NILSEN v LOYAL ORANGE TRUST (ACN 004 245 694) [1997] IRCA 32

DECISION NO:32/97 CATCHWORDS INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - Claim of UNLAWFUL TERMINATION - Applicant employed by the Loyal Orange Trust for over 25 years - Responsible for running the Institution's bookshop - Trust operating in deficit - Trust resolved to reduce staff of three by one and close bookshop - Applicant selected for termination after consideration of Trust's needs and relative skills of other employees - Whether VALID REASON connected with operational requirements - Applicant alleged that real reason for termination was her association with members who had challenged the propriety of the Trust's administration - Applicant and these members expelled from the Institution six months before termination of employment - Whether events surrounding the expulsion related to her termination - Whether selection process a sham or unfair - Whether NOTICE sufficient - Whether CONSULTATION adequate Workplace Relations Act 1996 (formerly Industrial Relations Act 1988) ss 170DE(1), 170EA NILSEN v LOYAL ORANGE TRUST (ACN 004 245 694) VI 4875R of 1994 Before: NORTH J Place: MELBOURNE Date: 20 FEBRUARY 1997

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2875R of 1994 B E T W E E N : MARGARET NILSEN Applicant AND LOYAL ORANGE TRUST (ACN 004 425 694) Respondent MINUTES OF ORDERS BEFORE: North J PLACE: Melbourne DATE: 20 February 1997 THE COURT ORDERS THAT: 1. The application is dismissed. 2. The question of costs is adjourned to a date to be fixed.

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 2875R of 1994 B E T W E E N : MARGARET NILSEN Applicant AND LOYAL ORANGE TRUST (ACN 004 425 694) Respondent BEFORE: North J PLACE: Melbourne DATE: 20 February 1997 REASONS FOR JUDGMENT The applicant, Miss Margaret Nilsen, had her employment terminated by the respondent, the Loyal Orange Trust (the Trust), as a result of a resolution of a Trust meeting on 25 November 1994. She last attended work on 22 December 1994. On 29 December 1994, the applicant filed an application under s 170EA of the Industrial Relations Act 1988 (now the Workplace Relations Act 1996) (the Act) alleging that her employment was unlawfully terminated. The application was heard by a Judicial Registrar and was dismissed on 23 August 1995. On 13 September 1995, Miss Nilsen applied under s 377 of the Act to review the exercise of the power by the Judicial Registrar. THE ISSUES ON THE REVIEW Section 170DE(1) of the Act reads: "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 central issue in this review is whether there was a valid reason, based on the operational requirements of the Trust, for the termination of the employment of Miss Nilsen. The Trust argued that it was operating in deficit and needed to cut expenses. One way to reduce expenses was to reduce staff costs and reduce the operations of the Trust. The Trust employed three people. It determined that it would have to function with two people and that it would close the bookshop which it operated. The Trust contended that the reason for the termination of Miss Nilsen's employment was based on the financial requirement of the Trust to reduce costs, and the selection of Miss Nilsen was based on an assessment of the relative suitability of the employees for the remaining needs of the Trust. In particular, Miss Nilsen's main function of running the bookshop no longer existed. In response, Miss Nilsen contended that the members of the Trust were not in a position to determine that the financial position of the Trust required a reduction in staff because they had not been given adequate information. Further, she argued that, quite apart from whether the financial position of the Trust justified the termination or not, the real reason for the termination was to protect the personal interests of a small group of members of the Trust. This group of members wished to rid the Trust and the Institution of Miss Nilsen because she was associated with some members who had questioned the competence and propriety of the administration of the Trust and, thereby, threatened the interests of that group. Miss Nilsen was expelled from the Institution on 1 June 1994. She argued that her dismissal in December 1994 by the Trust was part of the one process, which commenced with her expulsion from the Institution. Much of the applicant's case involved reference to the circumstances of the expulsion. In part, this reference was intended to demonstrate that the reason for the dismissal was related to the events of the expulsion. In part, the reference was intended to demonstrate that the circumstances of the expulsion were unfair and unjust. From this base, the applicant argued that the unfairness and injustice of the expulsion caused the dismissal to be unlawful. In addition, the applicant argued that the termination was unlawful because: · the Trust had an excessive concern for confidentiality in relation to its affairs and dismissed the applicant, partly because it regarded her as unable to maintain adequate confidentiality; · the applicant was not given adequate notice of termination; · the applicant was not adequately consulted in relation to her termination; · the process by which the applicant was selected for termination ahead of other employees of the Trust was