Walton v Mermaid Dry Cleaners Pty Ltd [1996] IRCA 655

DECISION NO:655/96 CATCHWORDS INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Review of Decision of Judicial Registrar - whether VALID REASON - whether fundamental breach of contract of employment - PROCEDURAL FAIRNESS - whether applicant granted opportunity to deal with allegations - meaning of expression "continuous service with the employer" - duty of supervisor to inform manger of discontent of other staff who may be likely to leave employment INDUSTRIAL RELATIONS ACT 1988 s 170EA, s 170DE(1), s 170DB QUEENSLAND INDUSTRIAL RELATIONS ACT 1988 Perrin v Des Taylor Pty Limited (1995) 58 IR 254 Nicholson v Heaven and Earth Gallery (1994) 57 IR 50 No. QI 1280R of 1995 Mark Strudwick Walton v Mermaid Dry Cleaners Pty Ltd MOORE J BRISBANE 24 OCTOBER 1996

IN THE INDUSTRIAL RELATIONS ) ) COURT OF AUSTRALIA ) No. QI 1280R of 1995 ) QUEENSLAND REGISTRY ) BETWEEN: MARK STRUDWICK WALTON Applicant AND: MERMAID DRY CLEANERS PTY LTD Respondent JUDGE: Moore J PLACE: Brisbane DATE: 24 October 1996 ORDER OF THE COURT THE COURT ORDERS THAT: 1. The third order of the Judicial Registrar is set aside. 2. The sum of $7,000.00 compensation be paid to Mr Walton in lieu. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS ) ) COURT OF AUSTRALIA ) No. QI 1280R of 1995 ) QUEENSLAND DISTRICT REGISTRY ) BETWEEN: MARK STRUDWICK WALTON Applicant AND: MERMAID DRY CLEANERS PTY LTD Respondent JUDGE: Moore J PLACE: Brisbane DATE: 24 October 1996 EXTEMPORE REASONS FOR JUDGMENT (revised from transcript) This is a review of the decision of a Judicial Registrar dealing with an application under section 170EA of the Industrial Relations Act 1988 ("the Act"). The applicant, Mr Mark Strudwick Walton, was employed by Mermaid Dry Cleaners Proprietary Limited ("Mermaid Dry Cleaners") from April 1994 to 29 July 1995, when his employment was terminated. His initial employment with Mermaid Dry Cleaners arose as a consequence of the purchase by that company of a dry cleaning business which had operated for a considerable period of time from the premises at which Mr Walton worked. Indeed, Mr Walton commenced employment with the predecessor in title to the business in January 1958. The principal of the company who bought the business was Ms Leonie Harris. She and Mr Walton gave evidence before the Judicial Registrar. By order of the Court, the evidence before the Judicial Registrar is to be treated as evidence before me in the review. The review is a hearing de novo and both Mr Walton and Mermaid Dry Cleaners led further evidence in the review, both in an affidavit form supplemented by oral evidence and in cross-examination. As a result, I had the benefit of seeing both Mr Walton and Ms Harris in the witness box. Setting out in summary form the evidence before the Judicial Registrar as it establishes a chronology of events, the following emerges. After the business was bought in April 1994, Ms Harris conducted the first of a number of staff meetings and did so in May 1994. In February 1995 there was an incident in which Mr Walton indicated he proposed to resign, though that did not ultimately lead to the termination of his employment with the company. There were further staff meetings in the early part of 1995, and between June 8 and 16 1995, Ms Harris attended a conference in the United States. During her absence, work was performed by Mr Walton that led, amongst other things, to the provision by Ms Harris of a voucher to Mr Walton in appreciation for, on one view, the work he had done, and on another view, the work his wife and son had done on behalf of the business during Ms Harris' absence. As I indicated earlier, Mr Walton's employment was terminated on 29 July 1995. To complete the chronology, it should be noted that on 18 November 1995 Mr Walton obtained employment with another dry cleaning business in the area, namely, Golden Service Dry Cleaners. Mr Walton contends that when terminating his employment, Mermaid Dry Cleaners contravened the provisions of the Act in two respects. The first, it is said, is that section 170DC was contravened, in that he was no given an adequate opportunity to defend himself. Second, it is contended that the termination of his employment was not for a valid reason, having regard to the terms of section 170DE(1). It is also contended that he was given inadequate notice as provided for in section 170DB. Before going any further, I will deal briefly with the issue arising in relation to section 170DB. That section directs that an employer not terminate an employee's employment unless notice of the type specified in the section is given or compensation paid instead of notice. There is an exception to the operation of that provision in circumstances where the employee has been guilty of serious misconduct, but there is no suggestion in these proceedings that the provision has any relevance. The critical issue involves the construction of the provision. It is contended, on the one hand, that Mr Walton is both over the age of 45 years and has completed more than five years' service. That being so, his entitlement exceeds that that he