Alan Herbert Beckworth v Merran Judith Sawers T/as G & H Glassworks and Frankston Door & Leadlight Centre [1995] IRCA 531

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2356 of 1995 B E T W E E N : ALAN HERBERT BECKWORTH Applicant AND MERRAN JUDITH SAWERS T/as G & H GLASSWORKS AND FRANKSTON DOOR & LEADLIGHT CENTRE Respondent Before: Judicial Registrar Chancellor Place: Melbourne Date: 28 September 1995 REASONS FOR DECISION This is an application by Alan Beckworth pursuant to section 170EA of the Industrial Relations Act in respect to the termination of his employment by the Respondent on 21 March 1995. The Applicant has many years of experience in the doors and leadlight area. He and his wife were the registered proprietors of their own business, A & M Leadlights from 24 July 1986. A & M Leadlights was established primarily to provide product and services to another company, Door World, and operated almost exclusively in that regard. Mr Beckworth's accountant advised him that for taxation purposes it would be wise if A & M Leadlights appeared not to have an exclusive operation and he accordingly advised the Applicant to advertise in the Yellow Pages and occasionally in the local papers. A & M Leadlights ran an advertisement in the Yellow Pages from approximately 1986 or 1987 and occasionally placed local advertisements. The Applicant's son, Mark who is now aged 23, became involved in the business when he was aged approximately 14. Mark is a chronic epileptic who has regular seizures and is unable to obtain a drivers licence. Because he has to be watched closely he is really unable to work for anyone except the family business of A & M Leadlights. A & M Leadlights worked for Door World until July 1993 when the relationship ceased. Mr Beckworth gave evidence that he tried to improve the profile of A & M Leadlights so that it could run successfully on its own behalf. For example, brochures were printed and distributed. However this was not particularly successful and the business did not generate enough income to support the family. Merran Sawers is the manager/owner/proprietor of the Respondent which is primarily a door and leadlight shop. Her partner in both private and business life is Garry Bos. He is the co-manager of the Respondent but could not be registered as a proprietor because of his bankruptcy status. The Respondent has been operating from its Frankston premises since about 1992. As is generally the case with a small business Ms Sawers and Mr Bos spent a lot of time in the business which gradually increased its turnover. Because they were having little or no time to themselves and because of the increased turnover they considered taking on an employee. Mr Bos had known the Applicant for many years and knew that he had finished with Door World. Ms Sawers and Mr Bos went away in the school holidays, probably in September 1993 after the Applicant had stopped at Door World, and employed the Applicant to manage the business for one week. He performed satisfactorily and he was employed on a full-time basis from probably November 1993. The Applicant worked Monday to Friday and after a short while every second Saturday earning an average of $650.00 gross per week. The Applicant was dismissed from his employment shortly after lunchtime on 21 March 1995. He was told by Mr Bos that he was dismissed because of an alleged conflict of interest between his proprietorship and involvement with A & M Leadlights and his employment with the Respondent, in particular evidenced by a more conspicuous advertisement in the new edition of the local Yellow Pages which also advertised a wider range of services to be provided by A & M Leadlights. Was there a Valid Reason for Termination? At the time of the Applicant's employment both Ms Sawers and Mr Bos knew of the existence of A & M Leadlights and knew that A & M Leadlights advertised in the local Yellow Pages. Although it was not tendered in evidence it seems that the advertisement in the Yellow Pages as at November 1993 was the same advertisement which subsequently appeared in the 1994 Yellow Pages and it read as follows: "A & M Leadlights Leadlights made to order traditional or contemporary acid etch and sandblasted glass solid timber entries and doors 15 Sibyl Avenue, Frankston 787 4176" The advertisement was 5cm by 1.4cm in size and was contained in the general column of the relevant page. The Respondent had a two line column entry on the same page and also had a special advertisement on the same page which was 5cm by 6cm in size. Ms Sawers said in evidence that she knew the advertisement in the Yellow Pages contained more than just leadlights but felt that the other matters were insignificant as Mark would have had difficulty in carrying them out. Mr Bos said that he did not specifically look at the 1993 Yellow Pages advertisement but recalled that it was fairly small and insignificant and said that he assumed it was only for leadlights. It was agreed by all three witnesses that the question of the status of A & M Leadlights was discussed prior to the Applicant's commencing employment. The Applicant said that he could not make a living out of the business and said that he would keep it going for Mark because Mark had to be occupied and had to be watched because of his medical condition. Mr Bos said in evidence that the Applicant had told him that he could not make a go of the business so the Respondent was prepared to take him on. Mr Bos accepted that A & M Leadlights would continue mainly for Mark's benefit. He said that the Applicant had indicated that he would not work in opposition to the Respondent and that he agreed that he would not quote against the Respondent. Ms Sawers gave evidence that she told the Applicant that she did not like the Yellow Pages advertisement