CARYDIAS v THE GREEK ORTHODOX COMMUNITY [1997] IRCA 31

Federal Court of Australia

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DECISION NO:31/97 CATCHWORDS INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Claim of unlawful termination - Employer in financial difficulty - Applicant dismissed to reduce expenses - Whether VALID REASON - Failure to consult - Whether termination justified in all the circumstances CLAIM FOR REPAYMENT of salary - Allegation that applicant overpaid himself - Whether applicant was entitled to the amount because of an increase to his salary package Workplace Relations Act 1996 (formerly Industrial Relations Act 1988), ss 170DE(1), 170EA, Schedule 10 (Convention Concerning the Termination of Employment at the Initiative of the Employer) Nettlefold v Kym Smoker Pty Ltd (unreported, IRCA, Lee J, 4 October 1996) Thomas v Ralph Lynch t/as Bellingen Grocery (unreported, IRCA, Wilcox CJ, 20 December 1996) CARYDIAS v THE GREEK ORTHODOX COMMUNITY VI 1786R of 1994 Before: NORTH J Place: MELBOURNE Date: 20 FEBRUARY 1997

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1786R of 1994 B E T W E E N : ANASTASIOS CARYDIAS Applicant AND THE GREEK ORTHODOX COMMUNITY Respondent MINUTE OF ORDERS BEFORE: North J PLACE: Melbourne DATE: 20 February 1997 THE COURT ORDERS THAT: 1. The application by the applicant for an extension of time to bring the application under s 170EA is granted. 2. The orders made by Judicial Registrar Staindl on 31 March 1995 are set aside. 3. The application under s 170EA is dismissed. 4. The moneys paid into Court by the respondent be paid out to the respondent. 5. There be judgment for the respondent in the sum of $13,275. 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 VICTORIA DISTRICT REGISTRY VI 1786R of 1994 B E T W E E N : ANASTASIOS CARYDIAS Applicant AND THE GREEK ORTHODOX COMMUNITY Respondent BEFORE: North J PLACE: Melbourne DATE: 20 February 1997 REASONS FOR JUDGMENT This is a review of the exercise of power of a Judicial Registrar in respect of the termination of employment of the applicant, Mr Carydias. Mr Carydias was employed by the Greek Orthodox Community of Victoria (the Community), the respondent, as the General Manager. On 27 May 1994, the Community terminated his employment. On 3 October 1994, he filed an application under s 170EA of the Industrial Relations Act 1988 (now called the Workplace Relations Act 1996) (the Act). The application was heard by a Judicial Registrar, who determined that the termination was unlawful, and ordered that the Community pay $8,500 compensation to Mr Carydias. The Community instituted a review of the exercise of power by the Judicial Registrar. This is one of the matters presently before the Court. The Community also claims the repayment of a sum of $13,275 which it alleges Mr Carydias overpaid himself. EXTENSION OF TIME Section 170EA(3), as it applied to the termination of employment of Mr Carydias, provided that the application be filed within 14 days of the receipt of written notice of termination. Section 170EA(3)(b) permitted the Court to extend the time for bringing an application. Mr Carydias applied for an extension of time. In this case, Mr Carydias received written notice of termination on 27 May 1994. He filed the application in the Court on 3 October 1994 together with an application for an extension of time. Between 27 May 1994 and 3 October 1994, the following events occurred. On 6 June 1994, Mr Carydias lodged an unfair dismissal claim with the Employee Relations Commission of Victoria. On 29 June 1994, a prima facie hearing took place in that Commission. On 28 July 1994, a conciliation conference occurred. On 5 and 6 September 1994, Commissioner Stewien heard the application. On 30 September 1994, he decided that the Commission did not have jurisdiction because Mr Carydias' functions were managerial and, hence, did not fall within the scope of the relevant State award. On 3 October 1994, the present application was filed. The application for extension of time was heard together with the hearing of the merits of the application as a whole. While the Community did not consent to the extension of time, it did not point to any prejudice to it as a reason for denying the extension of time. It was clear to the Community from the proceedings in the Commission that Mr Carydias was concerned to test the validity of the termination. The extension of time should therefore be granted. THE ISSUES Section 170DE(1) provides: "An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service." The first issue is whether the Community has established that it had a valid reason for the termination of the employment of Mr Carydias. It contended that the reason was that a major function for which he was employed, namely, to liaise with the National Australia Bank, was no longer required and, due to the financial difficulties of the Community, it needed to reduce expenses and replace Mr Carydias with a less costly employee. Mr Carydias contended that liaising with the National Australia Bank was not a main function of his employment and that the major functions of his employment still remained to be performed after his termination. He submitted that the reasons given by the Community for his termination were not genuine. The second issue is whether Mr Carydias was entitled to receive the $13,275 which the Community contended he had been overpaid. The third issue arises if the reasons given by the Community do not constitute a valid reason for termination, and if Mr Carydias received the $13,275 in circumstances amounting to serious misconduct. The issue then is whether the misconduct provides a valid reason for the termination, even though it was not the actual reason for the termination and even though the Community was not aware of the misconduct at the time of the termination. The final issue is whether, apart from the alleged economic justification, the termination was justified in all the circumstances. In the proceedings before the Judicial Registrar, the Community succeeded in establishing a valid reason under s 170DE(1), but Mr Carydias succeeded under s 170DE(2) on the ground that the circumstances of the termination were harsh. Before the conclusion of this case, the High Court determined that s 170DE(2) was unconstitutional: State of Victoria v Commonwealth of Australia (1996) 138 ALR 129. The question now arises as to whether s 170DE(1) allows the Court to consider whether the termination was justified in all the circumstances and, if so, whether, on the facts of this case, the termination was justified in all the circumstances. BACKGROUND AND THE REASON FOR TERMINATION OF MR CARYDIAS' EMPLOYMENT The Community is an incorporated body which was established in 1897. Its objects are adequately described, for present purposes, by reference to the first object set out in its Memorandum of Association, as follows: "(a)To bring together the adherents of the Greek Orthodox Denomination in the City of Melbourne and elsewhere for the better propagation, observance, and performance of the religious tenets, teachings, rites, and ceremonies of that denomination and to provide facilities in the City of Melbourne and elsewhere in the State of Victoria for public worship and religious instruction and ceremonies pursuant to the rites of the Greek Orthodox denomination and to establish and facilitate and encourage the establishment of such religious educational