Fenton, Linda v Swan Hill Aboriginal Co-operative Ltd [1998] FCA 1613

FEDERAL COURT OF AUSTRALIA

INDUSTRIAL LAW – termination of employment – whether valid reason for termination – whether unsatisfactory work is a valid reason – whether employee's refusal to remove name from a petition critical of employer a valid reason for termination– whether the stated reason for termination need be the actual reason

Industrial Relations Act 1988 (Cth) ss 170DC, 170EDA

Association of Professional Engineers, Scientists, Managers Australia v Deniliquin Council (1995) 58 IR 275 applied

Marazzato V Qantas Airways Ltd (unreported, Ryan J, Federal Court of Australia, 19 September 1997) mentioned

Nettlefold V Kym Smoker Pty Ltd(1996) 69 IR 370 mentioned

Selvachandran v Peteron Plastics Pty Ltd(1995) 62 IR 371 applied

LINDA FENTON v SWAN HILL ABORIGINAL CO-OPERATIVE LTD

VI 5974 of 1995

FINKELSTEIN J

4 SEPTEMBER 1998

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

victoria DISTRICT REGISTRY VI 5974 of 1995

BETWEEN: linda fenton

Applicant

AND: swan hill& district aboriginal co-operative ltd

Respondent

JUDGE: finkelstein j

DATE OF ORDER: 4 SEPTEMBER 1998

WHERE MADE: melbourne

THE COURT ORDERS THAT: 1. The application be dismissed. Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA

victoria DISTRICT REGISTRY vi 5974 of 1995

BETWEEN: linda fenton

Applicant

AND: swan hill& district aboriginal co-operative ltd

respondent

JUDGE: finkelstein j

DATE: 4 SEPTEMBER 1998

PLACE: melbourne

REASONS FOR JUDGMENT

HIS HONOUR: The applicant, Linda Fenton, was employed by the respondent, Swan Hill and District Aboriginal Co-operative Limited (the Co-operative), as an accommodation assistance programme social worker in 1994. She was dismissed by the Co-operative on 20 November 1995. The reason given for Ms Fenton's dismissal was her failure to remove her name from a petition that expressed no confidence in the directors of the Co-operative. Ms Fenton says that her dismissal was unlawful and she seeks to recover damages from the Co-operative. The legislation that governed Ms Fenton's employment was the Industrial Relations Act 1988 (Cth). That legislation has now been repealed and replaced by the Workplace Relations Act 1996 (Cth). Section 170DE(1) of the Industrial Relations Act provided: "An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service." By s 170DC an employer was not permitted to exercise the power to terminate an employee's employment for reasons related to the employee's conduct or performance unless: "(a) the employee has been given the opportunity to defend himself or herself against the allegations made; or (b) the employer could not reasonably be expected to give the employee that opportunity." Ms Fenton made application to the Industrial Relations Court seeking a declaration that the termination of her employment was in contravention of s 170DE(1) on the ground that there was no "valid reason" for that termination. She also sought an order that the Co-operative reinstate her (a claim no longer pressed) or pay her compensation for the loss that she has suffered as a consequence of her unlawful dismissal: see s 170EE for the powers of theIndustrial Relations Court. The application was transferred to the Federal Court in accordance with Schedule 16 of the Workplace Relations And Other Legislation Amendment Act 1996 (Cth). The application was heard by a Judicial Registrar of the Court (see s 376 of the Industrial Relations Act) and was dismissed. Ms Fenton seeks to review the decision of the Judicial Registrar under s 377 of the Industrial Relations Act. The review is to be conducted as a re-hearing of the application (see Association of Professional Engineers, Scientists, Managers Australia v Deniliquin Council (1995) 58 IR 275) and it is accepted that the onus is on the Co-operative to prove that there was a "valid reason" for the dismissal of Ms Fenton: see s 170EDA(1). The Co-operative was established under the Co-operation Act 1981 (Cth) with the principal object of providing community services to Aboriginal people in the Swan Hill district. Ms Fenton was one of the persons involved in its establishment some eighteen years ago and has been a member of the Co-operative ever since. Ms Fenton commenced to work for the Co-operative some time in late 1994; the precise date is unclear. The duties that Ms Fenton was obliged to perform are detailed in a document entitled "Job Description". That document did not come into existence until early 1995 but Mr A Shannon, the administrator of the Co-operative who was responsible for the day to day management of its affairs, said that it contained an accurate statement of her duties as from the commencement of Ms Fenton's employment. According to the Job Description Ms Fenton's prime function was "to identify Koori community members in need of assistance and ensure this assistance is given in an orderly and controlled manner." The specific tasks which Ms Fenton was required to undertake (and I take them from her Job Description) were: "To have eight families identified as in need of support on an on-going support programme To maintain as a minimum, weekly contact with these families, to identify and mediate difficult situations, and generally act as first point of contact with support Supervise the management of two crisis homes, including: (a) arranging entry contracts, (b) enforcing conditions of use of homes, (c) ensure weekly inspections are carried out, (d) ensure the families are integrated back into the community within three months, (e) evict tenants if contracts of use are breached or the Rules of the Crisis Centre are broken, (f) follow-up and report on families in rent areas with the Ministry of Housing, (g) provide an initial assessment on each family applying for crisis assistance." In addition, Ms Fenton was required to submit the following weekly reports: a report in relation to each family under care, a report on each crisis house and a report in relation to outstanding rent due by the families occupying a crisis house. Each report was to be provided to the co-ordinator responsible for supervising Ms Fenton. Ms Fenton was also required to provide an assessment of each family seeking assistance and report on the progress of integration back into the general community of families previously occupying a crisis house. The co-ordinator who was responsible for the accommodation assistance programme conducted by the Co-operative and to whom Ms Fenton was required to report was Mr K Knight. By early 1995 Mr Knight had become concerned about the manner in which Ms Fenton was performing her duties. The particular areas that were of concern to Mr Knight were as follows. To carry out her duties Ms Fenton had been provided with a motor vehicle. According to the policy of the Co-operative (the policy was later recorded in a document entitled "Vehicle Policy") when a vehicle is provided to an employee that vehicle can only be used for the purposes of the employee's employment and cannot be used for any other purpose without permission. Ms Fenton was apparently using her