which meant that A & M Leadlights was running in competition. She said that the Applicant had said to her that he had nothing to do with the business, that he did not measure quote or install, that he was not seen out in the public and that at the most all he did was some soldering work at home. It is clear that at no stage did the Respondent require the Applicant to divorce himself from the business of A & M Leadlights nor did it require him to cease placing the advertisements in the Yellow Pages. The evidence suggests that the request for an advertisement for the Yellow Pages had to be placed in November of the previous year. Given that the Applicant's employment commenced in November it would have been quite a simple matter for the Respondent to have demanded that the advertisement be withdrawn as a condition of employment. However, this was not done. Taking into account all of the evidence I find that the Respondent's were of the view that A & M Leadlights was a home-based, fairly unsuccessful business, run primarily by Mark and the Applicant's wife and effectively amounted to little competition. On that basis they made the decision to allow A & M Leadlights to continue and also allowed it to continue to advertise in the Yellow Pages. At the time the Applicant commenced employment these advertisements clearly extended beyond leadlights and to doors and entries. The Applicant denied in evidence that he had been told not to quote or to be seen in public in relation to A & M Leadlights. Although there may have been some mention of quotations I am not convinced that he was clearly and specifically told that he was not to quote as a condition of his employment. It seems that all of the discussions concerning A & M Leadlights were very vague and general in nature and that Mr Beckworth was justified in reaching the conclusion that matters could continue basically just as they had been prior to his commencing employment. Mr Bos gave evidence that when the 1994 Yellow Pages came out, presumably in approximately March 1994, that he noted for the first time that the A & M Leadlights advertisement included in it a reference to "solid timber entries and doors". In evidence-in-chief he said that he indicated to the Applicant that he was not happy with the ad and that the Applicant replied that there had been no work from it and there was no point in having it in there. In his evidence-in-chief Mr Bos did not say that he told the Applicant to delete that part of the advertisement or that he told him not to put the advertisement in at all in the following year. However, when pressed in cross-examination in relation to his apparent lack of concern in relation to the advertisements, Mr Bos alleged that he told the Applicant not to put any reference to doors in any future Yellow Pages ad. I am unable to accept that evidence of Mr Bos. The alleged conversation was not specifically put to the Applicant in cross-examination and indeed it was never said to the Applicant at the time of his dismissal that he had undertaken to delete part of the advertisement. Further, Ms Sawers did not indicate in her evidence that the Applicant had failed to delete part of an advertisement contrary to a prior agreement. In September of 1994 the Respondent became aware that Mr Beckworth had attended at the residence of one Mrs Ford in order to provide a quotation for A & M Leadlights. Subsequently, Mrs Ford attended at the Respondent's premises where she saw Mr Beckworth and reported that she was considerably embarrassed and left the premises. Ms Sawers and Mr Bos became aware of this incident through third parties and put the matter to the Applicant. The Applicant said in evidence that he had never previously been warned not to quote but said that as Ms Sawers was obviously concerned that he undertook not to quote again. Ms Sawers said that she felt betrayed in that the Applicant had breached his alleged undertaking not to quote but accepted his undertaking never to do it again. The Applicant gave evidence that he did not quote after that date and there is no evidence to the contrary. In October 1994 A & M Leadlights placed a small advertisement in the local Independent newspaper under the heading of "Leadlights". The Applicant said in his evidence that his wife had placed the advertisement in the newspaper and that it had attracted no work. In his evidence-in-chief Mr Bos said that he had seen the advertisement in the paper and that he had spoken to the Applicant about it. He said that the Applicant said that A & M Leadlights had not got work from the advertisement and that it had been placed for one month only. The Applicant had said that the ad finished that week. The Applicant said in his evidence that Mr Bos seemed interested in the advertisement and in the types of result that it may have been getting. When pressed in cross-examination as to his apparent acceptance of the advertisement Mr Bos said that he had told the Applicant that it represented a conflict of interest. Again, it seems to me that there was some embellishment by Mr Bos of his evidence and in general terms I prefer the Applicant's version of the discussions concerning the October 1994 advertisement. Ms Sawers and Mr Bos gave evidence that they obtained the 1995 local Yellow Pages on 20 March 1995. They turned to the leadlight section and saw the same special ad as for the previous year lodged on behalf of the Respondent. They gave evidence that they were very surprised and disappointed to see the advertisement placed by A & M Leadlights. The advertisement contained the following additional words: "Stained glass for sidelights skylights, bathroom windows, etc with toughened and safety glass for your security" The advertisement was also larger in size being 5cm by 2.6cm but it