Neil Victor Sutherland v Swales Kemp Homes Pty Ltd and Merchant Homes Pty Ltd [1994] IRCA 143

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1432 of 1994 B E T W E E N : NEIL VICTOR SUTHERLAND Applicant AND SWALES KEMP HOMES PTY LTD First Respondent AND MERCHANT HOMES PTY LTD Second Respondent MINUTES OF ORDER 18 November 1994 Judicial Registrar Staindl THE COURT DECLARES That the termination by the second respondent of the employment of the employee contravened Division 3 Part VIA of the Industrial Relations Act 1988. AND THE COURT ORDERS That the second respondent pay to the applicant compensation of $15,000.00. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1432 of 1994 B E T W E E N : NEIL VICTOR SUTHERLAND Applicant AND SWALES KEMP HOMES PTY LTD Respondent AND MERCHANT HOMES PTY LTD Second Respondent REASONS FOR JUDGMENT (Delivered Ex Tempore - Revised from Draft Transcript) 18 November 1994 Judicial Registrar Staindl On 24 August 1994 an application was filed by Neil Victor Sutherland alleging that his dismissal was harsh, unjust or unreasonable and was contrary to Division 3 of Part VIA of the Industrial Relations Act. His application named two respondent employers, Swales Kemp Homes Pty Ltd being the first, and Merchant Homes Pty Ltd the second. When this matter was called on for hearing today, 18 November 1994, there was no appearance for the first-named respondent, Swales Kemp Homes Pty Ltd. Mr Graham Maddison appeared for Merchant Homes Pty Ltd and informed me that he was a director of that company. I was also informed that Swales Kemp Homes Pty Ltd was in liquidation. The substantial issue in this case was the identity of the applicant's employer. The applicant's case was to the effect that in fact his employer was Merchant Homes Pty Ltd and ultimately he did not seek orders against Swales Kemp Homes Pty Ltd. The respondent said the applicant's employer was Swales Kemp Homes Pty Ltd. In order to determine this issue, it is necessary to consider the background of this matter. Background On 1 September 1993, the applicant was employed with Swales Kemp Homes Pty Ltd, a company which was engaged in housing construction work. The applicant was employed to do estimating work, that is, to calculate the cost of a particular house and to ensure that the materials were supplied to allow the construction of that house. Although the applicant commenced at a salary of some $35,000 p.a. with the provision of a car, that salary was increased to $40,000 as from 1 December 1993 following a review of his salary. The applicant maintained the use of a car. In January 1994, the applicant was asked to concentrate on projects in and around Canberra. These projects were undertaken by Swales Kemp Pty Ltd as distinct from the respondent company known as Swales Kemp Homes Pty Ltd. I was informed that there was an identity of directors in respect to these two companies. I note at this point that according to corporate records, Swales Kemp Pty Ltd changed its name to Merchant Homes Pty Ltd, the second respondent, on 17 May 1993. The applicant was subsequently requested to move to Canberra to take the place of an employee who had left the company. This was in about May 1994. At the time the applicant stated that he would be prepared to work in Canberra through the week but did not wish to reside in Canberra because of personal difficulties including the illness of his elderly mother. At this time there appears to me to be some confusion about the identity of the employer. However, in my view, the employer's identity was clarified by later events. Whilst in Canberra, the applicant was asked to take on the role of construction manager for Merchant Homes Pty Ltd. He received a business card for Merchant Homes Pty Ltd. He had at least one employee reporting to him and it would appear that some other persons were also reporting to him although it is not clear whether such persons were employees or not. The employee who reported to him also had a business card of Merchant Homes Pty Ltd. The applicant reported to Mr Maddison, the managing director of Merchant Homes Pty Ltd. He performed work on projects being run by Merchant Homes Pty Ltd. In these circumstances, the evidence is overwhelming to support the applicant's case that he was an employee of Merchant Homes Pty Ltd. The only significant evidence to the contrary is evidence that Merchant Homes Pty Ltd paid Swales Kemp Homes Pty Ltd a management fee for the services of the applicant. As was submitted by Mr Shaw, counsel for the applicant, this seems to me to be no more than an accounting procedure which suited the method of operation of Merchant Homes Pty Ltd. Termination of Employment On 3 August 1994, the applicant was informed that his services were no longer required in Canberra but that he could return to work on a project in Albury/Wodonga. This arrangement was later clarified to mean that the project on which he was to return to work in Albury/Wodonga was in fact on a sub-contract basis for which he would be paid a set fee for the management of the construction of some six villa units. The fee discussed was either on a 1˝ per cent commission basis or the sum of $9000, those amounts being what were sought by the applicant. However, no agreement was reached on these figures and it is clear to me that the applicant's employment was terminated by Merchant Homes Pty Ltd on or about 3 August 1994. However, there was some uncertainty as to the applicant's continued employment and he subsequently obtained a certificate of service dated 16 August 1994. That certificate of service was to the effect that the applicant was employed by Swales Kemp Homes Pty Ltd, and also an associated company