Westen v Union Des Assurance De Paris
[1996] IRCA 419
•28 August 1996
DECISION NO: 419/96
CATCHWORDS
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - HARSH, UNJUST OR UNREASONABLE - COMPENSATION
INDUSTRIAL LAW - EMPLOYMENT CONTRACT - change in duties - whether REPUDIATION of contract
INDUSTRIAL LAW - BREACH OF CONTRACT - whether IMPLIED TERM of reasonable NOTICE - DAMAGES - MITIGATION of LOSS
Industrial Relations Act 1988 (Cth): s 170de(2)
Beck v Darling Downs Institute of Advanced Education (Supreme Court of Queensland, No. 3865 of 1988, Dowsett J, 20 April 1990, unreported)
Driver v War Services Homes Commissioner (1923) 44 ALT 130
Fryar v System Services Pty Ltd (1996) 137 ALR 321
Mitchell-Collins v Latrobe Council (1995) 60 IR 480
Quinn v Jack Chia (Australia) Ltd (1992) 43 IR 91.
TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130
TCN Channel 9 v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130
Carter, JW & DJ Harland, Contract of Law in Australia, 3rd ed, (1996, Butterworths)
Gray J, "Damages for Wrongful Dismissal; Is the Gramaphone Record Worn Out” in McCallum, McCarry & Rondfeldt, Employment Security (1994, Federation Press)
Macken, James J, Greg McCarry & Carolyn Sappideen, The Law of Employment, 3rd ed, (1990, The Law Book Company)
GERARD WESTEN v UNION DES ASSURANCES DE PARIS
NI 2819 of 1995
CORAM: MADGWICK J
PLACE: SYDNEY
DATE: 28 AUGUST 1996
IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES
DISTRICT REGISTRY
No. NI 2819 of 1995
BETWEEN GERARD WESTEN
Applicant
AND UNION DES ASSURANCES DE PARIS
Respondent
CORAM: MADGWICK J
PLACE: SYDNEY
DATE: 28 AUGUST 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
1.That the respondent pay to the applicant within 21 days the sum of $34,100 together with interest thereon at the rate prescribed by Order 35 Rule 8 of the Industrial Relations Court Rules; and
2.The Application is otherwise dismissed.
IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES
DISTRICT REGISTRY
No. NI 2819 of 1995
BETWEEN GERARD WESTEN
Applicant
AND UNION DES ASSURANCES DE PARIS
Respondent
CORAM: MADGWICK J
PLACE: SYDNEY
DATE: 28 AUGUST 1996
REASONS FOR JUDGMENT
MADGWICK J: The applicant claims compensation for unlawful termination of his employment by the respondent and common law damages for breach of his employment contract.
The applicant was aged 48 at trial. He was first employed by the respondent (actually a predecessor company) on 15 November 1985 in Melbourne as the Claims Manager of the Victorian Branch. He was on good terms with the then Victorian Branch Manager, Mr Watts. In late 1986, following Mr Watts' promotion to a national position, Mr Watts proposed a promotion for Mr Westen: that he should become the NSW Branch Claims Manager and assume certain responsibilities for larger claims of national significance. Mr Westen accepted and he and his family moved to Sydney in early 1987.
Relocation expenses
It was agreed that the usual full-scale relocation expenses would be paid by the company.
Mr Westen says that he asked what would happen if he and his wife did not like being in Sydney. He says that Mr Watts responded:
"If ever you want to move back to Melbourne we will pay for the move back, but there's only one condition. That is, we want you to make a fair go of it and expect you to stay at least two or three years to make it worth our while."
Mr Watts does not clearly recollect that conversation, but denies that he would have agreed to pay the applicant's expenses of a move back to Melbourne upon the lawful or unlawful termination of his services after 9 years' service. Indeed, that seems extremely unlikely. I am not satisfied that Mr Watts did so agree. If Mr Watts did not so agree, the applicant can hardly claim that the unlawful termination of his services, as he alleges, after such a period would sound in damages for denial of a benefit which the applicant no longer contractually enjoyed.
There was, in my view, no breach of contract on this score and no entitlement to the value of such relocation expenses for any other breach of the contract.
Who terminated the contract of service?
As at 10 May 1995 the applicant's position was still what it had always been in Sydney:
(a)He was the manager of all claims for the NSW Branch and of a small staff which comprised that Branch's "Claims Department".
(b)He reported directly to the NSW Branch Manager.