vehicle for private purposes. The next issue concerned the obligations of the families who were permitted to occupy the crisis houses. These families were required to enter into an agreement to pay up to 20% of their income as rent. It appeared that Ms Fenton was not making any effort to recover that rent. Mr Knight was also concerned that families who had been allowed to occupy the crisis houses were related to Ms Fenton. It is not suggested that those families were not in need of relief. It seems that Mr Knight was of the view that families related to Ms Fenton had been given favourable treatment. Finally, the policy of the Co-operative was to allow families to remain in a crisis house for a period of about three months. Thereafter they were to be integrated back into the general community. Mr Knight was of the view that Ms Fenton was not taking sufficient steps to assist these families to readjust "back into 'normal' lifestyles" within that period. On 12 January 1995 Mr Knight wrote to Ms Fenton outlining these concerns. He also reminded Ms Fenton of her reporting obligations as they were not being satisfactorily complied with. The letter stated that Ms Fenton was to be placed on three months probation during which time she was to satisfy all of her reporting requirements. A week or so later Ms Fenton wrote to the directors of the Co-operative denying that she was carrying out her duties improperly. She said the letter from Mr Knight was "an insult" and that she was not a failure in her work. It is worth pointing out that Ms Fenton did not deny that she had used the Co-operative's motor vehicle for private purposes. She wrote that whenever she had used the vehicle for private purposes she had done so after notifying her co-ordinator. She also wrote "I have used the car as discreetly as possible and there were times when I have needed it for work purposes. Why is it that others can use the car on weekends and for weddings etc. Double Standards." The directors considered Ms Fenton's letter and instructed Mr Shannon to write to advise her that the three month probation had been withdrawn but that the matters raised by Mr Knight remained matters of concern. Mr Shannon's letter enclosed a copy of the new Job Description that had been prepared. The letter concluded by stating that a failure to adhere to the Job Description could result in Ms Fenton's dismissal. Although Ms Fenton made some attempt to provide adequate and regular reports she was not altogether successful in that regard. Certainly weekly reports were not provided and those that were provided were deficient in various respects. Most importantly, the reports did not provide details of rent arrears nor did they contain any information about the condition of the crisis houses. Further, Ms Fenton continued to make use of the motor vehicle for private purposes although she knew that this was contrary to policy and that she required the permission of her co-ordinator. I suspect that Ms Fenton was of the view that because other members of the Co-operative were being permitted to make use of a motor vehicle out of hours it was unreasonable that she be treated differently. At all events, according to Mr Shannon the position was that Ms Fenton was taking her vehicle home almost every weekend and on many week nights as well. Mr Shannon spoke to Ms Fenton about this on many occasions but the position did not improve. On 20 April 1995 Mr Shannon wrote to Ms Fenton complaining about her deficient weekly reporting and her improper use of the motor vehicle. Mr Shannon described the deficiencies namely, the failure to provide details of the rent arrears and the failure to keep a proper inventory of the contents of the crisis homes. He also drew Ms Fenton's attention to her continual failure to adhere to the vehicle policy. He stated that Ms Fenton should consider the letter as a second warning. Mr Shannon continued to express concern as to the manner in which Ms Fenton was performing her duties. This led Ms Fenton to contact Mr J Harris, a representative of the Australian Services Union (ASU), for advice. An arrangement was made for Mr Harris and Ms Fenton to meet with Mr Shannon and Mr D Addison, a representative of the Victorian Employers Chamber of Commerce and Industry (VECCI) who was providing advice to the Co-operative concerning Ms Fenton's employment. The meeting took place on 30 June 1995. During the course of the meeting the various complaints about Ms Fenton's work were discussed. The evidence given by Mr Harris suggests that Ms Fenton conceded that her reporting was deficient in content and that she was not providing all of the required reports. It also seems clear that Ms Fenton accepted that she was not using the motor vehicle in accordance with the vehicle policy but she persisted with her claim that the policy was being applied in a discriminatory way. That is, Ms Fenton alleged that she was being treated unfairly because some staff members were allegedly using motor vehicles for private purposes and that conduct was sanctioned by the Co-operative. Mr Harris could not recall what was said about the failure of Ms Fenton to take steps to ensure that families in the crisis houses paid their rent. Neither Mr Shannon nor Ms Fenton was asked any questions about this. But it is clear from later correspondence that the issue was discussed. It was a matter of great concern to the Co-operative. As Mr Shannon explained: "I mean, I know Mrs Fenton is a very kind-hearted person and the very fact that we had two crisis homes with people living in them, not paying any rent, was a really disappointing feature. Not only were they not paying rent, they weren't paying their Ministry Housing arrears. In other words they were living rent-free at out expense. That's not what we're there for. We're there to teach