C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - VALID REASON - whether allegations of poor performance justified - procedural fairness - whether the applicant given any or any appropriate warning and an opportunity to respond to the allegations of poor performance - REINSTATEMENT - whether reinstatement practicable where there is a valid reason for termination - COMPENSATION - whether any compensation payable should be substantially discounted Workplace Relations Act 1996 ss 170DC, 170DE(1) Nicolson v Heaven & Earth Gallery Pty Limited I IRCR 199 Gibson v Bosmac Pty Ltd (1995) 60 IR 1 Perkins v Grace Worldwide (Aust) Pty Ltd (unreported, Industrial Relations Court of Australia, Full Court, 7 February 1997) Davis v Portseal Pty Ltd (1996) 70 IR 320 Davis v Portseal Pty Ltd (unreported, Industrial Relations Court of Australia, Full Court, 10 April 1997) VITTORIO DIMASI - v - CARLTON AND UNITED BREWERIES LTD No. VI 1094 of 1997 Before: Judicial Registrar Millane Place: Melbourne Date: 11 July 1997 FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1094 of 1997 B E T W E E N : VITTORIO DIMASI Applicant A N D CARLTON AND UNITED BREWERIES LTD Respondent MINUTES OF ORDERS Judicial Registrar Millane 11 July 1997 THE COURT DECLARES THAT: 1. The termination of the applicant's employment on 29 November 1996 contravened section 170DC of the Workplace Relations Act 1996. AND THE COURT ORDERS THAT: 2. The applicant's application is otherwise dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules. FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1094 of 1997 B E T W E E N : VITTORIO DIMASI Applicant A N D CARLTON AND UNITED BREWERIES LTD Respondent Before: Judicial Registrar Millane Place: Melbourne Date: 11 July 1997 REASONS FOR JUDGMENT The applicant asks to be reinstated to his former position with the respondent as a tax adviser. He alleges that on 29 November 1996 the termination of his employment of some eight years contravened section 170DE(1) and section 170DC of the Workplace Relations Act 1996 (the Act). On that date the applicant was paid three paid months pay in lieu of notice totalling $10,475.01 together with his annual leave entitlements of $9,963.01. He was also provided with outplacement counselling. The respondent defends the proceeding alleging that the termination was justified by the applicant's continuing poor performance in the face of assessments that required him to improve. THE WITNESSES The respondent called the following witnesses: - Kevin Francis Jones (Jones), manager of the respondent's tax compliance section within the Foster's Brewing Group; - Kay Janet Conroy (Conroy), a psychologist with Coyne Didsbury, Consulting Psychologists; and - Janet Leslie Latchford (Latchford), an accountant and Vice President of the respondent's taxation section within the Foster's Brewing Group. The applicant gave evidence and called one other witness, Stephen John Wilson (Wilson), a chartered accountant employed by the respondent. THE EVIDENCE After hearing the evidence of all the witnesses I formed the view that the evidence given by the two principal witnesses called by the respondent was both plausible and credible evidence in the circumstances described to the Court. In contrast, the applicant's version of the events, between particularly January 1996 and the date of termination, required me to accept the less probable proposition that his performance in the lastmentioned period did not warrant, nor was it really the subject of any bona fide criticism, and that Jones and Latchford made up much of their evidence about discussion with him directed to requiring the applicant to improve his performance. As will become apparent from the summary of the evidence below, if there is any merit in the application made to the Court it lies in the allegation that there was a lack of procedural fairness in the termination process. This came about because there was no evidence given of an unequivocal warning to the applicant that if the applicant failed to improve his performance his longstanding employment would be terminated. Jones did assert, and I have accepted his assertion as true despite the applicant's denial, that Jones informed the applicant in a discussion during a performance appraisal in June 1996 that there would be "consequences" unless the applicant improved his performance. Notwithstanding this assertion Jones did agree that he stopped short of spelling out what the consequences might be. I am satisfied that during the relevant period Jones did place some pressure on the applicant to improve and meet the new challenges offered to him by reason of a merging of the respondent's tax groups in April 1995. However, like many managers and employers before him and, no doubt since, he stopped short of giving a warning, which in the context in which the statement was made, actually notified the employee that his position was in fact in jeopardy. More importantly, it was not clear to me after hearing the evidence that Jones raised with the applicant all the issues he relied on prior to the decision being made by Latchford to terminate the applicant and, thereby, arguably denied the applicant a proper opportunity to respond to and defend himself against the particular performance issues relied on to terminate his employment. Two decisions of the Industrial Relations Court of Australia handed down by Chief Justice Wilcox are often cited as providing an appropriate analysis of what the requirements of section 170DC of the Act are. The first decision is that of Nicolson v Heaven & Earth Gallery Pty Limited I IRCR 199. In that case His Honour made the following observations regarding the matters that must be addressed in order to satisfy the requirements of section 170DC of the Act: "The paragraph does not require any particular formality. But this does not mean that it is unimportant or capable of profunctory satisfaction. Section 170DC carries into Australian labour law a fundamental component of the concept know to lawyers as "natural justice" or, more recently, "procedural fairness". The relevant principle is that a person should not exercise legal power over another, to