Stephen Koenig v City of Darebin

[1994] IRCA 191

CATCHWORDS

INDUSTRIAL LAW - Termination of employment - employee performing private work in working hours - other matters relating to performance - whether procedural fairness - whether harsh, unjust or unreasonable - reinstatement.

Industrial Relations Act 1988, ss.170DC, 170DE and 170EE

Nicolson -v- Heaven & Earth Gallery Pty Limited (unreported, Wilcox CJ, 20 September 1994).

Byrne -v- Australian Airlines Limited (1994) 120 ALR 274

Wheeler -v- Philip Morris Limited (1989) 97 ALR 282

STEPHEN KOENIG -v- CITY OF DAREBIN

NO. VI 1439 of 1994

Before:     MURPHY JR

Place:      MELBOURNE

Date:       16 December 1994

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 1439 of 1994

BETWEEN:

STEPHEN KOENIG
Applicant

AND

CITY OF DAREBIN
Respondent

MINUTES OF ORDER

16 December 1994  Judicial Registrar Murphy

THE COURT ORDERS THAT:

1. The termination of the applicant's employment by the respondent contravenes the provisions of sections 170DC and 170DE of the Industrial Relations Act 1988;

2. The respondent reinstate the applicant by appointing him to another position on terms and conditions no less favourable than those on which the applicant was employed immediately before the termination, and that reinstatement operate from the date of this decision;

3. The respondent pay to the applicant the sum calculated at the rate of $1016 per week for the period from 22 August 1994 to today's date, being the amount of remuneration lost by the applicant as a result of the termination of his employment, such sum to be paid within 14 days;

4. The period between 22 August 1994 and the date of this decision be treated as continuous employment of the applicant by the respondent for all purposes.

NOTE:  Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 1439 of 1994

BETWEEN:

STEPHEN KOENIG
Applicant

AND

CITY OF DAREBIN
Respondent

COURT:Judicial Registrar Murphy

PLACE:Melbourne

DATE:16 December 1994

REASONS FOR JUDGMENT (EX TEMPORE)
(Revised from Draft Transcript)

This is an application under Division 3 of Part VI of the Industrial Relations Act, whereby the applicant seeks reinstatement to his position as a senior town planner with the respondent. The applicant is a highly qualified and experienced town planner who has some 11 years experience in local government statutory planning, and since 1989 he has been employed by the City of Preston, which has now become the City of Darebin. He was terminated from that position on 22 August 1994 and issued these proceedings.

The Evidence

The court has heard evidence from the applicant and also from Mr Mancuso, the principal of the Manhattan Design Studio, who described himself as a planning consultant.  It has also heard evidence from Mr Lancashire, who was the applicant's manager at the City of Darebin, as well as from Mr Neil Hunt, the acting human resources manager at the City of Darebin, who was formerly the personnel manager at the City of Preston.

The applicant's evidence was that he discharged his duties well for the period up until late May of this year and was not subject to any formal criticism by his superiors, although there was informal criticism at times of the way he treated some members of his staff.  In the course of his duties he became involved in a federal government project known as the Local Approval Review Program (“LARP”), which involved liaising with interested groups, including the council and users of council approval mechanisms to simplify those mechanisms.

Personnel from the private sector were invited to participate in that review program, which was managed by the applicant.  In the course of the program, which commenced sometime around October last year, he met or became closely involved with Mr Mancuso, who had been invited to participate.  Prior to that Mr Mancuso had been a fairly regular applicant for building and other permits from the City of Preston, but in the course of LARP they saw a lot more of each other.

Around that time Mr Mancuso from time to time would approach the applicant seeking his assistance in some of the matters that Mr Mancuso was dealing with in his business.  Consequent upon that, the applicant actually participated in an AAT appeal for a client of Mr Mancuso involving a property at Ivanhoe  He was also involved in drafting the terms of appeal for a building control referee appeal for a property in Eltham.  The applicant also received, in the course of his time at Preston, requests from various other people for the use of his expertise as a town planner, and as a result of that he participated in an AAT appeal which took place on 2 May of this year.