our people right from wrong and where possible get as many people back into housing as we can, as soon as we can." Following the meeting the ASU wrote to Mr Shannon setting out what had been agreed at the meeting. So far as is presently relevant the letter records: "That Ms Fenton would participate with yourself [Mr Shannon] and others (including HC and S staff if necessary) to clarify and document the procedure required for selecting people for emergency housing - That a programme of staff meetings will be developed to re-establish a mechanism for staff to discuss issues in a co-operative manner and allow debate over changes which may be introduced in the operation of the Co-op. That Linda Fenton and yourself [Mr Shannon] will meet to formulate an agreed position description as a matter of urgency. That management will review and reformulate a motor vehicle policy to be applied equitably and that this be an item for discussion at the next staff meeting." Unfortunately, matters did not improve. Ms Fenton still failed to take steps to collect the rent and she did not adequately comply with her reporting obligations. This caused Mr Shannon to write to Ms Fenton on 11 August 1995. It is worth setting out the text of this letter in full: "I refer to our previous discussions in relation to your work performance, specifically in the areas reports on the crisis homes, reports and follow-up on rent arrears and updated reports on the progress of the occupants. I also refer to our discussions on 30 June, where you agreed to help document the procedures for selection of people for emergency accommodation and your agreed attendance and import at staff meetings. We are not getting regular reports on the crisis homes, there is no follow-up on rent arrears, you have attended staff meetings and you are not communicating with the administrator, all of which were agreed by all parties. Therefore, this letter is a formal warning that unless the areas outlined above are corrected to the standard agreed by both parties, your future employment may be in jeopardy. Specifically, we ask: - weekly reports on the condition of the crisis homes - weekly reports on rent arrears - weekly reports on the progress of the occupants - your acceptance to meet with the administrator and work through the issues as discussed on 30 June. We look forward to your immediate co-operation on the above matters." Ms Fenton responded a few days later. She wrote: "1. I do regular reports. 2. I do attend staff meetings, I have only missed one and I had a good reason for missing it. 3. You asked for this and that my job description that I've got is a draft. 4. I have complaints against the Administrator and you as Directors never give me the time of day. 5. Ned [a reference to Mr Shannon] can say and do what he likes. You as Directors need to be more up front with me and have a meeting with me alone." Nevertheless, Ms Fenton did begin to submit more extensive reports on a more regular basis. For example, she provided three reports in August 1995 and three or four reports in September 1995. However, although the reports contained more detailed information they still did not cover all of the matters that were required to be dealt with. In September or October 1995 a requisition was served on the Co-operative calling upon the directors to convene a "special general meeting" of its members to consider whether the administrator and the board of directors should be replaced. The requisition was signed by a large number of members as well as by persons who were not members of the Co-operative but who supported a change of its management. Ms Fenton was one of the requisitionists. At around the same time a number of unsigned documents were circulated that were highly critical of the directors of the Co-operative and urged a vote of no confidence in the board. The documents alleged that the directors had breached many of the rules of the Co-operative, that they had harassed staff, that they were failing to secure the provision of proper services to Koori people and that they were guilty of other improper practices. At the hearing it was not suggested that Ms Fenton had anything to do with the circulation of these documents. However, I suspect that Mr Shannon held the belief that Ms Fenton may have been in some way responsible for these documents being circulated. In November 1995 Mr Shannon asked Ms Fenton and Mr Harris to attend a meeting with a number of the directors of the Co-operative, Mr Addison and himself to discuss Ms Fenton's future. Mr Shannon explained that the meeting was called because the matters that had been agreed with Ms Fenton at the meeting of 30 June 1995 were not working satisfactorily. He said: "We were getting to the desperate stage whereby we had made every endeavour to have our worker follow the guide lines and it hadn't happened." The meeting took place on 16 November 1995. During the course of it either Mr Shannon or Mr Addison outlined the continuing concerns that the Co-operative had about the manner in which Ms Fenton was performing her duties. Again the issues raised were Ms Fenton's failure to provide proper reports, her failure to collect rent, her failure to provide adequate assistance to the families living in the crisis houses and her continual improper use of the motor vehicle. I should indicate that the evidence is clear that Ms Fenton had continuously failed to carry out her duties in at least the following respects. While her reporting had greatly improved after August 1995 the reports she did submit did not provide all of the required information. Importantly, the reports failed to deal with the arrears of rent. In addition, I have no doubt that Ms Fenton did not make any serious attempt to collect the rent that was due by the families occupying the crisis