that person's disadvantage and for a reason personal to him or her, without first affording the affected person an opportunity to present a case. The principle is well-established in public administrative law. It was accepted into international labour law when Art 7 was inserted in the Termination of Employment Convention. Section 170DC is directly modelled on Art 7. The principle is, I believe, well understood in the community. It represents part of what Australians call "a fair go". In the context of s 170DC, it is not to be treated lightly. The employee is to be given the opportunity to defend himself or herself "against the allegations made"; that is, the particular allegations of misconduct or poor performance that are putting the employee's job at risk. Section 170DC(1) is not satisfied by a mere exhortation to improve. ... For s 170DC(a) to be satisfied, it would have been necessary for the respondent to determine what aspects of Mr Nicolson's conduct or performance were such as to justify possible dismissal and put those matters squarely to him, under circumstances where he had a fair opportunity to defend himself. That would have had to be done at a relevant time, close to the date of dismissal. It would not suffice that something was said to Mr Nicolson four weeks earlier, after which he was allowed to go on with his work as before." Following on from Nicolson's case His Honour Chief Justice Wilcox expanded on the abovementioned observations in Gibson v Bosmac Pty Ltd (1995) 60 IR 1 by saying: "... the section does not require any particular formality. It is intended to be applied in a practical, common sense way so as to ensure that the affected employee is treated fairly. Where the employee is aware of the precise nature of the employer's concern about his or her conduct or performance and has a full opportunity to respond to this concern this is enough to satisfy the requirements of the section. ..." In Gibson's case the warning was an explicit one and there could have been no doubt in the employee's mind that his job was in jeopardy if he failed to perform the weekend work required of him. In the case before me I am satisfied that the applicant knew and understood that there were real concerns about his performance but believed that because he was then looking to be transferred to an alternative position he was not going to lose his job. This being so, he was genuinely shocked when the termination occurred. The applicant commenced his employment with Carlton and United Breweries in 1989 as a trainee. Eventually he obtained his accountancy qualifications from the Swinburne University of Technology. As I have already noted above, in April 1995 there was a merger of two separate tax groups within the Foster's Brewing Group of companies and Carlton and United Breweries was part of that merger or what was on occasions referred to as an integration. Until April 1995 the applicant worked mainly in a tax compliance role ensuring that various tax returns were filed within the times required. It was common ground that after the April 1995 merger of the tax groups the role and duties performed by the applicant altered and expanded beyond his earlier role. Broadly speaking, it was agreed that the applicant was allocated the retail hotels group of companies and the Carlton Special Beverages group (Exhibits R2 and R3) work as well as being required to perform a more extensive advisory role on tax planning and strategies, which included advice on matters such as fringe benefit tax and capital gains tax. The new role was characterised by the respondent as a more challenging one. With it came a change in the reporting structure. Whereas the applicant previously reported to a person named Dominic Arceri he now reported to Jones who in turn reported to Latchford (see Exhibit R1). The significance of this change is that until the merging of the tax groups the applicant's performance was reviewed by Arceri. For the review conducted on 28 June 1995 this arrangement continued because most of the performance of the applicant's duties for the previous year occurred under the auspices of his previous supervisor. However, the subsequent performance review of his expanded duties was undertaken by Jones in June 1996 as was the earlier interview in January 1996 relating to the applicant's employee development review. The respondent has in place a system for managing its employees' performance and development. This consists of two formal processes during each year as well as a salary review which takes place in the latter part of the year. The first in time is the employee development review conducted in December/January each year, the focus of which is on the employee's individual development needs and career goals within the group. This process comprises the compilation by the employee of a review document (Exhibit R4). The process is not only designed to develop the employee's career objectives but it also appears to be designed to overcome performance weaknesses. After the employment development review document is completed by the employee, it is the subject of discussion with management and, in this case, Jones and Latchford, concerning the matters raised by the employee in that document. Essentially the employee development review process is a self assessment process that calls for some candour on the part of the employee both about their objectives and the things that they see as acting as barriers to achieving those objectives in their workplace. In the applicant's case he identified "lack of motivation" as one such barrier. In January 1996 the applicant met with Jones during which meeting the contents of the applicant's employment development review was discussed and that document was eventually signed by both the applicant and Jones. As I have already observed, Jones was not involved in the applicant's performance review conducted in June 1995 because he felt it was then fairer for the applicant to be assessed on the substantial duties he had performed under his previous supervisor. However, Jones was responsible for creating what he described as the more meaningful role elevating the