Trevor Keith Rodley v Capricornia Pty Ltd (t/as Batmans Hill Hotel)

[1995] IRCA 130

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 1379 of 1994

BETWEEN:

TREVOR KEITH RODLEY
Applicant

AND

CAPRICORNIA PTY LTD
(T/AS BATMANS HILL HOTEL)
Respondent

REASONS FOR JUDGMENT

30 March 1995  Judicial Registrar Murphy

Introduction

This is an application under Division 3 of Part VIA of the Industrial Relations Act (“the Act”). From 1988 until 8 August 1994 the applicant was employed as the general manager of the Batmans Hill Hotel ("the Hotel") which is owned by the respondent. The applicant was terminated on 8 August 1994 and in these proceedings seeks reinstatement to his position and payment of his lost remuneration.

Preliminary Jurisdictional Issue

Counsel for the respondent in this matter took a preliminary point that the jurisdiction of the Court was excluded under s.170CD of the Act. Section 170CD(2) provides that the provisions of Part VIA do not apply to an employee whose relevant wages exceed $60,000.00 per annum.

The respondent relied on an affidavit which stated that the applicant’s base salary was $54,823.00 per annum.  There was also a "salary sacrifice" superannuation payment of $3,000.00 per annum.  In addition the employer was required to make a superannuation contribution under a statutory scheme of $2,192.00 per annum.  The total of these three amounts exceeds $60,000.00 and it was argued that the Court did not have jurisdiction.  I was referred to the decision Ardino-v- Count Financial Group Pty Ltd (Industrial Relations Court of Australia, Wilcox CJ, 14 November 1994). In that case at 17 Wilcox CJ indicated that an amount paid pursuant to a statutory levy should not be included within the definition of “relevant wages” under section 170CD. The approach to this provision was also considered in Thomas Gordon Brown -v- Listaglen Pty Ltd (Industrial Relations Court of Australia, Murphy JR, 21 December 1994) where the amount in issue was described as commissions.

In this case the amount was paid by force of law.  There is no suggestion that the employee was entitled to receive the superannuation contributions in cash as they became due.  I am of the view that for these reasons it is not included within the definition of “relevant wages”. Therefore the total relevant wages are less than the statutory limit and the Court has jurisdiction.

Background

The applicant has quite extensive experience in the hospitality industry and for a period of about 3 years prior to joining the respondent was working at general manager level in hotels in New South Wales and other parts of Australia.  In 1988 he was approached by Mr Bruce Matheson ("Matheson"), who is the principal of the Cambridge Group of companies ("the Group").  This group at that stage managed numerous pubs and owned five major hotels.  Matheson offered the applicant the position of general manager of the Batmans Hill Hotel which was part of the five accommodation hotels owned by the Group.  The five hotels, although owned by separate entities, are marketed as a group from Sydney.  They are also run from Sydney with a general manager being located there and all accounting functions conducted there.  Matheson has silent partners in some of the hotels, while he owns others outright.

The applicant accepted the position and, on the respondent’s own evidence, there were no major concerns about the day to day performance of his duties.

Commencing in about March 1993 the accommodation industry in Victoria, and in particular Melbourne, took a downturn.  The occupancy rates at the Hotel also fell.  This was attributable to the recession, to the closing of a major theatrical production and to the opening of a competing hotel a few doors down the street.  Efforts were made by the applicant, in conjunction with the marketing department in Sydney, to improve the fortunes of the Hotel.  The applicant had complained to Sydney that there had been no marketing manager or officer attached to the Hotel and sometime in 1993 one was appointed.  Various other endeavours were undertaken by the applicant to increase occupancy and to market the Hotel.  These endeavours, on the evidence, were not successful and occupancy rates, and consequent profitability, remained unsatisfactory through 1994.