in the ACT, Merchant Homes Pty Ltd, from 1 September 1993 to 11 August 1994. I note that this adds at least some support for the proposition that Merchant Homes Pty Ltd was an employer of the applicant albeit perhaps not the sole employer during this period. The termination of employment of the applicant was carried out in circumstances in which the applicant was told he was to return to Albury/Wodonga or that his employment would not continue in Canberra. He was not given any significant reasons for such decision, and in my view the conduct of the respondent breaches subsection 170DE, (2) of the Act, which provides that a reason, being a reason for a termination of employment, is not valid if having regard to the employee's capacity and conduct and the operational requirements of the employer, the termination was harsh, unjust or unreasonable. Furthermore, it seems to me, as was put by Mr Shaw, that the termination of employment may also breach subsection 170DE(1) in that I do not believe there was a valid reason for the termination of the applicant's employment. It was further put that the termination was contrary to subsection 170DB(1) in that no opportunity was given to the applicant to answer any allegations of misconduct made against him. Insofar as there is any reliance upon inadequate work performance by the applicant, then this subsection has also been breached. As just noted, there was some question of the applicant's performance of his duties raised by the respondent. However, such concern had not previously been raised with the applicant in a formal way. This was conceded by Mr Maddison because he said that the applicant was not an employee of Merchant Homes Pty Ltd and therefore it was not up to him to counsel or warn the applicant. I accept that at times the applicant was urged to improve his performance, especially in his duties relating to his work as an estimator, but I do not regard these as constituting a warning that his continued employment was at a risk. Remedy The applicant does not seek re-employment and given the evidence before the court and my impression of the witnesses, I find that the reinstatement of the applicant to his former position is in fact impracticable. That leads me to consider the question of compensation pursuant to section 170EE of the act. It was initially put that the maximum amount able to be awarded to the applicant was an amount of $20,000, that being half the applicant's annual salary of $40,000. However, the applicant's counsel later adopted the submission that in fact the remuneration of the applicant was greater than $40,000 when the applicant's use of a car was taken into account. As was rightly conceded, however, there was no evidence about the value of the provision of a car to the applicant for his personal use. The applicant's weekly salary is $769.23, obtained by simply dividing the sum of $40,000 by 52. The applicant was paid up until 10 August 1994. The period from 10 August to today's date is some 100 days, equating approximately to 14 weeks. The applicant gave evidence that during this time he has received income of approximately $1800. He also expects to receive further income of $1000 for two weeks work that he performed and also is entitled to payment of about $435 in respect to a project that he is supervising to date. That totals an amount of $3235 that the applicant has earned or is entitled to at today's date. During the 14 weeks since his termination the applicant would or could have expected to receive the sum of $10,769.22. During this period he received $3235, a difference of some $7534.22. This figure makes no allowance for the loss of use of a motorcar. However, in my view compensation is not necessarily limited to the period of income lost between the time of termination and the date of this hearing. It can be expected that in the future the applicant will not immediately attain a job with a salary of $40,000 p.a. plus car. I note the applicant's evidence that prior to taking up the job with Swales Kemp Homes Pty Ltd on 1 September 1993 that he had built and/or supervised the building of homes in the Wodonga area over a period of 16 years. He stated in evidence that he had been involved in the building of about 100 houses during this time, and he stated that he had a good reputation in the area. Accordingly, in my view it is not unreasonable to expect that the applicant should be able to gain worthwhile work within the near future. In saying the near future, I assess that period as perhaps being in the vicinity of three months, although I do not make any definite finding as to that, given the uncertainties involved in such an estimation. Doing the best I can therefore, I have assessed the compensation that should be payable to the applicant in the sum of $15,000. That figure is constituted by the loss, or the difference in income that the applicant has already undergone over the previous 14 weeks, and an allowance for loss of income over the next few months. It also takes into account the loss of use of a motor car to some extent, although because of the lack of evidence on this point I have been unable to give much weight to that consideration. Accordingly, there will be an order that the second respondent pay to the applicant the sum of $15,000. I certify that this and the preceding seven (7) pages are a true copy of the reasons for judgment of Judicial Registrar Staindl as recorded in the draft transcript and revised by the Judicial Registrar on 24 November 1994. Associate: Dated: Appearances: Solicitor for the Applicant : Mr B Shaw Firstnamed Respondent : No appearance Representative for Secondnamed Respondent : Mr G Maddison Judgment : 18 November 1994