applicant out of his limited tax compliance role and generally expanding his advisory responsibilities and was, therefore, familiar with what was expected of the applicant in the new role. It was agreed that during the course of their discussions concerning the applicant's employee development review document, the applicant's lack of motivation was discussed. It was Jones' evidence that he emphasised the need for the applicant to address this problem because he viewed it as an essential element to the applicant's success and the success of the team he worked in. According to Jones the gist of the applicant's statement to him was that the applicant was then struggling to get into the newly defined role and he was not enjoying the work. As part of their discussion and the matters documented by the applicant in the review document, he indicated a desire to go into sales and marketing and ultimately run his own business. It was this information which prompted Jones to talk to the applicant about the motivation he needed to be successful in managing and running his own business. Latchford also read the employee development review document prepared by the applicant and met with him to discuss its contents on or about 24 January 1996. Her evidence is that that discussion centred around the applicant's performance and her concern with two issues. One was his timeliness and the other was his understanding of his role and the need to provide advice and get involved in projects. She recalled expressing concern about his level of participation in monthly training meetings and development activities. According to Latchford the applicant acknowledged then that he was not performing as he should; telling her that he did not feel motivated. He also said that he did not want to remain in the tax area, but was interested in sales and marketing. Her response was to inform him that he needed to ensure that he performed his current job properly. However, she agreed to talk to the respondent's human resources team to ascertain what opportunities there were for the applicant in sales and marketing. It was the applicant's case that the employment development review document he prepared and the discussions he had with both Jones and Latchford were purely forward looking; that is to say, to his mind they were not at all directed to his performance of the expanded role he had taken up from mid 1995. He did agree that the lack of motivation identified by him in the employee development review document was discussed. He explained to the Court that this lack of motivation was caused by the lack of experienced personnel in the respondent's regional areas which required him to assist them. He also referred to the changes the company was experiencing and his belief that there was not a broad enough skill base in the tax area for him. These matters, he said, prompted him to explore other employment options within the respondent's group of companies such as sales and marketing. The written guidelines for the manager/team leader attached to the employee development review proforma document not only stress the importance of using this process as an opportunity for staff to review their performance before the formal employee performance feedback review in June each year, but also stress the need to be "frank" with poor performers. Both Jones and Latchford, the manager of taxation and the Vice President of taxation respectively, had every reason to take up any issue of motivation impacting on the applicant's performance during their meetings with the applicant in January 1996 because their interests lay in ensuring that the Foster's Brewing Group taxation area performed well. Even though the applicant's interests for the future were directed elsewhere, it is reasonable to conclude that their concerns were immediate ones. The suggestion by the applicant that the employee development review process and his discussions with Jones and Latchford were somehow confined to his career objectives, ignores the place of this review process with its written guidelines in the respondent's staff management structure. It also ignores the priorities that I have identified the respondent's two witnesses had in ensuring that the Foster's Brewing Group tax team operated efficiently. In my view it is more probable than not that the discussions held with each of them in January 1996 addressed both the applicant's career aspirations and performance issues because his acknowledged lack of motivation was obviously a state of mind likely to impact on his performance. Apart from anything else, this lack of motivation signalled to the respondent's management that the employee may not be functioning as well as he should in his new role taken up some six to seven months earlier. Following the employee development review process the approach adopted by the respondent's management was a positive one inasmuch as they agreed to initiate enquiries within the group to assist the applicant in achieving his desire to change direction in the future if a suitable sales and marketing position was available. It was common ground that subsequent to the employee development review process the applicant's interest in a transfer was taken on board by the respondent's human resources people. Jones' uncontested evidence is that in March 1996 he and the applicant had a discussion about accelerating the applicant's goal to go into marketing and sales and that discussion covered what skills would be expected of the applicant in the changed role. The applicant then undertook a workshop course on presentation and communication skills and in June 1996 he was subjected to a psychological appraisal to assess his suitability for a sales and marketing role. A written appraisal was prepared during June 1996 (Exhibit R11). The respondent's copy of that document indicates that the applicant did not rate highly in the intelligence/aptitude tests performed. On the applicant's evidence he unsuccessfully applied for marketing positions in early 1996 and again in about September 1996. From an evidentiary point of view the psychological appraisal's significance lies primarily in the