Dorothy Maher v Carbide International Pty Ltd [1995] IRCA 364

Federal Court of Australia

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C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - claim of UNLAWFUL TERMINATION - whether VALID REASON FOR TERMINATION - whether TERMINATION HARSH, UNJUST OR UNREASONABLE. INDUSTRIAL RELATIONS ACT 1988, Ss 170EA, 170DE, 170DC, 170EE Chris Karambelas v Compack Packaging Pty Ltd, IRCA Decision No. 178 of 1995 Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20 DOROTHY MAHER v CARBIDE INTERNATIONAL PTY LTD - WI 1101 of 1995 BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995

IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI1101 of 1995 BETWEEN: DOROTHY MAHER - Applicant AND: CARBIDE INTERNATIONAL PTY LTD - Respondent MINUTE OF ORDERS BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995 THE COURT ORDERS THAT: 1. The Respondent pay the Applicant the sum of $15,000 by way of compensation for the unlawful termination of her employment. 2. The amount of compensation be paid within 28 days of the date of this order. NB: Settlement and entry of Orders dealt with by Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI1101 of 1995 BETWEEN: DOROTHY MAHER - Applicant AND: CARBIDE INTERNATIONAL PTY LTD - Respondent BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995 REASONS FOR JUDGMENT This is an application under Section 170EA of the Industrial Relations Act 1988 relating to the termination of the applicant's employment by the respondent. The applicant's position is that the respondent was motivated to terminate her employment by the fact that she gave evidence which did not support the respondent's case in an earlier hearing in this court. That earlier hearing arose out of the alleged unlawful termination of the employment of another former employee of the respondent. The respondent denies that this was the reason for the termination, and says that the applicant's employment was terminated for a valid reason on the basis that the value to the respondent of the work done by the applicant did not warrant her salary of $38,000 per annum. The respondent decided to abolish the applicant's position and replace it with a lower level clerical position with reduced duties. Alternatively, because of the economic difficulties faced by the company it was said by the respondent that the termination had an element of redundancy. In either event, the respondent contends that the termination was for a valid reason based on the operational requirements of the respondent's undertaking. The applicant says that there was no valid reason for termination and says that in any event the termination was harsh, unjust or unreasonable. BACKGROUND The respondent, Carbide International Pty Ltd, is a company which sells, amongst other things, tungsten carbide inserts for use in heavy machinery. The company was founded by its managing director, Alan Macdonald. In 1990 his wife, Rosalind Macdonald, became a director of the company and lent a total of $25,450 to the company in the form of a director's loan. Mrs Macdonald has qualifications in accountancy. Mr and Mrs Macdonald are the only two shareholders in the company. Up until mid 1993, the respondent's business was conducted from the Macdonald family home. In the latter part of 1990, Mrs Macdonald gave birth to twins. In September 1990, Mrs Macdonald was employed as Financial Director for the company and during her first year with the company this employment was part time. The workload gradually increased and the Macdonalds say that since February 1993 Mrs Macdonald has been employed on a full time basis with the company. Mrs Maher, the applicant, denies that Mrs Macdonald's work for the company could be classified as full time since July 1993 and that issue will be dealt with in more detail below. 0Between February 1993 and July 1993, Mrs Macdonald employed a full time nanny to look after the children. By mid 1993, the company had decided to expand its operations. Mr and Mrs Macdonald also decided that they wanted their children back at home and that Mrs Macdonald would spend more time with the twins. They decided to employ an office manager. Mrs Maher, the applicant, was employed by the respondent as its Office Manager and started work on 19 July 1993. Shortly after this, the respondent moved to rented accommodation away from the Macdonald family home. Until mid 1993, the company employed only one Sales Engineer, Gary Haar. He is still with the company. Around the time Mrs Maher started work with the respondent, the company employed two other Sales Engineers, David Wylie and Tony Butling. At the time the applicant started work with the respondent, the salaries of its employees were as follows: Alan Macdonald - initial salary of $900 per week ($46,800 per annum). - later $52,000 per annum plus a fully maintained vehicle Rosalind Macdonald - salary of $900 per week ($46,800 per annum) plus a fully maintained vehicle Gary Haar, Sales Manager - salary of $1,300 per week ($67,600 per annum) - later $1400 per week or $72,800 per annum plus a vehicle David Wylie, Sales Engineer - salary of $750 per week plus a vehicle Tony Butling, Sales Engineer - salary of $650 per week plus a vehicle David Wylie and Tony Butling were dismissed in April 1994. Two new Sales Engineers were hired during 1994 but both of them resigned within a few weeks and they were never replaced. Mrs Maher, the applicant, is 56 years of age and has extensive experience in office management. She has some qualifications in accounting and has always had accounting functions in every job she has held, although she has never portrayed herself as an accountant. Mrs Maher's evidence was that at her interviews she was only given a general outline as to the nature of the work she would be doing for the respondent. Mr Macdonald asked her what was the absolute minimum she needed "to live on" and in the course of these negotiations she told him $28,000 but made it clear that this was not the value she put on the job. She agreed to start work for $26,000 per annum on the basis that her salary was to be reviewed after four weeks. It soon became apparent to Mrs Maher that the position was more onerous and responsible than had originally been indicated to her. According to Mrs Maher, the workload of the position required at least one and a half employees, and she worked at least 52 hours per week. Mrs Maher had no objection to working the long hours, but felt that there was an inequity in what was being paid for her work relative to others within the company and the role as originally explained. On 24 July 1993, Mr Macdonald increased Mrs Maher's salary to $28,500 per annum. On 14 February 1994, her salary was increased to $31,100 per annum, on 4 July 1994 it was increased to $36,920 per annum and in late July 1994 it was increased to $38,220 per annum. Mr and Mrs Macdonald deny that the position was more onerous and responsible than indicated to Mrs Maher and deny that Mrs Maher necessarily worked a 52 hour week. The fact that Mrs Maher was paid a $38,000 salary, however, is consistent with the position having a significant amount of responsibility. Further, for reasons which will be dealt with below, I prefer the evidence of Mrs Maher to that of Mr and Mrs Macdonald to the extent that there is any inconsistency. THE WYLIE HEARING In mid 1994, David Wylie and Tony Butling brought claims in this court alleging that the termination of their employment by the respondent breached the provisions of the Industrial Relations Act. According to Mrs Maher, Mr Macdonald asked her in June 1994 if she would be prepared to give evidence for him if he needed it. Mrs Maher replied that she would but that if she did so she would be telling the truth. Mrs Maher was served by David Wylie with a subpoena to give evidence in a hearing on 16 and 17 January 1995. She gave her evidence on 16 January 1995, the first day of the hearing, and was driven to and from the court by Mr Macdonald, together with Gary Haar. When she gave her evidence, Mr Wylie's solicitor examined Mrs Maher about the events on Mr Wylie's birthday, and whether Mrs Maher knew of any warnings given to Mr Wylie by Mr Macdonald. Mrs Maher gave evidence that she knew of no such warnings. The claim was settled on the following day. Mrs Maher states that after the hearing on the first day, while she and Mr Macdonald were alone together waiting for the lifts outside the court, Mr Macdonald accused her of not supporting his story in court. On the following afternoon, when Mr Macdonald handed Mrs Maher the settlement cheque he had made up for Mr Wylie, he made similar remarks to her. Mrs Maher replied that she was under oath to tell the truth and asked him "What did you want me to do - lie?" In his affidavit, Mr Macdonald states at paragraph 43 "I was not aware that anything that DM [Dorothy Maher] had said in this court was contrary to any evidence presented by AM [Alan Macdonald] or GH [Gary Haar] nor that her appearance and evidence was in anyway detrimental to our case. AM and GH regarded all DM evidence as confirmation of our own evidence. At the end of the first day's hearing GH, DM and I left the court together, walked back to the car together, and returned to the office together. The evidence given by all three in the court was not discussed at all. DM did not attend the second day's hearing. The matter was settled early afternoon of Tuesday 17 January. Part of the settlement agreement, ratified by the court, was that the settlement terms remain confidential." The transcript shows that at the hearing of this matter when Mr Macdonald was cross-examined on 1 June 1995 in relation to Mrs Maher's evidence at the Wylie hearing, the following was said "Do you recall what Mrs Maher was examined on - what evidence she gave; what questions she was asked; what the issues were?