(c)He had his own personal secretary.
(d)He had important powers of final decision over the settlement of claims.
(e)He had the final advisory role as a claims specialist in relation to "national" claims, ie. claims in any Branch, both those for over $100,000 and others having such significance that the respondent's head office in Paris needed to be informed of them. In relation to such matters, the applicant reported directly to Mr Kahn, the Australian Regional Manager, or his assistant, Mr Watts.
The respondent merged with another, smaller insurance company. On this account and otherwise, a reorganisation of the work was put in hand. A "team" structure, with a different team (including one or more persons responsible for claims) for particular kinds of work underwritten, was to replace the previous "departmental structure" whereby each department would deal with an aspect of all kinds of insurance underwritten. The idea was to view each team as a "profit centre".
The applicant was to be, in substance, the senior claims employee within a team led by a Mr Cummins, which would deal with "specialist" business, that is, business sourced from larger customers. There was no actual proposal to reduce his salary. It was intended that he would still be called "Claims Manager". There was no plan to move him from his office. However, in the result, the applicant:
(a) would not be the manager of all claims in NSW, nor, in any real sense, of his own discrete staff;
(b) he would not report directly to the State Manager: his Team Leader, Mr Cummins, would be interposed between them;
(c) he would not have his own personal secretary;
(d) he would not have the power of final decision over claims except by way, no doubt, of delegation in routine matters from his Team Leader;
(d) he would not have the final advisory role to national top-level management in relation to national claims.
The applicant perceived, and in my view correctly perceived, that there was a considerable change in the nature of the new position he was being offered. He was, in effect, to become a senior, specialist claims clerk, whose considerable experience and expertise might be available to other people, outside his team, dealing with claims, but it would be at the option of those other people to consult him or not. Continuing to call him a Claims Manager did not make him one.
He was thus offered new and different employment from what he had contracted for. He declined it, as was his contractual right. The respondent by its officers made clear that it would not continue to employ him to do his previously-contracted work. He was entitled to, and did, treat the contract of employment as breached in a fundamental way by the respondent and to regard it as terminated at the instance of the employer.
I agree, subject to a gloss, with the learned authors of The Law of Employment (3rd ed.) (Law Book Company 1990), Macken, McCarry and Sappideen:
"In the absence of a contract allowing it, the employer cannot force changes [of job or regrading] on an employee. An attempt to do so will involve the employer in breach of contract if the [employee] presses her or his requirements..." (p 188)
The gloss is that this must not be taken to propound undesirable inflexibility: there must be some reasonable give and take. In a rapidly changing world, it would be uncommon for the parties to a contract of employment to envisage no change in aspects of the job. But employers' perceptions as to what are the important aspects of jobs they have promised employees and later wish to change may not coincide with the perceptions of the employees, nor of independent observers, such as courts to which the employees might, in due course repair. Serious, non-consensual intrusions upon the status or responsibilities, as well as upon the remuneration, attaching to a job may well be held to amount to a repudiation of the contract of employment, and their actuality will not be denied merely by the retention of the job's title. That is the drift and the tenor of cases such as Beck v Darling Downs Institute of Advanced Education (Supreme Court of Queensland, No. 3865 of 1988, Dowsett J, 20 April 1990, unreported) and Quinn v Jack Chia (Australia) Ltd (1992) 43 IR 91.
So it is here. Mr Westen's employment was terminated by the respondent's having indicated that it would not continue to be bound by the contract it had with him as to his employment.
Consequences under the Industrial Relations Act 1988 (Cth)
There was, apart from s 170de(2), a valid reason for the termination, namely bona fide reorganisation of the respondent's business in pursuit of increased profits.
However the question is whether that reason is robbed of its validity by s 170de(2) through harshness, injustice and/or unreasonableness.
While the bolt did not entirely descend from the blue, in that there were indications to Mr Westen over some months that he might be affected by some considerable degree of change, ultimately he was presented, without prior notice, with a concluded decision, a fait accompli. The attitude of the respondent's officers, I think, was that they had made efforts not to offend his feelings, by keeping the title "Claims Manager" for him and by indicating that his claims expertise was genuinely valued, so they felt that it was unreasonable of him not to accept the changes. However, as I have indicated, their judgment of that matter is not that of the Court and, indeed, the notion was misplaced: a contracting party cannot escape the consequences of terminating a contract by offering the other party a new and different one, even if the offeror considers its offer to be reasonable and fair.
