Sterrey v McKechnie
[1997] IRCA 305
•23 December 1997
IN THE INDUSTRIAL RELATIONS )
)
COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) NI 1196 of 1996
BETWEEN: LEE ELIOT STERREY
Applicant
AND: McKECHNIE METALS PTY LTD
(ACN 004 290 288) T/As
McKechnie Consumer Products Respondent
JUDICIAL
REGISTRAR: McILWAINE JR
PLACE: SYDNEY
DATED: 11 FEBRUARY 1998
CORRIGENDUM
That the first word on the top of the front page of the judgment, being "Federal" be deleted and replaced with the word "Industrial".
Associate to
Judicial Registrar McIlwaine
11 February 1998
FEDERAL COURT OF AUSTRALIA
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - alleged unlawful termination of employment - VALID REASON - Dismissal for lack of commitment to his job not a valid reason to terminate - Applicant in advance of approved sales budget target - new increased sales budget proposed - reservations of applicant about capacity to meet budget does not constitute a valid reason for termination - OPPORTUNITY TO RESPOND - Applicant not offered person to assist in defence - not given opportunity to defend himself. MISCONDUCT not serious misconduct to fill in sales call sheets weekly and not daily. PRACTICE AND PROCEDURE - PARTICULARS - particulars of misconduct supplied insufficient to allow a detailed response by applicant other than general denial of misconduct.
Evidence Act, 1995(Cth) s.60
Industrial Relations Act, 1988 (now Workplace Relations Act, 1996)ss170DB, 170DC, 170DE(1) & (2)
Selvanchandran v Peteron Plastics Pty Ltd (1995-96)62 IR 371 Northrop J
Victoria v Commonwealth of Australia (1996)138 ALR129
Perrin v Des Taylor Pty Ltd (1994) 58IR 254 Moore J
Bryant v City of Fairfield RSL Memorial Club Ltd (an unreported IRCA decision No.302/97 dated 16 December 1997) McILwaine JR
STERREY V McKECHNIE
NI 1196 of 1996
MCILWAINE JR
SYDNEY
23 DECEMBER 1997
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NI 1196 of 1996
BETWEEN
LEE ELIOT STERREY
ApplicantAND
McKECHNIE METALS PTY LTD
(ACN004 290288) Trading as
McKechnie Consumer Products
Respondent
BEFORE: MCILWAINE JR
PLACE: SYDNEY
DATE: 23 DECEMBER 1997
MINUTES OF ORDERS
THE COURT DECLARES THAT:
The respondent has contravened Section 170DE(1) of the Act.
The respondent has contravened Section 170DC of the Act
The respondent has not contravened section 170DB of the Act.
It is impractical to reinstate the Applicant in any position with the respondent.
THE COURT ORDERS THAT:
The respondent to pay to the applicant within 21 days of today the amount of $26,310.00.
Any sum paid within 21 days of today to the Australian Taxation Office, on account of the applicant with respect to the sum ordered in paragraph 5 shall be pro tanto satisfaction of the obligation of the respondent under Order 5.
Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court rules.
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NI 1196 of 1996
BETWEEN:
LEE ELIOT STERREY
Applicant
AND
McKECHNIE METALS PTY LTD
(ACN004 290288) Trading as
McKechnie Consumer Products
Respondent
BEFORE: MCILWAINE JR
PLACE: SYDNEY
DATE: 23 DECEMBER 1997
REASONS FOR DECISION
This is an application by Lee Eliot Sterrey claiming unlawful termination of his employment under Division 3 Part VIA of the Industrial Relations Act 1988 now known as Workplace Relations Act, 1996 (“the Act”) against his former employer, McKechnie Metals Pty Ltd (ACN004290288) Trading as McKechnie Consumer Products (“McKechnie Consumer Products”).
In his claim, the applicant records the work performed for his employer as a “Sales Representative” in the Sydney metropolitan area and the central coast of NSW. The applicant started work with the respondent on 1 October 1993 and the last day he worked was 12 January 1996. His period of employment was over 2 1/2 years. The remedy originally sought by the applicant in his claim was for compensation. However at the start of the hearing this was amended to include a claim for reinstatement.
The application was received by the Australian Industrial Relations Commission on 25 January 1996. I have a certificate issued by Deputy President Drake of the Australian Industrial Relations Commission dated 26 February 1996 in the following form:
“In accordance with subsection 170ED(1) of the Industrial Relations Act 1988 (the Act) the Commission hereby certifies:
(i) that it has been unable to settle this matter by conciliation within a reasonable period, and
(ii) that the parties in this matter, having been invited to elect to have the matter dealt with by consent arbitration, have not so elected.Under paragraph 170EA(3)(b) of the Act, the Commission allows the lodgment of the application to be extended until 25 January 1996.”
