Margaret Nilsen v Loyal Orange Trust [1995] IRCA 394

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2875 of 1994 B E T W E E N : MARGARET NILSEN Applicant AND LOYAL ORANGE TRUST Respondent Before: Judicial Registrar Chancellor Place: Melbourne Date: 23 August 1995 REASONS FOR DECISION This is an application pursuant to Section 170EA of the Industrial Relations Act by Margaret Nilsen with respect to the termination of her employment by the Loyal Orange Trust ("L.O.T.") on 16 December 1994. At the beginning of the hearing the Applicant sought leave to join the Loyal Orange Institution of Victoria ("L.O.I.V.") and a number of its members known to the Applicant as Respondents to the action. An application to this effect had been previously made by way of Notice of Motion but was dismissed by Judicial Registrar Murphy on 8 May 1995. I agreed to reconsider the application for joinder after hearing all of the evidence but indicated this was primarily if there was any problem concerning time limits on any proposed review of Judicial Registrar Murphy's decision. After hearing all of the evidence I confirmed Judicial Registrar Murphy's decision to dismiss the application. Although there may be some confusion as to the correct identity of the employer of Ms Nilsen prior to June 1987, it seems that from that time her group certificates indicated that her employer was the Loyal Orange Trust and this is consistent with the fact that L.O.T. is a creation of L.O.I.V. which holds property on trust for L.O.I.V. and basically handles most of its financial affairs. The L.O.I.V. is a voluntarily association whose main objective is to support and defend the Protestant religion. The L.O.T. is responsible for the advancement of the Protestant religion in particular, by way of education and charity and this involves it in controlling a large number of houses or units which house aged or infirmed members. The Respondent argued that Ms Nilsen's termination was as a result of its operational requirements due to the continuing deficit of L.O.T.. The Applicant's primary contention was that Ms Nilsen was terminated because she had been removed from membership of the L.O.I.V. on 1 June 1994 and that the termination was personality based and not economically based. The following persons gave evidence on behalf of the Applicant:- Margaret Nilsen Jean Lewington - who has been a member of the L.O.I.V. for some 68 years. She is currently on the Grand Lodge which is the ruling body and on many occasions has been a director/member of L.O.T. up until 1993. Dr Margaret Ely - who was a member of L.O.I.V. from 1989 until 1 June 1994 and a director of L.O.T. from November 1989 to at least June 1994. Patricia Mckenzie - a union organiser with the Australian Services Union, a Union of which Ms Nilsen was a member. William Berry - an accountant who has been a member of L.O.I.V. since 1967. In the past he has been the treasurer of the L.O.I.V. and L.O.T.. Evidence was given on behalf of the Respondent by the following persons:- Jeff Davis - the current assistant secretary of L.O.T. and former grand secretary of L.O.I.V. and former secretary of L.O.T. until his resignation in November 1992 from those positions. Robert Curran - the grand secretary of L.O.I.V. and secretary of L.O.T.. George Brown - a director/member of L.O.T.. Ms Nilsen had commenced employment in August 1969. She worked on a full time basis and carried out a number of duties including receptionist work, typing, clerical duties and the hospitality of visitors, overseas members and persons who enquired of the organisation. She worked at the Elizabeth Street headquarters known as Loyal Orange House. Mr Davis had commenced work approximately one week after Ms Nilsen in August 1969. There had always been a Christian Witness Bookshop at Loyal Orange House and this provided information for members and those with general enquiries. This was initially run by two retired clergy but Mr Davis and Ms Nilsen helped out from time to time. In November 1977 with the retirement of the then grand secretary, Mr Davis became grand secretary of L.O.I.V. and secretary of L.O.T.. Ms Nilsen, who had been asked to become a member of L.O.I.V. upon commencing employment which she did, continued as the assistant of Mr Davis. There were no restrictions on her access to the building, materials or records of the L.O.I.V. or L.O.T.. In about 1978 the clergy no longer volunteered in the bookshop and it was run primarily by Mr Morris, the former grand secretary with assistance from Mr Davis and Ms Nilsen. Mr Morris died in 1988. Although there was some conflict of evidence on this point, I find that Ms Nilsen became primarily responsible for the operation of the bookshop from 1988. Indeed, the records of the bookshop which were tendered in evidence indicate that Ms Nilsen had been responsible for 2,027 of 2,193 bookshop transactions over recent years. It is likely that Ms Nilsen spent less time on typing and telephone duties after 1988. Mr Davis gave evidence that he attempted to do as much of his own typing as was possible. In November 1992 Mr Davis resigned as grand secretary of L.O.I.V. and secretary of L.O.T. and subsequently Mr Curran, who was previously a grand master, was elected unopposed to those positions. Mr Curran worked full time from early 1993. Mr Davis remained on a full time basis as the assistant to Mr Curran. He taught