DECISION NO: 714/95 CATCHWORDS INDUSTRIAL LAW - UNLAWFUL TERMINATION - No VALID REASON - Redundancy due to alleged financial difficulties - Employer seriously ill. Industrial Relations Act 1988 ss 170DB, 170ED, 170EE Nicholson v Heaven and Earth Gallery Pty Limited (1994) 52 IR 55 LESLIE RALPH AMOS -v-DELEKI PTY LIMITED AS TRUSTEE FOR SWORDS FAMILY TRUST trading as MUDGEE TOURIST AND VAN RESORT No. NI 2418 of 1995 COURT: MCILWAINE JR PLACE: MUDGEE DATE: 27 NOVEMBER 1995 INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY No. NI 2418 of 1995 BETWEEN: Leslie Ralph AMOS Applicant AND: DELEKI PTY LIMITED AS TRUSTEE FOR SWORDS FAMILY TRUST trading as MUDGEE TOURIST AND VAN RESORT Respondent REASONS FOR JUDGMENT (Delivered ex tempore - revised from transcript) 27 NOVEMBER 1995 MCILWAINE JR This is an application for unlawful termination of employment under Division 3 of Part VIA of the Industrial Relations Act 1988 ("the Act") made by Mr Leslie Ralph Amos. The applicant's claim for a remedy is against his former employer, known to him as the Mudgee Tourist and Van Resort. However, by consent, the name of the respondent to these proceedings has been amended to include in the proceedings the company known as Deleki Pty Ltd as trustee of the Swords Family Trust, trading as Mudgee Tourist and Van Resort which will be referred to in this judgment as the "Tourist and Van Resort". I have a certificate under section 170ED(2) of the Industrial Relations Act 1988 from the Industrial Relations Commission signed by Deputy President Drake in the following terms: "In accordance with subsection 170ED(2) of the Industrial Relations Act 1988 the Commission hereby certifies that it has been unable to settle this matter by conciliation." I therefore find that the matter is properly before me. At the conclusion of the hearing of this matter I had very helpful oral submissions made to me by Mr Williams for the applicant and Mr Washington for the respondent. I do not propose to examine those submissions in detail in this judgment as the time does not permit, but I thank them for their respective outlines of their case. The evidence in this matter was largely uncontested. Mr Amos commenced work on 4 October 1994 and worked through to 24 May 1995. He gave evidence that he lived about 35 kilometres out of Mudgee. He has a hearing difficulty which has arisen out of using a chain saw without earmuffs and it appears that he has a back injury. However, there has not been any issue raised on any of these suggested ailments in terms of his performance in his employment at the Tourist and Van Resort. Mr Amos answered an advertisement in the Mudgee Guardian and had an interview with Mrs Irene Swords. Whilst he was not cross-examined about this it appears - and there probably is no real issue on the matter - that Mr Barry Swords was present during that interview. Moreover, in his evidence Mr Swords confirmed that all the discussions about the salary would have been handled by his wife. He was employed as a gardener/handyman to maintain the caravan park. This included cleaning the toilet blocks and removing the garbage twice a week. He was also expected to back up Mrs Swords, if there were any troublesome tenants. He gave evidence of doing this on two occasions. One such situation occurred when Mr Swords was in Sydney and he received a phone message that Mrs Swords was having a difficulty with one of the guests at the resort. He also gave evidence that he had seen Mrs Swords in either late October or early November 1994 and told her that he needed a loan from the credit union and a letter was obtained from Mrs Swords as follows: "This is to verify that Les Amos has been employed by us for the last two months in a full time capacity. Les's employment with us is secure and on a long term basis. If you have any further inquiries, do not hesitate to call us." It is also convenient at this stage to record a letter which Mrs Swords wrote on 24 May 1995 by way of a reference: "To whom it may concern. Les Amos has worked at the Mudgee Tourist and Van Resort from 4 October 1994 to 24 May 1995. Due to illness in our family we have cut down on staff. During his time with us, Les has established gardens and has also been the repair/maintenance person for which he is most capable and has been a reliable and trustworthy employee. I would recommend Les for a position he applies for in this field." There was no evidence called to suggest that the reference was inaccurate. I have accepted that what Mrs Swords wrote is both frank and truthful. The evidence in terms of the salary paid to the applicant is again not really under dispute. Mr Amos gave evidence that he received $380 per week gross, together with $20 per week fuel allowance which would give a total of $400 per week gross. Exhibit C, which was tendered on behalf of the respondent, is an extract from the Miscellaneous Gardeners and Such (State) Award. The evidence from Mr Swords was that Mr Amos was paid at a level 3 on amount shown under part B of that document and I note that the amount recorded there is $374.40. However, alongside in handwriting, the author of which has not been disclosed to me, there is written a figure of "$380.60". In the light of the evidence from the applicant and that note, I accept the figure of $380.60 as the gross amount of salary being paid to the applicant. There was no cross-examination in relation to the $20 per week fuel allowance. Mr Amos gave evidence that since his termination, which both parties agree occurred on 24 May 1995, he has had five days casual work for a contractor. There was some dispute about the amount of time which was worked after the notice was given. I am satisfied on the evidence of both Mr Amos and Mr Swords that a notice period of two weeks was given and