---No. There were a lot of issues. I can recall some of them, but certainly not a lot of them. All right. Do you recall her being cross-examined by the solicitor for Mr Wylie in some detail about the events on the day of David Wylie's birthday?---Yes, I can recall some of that, yes. Can you recall what her evidence was about that day, in particular her evidence about the extent of Mr Wylie's attendance at the office?---No, not specifically. It was his birthday and some refreshments had been arranged later in the afternoon when he returned. What was the significance of Mr Wylie's birthday to the case?---I don't know that there was any significance to the case Was it not the case that you were alleging that he was given a warning on his birthday?---He was given a warning on that day, yes. So that was then and is now your contention?---That's right, yes. Is it not the case that Mrs Maher said that he was only in the office for about 10 minutes on that day and that was in the company of everybody else in the office and therefore he could not have - - -?---No, that wasn't said at all, and it wasn't the case either. So you are saying that Mrs Maher's evidence was not that he was only in the office for a very short period on that day?---As I recall it, that's right. Well, if it comes to that, the transcript will reveal that?---Well, as I said, that's how I recall it. As far as I am concerned it had no significance. Was Mrs Maher cross-examined in more general terms about her - whether Mr Wylie was given warnings?---Yes, I think so - I can't remember it for sure. Do you recall - is it not the case that her evidence was that as far as she was aware he had never been given any warnings?---No, that's not my recollection of it at all. So you say your evidence was not that. What do you recall her evidence as being on the question of warnings?---As I recall it, she thought that we had given him some verbal warnings. On the following day, when the cross-examination continued, Mr Macdonald was shown some notes of evidence prepared for the Wylie trial which said in part that "On 21 January 1994 Alan Macdonald gave David Wylie his first official advice that he must improve sales immediately or face dismissal." Twenty-first January 1995 was David Wylie's birthday. The following was said on the second day of Mr Macdonald's evidence "Do you still hold the view that Mrs Maher's evidence was that verbal warnings were given to Mr Wylie? Is that still your evidence?---That I gave Mr Wylie verbal warnings? No. Yesterday you said that Mrs Maher's evidence at the hearing, that Mrs Maher gave evidence that you had given David Wylie verbal warnings?---I think she's claimed yesterday that she wasn't aware that I had given him verbal warnings. Certainly that is her position but it was not your position yesterday, I am asking you what your position is today?---The same as it was yesterday. Did Mrs Maher's evidence at the hearing make any reference to verbal warnings?---I can't recall for sure, she - she - - - Right. So today you cannot recall for sure?---She - at the - at the hearing - at the Wylie hearing to the best of my recollection she said she couldn't state for sure whether or not I'd spoken to David Wylie after the drinks and refreshments we had to celebrate his birthday late in the afternoon. And the question wasn't asked of me in fact yesterday whether I had or not given him a warning, but I in fact I had, I spoke - I spoke to him --- No, no. The question that was asked of you - well, I think from memory you volunteered that Mrs Maher's evidence had been very helpful and that in fact she had confirmed that you had given Mr Wylie verbal warnings?---No, I didn't say she'd confirmed, it wasn't asked and I didn't say that. All right?---In fact I believe, and the transcript will show, I believe Mrs Maher said that she was not aware of me having given Mr Wylie any verbal warnings." Mr Macdonald's evidence was also that he had not said anything to Mrs Maher outside the court and was absolutely certain that he and Gary Haar had gone to the toilet together and had come out together after the Wylie trial. He said he had not been alone with Mrs Maher at any time outside the courts. The evidence given by Mr Macdonald on the second day of his verbal testimony after he was presented with a document prepared for the Wylie trial conflicted somewhat with his evidence on the first day and with his affidavit evidence. It also conflicted with Mrs Maher's recollection of the trial. For reasons which will be dealt with more fully below, on balance I prefer Mrs