Watt v Intercultural Management Services Pty Ltd

[1996] IRCA 518

DECISION NO:518/96

CATCHWORDS

INDUSTRIAL LAW - complaint of UNLAWFUL TERMINATION - whether applicant excluded from the operation of Div 3 Pt VIA Industrial Relations Act 1988 - whether term of PROBATIONARY EMPLOYMENT - whether acceptance of term of probation to be inferred from the whole of the circumstances

Industrial Relations Act 1988 ss 170CC, 170EA, 377
Industrial Relations Regulations reg 30B(1)(c)

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
May and Butcher Limited v The King [1934] 2 KB 17
Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199

No. VI 3682 of 1995

JUDITH WATT v INTERCULTURAL MANAGEMENT SERVICES PTY LTD

JUDGE:    Marshall J
PLACE:    Melbourne
DATE:     1 November 1996

IN THE INDUSTRIAL RELATIONS  )
COURT OF AUSTRALIA          )
VICTORIA DISTRICT REGISTRY   )   
  No.  VI 3682 of 1995

BETWEEN:                JUDITH WATT

Applicant

AND:       INTERCULTURAL MANAGEMENT
  SERVICES PTY LTD
  Respondent

JUDGE:    Marshall J
PLACE:    Melbourne
DATE:     1 November 1996

ORDER

THE COURT ORDERS THAT:

1.The order of Judicial Registrar Millane dated 29 February 1996 be set aside.

2.The application 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          )
VICTORIA DISTRICT REGISTRY   )   
  No. VI 3682 of 1995

BETWEEN:                JUDITH WATT

Applicant

AND:       INTERCULTURAL MANAGEMENT
  SERVICES PTY LTD

Respondent

JUDGE:    Marshall J
PLACE:    Melbourne
DATE:     1 November 1996

REASONS FOR JUDGMENT

BACKGROUND - THE PROCEEDING

On 7 July 1995 the applicant, Ms Watt, filed in the Victoria District Registry of the Court an application pursuant to s170EA Industrial Relations Act 1988 (“the Act”) in which she sought remedies, including compensation, for what she alleged was the unlawful termination of her employment by the respondent, Intercultural Management Services Pty Ltd (“IMS”). On 20 July 1995 the matter was referred to the Australian Industrial Relations Commission (“the Commission”) for conciliation. On 14 September 1995, Commissioner Simmonds certified that the Commission had been unable to settle the matter by conciliation.

The matter was heard by Judicial Registrar Millane (“the Judicial Registrar”) on 18, 19, 23 and 24 January 1996. The Judicial Registrar delivered her reasons for judgment on 29 February 1996. The Judicial Registrar found that Ms Watt’s application was jurisdictionally sound. She held that Ms Watt was entitled to a remedy and ordered the payment of compensation in the sum of $13,153.85. On 13 March 1996, the respondent sought a review of the exercise of power by the Judicial Registrar (see: s377 of the Act). Pursuant to a private arrangement between the parties, the sum of compensation awarded was placed in an interest bearing account pending the outcome of the review.

The review was heard on 29 October 1996. Mr B. Lacy of counsel appeared for Ms Watt and Mr M. McDonald of counsel appeared for IMS. The only issue before the Court on the review was whether or not the application was jurisdictionally competent. Mr McDonald contended that Ms Watt was not able to bring her application under s170EA of the Act as a result of the combined operation of Regulation 30B(1)(c) of the Industrial Relations Regulations (“the Regulations”) and s170CC of the Act. Mr Lacy submitted that the application was not precluded by those provisions. There was no issue between the parties that if Mr Lacy’s submissions were accepted, the order of the Judicial Registrar would not be disturbed.

BACKGROUND FACTS

At the time of her employment by IMS, Ms Watt had spent most of her working life in the education industry.  Prior to commencing employment with IMS she had been the Principal of Morongo Girls’ College for about nine years.  Before that, she had been the Director of Studies at Korowa Anglican Girls’ School.

IMS conducts a student exchange operation which facilitates the placement of foreign students in Australia and Australian students in schools in other countries through a variety of cultural exchange programs.

