Schiller & Partridge v Professional Care Services of Australia Pty Ltd [1996] IRCA 128

DECISION NO: 128/96 CATCHWORDS INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - claim of UNLAWFUL TERMINATION - disability service industry - whether termination at initiative of the employer - whether SPECIFIED PERIOD CONTRACT - REDUNDANCY - whether HARSH, UNJUST OR UNREASONABLE. Industrial Relations Act 1988 ss 170DE(2), 170EA, 170EE(3) Fair Trading Act (WA) s 14 Quality Bakers of Australia Limited v Goulding (1995) 60 IR 327 Peter SCHILLER & Alison PARTRIDGE -v- PROFESSIONAL CARE SERVICES OF AUSTRALIA PTY LTD - WI 95/2353 & WI 95/2354 Before: BOON JR Place: PERTH Date: 4 APRIL 1996

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WI 95/2353 & WI 95/2354 B E T W E E N: Peter SCHILLER & Alison PARTRIDGE Applicants A N D: PROFESSIONAL CARE SERVICES OF AUSTRALIA PTY LTD Respondent MINUTE OF ORDERS 4 APRIL 1996 BOON JR THE COURT ORDERS THAT: 1. The respondent pay to each of the applicants the amount of $17,500 within 28 days of the date of this order, by way of compensation for the contravention of Section 170DE. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WI 95/2353 & WI 95/2354 B E T W E E N: SCHILLER & PARTRIDGE Applicants A N D: PROFESSIONAL CARE SERVICES OF AUSTRALIA PTY LTD Respondent REASONS FOR DECISION (Delivered ex tempore - revised from transcript) 4 APRIL 1996 BOON JR 1. The applicants have applied under Section 170EA of the Industrial Relations Act 1988 for compensation arising out of the alleged unlawful termination of the applicants' employment by the respondent. There is a further claim for damages for an alleged breach of Section 14 of the Fair Trading Act (WA). It is alleged that the employer, in transferring the applicants from Adelaide to Perth, engaged in conduct misleading as to the nature of the business of the respondent. In relation to the claims under the provisions of the Industrial Relations Act, the applicants allege that their termination was harsh, unjust or unreasonable within the meaning of those words in Section 170DE(2). 2. The respondent says that the termination of the applicants' employment was not a "termination at the initiative of the employer" and alleges that the applicants were employed for a fixed term initial period of three months, after which their contracts were simply not extended. If the Court finds that it was a termination at the initiative of the employer, the respondent says that there was a valid reason for the termination in that the position of both applicants was made redundant, and that the termination was not in all the circumstances harsh, unjust or unreasonable as the applicants were not suitable for the one remaining position in the Perth office of the respondent. It was said that the respondent had no alternative to terminating the employment of the applicants. BACKGROUND 3. The applicants, Peter Schiller and Alison Partridge, are married to each other although they have, since their employment with the respondent was terminated, separated. Ms Partridge is a paraplegic and Mr Schiller is a quadriplegic. They have both been wheelchair bound for many years. Each of the applicants has had many years' experience working with various organisations relating to the care of disabled people. It appeared to be common ground that both Mr Schiller and Ms Partridge are well known in the disability industry in Adelaide and that their work with disabled people is highly regarded. 4. Evidence was given at the hearing that for disabled people who are unable to fully care for themselves without assistance there appear to be three options in relation to their residential arrangements. Firstly, they may live in an institution specifically catering for people with disabilities. Secondly, they may reside at home and be cared for primarily by their families. Thirdly, they may reside in their homes and live an independent life but receive care from professional carers in the disability industry. There are various organisations throughout Australia which receive government funding and which provide various kinds of care for disabled people in their own homes. Evidence was given that there are waiting lists in each state for disabled people requiring such care. The schemes covering the care of disabled people are funded by both federal and state governments. 5. The evidence was that Mr Schiller and Ms Partridge, prior to their transfer to Perth, received care in their own home in Adelaide of two-and-a-half hours' assistance in the morning and half-an-hour's assistance in the evening. The type of care provided to them included assistance with getting out of bed, showering and having breakfast in the morning, and assistance with getting into bed in the evening. When they left South Australia they had to give up that care and if they were to return to South Australia they would have to go back onto a waiting list for that level of care once again. 