and charitable institutions as may conduce to the attainment of the objects of the Community." The general management of the affairs of the Community is vested in a committee of 19 people. Under the Articles of Association, elections to the committee are held every two years in November. After the elections held in November 1990, Mr George Fountas became the President of the Community, Mr Elias Rallis became Vice President, and Mr Con Pappas became Treasurer. The committee was divided between those who supported Mr Fountas and those who did not. Mr Antonis Pashos was the Secretary and one of the vocal opponents of Mr Fountas. Although Mr Fountas commanded majority support, there was a substantial minority opposed to him. The committee members served on an honorary basis. Many had their own business or professional lives to run. For instance, Mr Fountas operates a travel agency in Lonsdale Street, Mr Rallis is a barrister, Mr Pappas runs his own business, and Mr Pashos is a salesman. At the time of Mr Carydias' employment, the Community had about 5,000 members. Its headquarters were in premises owned by the Community at 168 Lonsdale Street. Part of these premises were leased to tenants. The Community also owned five churches and employed the five priests for these churches. It owned the property on which the Footscray Childcare Centre was conducted, and it provided some administrative support to the Centre. It operated a number of afternoon schools, mostly in premises leased from others, which taught Greek language, history and culture. It also owned a number of halls used for community purposes and about six houses which were leased as investments. It owned a vacant 13-acre site in Bulleen which had previously been a drive-in theatre. It also owned the land on which the Alphington Grammar School was built. Some members of the committee sat on the school council, although Alphington Grammar School was a separate legal entity. In 1991, the Community was in serious financial difficulty. It had borrowed heavily from the National Australia Bank and was not able to service the loan adequately. As a result, the amount owing had increased to about $8 million by early 1994. Mr Carydias is now aged 59. Between 1969 and 1979, he worked for the State Bank as a Migrant Promotions Officer. Between 1979 and 1984, he operated his own business as a finance broker in Darwin. Then he became the Operations Manager of the Hellenic Club in Canberra. In January 1988, he commenced his first period of employment with the Community. Mr Fountas was then the Secretary of the Community and came to know Mr Carydias at that time. As part of his work for the Community at this time, Mr Carydias helped obtain a loan for the purchase of Alphington Grammar School. The committee which first employed Mr Carydias was defeated in the November 1988 elections. The new committee did not want to retain Mr Carydias, but honoured his contract of employment, which lasted until about mid 1990. Mr Fountas and his supporters were elected again to the committee in the November 1990 elections. Mr Fountas asked Mr Carydias to help on the finance subcommittee, as Mr Carydias said, "because they had a lot of problems, a lot of pressure from the National Australia Bank", and Mr Fountas knew that Mr Carydias had been involved in procuring the loan for Alphington Grammar School. In October 1991, the office of the Community was staffed by a bookkeeper, Mr Stefanidis, and an office assistant. Mr Carydias was asked by Mr Fountas to come and look after the office one day when the bookkeeper was absent. Mr Carydias continued to help out the Community when it became clear that the bookkeeper was not likely to return in the medium term, due to illness. At this time, the National Australia Bank was putting pressure on the Community to make arrangements to deal with the Community's increasing indebtedness. The National Australia Bank asked the Community to appoint a person to liaise with it, as part of the process necessary to deal with the outstanding loan. While Mr Carydias was helping out in the absence of Mr Stefanidis, Mr Fountas asked Mr Carydias if he would be interested in the position of General Manager. In his evidence, Mr Carydias explained the circumstances of the enquiry as follows: "Mr Fountas told me that given the situation that he didn't know if Mr Stefanidis was coming back now, things have changed. It wasn't just a matter of a day or a week. He didn't know, Workcare, and the other girl, and somebody was needed badly in the office and also due to the fact that the bank was pressuring for, you know, for somebody to come and negotiate with them directly since it could not find people to work with the Community, from the committee of management, if I would consider coming back to the Community. .... Anyway, I considered it. I said to him: 'All right'. And then he said to me: 'Well, all right, please apply, because I have to make it formal with the committee of management as quick as I can. So - and all this worries off my mind from the side of administration and also the bank also wants to know if somebody's being put on or what. That's the instructions I got from them, so they can liaise with him, someone experienced in that sort of thing'." Mr Carydias said the reason Mr Fountas asked him to work for the Community was that Mr Fountas knew of Mr Carydias' ten years' experience in the State Bank and three and a half years as a finance broker. Mr Pashos, who was called as a witness for Mr Carydias, and who was generally opposed to Mr Fountas in matters concerning the administration of the Community, said that the reason Mr Carydias was employed was because of the absence of the other office staff and: "after we received many pressures from the bank that we must employ someone so that the bank will have to deal with one person and a person knows a bit of accounting and how the banking system works ...." On 17 December 1991, the committee resolved to appoint Mr Carydias as General Manager for three months. After the three months, he was retained until he was dismissed on 27 May 1994. His initial salary was $45,000 per year. There is a dispute as to the amount of his later salary and I shall return to that matter in due course. For the present, it is sufficient to note that the salary paid was well in excess of a bookkeeper's salary. Mr Katos, a chartered accountant employed by Price Waterhouse with 20 years' experience, including experience in the remuneration of managers, gave evidence that, in 1994, a $47,000 salary would be paid to a manager of a manufacturing company with an annual turnover of $15 million. The actual turnover of the Community (excluding rent from Alphington Grammar School, which was not actually paid) was about half a million dollars. This high salary level confirms that an important reason for the appointment of Mr Carydias was to provide a liaison with the National Australia Bank in the financial crisis which faced the Community. The evidence is that a considerable part of Mr Carydias' time and effort was spent on matters relating to the financial difficulties of the Community. He prepared cash flows for the National Australia Bank. He attended meetings with the National Australia Bank and meetings of the committee about the financial crisis. Mr Pashos said that he saw Mr Carydias two or three times a week, sometimes every day, because of "the problem of dealing with the bank". Mr