Philippa Thomas and Geoff Thomas v Lake Eildon Country Club Ltd [1995] IRCA 489

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2213 of 1995 B E T W E E N : PHILIPPA THOMAS Applicant AND LAKE EILDON COUNTRY CLUB LIMITED Respondent VI 2214 of 1995 B E T W E E N GEOFF THOMAS Applicant AND LAKE EILDON COUNTRY CLUB LIMITED Respondent Before: Judicial Registrar Chancellor Place: Melbourne Date: 30 August 1995 REASONS FOR JUDGMENT (Ex Tempore) (Revised from draft Transcript) These are applications pursuant to section 170EA of the Industrial Relations Act in relation to the termination of the employment of Geoff and Philippa Thomas as manager and assistant manager of the Lake Eildon Country Club on 13 March 1995. Mr and Mrs Thomas, who were effectively a husband and wife joint management team, gave evidence on their own behalf. Evidence was given on behalf of the respondent by Will Charlton, the President of the club, Ian Gray, the Honorary Treasurer, Peter Riella and Nina Riella, who were the prior joint managers of the club in a similar arrangement to Mr and Mrs Thomas, and two employees of the club, Cornell Szymanski and Kylie Casey. The club placed an advertisement in July of 1994 and the Applicants applied for the management positions. They were given some preliminary information, documents, rules and articles of association and were invited to walk the club with Mr and Mrs Riella in order to gain some understanding of what was required in the management role, and what the Lake Eildon Country Club provided in terms of service to its members. This is a time share resort, so effectively time in terms of premises, caravans, and other assets is owned by the various members, presumably for the whole of the year, although from time to time members are unfinancial and/or not requiring accommodation, and it becomes available for rent. The Applicants attended an interview on 17 September 1994 with the Committee of Management. They were subsequently offered a contract of employment. In terms of remuneration, there was a total sum of $50,000 per annum, together with the provision of accommodation to be split between Mr and Mrs Thomas. I find that in terms of both Mr and Mrs Thomas, the total remuneration package was the sum of $29,900 each per annum, being $25,000 by way of salary, $3900 being effectively a half share in accommodation which I value at $150 per week, and $1000 each with respect to a 4 per cent superannuation entitlement, which is averaged over the period pre and post 30 June 1995. The contract included the following terms: Term of appointment: three years. Probationary period: a probationary period of three months is applicable and the three year term will commence from the end of the probationary period. Termination of contract: Termination of the contract may be given by either party by giving one month's notice. The evidence clearly established and in the end I think it was effectively conceded by the respondent, that the Applicants commenced employment as manager and assistant manager on 1 December. Their pay commenced on that date. Their signatures were recorded at the bank shortly after that date. They had moved into the managers residence, and indeed Mr Thomas sent a letter, dated 4 December, to the local Shire in relation to road resurfacing which he signed as Manager. It was also conceded that the termination, which was done on an oral basis, occurred on 13 March 1995. On the face of it, that would be outside the three month probationary period. However, the respondent argued that the applicants were excluded from the protection of the Act by reason of regulation 30B(I)(c) which states: "For the purposes of section 170CC of the Act the following employees are excluded from the operation of the Act: employees serving a period of probation or a qualifying period of employment, if the duration of the period or the maximum duration of the period, as the case requires, (i) is determined in advance, and (ii) is reasonable, having regard to the nature and circumstances of the employment." The first matter to consider is whether the three month period contained in the contract can be said to be reasonable. The reasonableness of a probationary period was discussed by Wilcox CJ in the matter of Nicholson v Heaven and Earth Gallery Pty Limited [1994] IRCR 199 where he indicated that circumstances will vary from case to case, the size, location and mode of operation of the employer being relevant factors, along with the personal characteristics and circumstances of the employee. He indicated that he suspected that an employer will rarely be able to justify a period exceeding two or three months in the case of an employee who would otherwise come within Part VIA of the Act. In Nicholson's case there were some similarities to the present case in that Mr Nicholson had a high degree of operational independence, was expected to initiate ideas and develop programs, and was not under direct supervision as he was responsible to the company's directors, who resided in a different part of New South Wales. There is a very similar situation in this case with the members of the committee generally being resident in Melbourne, and only attending at the club from time to time. It is also the case that the Applicants had to undertake a very wide range of duties in terms of handling the resort, the facilities on the resort, the finances of the resort, looking after staff and directing them, and other matters. It is also relevant in this case that the period covered was the Christmas holiday period, which both meant that it was more difficult for the Applicants to be monitored in that committee members may have been away, and also that it was a very busy period and a good test period. In all the circumstances I find