Michael Krauth v Tradebanc International Pty Limited [1995] IRCA 45

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1485 of 1994 B E T W E E N : MICHAEL KRAUTH Applicant AND TRADEBANC INTERNATIONAL PTY LIMITED Respondent Before: Judicial Registrar Millane Place: Melbourne Date: 24 February 1995 REASONS FOR JUDGMENT By an application made 31 August 1994 pursuant to Section 170 EA of the Industrial Relations Act 1988 (the Act) the Applicant contends that on 25 August 1994 his employment with the Respondent as a broker was unlawfully terminated. The Applicant does not seek reinstatement rather he seeks $30,000.00 by way of compensation. The Respondent defends the Applicant's claim on two bases. The first is that the Applicant is excluded from the operation of Section 170 EA of the Act because on 25 August 1994 when his employment was terminated he was serving a three month period of probation commencing on 1 July 1994; and, secondly if there is a finding against the Respondent on the preliminary question, the Respondent contends that the Applicant's employment was terminated in accordance with the Act because of the Applicant's poor performance and after counselling and a number of warnings were given to him. At hearing the Applicant appeared in person. The following witnesses were called:- a) By the Applicant:- i) the Applicant; ii) Andrew Alexander Charles Damman. b) By the Respondent:- i) William Frederick Rorke; ii) Paul Joseph Douglas Irving; iii) John Alfred Graves. Background It is not contested that from 1 July 1994 the Respondent employed the Applicant as a broker in its trade bank operation. The Respondent's business can loosely be described as a reciprocal trade exchange where members access goods and services on an exchange basis. It operates ten branches in various states of Australia with 2,000 members and a turnover of around $20,000,000.00 per annum. Between March 1994 and July 1994 the Applicant worked for the Respondent as an independent contractor in its sales division at its St Kilda Road office. This involved the recruitment of new members to the exchange. On the other hand, a broker's job is to source the items required by members and effect exchanges. For instance, if a member wanted a modem for a computer the broker would source this item and set up an exchange. In about June 1994 the Respondent required the services of another broker at its Mitcham office. The Applicant was keen to move from sales to brokering and applied for this position. Paul Joseph Douglas Irving (Irving) is the Respondent's national sales and marketing manager and he is located in the Respondent's Sydney office. It was Irving's evidence that he and the managing director, William Frederick Rorke (Rorke), were the two people in the company responsible for recruiting managers and brokers as employees. These two men have adjacent offices in Sydney and communicate closely on these matters. Probationary Employment Regulation 30B of the Industrial Relations Regulations for the purposes of Section 170 CC of the Act excludes from the operation of sub-divisions B, C, D and E of Division 3 of Part VIA of the Act employees serving a period of probation or a qualifying period of employment if the duration of the period or maximum duration of the period, as the case requires, first is determined in advance and, secondly, is reasonable, having regard to the nature and circumstances of the employment. It was contended by the Applicant that the first time he heard any allegation of probationary employment was at the hearing. The court file was of no assistance in the matter as that the Respondent did not file any responsive material disclosing its defence prior to the hearing date. It was difficult to obtain from the Applicant clear sequential evidence about the matters he relied upon and, more importantly, the discussions leading up to the formation of the contract of employment and the precise terms of the contract governing the relationship. Because there was no written agreement or other documentary evidence disclosing the terms of the contract of employment the court was faced with the unenviable task of having to choose between conflicting stories as to the terms of the contract and the date at which the offer of employment was made and accepted. It was not contested that Irving and the Applicant negotiated the contract of employment during June 1994, and, because of this, the extent to which any terms and conditions of such contract were brought to the Applicant's notice was solely dependant upon their verbal negotiations prior to 1 July 1994. It was Irving's evidence that on two separate occasions, once by telephone from Sydney and the other at a face-to-face meeting in Sydney after a broker's conference he informed the Applicant, amongst other things, that the Applicant would be employed by the Respondent for a period of 3 months at the end of which period his employment would be reviewed. Although there were no witnesses to the formative discussions between the Applicant and Irving the Respondent also called two other witnesses, Rorke and John Alfred Graves (Graves), the Respondent's regional manager located at the Mitcham office, both of whom corroborated Irving's contention that at the relevant time the Respondent had a policy in place requiring any newly appointed manager or broker to serve a three month probationary period of employment. All three of the Respondent's witnesses agreed that the policy of probationary employment for brokers and managers was not in writing and there was no documentary evidence the company could adduce from which the existence of such a policy might be inferred. In Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233. Wilcox C.J. whilst considering a defence