Vermeesch v Harvey World Travel Franchises P/L
[1997] IRCA 112
•09 April 1997
DECISION NO:112/97
CATCHWORDS
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Irretrievable breakdown in working and personal relationship between applicant (the Personal Assistant to the Managing Director) and the Managing Director - Applicant refused offer of alternative position in related company, with retention of all existing benefits - VALID REASON FOR TERMINATION to do with the OPERATIONAL REQUIREMENTS of the respondent’s undertaking.
BREACH OF CONTRACT - DAMAGES are not payable at common law for humiliation, loss of privilege, reputation, status and self-esteem, unless those matters amount to a psychiatric illness, or cause the exacerbation of an existing psychiatric illness.
Workplace Relations Act, 1996; ss. 170 DB, 170 DE
Addis -v- Gramaphone Company Limited (1909) AC 488
Baltic Shipping Co -v- Dillon (1993) 176 CLR 344.
VERMEESCH v HARVEY WORLD TRAVEL FRANCHISES P/L
NI 3607 of 1995
Before: PATCH JR
Place: SYDNEY
Date of judgment: 9 APRIL 1997
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NI 3607 of 1995
BETWEEN:
ELEANOR JANE VERMEESCH
Applicant
AND
HARVEY WORLD TRAVEL FRANCHISES PTY LTD
Respondent
BEFORE: PATCH JR
PLACE: SYDNEY
DATE: 9 APRIL 1997
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The application be dismissed.
The claims in the associated jurisdiction of the Court be dismissed.
Note: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NI 3607 of 1995
BETWEEN:
ELEANOR JANE VERMEESCH
Applicant
AND
HARVEY WORLD TRAVEL FRANCHISES PTY LTD
Respondent
BEFORE: PATCH JR
PLACE: SYDNEY
DATE: 9 APRIL 1997
REASONS FOR DECISION
The applicant claims that the termination of her employment was unlawful, and seeks compensation. A claim for reinstatement was abandoned during the hearing of the matter.
By way of an Amended Statement of Claim, the applicant also claims damages in the associated jurisdiction of the Court for breach of the contract of employment.
BACKGROUND FACTS
The applicant commenced employment with the respondent in May 1988. Her employment was terminated by the respondent on 29 August 1995. For the bulk of the time that she was employed by the respondent, the applicant was the personal assistant to the managing director, Mr Paul Fleming. Mr Fleming is the founder, and the largest shareholder of the respondent company (although he does not own a majority of the shares). The applicant was the minutes secretary to the respondent’s Board.
The applicant asserted that, for most of the time that she worked for Mr Fleming, the relationship was both friendly and businesslike. This was not disputed by the respondent, and I accept what the applicant says in this respect.
The relationship between the applicant and Mr Fleming broke down in late May 1995. After attempts by the Board of the company to resolve this situation without the termination of the applicant’s employment, the situation was eventually resolved by the termination of the applicant’s employment on 29 July 1995.
WAS THERE A VALID REASON FOR THE TERMINATION OF THE APPLICANT’S EMPLOYMENT?
Mr Fleming was, and probably still is, a very busy man. I have no doubt that his job placed him under a lot of pressure. It is likely that, from time to time, this pressure resulted in him losing his temper if something went wrong in the office, perhaps speaking loudly and, occasionally, to some extent, offending his employees.
Managers should, of course, behave properly in the workplace, and not, by way of improper behaviour, cause offence to their employees. Nonetheless, it is to expected that in a high pressure workplace, from time to time, there will be the occasional outburst or spat between various people in the workplace - particularly if they have been working together for a long time and are very familiar with each other, as was the case with the applicant and Mr Fleming.
There were two particular incidents which formed the basis for the development of a situation which resulted in the breakdown of the relationship - both on a personal and working level - between the applicant and Mr Fleming.
In early 1995, the respondent company had determined that all employees working at head office, and in the offices of it’s many franchisees throughout Australia, should wear a new standardised company uniform.
