Gunnedah Shire Council v Raymond Ernest Grout [1995] IRCA 661

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Resignation because of ill health - Inadequate notice given by employee - Resignation accepted - Whether acceptance brought contract of employment to an end - Whether termination at initiative of employer - Associated jurisdiction of Court. Industrial Relations Act 1988 (Cth) s.170EA, s.170EB, s.430 GUNNEDAH SHIRE COUNCIL v RAYMOND ERNEST GROUT No. NI 1903 of 1995 No. NI. 950 of 1994 No. NI. 1461 of 1995 CORAM: WILCOX CJ, SPENDER and BEAZLEY JJ PLACE: SYDNEY DATE: 19 DECEMBER 1995

IN THE INDUSTRIAL RELATIONS COURT ) OF AUSTRALIA ) ) No. NI 1903 of 1995 NEW SOUTH WALES ) No. NI 950 of 1994 DISTRICT REGISTRY ) No. NI 1461 of 1995 BETWEEN: GUNNEDAH SHIRE COUNCIL Appellant/Cross Respondent AND: RAYMOND ERNEST GROUT Respondent/Cross Appellant CORAM: WILCOX CJ, SPENDER AND BEAZLEY JJ PLACE: SYDNEY DATE: 19 DECEMBER 1995) SHORT MINUTES OF ORDER THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The declarations and orders made by Moore J on 13 October 1994 and 30 March 1995 be set aside and, in lieu thereof, it be ordered that the Application be dismissed. 3. The cross-appeal be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS COURT ) OF AUSTRALIA ) ) No. NI 1903 of 1995 NEW SOUTH WALES ) No. NI 950 of 1994 DISTRICT REGISTRY ) No. NI 1461 of 1995 BETWEEN: GUNNEDAH SHIRE COUNCIL Appellant/Cross Respondent AND: RAYMOND ERNEST GROUT Respondent/Cross Appellant CORAM: WILCOX CJ, SPENDER AND BEAZLEY JJ PLACE: SYDNEY DATE: 19 DECEMBER 1995) REASONS FOR JUDGMENT THE COURT: This is an appeal and cross-appeal from declarations and orders made by Moore J in a proceeding between the respondent, Raymond Ernest Grout, and his former employer, Gunnedah Shire Council. Mr Grout instituted a proceeding in which he put alternative claims. First, he relied on Division 3 of Part VIA of the Industrial Relations Act 1988, contending that, if the council had terminated his employment, the termination was unlawful. He claimed reinstatement and damages. Second, relying on the associated jurisdiction of the court (see s.430 of the Act), he sought a determination that his employment had not been terminated by the council and orders requiring the council to treat his employment as continuing. The proceeding at first instance The matter came before Moore J on 24 and 25 August and 5 September 1994. On 30 September 1994, his Honour delivered reasons for judgment on the issues agitated at that hearing. Those reasons are reported: see Grout v Gunnedah Shire Council (1994) 1 IRCR 143, 125 ALR 355, 57 IR 243. After an analysis of the evidence, Moore J held that the contract of employment between Mr Grout and the council had not been terminated. Nonetheless, he held that Division 3 of Part VIA of the Act applied because the council had taken action that amounted either to termination of the employment, as distinct from termination of the contract of employment (see Siagian v Sanel Pty Limited (1994) 1 IRCR 1), or an unaccepted repudiation of the contract of employment (see Association of Professional Engineers Scientists and Managers Australia v Skilled Engineering Pty Ltd (1994) 1 IRCR 106). His Honour thought that an extension of time for filing the application might be necessary: see s.170EA(3). There being no objection by the council to that course, he ordered that time for filing the application be extended to the date of filing, 16 June 1994. Moore J then considered whether the Industrial Relations Act 1991 (NSW) provided an "adequate alternative remedy" within the meaning of s.170EB of the Commonwealth Act. In an analysis that cannot stand with the later Full Court decision in Liddell v Lembke (1994) 127 ALR 242; 56 IR 447, he held that it did; consequently, this Court had no power to determine the statutory claim. However, he said this did not affect the Court's jurisdiction to determine the associated claim. Pursuant to these reasons, and having heard counsel as to the form of his order, on 13 October 1994 his Honour made five declarations: "1. The contract of employment between the applicant and the respondent: (a) was not brought to an end by the applicant's letter of 18 May 1994; (b) was not repudiated by the applicant's conduct; (c) is still on foot. 2. There was a termination of the applicant's employment by the respondent within the meaning of s170EA of the Industrial Relations Act (the Act). 