invalid. I will examine these contentions further later in these reasons. It is desirable, by way of background, to examine the structure and operation of the Trust and the Institution, and then to say something about each of the three employees of the Trust. THE STRUCTURE AND OPERATION OF THE TRUST AND THE INSTITUTION The Trust is a company limited by guarantee and was incorporated in 1946. Its objects are adequately described, for the purpose of this case, by reference to the first three objects set out in the Memorandum of Association, as follows: "3. The objects for which the Trust is established are to: (a) Propagate and defend the Protestant Faith, proclaiming the Lord Jesus Christ as the Saviour of men, and to attain this object to conduct religious services, activities and Sunday Schools and to encourage the reading and study of The Holy Bible. (b) Establish, maintain, conduct, and regulate in foreign countries missionary activities to extend the Protestant Faith. (c) To apply the property and assets of the Trust to: 1. establish, maintain, conduct and regulate a charitable institution or institutions for the care, relief and maintenance or [sic] destitute orphaned or neglected children. 2. establish, maintain, conduct and regulate a charitable institution or institutions for the care, relief and maintenance of aged destitute or infirm persons. 3. establish, maintain, conduct and regulate a hospital or hospitals for the care of sick persons. 4. loan money either bearing interest or free of interest or charge of any kind for the relief assistance and help of persons of poor and moderate means or to make gifts of money from its funds to help sick persons to procure medical surgical and/or hospital attention and/or to have a period of convalescence or to make gifts or donations to such institutions established for religious charitable or educational purposes as the Trust may deem fit. 5. conduct and carry out research into the history of the Protestant Faith. 6. establish print publish maintain distribute and regulate any newspapers periodicals books publications leaflets pamphlets and tracts that the Trust may think desirable for the promotion of its objects. 7. undertake activities establish conduct and regulate clubs associations and such other organizations as will assist in promoting the satisfactory development physically spiritually mentally and socially of children and young people." The Trust is managed by a group of people described in the Articles of Association as members. The Trust has 14 members, comprising the Grand Master, Grand Secretary and Grand Treasurer of the Institution, nine persons appointed by the annual meeting of the Institution, three of whom retire annually, and two persons appointed by the annual meeting of the associate members of the Trust, one of whom retires annually. There is thus a close link between the Trust and the Institution. The link is further seen in the provision that the Grand Secretary and Grand Treasurer of the Institution are to be the Secretary and Treasurer of the Trust respectively, and the property and assets of the Trust may not be given to or used for any body or organisation not associated with the Institution without the consent of the Grand Executive of the Institution. Clause 17 of the Constitution and Laws of the Institution describes the role of the Trust in relation to the Institution as follows: "All the real estate, property and effects of the Grand Lodge, and that of any Primary Lodge, Chapter or Auxiliary passing a resolution to that effect, or becoming defunct, shall vest in LOYAL ORANGE TRUST, which shall be the Trustee, and the said TRUST is hereby empowered to sue for, and recover, and to hold and apply the use of such property in accordance with its Memorandum and Articles of Association." The Articles of Association of the Trust require the Trust to keep proper books of account and to allow access by members to the books. The accounts of the Trust must be audited at least annually. The Trust must hold an annual meeting of members in October every year. The accounts and balance sheet of the Trust made up to 31 August preceding the date of the meeting must be laid before the annual meeting in October. Clause 17 of the Articles of Association provides: "A copy of all accounts laid before the Annual Meeting of members accompanied by a report thereon the officers of the Trust [sic] shall be sent to the Grand Lodge of the Loyal Orange Institution in Victoria in time for its Annual Meeting." The annual meeting of the Institution must be held in November every year. The Institution is an unincorporated association formed in 1843. The governing body is the Grand Orange Lodge of Victoria. The objects of the Trust referred to earlier are, in essence, a mirror of the objects of the Institution. The Grand Orange Lodge of Victoria is made up of various officers, including past and present Grand Masters/Mistresses, and numerous other officers together with one delegate for every twenty members of the Primary Lodges. The Grand Lodge meets at least twice every year, namely, at an annual meeting in November and at a half-yearly meeting in May. Thirty members form a quorum. The officers of the Grand Lodge constitute the Grand Executive, which has the power of management of the Institution between