of probationary employment where the evidentiary conflict was confined to different versions of conversations said at page 241:- ... it is tempting for a judge to say that, if employers do not bother to put the terms of the agreement in writing, they ought not to expect a court to accept that there was an oral agreement for a probationary period. However, lawyers have been lamenting that commercial people often fail to put agreements in writing since time immemorial; to little effect. Notwithstanding the failure of parties to take this obvious step, courts have to take the evidence as they find it and endeavour to devine the truth. I must resist Mr Christie's invitation to treat the absence of writing as a reason for preferring his case on this issue. Irving sought to explain the absence of any documentary record of the company policy and the terms and conditions of employment by observing that he and Rorke had the responsibility of employing brokers and managers and, because of their proximity to one another, they dealt closely with each other on these matters. In a business operation of the size conducted by the Respondent, whilst it would be desirable for the Respondent to use a more sophisticated means of making known and recording its policies and the terms of its contracts of employment entered into with each broker and manager, the failure to do this cannot be decisive of the issue without also examining the demeanour and the behaviour of the witnesses and the general thrust of the evidence given. In her closing submission to the court the Respondent's counsel, Mrs Nordlinger, emphasised the issue of the Applicant's credibility by describing Applicant's answers to questions put to him in cross examination as:- ... evasive, they were contradictory, they were non‑responsive, they were an extraordinary mixture of accurate recall and no recall at all. Because the Applicant appeared in person he was given considerable latitude in putting his case to the court and calling evidence to support his application. Notwithstanding this opportunity the Applicant's demeanour and his response to direct questions, particularly when those questions required some concession to be made, for instance, about his performance and the warnings received by him, led me to the conclusion that the Respondent's description of the Applicant as a witness on his own behalf was an accurate one. The instances were numerous however by way of illustration a number of such instances are summarised in the succeeding paragraphs. The Applicant's evidence was that in June he initially saw Graves at the Mitcham office where he was interviewed regarding the position he was seeking and his abilities. He was told by Graves that Graves would report to Irving who would contact the Applicant. Within days Irving contacted the Applicant from Sydney and suggested that rather than Irving travel to Melbourne to meet the Applicant, the Applicant should attend the Respondent's broker's conference in Sydney on 25 and 26 June, 1994 and, in the Applicant's words, it would then "take place from there". In the same conversation the Applicant alleges that Irving told him "...the position was there and it was effective as of 1 July 1994 prior to going up to the conference". The Applicant attended the conference and after the conclusion of the conference had a further discussion with Irving about what was to happen in Melbourne but not, according to the Applicant, about the terms of his employment. The only discussion he had about these terms was with Irving prior to the conference and at no stage was there any mention of probationary employment. Irving's evidence was that the manager of the St Kilda Road office had first mentioned the Applicant's name to him as a potential broker. Subsequently, Irving spoke by telephone to the Applicant detailing what the position entailed, the company's expectations of its employees and the requirement that a 3 month probationary period of employment be served. In that conversation the Applicant was told that to be considered for the position he would have to attend the broker's conference in Sydney on the following weekend to see Irving "face-to-face" and meet Rorke and other brokers. This meeting was to allow the Respondent to ascertain whether it would offer the Applicant the broker's position. After the conference Irving did meet with the Applicant and told him his job application had been successful. His salary package and other job details were discussed as well as, according to Irving, a reiteration of the period of probation to be served. In cross examination the Applicant claimed that in the one telephone conversation with Irving prior to the broker's conference Irving offered him the position and stated that the starting date was 1 July 1994. The Applicant then contradicted his earlier evidence by alleging that there were a number of telephone interviews between him and Irving before the conference. When pressed the Applicant could not recall how many telephone calls there were with Irving and when they had occurred. Moreover, he could not recall whether he had any telephone conversations with Irving concerning this position. When it was put directly to him that there was one call in which Irving told the Applicant it would be necessary for the Applicant to attend the broker's conference before Irving could assess the Applicant's suitability for the job he responded by saying "I can't recall". The exchange in cross examination continued:- You cannot recall. So that could have happened?---I don't recall those specific comments. I am not disputing there was a conversation but I don't dispute those calls - those remarks. So it could have happened. He could have had a conversation with you along those lines?