6. Evidence was given by Mr Schiller and Ms Partridge that some years ago they saw a gap in the provision of care for disabled people. The type of assistance then available for people such as themselves who wish to live an independent life was limited to carers coming into their homes between the hours of 9.00 am and 5.00 pm. This meant that unless they asked for the assistance of family or friends, or paid for carers privately, they were restricted to staying in bed until 9.00 am and having to retire in the evening by 5.00 pm. 7. Mr Schiller and Ms Partridge set up their own company, Professional All Care Services Pty Ltd. Mr Schiller and Ms Partridge were the two directors of that company. At the time that this company was set up there was no such thing as private health care in the sense of a private, profit-making organisation engaged in the brokerage of services for disabled people. The company employed and trained carers for disabled people. The company's customers were disabled or elderly people who required nursing care. Their customers were charged a certain fee per hour depending on the type of care required. The company's performance was measured in the numbers of hours of care provided per week. At its peak, Professional All Care Services sold 2,000 hours of care per week in Adelaide. 8. In the last few months of operation of Professional All Care Services in Adelaide, the company experienced severe financial problems. Mr Schiller knew Mr Jeffrey Edmond socially and approached him for financial assistance through Frank Du Bois & Associates, investment advisers. Mr Edmond was at that time the office manager for Frank Du Bois & Associates. Mr Du Bois arranged for Mr Peter Mattiske, a financial consultant with Frank Du Bois & Associates, to spend some time with Professional All Care Services to uncover its true financial position. This occurred in July of 1994. Mr Mattiske gave evidence that it took him some months to discover the financial position of Professional All Care Services. He ultimately discovered that the company had a significant amount of debt and was insolvent. The amount of the debt was over $400,000. Mr Mattiske recommended that Professional All Care Services go into voluntary liquidation, and this was eventually done. The two directors of Professional All Care Services, Mr Schiller and Ms Partridge, also became personally bankrupt because of outstanding debts associated with the failure of the business. 9. Mr Edmond and Frank Du Bois & Associates incorporated a new company, Professional Care Services of Australia Pty Ltd, at around the time that Professional All Care Services went into liquidation. Mr Mattiske was appointed general manager of Professional Care Services. The two shareholders of Professional Care Services were Mr Edmond and Frank Du Bois. Professional Care Services negotiated with the liquidator of Professional All Care to purchase the contracts of Professional All Care's clients. This was done and Professional Care Services commenced operation in Adelaide in November 1994. 10. It is common ground that at around the time of the liquidation of Professional All Care Services, the federal police raided its business premises in relation to allegations of sales tax exemption fraud relating to another company with which Mr Schiller and Ms Partridge were involved. The federal police were apparently seeking evidence relating to allegations that the directors of Professional All Care Services were involved in the sale of vehicles and other equipment which had been purchased on a sales tax exempt basis. It was alleged that a fee was charged to the purchasers of the vehicles and goods. Mr Schiller and Ms Partridge have both denied any wrongdoing and they have to date not been charged with any offence arising out of those allegations. Neither Mr Schiller nor Ms Partridge has any criminal convictions. 11. When Professional Care Services of Australia Pty Ltd was established, it employed Mr Schiller as a marketing manager and Ms Partridge as a care co-ordinator. Professional Care Services of Australia was set up to run a business along very similar lines to the old Professional All Care Services' business. Mr Schiller and Ms Partridge were useful employees as they had operated an almost identical business in the past and they each had considerable experience in the field of disability services. They were both well known in Adelaide and had gained some credibility in the disability service industry. Although the board of directors of Professional Care Services included a doctor who had experience in the disability industry, none of the staff who ran the business on a daily basis, apart from Mr Schiller and Ms Partridge and another former employee of Professional All Care Services of Australia, had any previous experience in the disability industry. 