INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2983 of 1995 B E T W E E N : RICHARD HISCOCK Applicant AND EXPO SOLUTIONS PTY LTD Respondent Before: Judicial Registrar Murphy Place: Melbourne Date: 15 September 1995 REASONS FOR JUDGMENT - Delivered Ex Tempore (Revised from Transcript) The parties are agreed in this application under Part VIA of the Industrial Relations Act (the Act) that the first issue to be determined is whether there was a termination at the initiative of the employer. The Respondent contends that the Applicant, on 10 May 1995, resigned from his position of sales manager with the Respondent. The Applicant, on the other hand, contends that there was no resignation by him on that day. Rather he contends that on that date he was advised that he would not be paid, and that when he protested he was treated as having resigned. Findings on the Evidence The Respondent is a relatively small organisation, established in October 1994, and involved in the exhibition industry. The shareholders in the Respondent were previously involved in another company, the Hire Works Pty Ltd, which the now managing director of the Respondent, Mr Norman May (May), was looking to buy into. The proposal did not proceed and the Respondent was established by these employees. The Applicant left his position as a corporate account manager with that company, and became sales manager of the Respondent. He was offered and accepted a 5 per cent shareholding in the Respondent of 7500 shares. The Applicant was to be paid $50,000 per annum. He was unable to raise the total $7500 due for his shares. He paid $2500, and it was agreed that he pay the balance of $5000 by way of "salary sacrifice" over the next 12 months. Of the remaining $45,000 per annum salary the Applicant chose to have $9000 designated as a car allowance, to be paid monthly, with his salary in a normal sense thus being $36,000 per annum. Salaries were paid monthly, half in arrears and half in advance, on or before the fifteenth day of the month. At the time that the Respondent was established budgets were established for the projected sales over the next 12 months. There was a conflict in the evidence as to whether or not prior to May 1995 those budgets were discussed between May and the Applicant. I accept the Applicant's evidence that after the original budgets were set he raised with May that the figures in the early months were too optimistic and that in the latter months they were understated. The events of 9-12 May 1995 The crucial events in this case occurred over a four day period commencing Tuesday, 9 May. In the early part of May 1995, May obtained some year to date sales and other figures in relation to the Respondent's performance which he took with him to Brisbane, where he was attending, on behalf of the Respondent, a convention. Those figures indicated that to May's mind action needed to be taken or the Respondent would be in real financial difficulties. He determined to call a meeting of shareholders when he returned. That meeting took place late in the afternoon of 9 May. Present were all the shareholders. I find that at that meeting May outlined the future prospects for the Respondent as he saw them and invited comment. In particular he put before the meeting a number of options designed to turn around the fortunes of the Respondent. Among the options raised included, I find, the prospect that salaries would not be paid for May and possibly June. The option of liquidating the Respondent was also raised, but not seriously. Other options included the services of employees, including Putnam, the Design Manager, and May, the Managing Director, being changed or reduced. The future role of the Applicant, and in particular whether his remuneration was to be changed onto a commission based package was also raised. I find that the Applicant made it clear at the meeting that he would not work on a performance or commission based package. It is unnecessary for me to make precise findings on what else was discussed at that meeting. I do find, however, that matters were left unresolved at that meeting and that May was to do some more work on the figures and come back to those involved. Further, the shareholders present at the meeting were to provide appropriate input. As a result of this meeting the Applicant came away with the impression that he would not be paid for that month and possibly the next month. He was concerned as he had financial commitments, and returned home and told his spouse. Late the next day, Wednesday, he had a conversation with May, which is at the heart of the case. It is the Applicant's version that in the conversation he asked May whether he was to be paid on the Friday, which he believed was the regular pay day. May replied that the following Monday was the pay day. The Applicant then asked whether he was going to be paid this month or not, and May replied "We are not". The Applicant then said "You can't do that. When are we going to get paid?" May replied that he did not know. The Applicant said that if May could not tell him when he was going to be paid next he would have to find alternative employment. May then said that that is a good job. The Applicant then said he realised that May wanted him to resign, and was careful with what he said. The two argued further and he left the premises. May's version was that the Applicant said that if he was not paid on the Friday he was left with no alternative but to resign. He then got up and walked out. The conversation, according to May, was then repeated in front of Mr Mark Bond, another employee and shareholder, near the warehouse door. Bond's evidence was that the Applicant said that he could not wait for the financial position of the Respondent to be clarified. He wanted his wages on the Friday and that he would have to go and find other employment. On the Thursday the Applicant did not go to work. He, at his wife's suggestion, saw a solicitor on the Friday morning. He went to the Respondent's premises on Friday, 12 May. When he arrived he was met with a query from May as to whether he had received a letter by courier from the Respondent that day accepting his resignation. The Applicant replied that he had not received the letter, and protested that he had never resigned. The Applicant said he went to the premises on the Friday to see if the position that May had put to him on Wednesday had changed. The letter of 12 May accepts the Applicant's resignation as of 10 May. In it May says: "I appreciate the personal circumstances under which you felt you had no alternative". The letter refers to the Applicant's entitlements to remuneration and outstanding leave. It also notes that the Applicant still has an "outstanding loan" to the company of $1606 for the purchase of the shares. Because this was greater than the other amounts due no termination amount was forwarded with that letter. Other Evidence In support of its case the Respondent tendered minutes of the meeting of shareholders on 9 May. It also tendered minutes of meetings of directors of the Respondent on 11 and 12 May at which the Applicant's resignation was accepted. The minutes generally accord with May's evidence. The documents were attacked by counsel for the Applicant as lacking in credibility, self-serving and not genuine. I am satisfied that all the documents were generated after 12 May 1995, the day that the alleged resignation was accepted by letter. In fact the only document I find which was contemporaneous was the letter accepting the resignation, Exhibit A5, dated 12 May 1995. That letter makes no reference to the whole future of the Respondent being determined at a meeting which was to occur on 15 May. It is central to the Respondent's case that the Applicant acted rashly and precipitately on 10 May by making a demand that he be paid a business day early, namely on Friday 12 May. This was when the future of the Respondent was still up in the air, and to be decided after May undertook an evaluation over the weekend. Counsel for the Respondent submits that the Applicant formed the view, in the light of the discussion on 9 May, that he had no future in the Company and chose to resign on 10 May and explore his options elsewhere. Such a scenario does not have a ring of truth. The Applicant had family commitments and no job to go to. It is unconvincing to accept that an employee with an equity interest in the Respondent would, in the face of a refusal to have his monthly pay advanced by a single day, throw up his position on that basis. Further, it was the Applicant's view that the Respondent was facing a good future despite a short term cash crisis. He gave evidence, not challenged, that he believed that the Respondent had an overdraft facility that would tide it over until a busier period commencing August. He also gave evidence that he had a very high prospect of a job for the Respondent which he had inquired into on the Wednesday. In those circumstances a more likely reason for his departure on 10 May was some action by May that the Applicant saw as contrary to his employment rights. That action was May's statement that the Applicant was not to be paid this month and he did not know when he would be. I find that May would have been likely to make such a statement since he had an interest in sheeting home blame for the Respondent's perceived difficulties to the Applicant. This is consistent with the proposal to move the Applicant to a performance based salary, and May's statement, in the letter of 12 May, that the Applicant was responsible for the poor performance of the Respondent. Further, that same letter refers to May anticipating a reduction in both the Applicant's and May's own services in the short to medium term. Having regard to all these matters, and having an opportunity to assess the presentation and demeanour of the witnesses I prefer the Applicant's version of the conversation on 10 May. I find therefore that in the conversation May told the Applicant that he would not be paid in May and that he did not know when he would be paid. It was in response to this that the Applicant said he would have to find alternative employment. It follows that I do not accept that the minutes of the directors meeting on 11 May reflect what happened. Rather, they were designed to provide an ex post facto justification for the letter of 12 May purporting to accept the Applicant's resignation. It follows that I find that the Respondent has terminated the Applicant's employment, and that the Court has jurisdiction. Having regard to this finding I find that it is unnecessary to make any finding as to the various minutes which purport to forfeit the Applicant's shares for failure to pay calls made. Remedy Having found that the Applicant had his employment terminated by the Respondent, it was accepted by Counsel for the Respondent that the Respondent did not have a valid reason to do so under section 170DE(1) of the Act. The Applicant now has other employment and did not seek reinstatement. The Applicant has, from 7 July, obtained other employment which pays on a gross and commission basis slightly less than what he was earning with the Respondent. In considering the discretionary remedy of compensation the Court must take into account what would have happened had the termination of employment not occurred. I reject any argument that there should be no award of compensation by reason of some behaviour of the Applicant or by reason of the nature of the Respondent. The Applicant has sustained a significant loss as a result of the events in May, and that loss has been caused by the actions of the Respondent. Here the evidence was that after the Applicant left the Respondent continued in operation but that staff comparable to the Applicant took a 20 per cent pay cut, commencing in June. Had the repudiatory action of May 1995 not occurred it is no easy task to ascertain what would have happened to the Applicant. At the least the Applicant's pay would have been cut by 20 per cent. He may have voluntarily resigned. Given the evidence that he had a reasonable prospect of a significant project to come to fruition during July, and also the evidence of a major contract with another organisation involved in the exhibition industry, I consider it more probable than not that the Applicant would have survived in his employment with the Respondent. He has thus lost on this basis three weeks pay at his old remuneration package of $50,000 per annum, and five weeks pay at what I find would have been a reduced remuneration of $40,000 per annum. These amounts add to about $7,300. Further, his shares have been forfeited, and he paid for them a total amount of $5,600. This brings his total losses to $12,900. The value of the shares is difficult to ascertain as it is not clear whether they in fact had any value at the time of his termination or, indeed, have any value at the present time. I note that the Applicant offered to accept $2,000 for the shares in the conversation of 12 May after his resignation was purported to have been accepted. Thus, leaving aside the value of the shares, his losses are around $7,300. That loss must be discounted by the contingency that the employment may have been terminated lawfully in any event. The loss sustained on the shares, on the other hand, can be said to be set off against any discount for contingencies on his actual loss of remuneration. Having regard to all the matters that I have referred to I am satisfied that an appropriate award of compensation for the losses that he has sustained should be referable to the amount of remuneration that he has lost. I therefore propose an award of compensation in the sum of $7,300. The Order of the Court That the Respondent pay to the Applicant the sum of $7,300 within 21 days. MINUTES OF ORDERS THE COURT ORDERS: 1. That the Respondent pay to the Applicant the sum of $7,300 within 21 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 (10) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy. Associate: Dated: 15 September 1995 Solicitors for the Applicant: Barrett, Walker & Co Counsel for the Applicant: Mr Robert Lombardi Solicitors for the Respondent: Tress Cocks & Maddox Counsel for the Respondent: Mr I. Fehring Date of hearing: 14 & 15 September 1995 Date of judgment: 15 September 1995 C A T C H W O R D S INDUSTRIAL LAW - UNLAWFUL TERMINATION - employer advising employee that he was not to be paid and employee leaving - whether RESIGNATION or TERMINATION OF EMPLOYMENT - COMPENSATION Industrial Relations Act 1988 s.170DE RICHARD HISCOCK -v- EXPO SOLUTIONS PTY LTD No. VI 2983 of 1995 Before: Judicial Registrar Murphy Place: Melbourne Date: 15 September 1995 INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2983 of 1995 B E T W E E N : RICHARD HISCOCK Applicant AND EXPO SOLUTIONS PTY LTD Respondent MINUTES OF ORDERS Judicial Registrar Murphy 15 September 1995 THE COURT ORDERS: 1. That the Respondent pay to the Applicant the sum of $7,300 within 21 days. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.