3. There is available to the applicant an adequate alternative remedy within the meaning of s170EB of the Act. 4. Determination of the application made under s170EA of the Act is declined. 5. The Court has jurisdiction to continue to deal with the claims made by the applicant in the Court's accrued jurisdiction pursuant to s430 of the Act." As contemplated by the last declaration, Moore J conducted a further hearing of the associated claim. This took place on 7 and 8 November 1994. On 13 February 1995, he delivered a second instalment of reasons for judgment. These reasons are also reported: see Grout v Gunnedah Shire Council (No.2)(1995) 58 IR 67. They record that, at the commencement of the hearing on 7 November, counsel for Mr Grout indicated that his client had elected to accept the council's repudiation of the contract of employment and now sought damages for wrongful dismissal. There was some debate about his entitlement to take that course. His Honour apparently reserved the point and proceeded to hear evidence directed to the issue of damages. In the event, he determined that Mr Grout was entitled to recover damages. The reasons for judgment of 13 February 1995 explain why he thought this to be so. They also deal with many aspects of assessment of damages. But his Honour was unable to conclude that assessment, and so finalise the case, because he was uncertain whether damages should be calculated on a gross earnings basis or on the basis of net earnings after tax. He stood the matter over for further submissions on that point. They were provided and, on 30 March 1995, his Honour delivered his third set of reasons. He gave judgment in favour of Mr Grout in the sum of $71,134.30. Those reasons are not yet reported. The appeal proceedings On 19 April 1995 the council filed a Notice of Appeal whereby it challenged all aspects of Moore J's decision of 30 September 1994 (other than his decision that Mr Grout had an "adequate alternative remedy" under New South Wales law), declarations 1, 2 and 5 of the consequential declarations of 13 October 1994 and most aspects of the decisions of 13 February and 30 March 1995. Mr Grout responded with a cross-appeal challenging his Honour's decision about "adequate alternative remedy" and some aspects of the February and March decisions. He contended that the damages award ought to be increased. As the above narrative indicates, before the conclusion of the hearing by Moore J, it had become common ground that Mr Grout's employment by the council was at an end. But there was a major issue between the parties as to which of them had caused it to come to an end. Mr Grout contended that his employment had been terminated by the council, or alternatively by reason of his acceptance of the council's repudiation of the contract of employment. The council said that Mr Grout himself brought the employment to an end, by resigning his position. When the appeal and cross-appeal came before us for hearing, it quickly became plain that this was the central issue in the case. It was clear, and accepted by his counsel, that, if Mr Grout himself brought the employment to an end, his primary claim, under Division 3 of Part VIA, and his associated jurisdiction claim must both fail and the proceeding must be dismissed. On the other hand, if the employer brought the employment to an end, Mr Grout was entitled to recover a money sum, either as compensation pursuant to s.170EE of the Industrial Relations Act or as damages for wrongful dismissal. That was clear, although there was room for argument about the proper computation of the money sum. Although counsel for each party put submissions on many aspects of the case, not surprisingly in the circumstances, they concentrated their main attention on this central issue. In the result, respectfully differing from Moore J, we have reached the conclusion that Mr Grout himself brought his employment to an end. Consequently, it is not necessary for us to deal with the parties' arguments about assessment of damages. It is better that we refrain from doing so. Moore J's reasons for judgment of 13 February and 30 March contain a discussion of several important issues in relation to the calculation of damages in unjust dismissal cases. Much of that discussion is likely to be relevant to the