Catsourakis was a member of the committee and was called as a witness by Mr Carydias. Mr Catsourakis said that, judging from his reports to the committee, Mr Carydias spent "quite a bit" of his time liaising with the National Australia Bank. Mr Carydias also drove officers of the National Australia Bank around suburban Melbourne to inspect the properties of the Community. Some time before April 1993, the National Australia Bank had the Community appoint Coopers & Lybrand to report on the financial position of the Community. Mr Carydias spent considerable time with the accountant from Coopers & Lybrand, explaining the financial affairs of the Community and providing necessary documents. The report of Coopers & Lybrand recommended that the Community sell the Footscray Childcare Centre to release some funds. This was done and Mr Carydias was involved in the process. After the sale of the Footscray Childcare Centre, Mr Carydias was "continuously" attempting to find ways to refinance the loan from the National Australia Bank. Under further pressure from the National Australia Bank, the Community appointed Mr John Perrins of Price Waterhouse as Administrator of the Community from 29 September 1993. Mr Carydias met with Mr Chris Katos, a member of Mr Perrins' staff, to explain the financial affairs of the Community for the purpose of the administration. At about this time, he was involved in negotiations with a French bank for alternative finance for the Community. The negotiations involved considerable effort because they included a proposal to develop the Bulleen site into an income-producing club. Mr Carydias was involved in the preparation of plans for the building on the site. During his employment, Mr Carydias also ran the office of the Community with the assistance of an accounts clerk. Mr Carydias was responsible for the payment of salaries of priests, teachers and staff, and the payment of the regular bills and other expenses of the Community. He had to ensure that the properties were maintained and the rents collected. He was also responsible for enquiries from members of the Community. On the evidence as a whole, I find that one of the main reasons for his employment by the Community was to liaise with the National Australia Bank in respect of the financial crisis facing the community. I further find that, once Mr Carydias was employed by the Community, his work in liaising with the National Australia Bank and his work in attempting to address the financial difficulties of the Community consumed a large part of his working time and were a very significant part of his employment. At some stages in his evidence, Mr Carydias attempted to downplay the importance and extent of these functions. To the extent that he did so, his evidence is inconsistent with the evidence of all the other witnesses who gave evidence on the subject, and it is inconsistent with other parts of his own evidence. I do not accept that part of Mr Carydias' evidence. The Administrator ceased administration of the day to day operations of the Community on 17 January 1994 but retained control of the properties of the Community until early June 1994. By 26 May 1994, the Community had arranged for the National Australia Bank to accept $4.75 million in full satisfaction of its debt, which then amounted to about $8 million and the National Bank of Greece had agreed to lend the Community $4.75 million to pay out the National Australia Bank. The government of Greece provided a guarantee to the National Bank of Greece for the loan. It was evident to the committee, in May 1994, that although the pressure from the National Australia Bank was gone, there was still a need to reduce the costs of the Community. As succinctly stated in the auditor's qualification to the 1993/94 accounts of the Community dated 21 October 1994: "Consideration of the current debt to the National Bank of Greece and the current level of income of the Community raise doubt that the Community will be able to continue as a going concern. In this regard I have not been able to determine whether the use of the going concern basis of accounting is appropriate. If it is not the Community may need to realise significant freehold assets at current market values." History has vindicated the auditor's doubt. The loan repayments are presently being made by the guarantor. Mr Katos gave evidence that he advised Mr Fountas that, following the refinancing, the Community should reduce costs by dispensing with the services of the General Manager. On the subject, he gave this evidence: "HIS HONOUR: Mr Katos, did you advise the community in the course of the administration about the - about cost-cutting possibilities for the purpose of the time after the refinancing of their debt - of its debt? --- Yes, I did. I didn't do it on a formal basis, I discussed it with Mr Fountas that my concerns were that given a debt level of $4.7 million, and having an appreciation of the level of income that come in from the churches and from the Alphington Grammar School etcetera, that there had to be some considerable areas of cost-cutting exercises to be undertaken, and also that I felt that there was - their administration set-up was overloaded for what it was really required to do. Yes? --- So you had a lot of - a lot of functions being created, a lot of expenses being incurred at - when you really stop and think about it, apart from collecting the proceeds in from the churches and the rents and just paying general expenses and your - your priest payroll, it really doesn't involve - probably a couple of days, or maybe a three days' maximum book-keeping exercise. But they had a fairly - fairly heavy administrative set-up which if they had continued along that - in that fashion, again they would have defaulted. And so did you make an informal recommendation about cutting costs? --- I didn't - I didn't actually sit down and do a detailed calculation and say, well, this is what my opinion is and this is - I think you should go about it, it was just in - just in pure general discussions because I just felt obligated that - say to them that after my involvement in seeing the cash in-flow and cash out-flows they had to address the position very quickly because otherwise they would just ... (indistinct) ... themselves in the same situation. It was up to then to Mr Fountas to decide whether he wanted to take it any further. What administrative costs were you referring to in these discussions? --- The general - the general overhead expenses, the general manager's salary that was being paid at that level, the assistant to a general manager, a secretary within the organisation. You know, it was overloaded with people. Yes. Have you - you said that your opinion was that $47,000 was an overly generous salary for the work that you saw that Mr Carydias had to do? --- Yes." On 26 May 1994, the committee met to approve the conditions of the loan from the National Bank of Greece. Eight members of the committee were present. Six members were necessary to constitute a quorum. Towards the end of the meeting, Mr Rallis moved a motion, the English translation of which reads: "The position of General Manager of the Greek Orthodox Community of Victoria is made redundant for clearly economic reasons. The decision to apply immediately and the decision to be made known to the current General Manager." Mr Rallis gave the following evidence in relation to the discussions leading