Mr Mancuso gave evidence that at all times when he was involved with the LARP study he would deal with council officers in planning matters rather than with the applicant, who was the superior of the officers issuing relevant permits.

The applicant's position within the City of Preston, now the City of Darebin, was a senior position and at the time of his termination he held a very high level delegation from the council to issue permits that were within council guidelines and that did not require advertising or formal council approval.  The arrangement was that those permits would be issued and then they were reported to a subsequent meeting of council.  It is clear on the evidence that the applicant did have a significant and senior position and it was the level of that position which was at the centre of concern of the respondent when the respondent became aware that the applicant had been involved in private work activities.

Respondent’s Concern With Applicant’s Performance

The first formal issue of the applicant's performance arose around late May when the applicant was answering a telephone call in the office and attempting to transfer it to another division, at which time he received a recorded message.  He then expressed some frustration to the caller that he was unable to transfer the call, and on one reading of the transcript there is an implied criticism of another division of the respondent in that call.  That call was recorded and the tape was transcribed and the matter was the subject of two interviews with the general manager. The applicant gave evidence that in the course of those interviews he denied any intention to disparage another division of the respondent, but his explanation was not accepted by the respondent and he was required to apologise to the relevant officers, and a formal warning was placed on his file on 31 May 1994.

Subsequent to that the respondent became aware that the applicant was involved in activities outside of his duties to the council and these were raised in an interview with him on 8 June 1994.  The applicant responded to what was put to him, in particular about his involvement with the Shire of Eltham matter, and he was asked for details of other matters that he was involved in a private capacity.  He gave evidence that he was guarded in that meeting because he was not sure what use the respondent intended to make of that information, and he did give details of one or two other instances where he had been involved in work of a minor nature which was performed at lunch time or outside normal hours.

In the course of that interview the applicant stated that in the future, if he had to carry out any of this work during normal hours, then he:

“Would in the future seek approval from the manager, development services before any such assistance would be provided.”

The respondent took a very serious view of the matter and it was described as a total indiscretion in the note of that interview.  The results of the interview were placed on his file and the matter was to be investigated further.

Subsequent to that a further interview was held with the applicant to discuss the previous matter of private work.  That interview occurred on 16 June.  At that time Mr Lancashire, who had been the applicant's manager since he commenced in late August 1993, raised a number of matters relating to the applicant's performance over the period November 1993 to May 1994.  Some of these various incidents had been raised with the applicant at the time and he had given an explanation, but others had not been specifically raised with him.  At no time during the course of the period November to May had the applicant been told that the matters were being recorded for subsequent use.

The applicant, in the interview of 16 June, gave a response to each of those matters and again responded to the issue of private work.  He contended, and this is recorded in the interview dated 20 June 1994, that he was not running a private business and that any work that was done was of a minor nature and any time incurred during working hours had been made up by him working extended hours, including weekends.

The contentious point in the interview was whether or not he had obtained the approval of his superior before carrying out this other work during working hours.  In the course of that interview the applicant stated that there were indeed other members of council who had, in effect, been conducting private businesses but he did not give any specific details at that stage.  Mr Lancashire gave evidence that he could not recall whether he specifically put to the applicant that the respondent did not accept his assurances at that point that it would not continue in the future.

The Position In Relation To Time In Lieu

The applicant over the period, particularly April, May 1994, was working long hours due to pressure on the planning section of the council and he gave evidence that he would be attending meetings every second week and the arrangement in relation to time in lieu was that he would record on a sheet, exhibit A3, the time commencing and ceasing work, as well as any additional hours and then take that time off.  He gave evidence that he was not in the habit of indicating to Mr Lancashire when he was taking time off in lieu but he would indicate that to his own staff.