assessment of compensation under s.170EE(3) of the Industrial Relations Act. Because the same questions will arise in other cases, it is better for a Full Court to avoid intruding into the area until that is necessary. The only comment we would make is that Moore J was clearly correct in holding that he had power to determine the unjust dismissal claim under the Court's associated jurisdiction, notwithstanding his (erroneous) view that he could not determine the primary claim because of s.170EB of the Act. The Court has jurisdiction under s.430 of the Act to hear and determine matters that are associated with matters in which the jurisdiction of the Court is invoked. The test is whether the matters arise out of the same substratum of fact: see Fencott v Muller (1983) 152 CLR 570 at 607 and the discussion of s.430 in Sutton v Sharp (1994) 125 ALR 643 at 658-661. That test is plainly met in this case; the relevant facts are identical. Counsel for the appellant seemed to accept this. But they submitted that the Court does not have jurisdiction to hear an associated claim in a case where there is a complete absence of power to determine the primary claim. We do not agree. It is worth setting out what the Full Federal Court said, in response to a similar argument concerning s.32 of the Federal Court of Australia Act 1976, in Burgundy Royale Investments Pty Limited & Ors v Westpac Banking Corporation and Ors (1987) 18 FCR 212 at 219: "...We have determined preliminary points of law in the claims under the Act brought against the second and third respondents; and that, in consequence, there will be no further trial of those issues. But it does not follow that the Court ever lacked jurisdiction to deal with such claims. Nor does it follow that the Court now loses its jurisdiction to deal with the attached common law claims ... in principle, the decision is no different than it would have been if the claims under the Act had proceeded to trial and had been dismissed on the merits. In that situation, it could not seriously be suggested that the dismissal of the claim under the Act had the effect of depriving the Court of jurisdiction to deal with any attached non-Federal claim. The position may have been different if the claims under the Act had been 'colourable' in the sense that they were made for the improper purpose of 'fabricating' jurisdiction." We turn to our reasons for concluding that it was Mr Grout who brought the employment to an end. The facts Mr Grout commenced employment with the council in 1987 as manager of the Gunnedah Shire Abattoir. There was no written contract of employment. The oral terms of the contract of employment were that the respondent would be paid a salary of $65,000 per annum (which was subsequently increased), that he would be provided with accommodation at a fixed rental and there would be certain other emoluments and superannuation contributions. Other terms and conditions of employment were to be consistent with those of other senior local government employees. Between September 1987 and May 1994, Mr Grout oversaw the modernisation of the abattoir. The modernisation process was the subject of local community controversy. Along with the Mayor, John Lyle, and the Chairman of the Council's Abattoir Committee, Neil Kemmis, the respondent came under considerable pressure. On 5 May 1994, Mr Grout consulted his local general practitioner, Dr Philip Harris. He prescribed anti-depressant medication. On the night of 17 May 1994, the respondent slept very little. At 6am on the following day, he rang Dr Harris and requested an appointment. Mr Grout saw Dr Harris at about 8am that day, Wednesday 18 May 1994. During the consultation, Mr Grout spoke about his work situation. He broke down and wept. Dr Harris wrote a note for him. The note, which was not addressed to anyone in particular, read: "Mr Ray Grout has been suffering from severe work related stress, which is now causing severe depression and which is also causing his general health to deteriorate. As the manager of 'the Gunnedah Council Abattoir', he is reluctant to apply for WorkCover benefits, or to go on any sick leave entitlement. I therefore recommend that he take early retirement from his work to be effective immediately, as he can no longer cope with the stresses of work. He has been advised to seek specialist assessment which is being