INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 3012 of 1995 B E T W E E N : GEOFFREY ALLAN RESSOM Applicant AND MAIN SCREEN PRINTING PTY LTD Respondent Before: Judicial Registrar Millane Place: Melbourne Date: 21 September 1995 REASONS FOR JUDGMENT This is a case where there is very little dispute over the facts relevant to whether the Applicant's employment as a Production Manager of the Respondent's screen printing business was unlawfully terminated on 19 May 1995. The Applicant gave evidence and was represented by Mr Burchardt of Counsel. The Respondent was represented by Francis Mark Phillips (Phillips), an officer of the Respondent company. Phillips was the only witness to give evidence on behalf of the company. The Facts From 1 July 1987 the 38 year old Applicant worked for PSI Printing. When the partnership operating that business dissolved the remaining two partners continued the business in the Respondent's name from 9 August 1989. The Applicant continued to be employed by the new entity as a factory manager. From 1992 Phillips became involved in the business and told the Court that he is a director of the Respondent company. The Applicant's employment was terminated by the Respondent on 19 May 1995. At the date of termination the Applicant had risen to the position of production manager on a gross salary of $38,355 per annum together with the use of a Commodore motor vehicle fully paid for by the Respondent and available for the Applicant's own use. The arrangement with the Respondent was that each month the Applicant submitted a bankcard invoice for petrol in the order of $300 to $400 per month and this account was paid by the Respondent. The Applicant estimates that some 50% of the petrol account submitted to the Respondent for payment was attributable to the Applicant's private use of the vehicle. Bearing this percentage in mind as well as other matters such as insurance and maintenance of the vehicle the Court was asked to allow no less than $100 per week as an appropriate sum to cover the benefit to the Applicant of the use of the vehicle. The unreported decision of his Honour Mr Justice O'Bryan in Kilburn v Enzed Precision Products (Aust) Pty Ltd & Others (Supreme Court of Victoria 1985 No. 2395) confirms that the task for calculating the loss of the benefit of the motor vehicle over a period of some weeks is a difficult and imprecise exercise. However, the Respondent did not challenge the Applicant's calculation and, for the purpose of assessing any loss I have accepted the $100.00 per week estimate. It was not contested that from approximately January 1995 after the return from the Christmas vacation that there were discussions between both Phillips and the Applicant as well as other employees about the downturn in the Respondent's business and what Phillips described as its bleak future. This downturn was attributed to a number of factors such as clients taking their business overseas, increased competition and the reduction in the number of samplings and orders placed with the Respondent. Phillips did not contest that in the course of the abovementioned discussions he made no mention of possible retrenchment or dismissal. His evidence is that he tried to retain the employees of the Respondent company, who then numbered eight including himself, by injecting funds into the business. However, by 19 May 1995 Phillips was not in a position to pay any further wages. Because he was not prepared to continue to employ staff when he could not pay them beyond 19 May 1995 Phillips told the Applicant on the morning of 19 May 1995 that there would be a meeting in the afternoon to discuss the future of the company. That meeting took place at approximately 3.50 pm when the Applicant says Phillips told those assembled that the "future was not good" and that some people would have to go. Within thirty minutes or so the Applicant was called into the Respondent's office and asked for the return of the keys to the company car and told by the Respondent that the Respondent might use the Applicant's services as a consultant but this would not occur in the foreseeable future. The Applicant was also told by Phillips that Phillips' expectation was that the business would close within one month. On 30 May 1995 the Applicant received a cheque for payment of wages to 19 May 1995. He did not receive any payments in lieu of notice or severance pay; nor did he receive his accrued annual leave entitlement of $2,137.67. In a letter dated 6 June 1995 from the Respondent to the Applicant (see Exhibit A2) amongst other things the Respondent agreed to meet the Applicant's "claim for termination pay" by instalments, subject to the withdrawal of this proceeding. It is clear from Phillips evidence that the Respondent's only reason for not paying annual leave entitlement and payments in lieu of notice was the company's inability to meet such payments. Indeed, the same reason is offered by the Respondent as a valid reason for making redundant the Applicant along