Mr Lancashire gave evidence that at no time did he specifically raise with the applicant the question of the applicant notifying him when he intended to take any time off.  Mr Hunt gave evidence that he would have expected that a manager of the seniority of the applicant would have notified his manager before taking time off in lieu, but the applicant's evidence was that it was an informal arrangement where, in effect, he was in control of the periods of time that he took off in lieu.

The Second Warning

Around early June an incident occurred where the applicant arranged for a photo opportunity involving a councillor and contacted the local media.  Subsequent to that Mr Lancashire had a conversation with him in relation to contact with the media and Mr Lancashire indicated that he in effect gave him a direction to advise him of contacts with the media.  The applicant's version was that he had had extensive contact with the media in the course of his position over some years and that he did not regard the conversation with Mr Lancashire as any form of direction that in relation to contacts with the press he should make prior arrangements with Mr Lancashire.  I accept the applicant's version in relation to that conversation.

Subsequently on 21 June an article appeared in the local newspaper and on 22 June Mr Lancashire brought this to the applicant's attention and wrote, "This is now the second time in the last month that you have failed to comply with the media contact procedure."  He indicated that he intended to place the letter on his personal file. He attached to the letter a media contact memorandum dated 21 June which stated that then if a middle manager was asked for the council's opinion on the merits of a particular program they should refer the question to the relevant senior management panel member.

So, in effect, Mr Lancashire, was claiming in the letter of 22 June that the applicant had failed to comply with the media contact policy.  The applicant denied that he was aware of the policy in the terms set out of the memo dated 21 June 1994 and also stated that at no time did he issue a press release in relation to that particular media contact.

Subsequent to these two incidents involving the media, on 23 June another incident arose between Mr Lancashire and the applicant.  The applicant, being in charge of the LARP study, had organised a wind up lunch for that study on Monday, 20 June.  The lunch was organised late on the Friday and Mr Lancashire was not notified of it until midday on the day of the lunch and had another engagement and so could not attend.

In addition, the applicant purchased four electronic organisers, costing $115 each, for presentation to the private sector members of the LARP study team.  Mr Lancashire was concerned about these two activities due to the failure to communicate the details of them to him prior to them being undertaken.  He regarded the size of the gift as too great and he should have been advised and involved in the organisation of the luncheon, particularly where it involved the mayor of the municipality.  The applicant's explanation for this was that he had been fully in charge of the LARP study group within the respondent and had not reported these matters of detail to Mr Lancashire and, further, that there was money in the budget for the purchase of a presentation item.  This evidence was not challenged. 

Subsequently on 29 June again Mr Lancashire wrote to the applicant seeking details of all private work that the applicant had been involved in.  This matter had been the outcome of the earlier meeting on 20 June wherein the applicant was required to provide full details of all private work that he had been involved in to the council with the original deadline being late in June.  In the letter of 29 June that deadline was extended to 3 July 1994.  On 4 July 1994 the applicant delivered to the respondent a full response to the matters that were raised in 8 June interview in relation to his private activities and in that response he stated:

“In the future I will not provide any assistance of this type to friends, colleagues or others during normal working hours whatsoever.”

He also indicated that in respect of the time that he had taken for these activities it was less than 10 hours in the period since 1993 and he offered to make up that time if requested to do so by management.  He also asserted that the assistance was not provided for private gain but was to enhance the image of the organisation by providing a responsive service.  In evidence he also stated that it was a learning process for him and was a spin off from the LARP study.

In that same letter he provided a full response to the matters that Mr Lancashire had been minuting over the period 22 November 1993 through to May 1994 and raised for the first time formally with him in the meeting on 16 June 1994.

The applicant had still not at that stage provided details of the private work that he had been involved in over the period to the respondent, as requested by them, and the request to do so was again reiterated in a letter dated 11 July 1994.  In that same letter a second formal disciplinary warning was issued to the applicant in relation to the matters arising out of the contact with the media, the luncheon and purchase of the electronic organisers for the LARP study group.