that Mr Amos worked during that two weeks' notice period apart from one day of sick leave which was taken during that time. Under section 170DB of the act where the employment has not been longer than one year, at least one week's period of notice is required, unless the employee is over 45 years old and has completed at least two years' continuous service with the employer. Whilst Mr Amos has given evidence to me that he was born on 22.9.1939 and is currently 56 years of age, he has not served the required two years of continuous service with the employer and therefore only one week's notice was required. There is therefore no contravention of section 170DB of the act by the respondent. Mr Amos has given me additional evidence as to his efforts with the CES to obtain further employment. He has approached the local estate agents for handy man type work and local builders and retirement homes for similar jobs. I am convinced that he has made a genuine effort to obtain work in this regard. He has given evidence that between him and his wife they have obtained a loan of some $5000 on his behalf and $3000 for his wife, that this loan was acquired on the basis of his understanding that he had secure employment. Again, I think this is not disputed, that at the time of the termination by Mr Swords, he asked if he could stay until he paid out the loan. I understand that since the termination some action has been taken to consolidate the loans and to come to some alternative terms for repayment of the loan with the credit union. Mr Swords gave evidence that he is a director of Deleki Pty Limited. The company, Deleki Pty Limited is trustee of the Swords Family Trust. It is the registered proprietor and registered owner of the business name, and operator of the Mudgee Tourist and Van Resort. Apparently his brother is also involved in the business although he does not take an active management role as he has been involved in another business, Ces Swords Pty Limited and Mid-Western Plant Hire. Mr Swords testified that approximately two years ago they obtained a loan for about $400,000.00 and upgraded the park. They installed a new office, established a restaurant and built some new roads. Some of their own money was also involved in the business. Over the years the caravan operation has previously been leased out to a number of people, but apparently it was regularly losing money. After the upgrade it was decided that he and his wife, Mrs Irene Swords, would move in and try and rectify the situation. Mrs Swords was not called to give evidence. There was no explanation offered for her absence. Mr Swords testified that his wife has not received any remuneration at all from the business, although working full-time in it. In addition to the applicant the business supported a Mr Robbie George who performed similar duties as a garden handyman to the applicant, as well, he also had a management role. The business also employed, his wife, Vicki George and some casual cleaners. A glance at some of the pay summaries reveals that there are a number of other employees not referred to in the evidence who appeared to have been the subject of payments from the business. That is contained in exhibit B which was tendered by the respondent. Evidence was led from Mr Swords in relation to the licensed restaurant, "The Hungry Lion", which at one stage apparently sustained a full-time chef, a full-time bar tender and some other casual employees. The restaurant apparently has not been as profitable as was thought possible and has until recently been closed down. It now appears that Vicki George, the wife of the other main employee in the business, has taken on the restaurant on some type of contractual arrangement, albeit on a basis of much more limited opening times. I understand that this has been done because of advice from selling agents to the effect that the restaurant needs to be operating to improve the prospects for the sale of the Tourist and Van Resort. There is no doubt in my mind that Mr Swords has suffered a severe setback in his personal life and in his business operations as a result of a diagnosis that he is suffering from cancer. I did not think it was necessary to insist on a full description of his illness as I could make an assessment of Mr Swords in the witness box. I accept that he was quite distressed about his illness. Undoubtedly he has had a great deal of difficulty in coping with the illness and dealing with the financial and other implications that it brings for his lifestyle. In any event, all I need say is that I accept unreservedly the evidence of, it appears to be, Dr Barclay in a medical report dated 6 July 1995 which is in the following terms: "Mr Barry Swords has been under constant medical supervision for a major medical illness from 9 March 1995 to the present time. He will undergo treatment for at least 12 months." I accept the evidence of Mr Swords that he will be undergoing chemotherapy for a considerable period of time. I now turn to the circumstances of the termination. It is accepted by both sides that this was done verbally by Mr Swords which is contrary to the usual practice of the business in the sense that Mrs Swords had originally concluded the monetary terms of the initial engagement. Mr Swords gave evidence that his wife would normally have dealt with all of the financial aspects of the employment of Mr Amos. Both parties, I think, concede, although they are not sure of the date, that 10 May 1995 was probably the day on which this conversation occurred. Mr Amos was walking back to the workshops and he gave evidence that Mr Barry Swords came up to him and said: "I've got to let you go." And the response from Mr Amos was: "What have I done? It's not you, it's me." And the conversation then went on with