to the passing of the resolution: "And would you tell the court please what occurred at that meeting regarding Mr Carydias' employment" --- Yes, it was decided that the position of general manager to be made redundant because of the financial position that the Greek community was in at the time. It had - a loan had been sought and approved from Greece and there would be certain payments to be made with regards to that loan and it was felt at that meeting that certain cost cutting exercises had to be taken place in order to be able to meet those particular payments. .... As I said discussions took place A, after - well ultimately we did not have any other choice but to accept the conditions that the National Bank were placing with regards to the loan because that ensured A, that the majority of the Greek community's properties would remain and Greek community as an entity would remain. So, it was really then a discussion on having approved that on how then we could best meet those obligations and what needed to be done in other [sic] to meet that. And, really, at the time our employees or the priests and because of the nature of the organisation, we certainly could not cost cut on the priests. The teachers, there was a service that was really paying for itself. Teachers, where? --- The Saturday morning school teachers. Alphington Grammar was a stand alone organisation but nevertheless that it was not sort of paying its way fully, but nevertheless it was an investment and you had to continue with it and really the only place that you could do any effective cost cutting was the actual administration staff and the biggest cost to that was Mr Carydias or the position of manager and that is why the discussion ended up with that position being made redundant. What discussions, if any, was held regarding alternatives for Mr Carydias? --- I recall that part of the discussion was that given that in effect Mr Carydias' position had changed in so far as the position of Mr Carydias and Alphington Grammar really could not continue because the school had got to the stage where it required its own specific bursar to handle the day to day matters of Alphington. When Mr Carydias was first employed, one of his main duties was to liaise with the National Bank because they were putting pressure and also because of his background to see if we could find alternative financiers for the community. Now because all that had basically ended with the loan from the Greek National Bank, it was felt that that position especially at that salary given the financial circumstances could not be justified." Mr Catsourakis attended the meeting. He disagreed with the motion and abstained from voting. He did agree that the discussion concerning the termination of Mr Carydias' employment was about saving money. The meeting then passed the motion. Some evidence was led that the notice of the meeting was inadequate, but the applicant did not argue that the resolution was ineffective to terminate the employment of Mr Carydias. On 27 May 1994, Mr Carydias, who was then on holidays, was asked to come to the office of the Community. He saw Mr Fountas and Mr Pappas. Mr Fountas said that he had a difficult task as President to tell him that the committee had decided that, because the loan from the National Bank of Greece was approved, "we have to make .... savings, and being highly paid, you got chopped off". On this evidence, I am satisfied that the Community had ongoing financial difficulties after the refinancing of the National Australia Bank loan. It determined to reduce expenses. Mr Carydias' salary was the largest single administrative expense. A major function for which he had been employed was no longer necessary. For these reasons, the Community determined to terminate his employment. It was contended by Mr Carydias that the alleged economic reasons for the termination of his employment were a pretence. It was argued that the work Mr Carydias did continued to be done after his dismissal. The Community employed a clerk on a salary of about $25,000 to administer the office of the Community. The supervision of such an employee had been part of Mr Carydias' role. However, his main functions of bank liaison and financial manager were not performed by the replacement employee. Mr Pashos was not at the meeting of the committee on 26 May 1994. However, his view was that the Community needed a professional manager and that there was a role for Mr Carydias. Mr Pashos' view on this subject may reflect his political opposition to Mr Fountas rather than an objective consideration of the merits of the decision of the committee. In my view, given the financial situation of the Community, its decision to dismiss Mr Carydias was "sound, defensible and well founded": Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371. The committee meeting on 26 May 1994 was called on short notice. This was not an unusual occurrence at the time. The Community was in a financial crisis and it was frequently necessary for the committee to consider matters urgently. Notice of the 26 May 1994 meeting was given by phone but members were not told that the termination of employment of Mr Carydias would be considered. The applicant contended that the absence of notice of that particular item of business demonstrated that there was no genuine basis for the decision. This argument does not follow. The failure to give notice of a particular item of business does not mean that the decision was made without merit. It is understandable that all desirable procedural steps may not have been taken in the atmosphere of urgency which then existed. The applicant did not argue that the failure to give notice invalidated the decision, but rather that it reflected on its genuineness. In his evidence, Mr Carydias suggested a number of other reasons which he contended were the real reasons for his dismissal. He suggested that he failed to do something which Mr Fountas wanted, that Mr Rallis did not like him, that the only reason the Community was in an admittedly bad financial position was that it did not take the loan from the French bank organised by Mr Carydias and did not develop the club on the Bulleen site. Counsel for Mr Carydias rightly did not pursue these suggested reasons in final submissions. On the evidence, there was no basis for them. Rather, they reflected Mr Carydias' resentment of the termination of his employment. At the time of dismissal, Mr Fountas offered Mr Carydias a cheque for the amounts due upon termination. Mr Carydias disputed the amount of the cheque. Subsequently, the auditor for the Community investigated Mr Carydias' entitlement. He found that the Community had overpaid Mr Carydias' salary package by $13,275. Mr Carydias disputed the fact that he had been overpaid. A meeting of the committee was called to allow him to explain his position. This issue generated further controversy in the committee, but the controversy did not relate to the question of the financial desirability of his dismissal. Indeed, it is significant that Mr Carydias did not question the economic justification for the termination at the time of his dismissal, although he did question the amount of his termination entitlement. Thus, I do not accept Mr Carydias' contention that the subsequent consideration of his disputed overpayment by the committee reflected dissension from the view that there was a valid economic reason for his termination.