The Applicant Provides Further Details

At around that time the applicant was seeking to take annual leave, but this was deferred by the respondent until he provided the information that was required to them.  Further material came to the notice of the respondent, including a decision of the AAT which described the applicant as a "town planning consultant".  The applicant denied that that was the way he described himself in that decision.  Investigation by the respondent revealed that that particular appeal had been conducted on a rostered day off by the applicant. 

It had also come to the respondent's attention that the applicant had in fact filled in a time sheet that he had been working on one day when, for the afternoon of that day, he had been at an AAT hearing.  These matters were raised with the applicant in a letter of 14 July 1994, which described the matter as totally unacceptable and again a full detailed report was requested.

The applicant finally produced the detailed report to the respondent on 1 August.  It appears that the report was not a written report but was oral and was recorded by Mr Hunt, the acting manager, human resources.  That detailed some seven items of private work that the applicant had been involved in, some of which he had previously raised with the respondent.  All of the matters did not involve the City of Preston and not all of them involved Mr Mancuso's business. 

The Termination

Subsequently on 7 August the applicant went on leave and returned from leave on 22 August.  On that day he was called in to the chief executive officer's office and given one hour to choose between resignation and termination.  He declined to resign and was terminated a short time later.  In the course of the first meeting on that morning the respondent gave as one of the reasons for the termination the perceived conflict of interest between the applicant holding a senior position within the municipality and being involved in private work and, in particular, with Mr Mancuso.

The actual letter of termination records the reason for termination as:

“On the basis of work performance, neglect of duty and the undertaking of private work during working hours in which your attendance has been recorded.  The nature and details of these events have been clearly recorded and advised to you over the past month.”

Did the termination of employment contravene section 170DC of the Industrial Relations Act?

Section 170DC(1) of the Industrial Relations Act requires that

“An employer must not terminate and employee's employment for reasons related to the employee's conduct or performance unless the employee has been given the opportunity to defend himself or herself against the allegations made.”

In Nicolson -v- Heaven & Earth Gallery Pty Limited (unreported , Wilcox CJ, 20 September 1994) it was stated:

“The paragraph does not require any particular formality but this does not mean that it is unimportant or capable of perfunctory satisfaction. “

“S.170DC carries into Australian labour law a fundamental component of the concept known to lawyers as "natural justice" or, more recently, "procedural fairness".  The relevant principle is that a person should not exercise legal power over another to that person's disadvantage and for a reason personal to him or her without first affording the affected person an opportunity to present a case.”

In the decision of Byrne -v- Australian Airlines Limited (1994) 120 ALR 274 at 328 Gray J said, when discussing a provision which provided that termination shall not be harsh, unjust or unreasonable, that the requirements of procedural fairness had a number of elements:

“In the circumstances of this case, that obligation translated into a number of specific steps which the respondent was obliged to take.  First, it was obliged to conduct a reasonable investigation, to ascertain what view it should take of any circumstance which it might take into account in deciding to dismiss the appellants.  Secondly, it was required to formulate what is alleged the appellants had done or failed to do.  Thirdly, it was obliged to put the allegations of commission and omission to the appellants, and give them a fair opportunity to be heard as to those allegations.  Finally, it was obliged to give the appellants a fair opportunity to be heard on whether they should be dismissed, if they were to be regarded as guilty.”

That case involved a video-tape of some suspicious activity by some employees and they were shown the tape and invited to comment.  When their comments were unacceptable they were terminated.  The principles that Gray J has laid down are important in this case because what the applicant’s representative says is that the respondent had not given the applicant any proper opportunity to respond to the performance issues which it had raised.

I agree with the submission by the applicant’s representative that the applicant has not been given a proper opportunity to respond and not been afforded procedural fairness in the circumstances of this case. This is for a number of reasons.