meetings of the Grand Lodge. The Grand Lodge or Grand Executive may form districts. The Primary Lodges within each district elect District Masters or Mistresses. Primary Lodges may be formed under the authority of the Grand Lodge by the grant of a warrant. There are about 17 primary Lodges. Each Lodge holds annual elections for various offices including that of a Worshipful Master/Mistress, Secretary, Treasurer and a committee of five members. The parties agreed that, in 1993, the Institution had approximately 250 full and honorary members and, in 1996, had approximately 185 full and honorary members. In 1994, the Trust operated a number of homes for the aged. It also owned a number of halls in the suburbs of Melbourne and country Victoria, used for Lodge meetings. It held investments which produced income. The Trust also owned Loyal Orange House at 524-530 Elizabeth Street, Melbourne, and the adjoining building at 520-522 Elizabeth Street, which was previously an ANZ bank. Loyal Orange House contained a meeting hall which was used for Lodge meetings and activities. The Trust operated a bookshop for the sale of Protestant literature which was also located in Loyal Orange House. The administrative offices of the Trust were located in Loyal Orange House before June 1993. They were then relocated to the adjoining old ANZ bank premises until June 1994, after which they were relocated back to Loyal Orange House, until they were shifted to Box Hill in February 1996. After the filing of the unlawful termination application against the Trust, Miss Nilsen applied to have the Institution joined as a respondent. Judicial Registrar Murphy dismissed this application. A further application was made to Judicial Registrar Chancellor and this was also dismissed. On the hearing of the review, Mr Bourke, who appeared as counsel for the Trust, said that he had instructions from the Institution to consent to an order that it be joined as a respondent. That order was made by consent on 26 June 1996, the first day of the hearing of the review. At various times during the first three days of the hearing, Mr Flower, who appeared as counsel for Miss Nilsen, cross-examined the respondent's witnesses in an attempt to establish that the Institution was the employer of Miss Nilsen. On 25 November 1996, which was the fourth day of the hearing of the review, Mr Ray Nilsen announced his appearance on behalf of Miss Nilsen, in place of Mr Flower. Mr Nilsen is a solicitor, and the brother of Miss Nilsen. I will deal with his involvement in the events concerning this case later in these reasons. Mr Nilsen also sought to cross-examine the respondent's witnesses as to the identity of the employer of Miss Nilsen. The original estimate of the time the hearing of the case was three days. The manner in which the issue of the identity of the employer was being pursued indicated that the issue would take a considerable time to explore. It was clear that the other contentious issues would take a considerable time to hear. Mr Bourke indicated that both the Trust and the Institution would stand behind any judgment of the Court. In the light of the close legal connection between the Trust and the Institution, and the willingness of both the Trust and the Institution to be bound by the judgment of the Court, there seemed no practical reason for this matter to be pursued. Mr Nilsen was unable to provide any practical reason for Miss Nilsen to pursue the matter. After some consideration, she conceded, for the purpose of this case, that the Trust was the employer. The Trust admitted that fact and, by consent, I gave leave to Miss Nilsen to discontinue the application against the Institution. THE EMPLOYEES OF THE TRUST As at November 1994, the Trust had three employees: Miss Nilsen, Mr Jeff Davis, assistant to the Secretary of the Trust, and Mr Robert Curran, the Grand Secretary of the Institution and Secretary of the Trust. Miss Nilsen had started working for the Trust in mid August 1969. She was then 37 years old. She worked for the Trust for 25 years. In her unlawful termination application, she described her work as "typist, receptionist, bookshop attendant, clerk". Prior to 1988, Miss Nilsen assisted voluntary helpers to run the bookshop. After the voluntary assistance ceased, she managed the bookshop. From 28 January 1986 until her dismissal, Miss Nilsen handled all but 166 of the 2,193 transactions in the bookshop. Mr Davis gave evidence that, from 1988, Miss Nilsen spent 75 per cent of her time in the bookshop. I accept this evidence. Miss Nilsen attempted to downplay the extent of her involvement in the bookshop. Her answers on this issue were clearly designed to assist her contention that the closure of the bookshop was not a reason for her dismissal. Her answers were evasive and I prefer the evidence of Mr Davis on this subject. In evidence, she said that some particular duties were to act as hostess for visitors, including interstate and overseas visitors, to research the old records of the Institution for people interested in the history of the Institution, to help the old people who lived in the homes if they came to Loyal Orange House, to help young people with information for assignments, to counsel people with problems who visited Loyal Orange House and, on instructions from other employees, to