still appeared in the normal column. I must say that the advertisement seemed to me to be still a relatively insignificant entry and was not as catching or as obvious as the special advertisement placed on behalf of the Respondent. Ms Sawers gave evidence that when they opened the Yellow Pages they saw the additional words, felt that the Applicant's business was getting bigger and was therefore in conflict, and in view of other matters felt that this was the last straw. She and Mr Bos gave evidence that they decided at that time to terminate the employment of the Applicant. The Applicant said in his evidence that he was unaware of the nature and size of the advertisement and that his wife had added the stained safety glass to the advertisement without his knowledge. Ms Sawers said in her evidence that she found it very hard to believe that the Applicant did not know anything about the advertisement. I accept that the Applicant may have been unaware of the exact contents of the ad and the size of the ad, however, it appears likely that he at least discussed the question of stained safety glass with his wife and son. The Respondent argued that it had a valid reason for termination in that the Applicant breached his duty of fidelity to the employer by running a business in competition to the Respondent and allowing that business to grow and develop in competition to the Respondent's business. I am unable to accept that submission on behalf of the Respondent. In my view, on balance, the Respondent at all times acquiesced to the continuation of A & M Leadlights as an ongoing business and to the continuation of advertising for that business. Indeed, A & M Leadlights remained as a customer of the Respondent through the course of the Applicant's employment and the Respondent supplied A & M Leadlights with glass and other items from time to time to enable it to carry out its business. If the Respondent sought to limit the extent of the work undertaken by A & M Leadlights and the extent of the advertising which it undertook as a condition of the Applicant's employment, then in my opinion, it was clearly a matter for the Respondent to specifically outline the limitations within which A & M Leadlights had to operate. I am not satisfied that this was ever done. It was obvious from the very beginning that certain customers, at the very least in the field of leadlights, possibly also in relation to doors given the nature of the Yellow Pages advertisement, would be attracted to A & M Leadlights rather than to the Respondent. This was accepted by the Respondent and I fail to see how it can now argue that some alleged conflict of interest exists and that there has been a breach of duty in circumstances where it has effectively consented to the matter. Mr Ireland for the Respondent referred me to the Victorian Supreme Court decision of Justice Hayne in the matter of Daily Cleaning Service Pty Ltd v Pavlovic reported in the November 1992 Australian Industrial Law Review at page 413. Justice Hayne found that the defendant took to himself contracts which might, not must, have been open to the plaintiff to secure. He said that the defendant was under an obligation during the subsistence of his employment to look after the interests of his employer and not to engage in conduct which involved an opposition or conflict between his interest and his duty to his employer. I accept the proposition put forward by Justice Hayne but I fail to see how it assists the Respondent where in my view it has clearly consented to such activity. Mr Burnett for the Applicant submitted that even if there had been no consent by the Respondent that there was no breach by the Applicant of his duty of fidelity to his employer since there was no conduct by him which fraudulently undermined the Respondent whilst the Applicant was in its employ: see Independent Management Resources Pty Ltd v Brown, 1987 VR 605. Ms Sawers agreed in cross-examination that the Applicant had not deliberately set out to undermine her business. She also agreed that there was no evidence that any potential work for the Respondent had been taken by the Applicant. Indeed, at the request of the Respondent the work books of A & M Leadlights were produced and they indicated that through 1993 and 1994 that effectively very little work was being done by the business. Ms Sawers described the decision to terminate as being based on a perception that there was a conflict of interest in that the business of A & M Leadlights was expanding. There was no investigation carried out in relation to this perception prior to the decision being made. In all the circumstances, I am not satisfied that the Respondent has satisfied the onus of establishing that there was a valid reason for termination. Although they were not given as reasons for termination at the time of the dismissal, the Respondent argued that there was a valid reason for termination on the basis of the operational requirements of the business ie. that there was insufficient ongoing work to justify continuing with the Applicant's full-time employment and further, that the Applicant's work performance had been inadequate and justified his termination. It has been clearly established that the valid reason must exist at the time of termination and although there may have been some concerns over the ongoing viability of the Applicant's full-time employment and his performance neither of those matters had reached the stage where they constituted a valid reason for termination as at 21 March 1995. Was there a breach of section 170DC of the Act? It was conceded by Ms Sawers and Mr Bos that the decision to terminate the Applicant was made on the evening of 20 March 1995. The Applicant commenced work at the normal time on 21 March 1995. He was not approached