Mr Curran the administrative side of the position, assisted him with his duties and filled in if Mr Curran was on holiday, on leave or absent for any other reason. From the time of Mr Curran's appointment it appears that there were now three people doing the work previously done by two, although it seems that Ms Nilsen spent even more time in the bookshop. From 1991/1992 L.O.T. began to develop cash flow problems. The main contributing factors seemed to be the increase in maintenance costs of older homes and units, the extra staff member and the large drop in interest rates from around about 14% - 15% down to 5% which affected the income on investments. A number of steps were taken in an attempt to remedy the problem. Properties were sold at Echuca and Croydon. Initially the bookshop was enlarged in the hope that the image of the organisation would be improved and that sales would increase. This meant that Ms Nilsen was spending even more time on bookshop work. She continued to do occasional typing, some photocopying and wrapping of the L.O.I.V. newspaper - The Sentinel. Despite taking these steps the deficit of the L.O.T. was not properly controlled. The accounts which were tendered in evidence indicate that the deficit for the year ending 30 June 1993 was $64,127. As at November 1993 the deficit for the first four months was $27,000 and by March 1994 it had risen to $56,000. In a memorandum dated 30 March 1994 the treasurer Mr Homan submitted a number of possible options to deal with the cash flow problem. These included leasing the adjacent building at 520 Elizabeth Street, selling further properties, encouraging the retirement of the homes administrator, reducing one employee to a part time position, increasing drawings from home accounts and, perhaps surprisingly, the option of selling the flagship of the organisation Loyal Orange House. This would seem to confirm the very significant concerns held by the treasurer at that time. There were also recommendations that costs be reduced by reducing to only 1 telephone line and also, again significantly, reducing the size, pages and number of issues of the Sentinel in order to further cut costs. At the L.O.T. meeting held on 27 May 1994 the treasurer recommended that the bookshop be opened only in the afternoon between 1.00pm and 5.00pm and that Ms Nilsen's salary be adjusted accordingly. It was resolved that this matter be dealt with at the July meeting. I find that as at 27 May 1994 there were very genuine concerns about the cash flow situation of L.O.T. and this had already led to consideration being given to Ms Nilsen's position. The accounts for the year ending 30 June 1994 showed a deficit in the sum of $61,956. Mr Berry, who had examined the 1993 and 1994 accounts and statements, accepted that an income deficit did exist. The evidence indicates that from early 1994 that several members of L.O.I.V. became concerned with the manner in which L.O.T. was carrying out its charter and operations. Dr Ely seems to have been the primary complainant but she received support from both Jean Lewington and also from Ray Nilsen, the brother of the Applicant. Mrs Lewington had particular concerns over a potential conflict of interest in relation to George Brown who was both a member of L.O.T. and also a building contractor who it appears carried out the vast majority of maintenance work that was done for L.O.T.. Dr Ely was concerned about this matter and also had concerns about an alleged lack of financial information, lack of budgeting, breach of duty and disclosure by the directors and also concerns over whether or not the tenants of a number of homes and units were proper tenants within the meaning of the trust deed. Dr Ely forwarded a detailed letter to L.O.T. in January 1994 regarding her concerns and lodged further detailed documentation in March 1994. The L.O.T. sought legal advice in relation to the matters raised by Dr Ely and George Brown sought his own advice concerning any possible conflict of interest and comments which had been made in relation to that possible conflict. This apparently led to quite considerable conflict within the Lodge of the L.O.I.V. of which Dr Ely, Mr Nilsen and Ms Nilsen were members. At the Lodge meeting of 19 May 1994 there was considerable ill feeling. Mr Davis addressed the meeting and was extremely critical of Dr Ely and Mr Nilsen attacking their competence, accusing them of disseminating misinformation and describing them as a "festering sore". Janis Dingwall moved a motion that the Grand Lodge-executive of the L.O.I.V. re-ballot all members of the Lodge. She said that she moved the motion because she was sick of the bickering between the members and that meetings were like a bar room brawl. In her evidence Dr Ely said that she felt that the motion was passed in an effort to get rid of both herself and Mr Nilsen. Indeed, at the meeting Mr Nilsen moved an amendment that he be the only member re-balloted, but this was rejected. On 1 June 1994 the Grand Executive of L.O.I.V. proceeded to a re-ballot of members of the Lodge by way of blackballing procedure. As a result of that re-balloting five members were excluded from membership of L.O.I.V.. Not surprisingly this included Dr Ely and Mr Nilsen. Perhaps a little surprisingly Ms Nilsen and Mr Hawthorn who are both related to Mr Nilsen were also excluded. The fifth person excluded was Janis Dingwell