with most of the other employees of the company on 19 May 1995. It is contended by the Applicant that the Respondent's business continues to operate to this day. In the day preceding this hearing the Applicant, as a result of conversations with three of the Respondent's employees, formed the view that these men were still employed at the Respondent's factory. None of the individuals with whom these discussions were allegedly held were called to give evidence. Phillips in cross-examination agreed that in order to honour the company's commitment to existing clients the Respondent continued to operate with less staff until at least the end of July 1995. However, Phillips claims that the company has not operated beyond that date. Because the company has the use of its premises until September 1995 the Respondent has allowed its ex-employees, who have been provided with Employment Separation Certificates, to use the premises and the company's equipment to work for themselves. Otherwise, he claims the company has no intention of re-opening its business. When giving evidence Phillips was clearly distressed about the company's failure. On balance, I accept his evidence on the abovementioned matters. Findings On the evidence I am satisfied that because of its parlous financial circumstances the Respondent retrenched or made the Applicant redundant from 19 May 1995. It was agreed by Phillips there was no consultation with employees in the period preceding the termination or any steps taken to given them an opportunity to find alternative employment; nor was there any argument put to the Court to show why the Applicant was selected for redundancy ahead of the other employees who remained working with the Respondent for some two months. These matters, the process leading to the termination and the manner in which the termination occurred and the failure to provide for proper payment to the employees all point to the termination being in breach of s.170DE(2) of the Industrial Relations Act 1988 (the Act); in that the termination was harsh, unjust or unreasonable. In making the abovementioned findings I am mindful of the unfortunate financial circumstances surrounding the Respondent's decision to terminate. However, as a director of the Respondent company the Court must assume that Phillips was well aware of these problems prior to 19 May 1995 and, despite this knowledge, continued to trade without proper provision for retrenchment of some if not all the employees and further elected not to tell at least the Applicant that he may be dismissed until the afternoon he was in fact made redundant. On 8 August 1995 with the leave of the Court the Applicant filed a Statement of Claim. The Statement of Claim calls upon the Court to exercise its accrued jurisdiction in respect to the unpaid annual leave and further asserts that there was an implied term in the Applicant's contract of employment that he be given reasonable notice of dismissal and such notice, having regard to his age, length of service and seniority should have been six months notice. The Applicant also relies on a breach of s.170DB of the Act inasmuch as the Respondent did not pay the Applicant compensation in lieu of notice for the four week statutory minimum totalling $2,950.38. In the alternative to the common law argument the Applicant alleges that as at the relevant time, and because he was employed prior to 1 March 1993, the Applicant was employed pursuant to the Textile Industry Award, which Award includes the printing of textiles. It was conceded that the Applicant performed a variety of Award related functions in his employment, which permit the conclusion that the provisions of the Award were incorporated in his contract of employment. My attention was drawn to clause 44 of the Award dealing with redundancy. Sub-paragraph (c) of that clause provides for the payment of severance pay of eight weeks pay in the Applicant's case in addition to four weeks notice of termination required by sub-clause 5(c) of the Award. I note that sub-clause 5(c) in many ways reflects the provisions of s.170DB of the Act. However, sub-clause 44(l) exempts employers from the application of clause 44 of the Award where, as in this case, the employer employs less than fifteen employees. Accordingly, I have not taken into account the Award provision in respect to any severance pay claim. Having regard to matters such as the Applicant's age, length of service, his seniority, the rate at which he was paid and the size of the corporate enterprise he was employed in, it is my view that reasonable notice is a period of eight weeks. Whilst I was referred to decisions such as that in Quinn v Jack Chia (Australia) Ltd (1992) 1 VR 567 and Brookton Holdings Pty Ltd No V & Others v Kara Kar Holdings Pty Ltd & Anor (1994) 57 IR 288, where periods of notice of 12 months and 3 months respectively were considered appropriate, it seems to me that the employees in the decisions cited held more senior positions and were able to rely on more factors in their favour in calculating a longer period of notice. This is not a case where it can be said that reinstatement is practicable. The Respondent has ceased its operations even though the premises and equipment are still being used by former employees for the time being. In seeking compensation the Applicant asked the Court to take into account that he was not gainfully employed until 20 June 1995, save for some two days casual employment for which he earned $140.00. His new position is as a manager of a screenprinting factory with salary paid at the rate of $35,000 per annum. He no longer has the benefit of the motor vehicle. Accordingly, apart from the other amounts sought the Applicant contends that he should be compensated for his continuing loss both as to the shortfall in income and the use of the motor vehicle. It seems to me that the Court should not be too quick to award substantial compensation for these items in addition to the sum awarded for reasonable notice where there is a genuine redundancy. In calculating common law damages, I have allowed for the loss of the benefit of the motor vehicle at the rate of $100 per week during a period of 8 weeks and totalling $800. So far as any shortfall is concerned, I take the view that where there is a redundancy brought about by failure of the business and the Applicant receives from this court common law damages for a period of reasonable notice; not to mention compensation for the loss of the benefit of the motor vehicle over that period, it is not appropriate to make a further order for any loss that may be occasioned by obtaining employment at a lower rate of income. My rationale in coming to this conclusion is that the financial misfortune of the corporate employer is an indication that the Applicant did not have job security even in the short term. The orders I propose to make in favour of the Applicant are for the following amounts. 1. $2,137.66 for the unpaid annual leave entitlement. 2. $2,950.38 by way of damages pursuant to s.170EE(5) of the Act which sum covers the statutory minimum period of notice. 3. Common law damages in the sum of $1,254.62. This sum represents the period of reasonable notice and the loss of the benefit of the motor vehicle less: (a) the statutory damages referred to above; and (b) the amounts earned in mitigation of the Applicant's loss from casual employment ($140) and 3.5 weeks employment with the Applicant's new employer ($2,355.77). I have not acceded to the Applicant's application for costs in respect to the accrued jurisdiction claim as I take the view that in this case these costs are indistinguishable from the costs incurred in prosecuting the application under s.170EA of the Act. MINUTES OF ORDERS THE COURT ORDERS that within 14 days of the date of making these Orders the Respondent pay to the Applicant: 1. $2,137.66 annual leave entitlement; 2. $2,950.88 by way of damages pursuant to s.170EE(5) of the Industrial Relations Act 1988; and 3. $1,254.62 by way of further damages. 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 nine (9) pages are a true copy of the reasons for judgment of Judicial Registrar Millane. Associate: Dated: 21 September 1995 Solicitors for the Applicant: Mason Sier Turnbull Counsel for the Applicant: Mr P. Burchardt Representatives for the Respondent: Mr F. Phillips, Manager of the Respondent, appeared in person Date of hearing: 31 August 1995 Date of judgment: 21 September 1995 C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Retrenchment - failure to consult with employee or give opportunity to seek alternative employment - cessation of operation of business within 2˝ months of termination - no provision for payment of entitlements to retrenched employee - ACCRUED JURISDICTION - reasonable notice - implied term in contract of employment - calculation of loss of benefit for use of motor vehicle and compensation for a continuing shortfall in income where there is a genuine redundancy. Industrial Relations Act 1988 ss.170DB, 170DE(2) & 170EE. CASES: Kilburn v Enzed Precision Products (Aust) Pty Ltd & Others (Unreported, Mr Justice O'Bryan, Supreme Court of Victoria 1985 No. 2395) Quinn v Jack Chia (Australia) Ltd (1992) 1 VR 567 Brookton Holdings Pty Ltd No V & Others v Kara Kar Holdings Pty Ltd & Anor (1994) 57 IR 288 GEOFFREY ALLAN RESSOM -v- MAIN SCREEN PRINTING PTY LTD No. VI 3012 of 1995 Before: Judicial Registrar Millane Place: Melbourne Date: 21 September 1995 INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 3012 of 1995 B E T W E E N : GEOFFREY ALLAN RESSOM Applicant AND MAIN SCREEN PRINTING PTY LTD Respondent MINUTES OF ORDERS Judicial Registrar Millane 21 September 1995 THE COURT ORDERS that within 14 days of the date of making these Orders the Respondent pay to the Applicant: 1. $2,137.66 annual leave entitlement; 2. $2,950.88 by way of damages pursuant to s.170EE(5) of the Industrial Relations Act 1988; and 3. $1,254.62 by way of further damages. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.