fact that the respondent provided the applicant with an opportunity to explore, as was his desire, other avenues of development in the company when he was having some difficulty in performing his existing role. Jones knew of the existence of the report but neither he nor Latchford saw that report or had any reference to its contents prior to the decision to terminate in November 1996. On the applicant's evidence he was given an abridged copy of that appraisal in about June 1996, prior to the employee performance feedback assessment undertaken in late June and early July, and because of this the applicant's knowledge of its contents is relevant to establishing his understanding of his future options in the company when he engaged in the employee performance feedback assessment. The second formal step in the management of the respondent's staff involves the employee performance feedback session. This occurs in the middle of the year. In June 1996 this appraisal of performance was completed in draft by both Jones and the applicant (Exhibits R7 and R8 respectively). It was finalised in Exhibit R5, which was signed by the applicant on 17 July 1996. This final document was reviewed and commented on by Latchford who also signed the document on 18 July 1996. It was Jones' evidence that the feedback session was initiated by a meeting with the applicant at the end of June 1996 to discuss the applicant's performance. At that meeting Jones had the draft document (Exhibit R7) with him and the applicant had his own draft document (Exhibit R8). Broadly speaking, as can be seen from the feedback document, it provides an opportunity for management to offer comments on various aspects of the employee's performance and assess that performance against what is referred to as a performance continuum moving from "must improve - doesn't meet criteria", to "marginal - room for improvement in some criteria", to "effective - meets criteria", to "proven performer - regularly exceeds criteria" to the top category of "exceptional - performs always beyond criteria". The staff performance review documents used between 1991 and June 1995 were structured in a different way to the feedback document used in 1996. Nevertheless, the earlier assessments provided for the rating of an employee's performance from "poor", "fair", "effective", "accomplished" to, lastly, "outstanding". So far as the applicant was concerned his overall performance in earlier years was rated as "effective". When he had the opportunity to rate his own overall performance in the draft feedback document (Exhibit R8) the applicant again rated himself as "effective". In contrast, in his draft document which contained detailed comments in each category of performance, Jones rated the applicant's performance and his overall performance as "marginal". His comment was then that "Vic lacks the motivation and interest in his current role and this is having an adverse impact on performance. Vic finds it challenging to move beyond the compliance aspects of his work." It is Jones' evidence that when he first met with the applicant in June 1996 to undertake the feedback session they discussed and went through the areas of performance referred to in this draft document and, in the section providing for the employee's comments on the feedback session, the applicant then wrote, "Agree that lack of motivation in current role has naturally had some impact on performance. However not enough credit or recognition has been given for the level of service and support provided to the Retail Group and CSB, particularly with the level of change that has occur (sic) recently within those regions. There also appears to be no appreciation for the knowledge transfer and support provided to other tax advisers who have undertaken new roles and responsibilities within the Carlton Group. Believe more feedback on performance should have been sought from regions and tax advisers, as I believe it would be difficult for Ken to provide a fair and accurate assessment of performance, particularly with the large amount of time devoted to the tax audit and genesis during this time." The finalised document, Exhibit R5, was the subject of discussion between the two men and, according to Jones, the applicant did not take issue with the matters, particularly the performance criticisms set out by Jones in that document. In fact, it was Jones' evidence that the applicant appeared to accept his overall assessment that the applicant's performance was "marginal". Jones also told the Court that he and the applicant engaged in a general discussion about the overall assessment. During this discussion Jones alleges that, and I accept this allegation as being consistent with the purpose of the feedback session undertaken, he told the applicant that a marginal performance assessment was not acceptable and the applicant then needed then to address this problem. If he did not return his performance to the performance level of "effective", Jones claims to have said to the applicant that there would be "consequences". Jones recalled that during this part of their discussion the applicant agreed that he would try and address the concerns raised and indicated to Jones that he did not want "... these consequences to arise". There was no explanation offered to the Court by Jones about what he believed the applicant was referring to when he spoke of "consequences". As I have already noted above, the finalised employee performance feedback document was signed by the applicant on 17 July 1996. In that final document the applicant again added his own written comment as follows: "Agree that lack of motivation in current role and general uncertainty with respect to career path has had an impact on performance." With regard to the employee's comments made on the draft document (Exhibit R7), Jones told the Court he took into account the earlier comments made by the applicant before completing the final employee performance feedback document, Exhibit R5. He understood the comments made by the applicant in Exhibit R7 required him to speak about the applicant's performance to other people with whom the applicant had