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IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1786R of 1994 B E T W E E N : ANASTASIOS CARYDIAS Applicant AND THE GREEK ORTHODOX COMMUNITY Respondent MINUTE OF ORDERS BEFORE: North J PLACE: Melbourne DATE: 20 February 1997 THE COURT ORDERS THAT: 1. The application by the applicant for an extension of time to bring the application under s 170EA is granted. 2. The orders made by Judicial Registrar Staindl on 31 March 1995 are set aside. 3. The application under s 170EA is dismissed. 4. The moneys paid into Court by the respondent be paid out to the respondent. 5. There be judgment for the respondent in the sum of $13,275. 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 VICTORIA DISTRICT REGISTRY VI 1786R of 1994 B E T W E E N : ANASTASIOS CARYDIAS Applicant AND THE GREEK ORTHODOX COMMUNITY Respondent BEFORE: North J PLACE: Melbourne DATE: 20 February 1997 REASONS FOR JUDGMENT This is a review of the exercise of power of a Judicial Registrar in respect of the termination of employment of the applicant, Mr Carydias. Mr Carydias was employed by the Greek Orthodox Community of Victoria (the Community), the respondent, as the General Manager. On 27 May 1994, the Community terminated his employment. On 3 October 1994, he filed an application under s 170EA of the Industrial Relations Act 1988 (now called the Workplace Relations Act 1996) (the Act). The application was heard by a Judicial Registrar, who determined that the termination was unlawful, and ordered that the Community pay $8,500 compensation to Mr Carydias. The Community instituted a review of the exercise of power by the Judicial Registrar. This is one of the matters presently before the Court. The Community also claims the repayment of a sum of $13,275 which it alleges Mr Carydias overpaid himself. EXTENSION OF TIME Section 170EA(3), as it applied to the termination of employment of Mr Carydias, provided that the application be filed within 14 days of the receipt of written notice of termination. Section 170EA(3)(b) permitted the Court to extend the time for bringing an application. Mr Carydias applied for an extension of time. In this case, Mr Carydias received written notice of termination on 27 May 1994. He filed the application in the Court on 3 October 1994 together with an application for an extension of time. Between 27 May 1994 and 3 October 1994, the following events occurred. On 6 June 1994, Mr Carydias lodged an unfair dismissal claim with the Employee Relations Commission of Victoria. On 29 June 1994, a prima facie hearing took place in that Commission. On 28 July 1994, a conciliation conference occurred. On 5 and 6 September 1994, Commissioner Stewien heard the application. On 30 September 1994, he decided that the Commission did not have jurisdiction because Mr Carydias' functions were managerial and, hence, did not fall within the scope of the relevant State award. On 3 October 1994, the present application was filed. The application for extension of time was heard together with the hearing of the merits of the application as a whole. While the Community did not consent to the extension of time, it did not point to any prejudice to it as a reason for denying the extension of time. It was clear to the Community from the proceedings in the Commission that Mr Carydias was concerned to test the validity of the termination. The extension of time should therefore be granted. THE ISSUES Section 170DE(1) provides: "An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service." The first issue is whether the Community has established that it had a valid reason for the termination of the employment of Mr Carydias. It contended that the reason was that a major function for which he was employed, namely, to liaise with the National Australia Bank, was no longer required and, due to the financial difficulties of the Community, it needed to reduce expenses and replace Mr Carydias with a less costly employee. Mr Carydias contended that liaising with the National Australia Bank was not a main function of his employment and that the major functions of his employment still remained to be performed after his termination. He submitted that the reasons given by the Community for his termination were not genuine. The second issue is whether Mr Carydias was entitled to receive the $13,275 which the Community contended he had been overpaid. The third issue arises if the reasons given by the Community do not constitute a valid reason for termination, and if Mr Carydias received the $13,275 in circumstances amounting to serious misconduct. The issue then is whether the misconduct provides a valid reason for the termination, even though it was not the actual reason for the termination and even though the Community was not aware of the misconduct at the time of the termination. The final issue is whether, apart from the alleged economic justification, the termination was justified in all the circumstances. In the proceedings before the Judicial Registrar, the Community succeeded in establishing a valid reason under s 170DE(1), but Mr Carydias succeeded under s 170DE(2) on the ground that the circumstances of the termination were harsh. Before the conclusion of this case, the High Court determined that s 170DE(2) was unconstitutional: State of Victoria v Commonwealth of Australia (1996) 138 ALR 129. The question now arises as to whether s 170DE(1) allows the Court to consider whether the termination was justified in all the circumstances and, if so, whether, on the facts of this case, the termination was justified in all the circumstances. BACKGROUND AND THE REASON FOR TERMINATION OF MR CARYDIAS' EMPLOYMENT The Community is an incorporated body which was established in 1897. Its objects are adequately described, for present purposes, by reference to the first object set out in its Memorandum of Association, as follows: "(a)To bring together the adherents of the Greek Orthodox Denomination in the City of Melbourne and elsewhere for the better propagation, observance, and performance of the religious tenets, teachings, rites, and ceremonies of that denomination and to provide facilities in the City of Melbourne and elsewhere in the State of Victoria for public worship and religious instruction and ceremonies pursuant to the rites of the Greek Orthodox denomination and to establish and facilitate and encourage the establishment of such religious educational and charitable institutions as may conduce to the attainment of the objects of the Community." The general management of the affairs of the Community is vested in a committee of 19 people. Under the Articles of Association, elections to the committee are held every two years in November. After the elections held in November 1990, Mr George Fountas became the President of the Community, Mr Elias Rallis became Vice President, and Mr Con Pappas became Treasurer. The committee was divided between those who supported Mr Fountas and those who did not. Mr Antonis Pashos was the Secretary and one of the vocal opponents of Mr Fountas. Although Mr Fountas commanded majority support, there was a substantial minority opposed to him. The committee members served on an