On 21 January 1995, IMS caused an advertisement to be placed in the “Age” newspaper by a recruitment agency which it had engaged.  The advertisement was for a “public affairs director” with a “prominent international student exchange organisation”.  Remuneration of $55,000 per annum plus “benefits” was referred to in the advertisement.  Ms Watt applied for the position shortly after it was advertised.

Ms Watt was originally interviewed for the position of Director of Public Affairs in February 1995.  She was not successful in obtaining the position at that time.  On 5 April 1995, Ms Watt was reinterviewed for the position.  The interview was conducted by Ms Lane, the Director of IMS.  At that interview aspects of the remuneration package were discussed, including the $50,000 per annum salary and the provision of a motor vehicle and superannuation.  After the interview, Ms Lane offered Ms Watt the position of Director of Public Affairs with a commencement date of 18 April 1995.  Ms Lane said that she would send Ms Watt a contract for her to sign.

On about 12 April 1995, Ms Watt received a letter, dated 11 April 1995, from Ms Lane in the following terms:

“Dear Judith,

We enclose herewith our offer of employment.  If agreeable please return one copy of the contract to us.

We would like to take this opportunity to welcome you as a valued member of our organisation.

Yours faithfully

Betty Lane,

Director”

The contract contained some fifteen clauses dealing with a range of employment issues.

Clause 2 of the contract provided that:

“2.  PROBATIONARY PERIOD

During the first three months of your employment with the Company, you will be employed on a probationary basis (“the probationary period”).  During the probationary period this contract of employment may be terminated by either party on not less than 5 days notice in writing.  In the case of notice by the Company, it may, at its election, pay 5 day’s salary in lieu of notice.”

Clause 8 of the contract provided that:

“8.  LEAVE ENTITLEMENTS

8.1Annual Leave

(a)The Employee is entitled to 4 weeks’ paid annual leave on the completion of 12 months of service and proportionally less for any lesser period.  This 4 weeks annual leave entitlement is cumulative.

(b)Annual leave shall be taken not more that (sic) 2 weeks’ at a time.

(c)The time at which leave is taken must be agreed at least 3 months in advance with the Company to enable the National Director sufficient time to make alternative arrangements to cover the Employee’s absence.”

8.2  Sick Leave

(a)  The Employee is entitled to 38 hours of sick             leave per annum, non-cumulative.

Clause 12 of the contract provided that:

“12. AMENDMENT

Any addition or amendment to this contract of employment must be agreed to by the parties and be in writing.”

Clause 14 of the contract provided that:

“14. ENTIRE CONTRACT

This contract of employment supersedes all prior representations and agreements in connection with your employment.”

Ms Watt commenced employment with IMS on 18 April 1995.  Before commencing work she read the written contract which included the terms set out above.  There had been no prior discussion between Ms Watt and anyone representing IMS about Ms Watt’s employment being subject to a period of probation.  Equally, there had been no discussion about the amount of annual leave that could be taken at any one time or about sick leave being non-cumulative.

On 18 April 1995, Ms Lane enquired of Ms Watt as to whether she had received the written contract.  Ms Watt replied that she had received it and that she wished to discuss two of the terms contained in it.  After experiencing difficulty in finding a mutually convenient time to discuss the matters which were of concern to Ms Watt, the two women eventually met on 21 April 1995.

At the meeting Ms Watt told Ms Lane that she wished to be able to take her annual leave entitlement in one period and that she desired her sick leave entitlements to be cumulative.  In the same meeting, Ms Lane suggested that the title of the applicant’s position be changed to “Deputy Director”.  Ms Lane also requested Ms Watt to draw up a “statement” setting out the changes Ms Watt desired to be made to the written contract on the disputed topics of annual leave and sick leave.  Ms Watt drafted some alterations to cl 8 of the written contract.  However, due to Ms Lane’s unavailability to discuss the issue, the changes were not made to the contract.  The contract was never signed by Ms Watt.

Having unsuccessfully tried to arrange a further meeting with Ms Lane, Ms Watt wrote to Ms Lane on 20 June 1995 requesting “a private interview”.  Ms Lane’s response to that correspondence was ultimately to terminate the employment of Ms Watt.