12. The respondent, Professional Care Services of Australia, suffered some setbacks as for various reasons some of the former clients of Professional All Care Services transferred their care to other care providers. Professional Care Services was constantly looking for new business opportunities. Evidence was given that at the time Professional Care Services was established, it was intended to eventually set up offices in each state of Australia. Western Australia and Queensland in particular were seen as potential markets. 13. The chairperson of directors of the respondent visited Perth and found that the disability industry in Western Australia was going through a privatisation phase. It was decided that Mr Edmond was to organise a feasibility study in relation to setting up a Perth office of the respondent. Mr Schiller, drawing from his personal knowledge of the disability industry, drew up a list of people in the disability services industry in Western Australia who would make useful contacts. He arranged over 30 interviews with various representatives of organisations in Perth. 14. Mr Edmond and Mr Mattiske flew to Perth in March and each attended about 15 interviews. They returned to Adelaide feeling confident from speaking to industry people that it would be feasible to set up a Perth branch. The confidence of the company's management increased when the company successfully tendered for work with the Stirling City Council. That council had a budget of $1.3 million allocated to the provision of care for disabled and elderly people. Professional Care Services was successful to the extent that it was named as the second preferred provider of care to the City of Stirling Council. Although the City of Stirling did not confirm any particular number of hours of business which it would provide to Professional Care Services, Peter Mattiske estimated that it would amount to about 400 hours per week. 15. On the basis of the feasibility study carried out by Mr Edmond and Mr Mattiske, the board of directors of Professional Care Services decided to set up a Perth branch. Mr Mattiske's evidence was that he became aware, from discussions with Mr Schiller, that Mr Schiller himself was interested in applying for a transfer to Perth. Mr Mattiske's evidence was that he had some concerns about Ms Partridge being "steamrolled" into a move to Perth and he asked Mr Schiller to go home, discuss the matter with Ms Partridge, and prepare a written expression of interest. Mr Schiller's evidence was that he was very keen to move to Perth because he saw it as an opportunity to leave his failed business venture behind him and get away from the embarrassment he had suffered as a result. Further, there was to be a bonus scheme put into place at the Perth office and he saw it as a way of recouping some of his losses. 16. Ms Partridge's evidence was that she did not want to move to Perth as she was established in Adelaide. She received care from someone she trusted, her daughter and grandson lived in Adelaide and her elderly parents also lived in Adelaide. After some persistence on the part of Mr Schiller, however, she saw that the move would be good for him and decided to support him. Mr Schiller prepared an expression of interest which was signed by both Mr Schiller and Ms Partridge and submitted it to the board of the respondent. The management of Professional Care Services were never made aware that Ms Partridge was extremely reluctant to move to Perth. 17. During April and May 1995, negotiations took place between Mr Schiller, Ms Partridge and Professional Care Services for the transfer of Mr Schiller and Ms Partridge to Western Australia. Mr Edmond gave evidence that as far as the board was concerned, the agreement was to be that there was an initial three month contract to be offered to Mr Schiller and Ms Partridge. Mr Edmond himself did not speak to the applicants about this. Mr Mattiske gave evidence that Mr Schiller was unhappy about what he said was a three month probationary period after already having served six months' probation when he first started with Professional Care Services. Mr Mattiske said that the terms of the offer from the board were not negotiable. The terms of appointment, as far as Mr Mattiske was concerned, were contained in a letter from himself to Mr Schiller and Ms Partridge. The relevant part of the letter states: "The approved salary for both of you will remain unaltered (ie $35,000 pa each) for the initial three month period and these salaries will be subject to review at the end of the first quarter of trading in Perth. The initial probationary period for your employment in Perth will represent three months and again your individual performances will be reviewed at the end of the first quarter of trading." 18. Mr Mattiske referred to this part of the letter as being somewhat ambiguous and he said he made it clear verbally to both applicants that it was to be a three month appointment. 19. Both Mr Schiller and Ms Partridge gave evidence that what was being offered to them was a transfer to Perth with a three month probationary period similar to the six month probationary period they had already served in Adelaide. After serving with the respondent for the first six months, their employment had continued without any formal written notification to that effect. 