Those uniforms became available in about May 1995.
On the evening of 29 May 1995, Mr Fleming gave the applicant a lift home in his car. The applicant put a box containing some newly delivered uniform items which were for her use in the boot of Mr Fleming’s car. The box was not very big and Mr Fleming asked if it was all the uniform she had. The applicant informed Mr Fleming that she hadn’t yet ordered the entire uniform because she wanted to see what the uniforms were like. That was the end of the conversation.
The next morning, on 30 May 1995, there was what can only be called a confrontation between the applicant and Mr Fleming over the question of the applicant wearing the uniform, not having ordered the uniform, and whether she should order the rest of the uniform immediately.
The evidence of the applicant and the evidence of Mr Fleming of this incident differed to some extent, but, on any version of the facts, Mr Fleming was annoyed at the applicant, and he raised his voice. I accept that he did tell the applicant to “order the bloody uniform for Christ’s sake,” and did so in a loud and bad tempered voice. I accept that the applicant was offended and upset.
The second incident followed the decision of the respondent to order 330 answer phones for use at head office and in the offices of the franchisees. The applicant asked Mr Fleming, on 1 June 1995, whether she could order an answerphone, at the (relatively cheap) price obtained by the company, through the company, and for her own use. Mr Fleming said she could.
On the morning of 2 June 1995, Mr Fleming counted the answerphones, whilst sorting them out into the various pigeon holes, and could only find 329.
The evidence of the applicant and Mr Fleming differed as to what the ensuing conversation was between them, but I do not accept that Mr Fleming was accusing the applicant of stealing the “missing” answerphone. Mr Fleming certainly did ask the applicant if she knew where the missing answerphone was, and I accept that the applicant at the time, (incorrectly) construed that to be an allegation that she had stolen it. In my opinion, they were simply at cross-purposes.
After a sharp exchange concerning the answerphone, during which both the applicant and Mr Fleming became upset, Mr Fleming returned to the discussion of uniforms. I accept that he did this in a fit of bad temper, prompted by both the memory of the earlier incident, and the fact that the applicant had become so upset at Mr Fleming asking her about the missing answerphone. There followed a sharp exchange between Mr Fleming and the applicant in which Mr Fleming ordered the applicant to order the rest of the uniform. He did this in a loud and bad tempered way.
As a result of this second confrontation, Mrs Vermeesch was, once again, very upset. She left the room and went to get a glass of water in the tearoom.
I accept the applicant’s evidence that, when she did so, Mr Fleming shouted at her down the corridor, telling her to come back, and that he wanted to sort it out once and for all.
The applicant asked for the Administration Manager, Mr Tim Dodds, to be present during the discussion that was to follow between herself and Mr Fleming. Mr Fleming agreed to that and Mr Dodds was present.
It is, once again, not necessary to go into the details of the conversation. However, once again, I accept that both the applicant and Mr Fleming were upset. Mr Fleming was behaving in a bad tempered and loud way. This is corroborated by Mr Dodds. However, I do not accept the applicant’s evidence that Mr Fleming shook his fists at her - rather I accept the evidence of Mr Dodds that Mr Fleming, at some point in the conversation, in bad tempered way, pointed his finger at the applicant across the table - but not in a way that was physically threatening to the applicant. In particular, I do not accept that Mr Fleming “lunged across the desk and shook his fists” at the applicant.
As a result of what had happened, the applicant was very upset and distressed - she spent the weekend thinking about it, and discussed the matter with her husband. She decided she would write a letter of complaint to the chairman of the board, Mr Paul Kearin. She did so, by way of letter dated 4 June 1995. (Annexure “A” to her affidavit) (exhibit 1).
In that letter she briefly set out her version of what had occurred, and said, “I demand, in writing, an apology from your employee that he will discontinue his bullying tactics and intolerable and harassing behaviour towards me. I also seek an assurance from the Board that there will be no repercussions initiated by Mr Paul Fleming towards me.”