honorary basis. Many had their own business or professional lives to run. For instance, Mr Fountas operates a travel agency in Lonsdale Street, Mr Rallis is a barrister, Mr Pappas runs his own business, and Mr Pashos is a salesman. At the time of Mr Carydias' employment, the Community had about 5,000 members. Its headquarters were in premises owned by the Community at 168 Lonsdale Street. Part of these premises were leased to tenants. The Community also owned five churches and employed the five priests for these churches. It owned the property on which the Footscray Childcare Centre was conducted, and it provided some administrative support to the Centre. It operated a number of afternoon schools, mostly in premises leased from others, which taught Greek language, history and culture. It also owned a number of halls used for community purposes and about six houses which were leased as investments. It owned a vacant 13-acre site in Bulleen which had previously been a drive-in theatre. It also owned the land on which the Alphington Grammar School was built. Some members of the committee sat on the school council, although Alphington Grammar School was a separate legal entity. In 1991, the Community was in serious financial difficulty. It had borrowed heavily from the National Australia Bank and was not able to service the loan adequately. As a result, the amount owing had increased to about $8 million by early 1994. Mr Carydias is now aged 59. Between 1969 and 1979, he worked for the State Bank as a Migrant Promotions Officer. Between 1979 and 1984, he operated his own business as a finance broker in Darwin. Then he became the Operations Manager of the Hellenic Club in Canberra. In January 1988, he commenced his first period of employment with the Community. Mr Fountas was then the Secretary of the Community and came to know Mr Carydias at that time. As part of his work for the Community at this time, Mr Carydias helped obtain a loan for the purchase of Alphington Grammar School. The committee which first employed Mr Carydias was defeated in the November 1988 elections. The new committee did not want to retain Mr Carydias, but honoured his contract of employment, which lasted until about mid 1990. Mr Fountas and his supporters were elected again to the committee in the November 1990 elections. Mr Fountas asked Mr Carydias to help on the finance subcommittee, as Mr Carydias said, "because they had a lot of problems, a lot of pressure from the National Australia Bank", and Mr Fountas knew that Mr Carydias had been involved in procuring the loan for Alphington Grammar School. In October 1991, the office of the Community was staffed by a bookkeeper, Mr Stefanidis, and an office assistant. Mr Carydias was asked by Mr Fountas to come and look after the office one day when the bookkeeper was absent. Mr Carydias continued to help out the Community when it became clear that the bookkeeper was not likely to return in the medium term, due to illness. At this time, the National Australia Bank was putting pressure on the Community to make arrangements to deal with the Community's increasing indebtedness. The National Australia Bank asked the Community to appoint a person to liaise with it, as part of the process necessary to deal with the outstanding loan. While Mr Carydias was helping out in the absence of Mr Stefanidis, Mr Fountas asked Mr Carydias if he would be interested in the position of General Manager. In his evidence, Mr Carydias explained the circumstances of the enquiry as follows: "Mr Fountas told me that given the situation that he didn't know if Mr Stefanidis was coming back now, things have changed. It wasn't just a matter of a day or a week. He didn't know, Workcare, and the other girl, and somebody was needed badly in the office and also due to the fact that the bank was pressuring for, you know, for somebody to come and negotiate with them directly since it could not find people to work with the Community, from the committee of management, if I would consider coming back to the Community. .... Anyway, I considered it. I said to him: 'All right'. And then he said to me: 'Well, all right, please apply, because I have to make it formal with the committee of management as quick as I can. So - and all this worries off my mind from the side of administration and also the bank also wants to know if somebody's being put on or what. That's the instructions I got from them, so they can liaise with him, someone experienced in that sort of thing'." Mr Carydias said the reason Mr Fountas asked him to work for the Community was that Mr Fountas knew of Mr Carydias' ten years' experience in the State Bank and three and a half years as a finance broker. Mr Pashos, who was called as a witness for Mr Carydias, and who was generally opposed to Mr Fountas in matters concerning the administration of the Community, said that the reason Mr Carydias was employed was because of the absence of the other office staff and: "after we received many pressures from the bank that we must employ someone so that the bank will have to deal with one person and a person knows a bit of accounting and how the banking system works ...." On 17 December 1991, the committee resolved to appoint Mr Carydias as General Manager for three months. After the three months, he was retained until he was dismissed on 27 May 1994. His initial salary was $45,000 per year. There is a dispute as to the amount of his later salary and I shall return to that matter in due course. For the present, it is sufficient to note that the salary paid was well in excess of a bookkeeper's salary. Mr Katos, a chartered accountant employed by Price Waterhouse with 20 years' experience, including experience in the remuneration of managers, gave evidence that, in 1994, a $47,000 salary would be paid to a manager of a manufacturing company with an annual turnover of $15 million. The actual turnover of the Community (excluding rent from Alphington Grammar School, which was not actually paid) was about half a million dollars. This high salary level confirms that an important reason for the appointment of Mr Carydias was to provide a liaison with the National Australia Bank in the financial crisis which faced the Community. The evidence is that a considerable part of Mr Carydias' time and effort was spent on matters relating to the financial difficulties of the Community. He prepared cash flows for the National Australia Bank. He attended meetings with the National Australia Bank and meetings of the committee about the financial crisis. Mr Pashos said that he saw Mr Carydias two or three times a week, sometimes every day, because of "the problem of dealing with the bank". Mr Catsourakis was a member of the committee and was called as a witness by Mr Carydias. Mr Catsourakis said that, judging from his reports to the committee, Mr Carydias spent "quite a bit" of his time liaising with the National Australia Bank. Mr Carydias also drove officers of the National Australia Bank around suburban Melbourne to inspect the properties of the Community. Some time before April 1993, the National Australia Bank had the Community appoint Coopers & Lybrand to report on the financial position of the Community. Mr