Although the Group was conducted by a general manager based in Sydney, on a day to day basis the applicant reported to the company secretary of the respondent, Mr Ross Blair‑Holt ("Blair-Holt") and the financial controller of the Group Mr Denish Chauhan ("Chauhan").  The office of the respondent was located in South Yarra and the applicant would attend at that office to have cheques countersigned at least three or four times a month.  In the course of those meetings the performance of the Hotel was discussed with the applicant by both Blair-Holt and Chauhan.  The applicant denied that they ever indicated that they were concerned about the profitability of the Hotel but he did concede that question of the occupancy rate was raised and he was asked for an explanation, which he gave.  The applicant gave evidence that at no time was he told that his job was on the line. Matheson gave evidence that he said to the applicant at one stage that he was not happy with the performance of the Hotel.  He said “Trevor the Hotel is not going very well.  We have to do something about it.”  Matheson’s evidence was that it was up to the applicant, as general manager, to bring off the results.  The focus was on the bottom line.

Chauhan gave evidence that he discussed both occupancy rates and profitability with the applicant on a regular basis as the applicant was provided with a monthly report on the Hotel's performance.  This discussion was on an accountant to accountant basis.  Chauhan made various suggestions to improve the fortunes of the Hotel.  He also said to the applicant that the company had assets and the applicant was running one of those assets and asked "why would it employ you if the asset is not profitable?"  He gave evidence that the applicant’s response was that there was a downturn and what could he do.

In cross examination Chauhan conceded that the discussions with the applicant were not in the nature of a warning but were criticism.  He agreed that the discussions were not warnings as to the applicant’s position within the group.  Chauhan never used the words "you are under review".  He maintained however that the applicant would have been pretty thick “if he did not know or didn’t understand that his performance was on the line”.

Blair-Holt gave evidence that he too had raised with the applicant the issue of turnover and occupancy.  He said however “it was implied that if the figures did not improve his job would have to be changed”.

Circumstances Surrounding Termination

Matheson gave evidence that as a result of concerns about the applicant’s performance, in mid 1993 he was offered a position as a general manager of one of the hotels within the Group in Sydney.  Although the position offered an increased salary package, the applicant declined this position.  Matheson was of the belief that had the applicant been in Sydney then he would have been under closer supervision from the general manager of the whole Group.  He would thus be able to perform better in the position.

During 1994 the Group lost the management contract for an hotel in Sydney.  This left a person at general manger level surplus.  A re-shuffle occurred but the Group was unable to find a position for the displaced Sydney general manager.

Matheson decided to offer that employee the position as general manager of the Hotel.  His reasons for doing this included the considerations relating to the performance of the Hotel.  He said that if the Sydney general manager had not become available he would "more than likely have brought in another outside general manager".

In August 1994 a meeting was called and Matheson told the applicant that he had been terminated.  In the course of the meeting the performance of the hotel was raised.  Matheson advised the applicant that the Sydney general manager would replace him.  He asked the applicant to work out a months notice.  Subsequently the applicant was paid three months as a redundancy payment.

The applicant gave evidence that both Blair-Holt and Chauhan were apologetic about the situation and stated that it was nothing against the applicant personally.

What Was The Reason For The Termination

In his final address counsel for the respondent put these as the reasons for the termination:

1.The performance/profitability/occupancy rate of the hotel under the applicant's management.

2.The necessity to put someone off at general manager level by reason of the reduction in the number of hotels forming the Cambridge Group.

I find that these reasons for the termination were in fact those which motivated Matheson who impressed me as a witness.  I accept his evidence that the Hotel was not performing adequately.  The applicant did not really dispute this.  The combination of the need to find a position for a long serving employee and the flagging fortunes of the Hotel were the cause for the termination.  The timing of the action taken was dictated by the Sydney reshuffle.

The reasons for the termination did not really relate to the applicant's performance as such but to the performance of his Hotel.

The fact that the termination came as a shock to the applicant is relevant in that it was not as though the applicant regarded his employment, at that time, as being at risk.  The lower occupancy rate had commenced in March 1993 and it was a period of twelve months after the applicant had been offered the alternative position in Sydney that the termination occurred.  This leads to the inference that there was no great urgency on the part of the respondent to remove the applicant by reason of his performance and the matter only came to a head when there was a need to find another position for the Sydney manager.

