Nash v Esther Investments Pty Ltd [1996] IRCA 175

DECISION NO: 175/96 C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - meaning of relevant wages' - whether correct employer - compensation - what is reasonable notice - contractual damages. INDUSTRIAL RELATIONS ACT 1988 Ss 170CD, 170DC, 170DE, 170EA, 170EE. Anderson -v- The Over 50's Friendly Society, IRCA No. 646 of 1995, Millane JR, unreported Fleming -v- National Mutual Funds Management Ltd, IRCA No. 335 of 1995, unreported. Ardino -v- Count Financial Group (1994) 1 IRCR 221. Coulsen -v- Thomas Cook Ltd, IRCA No. 66 of 1996, Madgwick J, unreported. Quinn -v- Jack Chia (Australia) Ltd (1991 - 1992) 43 IR 91. Grout -v- Gunnedah Shire Council (1994) 1 IRCR 143. Grout -v- Gunnedah Shire Council (No. 2) (1995) 1 IRCR 499. Derek Henry NASH -v- ESTHER INVESTMENTS PTY LTD - WI95/2577 BEFORE: R. D. FARRELL JR PLACE: PERTH DATE: 3 May 1996

IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. WI 95/2577 BETWEEN: Derek Henry NASH - Applicant AND: ESTHER INVESTMENTS PTY LTD - Respondent MINUTE OF ORDERS BEFORE: R. D. FARRELL JR PLACE: PERTH DATE: 3 May 1996 THE COURT ORDERS THAT: 1. The respondent pay to the applicant compensation pursuant to S 170EE in the sum of $15,625.00 within 14 days. 2. The respondent pay to the applicant damages for breach of contract in the sum of $42,029.00 within 14 days. NOTE: Settlement and entry of Orders is dealt with by Order 36 of the Industrial Relations Court Rule

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WI 2577 of 1995 BETWEEN: Derek Henry NASH Applicant AND: ESTHER INVESTMENTS PTY LTD Respondent REASONS FOR DECISION 3 May 1996 R. D. FARRELL JR 1. This is an application for compensation pursuant to Section 170EA of the Industrial Relations Act 1988 arising out of the alleged termination of the employment of the applicant, Mr Derek Henry Nash ("Mr Nash"), by Esther Investments Pty Ltd, ("Esther Investments"), which he claims was his employer. Mr Nash also seeks to claim damages for breach of contract in the associated jurisdiction of the Court, alleging that his employer failed to give him reasonable notice of his termination. 2. This application was heard with a similar application against John McKenzie and Associates ("JMA"), and these reasons should be read in conjunction with my reasons for decision in that application. 3. Mr Schapper, who appeared for Mr Nash, and Mr Hotchkin, who initially appeared for both respondents, indicated at the beginning of the hearing that it was common cause between the parties that the only matters which the Court is required to determine is the assessment of compensation and damages, the latter requiring an assessment of what would constitute reasonable notice in the circumstances of Mr Nash's contract. Whether Reasonable Apprehension of Bias 4. Mr Hotchkin requested that I disqualify myself from hearing this matter on the grounds of reasonable apprehension of bias - that is that, in all the circumstances, the parties or the public might reasonably apprehend that I might not resolve the questions before me with a fair and unprejudiced mind. Mr Hotchkin made it clear that he was not contending actual bias. 5. I am satisfied that I am able to determine the questions before me with a fair and unprejudiced mind. However, the relevant test is whether a fair-minded person might reasonably apprehend that I was not so able to resolve the questions before me with a fair and unprejudiced mind. An adjournment of some hours was warranted on an unrelated matter, and I used that time to fully consider Mr Hotchkin's request that I disqualify myself. I advised the parties that if I were to disqualify myself, the matter could not proceed that day. 6. Mr Hotchkin sent an urgent facsimile to the Court just before the hearing resumed to advise that he had "strict instructions that our client does not wish to be represented before Judicial Registrar Farrell. Accordingly, our client will not be represented at the hearing this afternoon." 7. Mr Hotchkin's submission was founded on three contentions which, he said, when viewed together, tended to give rise to a reasonable apprehension of bias. I will deal with each of them in turn. 8. First, Mr Hotchkin pointed to what he characterised as the "close working relationship" between myself and Mr Schapper, the counsel for the applicant. I did not understand him to be contending that that relationship has continued since my appointment. 9. It is possible that a relationship between a judicial officer and counsel might give rise to a reasonable apprehension of bias. That is much less likely to be the case, however, where that relationship has ceased to exist. My working relationship with Mr Schapper was limited to the period from November 1993 until my appointment to this Court as a full-time Judicial Registrar in October 1995. We were never partners. For most of that time, the relationship was limited to the exchanging of briefs. On 1 July 1995, I began sharing chambers with Mr Schapper and another sole practitioner. The relationship ended when I left those chambers on my appointment in October 1995. 