and presumably this was somewhat of a surprise. She was the member who had moved the motion for re-balloting, and one would assume that she did so on the basis that she felt her position was safe. Ms Nilsen, who had never received any prior complaints in relation to either her membership or her employment, was quite shocked and distressed at her exclusion from membership. Mr Curran saw that she was upset and crying after she had been notified of her exclusion. He said that in order to alleviate her fears he arranged for a letter dated 2 June 1994 to be sent to her. The letter stated:- "Notwithstanding my letter to you of today's date concerning the re-ballot of your membership of the L.O.I.V., the decision taken, in my opinion, and in the Grand Master's opinion, does not affect your work situation as bookshop salesperson/receptionist at Loyal Orange House and cleaner". It was put to Mr Curran that this letter was merely a sham and that certainly from 1 June 1994 onward that it was the intention of both Mr Curran and Mr Davis to ensure that Ms Nilsen's employment was terminated. Mr Curran agreed that the letter was not entirely accurate since, because Ms Nilsen had lost her membership of L.O.I.V., the rules required that she was no longer involved in internal correspondence in relation to the L.O.I.V.. In particular, this meant that she was no longer able to type monthly balance sheets nor did she have password access. However, Mr Curran said that he was genuinely concerned about Ms Nilsen and her upset at losing her membership, and that the letter was genuinely written by him in order to alleviate her fears. I accept Mr Curran's evidence that it was his genuine belief that Ms Nilsen could continue in her employment, despite her loss of membership, and only with a few restrictions. Ms Nilsen gave evidence that after 1 June there was a significant change in the nature of the duties which she performed and also in the manner which she was treated by other staff. Given my previous finding that Ms Nilsen's work was primarily involved in the bookshop, I am unable to accept her evidence on this point. If there was an alteration to her secretarial and typing duties then this would seem to have been minor in nature and only related to the very specific L.O.I.V. documents. Ms Nilsen complained to the union and Patricia McKenzie attended and spoke to Mr Curran and to Mr Davis. Ms McKenzie gave evidence that she gained the impression that Ms Nilsen had been moved from clerical duties to the bookshop because she was no longer a member of the L.O.I.V.. She was not aware that Ms Nilsen had worked in the bookshop pre-June 1994. Her notes of the meeting indicate that she was told that a recommendation had been made that someone commence full time in the bookshop from 1991. It is likely that Mr Curran and Mr Davis attempted to inform her that Ms Nilsen had been that person over the previous years. Ms Nilsen also gave evidence that she had restricted access to both the premises and information after 1 June 1994. Mr Curran conceded that there was some restriction in relation to L.O.I.V. documentation but said that he had locked his own office since August 1993, which pre-dated all of these issues and that Ms Nilsen still had access during business hours. In relation to Ms Nilsen's complaint that she was not trusted to be alone in the office during July of 1994 Mr Curran pointed out that this was the time of the commemoration of the Battle of Boyne and that Ms Nilsen was not left alone because of potential security problems and I accept his evidence on this point. In her evidence Ms Nilsen agreed that she continued doing receptionist work, continued working in the bookshop and continued with her hospitality role. I therefore find that she continued with the very large majority of her pre-June 1994 duties. Ms Nilsen was also concerned that her confidentiality was questioned. Mr Curran wrote to her on 8 September 1994 reminding her that in her dealings with the general public that she was to keep matters confidential and it appears that a similar reminder was sent in November of 1994. On 27 October 1994 a memorandum headed "Notice to All Staff" was distributed to Mr Curran, Mr Davis and Ms Nilsen. It stated:- "We bring to your attention proposals that will be considered at the forthcoming annual meeting of the Grand Lodge of the L.O.I.V.. The proposals have been suggested as a possible means of reducing the trusts operating deficit. The proposals are that staffing levels be reduced and for the bookshop at Loyal Orange House Melbourne to be closed. If the proposals as suggested are adopted by the Grand Lodge meeting and ratified by the L.O.T., it will effect the present staff levels and work conditions." The proposals were duly considered at the annual meeting on 5 November 1994. More than 50 officers and delegates voted in relation to the proposal. The proposal was accepted by the meeting. In a "Notice to All Staff" dated 8 November 1994 and distributed to Mr Curran, Mr Davis and Ms Nilsen the following information was provided: "These matters were debated at that meeting, and it was resolved; 1. That the staffing levels at Loyal Orange House, Melbourne, be reduced by one; 2. That the bookshop be closed on 23 December next." The Applicant argued that the two documents headed "Notice to All Staff" were both shams as there were only three members