Fabian Rebelo v Dynasty Temple t/as Capitol Nightclub [1995] IRCA 384

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1872 of 1995 B E T W E E N : FABIAN REBELO Applicant AND DYNASTY TEMPLE t/as CAPITOL NIGHTCLUB Respondent Before: Judicial Registrar Murphy Place: Melbourne Date: 17 August 1995 REASONS FOR JUDGMENT In the law of contract courts will often imply a term that the parties co-operate in the performance of the contract. The central issue in this case was to determine the extent of the duties of the parties to co-operate with each other and to determine which of them had breached that obligation. The Applicant is the Manager/Licensee of the Capitol Nightclub located in South Yarra. The club is conducted by the Respondent. The Applicant is a young man with extensive experience in the hospitality industry. He commenced employment with the Respondent in August 1994, shortly before the club opened. Like many employment contracts the arrangement between the parties was informal and he was paid $35,000 p.a. In November this was raised to $40,000 p.a. The Applicant's hours of work were not fixed but were dependent on the hours of business of the club. When the club opened it was open for trading on Thursday to Saturday evenings. It had a 3 am licence. Subsequently the club opened on Wednesday evenings. This additional night was unsuccessful and ceased. Thereafter the club opened on some Sunday evenings. In addition the club would also be open on other nights for private functions. On evenings that the club traded the Applicant would commence duties at 7.30 pm and cease at 4 - 4.30 am depending when the patrons left. At the time the Applicant commenced employment he was interviewed by Mr Pietrzak (Pietrzak), the Managing Director of the Respondent. Pietrzak is a mechanical engineer by profession and conducts an engineering business in the outer Melbourne suburb of Hallam. In discussions between the Applicant and Pietrzak it was agreed that the Applicant would be required to work between 55-60 hours per week. At the time of the original interview the parties did not discuss precise arrangements for the Applicant to have time off. The Applicant gave evidence that in January this year, after working 24 days without a day off, he approached Pietrzak and the other directors of the Respondent and it was agreed that proper arrangements should be put in place for him to have days off. He was advised that he should roster himself for two days off per week. From that time the Applicant did so and rostered himself off on a Tuesday and Sunday. He gave evidence that his days off were displayed on a white board in the office. Although Pietrzak disputed that they were so displayed I accept the Applicant's evidence on this point. In addition to evenings the club was also open during normal business hours to allow for inspection and promotion to persons and organisations interested in utilising its facilities. During business hours a Director of the Respondent, Mr Delanty and another employee were present on the premises to perform those functions. On occasions the Applicant would also attend to do paper work or supervise the receipt of stock. Pietrzak, who lived near the club, attended the club on a regular basis, often after work or during trading hours. He would usually call the Applicant and advise him that he would be attending at a specified time if there was a need for any discussion between them. The two usually had a meeting a week to discuss the trading performance of the club. The Applicant's duties including hiring, training and supervising staff. The club had bar staff who were required, at the end of trading, to clear and clean the bar areas. At 6 am, after trading days, contract cleaners would attend the premises and clean the non-bar areas, including vacuuming the floors and the rest rooms. The early arrival of the cleaners was to ensure that the premises were in a presentable condition for people attending during business hours. Events Surrounding Termination of Employment On the evening of Monday 20 February the club hosted a private function for an acquaintance of Pietrzak. The Applicant/Licensee was present for the function. He left the premises in the early hours of the morning and went home. Before doing so he checked the condition of the bar and found that it had been cleaned as usual, as required, by the bar staff. On Tuesday 21 February the Applicant had a rostered day off. On that day Pietrzak was advised by one or other of the two day time employees that the club was a "pigsty". The floor was covered with paper and debris of the previous night was throughout the premises, including the offices. It appeared that the contract cleaners had failed to attend. Pietrzak attempted unsuccessfully to contact the Applicant. Eventually he reached the Applicant by phone in mid afternoon. At the time that Pietrzak spoke to the Applicant he had viewed the state of the premises and was unimpressed. He said that the bar areas were not clean and there were bottles and mess throughout the premises, including in the offices. His response to all of this was that his "blood was boiling" and he was "ropeable". He phoned the Applicant and said to him that he couldn't believe the state that the club had been left in. He said he needed him to come in and give an explanation "as to how he could walk out and leave it in that position". The Applicant's reply was that "it was his day off". He also said he didn't have a car and had an arrangement to go out for dinner later. Pietrzak told him to get a cab which the Respondent would pay for. He asked to postpone the dinner and volunteered to meet him at any time later that night. Pietrzak also said that in addition to the state of the premises he had other "serious matters" to discuss with the Applicant. When the Applicant declined to come in to see him Pietrzak replied that if that was his attitude: "if you can't come in, don't come in at all". The Applicant's version of the conversation was that Pietrzak rang at 5 pm and said that the venue was in a mess. He was asked to "come in now." The Applicant asked whether the cleaners had been contacted. The Applicant told Pietrzak that this was his day off, he did not have a car and was going out for dinner in a couple of hours. Pietrzak had suggested that he take a train. He said that Pietrzak sounded hot under the collar. He described the tone of the conversation as almost abusive and his request was not framed in terms of a request. The Applicant said that it was the first time that he had been called up by Pietrzak in those circumstances. On all other occasions Pietrzak had phoned to advise the Applicant that he would be attending at the premises for a discussion. The Applicant gave evidence that during the conversation he had said to Pietrzak "you want a dog and you want to rub his nose in some shit". Pietrzak had replied "thats exactly right". Pietrzak gave evidence that about an hour after this conversation he again called the Applicant. In the meantime his secretary has ascertained the Applicant's termination entitlements. He rang the Applicant to advise him of those entitlements and to recover the keys to the premises. The Applicant's version was that the next conversation was by telephone at 9.30 am the following day. Pietrzak called and asked "where are you?". The Applicant said that he had thought he had been fired. Pietrzak had responded that he had been but they had some things to sort out. The Applicant subsequently forwarded the keys to the premises to Pietrzak. On all major areas of dispute in relation to the conversations I accept the Applicant's version. The most important area of dispute was whether Pietrzak had told the Applicant, in addition to the issue of the state of the premises, that he had other "serious matters" to discuss with him. The Applicant denied this and said it was only the state of the premises that was raised. I accept his evidence on this point. The time of the conversation is also in dispute and I accept that the conversation took place late in the afternoon at about 5 pm. I also accept that the second conversation took place on the next day, and that in the first conversation Pietrzak suggested that the Applicant should catch a train in for the meeting. The "serious matter" which Pietrzak claimed he sought to discuss with the Applicant was the issue of stock control. The club had a sophisticated computerised cash register system that recorded stock usage. Each week a contractor performed a physical stocktake. The physical stocktake was then converted, after being adjusted for free drinks and spillage, into an expected revenue total. The estimate was then compared with the actual weekly takings and a variance produced. The parties agreed that these variances were discussed on a regular basis. It was the Applicant's evidence that when the variances were raised by Pietrzak he would investigate the matter and provide an explanation to him. On one occasion in mid-January, when there was a major variance, a substantial part of it was found to relate to an error in the physical stocktake undertaken by the contractors. In the week prior to the termination a significant variation had been recorded. Pietrzak gave evidence that he sought an explanation from the Applicant but it had not been forthcoming. The Applicant denied this and said that he had given an explanation. On 21 February Pietrzak had also received the weekly report which showed another significant variation. It was this which he said was the "serious matter" which he wished to discuss with the Applicant. He accepted that he did not specify that he wished to discuss the stock variations with the Applicant. I accept the Applicant's evidence that only the state of the venue was raised in the conversation on 21 February. I also accept his evidence that previously he had responded to requests from Pietrzak to investigate variances in the weekly stock reports. The detailed nature of the stock control of the Respondent was such that it was possible to investigate variances in order to verify whether the report was correct. I am satisfied that this was done by the Applicant. I am further satisfied that at no time did Pietrzak ever give the Applicant any form of ultimatum in relation to the variances which were being produced by the stock reports. Did the Respondent Have a Valid Reason Pursuant to Section 170DE(1) of the Industrial Relations Act? The Respondent's counsel argued that it had discharged its onus of proof on the basis that the Applicant had failed to comply with a request from his managing director to attend the premises to clarify the state that they were left in by him after the previous night's function. It was put that the Applicant was a manager earning $40,000 p.a. and was expected to be flexible in his working hours. He was required to be available to attend the premises as and when required. Pietrzak wanted him to view the premises before the contract cleaners came to clean it up. The direction was said to be lawful, and reasonable or valid. It was put that the Applicant could have been in no doubt that he was required to comply with the direction. He understood the circumstances and the importance of what was being asked of him. Counsel for the Applicant, on the other hand, argued that this was not an emergency which required the Applicant's presence. He was asked to comply with an unreasonable request made in anger by Pietrzak. The Applicant was on his day off and was entitled, given the reasons he advised, not to attend. In Selvachandran v Peteron Plastics Pty Ltd (Industrial Relations Court of Australia, Northrop J., 7 July 1995) Northrop J., noted that "a valid reason"...[in s.170DE(1)] "applies in the practical sphere of a relationship between an employer and an employee where each has rights and privileges, and duties and obligations conferred and imposed on them". This invites the comment that each party has a duty to co-operate in the performance of a contract. Here the Respondent's "valid reason" does not withstand scrutiny within the overall context of the contract. There is no dispute that the premises were left in a mess. For some reason the contract cleaners did not attend as required. As Monday was not a usual opening night a specific request, which was in the province of the Applicant, should have been made to them. The Applicant gave evidence that he did make such a request. The reason why they did not attend was never fully ascertained by the Respondent. The Applicant's failure to notify the cleaners, even if made out, was minor in the context of his previous performance of his duties. The Respondent did not contend that the Applicant had been terminated for this failure in his management. He was terminated because he had failed to come and see the mess at the request of Pietrzak. He was required to view not only the mess that the contract cleaners should have cleaned up but also the state of the bar and the offices which it was said were the responsibility of the bar staff under his control. Counsel for the Respondent sought to argue that the state of the venue was a matter where there was a real difference of opinion between the Applicant and Pietrzak which could only be resolved by the Applicant attending the premises when requested and before the mess was cleared. I reject this analysis. The task of cleaning the venue was a joint responsibility of both bar staff under the ultimate supervision of the Applicant and the contract cleaners. The aim of the exercise was to have the venue in a condition so that it could be used during business hours. Even if Pietrzak was concerned as to the state of the bar areas, which should have been cleaned by bar staff, this was not a great matter of moment. It did not demand an urgent inspection by the Applicant. This was not an emergency which, on objective analysis, required the presence of the Applicant. The Applicant was not on 24 hour, seven days a week call by the Respondent. He had been granted rostered days off and this creates a presumption that he was free to do as be pleased on those days subject to reasonable emergencies which required his presence. It is significant here that Mr Delanty, a Director of the Respondent, gave evidence that some of the mess in the venue was moved by him and people were able to inspect the venue during business hours on 21 February. The manner of Pietrzak's request also points to its unreasonableness. The Applicant was on his rostered day off. The request was made late in the day. The Applicant had no transport and had made arrangements that evening. The "request" was delivered in an angry manner. It was the first request for a meeting of this nature. The request failed to have any regard to the Applicant's rights and privileges outside the employment relationship. It failed to recognise that he was entitled, as a senior employee, to be treated civilly. While the Applicant had a duty to co-operate with the Respondent in the performance of the contract, this duty did not extend to complying with Pietrzak's request in the circumstances I have outlined. There are some similarities here to the case of Gibson v Bosmac Pty Ltd (Industrial Relations Court of Australia, Wilcox, C.J., 5 May 1995). There the employee failed to provide a reason why he was not prepared to respond to a reasonable request that he work overtime. He was dismissed and the dismissal held not to contravene s.170DE of the Act. It appears from the decision that had the employee proffered a reason for not being prepared to work the overtime requested the dismissal would have been held to contravene the Act. Here, in contrast, the manner and nature of the request, were, I find, both unreasonable. Further the Applicant gave at the time a reasonable excuse for not complying. When the matter is considered in this way I am satisfied that the Respondent did not have a "sound, defensible or well-founded" (Selvachandran (above)) reason to terminate the Applicant's employment. The Respondent has breached s.170DE(1) of the Act. Having reached this conclusion it is unnecessary to consider the Applicant's alternative argument that the termination breached s.170DE(2) of the Act. If I am wrong in my conclusion that the Respondent did not have a valid reason pursuant to s.170DE(1) I should indicate that I would have found the termination in breach of s.170DE(2). Given the previous dealings between the parties in relation to the stock variances, and in particular the lack of any formal ultimatum to the Applicant, and the fact that this "request" was the first of its kind, termination on the basis of failure to comply was clearly harsh and unreasonable, particularly given Pietrzak's abusive tone in the conversation. It was also harsh given the reasons for non compliance proffered by the Applicant. Did the Respondent Breach Section 170DC of the Act? In Johns v Gunns Limited (Industrial Relations Court of Australia, Northrop J., 18 May 1995) the Court said that it was unnecessary to consider a breach of s.170DC of the Act where the employer had not made out a valid reason for termination under s.170DE(1) of the Act. The matter was however fully argued and it is appropriate that I deal with it. Having regard to my findings as to the conversation on 21 February I am satisfied that the Applicant was not given an opportunity to respond to allegations relating to his conduct which gave rise to the termination. The requirements of s.170DC are flexible but substantive. The Applicant is required to be given a reasonable opportunity to respond to any matter which puts his employment at risk. I have already found that Pietrzak had at no time given the Applicant any form of ultimatum in relation to the variances. I find that the ultimatum to attend, delivered in an abusive manner on the telephone, would not, on any view, meet the requirements of s.170DC of the Act. It follows from this that the Respondent has breached s.170DC of the Act. Remedy It was common ground between the parties that reinstatement was impracticable given that the Applicant had now obtained alternative employment. The Applicant, despite sustained efforts, had been unable to obtain alternative employment until shortly prior to the hearing of the proceedings. His new position was in the same industry but at salary of only $28,000 p.a. As a result of the termination of his employment he has therefore suffered a loss of salary for the period until he obtained an alternative position and a continuing annual loss of $12,000 p.a. In Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 212 Wilcox C.J. noted that it is appropriate when considering the issue of compensation to consider what may have happened had the termination of employment not actually occurred. This invites consideration of the extent of security of employment that the Applicant had in his position with the Respondent. I am satisfied that the Applicant was relatively secure in his position and had Pietrzak not terminated his employment on 21 February it is fairly likely that he would have continued in his employment for the foreseeable future. My reason for this conclusion is the lack of any real ultimatum to the Applicant by Pietrzak in relation to his performance prior to the events of 21 February. It is also to be noted that on 22 February Pietrzak phoned the Applicant to enquire why he was not at work. This is an indication that he may have had second thoughts about the decision. It is also significant that Delanty was prepared to sign a reference in quite glowing terms that the Applicant had prepared and asked him to sign. Although Delanty claimed he did not read the reference and only signed it to get rid of the Applicant I am satisfied that he did read it. Whilst he may not have agreed with it in precise detail it did represent his view of the Applicant's discharge of his duties. In assessing compensation I have also had regard to the Applicant's evidence about the impact of the termination on him. I have also had regard to the comments of the Court in Aitken v The Construction, Mining, Energy, Timberyards, Sawmills & Woodworkers Union of Australia - W.A. Branch (Industrial Relations Court of Australia, Lee J., 7 August 1995). The Applicant's losses to the date of the hearing were approximately $15,200. Having regard to all these matters I am satisfied that it is appropriate to award the Applicant compensation in the sum of $15,000. MINUTES OF ORDERS THE COURT ORDERS: 1. That the Respondent pay to the Applicant the sum of $15,000 within 14 days. 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 fourteen (14) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy. Associate: Dated: 17 August 1995 Solicitors for the Applicant: Messrs Slater & Gordon Counsel for the Applicant: Ms Jane Patrick Solicitors for the Respondent: Messrs Koutsantoni & Associates Counsel for the Respondent: Mr Brian Lawrence Date of hearing: 21 July 1995 Date of judgment: 17 August 1995