10. I am satisfied that my past working relationship with Mr Schapper could not give rise to a reasonable apprehension of bias. My review of other decided cases dealing with relationships between the bench and counsel fortify me in that view. 11. Mr Hotchkin's second contention was that I have had political affiliations with the Australian Labor Party ("the A.L.P.") and the union movement, and that it was notorious that there was antipathy between those organisations and Mr Len Buckridge ("Mr Buckridge"); Mr Buckridge is a principal of Esther Investments and the chief client of JMA. 12. This contention was put in very broad terms. Neither the A.L.P. nor the union movement are parties to these proceedings. Any general antipathy between the A.L.P. as an organisation and Mr Buckridge is not so notorious that I am aware of it. Even accepting that there is or has been antipathy between particular A.L.P. politicians or other members of the A.L.P. and Mr Buckridge, it is fanciful to suggest that a fair-minded observer would impute such an antipathy to me because of any affiliation I may have had with the Australian Labor Party. I am unaware of any general antipathy between the union movement and Mr Buckridge. However, even accepting that there is or has been antipathy between particular building unions and Mr Buckridge, any affiliation I have had with those unions was solely in my capacity as a legal practitioner. Any such antipathy could not reasonably be imputed to me by reason of my having represented them in legal matters. 13. Mr Hotchkin's third and final contention was based upon his recollection of a casual discussion between he and I about Mr Buckridge at a time when he and I were involved in litigation between a building union and another company of which Mr Buckridge was a director. Mr Hotchkin says he recalls that I expressed a personal view either to the effect that Mr Buckridge was philosophically opposed to unions generally, or perhaps to the effect that Mr Buckridge was philosophically opposed to unions having a right of entry into workplaces. 14. Any such conversation took place in or before 1993. While I do not recall the discussion, I am prepared to accept that I may have made the statements in the terms Mr Hotchkin has suggested. Whether the particular union had a right of entry onto a particular workplace was, as I recall, the matter in issue in that litigation. 15. I cannot, however, see that those statements have any relevance to the present proceedings. At its highest, any statements I am said to have made would have reflected a preliminary view formed some years ago on indirect evidence. The terms of the statements indicate no personal ill will to Mr Buckridge. I have never met Mr Buckridge. He has played no direct role in any of the proceedings in which I have appeared prior to my appointment to this Court. Mr Buckridge is not expected to play any personal role in these proceedings. Nor, for that matter, do these proceedings involve unions. I am satisfied that any statements I may have made in the terms suggested by Mr Hotchkin would not give rise to a reasonable apprehension of bias in this case. 16. Mr Schapper submits that, if each of Mr Hotchkin's contentions on their own could not give rise to a reasonable apprehension of bias, then they could not do so if viewed cumulatively. I do not agree. However, even viewed cumulatively, I am satisfied that the matters raised by Mr Hotchkin could not give rise to a reasonable apprehension of bias in this case. 17. The doctrine relating to reasonable apprehension of bias reflects the principle that it is important that justice be seen to be done. However, the High Court has recognised that it is also important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of an appearance of bias, encourage parties to believe that by seeking the disqualification of a judicial officer, they will have their case tried by someone thought to be more likely to decide the case in their favour. Similarly, I am satisfied that judicial officers should not encourage parties to believe that by seeking the disqualification of a judicial officer, they will have their case delayed. 18. It is regrettable if Mr Hotchkin's clients hold an apprehension that I might not resolve the questions before me with a fair and unprejudiced mind. I am, however, satisfied that this apprehension is not reasonable. Having satisfied myself that this issue could not be resolved by agreement between the parties, it was my decision not to accede to Mr Hotchkin's request and to proceed to hear the matter. As I have already noted, the respondents chose not to appear for the remainder of the hearing. The Circumstances Surrounding the Termination of Mr Nash's Employment 19. The only evidence before the Court was that of Mr Nash. Based upon that evidence, I make the findings of fact set out below. 20. Mr Nash is a registered architect, who was 40 years of age at the time of the termination of his employment, with a dependent wife and two children. His previous employers had been a range of local architecture firms. 21. Mr Nash was employed on 15 March, 1987. He said he considered himself to be employed by JMA, which he described as the commercial architecture arm of the Buckridge Group of companies. The business name "John McKenzie & Associates Architects" has, since 1985 been registered in the name of Malcolm John McKenzie and Marianne McKenzie. There is no evidence that Mr Buckridge had any official standing within JMA, other than as its chief and crucial client. 