that the three month period was a reasonable period, and on the face of it expired at midnight on 28 February 1995. Mr Maher submitted that it was appropriate to imply a term into the contract of employment. He argued that in order to give it business or employment efficacy, the contract of employment should be interpreted as providing that the applicants were on probation for three months, or such further reasonable period as the parties might be taken to have impliedly agreed upon to enable the respondent to arrive at an express determination as to whether it would offer the applicants a joint appointment for up to three years, and to communicate its decision to the applicants. He relied on the decision of the Privy Council in BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266, 282-3, which outlined a number of factors that should be taken into account when considering whether a term ought to be implied into a contract. One of those factors is that it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it. In my view, the contract in this case is effective without the need to imply extra terms into it. In particular, it seems to me that if the employer was properly organised in relation to this matter, that there would not have been any difficulty in arranging a meeting, for example, on the weekend of 25 and 26 February in which the parties could have met and discussed the probationary period. The committee would then have been in a position to have made an informed determination prior to the end of the three month period. The legislation requires that the period is determined in advance, and I am very reluctant to read in any implied term that leaves the period as it were up in the air. The regulation also refers to an employee "serving a period of probation," which to me reads in the present tense and suggests that some fixed period should be clearly identifiable. I therefore find that the termination did not take place during a period in which the applicants were serving a period of probation, and that the applicants have the benefit of the provisions of the Act. The next question is whether or not there was a valid reason for the termination of Mr and Mrs Thomas. It is common ground that they were not told the reasons for their termination on 13 March, nor were they asked their views in relation to a wide range of matters prior to the decision having been made. Eventually, by letter dated 4 April 1995, the respondents' solicitors advised the applicants' solicitors of the main reasons for termination of employment. It appears to me that the first five reasons listed in that letter are the major ones: 1. Use of a swing mooring owned by the club to store Mr Thomas' brother's boat without payment and without the directors' consent. 2. Use of cabin 41 at the resort by Philippa Thomas' family for three weeks during the period 30/12/94 to 20/1/95 without payment to the members or with the directors' consent. 3. Use of the caravan park site by Mr Thomas' uncle for a period between 30/12/94 and 13/1/95 without payment or directors' consent. 4. Use of cabin 41 during the Labour Day weekend 10/3/95 by Mr Thomas' family without payment or directors' consent. 5. Mr Thomas instructed staff to space bank (give time to the National Exchange Organisation called Resort Condominiums International) two weeks of members' time to enable them to use the time personally for a holiday later in 1995 without authority. In relation to those matters, it seems clear to me that Mr Charlton and the other members of the committee were of the view that the applicants had knowingly and wrongfully made use of the club's facilities and potentially were about to wrongfully make use of the space bank facility. This is clearly indicated in a summary that was prepared by Mr Charlton, headed "Review Of Management Performance," which was submitted to a committee meeting on 8 March 1995. In relation to the matters of the caravan, the cabin and the boat, Mr Charlton expressed the view that Peter Riella had specifically told Mr Thomas that he should make formal application to the committee. It was alleged my Mr Charlton in relation to each of the matters that either Mr or Mrs Riella specifically told either Mr or Mrs Thomas that committee approval would be required. In their evidence, the applicants denied that any such direction had been given by Mr or Mrs Riella. In terms of the credibility of the applicants, I note that Mr Thomas in particular was cross-examined at great length and in great detail over a wide range of matters, most of them relating to his employment with the Respondent and some of them relating to financial affairs relating to his previous partnership with Mrs Thomas in a hotel business. Although he was somewhat fuzzy on a couple of matters, I generally found him to be a fairly straight-forward witness who attempted to answer all the matters that were put to him in a straight-forward manner. In particular, his credit was attacked in relation to those earlier financial problems. It appears that debts of somewhere in the vicinity of $30 to $40,000 were owing by the applicants as a result of their involvement in a hotel in Mansfield prior to their employment with the club. At the initial employment interview on 17 September, Mr Charlton sought to raise the issue of the applicants financial state by asking a question in relation to their financial circumstances. Presumably he was aware of the fact that they were leaving the hotel and wanted to know whether or not there were any debts outstanding. Presumably also this may have been relevant because the hotel was in the same district as the club, and there may have been creditors. However, at that meeting Mr Charlton was stopped from asking the question by another committee