It was harsh, unjust and/or unreasonable not to have bona fide discussed, as distinct from confronted, the precise proposal with Mr Westen. It is common ground that he had a professional approach to his work and it is difficult to see what the respondent might have lost by so doing. Mr Westen would have gained by being accorded the due status of a valuable, relatively senior employee of some years' standing. Both parties might have gained by a frank, private discussion. There is no reason to think that employees are unlikely to be able to contribute to the solution of problems concerning them: see, for example, Mitchell-Collins v Latrobe Council (1995) 60 IR 480 at 490 et seq., per Spender J:
There is ... a need for consultation with employees .... The reason for the need for such consultation is reflected in the observation concerning technological change made by the Full Bench of the Commonwealth Conciliation and Arbitration Commission ( 1968) 122 CAR 339 at 344-5 where it said:
"When employers are contemplating the introduction of computers and other automatic devices which may have serious effects on employees such as termination of employment or transfer interstate it is essential that both the employees and the union concerned should be informed of and involved in the planning as soon as possible. Many real human problems may be involved which may not be known to company executives and they, with the best will in the world, may take steps which do not help to solve them. It is our view that employees and their welfare are as important in the planning of a change of the kind we have had to consider as any other aspect of the change and that they, both individually and through their union, should be brought in at the planning stage. When brought into the planning both employees and the union should in their turn attempt to understand the problems which the employer faces and co-operate with him to try to find a reasonable solution. "
Wilson J referred to this passage approvingly in Federated Clerks Union v Victorian Employers' Federation (1985) 54 ALR 489. He said at 511:
"Consultation between employers and employees, preceded by the distribution of adequate information is not only sensible but essential if commerce and industry are to meet the challenge of progress in a spirit of harmony and with some regard for human dignity. "
It was also harsh unjust or unreasonable not to have treated him, as he requested, as having been catapulted into a redundancy situation, and not to pay him due notice and decent redundancy pay. As to the justification for linking inadequate payments to the validity of a reason for termination, see Fryar v System Services Pty Ltd (1996) 137 ALR 321. While I lean strongly against the notions that "due notice", as I have put it, could be other than reasonable notice, or that, as was submitted by the respondent, an award prescribing a minimal standard of notice to apply to everyone in the industry, including the least skilled and experienced officer on administrative work (a letter-opener, perhaps) ought to prevail over an otherwise implied contractual right for reasonable notice, I do not need, as will appear, to decide the matter.
Mr Westen was at least entitled to a minimum of 5 weeks' notice of the termination of his employment under s 170db. He should at least have compensation instead of it.
Modern, reasonable Australian employers of mid-level managers such as Mr Westen, do not, in the marketplace, stand on their mere obligation to meet the minimum award entitlements of such employees, where such entitlements exist, in redundancy situations. Employers are influenced by the inflation of estimates of the quantum of reasonable notice by the common law courts under the generally-implied contractual term providing for such notice. Such inflation itself represents a process of adaptation by those courts to the increasingly-perceived miserliness of traditional approaches to assessment at common law of what an employee loses when his/her employment is wrongfully terminated on no or short notice: see Gray J, "Damages for Wrongful Dismissal; Is the Gramaphone Record Worn Out", McCallum, McCarry & Rondfeldt, Employment Security (1994, Federation Press).
Such employers pay amounts which, upon analysis, amount to something like truly (that is uninflated) reasonable notice and a "redundancy pay" component. This conceptual basis is, of course, heavily influenced by the contributions of the Australian Industrial Relations Commission and its predecessor. Von Doussa J summarised the nature of these notional components of common marketplace payments in Fryar v System Services Pty Ltd (1996) 137 ALR 321 at 331:
"There is a distinction between the nature and purpose of a period of notice or payment in lieu, and a severance payment. The distinction is reflected in Arts 11 and 12 of the Termination of Employment Convention. While the two are often treated together to arrive at a global redundancy package, the separate nature and purpose of the two entitlements remains, and assume importance in this case.
A period of notice is to give an employee the opportunity to adjust to the change in circumstances which is to occur and to seek other employment: Matthews v Coles Myer Ltd (1993) 47 IR 229. The period may be worked out, as s 170db allows, and it often is, as it is recognised that the employee's prospects of obtaining other employment may be better if the search is undertaken while the employee remains in employment: see for example Sinclair v Anthony Smith & Associates Pty Ltd (IRC of A, von Doussa J, 1 December 1995, unreported) at 8.