22. Mr Nash worked at 18 Mount Street, West Perth, which was the registered address of both JMA and Esther Investments. Mr Buckridge and other executives of the Buckridge Group of companies work from the same address. Mr Nash worked with Mr John McKenzie, another less senior architect and three draughtsmen within a defined space within that address. They shared a secretary with Mr Buckridge. Mr Buckridge used them as a drafting service. While Mr Buckridge didn't participate in the day to day business of the architectural work he was, in Mr Nash's words, "definitely the boss". Mr McKenzie had instructed them that if Mr Buckridge asked them to do something, then they should "drop everything" and do it. 23. Mr Nash gave evidence of some occasions in which Mr Buckridge had expressed his unhappiness with Mr Nash's performance. However, based on the version of facts given by Mr Nash, Mr Buckridge's complaint was unjustified on each occasion. 24. Mr Nash initially worked as Senior Project Architect for a major construction project for Foodland Australia Limited. It was a $11 million project. He went on to perform a similar role in a number of showroom/warehouse developments, worth about one to one and a half million dollars each. 25. Mr Nash's remuneration at the time of his dismissal included a salary of $50,000 per annum, superannuation of 5% of that amount (ie $2,500), and use for all purposes of a 1987 model Holden Commodore, with fuel, the value of which he assessed at $10,000 per annum. I have no reason not to accept that assessment of the car's value. His salary and entitlements were paid by Esther Investments. Mr Buckridge was at the relevant time a Director of Esther Investments. 26. On Monday 19 June 1995, Mr Nash started work early, at 7.30am, because he knew that he would need to leave at 4.00pm so that he would be in time to attend to some family commitments that night. Flexible working hours were accepted at the office. On other occasions, Mr Nash might work from 9.00am to 6.00pm. 27. Mr Nash was working on an urgent project for a company in the Buckridge Group, for which the builders were waiting on some plans. 28. In the late morning, he was approached by Mr Buckridge, who asked him to draw up plans based upon Mr Buckridge's sketch for some houses Mr Buckridge was building in Mosman Park. Mr Buckridge did not say when he wanted the plans done, but Mr Nash presumed that he wanted them immediately, and told him they would be ready the next day. 29. Mr Nash completed the job on which he had been working and made a start on the house plans before he left work at 4.00pm on Monday night. 30. He arrived for work at 8.30am the next day, and resumed working on the house plans. Mr Buckridge walked into his office, saying "I've had enough" and then "That's it - get out". Mr Nash, who was dumbfounded, said something like "Len, what's going on here?", but received no response. 31. Mr Nash left the office and went for a walk to gather his thoughts, and then came back to speak to Mr McKenzie. Mr McKenzie was distressed, but explained that he was just Mr Buckridge's employee as well, and he didn't believe there was anything he could do about it. 32. Mr Nash says he was devastated by the dismissal. He had until that time worked for 16 years in continuous employment. He had never been unemployed before. He suddenly found himself unemployed, without notice, and with significant commitments. 33. He sought and was given a reference from Mr McKenzie, on JMA letterhead, in the following terms: "DEREK NASH has been employed as an Architect in our firm for the last 8 years. Derek exhibits an excellent level of design skills which our office has undertaken on a variety of projects during this period. These projects have required educational, commercial, industrial, residential and managerial expertise in addition to the responsibilities of site inspections, contract administration, design and presentation work. Derek has the ability to present a well structured, aesthetic and commercially viable solution when confronting design criteria, showing sympathetic understanding to design with maximum attention to detail. Derek has both the experience and expertise to work in an individual capacity or as a team member. It is with regret that Derek leaves our firm but we understand his decision and reasons. We wish Derek well for the future and have no hesitation in recommending him as an asset to any architectural practice." 34. Mr McKenzie did not consult Mr Nash about the second last paragraph. 35. Though initially paid nothing on termination, Mr Nash was eventually paid his accrued leave entitlements, 4 weeks pay in lieu of notice and an additional $1000. 36. I am satisfied that Mr Nash made adequate attempts to find alternative employment and earn alternative income. He applied for many architectural positions, while simultaneously taking steps to establish his own architecture practice. He has presently received payment of only $1,500 for services rendered since beginning his own business, and expects to be paid an additional $8,500 to June 1996. Given the expenses he has already incurred in setting the business up, and the significant additional expenses he will need to incur in order to be equipped to service the larger contracts he expects to enter into, I am satisfied that he will have no net income from his business in the twelve months following the termination of his employment. 