member and the matter was not pursued. Mr Thomas was criticised during the course of this case for not raising the matter with the committee and indicating to them that the debts existed. In my view, this is not a valid criticism. The committee itself had the opportunity to ask the question and indeed the fact that Mr Charlton effectively withdrew the question indicates that the committee was indicating to the applicants that it was not a matter with which they were concerned or should be concerned. In relation to the discussions between the Riellas and the applicants, in general terms I prefer the applicants version of events. It is clear that they were extremely keen to get the job and, in my view, it is highly unlikely that they would have jeopardised their employment by directly ignoring a directive or an indication from Mr or Mrs Riella that they should notify the directors in relation to the matters of the caravan, the cabin and the boat. The use of the caravan, cabin and boat was carried out in the open. There was no attempt made to hide anything and that is consistent with the applicants version. I also accept that at the time of termination they were genuinely shocked by their dismissal and had no idea that they might be accused of any wrongdoing. They were also aware that the cabin had been used by other staff members for a variety of reasons. In relation to the evidence given by the Riellas and the applicants, there may well have been some confusion between them because of the fact that the Riellas were members of the club and the applicants were not. It is also possible that the Riellas' recollection is one of what they should have said or might have said but, in my view, on balance, it is not an accurate recollection of the conversations. I also note that Mr Riella became aware of the use by the applicants of the cabin by late January 1995, but apparently did not refer that to anybody, which to me seems inconsistent with the fact that he might have been of the view that there was a deliberate wrong-doing being done. Despite the dates referred to by the respondent it appears that cabin 41 was used between 27 December and 5 January, and only by Mrs Thomas' father who slept there, and again on the weekend of 10-13 March, but only to do loads of washing. In relation to the caravan, there were only 3 or 4 nights involved between 2 January and 5 January. These periods are considerably shorter than those which the respondent had indicated in its letter, and this indicates the risk of drawing conclusions in relation to matters without speaking to the parties most directly involved. In relation to the matter concerning the space bank, again, it seems that there was some confusion. It was clear from the evidence that the applicants were entitled to a two week holiday through a deal with RCI. I accept that there was a misunderstanding in relation to precisely how that should be organised, but I do not believe that the applicants were guilty of any obvious wrong-doing in relation to that matter. There were other matters of concern raised in the letter of 4 April. One was a failure by Mr and Mrs Thomas to keep a proper record of attendance. It would seem that there was some slackness in this regard but, in general terms, the records were completed, perhaps on a weekly basis instead of a daily basis, but given that the applicants were on a fixed contract and given that I find that they worked very long hours beyond those which they were required to work, I do not see that as being a major problem. The letter also contained criticism of failure to properly enforce the club rules including allowing smoking in the recreation lodge and allowing dinghies to be used out of office hours. Mr Thomas said that he attempted to deal with the smoking problem. This is a difficult problem in many areas of society and often leads to conflict and clashes, and I accept that he tried his hardest in that regard. In relation to the dinghies, he let them out at much earlier hours than was previously the case but generally that was for the benefit of members, and he felt he was doing the right thing. If there was any criticism in relation to those matters, they are matters that could have been put to Mr Thomas, and improvement obviously could have taken place. He had earlier been criticised for lack of communication to Mr. Charlton but this alleged problem was quickly remedied. There was also criticism of Mr Thomas in relation to the exercise of his accounting responsibilities. There was a problem with $500 which may or may not have been missing from fuel barge takings. It appears that bank reconciliations had not been properly completed going back to October 1994 which was a period of time when Mr and Mrs Thomas did not have responsibility for such matters. Mr Thomas went back over the records, instructed the bookkeeper in relation to the matter and, in my view, improved the situation. He also immediately arranged for a new system to be used in relation to the takings on the barge, and also introduced extra controls in terms of cash which might be on the premises with new systems of locking and handling. In my view, these matters improved the situation of the respondent. There was one occasion in which cash totalling $1700 was held in the top drawer of his desk for three days. That is not really acceptable, but on the other hand it was an error and not a matter that would justify dismissal. It seems that this was the only occasion that a mistake of that type took place. There was also criticism of failing to complete a stock take of the shop at the end of February. There was mixed evidence in relation to that. It appears that eventually the stock take was completed. Perhaps Mr Thomas did not arrange for it to be completed at the time suggested by Mr Gray, and there may have been a 2 week delay but, again, this is a matter that could have been cured by some extra direction. There are a number of other smaller matters that were referred to in the detailed Review prepared by Mr Charlton. However, he conceded in evidence, and indeed effectively concedes in the Review itself, that those matters in themselves do not add up to sufficient to justify termination. Given my findings in relation to the applicants state of mind in relation to the use of the cabin, the caravan and the mooring and the uncontradicted evidence that they were all vacant and not required for use by either members or potential persons renting during the times that they were being used, and given the applicants clear indication that if there was to be any requirement for use that they would have vacated the sites and given the other matters to which I have referred I find that in breach of s170DE(1) of the Act there was no valid reason for their termination. I also find that there was a clear breach of section 170DC of the Act. That section requires that allegations in relation to conduct or performance be specifically put to the employee to give the employee the opportunity to respond. Clearly, it was not done in this particular case, presumably because the respondent had taken the view that it was still somehow within the probationary period and was not required to do so. Leaving aside the question of the requirements of the Act, it seems to me that when making an important decision such as this one, it would have been fair in the circumstances to have raised the issues with Mr and Mrs Thomas prior to making the decision, and the respondent through its committee acted very unfairly by failing in that regard. The respondent submitted that because the actions of the applicants were so bad, that it was not necessary or practical to put the allegations to them but, given the findings that I have already made, I reject that submission and, in any case, I think that however severe the allegations, it is a clear requirement that the relevant matters should be put. Given my findings that there have been breaches of both section 170DE(1) and section 170DC of the Act, the question then is what is the appropriate remedy in the circumstances. The applicants attempted to stay on at the Country Club after receiving notification of their termination and made repeated requests for consultation and reinstatement but those requests were rejected. Eventually they left the premises about 3˝ weeks after 13 March. I accept the evidence of Mr and Mrs Thomas that they attempted to find work in the Mansfield area, including at Mount Buller, but were unsuccessful. They then made a decision that they would have to leave the area which, in my view, was a reasonable one in the circumstances and they chose to move to Queensland. They have two children, aged 7 and 11, who now reside up there and presumably are attending school up there. Mr and Mrs Thomas were of the view that reinstatement was no longer practicable as they had effectively moved on a permanent basis to Queensland. Quite naturally, the respondent did not argue with that proposition and I find that reinstatement is impracticable. In terms of the question of compensation the remuneration package for each of the applicants was $29,900 which represents approximately $2490 per month. They received one month's pay in lieu of notice and, as I said, remained in the accommodation for 3˝ weeks so, effectively, nearly received four weeks notice in terms of accommodation. Mr Thomas gained new employment on 29 May as a real estate agent in Caloundra in Queensland. That employment is on a commission only basis and at the time of the trial he had not sold any real estate and did not have any earnings. He has obviously chosen to move into a new career and at this stage is somewhat involved in a training and learning period. He is a qualified accountant. He previously worked as a TAFE teacher so it seems to me that, if he wished to obtain work in those areas, that he may well have done so by this time. Given the short employment history and the fact that he is in employment and has good prospects, given his obvious drive and enthusiasm, of earning a satisfactory income in the future, I think it is appropriate to award him three months' compensation or thereabouts in the sum of $7500. In the case of Mrs Thomas, she has made attempts to obtain employment in the hospitality industry in Queensland. The only work she has obtained has been part-time weekend work and she is earning somewhere in the vicinity of 80-odd dollars per week. She is obviously having more difficulty obtaining employment than her husband. However, again, based on her presentation and experience, it seems likely that she will be successful in obtaining full-time employment in the near future. Again, taking into account the short employment history with the respondent and what I consider to be her good prospects, I think it is appropriate to award compensation of approximately four months, in the sum of $10,000. MINUTES OF ORDERS THE COURT ORDERS: 1. That the respondent pay the applicant Philippa Thomas compensation in the sum of $10,000. Stay of 21 days. 2. That the respondent pay the applicant Geoff Thomas compensation in the sum of $7500. Stay of 21 days. I certify that this and the preceding sixteen (16) pages are a true copy of the reasons for judgment of Judicial Registrar Chancellor. Associate: Dated: 19 September 1995 Solicitor for the Applicants: Slater & Gordon Counsel for the Applicant: Ms K. Hawkins Solicitor for the Respondent: Howie & Maher Counsel for the Respondent: Mr L. Maher Date of hearing: 18, 19, 20, 21 July & 30 August 1995 Date of judgment: 30 August 1995