worked. He alleges that he did that before he completed the final document for signing. The applicant agrees that when they first met to discuss his performance he asked Jones to speak to other people who would be in a better position to judge his performance because Jones had been absent over a period of time performing an audit project in the latter part of 1995. Jones' evidence that he did speak to other people about the applicant's performance before completing Exhibit R5 was not challenged, nor was he cross-examined on what, if any, response he received to his enquiries. According to the applicant he received Exhibit R5 and told Jones, who denies this, that he did not agree with the contents and felt that the document did not give him the recognition he deserved. The applicant claims that during their meetings he made comments to the effect that the feedback was all "doom and gloom" and negative. Jones denied that these comments were made at all. In contrast to the evidence given by Jones it was said by the applicant that Jones did not take him to each and every criticism of his performance in each area requiring comment in that document. In effect, he denied agreeing with or acceding to the comments contained in the final document. It was his evidence that he only signed the document after Jones reassured him by pointing out that he was not in the last bracket provided for in the performance continuum. He signed the document after he says he wrote his comments in the section provided for in that document. I found the applicant's evidence in relation to the employee performance feedback sessions and the signing of the document implausible. He conceded that on any view of the employee performance feedback document, it was by comparison with earlier reviews a very poor performance review. The comments contained in Jones' draft document (Exhibit R7) were much the same as those contained in the final document. Because of this it is probable that after receiving the copy of the draft the applicant did acquaint himself with each of the comments made and that prompted him to seek to have input from other supervisors he thought were in a better position to judge his performance. In fact that is why he wrote the comment he did to this effect in Exhibit R7. The final document prepared by Jones contained no significant departure from the comments in the draft document. It is more likely than not that because the applicant's performance was then considered as being marginal there was discussion about the criticisms and comments made. The suggestion by the applicant that Jones somehow made him sign the final document against his better judgment lacks credibility because the applicant had the opportunity to make written comments signifying his views on the feedback session. What he did was to make a comment agreeing that his lack of motivation in the role he was then performing and his general uncertainty about his career path was impacting on his performance. This written comment is consistent with him having understood the criticisms made, having acknowledged them and having offered an explanation for them by reference to his continuing lack of motivation and uncertainty about his future career. By July 1996 the applicant had not been successful in relocating himself in the respondent's organisation and he must have by then realised that his performance needed to improve significantly even if he did not also turn his mind to the consequences Jones alluded to and the possibility of losing his job altogether. The applicant alleges that he had no further conversation about his performance between the employee performance feedback process dates and the termination in November 1996. This evidence is again at odds with that given by Jones. It was common ground that the respondent has a salary and bonus review system. This according to the respondent is part of its review structure taking place in September each year following the earlier review processes. In this case it was agreed that on or about 1 September 1996 Jones gave the applicant the following letter (Exhibit R9): "Dear Vic We have made significant strides forward during the year with the acquisition of Mildara Blass, expansion in China and the establishment of the International Division. I look forward to another productive year in F97 from each of our Divisions. Following our review of salaries, your salary will remain at $41900 per annum. Unfortunately FBG fell marginally short of its profit budget for F96, however, in view of the overall successful year the Board of Directors approved the recommendation that eligible staff will receive a pro rata bonus arising from the Short Term Incentive Plan introduced last year. The amount of bonus an individual receives will vary on the Individual Performance Factor - and this was explained in the policy distributed in May 1996. You will receive advice of your bonus in early October and it will be paid with your October salary. In conjunction with STIP we will continue to manage base salary levels to maintain broad competitiveness within the salary market generally. Later this year eligible employees will again be offered shares under the employee share plan. Full details will be given at the time. I look forward to your continuing contribution into next year. Yours sincerely E T Kunkel" The abovementioned letter shows that the applicant did not receive an annual salary adjustment. On his evidence he did not receive a bonus either. In previous years he had always received a salary adjustment. Jones claims that when he gave the letter to the applicant they had a discussion in which Jones informed the applicant that he was not receiving a salary adjustment because his performance was marginal and he needed to focus on the areas of improvement. According to the applicant Jones handed him the letter and told him there would be no adjustment. He did this, allegedly without making any mention of the previous feedback sessions or the applicant's performance. At the time the applicant says he was not aware that the salary adjustment was linked to his performance and, he says, he then believed that he