homes. According to Mr Shannon no rent was being collected at all. Ms Fenton did not contradict this or seek to explain what steps she had taken to collect the rent or why it had not been collected. If the position was that the families could not afford to pay rent (no doubt a real possibility) I would have expected Ms Fenton to say so. Further, the evidence sufficiently establishes that Ms Fenton continued to use the motor vehicle for her own private purposes. It is true that on a few occasions she did request permission to use the vehicle. But Mr Shannon said that the improper use was occurring regularly, often daily, and I have no reason to reject his evidence. I should also indicate that I do not regard the deficient reporting, the failure to collect rent or the improper use of the motor vehicle as trivial matters. It is only by the submission of regular reports by the social workers who are in contact with the families who are being assisted by the Co-operative that the Co-operative knows to what extent it is adequately performing the functions it was established to perform. The vehicle policy is important for other reasons. The Co-operative receives its funding from State and Federal governments. It purchases motor vehicles with that funding. If assets that are purchased from government grants are misused future grants will be at risk. Further, as Mr Shannon said, it would be difficult to convince other members of staff not to abuse the vehicle policy if some members of staff were allowed to do so with impunity. It is difficult to say whether Ms Fenton failed in her responsibility to provide adequate assistance to families who were in need. I doubt that she did fall down in her duties in this respect. Certainly there was no direct evidence from which it could be concluded that Ms Fenton did not attend to the needs of families under care. One other issue that was discussed during the meeting was the requisition. (All of the witnesses referred to it as a petition and I will continue to do likewise). Mr Harris said that this was one of the key issues that was discussed. He attributed to Mr Shannon the statement that the Co-operative regarded the circulation of the petition as "nigh on treason" and that the directors were very concerned about it. Mr Shannon said that he did not raise the issue of the petition at the meeting but that it was mentioned by one of the directors who was present. It is likely that it was Mr Nicholls who first mentioned the petition although I have little doubt that Mr Shannon made a significant contribution to the discussion about it. Ms Fenton was asked whether she would withdraw her name from the petition. She was told that the Co-operative was concerned that members of staff would lose confidence in the Co-operative's management if she failed to do so. It was made clear to Ms Fenton that unless she withdrew her name she might be dismissed. What is not clear is whether Ms Fenton was told that if she did not remove her name from the petition she would be dismissed. It seems that Mr Addison had advised the Co-operative that it could dismiss Ms Fenton if she failed to remove her name from the petition on the basis that her failure to do so was an act of disloyalty. I think the true position is that what was said to Ms Fenton was that the Co-operative was minded to dismiss her because of her unsatisfactory work performance but that if she agreed to remove her name from the petition then the Co-operative might not go ahead with her dismissal. I take this to be the position from what was said by Mr Harris. His evidence was that, quite apart from the petition, those representing the Co-operative at the meeting made it clear that the major concern of the Co-operative was Ms Fenton's failure to carry out her duties adequately. However, at some stage on 16 November 1995, most likely after the meeting with the directors, Mr Harris and Mr Addison discussed the position of Ms Fenton. According to Mr Harris he reached an agreement with Mr Addison that if Ms Fenton remained in the employment of the Co-operative certain procedures would be put in place concerning the manner in which Ms Fenton would carry out her reporting obligations. It was also agreed that Ms Fenton would no longer use the motor vehicle for private purposes. Finally, it was agreed that Ms Fenton would be given 24 hours to decide whether she would withdraw her name from the petition. It was Mr Harris' understanding that if Ms Fenton did not remove her name she would be dismissed. As events turned out, Ms Fenton refused to take her name from the petition and the Co-operative was advised of this on 17 November 1995. On 20 November 1995 Mr Shannon wrote a letter to Ms Fenton the terms of which were either drafted or suggested by Mr Addison. So far as is relevant the letter reads: "As you are aware we have had numerous meetings with you over the past twelve months, in an endeavour to have our working relationship become more understanding without much success, and as you would appreciate we must have full support from our staff. During this latest meeting [i.e. on 16 November 1995] you were given the option of removing your name from a petition, which has been circulated through our community which was a vote of no confidence in our Directors, you have decided that you do not wish to remove your name from this document, the Directors viewed this as an act of gross misconduct, and accordingly we have no alternative but to terminate your employment with the Co-op forthwith. Your holiday pay and termination pay will be made up this pay day." Whether this letter accurately states the reason for the dismissal of Ms Fenton is a matter of great significance. It is significant because if Ms Fenton was dismissed for the reason stated in the letters that would not be a "valid reason" for