arranged." Dr Harris referred the respondent to Dr John Ellard, a Sydney psychiatrist. At about 6.30am that morning, Mr Grout had telephoned Neil Thomas, the financial controller of the abattoir. He told him he would be late to work. He arrived at the abattoir at about 9.30 am and, shortly afterwards, had a discussion with Mr Thomas. He informed Mr Thomas that Dr Harris had recommended he see a specialist in Sydney and asked whether Mr Thomas thought that would be sufficient grounds for a superannuation benefit on medical grounds. Mr Thomas said that, whilst he thought so, the Superannuation Board would want Mr Grout to see their own medical panel. Mr Grout then said: "I have had enough and I am going to resign. Will you help me write a letter of resignation." Mr Thomas drafted a letter addressed to Mr Kemmis. Mr Grout had it typed up and signed it. The letter read: "Please find attached Doctor's Certificate which is self explanatory. I have a specialist's appointment in Sydney on Friday 20 inst. It is with regret that I find it necessary to advise you that I am taking the doctor's advice to take effect at 5 pm Monday 23 inst." Mr Grout's secretary faxed that letter, together with Dr Harris' certificate, to Mr Kemmis at about 11.30 am on 18 May 1994. Mr Kemmis received the fax at about 12.30 pm. Later that day, he consulted the Mayor, Mr Lyle, the Deputy Mayor, Mr Clegg, and the Council's General Manager, Mr Dutton. They decided that someone should speak to Mr Grout. However, there was a council meeting scheduled for that day. So it was decided that Mr Clegg and Mr Dutton would commence the meeting while Mr Lyle and Mr Kemmis went to the abattoir. They did so, arriving at about 3.30 pm. They saw Mr Grout. Mr Lyle gave evidence that he asked Mr Grout what was going on. Mr Grout replied: "Everything out there is out of control. I can't do anything. The situation is hopeless". He said he had tried to contact Mr Lyle but could not get him. Mr Lyle then said: "Is there anything I can do to get you to change your mind?" Mr Grout replied "no." He further said that he had decided to resign the previous night. Mr Lyle again asked: "Are you sure you won't change your mind about all this?" Mr Grout replied: "No. I can't go on". Mr Grout gave evidence that he did not have a specific recollection of what occurred at this meeting, save that he remembered breaking down and crying and Mr Lyle putting his arm around him and telling him that "everything would be alright". According to Mr Lyle and Mr Kemmis, Mr Grout regained his composure and there was discussion about the letter in which Mr Grout confirmed that he wished to resign his employment. On their way back to the council offices, Mr Lyle and Mr Kemmis briefly visited Mrs Grout at her home. There was an issue as to what was said during that visit. Mr Lyle and Mr Kemmis returned to the council offices and participated in the council meeting, which was then underway. After the dinner break, Mr Lyle reported to the council about the events of the day. He read to the meeting Mr Grout's letter and Dr Harris's certificate. At the time, apparently, the council was assembled as a Committee of the Whole. The committee's minutes record the following: "IT WAS RECOMMENDED that the abattoir manager's resignation due to ill health be accepted. IT WAS FURTHER RECOMMENDED that Council require the abattoir manager to sign a confidentiality agreement. " The recommendations were subsequently accepted by the council, assembled as such. Mr Grout attended work on 19 May 1994. During the course of the day, Mr Dutton sent Mr Thomas a draft press release, for Mr Grout's comment. The draft was in the following terms: "The Manager of the Gunnedah Shire Abattoir, Mr Ray Grout, has resigned due to work related stress - this follows doctor's advice. Mr Grout's resignation will take effect as of Monday, 23 May at 5:00 pm...." Mr Grout informed Mr Thomas that the word "resigned" was not correct and that it should be changed to "retired due to ill health". This comment was communicated to Mr Dutton but he refused to accept the change. Later in the day, Mr Dutton met with Mr Grout and discussed the method by which a successor might be found and the salary range that should be offered to attract applicants to the position. Mr Dutton gave evidence that Mr Grout said to him on this occasion: "...I had to look after myself