Davis v Nokia Telecommunications Pty Ltd [1996] IRCA 217

DECISION NO: 217/96 CATCHWORDS INDUSTRIAL LAW - UNLAWFUL TERMINATION - VALID REASON - HARSH UNJUST or UNREASONABLE - PROCEDURAL FAIRNESS - No OPPORTUNITY TO RESPOND to allegations concerning CONDUCT or PERFORMANCE - REINSTATEMENT is the primary remedy under the Act - Factors to be taken into account when determining the question of whether it is IMPRACTICABLE to order REINSTATEMENT - LOST REMUNERATION Industrial Relations Act 1988 ss. 170DC, 170DC, 170DE(1), 170DE(2), 170EE, 430 Nicolson v Heaven and Earth Gallery Pty Ltd (1994)1 IRCR 199 Cox v South Australian Meat Corporation, (SI 229 of 1994, Industrial Relations Court of Australia, 13 June 1995, unreported) Johns v Gunns Limited (1995) 60 IR 258 Izdes v L. G. Bennett and Co. Pty Ltd t/as Alba Industries, (WI 307 of 1994, Industrial Relations Court of Australia, 15 September 1995, unreported) Patterson v Newcrest Mining Limited , (WI 0595R of 1994, Industrial Relations Court of Australia, Marshall J, 21 December 1995, unreported) Abbott-Etherington v Houghton Motors Pty Ltd (WI 0429R of 1994, Industrial Relations Court of Australia, Marshall J, 28 September 1995, unreported Doyle v Western Suburbs District Rugby Leagues Club Ltd, (NI 527 of 1994, Industrial Relations Court of Australia, Patch JR 14 October 1994 unreported) KEITH DAVIS -v- NOKIA TELECOMMUNICATIONS PTY LTD No. NI 2447 of 1995 COURT: PATCH JR PLACE: SYDNEY DATE: 30 APRIL 1996

INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NI 2447 of 1995 BETWEEN : Keith DAVIS Applicant AND: NOKIA TELECOMMUNICATIONS PTY LTD Respondent REASONS FOR JUDGMENT 30 APRIL 1996 PATCH JR This is an application under section 170EA of the Industrial Relations Act 1988 ("the Act"). The applicant claims that his employment was unlawfully terminated and seeks reinstatement, an order for continuity of employment, and an order for lost remuneration. In the alternative, he seeks compensation. CLAIMS IN THE ASSOCIATED JURISDICTION OF THE COURT At the commencement of the hearing of the matter leave was given to the applicant to raise two claims in the associated jurisdiction of the Court, as set out in section 430 of the Act. The first matter was an alleged outstanding annual leave payment of $1,480.76, and the second matter was an alleged outstanding bonus payment of $1,960.00. The claim for outstanding annual leave was settled by the parties, and it was agreed that it was, therefore, not necessary for me to decide that matter. In my opinion, the applicant has not established that he is entitled to any payment for an outstanding bonus. The bonus was dependent upon certain performance targets being reached by the "team" of which the applicant was a member. There is simply no evidence as to those performance targets being reached, or not. The claim in the associated jurisdiction of the Court for an outstanding bonus payment is therefore dismissed. BACKGROUND FACTS The applicant first commenced working for the respondent on 12 November 1992, as a casual "temp" through a personnel agency. On 1 January 1993 he commenced permanent full-time employment with the respondent as the "Warehouse Controller". The applicant started working for the respondent at the commencement of a period of rapid expansion in the respondent's Australian business operations. This was because the respondent was a major supplier of equipment to Optus, which itself was rapidly expanding its operations. From about August 1994, the applicant gradually spent more and more of his time on repairs and spares handling, and less and less of his time on the warehouse side of his job. The applicant claimed that, in order to properly perform his duties, it was necessary for him to consistently work extra hours. This claim was not contested by the respondent, and I accept what he says. In 1992 the respondent had purchased a computer software package, or system, which is described by the initials of the Swedish words making up its name - "SCALA". Throughout the case, that system was simply called "SCALA", and I will adopt the same terminology. An analysis had been done of the capabilities of the "SCALA" system at about the time of its purchase, and it had been then decided that the system could not be used for all of Nokia's requirements in relation to repairs handling and processing. Nokia is in the business, not only of supplying telecommunications equipment, but of repairing equipment as well. When equipment supplied by Nokia is out of warranty, Nokia charges its customers for the repair of that equipment. The handling of repairs - whether they were under warranty or not - was a significant part of the applicant's job. In late October, following discussions between the applicant and Mr Anthony Frewen, (who, at the time, and at all times relevant to this case, was the respondent's Customer Service Accountant for Australia), they agreed to suggest to management that the possibility of using "SCALA" for all of the repairs and handling documentation and record keeping be investigated. This was done, and a short time later, Mr Paul Kvist, the manager of the respondent's Australian operations, directed those investigations be carried out. There followed a series of meetings between the "SCALA" representatives and representatives of the respondent, including the applicant. In early December a meeting was held involving the Australian management of the company, and also the applicant, and a decision was made at, or shortly after, that meeting by Mr Kvist to use the "SCALA" system for all of the respondent's requirements in relation to repairs and handling documentation and record keeping - including the tracking of repairs via the use of warranty numbers, and the production of quotes and invoices to customers. It is the applicant's alleged failure, either through "inflexibility", or deliberately, to implement this decision which was the reason for the termination of his employment THE ISSUES The issues in the case are as follows: 1. Was there a valid reason for the termination of the applicant's employment? 