her dismissal. A member of an organisation such as the Co-operative is entitled to exercise his or her right to call for a meeting of members for the purpose of removing a director and at such meeting vote in favour of removal. If the member is also an employee that is no reason for regarding the calling of the meeting as an act of disloyalty. What must be remembered is that the directors hold office at the will of the members. A member of the Co-operative does not lose his or her right to remove the directors simply because he or she happens to be an employee. However, I do not believe that it was the failure of Ms Fenton to remove her name from the petition that was the reason for her dismissal, although I have no doubt that it provoked that dismissal. Two directors of the Co-operative who were present at the meeting on 16 November 1995 were called to give evidence to explain the reasons. The directors were Ms J Connolly and Mr D Nicholls. Ms Connolly said that the decision to dismiss Ms Fenton was a unanimous decision of the board. She said that she was in favour of dismissal "because Linda wasn't doing her job and had shown that she wasn't doing it for nearly, you know, over a year, whatever it was." When asked whether it had been agreed that Ms Fenton would remain in her employment provided that she removed her name from the petition Ms Connolly said: "No, what I saw from that meeting is that we'd had a long history of Linda not doing her position and Ned [Shannon] speaking on numerous occasions saying to her, 'You are not doing this, you are not giving what we need in reports, you're still using the vehicle when you shouldn't be, you know, things haven't changed. Time and time again so that meeting was to discuss those issues and it just so happened that the petition that Linda had signed – that meeting would have happened anyway, whether she signed the petition or not." " Mr Nicholls gave evidence to a similar effect. When asked why the directors had decided that Ms Fenton should be dismissed Mr Nicholls said: "Well, on three occasions, or it could be four occasions, whether that be, sort of, you are asked to do jobs to clarify what, you know – warnings to say, 'Well, you know, the reports aren't up to standard, the housing issues are a problem with the emergency, the crisis, houses so there's problems there. And the car issue came up and there was a warning there and, sort of, there's three or four warnings and through administration – or three warnings through administration – and administration reported back to us and was saying, "well, three warnings is enough."" During cross-examination both Ms Connolly and Mr Nicholls were asked many questions concerning the reasons for dismissal. It was put to them that the directors were not so much concerned about Ms Fenton's performance as an employee but were more concerned to have her remove her name from the petition to protect the position of the board. Each of them denied that this was the case although it was clear that both Ms Connolly and Mr Nicholls were greatly troubled by the "political" implications of having Ms Fenton's name remain on the petition if she was to remain an employee of the Co-operative. I think that Mr Shannon was also concerned about the criticisms that were made of him in the other documents that had been circulated and wished to have Ms Fenton withdraw her name from the petition as a means of establishing that the criteria was unjustified. Nevertheless, there is no reason for me to reject the evidence of Ms Connolly and Mr Nicholls. I thought that each of them gave truthful evidence when explaining that the reason for Ms Fenton's dismissal was her poor work performance. The final issue that requires determination is whether the actual reason for the dismissal of Ms Fenton is a "valid reason" for the purposes of s 170BE(1). In this regard it does not matter that the stated reason is not the actual reason for the dismissal. An employer may state a false reason for dismissal but that dismissal will nevertheless be lawful if the actual reason was a "valid reason": see Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373 per Northrop J. The meaning to be given to the words "valid reason" in s 170DE(1) was also discussed by Northrop J in Selvachandran. His Honour said (at 373): "In its context in s 170 DE(1), the adjective "valid" should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s 170DE(1). At the same time the reason must be valid in the context of the employee's capacity or conduct or based upon the operational requirements of the employer's business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must 'be applied in a practical, common sense way to ensure that' the employer and the employee are each treated fairly …" See also Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370 at 373; Marazzato v Qantas Airways Ltd (unreported, Ryan J, Federal Court of Australia, 19 September 1997). Is the reason for the dismissal of Ms Fenton sound, defensible or well founded? I am sure that it is. Ms Fenton was well aware of the requirements that were imposed upon her in her position as an accommodation assistance programme social worker. She also knew of the importance of those obligations. She did not conform to them. I do not mean to suggest that Ms Fenton wilfully failed to perform her duties although when it came to the misuse of the motor vehicle I rather think that she may have intentionally flouted the rules. Ms Fenton was given ample warnings and no doubt had the counselling and advice of her union representative. Yet she persisted in continuing with the conduct about which many complaints had been made. There was no reason why the Co-operative was required to countenance this type of behaviour. In the result the application for review must be dismissed.