A severance payment, however, is intended to provide a payment as compensation for the loss of non-transferable credits and entitlements that have been built up through length of service such as sick leave and long service leave, and for inconvenience and hardship imposed by the termination of employment through no fault of the employee: Termination, Change and Redundancy case (1984) 8 IR 34 at 62, 73. The inconvenience and hardship includes the disruption to an employee's routine and social contacts and the competitive disability to long term employees arising from opportunities forgone in the continuous service of the employer: Food Preservers Union of Australia v Wattie Pict Ltd (1975) 172 CAR 227. Such a payment is taxed on the favourable terms which apply to an eligible termination payment. It is quite inconsistent with the nature and purpose of the payment, and the taxation regime, that the severance entitlement should be worked out as if the number of weeks used to calculate the entitlement were weeks of notice."
In this case, it was harsh and unreasonable, having regard to Mr Westen's relevant personal circumstances, and to all the circumstances of his employment, that he was not paid two weeks' pay for each completed year of service, that is, 16 weeks' pay, on account of the "redundancy pay" notional component.
It does not, however, follow that Mr Westen's compensation should now be limited to what he ought to have been paid at the time in order to save the termination of his employment from unlawfulness. In some cases, compensation may reasonably be so limited. But the statutory remedy provided for breach of one's statutory rights, reinstatement aside, is compensation at large, limited only by the "cap" provided for by s 170ee(3). It is one thing for a departing employee to know what his/her rights are, and to have them promptly fulfilled, so that he/she can commence the search for other work, and get on with life generally, knowing what his/her material assets are. It is another to be forced to take action for the vindication of one's rights. In the latter case, it is simply not necessarily just compensation to attempt to restore, belatedly, what should have been paid in the first instance, to prevent breach of a statutory duty occurring.
The present case is an illustration. The circumstances were complicated. The company refused to negotiate a pay-out as on redundancy; there were urgently extant some large and difficult claims; neither party wished the respondent to be left in the lurch with them; the parties came to an arrangement whereby the applicant would stay on to conclude his handling of those claims but so as not to prejudice his rights to compensation. Upon the termination of his employment, the applicant lost the near-certainty that, after another 18 months or so, he would qualify for pro rata long service leave.
In the result, and I think without breach by the applicant of his mitigatory duty not to act unreasonably (see Carter & Harland, Contract Law in Australia, 3rd ed., Butterworths, 1996, p 787 and my remarks below), the applicant was still out of work at the time of trial, more than 6 months after his ultimate cessation of work for the respondent on 30 June 1995. His loss was therefore at least 6 months' remuneration.
I would award him the maximum compensation possible under the Act, namely, the amount of the remuneration that he would have received in respect of the 6 month period that immediately followed the day on which his termination took effect.
But for such limit, I would have awarded him one year's such remuneration, less the value of the car that he retained for a couple of months after his departure. My approach is that such would represent the reasonable measure of his loss: it is reasonable to count within that the prospect that he might reasonably wish to travel interstate, in particular back to Melbourne, in search of suitable alternative work. Such an approach does not require or justify a deduction from the amount I am awarding of the value of the use of the car.
Common law claim
It is enough to dispose of this claim to say that, assuming the contract was governed by an implied term that it would not be terminated (absent employee misbehaviour) except upon reasonable notice, I would not think reasonable notice would be as long as 6 months. Each case depends on its own facts. Mr Westen's own assessment was that three months would be reasonable. That is not conclusive but, in the context, it has some persuasive value.
Hence, there is no benefit to either party in my pursuing consideration of those claims further. I have already held that Mr Westen has not made out his claim that there was a term of his contract that required that he be, as it were, repatriated to Melbourne at the respondent's expense.
Mitigation
It is contended that the plaintiff should have taken steps which would have mitigated the loss caused to him by the respondent's breach of duty. Accordingly, the onus of proving this is on the respondent: TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130 at 138. Priestley J in TCN Channel 9 v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 exhumed a helpful explanation of the concept of mitigation given by Irvine CJ in 1923 in the Victorian case of Driver v War Services Homes Commissioner (1923) 44 ALT 130:
"At the end of the passage set out by Hope JA, Irvine CJ referred to the way in which the rule has come to be formulated, namely that it is a plaintiff's duty to do what is reasonable to mitigate his damages. He went on to explain his understanding of this rule, in words which, to my mind, make it easier to understand than the way in which it is usually expressed. He said (at 134):
". . . This expression, I think, does not mean that he is under any duty in the ordinary sense, towards the party breaking the contract, but that he cannot be said to have really incurred any loss which might have been avoided by his taking steps as a reasonably prudent man in his position would have taken to avoid further loss to himself: and the best test is, what would such a man do to avoid such a further loss to himself, supposing that, from insolvency of the other party, or from some other reason, he could not get any damages."