was actually paid. On the other hand, it is contended by Mermaid Dry Cleaners that the employment with the employer commenced in April 1994 and, consequently, there has been employment for a much shorter period. This issue is not an easy one to resolve. Provisions often exist in industrial legislation dealing with circumstances where there has been a transmission of the business of an employer which may bring to an end the contract of employment and bring about the creation of a new contract with the successor or purchaser to or of the business. Such a provision in the definition of employer in section 4 of the Act, as it applies to agreements under Division 3 of Part VIB of the Act. However, section 170DB speaks in terms of an employee's period of continuous service with the employer. That expression appears in the table found in section 170DB(2). The reference to continuous service with the employer constitutes a reference to the employer who is precluded from terminating an employee's employment other than by giving them notice of the prescribed period. The question that arises is whether, in a case such as the present, where there has been the transmission of the business, the provision should be construed so as to deem earlier service with a predecessor of the employer as service with the employer who ultimately effects the termination. In my view, the language of section 170DB is comparatively clear. It speaks of service with the employer and does so, as noted earlier in a context where the employer is identified as the employer effecting the termination. The language of the section suggests that it is service with that employer that is to be viewed as the relevant service for the purposes of s170DB(1) and (2). That meaning is reinforced by the definition of "employer" I earlier referred to. Contained within that definition is a reference to an extended notion of service which again, as I earlier noted, is often found in industrial legislation dealing with matters such as long service leave and holiday pay. This aspect of the definition, dealing as it does with an assignee, transmitee or successor of a business operates only on certain specified provisions of the Act. They do not include, relevantly, s 170DB. In my view, the limited operation of the wider definition reinforces what I earlier indicated is the apparent meaning of the language of the section itself. I have concluded that, for the purposes of section 170DB, it is service with the employer effecting the termination which is the relevant service. Accordingly, any entitlement that Mr Walton may have had to notice is to be determined by reference to his employment from April 1994 and July 1995 with Mermaid Dry Cleaners Pty Limited. Insofar as the applicant contends there has been a breach of section 170DC, I am satisfied that Mr Walton's employment was terminated in contravention of that section. The relevant evidence may be briefly summarised as follow. I accept that during the period of Mr Walton's employment, there were discussions between him and Ms Harris as to the manner in which he should perform his duties. From time to time matters were raised with him and on one or two specific occasions, about which evidence was given, matters were raised with him dealing with particular events. However, the decision to terminate his employment was given effect to on 29 July 1995 in circumstances whee he was told words to the effect that: "I am sorry Mark but I have to let you go." His employment was terminated in circumstances where Ms Harris did not raise with him, prior to terminating his employment, the specific matters of concern proximate to the time at which the termination took place. The purpose of section 170DC is apparent from its terms. It is to ensure that the employee has an opportunity to meet allegations made against him or her concerning his or her employment. It is a matter that has been addressed by a number of judges of this court and in the matter of Perrin v Des Taylor Pty Limited (1994) 58 IR 254 at 256-7, I said the following about the purpose of section 170DC: "Its purpose is at least twofold. It is to give the employee the opportunity to demonstrate that the allegations have no foundation in fact or they should not be viewed as reflecting on the employee's capacity. In the present case, the applicant may have been able to show that the complaints about slow delivery of parts had no factual foundation or that there was an explanation for their slow delivery that did not relate to any want of effort on his behalf. A second purpose of s 170DC is that an employee with whom an allegation has been raised may be able to persuade the employer that, while the allegation is of substance, there are factors that should persuade the employer not to terminate the employment. They may be extenuating personal circumstances or they may involve undertakings about future conduct." In the present case, that opportunity was not given to Mr Walton and I am satisfied that there was a contravention of section 170DC. I will return in due course to the consequences of that contravention. Insofar as there is an allegation