and accept my doctor's advice. I intend to do that and take it easy for a while" Mr Dutton responded: "Is there anything I can do to help? I'm here to help you as much as I can. When do you finish up?" Mr Grout said: "I'll be at work on Monday. I'll finish up at 5.00pm. On Monday I'll tell clients I'm resigning due to ill health" Mr Dutton said: "Alright. Let me know if there is anything I can do" On the same day, Mr Grout's secretary collected airline tickets for him to travel to Sydney to see Dr Ellard. Mr Grout instructed her to pack up his personal effects in his office. He also told his wife to pack up their house and to arrange furniture removalists. Mr Grout travelled to Sydney on Friday, 20 May 1994. He saw Dr Ellard on that day and was admitted to Northside Clinic, a psychiatric hospital. He remained hospitalised for a period of six weeks. Dr Ellard formed the opinion that Mr Grout's disability was temporary. He suggested he seek legal advice. Mr Grout took up Dr Ellard's suggestion. He consulted Corrs Chambers Westgarth, solicitors. At 5.22 pm on Monday, 23 May 1994, the council received a faxed letter from the solicitors, reading as follows: "Dear Sir, Mr Ray Grout We act for Mr Grout. We understand that Mr Grout forwarded a letter to you on or about 19 May 1994 indicating that he had taken medical advice to the effect that he should retire from his duties as manager of the Gunnedah Shire Council Abattoir. Mr Grout hereby withdraws his letter of 19 May 1994. Mr Grout will remain on sick leave for at least the remainder of this week. If you require Mr Grout to provide a medical certificate please advise by return facsimile and we provide [sic] a certificate as soon as possible. Yours faithfully" In the meantime, a number of events had occurred in Gunnedah. On 19 May, the press release was issued. Mr Grout's resignation was promptly reported by the local radio station and on the front page of the local newspaper. During the course of 23 May, before his receipt of the solicitors' letter, Mr Dutton made an arrangement with a Mr Marshall for him to fill Mr Grout's position for a period of six months. Mr Marshall took up the position on the following Monday, 30 May 1994. On 24 May 1994, Mr Dutton replied to the solicitors' letter as follows: "I have to advise that at its Ordinary Meeting of 18th May 1994 Council formally accepted Mr Grout's resignation dated 18 May, 1994, effective from 5 pm Monday 23rd May, 1994. Mr Grout's employment has been terminated by his own resignation effective from 5 pm, 23 May 1994. Your advice that Mr Grout wishes to withdraw such resignation is not accepted." Termination of the employment: the trial judge's findings In his 30 September reasons, the trial judge found that: (i) the period of notice given by Mr Grout in his letter of 18 May was not reasonable, so the letter was not effective to terminate the contract of employment at 5 pm on Monday 23 May; (ii) Mr Grout's letter of 18 May and subsequent conduct did not amount to a repudiation of his contract of employment; (iii) upon its proper construction, the letter of 18 May was a conditional offer to resign; (iv) the council's letter to the solicitors of 24 May may have amounted to a repudiation of the employment contract. However, if it did, the repudiation was not accepted by Mr Grout; so the contract of employment was not terminated; (v) alternatively, it may be that, in writing its letter of 24 May, the council was merely acting on an incorrect understanding of its contractual rights not amounting to a repudiation; (vi) an application could be made under s.170EA of the Industrial Relations Act because the council: (a) accepted Mr Grout's letter of 18 May notwithstanding the knowledge of individual councillors about his circumstances; and (b) refused to accept or act upon the solicitors' letter of 23 May seeking to withdraw the letter of 18 May. Instead the council insisted that the letter of 18 May be honoured and appointed someone else to the position. These actions terminated Mr Grout's employment, though not his contract of employment. They were actions that could properly be characterised as a termination at the initiative of the employer. In his 13 February reasons, Moore J held, in relation to termination, that the letter of 24 May 1994 constituted wrongful dismissal of Mr Grout by the council, entitling him to damages.