Carydias spent considerable time with the accountant from Coopers & Lybrand, explaining the financial affairs of the Community and providing necessary documents. The report of Coopers & Lybrand recommended that the Community sell the Footscray Childcare Centre to release some funds. This was done and Mr Carydias was involved in the process. After the sale of the Footscray Childcare Centre, Mr Carydias was "continuously" attempting to find ways to refinance the loan from the National Australia Bank. Under further pressure from the National Australia Bank, the Community appointed Mr John Perrins of Price Waterhouse as Administrator of the Community from 29 September 1993. Mr Carydias met with Mr Chris Katos, a member of Mr Perrins' staff, to explain the financial affairs of the Community for the purpose of the administration. At about this time, he was involved in negotiations with a French bank for alternative finance for the Community. The negotiations involved considerable effort because they included a proposal to develop the Bulleen site into an income-producing club. Mr Carydias was involved in the preparation of plans for the building on the site. During his employment, Mr Carydias also ran the office of the Community with the assistance of an accounts clerk. Mr Carydias was responsible for the payment of salaries of priests, teachers and staff, and the payment of the regular bills and other expenses of the Community. He had to ensure that the properties were maintained and the rents collected. He was also responsible for enquiries from members of the Community. On the evidence as a whole, I find that one of the main reasons for his employment by the Community was to liaise with the National Australia Bank in respect of the financial crisis facing the community. I further find that, once Mr Carydias was employed by the Community, his work in liaising with the National Australia Bank and his work in attempting to address the financial difficulties of the Community consumed a large part of his working time and were a very significant part of his employment. At some stages in his evidence, Mr Carydias attempted to downplay the importance and extent of these functions. To the extent that he did so, his evidence is inconsistent with the evidence of all the other witnesses who gave evidence on the subject, and it is inconsistent with other parts of his own evidence. I do not accept that part of Mr Carydias' evidence. The Administrator ceased administration of the day to day operations of the Community on 17 January 1994 but retained control of the properties of the Community until early June 1994. By 26 May 1994, the Community had arranged for the National Australia Bank to accept $4.75 million in full satisfaction of its debt, which then amounted to about $8 million and the National Bank of Greece had agreed to lend the Community $4.75 million to pay out the National Australia Bank. The government of Greece provided a guarantee to the National Bank of Greece for the loan. It was evident to the committee, in May 1994, that although the pressure from the National Australia Bank was gone, there was still a need to reduce the costs of the Community. As succinctly stated in the auditor's qualification to the 1993/94 accounts of the Community dated 21 October 1994: "Consideration of the current debt to the National Bank of Greece and the current level of income of the Community raise doubt that the Community will be able to continue as a going concern. In this regard I have not been able to determine whether the use of the going concern basis of accounting is appropriate. If it is not the Community may need to realise significant freehold assets at current market values." History has vindicated the auditor's doubt. The loan repayments are presently being made by the guarantor. Mr Katos gave evidence that he advised Mr Fountas that, following the refinancing, the Community should reduce costs by dispensing with the services of the General Manager. On the subject, he gave this evidence: "HIS HONOUR: Mr Katos, did you advise the community in the course of the administration about the - about cost-cutting possibilities for the purpose of the time after the refinancing of their debt - of its debt? --- Yes, I did. I didn't do it on a formal basis, I discussed it with Mr Fountas that my concerns were that given a debt level of $4.7 million, and having an appreciation of the level of income that come in from the churches and from the Alphington Grammar School etcetera, that there had to be some considerable areas of cost-cutting exercises to be undertaken, and also that I felt that there was - their administration set-up was overloaded for what it was really required to do. Yes? --- So you had a lot of - a lot of functions being created, a lot of expenses being incurred at - when you really stop and think about it, apart from collecting the proceeds in from the churches and the rents and just paying general expenses and your - your priest payroll, it really doesn't involve - probably a couple of days, or maybe a three days' maximum book-keeping exercise. But they had a fairly - fairly heavy administrative set-up which if they had continued along that - in that fashion, again they would have defaulted. And so did you make an informal recommendation about cutting costs? --- I didn't - I didn't actually sit down and do a detailed calculation and say, well, this is what my opinion is and this is - I think you should go about it, it was just in - just in pure general discussions because I just felt obligated that - say to them that after my involvement in seeing the cash in-flow and cash out-flows they had to address the position very quickly because otherwise they would just ... (indistinct) ... themselves in the same situation. It was up to then to Mr Fountas to decide whether he wanted to take it any further. What administrative costs were you referring to in these discussions? --- The general - the general overhead expenses, the general manager's salary that was being paid at that level, the assistant to a general manager, a secretary within the organisation. You know, it was overloaded with people. Yes. Have you - you said that your opinion was that $47,000 was an overly generous salary for the work that you saw that Mr Carydias had to do? --- Yes." On 26 May 1994, the committee met to approve the conditions of the loan from the National Bank of Greece. Eight members of the committee were present. Six members were necessary to constitute a quorum. Towards the end of the meeting, Mr Rallis moved a motion, the English translation of which reads: "The position of General Manager of the Greek Orthodox Community of Victoria is made redundant for clearly economic reasons. The decision to apply immediately and the decision to be made known to the current General Manager." Mr Rallis gave the following evidence in relation to the discussions leading to the passing of the resolution: "And would you tell the court please what occurred at that meeting regarding Mr Carydias' employment" --- Yes, it was decided that the position of general manager to be made redundant because of the financial position that the Greek community was in at the