The first is that once the respondent sought details of the private work, which were provided by the applicant on 1 August, it needed at that point to indicate to the applicant what view it took of the information that he had provided.  It is clear that at no stage did it do so and when he returned to work on 22 August he was terminated.  The requirements as formulated by Gray J indicate that he should have been given the opportunity at that point to make submissions to the respondent in relation to whatever conclusions it had drawn as a result of whatever investigation it took.

A second reason why the respondent has not accorded the applicant procedural fairness in this case relates to the warnings.  The first warning in relation to the taped phone conversation was in circumstances which as the applicant's representative submitted hardly justified a formal warning.  The second warning in relation to the media contact and the luncheon was in a similar category. Although the warnings formal they did not relate to incidents which could justify a warning in the context of a senior manager.

The final matter in relation to the second warning is that, as the representative of the applicant indicated, there appears to have been no full investigation of the circumstances of the media contact by the applicant and in particular in relation to the contact that gave rise to the article on 21 June of this year.

Third, in relation to the private work there does not appear to have been any proper investigation of whether or not there was any actual conflict as distinct from a perceived conflict.  Any proper investigation would have at least required the respondent to interview Mr Mancuso or checked whether there had been any irregularities in applications made by him in recent times.  This was not done.

It is also important that Mr Lancashire in evidence stated that the grounds for concern related to a perception of a conflict or a potential conflict of interest rather than an actual conflict.  When the applicant was being terminated for a potential conflict of interest, procedural fairness at the very least required more than what was done in terms of investigation, in terms of putting to him the matters of concern and the conclusions intended to be drawn before a decision to terminate was made.

A fourth matter was the question of perceived performance inadequacies raised by the respondent.  Those matters had occurred over a period from November 1993 till May 1994 and they had not been formally raised with him at the time that they occurred; they were then raised in June.  Doing that after he had given earlier responses creates a sense of unfairness in that he has addressed those matters and yet they are raised with him again.

A fifth matter of concern in relation to the process of termination here, to the extent that the reasons for the termination relate to his performance, was that at no time was the applicant really given in any detail an indication from the respondent as to what was required of him in order to rectify perceived lack of performance.  As was pointed out by the applicant, there has been no real criticism of the discharge of his duties in a professional capacity as a town planner and that the perceived inadequacies related mainly to his performance as a manager.

I reject the submission of the representative for the respondent that the allegations against the applicant were such that the employer could not reasonably have been expected to put them to him in accordance with the disciplinary code agreed between the respondent and the relevant union.  On any view, adding up the various matters relied on by the respondent, they did not constitute an evidencing of an intention to put the applicant's own interests ahead of the respondent is which is the requirement for conduct to justify summary termination at common law.

The conduct of the applicant at its very highest could not have justified on any view summary termination and therefore the respondent was obliged under the rules of procedural fairness to put those matters to him before it made the decision to terminate his employment.

Finally, in terms of section 170DC, the applicant ought to have been given an opportunity to put to the respondent appropriate matters in mitigation. This applies particularly where the impact of the decision to terminate will, on the uncontested evidence, operate harshly on him by virtue of its effects on his superannuation entitlements. Similarly, it was put by the representative of the applicant, where the respondent itself was engaged in a potential restructure then the applicant ought to have been given an opportunity to discuss those matters with the respondent before they made the decision they did.

For all the above reasons the termination process was unfair to the applicant and puts the respondent in breach of its obligations under section 170DC.

Has The Respondent Breached s.170DE

It follows from my conclusion that the respondent has breached section 170DC that the respondent has also breached section 170DE(1) of the Act because I do not accept in these circumstances that the respondent had a valid reason to terminate the applicant's employment.

Consequently, the termination is harsh, unjust or unreasonable.  On any view the termination operates harshly on the applicant because of its effect on his superannuation entitlements, given his good service and clear record with the respondent up until May.

Further, it is harsh when the record subsequent to May is considered, because as I have said, the warnings do not justify termination based on those warnings, and it has been indicated by Gray J in Wheeler v Philip Morris Limited (1989) 97 ALR 282 at page 308 that:

“An employer cannot rely for a termination on a flawed final warning.