There was no objection made to the certificate by either party, including the granting of the extension of time, in which to lodge the application. On this basis I find this matter is properly before the Court.
A notice of employer’s appearance was filed by the respondent with the Australian Industrial Relations Commission the reasons for termination being outlined as: “not fulfilling his employment conditions, lack of commitment to his job, gross misconduct”. It was signed by the Payroll/Personnel Administrator who did not give evidence in the proceedings.
At the start of the proceedings on 20 June 1996 counsel for the applicant filed the following documents:
“The applicant claims;
An order declaring the termination of the applicant employment by the respondent contravened s170DC, 170DE(1) & (2) of the Industrial Relations Act 1988.
That the applicant be reinstated by the respondent and be appointed to the position he immediately occupied prior to the termination of his employment, and that reinstatement take place forthwith.
That the respondent pay the applicant the sum equal to his monthly salary $3,625 (less appropriate tax) and including a sum of $174.77 per week being the value of the applicant’s vehicle from the date of termination to the date of re-instatement.
That the period from 12 January 1996 to the date of judgment be treated for all purposes, as continuous employment of the applicant by the respondent in the position occupied by the applicant immediately prior to the termination of his employment.
Alternatively, appointing the applicant to an alternative position on terms conditions no less favourable than that occupied by the applicant prior to his termination. (sic)
Alternatively, compensation in lieu of reinstatement.
Such further or other order and this honourable court sees fit.”
I should immediately observe that the claim by the applicant for orders pursuant to Section 170DE (2) of the Act is no longer a valid claim having regard to the decision, Victoria -v- Commonwealth of Australia (1996) 138ALR 129 which was handed down on 4 September 1996. In that judgment the High Court declared that Section 170DE(2) of the Act was an invalid exercise of the power of the Commonwealth.
EVIDENCE OF APPLICANT
At the time of his engagement in the business he was working for Comalco Aluminium where he had been employed for two years. He received a telephone call on his mobile telephone asking him if he would like to work for Phipps International, the predecessor of the respondent. He said he was prepared to listen and all told he was contacted at least 4 times about taking the position. Finally he accepted a position at $43,500 dollars gross per year with the full use of a company vehicle which would be a Ford Station wagon of his choice of colour.
The applicant was married with two children and was aged 35 years of age at the date of trial.Since his termination he has been surviving on unemployment benefits and his earnings from coaching a soccer team. During his period of unemployment the applicant was forced to live with his parents while he rented his own house.
While the applicant was in employment with the respondent he coached the under 18 side of the Marconi Soccer Club. This coaching task may have taken more of his time than it ought to have during certain parts of the year. However the telephone account for the period 4 October 1995 to 6 October 1995 show that only four minutes was taken up with the calls to the Marconi Soccer Club. From this employment he earnt $208.00 nett per week. He was required to be at training three nights a week. Eventually his work with the club became a problem for the respondent. It may have been that at an earlier stage he was encouraged to have this position given the very close relationship which exists between sport and sales promotional activities.
The existing sales budget of $1.1 million dollars for the applicant had been set in consultation with Mr John Hutchison, his former supervisor. The applicant maintained that his first knowledge of any difficulties with his job situation was when he was contacted by Mr Haines and asked to attend a meeting on 5 January 1996. However, it is likely that the organisation as a whole was expecting some changes as a result of the arrival of Mr Jolly. At that meeting he was told that his budget was to be increased from $1.1 million dollars to $2.4 million dollars. He was to prepare a presentation as to how to achieve this target which he was to deliver at a meeting on 12 January 1996. He testified that he had afterwards said to Mr Haines: “Michael is not fair dinkum this is over 100% increase in budget.” He maintains Mr Haines replied: “look mate he is trying it on, he will probably accept something about $2 million.”
He prepared two documents for the meeting, given the sales management level at which Mr Jolly was working, I can understand his disappointment at the documentation produced by the applicant . It certainly was no glossy brochure however it did contain all that was basically required. The conclusion drawn by Mr Jolly that the applicant was not good at book work can be accepted by reference to his method of presentation.
During his testimony the applicant confirmed the details of the meeting between himself and his two managers. He mentioned that Mr Jolly had sat alongside him and he was surprised by the raising of the issue of the telephone calls and his call sheets. When Mr Jolly also raised the issue as to whether the applicant was always at Fairfield because of the Marconi club the applicant replied: “the club was located at Bossley Park.” The home of the applicant was at Wetherill Park. This would justify him wishing to finish his work at Fairfield each day.
The applicant was staggered by the suggestion that he had been in some way fraudulent about his call sheets. The applicant said that Mr Jolly had finally said: “I have decided to let you go.” He asked for an hour to pack up. He went to his desk and tried to rush this task. He asked if he could have the use of the vehicle for a week which was agreed to by Mr. Haines. Subsequently he had been loaned a vehicle by a friend and later on bought a Toyoto Corolla Seca with bank finance secured on his home.
The applicant was cross examined as to his prior knowledge or warnings that his budget was to be increased. He denied such knowledge. Some of the testimony by Mr Jolly as to what was said in the interview was not put to the applicant during this cross examination. I suspect this was because the memory of these issues was recalled only when Mr Jolly was giving his evidence. It is probable that there was a degree of reconstruction in the evidence given by Mr Jolly, rather than a sudden recollection coming to him. However on all of the key issues there is a remarkable similarity between the versions given by all three witnesses.
The applicant was posted a bank cheque for $925.75 on 19 March 1996 being the proceeds of the closure of a share option account held by the ANZ banking group. This was the only evidence tendered at the trial on this issue.
EVIDENCE OF SALES MANAGER
Mr Haines, the Sales Manager of the respondent, gave evidence that he had been with McKechnie Consumer Products for three years and before that for five years with Phipps International. In August, 1993, he attempted to obtain a Senior Sales Executive, with experience in the security industry. The applicant had such experience and he had accepted the position and the salary was set at $43,500 with the use of a station wagon. The objective of the applicant was to develop new clients and expand the business of the respondent. It was anticipated that the applicant would bring with him some of his existing clients thus building the market share of the respondent. Some time after his arrival he had formed the view that the performance of the applicant in the security industry had been pretty poor and disappointing. In April/May the then supervisor of the applicant Mr John Hodgkinson had expressed reservations about his performance and had suggested that they look at offloading him. However, there was a change in structure and Mr Hugh McGahon took over as his direct Manager before anything could be done.
In November 1994 he had emphasized to the applicant when they were discussing products that the sale of goods worth one million dollars at a 10% margin was no comparison with a transaction for one million dollars at a 20% margin for similar merchandise.
He had been warned that he should closely observe the applicant. It had been suggested to him that he should “watch him like a hawk - he’s a ‘flogger’”. Mr Haines believed that the applicant had an attitude problem particularly to new products such as Roll-a-Doors, which he found too difficult and was not keen to push as sales. At the end of November 1995, he advised the respondent that he wanted a month’s holiday in February to take a soccer team on an international visit. The timing of the applicant in this regard was pathetic as this was a busy time of year.
The applicant was advised at a meeting on 5th January 1996 of his new budget. Subsequently Mr Haines was given the telephone accounts of the applicant and asked to examine them. He discussed his findings about the telephone calls with Mr Jolly, and both had been disgusted with what they had found. This was a man, whom they thought could do without oversight, but in fact he apparently needed a lot of supervision. It was also noted that three out of the five times in the week he finished his calls at Fairfield.
There was a second meeting from 8.00am to 11.30am on 12 January,1996,when Mr Jolly presented material on the whiteboard. The applicant confirmed the numbers that he had been given by Mr Jolly. The applicant had agreed to the prospect that 8-10 calls per day was practical. At no time did the applicant refute this suggestion. It was pointed out to the applicant that his present rate of calling was 60% of what was expected and at that the applicant had laughed. Mr Jolly said that he had used his time fraudulently and asked him to give an explanation. It must also be remembered that the applicant had been told that what was expected was a “full days work”.
There was discussion with the applicant about the extent of the calls in Fairfield. He confirmed that the applicant said he had “dropped the ball” and that he had been coasting along. He has forgotten the exact words, however, it was confirmed that the applicant had been involved in some after hours coaching.
He agreed after the termination that the applicant could have the car for an extra week, however, he subsequently phoned him back and advised the applicant that the extended period would not be allowed.
Mr Haines gave a reference to the applicant which appears on a casual reading to contradict what is now being said about his performance.
The reference was posted to the applicant and dated 15 January 1996:
“TO WHOM IT MAY CONCERN
Mr Lee Sterrey of 30 Macaulay Street Wetherill Park, was employed by McKechnie Consumer Products for approximately 2½ years as a Specialist Representative, promoting sales of our Security range of aluminium and associated products to the Security Door Fabrication trade.During this period Lee was directly involved in expanding our product package and customer base within the Sydney metropolitan and NSW Central Coast areas.
His long experience and knowledge gained in his industry segment is valuable and I would have no hesitation in recommending him for a Sales Representative position in this area.
Lee leaves with out best wishes for his future success.
Yours sincerely
(Signed)
COLIN HAINESGeneral Manager
Securamesh Products.”
He was cross examined about the reference which he had written and pointed out his careful use of the phrase “specialist representative” and subsequently the phrase “sales representative”. He defended his position by suggesting that the applicant would be OK as a sales representative but not as a specialist representative. As a specialist representative a sales manager would expect a different or lower level of supervision of a sales person. His reasons for giving a good reference was that he did not want to impede his progress.
Under further cross examination he agreed that the first time he had made the offer of a job to the applicant he had declined it, but there had been subsequent offers made to him. In giving his answers under cross examination I found him to be evasive, particularly when he was asked about a telephone conversation which he had with Mr Peter Harding, on 25th January, 1996, during which he asked him to prepare a statement and a Statutory Declaration in relation to this case. In particular a complaint regarding the applicant and his use of the mobile phone. Mr Harding’s complaint was about the supply of a product that he had been advised to buy. Mr Harding had told Mr Haines that, “he would not be able to get Lee after 5.30pm.”
He was cross examined about his role with Mr Booth the CEO of Phoenix Security and admitted that he was a close friend and shared an interest in the sport of Rugby Union. He could not recall meeting him on 10 January, 1996. During the period from 5 to 12 January,1996, he had spoken to Mr Booth, with a view to advising him that Mr Foley would be calling on him as well as the applicant. It was put to Mr Haines that as far as the respondent was concerned that the applicant was finished as at 5 January 1996. Mr Haines denies this allegation. Later he concedes that market intelligence was an important issue and the applicant had certainly supplied such information on his call sheets. He regarded the call sheets as critically important. I observe that if that had been the case, there was no evidence given that at any stage they had been previously examined or called for, or tested in any way. The call sheets show the applicant passed on valuable sales intelligence information for the respondent.
There was then some cross examination about a call sheet which had apparently been removed from the desk. of the applicant. It was put to Mr Haines by counsel for the applicant that he had removed certain documents from his former employer and made alterations to them. In response he initially denied doing either and could not recall or remember what had happened. On the reverse side of the Call Report for 28th August-1st September there is a notation: “Advised Target $2m not budget as set by previous C.E.O./Sales Man.” This note was placed there by Mr Haines after the applicant had ceased to be employed. I find this was an attempt by Mr Haines to bolster the case for the respondent but he was defeated at the hands of a skilful cross examination using documents held by the applicant. His explanation was that he had been advised to make a note of things that had been said to the applicant. The effect of a contemporaneous note has been discussed by me in Bryant -v- City of Fairfield RSL Memorial Club Ltd (an unreported IRCA decision No.302/97 dated 16 December 1997). This note has no value on that basis. I believe it to be bogus and to require the acceptance of the version given by the applicant that he did not have a warning about an increase in his budget until much later in the year.
Mr Haines denied that Mr Jolly had intended to ambush the applicant at the meeting on 12 January, 1996. He had not said very much himself, but did recall the applicant saying he was “coasting along and dropped the ball just before Christmas.” He confirmed that Mr Jolly was of the view that he did not have to pay the applicant so much money; and that if applicant left then they could get ‘two salespersons for the price of one’. Mr Haines denied on a number of occasions the suggestion that it was an attempt to set the applicant up. It was put to him strongly that the mere fact that the applicant had given an indication that the budget figure could not be reached was not a sign of unwillingness to co-operate with the respondent. This suggestion went unanswered.
MOBILE TELEPHONE CALLS
One of the major claims made against the applicant was that his mobile telephone usage did not accord with his Call Sheet locations. Consequently his mobile telephone accounts were tended in evidence for that purpose. However once tendered they may be used in evidence for other purposes. (See s.60 Evidence Act, 1995 (Cth). To take one example, during the period 4 October 1995 to 6 October 1995, the account for the car phone shows the applicant made 57 calls. During his evidence he admitted there were three calls of a personal and private nature. There were four calls to the Marconi Club based on the number disclosed on the account. In addition there were eleven calls to telephone numbers allocated to the respondent. These calls were instances where the applicant testified that he needed to check on the progress of his orders. Despite the extensive cross examination,on behalf of the respondent I am satisfied that the remaining 39 calls being 68% of all calls during that period were also work related.
The respondent makes the point that on some occasions there would be a difference between where the call-sheet shows him as being located and the iniation of the telephone calls. The explanation of the applicant for these discrepancies was that he used to write out the call sheets at the end of the week. No doubt this was contrary to the intention behind the call sheets, but in my view it was not a matter which would ,without additional evidence of misconduct, be sufficient to justify summary dismissal.
PARTICULARS
The respondent before the trial commenced was directed to provide particulars of its claim. Pursuant to directions made by Judicial Registrar Walker Messrs. Cutler Hughes & Harris, the solicitors for the respondent filed in the registry of the Court prior to the hearing particulars of the defence of the respondent:
“PARTICULARS
Pursuant to directions made by Judicial Registrar Walker on 10 May 1996, the Respondent provides the following particulars:
At approximately 8.00 am on 12 January 1996 the applicant attended a meeting with Mr Michael Peter Jolly, Chief Executive Officer of the Respondent, and Mr Colin Robert Haines, Divisional General Manager of the Respondent.
That meeting lasted until approximately 11.30 am.
During that meeting Mr Jolly produced mobile telephone bills for calls made by the applicant between August 1995 and January 1996.
Call report sheets for corresponding periods which had been completed by the applicant where also produced by Mr Jolly. The call report sheets are used by sales representatives of the Respondent to indicate attendances on clients.
These telephone bills and call reports were shown to the applicant for comment. The applicant examined the documents.
During the meeting, the applicant was asked by Mr Jolly to look at telephone call entries and call report entries for corresponding periods and explain why the majority of his call report entries did not match up with the mobile telephone bill entries.
In the duration of the meeting the applicant was unable to offer any satisfactory explanation those in attendance to convince them that the applicant’s conduct did not amount to conduct of a kind such that it was unreasonable for the applicant to continue in the Respondent’s employ.”(sic)
In particular its representative was also asked to provide exact details of its claim of misconduct based on the telephone accounts. In my view the particulars supplied were not sufficient .to enable any proper answer to be made by the applicant. (See paragraphs 5 and 6 of Particulars) Such a general allegation can be answered satisfactorily by the reply given by the applicant
EVIDENCE OF THE CHIEF EXECUTIVE OFFICER
Mr Michael Peter Jolly, had been appointed on 12th August, 1996. as the Chief Executive Officer of Consumer Products. Mr Jolly gave evidence that the applicant had initially been reporting to a Mr John Hodgkinson, who had left the business. In late August at the farewell for that Supervisor, he had spoken to the Applicant and told him that he needed to get serious about his security sales. He also maintained in his evidence that a comparison of sales with South Australia showed that New South Wales was well behind. In September 1995 he asked Mr Colin Haines to discuss the matter. Mr Jolly gave evidence that he had done comparisons of the market share that could be expected in NSW compared with what had been obtained in South Australia and there was a large potential for improvement. He had also discussed the matter with Mr Haines who had been quite positive about the possibilities.
In October/November he had sat in on meetings at 7.30 am to 8.00am and pointed out to the applicant and other sales representatives that he was serious about budget increases. Although
he had been disatisfied with the performance of the applicant Mr Jolly acknowledged that the applicant had brought up some issues in discussion with him as to the need for points of sales systems such as pens and caps. In this regard he approved, on the recommendation of the applicant, a $20,000 budget for these items.
Subsequently he told Mr Haines that there was a new budget required. His recollection was the response of the applicant was that this was “bullshit”, or “over the top”. He also maintained that he told the applicant that the existing budget was a very soft budget and that there would be a new budget. During the August to November period the applicant constantly said that this was impossible. In late November, or early December he gave a copy of a document to the applicant regarding these matters. On 5 January, 1996 he had given the applicant a further document about 2.00pm showing an expected Budget of $2,410,000.
On 12 January 1996 he had set out a time management program which would enable the applicant to do some 8 calls per day, or 36 calls per week. These were set out on a whiteboard and a copy of the printout of the notations made on the board which became Exhibit 11 in the proceedings. When he had gone through the logic of his proposal with the applicant , he had agreed saying; “I can see what you are saying.” The assumption being that he was to attend at a customer’s place of business for one hour (to attend a customer 10 minutes, 30-40 minutes for customer contact 10 minutes for paperwork, and then onto the next customer) under this new scheme he had come up with a budget of $2,410,000. He had gone to some lengths to explain the background to the applicant, to ensure that he understood what was the situation.
Mr Jolly had formed the view after examination of the records that the applicant was doing an excessive amount of travelling and there were obviously difficulties with his time management and in planning calls. He also remembered using the expression : “that the applicant was doing more miles than the Leyland Brothers.”
He had an examination done by an officer of the company of the telephone calls and these had been passed on to Mr Haines to verify their accuracy. Mr Haines had come back and pointed out certain anomalies to him. It also appeared to him that the way the applicant dealt with his sales run was either adhoc or erratic and was responding simply to customer’s demands rather than a planned marketing program. He also formed the view that the applicant was not interested in some of his suggestions or new ideas and that he had a poor ability to do paperwork. He maintained that it was up to the applicant to get the call reports right and that this had been brought to his attention in the past.
Mr Jolly then drew to the attention of the applicant the fact that 80% of the calls did not relate to the phone bill. Moreover he had a large frequency of calls in the Fairfield area and he often finished his calls in this location. There were certain telephone calls which he recognised such as the Marconi Soccer Club. He maintained that the applicant apologised saying that he had been coasting He told the applicant he had obviously not done what he had been paid for and that he had abused his level of responsibility. The applicant replied: “Yes Michael, I agree with you.”
He had then gone through more examples of these matters. At this stage the applicant said: “I can see what you are saying.” At this stage Mr Jolly said: “We are going to have part company, I think what has happened is regrettable.” The applicant had offered to clean his desk and left.
Mr Jolly in his evidence confirmed that there was a lengthy discussion during the final meeting. This evidence basically accords with that of Mr Haines and that of the applicant as to the course and direction of the interview. However, in a revealing aside, he indicated during the course of his evidence, that at one point he had lost his “cool” with the applicant, which then caused him to take the view that the misconduct of the applicant in relation to the discrepancy between the mobile phone sheet locations and the callsheets was sufficient to justify termination.
Mr Jolly testified that he has previously had experience of terminating persons and that he is aware of the need to counsel them. In one case he had instead of termination, relocated a person from Sydney to Canberra. However the unwillingness and inability of the applicant to tell the truth made it impossible to continue his employment. This together with his interest in soccer made further employment impossible.
Under cross examination Mr Jolly indicated that the budget of $2.410 million dollars was not negotiable. This of course varies from the information which Mr Haines gave to the applicant, that he should do his best and the amount could be negotiated. It was put to him that he did not give the applicant the opportunity to achieve the $2.4 million. In response Mr Jolly indicated that there was always another reason put forward by the applicant why he could not do it, and that he became frustrated with this point of view.
TERMINATION OF EMPLOYMENT
Under the provisions of the Act the respondent carries the burden of showing that at termination it had a valid reason or valid reasons for bringing the employment to an end summarily. In his decision in Selvanchadran v Peteron Plastics Pty Limited 1995-96 62 IR 371, Northrop J describes the meaning of this phrase in the following way:
“Section 170DE(1) refers to “a valid reason, or valid reasons”, but the Act does not give a meaning to those phrases or the adjective “valid”. A reference to dictionaries shows that the word “valid” has a number of different meanings depending on the context in which it is used. In the Shorter Oxford Dictionary, the relevant meaning given is: “2. Of an argument, assertion, objection, etc; well founded and applicable, sound, defensible: Effective, having some force, pertinency, or value.” In the Macquarie Dictionary the relevant meaning is “sound, just, or well founded; a valid reason.
In its context in s 170DE(1), the adjective "valid" should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of subsection 170DE(1). At the same time the reason must be valid in the context of the employee's capacity or conduct or based upon the operational requirements of the employer's business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must "be applied in a practical, commonsense way to ensure that" the employer and employee are each treated fairly, see what was said by Wilcox CJ in Gibson v Bosmac Pty Ltd, 5 May 1995, unreported, when considering the construction and application of section 170DC.”
Taken at its highest it could be said that the applicant responded to the informal approach by Mr Jolly at the farewell function by being at the time of his termination in excess of his budget for sales by $78,000. In my view a conversation at a social occasion hardly counts as a proper and appropriate warning. It was alleged by Mr Jolly that the budget and sales target was a ‘soft’ one, set by the applicant himself. For this reason it ought to be rejected as a basis for comparision or as providing the standard required to be met by the applicant. There was no evidence given at the trial which would prove that the budget was set other than in accordance with the then guidelines or lines of authority which existed in the respondent. No doubt this is one of the reasons why Mr Jolly was brought in to resolve the situation.
The applicant showed he was prepared to make an effort to substantially increase his budget. Exhibit 10 a document prepared by the applicant under the heading “Securamesh Update” shows his attempt to achieve a more realistic budget given his knowledge of the local industry. In that document he suggests that $1.700 million is achievable as a budget figure. This was in contrast to the $2.41 million which Mr Jolly wanted. Mr Jolly took these suggestions the wrong way, he did not act soundly or objectively. There was an element of capriciousness in his response.
In my view, having regard to the circumstances, I do not regard the decision to terminate the applicant, as being for a valid reason.
OPPORTUNITY TO RESPOND
In a frank admission in his evidence Mr Jolly conceded that he had lost his ‘cool’ with the attitude of the applicant. It seems to me that there is a distinct possibility that the applicant was mislead by the suggestion made by Mr Haines that the budget figure was ‘negotiable’ to around $2 million.
Section 170DC of the Act as it then was, essentially provides that an employee be given an opportunity to respond to the allegations about his conduct or performance. Primarily, I am concerned that the applicant was not given an opportunity to arrange “to be assisted by another person when defending himself,” in accordance with the convention. This principle is set out in the Recommendation concerning Termination of Employment at the initiative of the employer, (See Schedule 11 of the Act):
“9. A worker should be entitled to be assisted by another person when defending himself, in accordance with Article 7 of the Termination of Employment Convention, 1982, against allegations regarding his conduct or performance liable to result in termination of his employment; this right may be specified by the methods of recommendation referred to in Paragraph 1 of this Recommendation.
After Mr Jolly made the decision not to accept the budget suggested by the applicant It would have been preferable for the applicant to be asked if he wanted someone else to assist him in his defence. Then there could be no doubt the applicant would have been given the opportunity to put forward any extenuating circumstances and the termination may have been dealt with in that way.
In this regard I refer to Perrin v Des Taylor Pty Limited (1994) 58 IR 254 at 256-7 where Moore J said the following about the purpose of section 170DC:
“In my view, s 170DC required the respondent to raise with the applicant these matters before terminating his employment. It is not, as counsel for the respondent suggested, a technical requirement. Its purpose is at least twofold. It is to give the employee the opportunity to demonstrate that the allegations have no foundation in fact or they should not be viewed as reflecting on the employee's capacity. In the present case, the applicant may have been able to show that the complaints about slow delivery of parts had no factual foundation or that there was an explanation for their slow delivery that did not relate to any want of effort on his behalf.
A second purpose of s 170DC is that an employee with whom an allegation has been raised may be able to persuade the employer that, while the allegation is of substance, there are factors that should persuade the employer not to terminate the employment. They may be extenuating personal circumstances or they may involve undertakings about future conduct.”
There was no evidence that such an opportunity was given to the applicant. In order to provide the applicant with an opportunity to defend what had happened it would have been a simple matter to adjourn or defer the meeting, then set out in some detail the apparent discrepancies in the Call Sheets and allow the applicant the opportunity of providing detailed answers.
There are few discrepancies in the evidence of the applicant and Mr Jolly about the course which the interview took. I have preferred the version given by the applicant because it is largely supported by the oral testimony of Mr Haines.
There is some scope for adopting a view that the termination was predetermined before the interview took place. Both men had formed an initial adverse view of the performance of the applicant which he had not been warned about by Mr Haines or Mr Jolly.
Mr Haines, was no doubt, careful or cautious about such a correct approach on this issue because he had originally secured the services of the applicant so he could bring with him his customers thus improving his new employer’s market share to the detriment of his former employers existing client base. The applicant having reached his “use by date” he could not be disposed of until alternative arrangements had been put in place to protect the then existing client base of the respondent.
There remain reservations about the way in which the interview was conducted together with the strong likelihood that the decision to terminate the applicant was taken before the interview commenced. This is not a a marginal case, I find on the balance of probabilities, that this applicant was not given the opportunity to defend himself as was required by the then legislation.
This finding is supported by the inadequate way in which the allegations about his call reports and telephone usage were put to him and which is also sufficient to lead to a contravention of Section 170DC.
IS IT IMPRACTICABLE TO REINSTATE THE APPLICANT?
I am satisfied that because of the position the applicant held in the company it would be impractical for the applicant to be reinstated. I am not sure that even earlier in the trial he would have really wanted a reinstatement, but now he has established himself in a new sales position in a different field. This is sufficient reason to establish that it would be impractical to reinstate the applicant in his former position. He has moved on to a different type of sales work.
Moreover the two most senior people in the operation are unlikely to accept him back with good grace or to acknowledge the lack of sound judgment in their actions. The trust between the two parties has been so badly damaged that reinstatement of the applicant is impractical.
It is not only the damage which has been done internally which I have taken into account. There is a strong possibility of external damage to his former reputation in the industry. It is extremely difficult to assess accurately the damage done by his termination to the relationship between the applicant and the customers of the respondent for which he was formerly responsible in the business. I also suspect his reputation has already been damaged, if only through the social world of Rugby Union.