time. It had - a loan had been sought and approved from Greece and there would be certain payments to be made with regards to that loan and it was felt at that meeting that certain cost cutting exercises had to be taken place in order to be able to meet those particular payments. .... As I said discussions took place A, after - well ultimately we did not have any other choice but to accept the conditions that the National Bank were placing with regards to the loan because that ensured A, that the majority of the Greek community's properties would remain and Greek community as an entity would remain. So, it was really then a discussion on having approved that on how then we could best meet those obligations and what needed to be done in other [sic] to meet that. And, really, at the time our employees or the priests and because of the nature of the organisation, we certainly could not cost cut on the priests. The teachers, there was a service that was really paying for itself. Teachers, where? --- The Saturday morning school teachers. Alphington Grammar was a stand alone organisation but nevertheless that it was not sort of paying its way fully, but nevertheless it was an investment and you had to continue with it and really the only place that you could do any effective cost cutting was the actual administration staff and the biggest cost to that was Mr Carydias or the position of manager and that is why the discussion ended up with that position being made redundant. What discussions, if any, was held regarding alternatives for Mr Carydias? --- I recall that part of the discussion was that given that in effect Mr Carydias' position had changed in so far as the position of Mr Carydias and Alphington Grammar really could not continue because the school had got to the stage where it required its own specific bursar to handle the day to day matters of Alphington. When Mr Carydias was first employed, one of his main duties was to liaise with the National Bank because they were putting pressure and also because of his background to see if we could find alternative financiers for the community. Now because all that had basically ended with the loan from the Greek National Bank, it was felt that that position especially at that salary given the financial circumstances could not be justified." Mr Catsourakis attended the meeting. He disagreed with the motion and abstained from voting. He did agree that the discussion concerning the termination of Mr Carydias' employment was about saving money. The meeting then passed the motion. Some evidence was led that the notice of the meeting was inadequate, but the applicant did not argue that the resolution was ineffective to terminate the employment of Mr Carydias. On 27 May 1994, Mr Carydias, who was then on holidays, was asked to come to the office of the Community. He saw Mr Fountas and Mr Pappas. Mr Fountas said that he had a difficult task as President to tell him that the committee had decided that, because the loan from the National Bank of Greece was approved, "we have to make .... savings, and being highly paid, you got chopped off". On this evidence, I am satisfied that the Community had ongoing financial difficulties after the refinancing of the National Australia Bank loan. It determined to reduce expenses. Mr Carydias' salary was the largest single administrative expense. A major function for which he had been employed was no longer necessary. For these reasons, the Community determined to terminate his employment. It was contended by Mr Carydias that the alleged economic reasons for the termination of his employment were a pretence. It was argued that the work Mr Carydias did continued to be done after his dismissal. The Community employed a clerk on a salary of about $25,000 to administer the office of the Community. The supervision of such an employee had been part of Mr Carydias' role. However, his main functions of bank liaison and financial manager were not performed by the replacement employee. Mr Pashos was not at the meeting of the committee on 26 May 1994. However, his view was that the Community needed a professional manager and that there was a role for Mr Carydias. Mr Pashos' view on this subject may reflect his political opposition to Mr Fountas rather than an objective consideration of the merits of the decision of the committee. In my view, given the financial situation of the Community, its decision to dismiss Mr Carydias was "sound, defensible and well founded": Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371. The committee meeting on 26 May 1994 was called on short notice. This was not an unusual occurrence at the time. The Community was in a financial crisis and it was frequently necessary for the committee to consider matters urgently. Notice of the 26 May 1994 meeting was given by phone but members were not told that the termination of employment of Mr Carydias would be considered. The applicant contended that the absence of notice of that particular item of business demonstrated that there was no genuine basis for the decision. This argument does not follow. The failure to give notice of a particular item of business does not mean that the decision was made without merit. It is understandable that all desirable procedural steps may not have been taken in the atmosphere of urgency which then existed. The applicant did not argue that the failure to give notice invalidated the decision, but rather that it reflected on its genuineness. In his evidence, Mr Carydias suggested a number of other reasons which he contended were the real reasons for his dismissal. He suggested that he failed to do something which Mr Fountas wanted, that Mr Rallis did not like him, that the only reason the Community was in an admittedly bad financial position was that it did not take the loan from the French bank organised by Mr Carydias and did not develop the club on the Bulleen site. Counsel for Mr Carydias rightly did not pursue these suggested reasons in final submissions. On the evidence, there was no basis for them. Rather, they reflected Mr Carydias' resentment of the termination of his employment. At the time of dismissal, Mr Fountas offered Mr Carydias a cheque for the amounts due upon termination. Mr Carydias disputed the amount of the cheque. Subsequently, the auditor for the Community investigated Mr Carydias' entitlement. He found that the Community had overpaid Mr Carydias' salary package by $13,275. Mr Carydias disputed the fact that he had been overpaid. A meeting of the committee was called to allow him to explain his position. This issue generated further controversy in the committee, but the controversy did not relate to the question of the financial desirability of his dismissal. Indeed, it is significant that Mr Carydias did not question the economic justification for the termination at the time of his dismissal, although he did question the amount of his termination entitlement. Thus, I do not accept Mr Carydias' contention that the subsequent consideration of his disputed overpayment by the committee reflected dissension from the view that there was a valid economic reason for his termination.

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