Was There A Valid Reason For The Purposes Of Section 170DE(1)

Under section 170EDA the respondent carries the onus under s.170DE(1) to prove that it had a valid reason or reasons to terminate the applicant's employment "connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service."

In relation to the "capacity or conduct" of the applicant I am not satisfied that the respondent has discharged its onus.

The applicant was the subject of some criticism of his marketing efforts.  He also did not dispute the occupancy figures.  At the same time however he maintained that his personal responsibility for the Hotel's fortunes was not made clear until it was put to him in these proceedings.  The evidence of Messrs Blair‑Holt and Chauhan is consistent with criticism which fell far short of any ultimatum.  The absence of any targets or performance criteria also supports the inference that the respondent was generally satisfied with the applicant's performance despite the poor fortunes of the Hotel.  It was the need to find a position for the displaced Sydney manager that brought matters to a head.

While the applicant's personal "capacity or conduct" was not a valid reason for the termination of his employment I am satisfied that the respondent had a valid reason or reasons related to "the operational requirements of the undertaking, establishment or service" within the terms of s.170DE(1).

Those operational requirements prompted Matheson to attempt to reverse the fortunes of the Hotel by replacing the applicant with the displaced Sydney general manger.  By reason of his common control over members of the Group he was able to do this.  In doing so he was acting in accordance with the operational requirements of both the respondent and the other members of the Group.  This is because it was obviously in the interest of the respondent to remain within the Group.  It derived benefits from its membership of the Group and so it becomes appropriate to regard the operational requirements of the Hotel as coterminous with those of the other members of the Group.

In these circumstances, where one member of the Group appeared to need an infusion of new management, it was connected with the operational requirements of the respondent to accept that new management from a surplus employee elsewhere in the Group.

When the operations of the Group, with their mutual obligations and benefits, are considered in this perspective I am satisfied that the respondent had a valid reason to terminate the applicant's employment based on the operational requirements of the undertaking.

It follows that I find that the respondent has discharged its onus to prove that it had a valid reason for the termination within the terms of s.170DE(1) of the Act.

Was There A Breach Of Section 170 DC

My finding that the reason for the termination related to the operational requirements of the respondent, as distinct from the conduct of the applicant, are relevant to the issue of section 170DC of the Act.

That provision requires an employer to accord procedural fairness to an employee when factors personal to the employee are to be the basis of a decision to terminate the employment.

It stretches the reasons of the respondent too far to suggest that it was the applicant's personal performance as general manager which was the real reason for termination.  The real reason related to the management response to the external factors which had caused the decline in the Hotel's fortunes.

It follows that I don't accept the submissions of the applicant's solicitor that the respondent was required to put the matters relating to the performance of the Hotel to him.  It is clear that within the adverse economic climate faced by the Hotel the respondent was generally happy with the applicant's day to day performance of his duties.  It was just that the profitability of the Hotel remained in decline and an effort had to be made to reverse that position.

For these reasons I don't accept that the respondent had an obligation to formally put these matters to the applicant. The respondent has not breached section 170DC of the Act.

Was The Termination In Breach Of Section 170DE(2)

Having found that the reason for termination was the performance of the Hotel and the need to place a surplus employee, the question is whether it was harsh, unjust or unreasonable, and thus contrary to s.170DE(2) of the Act.

Counsel for the respondent maintained that the respondent had not acted harshly or unreasonably here because in the face of its operational requirements it had terminated the applicant's employment upon reasonable notice.

In determining whether the termination was unreasonable and thus in breach of s.170DE(2) it is appropriate to have regard to moral and prudential considerations current in the community (Jenkinson J in Gregory -v- Phillip Morris (1989) 80 ALR 455 at 457).

Here I am of the view that the termination was unreasonable on the ground that the applicant was not given reasonable notice of termination.  He was paid three months as a redundancy payment.  In my view, however, having regard to his age, his length of service, the nature of the appointment and the fact that he moved from Sydney to accept the position in the first place, the period of notice was inadequate.