2. If there was a valid reason for the termination of the applicant's employment, is that termination to be deemed to be not for a "valid reason" because it was harsh or unjust or unreasonable within the meaning of section 170DE(2) of the Act? 3. Was the termination of the applicant's employment unlawful by reason of a breach of Section 170DC of the Act? 4. If the termination of the applicant's employment was unlawful, is it impracticable to order his reinstatement? 5. If reinstatement is impracticable, what amount of compensation should be ordered? Was there a valid reason for the termination of the applicant's employment? The stated reasons for the termination of the applicant's employment were that he was inflexible in implementing the "SCALA" system and, in addition to that, he did not implement that system in deliberate defiance of a specific directive of the management of the respondent that he do so. The "inflexibility" was an inflexibility regarding the implementation of the "SCALA" system for hardware repairs. The applicant's case was that he was never "inflexible" in that way, and never refused to implement the system. Indeed, it was his case that he was happy to do so because it was partly his idea that it be done. The respondent argues that on 14 February 1995, in a memorandum from Mr Arno Schaaf (then, the applicant's direct manager) to the applicant (exhibit 7) the applicant was given an explicit directive to implement the "SCALA" system. It is this directive that the respondent argues the applicant refused to implement, thus leading to the termination of his employment. That memorandum became exhibit, and reads as follows: "After our discussion last Friday about the use of the "SCALA" system for repair management, I have investigated what systems are available to you at present and how they may be improved. I have found that from October last year, SCALA has been set up to handle repair quotations and invoicing, very much along the lines of what we discussed. You have received training on this system, but to date you have not used it. This is not acceptable. We invest in systems to improve our efficiency and reduce your workload, and these objectives cannot be achieved if you simply carry on working as before. This attitude also results in higher workloads for other people, such as in the accounts department. Please present me with a plan as to when you will phase out the current tools you are using for transmission repair and swap repair management, by Friday 17 February. My expectation is that you will be doing this before the end of this month. If there are improvements to be made to the SCALA system, I will accept and support suggestions made by its users." There was a stark conflict of evidence between the applicant, on the one hand, and the witnesses for the respondent on the other hand, as to whether or not the "SCALA" system was capable of being used for all of the functions which management wanted. In particular, it was the applicant's case that at the time of the termination of his employment (2 June 1995) the "SCALA" system simply could not be used to calculate final prices for quotations to customers because of problems associated with the calculation of a number of variables, including sales tax, import duty and handling fee. Mr Anthony Frewen, Mr Paul Kvist, and Mr Arno Schaaf all gave evidence that the "SCALA" system could be used for all of the desired functions. On analysis, however, Mr Kvist and Mr Schaaf were repeating information given to them by Mr Frewen. In cross-examination (as he had in his evidence-in-chief) Mr Frewen asserted that the SCALA system was, at all relevant times, capable of producing a final quote to customers, incorporating sales tax and import duty, without the need for the operator to do any calculations outside the system. This was because, he said, there were a number of price lists allowing for all the necessary variables to be added on to the base price. However, he was then confronted with the written instruction provided by SCALA, and admitted that, if those instructions were followed, only one price list could be used - and that the instructions then stated: "If sales tax is applicable, enter sales tax." There was no mention, in the instructions, of using another price list. Mr Frewen then agreed that there was no reference at all in the instructions to the incorporation, in the final price, of import duty or a handling fee (the latter of which was always charged), and that, therefore, if those instructions were followed, Nokia would "lose out". At that point in his testimony, it had become apparent that his understanding of the SCALA system was flawed - and that his earlier assertion was wrong. Also at that point, the nature of his criticism of the applicant's performance changed. Up until