prior to lunchtime. When Ms Sawers and Mr Bos returned after lunch they approached the Applicant and advised him that he was to be dismissed. The Applicant was given no opportunity at all to discuss the allegations against him prior to his termination. There was a clear breach of section 170DC of the Act. When told of his dismissal the Applicant asked for a copy of the Yellow Pages so that he could see the ad. There was not a Yellow Pages in the shop at that time. When he eventually saw a copy of the Yellow Pages advertisement the Applicant was of the view that it was not particularly conspicuous and indeed that effectively only one product, glass magic, had been added into the advertisement and that this was a fairly insignificant matter. I tend to agree with the Applicant's assessment, particularly when one looks at the A & M Leadlights work books both pre and post March 1995. It is obvious that the advertisement had little effect and that there was not really any significant expansion in the business. Ms Sawers perception was probably not properly placed. If the Respondents had discussed the matter with the Applicant prior to termination possible arrangements may have been reached, for example, the Applicant could have agreed to completely divorce himself from A & M Leadlights, the Applicant could have agreed that any enquiries to A & M Leadlights in relation to doors or glass magic could have been forwarded to the Respondent, and there could have been agreement reached that all advertising would cease forthwith. At the very least, these matters could have been canvassed so that the Applicant was given the opportunity to make a clear choice and so that the guidelines concerning the operation of A & M Leadlights were clearly understood. Remedy When he issued his Application the Applicant did not seek reinstatement. This appears to be on the basis that following his termination he again attempted to increase the business of A & M Leadlights by further promotion and advertising. He also considered the prospect of renting premises so that he could operate from a shop site and not from home. Further, the working environment was a very small one indeed with only Ms Sawers, Mr Bos, the Applicant and one other part-time employee. Given the apparent breakdown in trust on the part of both parties, it seems very difficult to envisage a happy and workable ongoing working relationship. However, at the time of commencement of this hearing the Applicant sought to include a claim for reinstatement. The Respondent argued that reinstatement was impracticable for the two reasons previously outlined and further on the basis that at the time of Mr Beckworth's termination there was genuine concern as to the ongoing viability of a full-time employee. I accept the evidence of the Respondent that the Applicant was only involved in display work at the time of his termination. Indeed, although the gross turnover figures have remained at least stable and perhaps improved a little since the Applicant's termination, these have been achieved without employing another employee. Ms Sawers and Mr Bos agreed that they had to increase their own workload but on balance that they were prepared to do this to increase the profit rather than employ someone on quite a significant wage. In all the circumstances I find that reinstatement is impracticable. In relation to the question of compensation I note that subsequent to his termination the Applicant has worked as a sub-contractor with Edward Homes Pty Ltd earning a total of $2,850 gross and that the business of A & M Leadlights has earned a profit of $1,832 in that time. Obviously, the profit has to be distributed amongst the family members. Further, I accept the evidence of Ms Sawers and Mr Bos that there were concerns over the ongoing employment of the Applicant, there being a fine balancing act between his wage, the time they had to commit to the business, and the overall profits being earned. I accept that they have now opted to continue the business without a full-time employee. Although there was some frustration with the Applicant's work performance, he had not been given a formal warning that his employment was in jeopardy and there is no reason to suggest that on performance related reasons his employment would have terminated in the short term. Taking into account the work which he has done since termination, and the distinct possibility that his employment may have terminated on operational grounds, I believe that it is appropriate to award compensation in the sum of $10,000. I also note that the Respondent has admitted that it paid only one week's pay in lieu of notice rather than the statutory requirement of two weeks pursuant to section 170DB and I therefore order that the further sum of $650 be paid. MINUTES OF ORDERS THE COURT ORDERS: 1. That the Respondent pay to the Applicant the sum of $10,000 by way of compensation pursuant to s.170EE. 2. That the Respondent pay to the Applicant the sum of $650.00 pursuant to s.170DB. 3. That the sum of $650 be paid within 7 days of this date. 4. That the sum of $5,000 be paid within one month of this date. 5. That a further sum of $5000 be paid within two months of this date. 6. That if there is any default in payment by due date then whole of the judgment becomes due and payable. 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 sixteen (16) pages are a true copy of the reasons for judgment of Judicial Registrar Chancellor. Associate: Dated: 28 September 1995 Solicitors for the Applicant: Testart, Robinson & Pitts Counsel for the Applicant: Mr D.J. Burnett Solicitors for the Respondent: Mr C. Rechnitzer Plotkins, Solicitors Counsel for the Respondent: Mr Julian Ireland Date of hearing: 21 & 31 August 1995 Date of judgment: 28 September 1995