37. Application was not brought in this court until 20 December 1995, some 6 months after the date of termination. The time limitation set out in Section 170EA does not apply, because it was not contended that there was any written notice of termination. The Limit Imposed by Section 170CD 38. The total value of Mr Nash's remuneration amounts to $62,500. Section 170CD of the Act provides that Sections 170DC and 170DE do not apply to a termination of employment of an employee who is not employed under award conditions if the employee's relevant wages exceeded the applicable amount, which is currently $62,200 per annum. Relevant wages is defined to mean the total amount of the wages that the employee received, or was entitled to receive, from the employer in respect of the period of 12 months immediately before the day on which the employer terminated the employee's employment. 39. Mr Schapper made a brief submission during the hearing as to the applicability of this provision in response to a question from the court. When in the course of my researches I became aware of the decision of Judicial Registrar Millane in Anderson v The Over 50's Friendly Society (IRCA No. 646 of 1995, unreported), I invited Counsel to file further submissions on the issue, which they did. 40. In that decision, Judicial Registrar Millane held that the value of a car made available to the employee formed part of her relevant wages, thus taking her outside the limit imposed by Section 170CD. 41. However, in that case, the employee could have elected to receive the money allocated to her motor vehicle expenses as cash. Judicial Registrar Millane followed the reasoning of Judicial Registrar Murphy in the earlier decision of Fleming v National Mutual Funds Management Limited (IRCA No. 335 of 1995, unreported), which was another case where the employee had the option of allocating a total remuneration package between various salary and non-salary components, including a motor vehicle. There was no evidence that Mr Nash had a similar option in this case. 42. In Ardino v Count Financial Group (1994) 1 IRCR 221, (1994) 57 IR 89, Chief Justice Wilcox noted that: "The parties may agree that the employer will provide non-pecuniary benefits, such as use of a car or overseas travel, or make payments to someone else, such as for superannuation or school fees. The effect of that agreement may be to diminish the periodical payments made directly to the employee. Part of what might have been available to the employee as salary is diverted elsewhere. I do not think any of this matters. The question is not the genesis of the obligation but its nature. In relation to non-pecuniary benefits, I cannot see how they can ever be regarded as 'wages' for the purpose of the definition. [Wilcox CJ then cites various dictionary definitions of 'wages'.] I think these definitions' emphasis on payment makes it difficult to argue that benefits that do not take the form of money payments are 'wages'. So far as money payments are concerned (superannuation, school fees etc) the critical question is whether the employee ever had an entitlement to receive the money himself or herself". 43. In my view, the decisions in Fleming v National Mutual Funds Management Limited and in Anderson v The Over 50's Friendly Society are not consistent with the reasoning of Wilcox CJ in Ardino v Count Financial Group, because they focus on the genesis of the obligation and not its nature. 44. It seems to me that Wilcox CJ is setting out a two step test. The first question is the nature of the obligation. The nature of the obligation in this case - that is, the obligation to provide a motor vehicle - is expressly identified by Wilcox CJ. He cites it as an example of a non-pecuniary benefit. He contrasts such benefits to money payments, for example superannuation. He says that he cannot see how they, that is non-pecuniary payments, can ever be regarded as 'wages'. No other questions therefore arise in relation to non-pecuniary benefits. 45. In my view, under Wilcox CJ's approach it is only when the nature of the obligation is found to be that of a money payment, for example superannuation or school fees, that one moves to the second, "critical" question, which is whether the employee ever had an entitlement to receive the money himself or herself. I do not believe it is consistent with Wilcox CJ's approach to consider, in relation to a non-pecuniary benefit, this second question as to its genesis. This second question only arises in relation to a money payment. 46. In any event, even if I am wrong in my interpretation of Wilcox CJ's approach in Ardino, there is no evidence that Mr Nash ever had an entitlement to receive cash in lieu of the motor-vehicle. It does not therefore form part of the relevant wages for the purposes of Section 170CD. 47. Finally, with respect to the superannuation component of Mr Nash's salary package, I note that Wilcox CJ held in Ardino v Count Financial Group that: "If the situation is that the employer never had any option but to pay particular moneys to a superannuation fund, as distinct from making it available to the employee, the payment cannot properly be described as wages". 48. In this case, the $2,500 paid into superannuation would have been paid pursuant to the statutory obligation upon the employer to do so under the Superannuation Guarantee (Administration) Act 1992, and so would not form part of the relevant wages. 49. Mr Nash's relevant wages for the purposes of Section 170CD is therefore $50,000, and within the limit imposed by the section. Whether Esther Investments was the Employer of Mr Nash? 50. Esther Investments asserts in the statement of facts filed on its behalf that Mr Nash was employed at all material times by Esther Investments. Mr Schapper, having brought the claim against both JMA and Esther Investments, declined to submit that one of them was the employer rather than the other. He even submitted that they might both be the employer. I can see no basis on the evidence for the latter submission. 