It is even harder to assess what damage has been done to his reputation in the industry by the attempts made by Mr Haines to ensure that when he left the business he was not in a position to take any of the key accounts with him and by his ‘coded’ reference. Thus the applicant now has a limited value on the open market in the security industry. He has now started afresh in a completely different industry and accordingly ought not to be forced to establish himself again with this employer.
I find it impractical to reinstate the applicant to any position with the respondent. In the circumstances I should turn to the question of compensation.
COMPENSATION
This dismissal greatly harmed the career prospects of the applicant. He was acknowledged even on the evidence of the witnesses for the respondent to have been a specialist in the field of security sales He was acquired for his specialist skills and the effect of this termination has been to destroy his career in that field. In my view, additional damage has been caused by the misleading reference which was written by Mr Haines. Without any knowledge of the jargon used by Sales Managers, the reference reads as a glowing endorsement of the applicant. However, the use of ‘coded’ words, Sales Representative as distinct from Specialist Representative, would apparently reveal to persons in the industry that the applicant only has a limited capacity and requires much supervision.
On the question of compensation the applicant claims an amount which is set out earlier in these reasons. That amount is capable of being supported. The applicant has had to endure a lengthy period of unemployment being from 12 January 1996 until 5 August 1997. Thereafter he was on three months probation with his new employer.
The applicant was paid a monthly salary of $3625.00 at the time of his termination. The maximum amount of compensation which I can award is limited to a six months period that immediately followed 12 January 1996. In making this calculation I am to have regard to the remuneration which would have been received by the applicant if his employment had not been terminated,viz. the applicant was paid a monthly salary of $3625.00. It is also claimed that the value of the station wagon to the applicant was worth $174.77 per week or $9088.04 per year. This can be rounded up in favour of the applicant to $700 per month. While there was no direct evidence of the value of the specific station wagon to the applicant it is well accepted in remuneration packages that a motor vehicle depending on model , size and rules regarding its use for other than employment purposes can have a value ranging between $10,000 to $20,000 in remuneration foregone.
There is evidence that he had the use of the vehicle for a period after his termination and an allowance should be made for this as well as the payment of the months salary in lieu. However under Section 170DB1(b), as it then was, I find that his conduct was not such as to make it unreasonable for this respondent to be required to allow him to serve out his period of notice. The amount of such notice as he was under 45 years of age is calculated as two weeks being $1812.50.
I accept the evidence of the applicant that he had to move in with his parents so that his home could be rented. There is clear evidence that he was unemployed up until 5 August 1996 and was paid Social Security benefit. If I allow the respondent credit for the two weeks paid to the applicant for notice in addition to his statutory entitlement the period for which compensation may be calculated is from 31 January 1996 to 5 August 1996. This equates to a period of six months and five days. During this period he earnt money from his employment with the Marconi Soccer club. As this money was already being earnt with the knowledge of, and, at least the tacit consent of the respondent prior to his termination I see no reason to discount it in the calculation of compensation. Moreover his new job is at substantially less salary being $30,000 from which is deducted $1040 per annum, ($20.00 per week), for the private use of his company vehicle. Effectively his new job pays $29,000 per annum. His remuneration in his former employment was $43,500 plus $9.088.04 as the value of the car being a total of $52,588.04.. This is an annual loss of $23,588. I am satisfied that such loss will continue for at least a year. In my assessment it may take the applicant up to three to five years to recover his position. I have not taken into account the future value which the share option scheme may have been to the applicant. There was no evidence of its current value. However, this would be an added head of damages for future loss. The maximum amount of compensation ought to be awarded to the applicant.
ORDERS
THE COURT DECLARES THAT:
The respondent has contravened Section 170DE(1) of the Act.
The respondent has contravened Section 170DC of the Act
The respondent has not contravened section 170DB of the Act.
It is impractical to reinstate the Applicant in any position with the respondent.
THE COURT ORDERS THAT:
The respondent to pay to the applicant within 21 days of today the amount of $26,294.00.
Any sum paid within 21 days of today to the Australian Taxation Office, on account of the applicant with respect to the sum ordered in paragraph 5 shall be pro tanto satisfaction of the obligation of the respondent under Order 5.
I certify that this and the preceding thirteen pages (13) are a true copy of the reasons for judgment herein of Judicial Registrar McIlwaine
Associate:
Dated: 23 December 1997
Counsel for the Applicant: Mr M Heath
Solicitors for the Applicant: Macree Scully Karras Solicitors
Solicitor for the Respondent: Mr Gardiner of Cutler, Hughes & Harris
Solicitors
Dates of Hearing: 20 June, 2-3 October, 15 October 1996
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