would not get an increase because the respondent had not met its budget. The terms of the letter contradict the applicant's evidence, as does the employee development review document which clearly speaks of performance and salary reviews being connected. Jones' evidence also shows that the applicant was one of only three employee in the department who did not receive a salary adjustment at that time. Whilst the applicant may not have known whether or not the other employees received adjustments, it is quite clear that the respondent's salary review system was then connected to the employee's performance. In September 1996 the applicant was interviewed unsuccessfully for a position as a business analyst within the respondent's organisation. By June, as I have already noted, he had an abridged version of the psychological appraisal (Exhibit A1) and that document indicated, rightly or wrongly, that he was not considered suitable for marketing and sales. By July 1996 his performance review, even if he was as he agreed satisfied with his own performance and believed there was no basis for significant criticism, rated him as a "marginal" performer. In September he was for the first time not given a salary adjustment. It stands to reason that by this time he was well aware that his performance was not regarded as adequate and his options to change within the group were not good. In September 1996 the applicant also received a detailed document (Exhibit R10) setting out the objectives he needed to meet in his role for the 1997 financial year. This document was prepared from about the time the review process started and was intended to take in some of the matters canvassed in the review process. Jones alleges that in approximately July 1996 he instructed the applicant to implement what he referred to as a power tax application in the hotel group of companies for the 1997 financial year. Exhibit R10 confirms that implementation of the power tax initiative was one of the requirements that the applicant had to meet in the 1997 financial year. According to Jones, and this was disputed by the applicant, the applicant did not introduce this system prior to termination. In the last fiscal period worked the applicant accepts that he was responsible for some eighty-one companies and this included responsibility for progressing the liquidation of companies after July 1996. On Jones' evidence this initiative was never implemented. It was common ground that the applicant's area of responsibility also included a group of hotels referred to as the Ashwick Group. This responsibility it was said required the applicant to ensure that groups tax returns were prepared and lodged. In October 1996 as a result of a general enquiry directed to the one of the respondent's tax agents, Price Waterhouse, the applicant obtained copies of the tax returns for the Ashwick Group for the financial year ending 30 June 1995. It then became apparent to the applicant that the tax return documentation supplied to him by the tax agents had not been signed. Further enquiries with Price Waterhouse revealed that the returns had not been lodged but were prepared and ready for lodgment. It was accepted that the tax agents were paid for the preparation and lodgment of the tax returns and it appears that because Price Waterhouse made representations to the Australian Taxation Office, no penalties were incurred for the late lodgment of the returns some five months after the date they were originally due for lodgment in May 1996. Apart from the failure to lodge the earlier returns, Jones told the Court that it also became apparent at that time that the Ashwick Group tax returns for the current financial year were not on target for timely completion. It was agreed that when the applicant discovered that the previous year's returns had not been lodged, he informed Jones. Their evidence, however, diverges on the question of who was responsible, who was actually held responsible for the failure to lodge the returns and who needed to ensure that the next lot of returns were then being processed on time. Both Jones and Latchford assert that the applicant was responsible for tax compliance issues to do with that particular group of companies. Whilst the tax agents were paid to prepare and lodge the returns, their evidence was that the applicant still needed to supervise and ensure the completion of the task relating to tax compliance. Jones gave evidence that he expressed anger and concern when he was told by the applicant of the oversight and, in part, he attributed the late lodgment to the applicant's failure to properly supervise his area of responsibility. The applicant rejected this evidence and the weight of the criticism levelled at him, asserting that the responsibility for the preparation and lodgment of the tax returns fell to the tax agents and, so far as he recalled, Jones directed no criticism at him personally. I am satisfied that the tax agents clearly bear a significant portion of the blame, however, the overall responsibility for tax compliance for this group of companies was the applicant's. If his evidence is accepted, he had no mechanism for ensuring that the tax agents performed their task within the times required by the taxation and corporations laws. If he is responsible for compliance as Exhibit R10 suggests he is, then it is reasonable to assume that he must have some system for ensuring that those to whom the task is delegated perform the task on time. Accordingly, I am satisfied that the applicant did and should bear some responsibility for what occurred and it is probable that Jones did, because of the seriousness of the oversight, take the applicant to task on this issue and the issue of the timely preparation of the current returns of that group of companies. Following the lastmentioned incident in late October 1996, Jones raised his concerns about the applicant's performance with Latchford. She eventually instructed him to terminate the applicant's employment with three months' pay in lieu of notice because of his continuing poor performance. The thrust of Jones' and Latchford's evidence was that by that time the applicant had exhausted the process of searching for an alternative suitable position within the company in the sales and marketing area and he had been given every opportunity to demonstrate his ability to meet the requirements of the new and expanded role undertaken by him since mid 1995. Therefore, they saw no alternative but to terminate his employment. On meeting with the applicant on 29 November 1996, Jones alleges that when he told the applicant his position was terminated due to his poor performance over the last eighteen months, he referred to a number of matters including the applicant's lack of progress in implementing the power tax system and his failure to progress the company liquidations. He also recalled referring to the issue of the late lodgment of the returns and the concern he had about meeting the compliance requirements in preparing the returns for the current year. Exhibit A2 is a typed summary prepared by Jones early in December 1996 after the last meeting with the applicant. It records Jones' recollection of what was said at that meeting. He conceded that he made this record because by then he had been advised that the applicant had initiated proceedings in respect to the termination of his employment. That document summarises their meeting in the following way: "File Note of Conversation with Vic Dimasi - 29/11/96 • I requested Vic to accompany me to Room 4.02 for the purposes of discussion. • I said I have some things to say regarding your performance. • At the last performance review a number of concerns were discussed: - Work rate - Participation - Motivation in current role - Seeing beyond income tax return process. • There have been no discernible improvements in these areas. • As well, together with HR a number of initiatives have been taken aimed at assisting you to identify your interests and identify any suitable alternative roles for you outside the Taxation Group. • These activities included attending a Presentation Skills Workshop run by Rogan Australia, discussions with Phil Rainer and others about your career goals and interests, undertaking career development assessment tests and receiving feedback on viable career options. • During this time you have also look (sic) at and applied for a number of positions within the organisation abut (sic) have been unsuccessful in obtaining an alternative position. • Based on your performance in the past 18 months and my conclusion that there is no likelihood of improvement sufficient to meet the demands of your existing role as we go forward, we have decided to terminate your employment. (Vic interjected at this point with "This is a joke isn't it?" I replied unfortunately Vic this is not a joke, this is very serious"). This decision is to be effective immediately. Normally under the circumstances the company is only required to give one month's pay in lieu of notice however on the basis of your loyalty and length of service to the organisation the company has arranged for a more generous payment to be made to you of 3 month's (sic) salary in lieu of notice. This payment is in addition to your accrued leave and superannuation entitlements. • Is there anything you would like to say in response? • I then accompanied Vic to Room 4.01 and introduced him to Dorothy. Vic said that he was at a loss to know what to say, and that he was stunned. • We have also arranged for HR to make available a number of services to help you through the transition to your obtaining alternative employment. • There is a consultant from Morgan & Banks "Dorothy Kelleher" who will meet you now to discuss these things with you. Once that discussion is concluded you are to meet with Lisa Casey on the 5th floor who will attend to the formalities, and provide you with the payments due to you." The applicant disputes the accuracy of Jones' evidence concerning their last meeting. His account of their last meeting suggests a far less detailed exchange. He says, without elaborating, that Jones summarised what had taken place in the last year and matters relating to the applicant's career aspirations. He told the applicant that in the last eighteen months there had been no significant improvement in the applicant's performance and the respondent had decided to terminate his employment immediately with three months pay in lieu of notice. He denied any reference to the employee's performance feedback matters or any reference to the power tax, liquidation and tax return preparation and lodgment issues. When he was asked about Exhibit A2 the applicant indicated that it seemed to be a "fairly accurate" record. He then qualified this response by saying that he did not recall Jones raising the points relating to "work rate", "participation" and "seeing beyond income tax return process". When he was cross-examined on these points and the issue of whether the power tax, liquidation and the tax returns matters were raised he denied that they were. What emerged from the cross-examination of the applicant was that he simply did not accept any criticism of his performance in most areas. He accepted that the employee performance feedback assessment was, from a professional point of view, an "appalling one" but he did not agree with it. When he was asked whether he believed that there would be no consequences notwithstanding the overall assessment of his performance being marginal, his response was that he did not give it much thought. I found this answer remarkable in all the circumstances. It suggests a complete denial of his predicament as a professional employee even allowing for the respondent's failure to spell out what consequences lay before him if he did not improve. FINDINGS On the evidence I am satisfied that at termination the respondent had a sound, defensible or well founded reason for terminating this employee's employment as a tax adviser; namely, his continued poor performance. Whilst I accept Jones' evidence regarding the performance issues such as the implementation of the power tax process and the liquidation process, there is no evidence of when and how the applicant's failure to perform these tasks adequately or at all were drawn to