Here, in my view, the two warnings that were given were flawed, in relation to the second warning there was not proper investigation, and substantively, in that the conduct in either case did not justify a warning.

Further, the termination here is unjust because there has been the failure to give procedural fairness, and it is unreasonable because the conduct did not justify the decision to terminate. So the respondent has breached section 170DE of the Act.

Reinstatement

The applicant seeks reinstatement in these proceedings, but the respondent says that it is impracticable because the relationship of employment has broken down. Section 170EE gives the Court a discretion to order reinstatement, but in the event that reinstatement is impracticable, the Court may make an order requiring the payment of compensation.

The evidence of the respondent is that the applicant's former position has been abolished, but that there is still work within the respondent for work of the nature that the applicant formerly was engaged in.

Further, in the restructured operations of the respondent, there will be a position of senior town planner advertised.  The respondent asserts that as a result of a lack of confidence in the applicant exhibited by Mr Lancashire and by the chief executive, although he was not called to give evidence, and also as a result of evidence given in these proceedings, it would be impossible for the parties to re-establish a proper working relationship here.

I do not accept the respondent's submissions on this point.  In the Court's view, where there has been an unlawful termination of employment, then in the usual course, an order for reinstatement will apply.  Here, the matters that have been raised by the respondent indicate that while there may be difficulties they do not appear insuperable.  The respondent clearly does still require the services of a senior town planner.  The applicant has proved that he can perform those duties and has performed them satisfactorily - more than satisfactorily - for the past four years.

The fact that he has had difficulties in communication between himself and Mr Lancashire are matters that management higher than the two of them ought to be able to address.  In any event, it is not clear on the evidence that Mr Lancashire would be the manager of the applicant when he returns to the respondent's employment.  I therefore propose to order reinstatement.

Section 170EE also provides that the court may order payment of arrears of remuneration, and I also propose to do that. Given that the applicant's position has been abolished I propose that the order be in terms of section 170EE(1)(a)(ii), which is reinstatement to a position on terms and conditions no less favourable than previously, and I also propose that there be a declaration in relation to continuity of employment.

The formal orders of the court are:

1.that the termination of the applicant's employment by the respondent contravenes the provisions of sections 170DC and 170DE of the Industrial Relations Act 1988;

2.that the respondent reinstate the applicant by appointing him to another position on terms and conditions no less favourable than those on which the applicant was employed immediately before the termination, and that reinstatement operate from the date of this decision;

3.that the respondent pay to the applicant the sum calculated at the rate of $1016 per week for the period from 22 August 1994 to today's date, being the amount of remuneration lost by the applicant as a result of the termination of his employment, such sum to be paid within 14 days;

4.that the period between 22 August 1994 and the date of this decision be treated as continuous employment of the applicant by the respondent for all purposes.

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.The termination of the applicant's employment by the respondent contravenes the provisions of sections 170DC and 170DE of the Industrial Relations Act 1988;

2.The respondent reinstate the applicant by appointing him to another position on terms and conditions no less favourable than those on which the applicant was employed immediately before the termination, and that reinstatement operate from the date of this decision;

3.The respondent pay to the applicant the sum calculated at the rate of $1016 per week for the period from 22 August 1994 to today's date, being the amount of remuneration lost by the applicant as a result of the termination of his employment, such sum to be paid within 14 days;

4.that the period between 22 August 1994 and the date of this decision be treated as continuous employment of the applicant by the respondent for all purposes

I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment of Judicial Registrar Murphy as recorded in the draft transcript and revised by the Judicial Registrar.

Associate:

Dated:  16 January 1994

Representative for the Applicant:	Mr N. Henderson
Representative for the Respondent:	Mr M. Harvey
Dates of hearing:	15 & 16 December 1994
Date of Judgment:	16 December 1994