TERMS OF THE CONTRACT OF EMPLOYMENT - THE CONDITIONS

Mr Lacy submitted that the contract of employment between Ms Watt and IMS which was entered into on 18 April 1995 did not include any of the clauses of the written contract sent to Ms Watt for her signature except in so far as any of its provisions were consistent with the orally agreed terms.  Those terms were that Ms Watt would serve as Director of Public Affairs for a $50,000 per annum salary, plus a company vehicle and superannuation.  Mr Lacy submitted that, as at 18 April 1995 and also as at 23 June 1995 when Ms Watt was terminated, in the absence of the written contract having been signed, there was no term of the contract of employment of Ms Watt that she would serve a period of probation.  He conceded that a logical consequence of his submission was that Ms Watt would also have had no entitlement to sick leave.

Mr Lacy further submitted that there was no basis for an inference to be drawn from the conduct of Ms Watt that she had agreed to the terms contained in the written contract.  He relied on the decision of the English Court of Appeal in May and Butcher Limited v The King (“May”) [1934] 2 KB 17, and in particular on a passage therein in the judgment of Lord Buckmaster at 20, where His Lordship said:

“In my opinion there never was a concluded contract between the parties.  It has long been a well recognized principle of contract law that an agreement in which some critical part of the contract matter is left undetermined is no contract at all.”

It was also put by Mr Lacy that as the letter accompanying the written contract had prescribed a means for its acceptance (i.e. by signature), the contract had no application to the employment in the absence of acceptance by that means.

Mr McDonald contended that Ms Watt had, as a result of her conduct, accepted all terms of the written contract, other than cl 8 in the respects identified above.  He submitted that at 18 April 1995, the clause dealing with probation was not a matter of concern to Ms Watt.  He relied upon evidence given by Ms Watt before the Judicial Registrar which demonstrated that Ms Watt had concerns only about cl 8.  In particular he referred to the following evidence given by Ms Watt concerning the probation clause:

“... In this case the employee must get to know the company.  And I would say then that the clause was there while I didn’t object to it - realised it had to be there - presumed it had to be there because I was now an employee but I also expected a fair treatment of that - their treatment in my employment - because I was - I had this probationary clause.”

Mr McDonald submitted that the fact that a mode of acceptance was prescribed by the correspondence from Ms Lane which accompanied the contract, did not preclude the Court from finding that Ms Watt had accepted the term of probation by other means.  He referred the Court to the decision of the New South Wales Court of Appeal in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (“Empirnall”) (1988) 14 NSWLR 523, at 528 - 529 where Kirby P said:

“... courts have come to conclude that sometimes, out of some circumstances, an acceptance can be inferred, notwithstanding the absence of specific assent.  Alternatively, in some circumstances, the law will provide an estoppel to preclude a party from denying the existence of a contract, even though specific acceptance was not given and could not be inferred from the facts proved.

...

The circumstances in which assent may be inferred, although never specifically stated, vary with the infinite variety of facts which come before the courts in disputed contractual cases.  From the facts, looked at objectively, a court may be willing to infer a party’s acceptance.  Various categories of cases of this kind have emerged over the years.  One arises where there have been previous dealings between the parties or where something in the history of the transaction between the parties gives rise to ‘an inevitable inference from the conduct’ of the disputing party, and from its ‘doing and saying nothing’ for a considerable time, that it ‘accepted the [contract] as valid’.  This was the way in which the English Court of Appeal expressed its conclusion in Rust v Abbey Life Assurance Co Ltd [1972] 2 Lloyd’s Rep 334 at 340: see also discussion in Chitty on Contracts, 25th ed, (1993) (pars 79ff at 48) and D W Greig and J L R Davis, The Law of Contract (1987) at 303f.

Another class of exception arises where one party has a duty to the other from which an obligation of candour might arise.  Thus, a fiduciary could not silently accept the benefits of an obviously mistaken assumption about the terms of an arrangement made by one to whom it owed a duty.  It would be bound to draw the apparent misapprehension to notice or otherwise be bound.”

TERMS OF THE CONTRACT OF EMPLOYMENT - THE CONCLUSION

I accept Mr McDonald’s submission that failure to accept an offer in the mode designated by the offeror does not necessarily result in a lack of acceptance.  In my view, the observations of Kirby P in Empirnall are apposite to the facts of this case.  The decision in May is not authority for the contrary view.  As Mr McDonald submitted, the decision in May dealt with the issue as to whether or not a contract had come into existence, not with its content or terms.