51. The statements of facts filed in these proceedings are neither pleadings nor evidence. I must determine the identity of Mr Nash's employer based solely upon the limited evidence before me. 52. The only direct and unambiguous evidence of an employment relationship between Esther Investments and Mr Nash is the fact that his salary and entitlements were paid by Esther Investments. 53. The fact that he worked from the same address as Esther Investments is not conclusive. Nor is the obvious influence wielded by Mr Buckridge, which is equally consistent with the status of a major client as it is with the status of employer, given that it was Mr McKenzie who instructed Mr Nash to comply with Mr Buckridge's requests. While Mr Nash says that Mr Buckeridge was "definitely the boss", he also said that he considered himself an employee of JMA. The statements made by Mr McKenzie at the time of the termination are hearsay. The termination could as easily be characterised as being the act of Mr McKenzie in compliance with the wishes of his dominant client as that of Mr Buckridge. 54. The unambiguous evidence of an employee relationship between Mr Nash and JMA is the reference provided by Mr McKenzie. 55. The state of the evidence on this question is unsatisfactory and I do not feel able to make a finding with any great confidence. However, in the absence of any evidence of any other explanation for Mr Nash's salary and entitlements being paid by Esther Investments, I find on the balance of probabilities that Esther Investments was the employer, rather than JMA. The fact that Mr Nash was "on Esther Investments' books" is, in my view, more likely to reflect the substance of the employment relationship than the manner in which Mr McKenzie chose to characterise the relationship for prospective future employers, particularly given the fact that the reference is apparently misleading as to the circumstances of the termination. Whether There was a Valid Reason for Termination 56. Section 170EDA(1)(a) confers the onus on the employer to prove that there was a valid reason for the termination of the employee's employment connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service. The only evidence was that of the employee. The employer's onus was not satisfied by that evidence. Accordingly I am not satisfied that there was a valid reason for the termination of Mr Nash's employment and find that Esther Investments has breached Section 170DE (1) of the Act. 57. As there was no reason was given for the termination, it is not clear that Section 170DC applies. If it did, there is no evidence that it was complied with. Calculation of Compensation 58. I am satisfied that reinstatement is impracticable. It was not sought and neither party asserted the contrary. 59. Mr Nash would have received remuneration of $31,250 in the 6 months immediately following the date of the termination of his employment. The limit of the compensation the Court can award him under Section 170EE, is $31,100. 60. Mr Nash has, on the evidence, suffered loss in excess of that amount since the termination of his employment. I am satisfied on the evidence that he will not earn any net income for 12 months following his loss. He has taken reasonable steps to mitigate that loss. 61. Mr Hotchkin has submitted that, in the exercise of my discretion, I should note that the application was brought 6 months after the termination. I have already noted, and Mr Hotchkin acknowledges, that this does not bar the claim, in the absence of written notice of termination. However, I have previously considered, in the context of an application for leave to extend time to file an application, (Patricelli v LJ Hooker Real Estate IRCA No. 715 of 1995, unreported, RD Farrell JR) the possible prejudicial effect upon a respondent of delay by an applicant in advising that the legality of the termination was contested. It may be that the respondent could lead evidence in such a case which satisfied the Court that, had the applicant promptly contested the termination, then the respondent would have taken the opportunity to reinstate the applicant or taken other steps to minimise the loss to the applicant and thus reduce the consequential liability of the respondent. It may be that in such a case, compensation should be reduced. However, there was no such evidence led in this case. 62. In the absence of the claim for contractual damages, I would see no reason to award less than the maximum compensation available. Damages for Breach of Contract: What is "Reasonable Notice"? 63. Mr Schapper submitted that in the circumstances of this case, reasonable notice would be twelve months' notice. Damages for breach of an implied term of the contract that reasonable notice be given would therefore be $62,500, less the amounts paid out on termination. 64. Mr Hotchkin submitted that this claim in the accrued jurisdiction of the Court is in excess of my powers as a Judicial Registrar. 65. Justice Madgwick has ruled to the contrary in Coulsen v Thomas Cook Limited (IRCA No. 66 of 1996), and accordingly I find that I have the power as a Judicial Registrar to determine this claim. 66. Mr Schapper referred me to the decision of Justice Ashley of the Supreme Court of Victoria in Quinn v Jack Chia (Australia) Ltd (1991-1992) 43 IR 91, and the authorities cited therein as to the principles governing the assessment of "reasonable notice".