---No, I don't believe so. But you do not recall? You do not recall one way or another?---Well, a comment - something that is as specific as that I would recall, because that is quite specific. I see, but your evidence to me a minute ago was that you did not recall. Which is it: you do recall or you do not recall?---I don't recall those comments being made. The contradictions in the evidence given by the Applicant and the clear understanding that, rather than Irving travelling to Melbourne to see the Applicant the Applicant would attend the conference in Sydney, make it more probably than not that Irving, who was responsible for hiring a new broker needed to meet and observe with the Applicant at the conference before finally offering him the position at the end of the conference. The Applicant was also asked if he had heard of a gentleman named Mr Colin Spencer, to which question he responded by saying "it sounds familiar". It appears from subsequent evidence that Spencer who operated a business called Specialty Tuning, had made a direct complaint to Rorke concerning the services his company was receiving in sourcing modems. From his responses to further cross examination it was perfectly clear that the Applicant did know Spencer and also knew of the complaint but was not at all responsive in his answer to the initial and subsequent questions. As a result of the complaint it was alleged by the Respondent that Rorke telephoned the Applicant and after discussing the complaint with him told the Applicant that if he did not improve his performance his job was at risk. The Applicant could not "...recall that specifically, no". He agreed that Rorke was angry and he may have threatened his job but could not "specifically recall" and after conducting his own enquiries could not recall if he had rung Rorke to explain what had occurred. More importantly, whilst conceding that Graves may have spoken to him about this matter the Applicant could not specifically recall whether he did speak to him. Subsequently, "from memory" the Applicant recalled speaking to Graves about this matter but could not recall what the Applicant had said to Graves. Graves' evidence of the Applicant's report to him on this matter was put to the Applicant prompting a reply that the Applicant disagreed with Graves' recollection of the conversation they had. The Applicant agreed that during the period of his employment he kept a log of his telephone calls on a note pad. He was asked if he took this log with him when he left his employment on 25 August 1994. At first the Applicant stated that he had only taken with him items that were his possessions and that the log had been discarded. The cross examination that ensued revealed the following inconsistencies:- You discarded that before you moved out of the office on 25 August. Is that right?---No. They would have been taken - whatever was to be left was left. Whatever I felt was relevant or was my own material which were my belongings I had taken with me. So the log you are describing you took with you, did you?---I can only assume so, yes. I asked you if you did or you did not take it with you?---Well, that's what I am saying, because it was in proper form, utilising scrap paper. Did you or did not---?---I can't answer that. I can't have a specific knowledge. I packed - I wasn't exactly in the best frame of mind being told I no longer had a position. What you took with you from the company, you have since discarded? Is that the position?---Well, it would have to be. Whatever it was that you took from the company?---I don't have them now so they would have to be discarded, yes. Well, did you discard them?---I cannot be specific because what was written on paper I would have thrown out. Well, did you throw it out or not? That is the question I am asking you Mr Krauth?---Well, I have cleaned up all the paper work. Did you or did you not throw out the paper records that you moved from the company on 25 August?---I removed no papers from the company that were belonging to the company, my personal notes. I will re-phrase it, Mr Krauth. You have given evidence that you took paper records on the day you left the company, 25 August 1994, about four months ago?---I stated what were my notes or documentations. I am sorry, I have not finished the question yet. Have you discarded those paper records?---Well, I would say, no. I see, and why are you saying no just because that is what you feel like, is it?---No, because you are asking me---. What about the truth, Mr Krauth?---No, you are asking me a question that I cannot specifically recall that I stating to you. What I am saying to you is that what were documents, company material, notes, books, whatever the case may be was left behind. What were my personal notes and my personal belongings I have taken with me. Mr Krauth I am not arguing with you about what was personal or what was the company's, I am asking you, the things that you took with you and I think your evidence was that they were paper records?---It was notes of what I had written on when I would receive a call. I do not mind what they were, Mr Krauth for the purpose of this question I am asking you whether you have, since 25 August, discarded them? It is a simple question, will you answer it?---Well, to my knowledge, no, I haven't discarded them." It was the Respondent's case that on 2 August 1994 Irving met with the Applicant and another broker at Mitcham at which meeting a number of performance related complaints were raised, both men being warned by Irving that they had one month to improve their performance. In fact, Graves was present during most of the meeting and corroborated Irving's evidence generally as to what took place at the meeting. The Applicant could not recall if Irving told him he would have to improve his trade and collection performance. When asked in cross examination:- You do not recall any other specifics. Is that the position? It would shorten things if that is the position?---Well, when a person is so upset because he was personally involved in the organising, I can't recall every specific comment. Mr Krauth, do you, or do you not, recall any other specifics of that meeting on 2 August other than discussions of Murphy's Car and Truck Rental. It would shorten things if that is the position- if you?---I can't recall - because of the time frame if you can then enlighten me on areas, then I can then inform you if I know them, but I can't recall specifics. The Applicant did subsequently concede that Irving was very angry at the meeting and had told both the Applicant and the other broker that he was going to dismiss them but when it was suggested to the Applicant that Irving had given him one month to improve his performance the Applicant said "I don't know" and "I don't recall". He then agreed that Irving "may have" said this. It was alleged by the Respondent that on or about 15 July 1994 the Applicant sent a facsimile message to a female employee in the Sydney office, which message offended both her and other female staff because it contained crude drawings, writing and sexual innuendo. The facsimile was destroyed however the Applicant admitted the incident but denied the description of the contents of the facsimile as relayed by the Respondent and further denied that the drawings and words used could be interpreted as being offensive. He did try to address the complaint made by sending flowers by way of apology to staff at the other office. Rorke, Irving and Graves were all in Adelaide at the time, however, Irving on being informed by telephone of the contents of the facsimile telephoned the Applicant and, amongst other things, told the Applicant he was lucky that Irving was in Adelaide because Irving would have dismissed him if he had been in Melbourne. Again the Applicant could not recall the specific statement made by Irving but agreed Irving "...may have said something to, (sic) of that nature". Graves gave evidence that he had been instructed by Irving to chastise the Applicant because of the abovementioned incident and when he returned to Melbourne Graves did just that telling the Applicant:- It was an absolutely stupid thing to do and he was very lucky that I was umpteen miles away in Adelaide because he probably wouldn't have lasted to the end of the day if I had been there. In his evidence in chief the Applicant in response to a direct question from the court about employment engaged in by him since the termination date told the court that two weeks prior to the hearing in December 1994 he had engaged in some casual employment. In cross examination the Applicant agreed that almost immediately after the termination of his employment he had worked for approximately two weeks with an organisation referred to as "Top Gun Academies". This he alleged was to discharge a debt owed to that organisation for tuition. He had not mentioned this in his evidence in chief because he did not think it was relevant. The Applicant told the court that his average gross weekly earnings prior to termination were $700.00. The pay slips tendered by the Respondent (Exhibit R2) show that in any one week other than in the first week of his employment the Applicant's gross income (even allowing for commission payments) did not exceed approximately $400.00. The abovementioned matters represent only a selection of the contradictions which emerged during the course of the hearing in the Applicant's evidence The Applicant called evidence from Andrew Alexander Charles Damman (Damman), who was formerly employed by the Respondent. Damman gave evidence that in both a telephone conversation and a meeting at a restaurant with Irving in September 1994, Irving expressed the view that the Respondent had made a mistake in "sacking" the Applicant because Irving was not aware of the new laws and further he expressed "total disbelief that you had to give warnings, and total ignorance as to that fact". Irving did not recall the precise content of his conversation with Damman however he recalled the meeting in September 1994 and in relation to the Applicant, recalled that "I expressed a personal opinion about how the system could allow someone that I believed had proven incompetent and of questionable character to actually take this issue to the courts". The abovementioned evidence is of no real assistance in determining whether the Applicant was a probationary employee. If it has any relevance it is on matters of procedural fairness in the termination process which because of the Applicant's probationary status at the time of the termination did not arise. Accordingly, I have accepted the evidence of the Respondent's witnesses on the preliminary issue and I find that it is more likely than not that it was a term of the Applicant's employment that he be engaged for a three month probationary period from 1 July 1994 and that such period of probation was agreed upon in advance and was reasonable, having regard to the nature and circumstances of the Applicant's employment. MINUTES OF ORDERS THE COURT ORDERS: 1. That this application is dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. I certify that this and the preceding fifteen (15) pages are a true copy of the reasons for judgment of Judicial Registrar Millane. Associate: Dated: 24 February 1995 For the Applicant: Mr Krauth in person Solicitors for the Respondent: Messrs Plotkins Counsel for the Respondent: Angela Nordlinger Date of hearing: 16 & 19 December 1994 Date of judgment: 24 February 1995