of staff and Mr Davis and Mr Curran, being actively involved with both L.O.I.V. and L.O.T., although not voting in relation to these matters, knew well in advance exactly what was taking place. However, I accept the Respondent's submission, that L.O.T. had received legal advice in relation to the matter and was merely trying to ensure that the correct procedures were followed. The L.O.T. met on 25 November 1994. The meeting endorsed the purchase of a photocopier and was also advised that 520 Elizabeth Street had been leased for two years with rent to be reviewed annually at $28,000 per annum with the first two months rent free. This rental obviously would lead to some improvement in the cash flow position. At the meeting each of the directors was given a list of guidelines which had been prepared by Mr Curran in consultation with the L.O.T.'s solicitors. These guidelines were prepared in the light of the new industrial laws and aimed to ensure that both substantive and procedural fairness was accorded. Mr Davis and Mr Curran retired from the meeting and the remaining directors considering the matters for about 50 minutes to 1 hour. George Brown gave evidence that the remaining directors considered the matters and then ratified the recommendation of the L.O.I.V.. On substantive grounds the meeting considered that L.O.T. was overstaffed by one. There had been two staff members for many years up to the appointment of Mr Curran who had been able to cope with the relevant duties. It was further decided that the bookshop could no longer be afforded. The ongoing deficit was the major consideration. Mr Brown indicated that the meeting then considered how the staff members should be dealt with. Mr Curran was not considered for termination because of his statutory and organisational roles as grand secretary and secretary also because of a fixed six year term. The relative merits of Mr Davis and Ms Nilsen were then considered in accordance with the prepared guidelines. It was felt that Mr Davis had the superior qualifications as he had been the grand secretary and secretary of L.O.T. in the past, that he had experience in inspecting properties, dealing with the press, carrying out office duties and had a better understanding of the Protestant faith. He was also experienced in typing, book keeping and accounts. On the other hand Ms Nilsen was working primarily in the bookshop and was not really familiar with the secretary's role. Mr Brown gave evidence that it was the unanimous decision of the meeting that Ms Nilsen would be made redundant. He said that this was a very difficult decision because both Ms Nilsen and Mr Davis had been very good employees for 25 years. A motion was passed that in consultation with solicitors, a termination package be prepared for Ms Margaret Nilsen and be referred to a meeting of members for approval. I should add that prior to the meeting of 25 November, Mr Nilsen had sent a letter in his capacity as a solicitor saying that he represented Ms Nilsen, obviously putting the L.O.T. on notice in relation to any proposed termination. The guidelines which were produced for the L.O.T. meeting of 25 November contained the following paragraph:- "If a person other than a staff member tries to interfere they are told it is an internal matter between staff and the trust: that it is therefore assumed the staff member does not wish to discuss the matter". Mr Curran quite properly conceded that this applied to Mr Nilsen, but for some reason Mr Davis was unable to make such an obvious concession. The Applicant attacked the guidelines on the basis that they were really prepared to enable a termination of Ms Nilsen and not for a full consideration of the matter. I reject this submission and accept that the L.O.T. considered the matter in good faith and properly considered the decision to terminate Ms Nilsen. On 12 December 1994 the L.O.T. met and approved a termination package for Ms Nilsen. She received five weeks pay in lieu of notice, her statutory entitlements to 10 weeks annual leave and 22 weeks long service leave and also received a redundancy payment of 12 weeks pay. The Trust executive attempted to meet with Ms Nilsen on 15 December but she was unwilling to talk to them in the absence of a witness, probably her brother Mr Nilsen. By letter dated 16 December 1994 the L.O.T. advised Ms Nilsen of her termination. The letter said in part:- "The Trust has in recent months had to assess its financial position and the manner in which it is organised. This assessment of its finances and its organisation has resulted in changes which will, hopefully, enable the Trust to remain economically viable." The letter confirmed the closure of the bookshop and the termination of Ms Nilsen's employment from 22 December 1994. Was There a Valid Reason for the Termination? In Selvachandran v Peteron Plastics Pty Ltd (unreported 7 July 1995) Justice Northrop made the following observations in relation to the question of valid reason:- "In its context in subsection 170DE(1) the adjective valid should be given the meaning of sound, defencable or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of subsection 170DE(1)." The question of "valid reason" in relation to a redundancy situation was considered by Justice Beazley inQuality Bakers of Australia Limited v Goulding & Wickham (unreported 23 June 1995). In that case the Applicant submitted that Quality Bakers had not proved that there was a need to restructure the business on economic grounds which it was submitted was a necessary ingredient of a genuine redundancy. Justice Beazley made the following comment:- "If the submission was correct, it would be necessary in every case of termination because of a redundancy for an employer to call expert economic or financial evidence to support an operational decision to make jobs redundant and the Court would become the arbiter of whether the employer's operational decision was justified. There is nothing in the Act to justify such an approach." Dr Ely, Mr Berry and Mrs Lewington all argued that there were alternatives to the termination of Ms Nilsen. Mr Berry referred to the reduction of maintenance and repair costs but conceded that this was possibly easier said than done, he suggested a pro-rata reduction in the roles of all three staff members, the possibility of selling further assets and somehow increasing income. Dr Ely said that she had done an analysis of the financial figures in April of 1994 and believed that despite assertions to the contrary, that there were sufficient funds to employ three staff members. On the other hand it is clear that the accounts tendered in evidence confirm an ongoing deficit. It is also clear that a number of steps were taken in an attempt to reduce the deficit. These steps included the sale of assets, the reduction in the size of the Sentinel and the rental of 520 Elizabeth Street. A number of these steps had been taken prior to the expulsion of Ms Nilsen from membership of the L.O.I.V. and, indeed, the records indicate that Ms Nilsen's position was being considered prior to her expulsion. In the circumstances, I am unable to accept the submission that Mr Davis and Mr Curran effectively orchestrated Ms Nilsen's termination following her expulsion from membership. I accept that based on the operational requirements of the Respondent that the closure of the bookshop and reduction of one staff member represented a valid reason for the termination of Ms Nilsen. The Applicant did not strongly press the argument that the termination was harsh, unjust or unreasonable and in breach of section 170DE(2) of the Act. The Quality Baker's case confirms the proposition that even in the case of a genuine redundancy, the termination of employment of a particular employee may be harsh, unjust or unreasonable. The case also confirms that in the case of a redundancy the employer is generally expected to give as much notice and warning as possible to the relevant employees, to consult with the relevant employees, to adopt objective selection criteria for those employees who are to be terminated and to attempt to continue employment by way of retraining and redeployment. In Ms Nilsen's case she was one of only 3 full time employees. She was advised on 27 October of the possibility of staff reductions which was very soon after the Trust became aware that serious consideration was going to be given to the matter. She was again advised on 8 November that there had been a motion recommending the reduction of one staff member and the closure of the bookshop. I find that at the meeting of 25 November that objective selection criteria were applied and indeed, it seems that if there was to be a reduction of one staff member then in all the circumstances Ms Nilsen was, unfortunately, the obvious candidate. Given the small size of the operation there was really no viable way of maintaining her employment and in all the circumstances the retrenchment package seems to be a reasonable one. The only criticism that could be made of the Respondent is its failure to consult with Ms Nilsen or, indeed, with Mr Davis. However, in this particular case, given the small nature of the operation, the fact that Ms Nilsen and Mr Davis had worked for over 25 years and were very well known to all the persons involved and the fact that the decision was being made by a large number of persons I find that there was little if anything to be gained by consultation. In all the circumstances I find that the termination was not harsh, unjust or unreasonable. I should also add that the Applicant asserted that the bookshop had not been closed. The evidence of Mr Davis, Mr Curran and Mr Brown was that it had been closed since December 1994, that it had not re-opened and that there was no intention to re-open it in the foreseeable future. I accept their evidence in this regard. Given the objects and history of the L.O.I.V. and L.O.T. this was obviously not a decision that was taken lightly. Although I can understand how Ms Nilsen may feel that she has been terminated as a result of her association with Mr Nilsen and Dr Ely and indeed as a result of her expulsion from the L.O.I.V., I find that those were not the reasons for her termination and that bona fide reasons do in fact exist. I therefore propose to dismiss the Application. MINUTES OF ORDERS THE COURT ORDERS: 1. That the 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 eighteen (18) pages are a true copy of the reasons for judgment of Judicial Registrar Chancellor. Associate: Dated: 23 August 1995 Solicitor for the Applicant: Ray Nilsen Counsel for the Applicant: G Watkins Solicitors for the Respondent: Messrs Hunt & Hunt Counsel for the Respondent: Mr J Bourke Date of hearing: 22, 23 & 24 May 1995 Date of judgment: 23 August 1995