his attention prior to the decision to terminate to enable him to respond to the allegations made. This is so because at the final meeting the decision to terminate had already been made and that meeting was not one designed to provide the employee with an opportunity to respond to any further allegations of poor performance before acting to terminate his employment by reason of these various allegations and continued poor performance. Accordingly, I find that the termination process contravened section 170DC of the Act. REMEDIES The applicant seeks reinstatement pressing the argument that this is a primary remedy and it is not sufficient for the respondent to contend that the filling of the applicant's former position with another employee renders reinstatement impracticable. He has not been successful in gaining alternative employment in the period between 29 November 1996 and the date of hearing despite attempts to do so. In seeking reinstatement the applicant relies on the Full Court decision in Perkins v Grace Worldwide (Aust) Pty Ltd (unreported, Industrial Relations Court of Australia, Full Court, 7 February 1997) which contains a detailed analysis of the meaning of "impracticable" and the matters relevant to the Court exercising its discretion to grant the relief sought. To my mind what distinguishes this case from others is that the respondent has established on the balance of probabilities that it had a valid reason for termination. In determining whether it is appropriate in all the circumstances of the case to reinstate this employee, the fact that the termination was for a valid reason weighs against reinstating him. For this reason, in this case, reinstatement is impracticable. In his decision in Davis v Portseal Pty Ltd (1996) 70 IR 320, His Honour Justice Moore had to consider an application by an employee for reinstatement where the Court found that the employee had been guilty of misconduct but had been, nevertheless, terminated in contravention of section 170DC of the Act because he had not been given the opportunity to respond to the allegations of misconduct. In considering the factors relevant to determining the appropriateness of reinstatement His Honour Justice Moore made the following observation: "The inappropriateness of reinstatement is reinforced by the fact that I have concluded the termination was for a valid reason and the only contravention of the Act was of s 170DC. In expressing this view I am not suggesting that the provisions of s 170DC are not of critical importance. They plainly are. However, as I will shortly discuss, the contravention of that section would not, in the circumstances of this matter, be likely to have altered the ultimate outcome." His Honour's decision in Davis' case was overturned by the Full Court in Davis v Portseal Pty Ltd (unreported, Industrial Relations Court of Australia, Full Court, 10 April 1997), however, it was not argued in the Full Court that reinstatement was practicable in that case. Principally what the Full Court had to consider was whether, had the employee been given the opportunity to respond, the prospect of him remaining in employment was so remote as to require substantial discounting of the compensation payable to him. On the facts of that case the Full Court found that Justice Moore erred in finding as he did that there was only a slight possibility that the applicant's employment would not have been terminated had he been given the opportunity to respond. In the case before me it is apparent that over a substantial period of time the applicant has unreasonably rejected all criticisms of his performance in a position giving him greater responsibilities and demanding more from him as an employee. I have accepted that contrary to what the applicant says, by September 1996, if he was prepared to acknowledge all the matters signifying his employer's continuing dissatisfaction with the level of his performance and the absence of any real opportunities for transferring to sales and marketing, he should have then realised that his performance needed to improve in a significant way. In the circumstances of this case I am of the view that there should be substantial discounting of any compensation otherwise payable. By the date of hearing the applicant was some days short of six months of unemployment and therefore his loss in remuneration alone, assuming he remained unemployed following the hearing dates, was more than the sum of $20,950, which sum represents twenty-six weeks' gross earnings. On termination the applicant was entitled to the statutory minimum period of notice; namely, the equivalent of $3,491.67. He was paid three times this amount and terminated immediately. As an alternative remedy the Court has a discretion to award the payment of compensation if it considers it appropriate in all the circumstances of the case. Bearing in mind my finding that there should be a substantial discount applied to any compensation payable to reflect the remoteness of the prospect of the applicant remaining in his employment with the respondent for any lengthy period had he received an explicit warning and an opportunity to respond to two further issues relating to his alleged poor performance, I consider it inappropriate to make an order for the payment of any sum of compensation beyond the amount already paid to the applicant on termination. Accordingly, I propose to dismiss the applicant's application. MINUTES OF ORDERS THE COURT DECLARES THAT: 1. The termination of the applicant's employment on 29 November 1996 contravened section 170DC of the Workplace Relations Act 1996. AND THE COURT ORDERS THAT: 2. The applicant's application is otherwise dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules. I certify that this and the preceding twenty-three (23) pages are a true copy of the reasons for judgment of Judicial Registrar Millane. Associate: Dated: 11 July 1997 Solicitors for the Applicant: Rosendorff & Associates Counsel for the Applicant: Ms R. Doyle Solicitors for the Respondent: Phillips Fox Counsel for the Respondent: Mr M. McDonald Date of hearing: 26 May & 2 June 1997 Date of judgment: 11 July 1997