20. Although there was some question in Mr Schiller's and Ms Partridge's minds about whether or not the letter dated 29 May 1995 contained the terms of the final agreement between the parties relating to the transfer to Perth, Mr Mattiske's evidence was that he made it clear that the terms set out in the letter were not negotiable. 21. On 19 June 1995, Mr Schiller and Ms Partridge were transferred from Adelaide to Perth. The respondent gave them an initial period of one week's paid leave to enable them to find accommodation in Perth. The respondent paid for their Adelaide carer to fly to Perth with them and help them become established. They had some difficulty locating suitable accommodation and this period was stressful, particularly for Ms Partridge. The total relocation costs for the two applicants were said to amount to approximately $9,000. 22. It was agreed that Mr Schiller and Ms Partridge were to commence work in Perth at 9.00 am on 26 June 1995. The official opening date for the Perth office was 3 July 1995. Mr Mattiske was flown to Perth to act as general manager of the Perth office. Mr Schiller was marketing manager and Ms Partridge was care co-ordinator. At the time the Perth office was opened it was intended that Mr Mattiske would remain in Perth for a period of only three months to help establish the new office and find a suitable local person to take over the management duties. By all accounts, Mr Schiller and Ms Partridge worked extremely hard in setting up the Perth office. The respondent has never questioned their commitment or criticised their performance. 23. The Adelaide office of Professional Care Services produced a target budget for the Perth office. This budget estimated hours sold to customers to range from 30 in July 1995 to 200 in August and 1,000 by December 1995. Mr Schiller informed the company that the proposed budget was unrealistic and unattainable in the short term. His evidence was that it took a considerable amount of time to gain credibility in the disability services industry and that private enterprise in particular was viewed with distrust. He said that he expected the number of hours sold to be very low at first and to increase gradually only after repeated canvassing of prospective clients. 24. Unfortunately, the Perth branch of the company did not perform anywhere near as well as had been anticipated by management. The company experienced heavy losses. According to Mr Mattiske, it was evident from early on that the company couldn't maintain the Perth office unless it gained a substantial increase in the number of hours of care sold. Mr Mattiske said that he had regular meetings with Mr Schiller and Ms Partridge at which they discussed the office's position. According to Mr Mattiske, by this time he had become close friends with both Mr Schiller and Ms Partridge and they would sometimes discuss what might happen in the future, although this was done on a social basis. 25. Mr Edmond gave evidence that he came to Perth in September 1995. He spoke to the applicants on or about 6 September 1995. He had been instructed by the board to make it clear to everyone in the Perth office that the company could not sustain the losses. Mr Edmond said that he made it clear to both Mr Schiller and Ms Partridge that their jobs were in jeopardy. Ms Partridge was in tears during the conversation. Although the applicants were clearly warned in September that their jobs were in jeopardy, there was no ultimatum issued and there appears to have been no discussion regarding alternatives if the Perth office couldn't be maintained with its staff of three people. 26. During September the Perth office continued to make a loss, although the number of hours sold did slowly increase. One of the main problems was that although Professional Care Services had successfully tendered for the City of Stirling contract, the actual workload it obtained from that source was far lower than had been anticipated. 27. The board of the respondent met on 28 September 1995. It passed a resolution that: "due to the inability of the Western Australian operation to achieve budget and become financially viable within the foreseeable future that the employment contracts of Peter Schiller and Alison Partridge are now due to expire will, regretfully, not be renewed. The secretary was instructed to advise Mr Schiller and Ms Partridge that their efforts have been appreciated and the directors are disappointed that the volume of hours anticipated have not materialised into chargeable hours." 