then, he had been asserting (as above) that the SCALA system was capable of being used as Nokia wanted but that the applicant would no do it. Forced to admit in effect, that the applicant could not do it, he changed tack, and the criticism became one of the applicant's failure to ensure that the SCALA providers changed the instructions and the system so that it functioned as Nokia management wished. I have carefully read the transcript of the evidence of each of the witnesses, searching for a means by which I could decide to prefer one side's account to the other, such as significant inconsistencies, evasive or glib answers, untruths, or the like. Apart from the above matter concerning Mr Frewen, no such factors were apparent. Furthermore, none of the witnesses' demeanour in the witness box led me to conclude that they were persons upon whose evidence I could not rely. None of the witnesses impressed me as persons whose evidence could not be relied upon because of their poor memory or inadequate knowledge of the subject matter. To put it bluntly, apart from the one matter referred to above, all of the witnesses in the case gave the appearance of being truthful and reliable. I move therefore, to an examination of the other material in the case, including contemporaneous documents created in the normal course of the respondent's business, by employees of the respondent, including the applicant. In a series of messages from the applicant to other persons working for the respondent, the applicant set out the problems that he was having in trying to fully implement the "SCALA" system, in compliance with the directives given to him on 14 February by Mr Schaaf. Exhibit 21 is an "e-mail" (a communication sent from one computer to another), sent from the applicant to Mr William Trinkler, an employee of the respondent. It was sent on Friday, 10 March 1995, at 8.09 am, and reads as follows: "William, Can you please run a price calculation update. This is what Rod Harrison spoke to you about 7/3. I need this to produce Customs Docs for repairs. Thanks and please let me know when this has been done. Keith" Exhibit 22 is a follow up e-mail from the applicant to Mr Trinkler. Copies were sent to Mr Arno Schaaf and Mr Alan Cainey (Mr Cainey took over from Mr Schaaf as the applicant's direct manager over late March and early April). As was the case with exhibit 22, the subject listed at the top of the e-mail (each was in the form of a memo) was "SCALA: Price Calculation updates". Exhibit 22 was sent on Tuesday, 21 March 1995, at 1730 hours. It reads as follows: "William, Price calculation is still not operating. Not sure if have run the update as requested 10/3, if not can you please do it so that I can produce Customs invoices for Swap Repairs. If you did do it please let me know as it ain't working!" A copy of the e-mail sent by the applicant on 10 March 1995 was sent together with that e-mail. In my opinion, exhibits 21 and 22 prove that, at least up to 21 March 1995, the applicant was conscientiously attempting to implement the directive of management, but was unable to do so because of problems with the "SCALA" system - problems which he alone could not solve. I accept what he said in Exhibit 22 as the (then) fact of the matter, namely "it ain't working". My opinion in this respect is confirmed by exhibit 15, which is a handwritten note, in the applicant's hand, made in respect of a meeting in which he participated on 30 March 1995. Part of that note reads as follows: "I explained the delays we had with "SCALA" developing and writing up procedures, that we were still waiting for fix of pro forma problem, William to update prices." That leads me to conclude, that up to 30 March 1995, the applicant was attempting to use the "SCALA" system to produce prices, but was unable to do so because of problems in the system which he himself could not solve - including the fact that the applicant was still waiting for Mr Trinkler to "update prices". Exhibit 23 consists of a memo (sent via e-mail) from the applicant to both Mr Alan Cainey and Mr Anthony Frewen. The subject of the memo was "Pricing Structure - TRS repairs" and the date of the memo is Tuesday, 2 May 1995. Together with the printed material, there are some additions in the hand of the applicant. Exhibit 23 came into evidence during the cross-examination of the applicant. The starting point for that particular part of the cross-examination of the applicant was this question: Q: "You said that one of the problems as at 2 June was that a cost element could not be done?" A: "Yes" Q: "Do you have a contemporaneous record to that effect, to verify that statement?" A: "Well, I'm not too sure, but - I'm not too sure to be honest without looking at my notes." The applicant then produced exhibit 23. Exhibit 24 came into evidence a short time later (see below). The typed part of exhibit 23 is as follows, omitting the formal parts: "Just confirming meeting arrangements Thursday, 4 May 1100/1200 Anthony's Office, to discuss our present pricing structure for TRS Repairs to ensure compatibility to our business goals. The points I would like to discuss are: 1. Conversion Rate Co-ordination. 2. Margin on Finnish Repair Centre Prices. 3. Margin on NZ Repair Centre Prices. 3A. Margin on Freight and Handling. 4. Sales Tax Adjustments. Any other suggestions gratefully received. Cheers Keith" Underneath that the applicant had written in his own hand the following: