of employment law to the sphere of contract law instead of laws of status: cf Byrne v Australian Airlines (1995) 131 ALR 422 at 439 (per McHugh and Gummow JJ):

"The evolution in the common law as to the relationship of employment has been seen as a classic illustration of the shift from status (that of master and servant) to that of contract (between employer and employee).  Dixon J referred to fluctuations in the context to which terms and conditions of employment were "left to free contract" and to the changes in the social and economic purposes to which the employment relationship has been put.  This case concerns the impact of what, to some extent, is the status conferred upon workers by awards under the 1904 Act and the 1988 Act, upon the particular contracts of employment under which individual workers may be engaged."

The reference to Dixon J was to his remarks in Attorney General (NSW) v Perpetual Trustee Co. Ltd (1952) 85 CLR 237, 248. In the same case, the Privy Council (92 CLR 113 at 122-3) said:

"There is no doubt that from early days a master could maintain an action against a wrongdoer for the loss of the services of his servant and that this right (to quote Sir William Holdsworth) "rested at bottom on the idea that the master had a quasi-proprietary interest in his servant's services:  and that idea is connected with ideas as to the status of a servant which originated in the rules of law applicable to villein status".  It is clear too from the cases cited from the Year Books and elsewhere in the learned judgment of Dixon C.J. ((1952) 85 CLR 237 at 243-253) that the action did not depend on any contract of service between master and servant but on the single fact of service. ...

But, though the contractual relation had no part in the historical origin of the action, it was inevitable that, as the relation of master and servant came to be less and less a matter of status and to depend more and more on a contract between the parties, that relation should become more prominent in the cases in which this form of action was used."

Modern employment law, at least for present purposes, entirely depends upon the law of contracts.

Nobody would think to speak of a relationship of, say, vendor and purchaser subsisting once their contract was at an end or before it was formed.  It is the contract which creates and determines the relationship.  Why are the parties to an employment contract now to be differently regarded?  Unlike, say, solicitor and client, where a relationship having legal significance may be supported by an agreement to provide services without fee, an agreement to perform work under the control of another for no reward does not at common law create the relationship of employer and employee for any legal purpose for which such a relationship has significance.

Submissions were made that, if employed, Ms Slattery's employment was merely casual.  Such a conclusion cannot sit with the facts as I have found them.

In my opinion, s 170de applied to the contract formed here.  As indicated above,  there is no question of there having been a valid reason for termination of the employment.

Compensation

The Judicial Registrar awarded Ms Slattery $13,000. 

As to its justification, I agree with the submissions of Ms Slattery's counsel. 

The annual salary applicable to Ms Slattery under the award was of the order of $39,000 per annum.  After taking account also of annual leave loading and the employer's obligation to contribute to superannuation, s 170ee(3) would put a "cap" on compensation of a little more than $20,000.

In the first six months of 1995, Ms Slattery apparently earned from other employment only $6,000.  It seems likely that the Judicial Registrar understood Ms Slattery to have lost about $13,000 in the first six months of 1995 and to have awarded her the amount of that loss.  In the second half of 1995, Ms Slattery was able to recommence her TAFE employment on a full-time basis.  The award was quite unexceptionable and, in my view, appropriate. 

It was argued by counsel for Capay that it would not be "appropriate" within the meaning of s 170ee(2) to award any compensation because, among other things, Ms Slattery received unemployment benefits after her employment by Capay was terminated.  The idea is a spectacular one.  It is enough to say that the protections of the Industrial Relations Act were scarcely intended to be conditional upon the never-essayed repeal of the Social Security Act.  

Taxation

I draw attention to the form of the order I propose.  Difficulties have attended the handling of provisions for compliance with the income tax legislation in cases in the Court where compensation has been ordered for unlawful dismissal (see Golja v Lord (Industrial Relations Court of Australia, Madgwick J, 20 June 1996, unreported)).  An order in this form should avoid such difficulties and otherwise do justice between the parties.

Conclusion

The application for review is dismissed.  I confirm the orders made by the Judicial Registrar.  Capay should pay interest on the amount of $13,000 in accordance with the rate prescribed by Order 35 Rule 8 of the Industrial Relations Court Rules.

Upon (a) payment within 21 days to the Commission of Taxation of any amounts bona fide believed by Capay to be so payable on account of tax in respect of the said award of compensation and interest, and the filing and service of evidence thereof and (b) payment within that period of the balance of the said award into Court (for payment out to Ms Slattery), Capay shall have credit against the amounts awarded for such taxation deduction.

I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of His Honour Justice Madgwick.

Associate:   

Dated:        18 October 1996

APPEARANCES

Counsel for the Applicant:                 R Reitano

Representative for the Applicant:       Independent Education Union

Counsel for the Respondent:             A Moses

Solicitor for the Respondent:             Dunhill Madden Butler

Date of hearing:  10 April 1996