In my opinion, on an objective consideration of all the relevant facts and circumstances, one should infer from Ms Watt’s conduct that she had accepted all the terms of the written contract with the exception of those parts of cl 8 which disentitled her to take more than two weeks leave in one period of leave and which made her sick leave non-cumulative.  She was aware as at 18 April 1995 and throughout her employment, that her contract of employment provided for a period of probation.  She raised no issue or concern about that matter with IMS.  She gave IMS no reason to doubt that the probation clause in the written contract was a term of her contract of employment.

It is not necessary, in my view, for the Court to determine whether Ms Watt is estopped by her conduct from asserting that the probation clause did not form part of her contract of employment.  That is because her acceptance of that term can be inferred from her conduct.

REGULATION 30B(1)(c)

Section 170CC of the Act provides as follows:

“170CC     The regulations may exclude specified employees from the operation of specified provisions of this Division.  An exclusion has effect only if:

(a)it is permitted by paragraph 2, 4 or 5 of Article 2 of the Termination of Employment Convention; and

(b)in respect of an exclusion permitted by paragraph 2 of that Article - it is limited in such a way as to provide adequate safeguards as mentioned in paragraph 3 of that Article.”

Regulation 30B(1) of the Regulations provides that:

“30B(1)  [Excluded employees] Subject to subregulation (2), for the purposes of section 170CC of the Act, the following employees are excluded from the operation of Subdivision B, C, D and E of Division 3 of Part VIA of the Act:

(a)...

(aa)...

(b)...

(c)an employee serving a period of probation or a qualifying period of employment, if the duration of the period or the maximum duration of the period, as the case requires:

(i)is determined in advance; and

(ii)is reasonable, having regard to the nature and circumstances of the employment;

(d)...

Mr Lacy submitted that the period of Ms Watt’s probation was not determined in advance of the commencement of her employment.  I reject that submission.  In commencing employment on 18 April 1995 without raising any concern about the probation clause in the written contract, it should be inferred from Ms Watt’s conduct that she accepted IMS’s requirement for a probationary period as a term of her contract of employment.  The term of that probationary period was identified to Ms Watt on or about 12 April 1995.  When she commenced her employment some six days later, she well understood that the probationary period was an aspect of her contract of employment.  Immediately before her employment was terminated on 23 June 1995 Ms Watt was serving a period of probation, the duration of which had been determined in advance.

Mr Lacy submitted that the term of probation was not reasonable, having regard to the nature and circumstances of the employment.  He suggested that the period of “three months” was too short and that a longer period was reasonable.  However, as Wilcox CJ said in Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 209:

“...an employer will rarely be able to justify a period exceeding two or three months, in the case of an employee to whom Pt VIA now applies; that is, an award employee or a non-award employee whose wages do not exceed $60,000 per year. See s170CD of the Act.”

In my opinion, a period of three months probation was reasonable in the circumstances of this case, especially having regard to the fact that Ms Watt’s work location was in close proximity to that of her direct supervisor, Ms Lane.  In such circumstances, Ms Lane would not require any more than three months to determine whether or not Ms Watt’s employment should continue beyond that time.  Additionally, cl 3 of the written contract provided for a term of one year.  It would be an odd result if the period of probation extended substantially into the fixed term provided for in that clause.

ORDER

Having regard to the views expressed above, it follows that the Court has no jurisdiction to entertain Ms Watt’s application and that, accordingly, it must be dismissed.

The order of the Court is:

1.The order of Judicial Registrar Millane dated 29 February 1996 be set aside.

2.The application be dismissed.

I certify that this and the preceding 15 pages are a true copy of the Reasons for Judgment herein of his Honour Justice Marshall.

Associate:  

Date:  

Counsel for the Applicant:            B. Lacy
Solicitor for the Applicant:           Phillips Fox

Counsel for the Respondent:           M. McDonald
Solicitor for the Respondent:          Corrs Chambers Westgarth

Date of hearing:  29 October 1996
Date of judgment:  1 November 1996