of contravention of section 170DE, it is necessary that an employer terminate an employee's employment for a valid reason connected with the employee's capacity or conduct. Section 170EDA casts on an employer the onus of establishing that there was a valid reason. In the present case, the evidence that was given before the Judicial Registrar was, in my opinion, insufficient to discharge that onus. The allegations of unsatisfactory performance were, in the main, in general terms and were not specific. Some of the matters that were adverted to in the evidence before the Judicial Registrar have not been adverted to in these proceedings. However, in these proceedings evidence has been given about two matters, one of which, in my view, is of some significance. As would be expected, the dry cleaning business involved the operation of plant, the reliability and dependability of which would plainly be relevant to the continuing profitability - indeed, possibly the viability - of the business. Evidence was given by Ms Harris that she spoke to Mr Walton, who had for some considerable period been involved in at least supervising the maintenance of the plant, to prepare or maintain plant maintenance records. Mr Walton accepted, as I understood his evidence, that such an instruction was issued to him. His explanation for not doing so was initially that he simply had insufficient time. He also accepted that the purpose of maintaining these records was explained to him and that that included enabling planned maintenance to be undertaken and secondly to enable budgeting to occur for the replacement and repairs of equipment. His evidence that there was insufficient time, was not made out. Indeed, in my opinion, the real reason for him failing to do what he had been asked to do was manifest in an answer he gave in the course of giving his evidence, namely that he had looked after the equipment for 20-add years and he did not see the need that these matters need be put down on paper. At least that was the general import of that evidence. The significance of this is that the general complaint made by Mermaid Dry Cleaners was that Mr Walton's attitude was not in accord with the policy that the company, through Ms Harris, was seeking to introduce. I should immediately say that if an employee had been working in a business for 35 years one could well understand that he or she had views about the appropriate way of conducting the business and may need to be persuaded that some change was necessary. However, the purpose for which the request was made to maintain maintenance records was, in my view, unexceptionable. It was, in my opinion, unexceptionable for an employer to ask that maintenance records be maintained for the purposes identified to Mr Walton. That is, to enable scheduled repairs and the budgeting or replacement and repairs of equipment as part of the orderly running of a business. In my view, the attitude manifest by Mr Walton, while understandable for the reasons that I just explained, was nonetheless a matter that the employer was entitled to pay regard to in determining whether the conduct of the employee was such as to justify the terminating of the employee's employment. Another matter raised in evidence before me concerned the employment of another employee who ultimately left. Again, this employee was one of longstanding and perceived by Ms Harris to be a valued employee. It was asserted in an affidavit filed by Ms Harris that one of the functions of Mr Walton was to act in a supervisory role in relation to staff. It may immediately be accepted that, in a small establishment with few staff of long standing, that supervisory role would be an extremely flexible one. However, I am satisfied that as part of that function it would have been incumbent upon Mr Walton to inform Ms Harris of any matter concerning another staff member that might lead that other staff member to terminate their employment with the employer. While the evidence is not entirely clear, I apprehend from evidence given by Mr Walton that he was at least aware that another employee, Daphne Bruh, was dissatisfied with her employment with Mermaid Dry Cleaners to an extent that might result in her leaving that employment. Indeed, his evidence rather suggested that it was not only her but others, including him, that were of a like mind. That is reflected in the uncontentious evidence that in February of 1995 Mr Walton indicated he was going to resign, though that was not ultimately carried through to the point where the employment was terminated. When asked questions about why these matters were not raised with Ms Harris, Mr Walton's response was that he did not view it as his role to tell Ms Harris how to run her business. Whilst that matter in isolation would not, in my opinion, point to conduct justifying dismissal or termination in the manner contemplated in section 170DE, it manifests what in my view is more apparent from the evidence concerning the maintenance of records concerning the plant. That is, Mr Walton had, and I repeat, probably for understandable reasons, a view about the way the business should be conducted, that did not accord with the view of Ms Harris as to how the business should be conducted. The discord between those respective views resulted in a circumstance where the employer was entitled to adopt the view that the conduct of Mr Walton was such that his services could be terminated. In my opinion, the evidence does establish that the employer had a valid reason for terminating the employment of Mr Walton. I should, however, make plain - and this has been made plain in many cases decided by this Court - that it is not the Court's function to stand in the shoes of the employer and determine whether or not the decision made by the employer was a decision that would be made by the Court but rather it is for the Court to assess whether the employer had a valid reason connected with the employee's capacity or conduct, and in these proceedings I have concluded it did. However, as I earlier indicated, I am satisfied that section 170DC of the Act was breached. That entitles, Mr Walton to a remedy subject to certain qualifications appearing in section 170EE. I am satisfied, in the circumstances, that compensation should be awarded. It was suggested in submissions by Ms Harris, who appeared for the company, that I should take into account what might have happened had Mr Walton been alerted to the prospect that his employment would be terminated having regard to his conduct. That principle has often been applied and was adverted to, as far as I am aware, in the case of Nicholson v Heaven and Earth Gallery Pty Limited (1994) 57 IR 50. Thus it is relevant for the court to ask the question: had the employee been alerted to the prospect that the conduct would lead to termination, would it have made any difference? That is, is it likely that had procedural fairness been afforded to the employee, the employee's employment would nonetheless have been terminated either then or shortly thereafter? In this case that is not an easy question to resolve. As I have already said, Mr Walton had been employed in this business since January 1958. There is evidence in which he said, and one can readily understand him saying so, that in a sense the business or the job was a home away from home and an integral part of his life. It is also clear to me that Mr Walton was comparatively set in his ways. Those two considerations must be balanced in dealing with the question of whether Mr Walton would have altered his conduct had he been told that to persist with the conduct would lead to his termination. I think that it is probable that had these matters been drawn to his attention, he would have taken steps to comply - or endeavour to comply - with the requests made of him by Ms Harris, so as to avoid termination of his employment. However, there is, of course, the possibility that he may not have, and that is a matter that I must take into account in assessing compensation. Mr Walton was unemployed for a period of three and a half months after his termination and it is common ground that his salary at the time of termination was $488 gross. There was a suggestion made in submissions before the Judicial Registrar, though not repeated in proceedings before me, that Mr Walton failed to mitigate his damage. Whilst he took some time to do so, he plainly took steps after his termination to obtain employment elsewhere and, to that extent, sought to mitigate the loss occasioned by the termination of his employment. It is necessary, having regard to the provisions of section 170EE(3) to pay regard to the income lost as a result of the termination which, in round terms, is approximately $5,800. In my view, both that figure and the long employment in the position of Mr Walton, suggest to me that compensation in excess of $6,000 would be warranted. I have concluded that an appropriate amount of compensation to be awarded to Mr Walton is the sum of $7,000, and I so order. Insofar as another order need be made dealing with long service leave, I am not satisfied that the employment of Mr Walton by earlier employers conducting the business acquired by Mermaid Dry Cleaners Pty Limited should not be taken into account, having regard to the provisions of the Queensland Industrial Relations Act 1988. I understand the position to be that there is no disagreement about the amount that should be ordered and, indeed, it is reflected in the order of the Judicial Registrar. One of the orders made by her on 12 June 1996 has not been challenged in these proceedings. Accordingly, it appears to me the appropriate order, in addition to the earlier order I made concerning compensation, is to set aside the third order made by the Judicial Registrar and in lieu make the order I earlier adverted to. I will otherwise make no orders interfering with the orders of the Judicial Registrar. I certify that the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Moore. Associate: ...................... Alexandra George Dated: 20 January 1997 APPEARANCES Counsel for the Applicant: Mr M Campbell Solicitors for the Applicant: Deborah Jean-Therese Kelly For the Respondent: Ms Leonie Harris Date of Hearing: 24 October 1996 Date of Judgment: 24 October 1996