Maher's version. THE TERMINATION Mr and Mrs Macdonald's evidence was that on the weekend following the Wylie trial, they held long discussions about the financial position of the company. Mr Macdonald's evidence was that it had cost the company about $50,000 including legal costs to deal with the Wylie and Butling claims. They wanted to consider ways of cutting costs. It was on that weekend that they decided to terminate Mrs Maher's employment. They decided to employ a cheaper clerk/typist at the award rate of around $21,000 per year. Mr and Mrs Macdonald said that they discussed offering Mrs Maher the lower paid position but they decided that as she had said at her interview that she would not work for less than $28,000 per annum it was not considered to be an option. In his affidavit, Mr Macdonald said "Even so I was concerned about any legal obligation that the company may have to offer her the position", and he sought legal advice as to whether they were under a legal obligation to offer the new position to Mrs Maher. The advice they received was that there was no such obligation. Mr Macdonald said in his evidence that if they had known that Mrs Maher had been prepared to accept $415 a week, she would still be working for them. On Monday 23 January 1995, Mr Macdonald met with Gary Haar and Mrs Maher and announced cutbacks, which he said were due to the economic situation of the company. They included a salary cut for Mr and Mrs Macdonald to $600 per week each; the discontinuation of a cleaning service for the office and for the Macdonald home; cutbacks in stationery; and cutbacks in the use of electricity. On Monday 30 January 1995, Mrs Maher was called into a meeting with Mr and Mrs Macdonald and Gary Haar. According to Mrs Maher, Mr Macdonald said that he was sure she was aware of the poor economic state of the company. He said that through no fault of Mrs Maher's, but over the previous seven months, the company had experienced losses, and that he and Mrs Macdonald had decided to do away with the position of Office Manager and that they were going to employ a younger, cheaper clerk/typist. It was denied by the Macdonalds that the word "younger" was used and in the end that does not make any difference to the outcome of the case. Mr Macdonald said that they had discussed all options and had no alternative but to terminate Mrs Maher's services and make the position redundant. They gave her two weeks' notice and to "ease the pain" they would pay an additional two weeks pay. That additional two weeks' pay was not ultimately paid. It is common ground that Mrs Maher said that there must be other options available. Mrs Maher wanted to have a round table discussion to see what alternatives there were to termination but this was not accepted by Mr Macdonald because he and Mrs Macdonald had already made up their minds. According to Mrs Maher, Mrs Macdonald said the only other option was for her to get a job and with the cost of childcare that was not viable. It was denied by Mr and Mrs Macdonald that this was said at the termination meeting. Gary Haar, in his evidence, stated that he did recall Mrs Macdonald saying that. To the extent that there is any inconsistency, I prefer the evidence of Mrs Maher over that of Mr and Mrs Macdonald. THE FINANCIAL POSITION OF THE RESPONDENT Mr Macdonald states that as a result of the Wylie and Butling cases, the company faced a total cost of $50,000. This meant that the company had to drastically reduce overheads. The steps taken by the company included those already listed and the termination of Mrs Maher. Mr and Mrs Macdonald also took out a personal loan of $55,000 using a home unit owned by them as security. Mr Macdonald said that the company was refused additional funds by way of an increased overdraft facility to pay creditors because of the poor financial state of the company. Mrs Maher's position is that whilst she acknowledges that there had been some falling off in sales, she does not accept that there was a true financial crisis facing the business such that her retrenchment was required, if the company limited itself to business related expenses. Mrs Maher believes that the accounts of the respondent company were manipulated by Mr Macdonald through the inclusion of non business related expenses to minimise profit for tax purposes. She states that if these expenditures had been allocated correctly, it would have been possible to retain her services. In her affidavits, Mrs Maher has listed a number of examples of the ways in which expenses were improperly allocated as business expenses. The relevance of these allegations will be dealt with below. It is not necessary to go into all of those allegations in detail here. Paragraph 108 of Mrs Maher's affidavit, sworn 3 May 1995, reads as follows: "By reference to the information set out above, the following amounts at least were treated as business expenses during the period of my employment which I believe could not properly be treated as business expenses in total, or at least could not properly be substantiated as business expenses:

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IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI1101 of 1995 BETWEEN: DOROTHY MAHER - Applicant AND: CARBIDE INTERNATIONAL PTY LTD - Respondent MINUTE OF ORDERS BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995 THE COURT ORDERS THAT: 1. The Respondent pay the Applicant the sum of $15,000 by way of compensation for the unlawful termination of her employment. 2. The amount of compensation be paid within 28 days of the date of this order. NB: Settlement and entry of Orders dealt with by Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI1101 of 1995 BETWEEN: DOROTHY MAHER - Applicant AND: CARBIDE INTERNATIONAL PTY LTD - Respondent BEFORE: BOON JR PLACE: PERTH DATE: 16 JUNE 1995 REASONS FOR JUDGMENT This is an application under Section 170EA of the Industrial Relations Act 1988 relating to the termination of the applicant's employment by the respondent. The applicant's position is that the respondent was motivated to terminate her employment by the fact that she gave evidence which did not support the respondent's case in an earlier hearing in this court. That earlier hearing arose out of the alleged unlawful termination of the employment of another former employee of the respondent. The respondent denies that this was the reason for the termination, and says that the applicant's employment was terminated for a valid reason on the basis that the value to the respondent of the work done by the applicant did not warrant her salary of $38,000 per annum. The respondent decided to abolish the applicant's position and replace it with a lower level clerical position with reduced duties. Alternatively, because of the economic difficulties faced by the company it was said by the respondent that the termination had an element of redundancy. In either event, the respondent contends that the termination was for a valid reason based on the operational requirements of the respondent's undertaking. The applicant says that there was no valid reason for termination and says that in any event the termination was harsh, unjust or unreasonable. BACKGROUND The respondent, Carbide International Pty Ltd, is a company which sells, amongst other things, tungsten carbide inserts for use in heavy machinery. The company was founded by its managing director, Alan Macdonald. In 1990 his wife, Rosalind Macdonald, became a director of the company and lent a total of $25,450 to the company in the form of a director's loan. Mrs Macdonald has qualifications in accountancy. Mr and Mrs Macdonald are the only two shareholders in the company. Up until mid 1993, the respondent's business was conducted from the Macdonald family home. In the latter part of 1990, Mrs Macdonald gave birth to twins. In September 1990, Mrs Macdonald was employed as Financial Director for the company and during her first year with the company this employment was part time. The workload gradually increased and the Macdonalds say that since February 1993 Mrs Macdonald has been employed on a full time basis with the company. Mrs Maher, the applicant, denies that Mrs Macdonald's work for the company could be classified as full time since July 1993 and that issue will be dealt with in more detail below. 0Between February 1993 and July 1993, Mrs Macdonald employed a full time nanny to look after the children. By mid 1993, the company had decided to expand its operations. Mr and Mrs Macdonald also decided that they wanted their children back at home and that Mrs Macdonald would spend more time with the twins. They decided to employ an office manager. Mrs Maher, the applicant, was employed by the respondent as its Office Manager and started work on 19 July 1993. Shortly after this, the respondent moved to rented accommodation away from the Macdonald family home. Until mid 1993, the company employed only one Sales Engineer, Gary Haar. He is still with the company. Around the time Mrs Maher started work with the respondent, the company employed two other Sales Engineers, David Wylie and Tony Butling. At the time the applicant started work with the respondent, the salaries of its employees were as follows: Alan Macdonald - initial salary of $900 per week ($46,800 per annum). - later $52,000 per annum plus a fully maintained vehicle Rosalind Macdonald - salary of $900 per week ($46,800 per annum) plus a fully maintained vehicle Gary Haar, Sales Manager - salary of $1,300 per week ($67,600 per annum) - later $1400 per week or $72,800 per annum plus a vehicle David Wylie, Sales Engineer - salary of $750 per week plus a vehicle Tony Butling, Sales Engineer - salary of $650 per week plus a vehicle David Wylie and Tony Butling were dismissed in April 1994. Two new Sales Engineers were hired during 1994 but both of them resigned within a few weeks and they were never replaced. Mrs Maher, the applicant, is 56 years of age and has extensive experience in office management. She has some qualifications in accounting and has always had accounting functions in every job she has held, although she has never portrayed herself as an accountant. Mrs Maher's evidence was that at her interviews she was only given a general outline as to the nature of the work she would be doing for the respondent. Mr Macdonald asked her what was the absolute minimum she needed "to live on" and in the course of these negotiations she told him $28,000 but made it clear that this was not the value she put on the job. She agreed to start work for $26,000 per annum on the basis that her salary was to be reviewed after four weeks. It soon became apparent to Mrs Maher that the position was more onerous and responsible than had originally been indicated to her. According to Mrs Maher, the workload of the position required at least one and a half employees, and she worked at least 52 hours per week. Mrs Maher had no objection to working the long hours, but felt that there was an inequity in what was being paid for her work relative to others within the company and the role as originally explained. On 24 July 1993, Mr Macdonald increased Mrs Maher's salary to $28,500 per annum. On 14 February 1994, her salary was increased to $31,100 per annum, on 4 July 1994 it was increased to $36,920 per annum and in late July 1994 it was increased to $38,220 per annum. Mr and Mrs Macdonald deny that the position was more onerous and responsible than indicated to Mrs Maher and deny that Mrs Maher necessarily worked a 52 hour week. The fact that Mrs Maher was paid a $38,000 salary, however, is consistent with the position having a significant amount of responsibility. Further, for reasons which will be dealt with below, I prefer the evidence of Mrs Maher to that of Mr and Mrs Macdonald to the extent that there is any inconsistency. THE WYLIE HEARING In mid 1994, David Wylie and Tony Butling brought claims in this court alleging that the termination of their employment by the respondent breached the provisions of the Industrial Relations Act. According to Mrs Maher, Mr Macdonald asked her in June 1994 if she would be prepared to give evidence for him if he needed it. Mrs Maher replied that she would but that if she did so she would be telling the truth. Mrs Maher was served by David Wylie with a subpoena to give evidence in a hearing on 16 and 17 January 1995. She gave her evidence on 16 January 1995, the first day of the hearing, and was driven to and from the court by Mr Macdonald, together with Gary Haar. When she gave her evidence, Mr Wylie's solicitor examined Mrs Maher about the events on Mr Wylie's birthday, and whether Mrs Maher knew of any warnings given to Mr Wylie by Mr Macdonald. Mrs Maher gave evidence that she knew of no such warnings. The claim was settled on the following day. Mrs Maher states that after the hearing on the first day, while she and Mr Macdonald were alone together waiting for the lifts outside the court, Mr Macdonald accused her of not supporting his story in court. On the following afternoon, when Mr Macdonald handed Mrs Maher the settlement cheque he had made up for Mr Wylie, he made similar remarks to her. Mrs Maher replied that she was under oath to tell the truth and asked him "What did you want me to do - lie?" In his affidavit, Mr Macdonald states at paragraph 43 "I was not aware that anything that DM [Dorothy Maher] had said in this court was contrary to any evidence presented by AM [Alan Macdonald] or GH [Gary Haar] nor that her appearance and evidence was in anyway detrimental to our case. AM and GH regarded all DM evidence as confirmation of our own evidence. At the end of the first day's hearing GH, DM and I left the court together, walked back to the car together, and returned to the office together. The evidence given by all three in the court was not discussed at all. DM did not attend the second day's hearing. The matter was settled early afternoon of Tuesday 17 January. Part of the settlement agreement, ratified by the court, was that the settlement terms remain confidential." The transcript shows that at the hearing of this matter when Mr Macdonald was cross-examined on 1 June 1995 in relation to Mrs Maher's evidence at the Wylie hearing, the following was said "Do you recall what Mrs Maher was examined on - what evidence she gave; what questions she was asked; what the issues were?---No. There were a lot of issues. I can recall some of them, but certainly not a lot of them. All right. Do you recall her being cross-examined by the solicitor for Mr Wylie in some detail about the events on the day of David Wylie's birthday?---Yes, I can recall some of that, yes. Can you recall what her evidence was about that day, in particular her evidence about the extent of Mr Wylie's attendance at the office?---No, not specifically. It was his birthday and some refreshments had been arranged later in the afternoon when he returned. What was the significance of Mr Wylie's birthday to the case?---I don't know that there was any significance to the case Was it not the case that you were alleging that he was given a warning on his birthday?---He was given a warning on that day, yes. So that was then and is now your contention?---That's right, yes. Is it not the case that Mrs Maher said that he was only in the office for about 10 minutes on that day and that was in the company of everybody else in the office and therefore he could not have - - -?---No, that wasn't said at all, and it wasn't the case either. So you are saying that Mrs Maher's evidence was not that he was only in the office for a very short period on that day?---As I recall it, that's right. Well, if it comes to that, the transcript will reveal that?---Well, as I said, that's how I recall it. As far as I am concerned it had no significance. Was Mrs Maher cross-examined in more general terms about her - whether Mr Wylie was given warnings?---Yes, I think so - I can't remember it for sure. Do you recall - is it not the case that her evidence was that as far as she was aware he had never been given any warnings?---No, that's not my recollection of it at all. So you say your evidence was not that. What do you recall her evidence as being on the question of warnings?---As I recall it, she thought that we had given him some verbal warnings. On the following day, when the cross-examination continued, Mr Macdonald was shown some notes of evidence prepared for the Wylie trial which said in part that "On 21 January 1994 Alan Macdonald gave David Wylie his first official advice that he must improve sales immediately or face dismissal." Twenty-first January 1995 was David Wylie's birthday. The following was said on the second day of Mr Macdonald's evidence "Do you still hold the view that Mrs Maher's evidence was that verbal warnings were given to Mr Wylie? Is that still your evidence?---That I gave Mr Wylie verbal warnings? No. Yesterday you said that Mrs Maher's evidence at the hearing, that Mrs Maher gave evidence that you had given David Wylie verbal warnings?---I think she's claimed yesterday that she wasn't aware that I had given him verbal warnings. Certainly that is her position but it was not your position yesterday, I am asking you what your position is today?---The same as it was yesterday. Did Mrs Maher's evidence at the hearing make any reference to verbal warnings?---I can't recall for sure, she - she - - - Right. So today you cannot recall for sure?---She - at the - at the hearing - at the Wylie hearing to the best of my recollection she said she couldn't state for sure whether or not I'd spoken to David Wylie after the drinks and refreshments we had to celebrate his birthday late in the afternoon. And the question wasn't asked of me in fact yesterday whether I had or not given him a warning, but I in fact I had, I spoke - I spoke to him --- No, no. The question that was asked of you - well, I think from memory you volunteered that Mrs Maher's evidence had been very helpful and that in fact she had confirmed that you had given Mr Wylie verbal warnings?---No, I didn't say she'd confirmed, it wasn't asked and I didn't say that. All right?---In fact I believe, and the transcript will show, I believe Mrs Maher said that she was not aware of me having given Mr Wylie any verbal warnings." Mr Macdonald's evidence was also that he had not said anything to Mrs Maher outside the court and was absolutely certain that he and Gary Haar had gone to the toilet together and had come out together after the Wylie trial. He said he had not been alone with Mrs Maher at any time outside the courts. The evidence given by Mr Macdonald on the second day of his verbal testimony after he was presented with a document prepared for the Wylie trial conflicted somewhat with his evidence on the first day and with his affidavit evidence. It also conflicted with Mrs Maher's recollection of the trial. For reasons which will be dealt with more fully below, on balance I prefer Mrs Maher's version. THE TERMINATION Mr and Mrs Macdonald's evidence was that on the weekend following the Wylie trial, they held long discussions about the financial position of the company. Mr Macdonald's evidence was that it had cost the company about $50,000 including legal costs to deal with the Wylie and Butling claims. They wanted to consider ways of cutting costs. It was on that weekend that they decided to terminate Mrs Maher's employment. They decided to employ a cheaper clerk/typist at the award rate of around $21,000 per year. Mr and Mrs Macdonald said that they discussed offering Mrs Maher the lower paid position but they decided that as she had said at her interview that she would not work for less than $28,000 per annum it was not considered to be an option. In his affidavit, Mr Macdonald said "Even so I was concerned about any legal obligation that the company may have to offer her the position", and he sought legal advice as to whether they were under a legal obligation to offer the new position to Mrs Maher. The advice they received was that there was no such obligation. Mr Macdonald said in his evidence that if they had known that Mrs Maher had been prepared to accept $415 a week, she would still be working for them. On Monday 23 January 1995, Mr Macdonald met with Gary Haar and Mrs Maher and announced cutbacks, which he said were due to the economic situation of the company. They included a salary cut for Mr and Mrs Macdonald to $600 per week each; the discontinuation of a cleaning service for the office and for the Macdonald home; cutbacks in stationery; and cutbacks in the use of electricity. On Monday 30 January 1995, Mrs Maher was called into a meeting with Mr and Mrs Macdonald and Gary Haar. According to Mrs Maher, Mr Macdonald said that he was sure she was aware of the poor economic state of the company. He said that through no fault of Mrs Maher's, but over the previous seven months, the company had experienced losses, and that he and Mrs Macdonald had decided to do away with the position of Office Manager and that they were going to employ a younger, cheaper clerk/typist. It was denied by the Macdonalds that the word "younger" was used and in the end that does not make any difference to the outcome of the case. Mr Macdonald said that they had discussed all options and had no alternative but to terminate Mrs Maher's services and make the position redundant. They gave her two weeks' notice and to "ease the pain" they would pay an additional two weeks pay. That additional two weeks' pay was not ultimately paid. It is common ground that Mrs Maher said that there must be other options available. Mrs Maher wanted to have a round table discussion to see what alternatives there were to termination but this was not accepted by Mr Macdonald because he and Mrs Macdonald had already made up their minds. According to Mrs Maher, Mrs Macdonald said the only other option was for her to get a job and with the cost of childcare that was not viable. It was denied by Mr and Mrs Macdonald that this was said at the termination meeting. Gary Haar, in his evidence, stated that he did recall Mrs Macdonald saying that. To the extent that there is any inconsistency, I prefer the evidence of Mrs Maher over that of Mr and Mrs Macdonald. THE FINANCIAL POSITION OF THE RESPONDENT Mr Macdonald states that as a result of the Wylie and Butling cases, the company faced a total cost of $50,000. This meant that the company had to drastically reduce overheads. The steps taken by the company included those already listed and the termination of Mrs Maher. Mr and Mrs Macdonald also took out a personal loan of $55,000 using a home unit owned by them as security. Mr Macdonald said that the company was refused additional funds by way of an increased overdraft facility to pay creditors because of the poor financial state of the company. Mrs Maher's position is that whilst she acknowledges that there had been some falling off in sales, she does not accept that there was a true financial crisis facing the business such that her retrenchment was required, if the company limited itself to business related expenses. Mrs Maher believes that the accounts of the respondent company were manipulated by Mr Macdonald through the inclusion of non business related expenses to minimise profit for tax purposes. She states that if these expenditures had been allocated correctly, it would have been possible to retain her services. In her affidavits, Mrs Maher has listed a number of examples of the ways in which expenses were improperly allocated as business expenses. The relevance of these allegations will be dealt with below. It is not necessary to go into all of those allegations in detail here. Paragraph 108 of Mrs Maher's affidavit, sworn 3 May 1995, reads as follows: "By reference to the information set out above, the following amounts at least were treated as business expenses during the period of my employment which I believe could not properly be treated as business expenses in total, or at least could not properly be substantiated as business expenses:

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