Particularly in the opening part of this passage, Irvine CJ makes it clear that the plaintiff must prove what damage it is that has flowed from the defendant's breach of contract. If it appears that the plaintiff is seeking to include in his damages losses which he would not have incurred had he acted reasonably in the ordinary course of his business following the breach of contract, then he has not shown that such "losses" were a result of the breach; hence, he is not entitled to make the defendant liable for them.
This way of looking at mitigation (which seems to be consistent with the discussion in the authorities mentioned in par 288(b) of McGregor on Damages, 15th ed (1988)) is exemplified by the order made by Irvine CJ in Driver (which was a case stated from arbitrators) sending the case back to the arbitrators for reconsideration with a direction (at 137):
". . . that the proper measure of damages is not the loss of profits which the contractor would have made on the contract if it had been carried out merely, but the loss of such profits reduced by the amount of profits, if any, which the arbitrators estimate the contractor has been or will be enabled to make acting as a reasonable man in the ordinary course of business by reason of his being released from his obligations under the contract. . . . "
Two criticisms are made of the applicant: that he should have mitigated his loss by acceptance of the new post, the same remuneration being offered, and that he ought in any case to have done more to find another job than he has.
The short and sufficient answer to the first criticism is the observation of Dowsett J in Beck:
". . . one can imagine that serious questions of waiver and novation may have been raised had he chosen to accept the offer."
The party claiming damages need only act reasonably. Moreover, I am not satisfied that, as a matter of common sense, if Mr Westen had tried to accept the new job while reserving his legal position, as was his legal right to do, the new job would still have been open to him: one comfortably infers that that would have been too much for the respondent's management to bear, given their attitude.
In relation to the second criticism, it is a tough person who, forced with the applicant's dilemma and choosing to resolve it as he lawfully did, would not suffer, practically speaking, some disorientation. He had big decisions to make for himself and his family. It was not an unreasonable approach to proceed as he did. I am not persuaded that he has been dilatory, insincere or wanting energy in his efforts.
There is nothing in the claim that the applicant has failed to mitigate his damage.
Calculation of amount to be awarded
Mr Westen's salary was $55,200 per annum. He had in addition the use of a car to the estimated value of $250 per week. I think therefore that, conformably with the approach indicated above, I ought to award as follows:
$27,600 ( = $55,200 x ½ )
$6,500 ( = $250 x 26)
$34,100
I will, therefore, in 48 hours' time, unless my Associate has received, in that time, by facsimile, an alternative proposal, accompanied by short submissions in support thereof, make formal orders thus:
1.That the respondent pay to the applicant within 21 days the sum of $34,100 together with interest thereon at the rate prescribed by Order 35 Rule 8 of the Industrial Relations Court Rules;
2.The Application is otherwise dismissed.
I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of His Honour Justice Madgwick.
Associate:
Dated:
APPEARANCES
Counsel for the Applicant: R. Reitano
Solicitor for the Applicant: Carroll & O’Dea
Counsel for the Respondent: C. Barton
Solicitor for the Respondent: Freehill, Hollingdale & Page
Date of hearing: 1 & 2 February 1996
IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES
DISTRICT REGISTRY
No. NI 2819 of 1995
BETWEEN GERARD WESTEN
Applicant
AND UNION DES ASSURANCES DE PARIS
Respondent
CORAM: MADGWICK J
PLACE: SYDNEY
DATE: 4 DECEMBER 1996
CORRIGENDA
The following amendments are made to his Honour's judgment of 28 August 1996:
Page 5
In the first sentence of the fourth paragraph, after the word "decision", delete the comma and the following words "a fait accompli".
Page 5
The first sentence of the fifth paragraph should be replaced with the following:
"It was harsh, unjust and/or unreasonable not to have bona fide discussed the precise proposal with Mr Westen, as distinct from confronting him with it."
Page 11
In the first sentence of the fourth paragraph, replace the word "forced" with the word "faced".
Associate:
Dated:
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