28. Mr Edmond gave evidence that the board would have liked to have closed the Perth office, but as part of the tender to the Stirling City Council, both directors had guaranteed a service to the clients for two years. The company needed to maintain the Perth office for this reason. In addition, they had around 70 clients in Perth by this time who needed care. It was not the type of business that the company could leave without notice as the people who needed care would effectively be left stranded. Mr Edmond gave evidence that the board did consider in September 1995 whether one or both of the applicants could be appointed to the one person operation in Perth. Mr Edmond said a number of factors led the board to decide not to do so. These included the historical performance of the applicants in their own company plus the possible fraud charges. Mr Edmond said there was "a huge difference between Mr Schiller and Ms Partridge being employees as opposed to the head of the Perth operations". The board was concerned that if Mr Schiller or Ms Partridge were eventually to be charged with fraud, it would look bad for the company if that type of person was managing the Perth office. In addition, Ms Partridge had always conceded that she was not the type of person to be able to manage the business by herself. Her strength lay in co-ordinating. This was confirmed by Ms Partridge at the hearing. 29. Mr Edmond telephoned Mr Mattiske on Friday, 13 October 1995. He advised Mr Mattiske of the resolution of the board and said that notice was to be given to the applicants by Mr Du Bois in person on the following Wednesday. Mr Mattiske however, because of his friendship with both of the applicants, asked that he be permitted to break the news to them instead. This was done on Monday, 16 October. Mr Schiller and Ms Partridge were each given two weeks' notice of termination to take effect from the following Wednesday, 18 October 1995. It was resolved by the company to employ a new person to carry out the three tasks of management, marketing and co-ordination. During her final period of employment, Ms Partridge trained the new appointee, Mr Danny Woodham, in the co-ordination aspects of the job. 30. Mr Schiller and Ms Partridge both gave evidence that the notice of termination came as a shock to them. Mr Schiller was of the view that they should have been given more time in which to establish the business. He was also of the view that he was the person who should have been appointed in place of Mr Woodham, who apparently had no previous experience in the disability service industry. Ms Partridge was extremely distressed as a result of having her employment terminated. She described co-ordinating as being her "life" and said that she had earlier offered to work for half time rates in return for doing a full week's work. 31. Both Mr Schiller and Ms Partridge felt that they had been treated extremely unfairly, particularly as they had worked exceptionally hard and had put in far more hours of work than they were actually paid for. It was insulting to be terminated suddenly and to have an inexperienced person taken on in their place. 32. The evidence was that Mr Woodham was trained by Mr Mattiske, who was unable to leave the Perth office until January 1996. Mr Mattiske was asked to resign as general manager and has since returned to a position with Frank Du Bois & Associates. WAS THE EMPLOYMENT TERMINATED AT THE INITIATIVE OF THE EMPLOYER? 33. It is the respondent's position that the applicant's contract of employment expired by effluxion of time as they had only been appointed for a three month period. It is my view that the evidence does not support this proposition. Although it was suggested that the letter of 29 May 1995 was in its terms ambiguous and needs to be interpreted in light of the oral evidence of Mr Mattiske, I find that there was nothing ambiguous about it. The letter of 29 May 1995 appointed the applicants to their positions and imposed a three month probationary period based solely on their performance. It was not expressed to be a fixed term contract which expired after three months. The sole criterion was the performance of the applicants, and refers to their individual performances being reviewed "again" at the end of the first quarter of trading. The word "again" in that letter obviously refers to the six month probationary period to which the applicants had been subjected when they first started work with the respondent in Adelaide. Once the applicants were transferred to Perth, their new positions started on Monday, 26 June 1995 and they continued to work beyond the three month period which expired on 26 September 1995. As was the case with their initial appointment in Adelaide, the probationary period came and went and the applicants continued to work. They were not given notice of termination until 16 October 1995. 34. Further, the respondent's contention that the appointment was to be for a period of three months only is inconsistent with the fact that the respondent's directors had given personal guarantees to keep the service open for two years. Mr Schiller and Ms Partridge both gave evidence that they expected to be in Perth for at least two years. 35. In these circumstances, I consider that the employment of the applicants did not expire by effluxion of time and that their employment was terminated at the initiative of their employer.