Mr Amos saying: "I've just got this loan, any chance of staying on to pay the loan?" Mr Swords replied that he would not to agree to this request. Mr Amos worked out the fortnight. He was given a reference. I have already set out the reference earlier in this decision. This reference nominates the reason why the employment finished as being "due to illness in our family." It does not mention any financial difficulties that the business may have been having as the reason for the termination. However this is now the explanation which is sought to be put forward to me as the reason for the termination. I have carefully considered the documentation that has been presented on behalf of the respondent in terms of the report from the accounting firm, Coates Bennett Pty Limited. The report only was tendered, it was not support by oral evidence. In this matter the company has an obligation to, on the balance of probabilities, to prove it had a valid reason for termination. I note that as Mr Williams on behalf of the applicant pointed out that, there is the usual disclaimer placed on the information reported on by accountants to the effect that they give no opinion as to whether the accounts present a true and fair view of the financial position of the Swords Family Trust and its results for the year. Moreover no warranty of the accuracy or reliability of the accompanying accounts is given. Mr Williams says the applicant did not have a real opportunity to test the accuracy of the financial information. Now, in response to that, Mr Washington, for the respondent, says that boxes of material were produced today under subpoena during the course of this one day hearing. He suggests that the applicant could have considered this material. I agree with Mr Williams that it would be impossible to examine that material during the course of today and obtain some considered or expert view in time to complete this case today. I have carefully examined the financial information contained in the accountants report. My attention has been drawn to various accounts. I note for instance on page 3 that the Swords Family Trust has a joint venture between Deleki Pty Limited and Savelon Pty Limited and there seems to be considerable amounts of moneys tied up in that operation. I have had no evidence one way or the other in relation to that aspect of these accounts. My attention has been invited to page 8 which is the unaudited Revenue Account for the year ended 30 June 1995 which shows a net loss of $100,052.56 in relation to this operation. In 1994 some $81,788.02 was distributed to beneficiaries being: James P Swords Adam J Swords Kelly A Swords Brett A Swords Sara J Swords Lisa B Swords Irene M Swords Peita N Swords There are no distributions made in 1995 to any beneficiaries according to these draft accounts. My attention has been invited to page 11 and in particular to the unaudited Divisional Trading Account for the Mudgee Tourist and Van Resort which relates to the shop attached to the Tourist and Van Resort. There is no evidence that Mr Amos was in any way involved in that aspect of the operation. There is a loss shown in this account. On the other hand, in relation to the Divisional Trading Account for the bar there is a profit shown of some $33,459.16. Then the Divisional Trading Account for the restaurant shows that there was $60,987.27 lost on that operation. The submission which is strongly made by Mr Williams to me is that I should take account of page 15 of the report which shows that for the Mudgee Tourist and Van Resort, that part of the entity in which Mr Amos was involved, the divisional profit was $64,906.32. In the light of all that apparently conflicting financial information, I am unable on the balance of probabilities to determine that the company had a valid reason based on its financial position for the termination of the employment of Mr Amos. This is so particularly as the section in which Mr Amos worked is, together with the bar operation, one of the profitable areas of the business. In coming to that decision I am also fortified by the evidence which Mr Swords volunteered that originally he drove around the park with Mr Amos and he showed him what he wanted done and told him that he wanted the "park done up and looking good." Now, it seems to me that when he saw Mr Amos on 10 May 1994 he may well have come to the decision that he no longer had a personal interest in the future development of the park as he had when he originally employed Mr Amos. What Mr Swords wanted done by Mr Amos in the park was no longer relevant because of the possible prognosis of his illness. I consider that the termination arose out of those circumstances rather than what is now said to be the financial difficulties of the operation. Having come to that decision, I also confirm that had I come to a different conclusion about the financial accounts, then I would consider that the reason would not be valid when I have regard to Mr Amos's undoubted capacity and conduct and the operational requirements of the company. I would have made a finding that it was harsh, unjust or unreasonable to terminate Mr Amos in the way in which it was done. Therefore the termination would not have been taken to be valid. There is one other issue for example, which was uncontested as Mr Swords frankly admitted that he did not know anything about. There was the T Shirt contained in exhibit "3" Mr Amos testified he had designed a new logo for the business at the request of Mrs Sword. I have the two letters and all of the other material that indicates to me that Mr Amos was a decent, hard working and loyal employee. I have given careful thought as to whether I should reinstate Mr Amos in the position. Had Mr Swords not been so distressed by his own personal circumstances