advise Lodge secretaries of the death of Lodge officers, to arrange for memorial notices drawn up by other employees of the Trust to be published, and to do the banking. Miss Nilsen joined the Institution at the time she started work with it. She was a very active member of Loyal Orange Lodge 111 (LOL 111). Adherence to the Protestant faith and loyal service to it was a very important part of Miss Nilsen's social and working life. She formed many long-lasting friendships with other members of the Institution. Members of her close family were involved in the Protestant cause. Her brother, Mr Ray Nilsen, her sister, Mrs Sylvia Child, Mrs Child's husband, Mr Robert Child, and her nephew, Mr Neil Hawthorn, were all members of the Institution. Mr Nilsen was an active leader of other Protestant organisations. Mr Davis started work with the Trust on 25 August 1969. He was assistant to the then Secretary, Mr Morris. In 1976, he was appointed Acting Grand Secretary of the Lodge and Secretary of the Trust, when Mr Morris was unwell. In 1977, Mr Davis was elected Grand Secretary of the Lodge, and hence became Secretary of the Trust. He remained Grand Secretary of the Institution and Secretary of the Trust until November 1992, when Mr Curran was elected Grand Secretary of the Institution. Then Mr Davis became assistant to the Secretary of the Trust. His main work was to administer the Trust properties other than the aged persons' homes. Mr Ian Black was the administrator of the homes. Mr Davis also assisted the Secretary by dealing with correspondence which Mr Curran gave him, helping Mr Curran with the administration of the Trust generally, and taking over the functions of Secretary when Mr Curran was absent. In January 1996, Mr Davis was appointed to the new position of Property Manager of the Trust, which involves the administration of all the Trust properties, including the homes. Mr Davis did most of his own typing. Mr Curran became a member of the Institution in 1967. He lived in Mooroopna. He was an elder of the Presbyterian Church, a lay preacher, and a Session Clerk for 11 years. In November 1992, he was elected Grand Secretary of the Institution for a six-year term. Consequently, he also became Secretary of the Trust. As a result he shifted to Melbourne and worked at Loyal Orange House with Mr Davis and Miss Nilsen. He was responsible for the administration of the Trust, which involved dealing with correspondence, attending to the banking, carrying out the decisions of the Trust and investing moneys as directed by the Trust. He did most of his own typing, including the minutes of Trust meetings and sometimes minutes of meetings of the Institution. CONSIDERATION BY THE TRUST OF ITS FINANCIAL POSITION PRIOR TO THE TERMINATION OF EMPLOYMENT I now turn to the facts relevant to the question of whether the Trust had a valid reason for the termination of the employment of Miss Nilsen. I will first consider the attention given by the Trust to its financial position before the termination, then examine the circumstances of the meeting of the Trust on 25 November 1994, at which the Trust decided to terminate the employment of Miss Nilsen, and then deal with the events following that meeting relevant to the termination. The annual accounts for the Trust for the year ended 30 June 1991 showed an operating surplus of $198,020. For the year ended 30 June 1992, the accounts showed an operating deficit of $10,864.05, and for the year ended 30 June 1993, they showed an operating deficit of $64,127.39. The Trust met in most months during 1994. At each meeting, the Treasurer, Mr Arthur Homan, presented written financial reports to the Trust and explained them to the meeting. Each month, his reports were adopted. Immediately after the Treasurer's report was adopted at the Trust meeting held on 25 February 1994, a resolution concerning staffing levels of the Trust was carried as follows: "That prior to the next meeting of the Trust that the staffing levels be discussed and that the Secretary and Mr Davis be excluded from this discussion both being payed [sic] officials of the trust". Although the financial statements presented by the Treasurer were not tendered in evidence, it is clear that this resolution was passed as part of an effort to deal with the ongoing deficit. The situation was of such concern that the Treasurer prepared a handwritten discussion paper outlining options to deal with the deficit. The paper was presented at the Trust meeting held on 8 April 1994. The Treasurer said in the paper that the deficit in the general fund of the Trust at the end of February stood at $55,000. He estimated the deficit for the full year to be approximately $65,000 at best. He set out four options in his paper, as follows: OPTIONS 1 2 3 4 Lease 520 Elizabeth St City Sell 520/524 Elizabeth St and Est income $30,000 move offices to Box Hill Sell Croydon cottage & land Possible yield on sale $1,500,000 Est income $10,000 Accept retirement of homes administrator Est savings $10,000 Est deficit One office employee to be Make up gap of $15,000 by drawing more money from home accounts. If reserves for maintenance are to be keep [sic] at present levels rents would have to rise on average $4/wk This would give an income of $75,000/year $15,000 part time Est savings $10,000 Est deficit $5,000