Should these not be forthcoming, I regret that I will have no hesitation but to take further action.”
The applicant never resiled from her demand for a written apology from Mr Fleming. This remained the case even when, at about 11.30am on 15 June 1995, the chairman of the Board, Mr Kearin, came to the applicant’s desk and invited her to lunch to “talk it over”. The applicant declined this invitation. She explained her reasons for so doing as follows (see paragraph 63 or her affidavit, exhibit 1):
“I thanked him but declined his invitation as I felt it to be inadvisable having regard to how the matter had been left on the previous evening. I also felt that he was perhaps hoping to talk me into forgetting it ever happened, without the written apology from Mr Fleming I had been told would be forthcoming, and without the undertakings I had asked for”.
The reference to the “previous evening” was a reference to a meeting that had occurred between the applicant, Mr Kearin and two other members of the Board.
The applicant’s insistence on a written apology continued on 15 June 1995 when, at around 2pm, Mr Fleming called the applicant into his office for some dictation. According to the applicant’s evidence (paragraph 64, exhibit 1), Mr Fleming, before giving the applicant any dictation, said, “About my outburst the other day.” The applicant replied, according to her evidence, by saying “I think it would be inappropriate to discuss the matter with you given last night’s meeting.”, at which point Mr Fleming started giving the applicant the dictation.
The applicant, in her affidavit, explained that, when Mr Fleming referred to his “outburst the other day” she “thought that he was either about to reopen the matter or to offer some words of regret.”
In her oral testimony, the applicant accepted, that at that moment, it was clear to her that Mr Fleming was about to apologise for his earlier behaviour.
Having been rebuffed on that occasion, Mr Fleming made no further attempts to apologise.
The Board then proceeded to investigate the matter, and obtained written statements from Mr Fleming and Mr Dodds. These statements were duly forwarded to the applicant, who was given an opportunity to respond. On 9 August 1995, by prior arrangement, the applicant attended a special meeting of the Board of the respondent, at which time she was interviewed and given the opportunity to state verbally, her case.
Mr Dodds attended the same special meeting of the Board, at which his statement was discussed.
On 15 August 1995, Mr Fleming attended a special meeting of the Board (but not in his capacity as a member of the board), at which he was given the opportunity to give his point of view.
It became clear to the Board, (in my view, correctly), that the working relationship between Mr Fleming and the applicant had deteriorated to such an extent that they could no longer work together.
Despite this, the Board did not at that stage decide to terminate the applicant’s employment - instead, the Board searched for a way in which to find her a new position within the respondent company or the group of related companies. After discussions, and investigations, it became clear to the Board that it would not be possible to relocate the applicant within the respondent company itself.
However, a closely related company, Harvey World Travel Investments, (HWT Investments) had recently resolved to appoint a General Manager.
In his affidavit (exhibit 20, paragraph 20) Mr Kearin said this:
“It had only been recently been resolved by HWT Investments to appoint a General Manager. Whilst HWT Investments had not intended appointing a Personal Assistant or Secretary at that time, it was agreed, after discussion with the Chairman of HWT Investments, that the Applicant could be offered the position on the basis of a contribution towards her remuneration by Harvey World Travel Franchises.”
On 21 August 1995, a letter dated 18 August 1995 was given to the applicant in which this offer was conveyed to her. (see annexure “J” to the applicant’s affidavit, exhibit 1). It said, in part:
“The Board has given the matter much consideration and thought. We believe, considering all the factors and hearing the views of the parties, that there are continuing difficulties in the working relationship between yourself and Mr Fleming. We further believe that the deterioration in the relationship will not be overcome by time or further indulgements and may well, through no direct intention of either of the parties effect the ongoing functions of the Company.”
The Board then offered her the position as set out above, and made it clear that the terms and conditions of her employment, including her salary and accrued entitlements, would not be affected.