Having regard to these factors, and also the evidence of a personnel consultant, I am of the view that reasonable notice in the circumstances was six months.

Having found that the termination was in breach of section 170DE(2) on this ground it is unnecessary to consider whether it could also be characterised as harsh or unjust.

Remedy

Having found that the termination was in breach of s.170DE(2) it is now necessary to consider the question of remedy.

The recent decision of the Court in Liddell v Lembke, (1994) 127 ALR 342 is authority for the view that where there is a breach of the Act the primary remedy is reinstatement. The majority however was considering the matter in the context of a breach of section 170DC of the Act.

Here I have found that the termination did not breach that provision, but was unreasonable and in breach of section 170DE(2) by reason of the failure to give reasonable notice.

The reasons for the termination are relevant to the question as to whether reinstatement is practicable. Matheson's evidence was that management was of the view that new management was necessary to reverse the Hotel's fortunes. The evidence was that the fortunes of the Hotel had revived under the replacement manager. In these circumstances where the reason for termination was related to operational requirements of both the respondent and the Group it is impracticable to reinstate the applicant to his former position. Having found that the employer had a valid reason to terminate the employment it is impracticable with the terms of the Act to now reverse that reason by reappointing the applicant.

Having found that reinstatement is impracticable it is necessary to consider whether the respondent should be required to pay the applicant compensation.

In working out an amount of compensation the Court is to have regard to the remuneration that the applicant would have received, or been likely to receive had the employer not terminated the employment (section 170EE(3)).

The evidence of Matheson was that had the applicant not been replaced when he was, it was likely that another general manager would have replaced him.  Such an event would have required the lawful termination of the applicant's employment.  This action would have required the giving of a period of reasonable notice, which I have found was six months.  The applicant has already been paid three months salary as a notice and redundancy payment.  He should be compensated based on the amount he would have received had his employment been lawfully terminated, which is an additional three months salary.

In all the circumstances I am therefore satisfied that the applicant should be awarded compensation under the Act of three months salary based on the rate of $54,600.00 per annum (as given in evidence) plus $3000.00 salary sacrifice, making a total salary of $57,600.00. I therefore propose to make an order in the sum of $14,400.00.

I certify that this and the preceding nine (9) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy.

Associate:

Dated:  30 March 1995

Solicitors for the Applicant: Counsel for the Applicant:	Franzese & Associates Mr P. Franzese
Solicitor for the Respondent: Counsel for the Respondent:	Aitken Walker & Strachan Mr G. Watkins
Dates of hearing:	15 & 16 March 1995
Date of Judgment:	30 March 1995

CATCHWORDS

INDUSTRIAL LAW - Termination of employment - relevant wages - whether employer superannuation levy contributions included - general manager of hotel with flagging fortunes - hotel member of group - no complaints about actual performance - applicant replaced by another manager from group - whether valid reason - whether allegations of performance put - reinstatement - whether practicable.

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

Ardino -v- Count Financial Group Pty Ltd (Industrial Relations Court of Australia, Wilcox CJ, 14 November 1994

Thomas Gordon Brown -v- Listaglen Pty Ltd (Industrial Relations Court of Australia, Murphy JR, 21 December 1994)

Gregory -v- Phillip Morris (1989) 80 ALR 455

Liddell v Lembke, (1994) 127 ALR 342

TREVOR KEITH RODLEY -v-  CAPRICORNIA PTY LTD (T/AS BATMANS HILL HOTEL)

NO. VI 1379 of 1994

Before:     MURPHY JR

Place:       MELBOURNE

Date:        30 MARCH 1995

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 1379 of 1994

BETWEEN:

TREVOR KEITH RODLEY
Applicant

AND

CAPRICORNIA PTY LTD
(T/AS BATMAN’S HILL HOTEL)
Respondent

MINUTES OF ORDER

30 March 1995  Judicial Registrar Murphy

THE COURT ORDERS THAT:

1. The respondent pay to the applicant the sum of $14,400.00 within 14 days.

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