and perhaps sat down with his wife and had a discussion some way may have been worked out between the parties to enable Mr Amos to reduce his hours or to job share with Mr George. An offer was made by Mr Swords, in his evidence described as a peace offering, to reinstate Mr Amos in his former position on a reduced working hours basis. I do not think that course is now practicable for a number of reasons. Mr Swords needs in terms of his own situation, to concentrate on recovering his health. Any person suffering from cancer requires a lot of help and assistance and single-mindedness to overcome the disease. I appreciate the open offer that was made. I cannot implement it unless it satisfies section 170EE(1)(a)(i) or (a)(ii) of the Act. There may have been an opportunity to do so if the parties had consented, but there is no unqualified consent given by the applicant to me to adopt that course. The offer also does not address the question as to what should be done about the wages lost since the termination. I find it is impractical to reinstate Mr Amos, I do make that finding reluctantly, because my experience of country towns is that it is very difficult to obtain employment once a person is known to have been involved in a previous case of this nature. The applicant has already found it difficult to get other employment. My preference would have been for reinstatement. Mr Swords, on 2 August 1995 engaged a local agent to sell the business. This decision was reinforced on 15 September 1995 when he went outside the local district to obtain help from an organisation outside the Mudgee district to sell the caravan park. It seems to me that that is a relevant date for the determination in Mr Swords mind that the operation should finally be sold. I am of the opinion that it would be appropriate to take account of this proposal rather than adopt the view that I should, having found that there was no valid reason for the termination, reinstate the applicant. I now consider whether this could be a case, where compensation to the maximum amount, was required. I find, as I mentioned earlier, that the applicant was receiving up to $400 a week, if I include the $20 fuel allowance or $380.60, if I accept the lower figure. This would mean a range of $10,400.00 or in the region of $9,900.00, if I accept the lower figure. In either case these are substantial amounts. However, I have taken account of what Mr Washington has to say about the short period of employment, I have taken account of the fact that Mr Amos has been able to be employed. I determined that I should look at the question of compensation having regard to the observations of His Honour, Chief Justice Wilcox in Nicholson v Heaven and Earth Gallery Pty Limited (1994) 57 IR 50 at pages 62 and 63: "I respectfully agree with the observations in both these passages. They lead me to conclude that, in assessing compensation for a breach of s.170DC, it is appropriate to consider what would have been likely to occur if that breach had not occurred. It should not be assumed that the employee would have been dismissed anyway. Such an assumption ignores the rationale of procedural fairness and everyday experience that decision makers often change their minds when presented with another side of a case. It devalues s.170DC to the point of redundancy." "On the other hand, it would be unrealistic for a court automatically to assume that, if this employer had complied with s.170DC, the employee's employment would have continued indefinitely." In that regard, I would see that the employment of Mr Amos may have continued to September 1994. This being the time when Mr Swords finally determined to place the caravan park up for sale. That period is approximately 16 weeks, being $6089.60. The legislation allows me to determine what is the appropriate amount of compensation. I have taken into account a number of issue including: the additional weeks pay that was paid; the fact that there is some question as to whether the full notice was worked out; the fact the period to 15 September is an additional couple of days. In all the circumstances the amount of compensation which is the appropriate is $6,000.00 I award the applicant $6,000.00 I order: 1. The change of name of the respondent to Deleki Pty Limited as trustee for the Swords family trust trading as Mudgee Van and Tourist Resort. 2. I find: (i) No contravention of section 170DB(2). (ii) That the termination was not based on the employee's conduct or performance. (iii) The company not to have had a valid reason for the termination of the employment of the applicant. (iv) It is impracticable to reinstate the applicant. 3. I award the applicant $6000 compensation to be paid within 21 days. 4. The exhibits may be returned after 21 days I certify that this and the preceding fourteen (14) pages are a true copy of the Reasons for Judgment of Judicial Registrar McIlwaine. Associate: Caroline Sternberg Date: 13 February 1996 APPEARANCES Counsel for Applicant: Mr Williams Solicitor for Respondent: Mr Washington, Washington Flyn & Conn INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY No. NI 2418 of 1995 BETWEEN: Leslie Ralph AMOS Applicant AND: DELEKI trading as MUDGEE TOURIST AND VAN RESORT Respondent BEFORE: MCILWAINE JR PLACE: MUDGEE DATE: 27 NOVEMBER 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The name of the respondent be changed so as to include Deleki Pty Limited as trustee for the Swords Family Trust trading as Mudgee Tourist and Van Resort. 2. The respondent pay the applicant to sum of $6000.00 compensation. 3. The compensation to be paid to the applicant within 21 days. 4. The exhibits may be returned after 21 days. Note: Settlement and entry of Orders is dealt with by Order 36 of the Industrial Relations Court Rules.