The letter made it clear that, if the applicant did not accept that offer, then her employment was in jeopardy, with the paragraph:
“The Board of Directors has asked me to make it clear to you that should you feel that you cannot accept the offer, then the Company would need to give serious consideration to your future in the Company.
Could you kindly advise if the above proposal is acceptable to you. We must ask that we receive your reply before 12 noon on Thursday 24 August 1995.”
In my opinion, this offer was a genuine attempt by the Board of the respondent to resolve the matter in a way not detrimental to the applicant, but consistent with the need of the company to maintain harmony within the workplace and not allow a potentially disruptive situation to, as it were, fester uncorrected.
The applicant replied by letter dated 24 August 1995 (annexure “A” to her affidavit) stating that she was not in a position “to either accept or reject your offer”.
On 24 August 1995, Mr Kearin wrote to the applicant requiring a firm decision by 5pm on that date.
At 4.50pm on 24 August 1995, the applicant faxed a letter to Mr Kearin saying that she had nothing further to add to her letter of 24 August.
On 29 August 1995, the applicant was handed a letter of the same date (annexure “N” to applicant’s affidavit) which read as follows:
“Dear Eleanor,
We refer to our letter of 18th August, 1995 and note that you have elected not to take up the position of Personal Assistant to the new General Manager of Harvey World Travel Investments (No.1) Limited. Having regard to the matters which have been raised previously and those referred to in our letter of the 18 August 1995, the Board has resolved to terminate your services effective as at 5pn on Thursday 31 August 1995. You will be paid one (1) months pay (in lieu of notice) in addition to the normal statuary entitlements.
Notwithstanding the termination referred to above, the Company is prepared to make you a without prejudice offer giving you the opportunity to resign and paying to you the following:
(a) six (6) months pay; and
(b) all statutory entitlements.In addition, should you elect to resign as above, the Company would provide a supportive reference. Such resignation and agreement would be subject to each party signing a mutual release of all actions and claims and signing a document relating maintaining confidentiality of the Company’s business and affairs and matters relating here too. We stress that this offer is open for 48 hours only and should you not take up the offer before pm on 31 August 1995 or if we receive no response from you, then the Notice of Termination shall stand and become effective as at that time.
Yours faithfully,
Paul Kearin
Chairman
Harvey World Travel Franchises Pty Ltd.”
By letter dated 31 August 1995 (annexure “O” to the applicant’s affidavit) the applicant refused that resignation option.
On 31 August 1995, the applicant was paid her statutory entitlements, with the exception that she was only paid 4 weeks pay in lieu of notice. As the applicant was over the age of 45 at the time, section 170DB of the Act requires her to be paid 5 weeks pay in lieu of notice. It was common ground at the trial of the matter before me that, subsequently, the applicant has been paid that extra week.
What was the reason for the termination of the applicant’s employment?
It was the respondent’s submission that the reason for the termination of the applicant’s employment was set out in the letter dated 18 August 1995 from Mr Kearin to the applicant, in the paragraph quoted above. In particular with the words:
“We believe, considering...... that there a continuing difficulties in the working relationship between yourself and Mr Fleming. We further believe that the deterioration in the relationship will not be overcome by time or further indulgence and may well, through no direct intention of either party, effect the ongoing functions of the Company.”
I accept that submission. I do not accept that the applicant’s employment was terminated because she was “at fault” as a result of her conduct or performance.
I also do not accept that Mr Fleming played any role in the decision to terminated the applicant’s employment, apart from the making of his statement, and his interview with the board - he denied that he’d played any such role, and that denial was not contradicted by evidence or cross-examination.
Section 170DE (1) of the Workplace Relations Act, 1996 reads as follows :
170DE(1) “An employer must not terminate an employee’s employment unless there is a valid reason, or valid reasons, connected with the employee’s capacity or conduct or based on the operational requirements of the undertaking, establishment or service.”
The board was legitimately concerned with the deterioration of the working relationship between the applicant and Mr Fleming. The evidence supports the assertion in the letter dated 18 August to the applicant from Mr Kearin that the situation “may well...effect the ongoing functions of the Company”. Mr Kearin was the Managing Director, and as the witnesses said, the company’s “motivator”. The company could not, in its own interests, tolerate the situation.
In my opinion, the decision to terminate the applicant’s employment was, therefore, for a valid reason to do with the “operational requirements” of the respondent’s undertaking.
The validity of the reason is supported by the applicant’s own behaviour in continuing to insist on a written apology from Mr Fleming, and in refusing to accept the offer of the alternative position - stances which, in the end, left the Board with no practical alternative other than to terminate her employment.
It follows that the termination of the applicant’s employment was not in breach of section 170 DE(1) of the Act.
It was not argued that the termination of the applicant’s employment was in breach of the Act for any other reason.
THE APPLICANT’S CLAIMS IN THE ASSOCIATED JURISDICTION OF THE COURT.
By way of an Amended Statement of Claim, the applicant pleaded various statutory claims, under the Act, and also some claims in breach of contract. The applicant’s claims for breach of contract were set out in paragraphs 36, 37 and 38 of the Amended Statement of Claim.
Although there was extensive oral argument on the question of the applicant’s claim that there was an implied term of her contract of employment that she be given a reasonable period of notice, or pay in lieu, no such claim was pleaded in the Amended Statement of Claim. Nor was there any related assertion pleaded that, when the respondent terminated her employment, it had breached such an implied term.
During oral argument, counsel for the applicant, counsel for the respondent, and myself did not address what is now (in hindsight) a significant gap in the pleadings. Indeed, during oral argument, I indicated that I was inclined to accept the applicant’s argument that her dismissal was in breach of the contract of employment, in the sense that she had not been given reasonable notice or pay in lieu.
Despite this, the fact that such a claim was not pleaded, in any way whatsoever, is fatal to the applicant’s claim.
No order will, therefore, be made in respect of that aspect of the proceedings.
Paragraph 37 of the Amended Statement of Claim reads as follows:
“The applicant claims further that the respondent was in breach of contract and in breach of good faith in that there was an implied term of the contract of employment that the respondent, by its servants and agents, would not terminate that contact wrongfully, unfairly or unreasonably, nor act in any avoidable way that might cause hardship and/or loss to the applicant, nor cause her humiliation, harassment, loss of privilege, reputation, status and self-esteem, nor cause her physical harm or emotional distress in the course of her employment.”
Putting aside, for the moment, the question of whether or not the Courts will imply a term into a contract of employment which is so broadly worded (see, for example, the assertion that such an implied term includes one that an employer “would not terminate that contract wrongfully, unfairly or unreasonably, nor act in any other avoidable way that might cause hardship and/or loss to the applicant” ), there was simply no evidence that the applicant had suffered any compensible damage as a result of the alleged breach (or breaches) by the respondent.
In particular, there is no evidence that the applicant had suffered a psychiatric illness or the exacerbation of an existing psychiatric illness, as a result of the termination of her employment.
At common law, unless there is evidence of such a psychiatric illness, any humiliation caused by the termination of the employee’s employment is not compensible, nor is loss of privilege, reputation, status and self esteem.
See Addis -v- Gramaphone Company Limited (1909) AC 488 and Baltic Shipping Co -v- Dillon (1993) 176 CLR 344.
The applicant’s claim in breach of contract will be therefore dismissed .
ORDERS
The orders of the Court are as follows:
The application be dismissed.
The claims in the associated jurisdiction of the Court be dismissed.
I certify that this and the preceding 15
pages
are a true copy of the reasons for decision of
Judicial Registrar Patch.
Associate: Debra Scott
Dated: 9 April 1997
APPEARANCES
Counsel appearing for the applicant: Mr John de Meyrick Solicitors for the applicant: Lincoln Smith & Co Counsel appearing for the respondent: Mr John Gallagher Solicitors for the respondent: White & Associates Dates of hearing: 25, 26 July, 2 13 September 1996
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