PETROVSKY V TASMANIAN UNIVALVE PTY LTD [1997] IRCA 105

DECISION NO:105/97 C A T C H W O R D S

INDUSTRIAL LAW - Termination of Employment - QUANTUM MERUIT CLAIM WORKPLACE RELATIONS ACT 1988, s.170DE

Pavey and Matthews Pty Ltd v Paul (1986) 162 CLR 221 PETROVSKY V TASMANIAN UNIVALVE PTY LTD TI96/1042 JUDICIAL REGISTRAR: L FARRELL PLACE: ADELAIDE (HEARD IN LAUNCESTON) DATE: 4 APRIL 1997

IN THE INDUSTRIAL RELATIONS COURT ) OF AUSTRALIA ) TASMANIA DISTRICT REGISTRY )

No. TI96/1042

B E T W E E N: PAUL ALEXANDER PETROVSKY Applicant AND TASMANIAN UNIVALVE PTY LTD Respondent MINUTES OF ORDER

BEFORE: JUDICIAL REGISTRAR L FARRELL PLACE: ADELAIDE DATE: 4 APRIL 1997 THE COURT ORDERS THAT: 1. The Respondent pay to the Applicant the sum of $5000. within 21 days. 2.The Respondent reimburse the Applicant his expenses in the sum of $1677.30 within 21 days 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 ) TASMANIA DISTRICT REGISTRY ) No.SA96/1042

B E T W E E N: PAUL ALEXANDER PETROVSKY Applicant AND TASMANIAN UNIVALVE PTY LTD Respondent BEFORE: JUDICIAL REGISTRAR L FARRELL PLACE: ADELAIDE DATE: 4 APRIL 1997

REASONS FOR JUDGMENT This application comes before the Court pursuant to the provisions of Section 170ED of the Workplace Relations Act. The Applicant claims that his employment was terminated unlawfully. He does not seek reinstatement, he seeks compensation. In addition the Applicant claimed reimbursement of expenses incurred pursuant to the employment agreement, damages for wrongful dismissal, and remuneration plus expenses upon a Quantum meruit The Respondent is a company set up to attempt to grow abalone in tanks on land. The Applicant was a Director of the company. In June 1995, whilst on leave from his position as a Commonwealth Public Servant, he was appointed as managing director of the Respondent. He was to be paid $3000 per month and he was provided with a car. It was anticipated that he would spend about 15 hours per week on his duties as managing director. In December 1995 he returned to work full time as a public servant. Minutes of board meetings in 1996 detail concerns about the ongoing situation with the Applicant's work and payment. They also detail the Respondents financial difficulties as well as the Tax losses of the Respondent. Minutes of a meeting of directors on 8 January 1996 record that the Applicant reported that he .... 'was working one day a week plus one day at the weekend for Tas and that he had not been drawing any salary but that this would be adjusted.' In the meeting of 1 April 1996 it was minuted that the Applicant was .... 'negotiating with his employer to work part time and he would have two days per week available for Tas Univalve. This arrangement would not be finalised until after Easter.' Later the minutes record that; 'Alex Petrovsky reported that he had paid himself $5000 gross for the three month period to 31 March 1996.' At a meeting of directors held on 2 May 1996; 'It was agreed that when Alex Petrovsky's situation was clarified as to his future payment a proposal would be received regarding any payments of remuneration after 31 March 1996.' The Applicant did not advise the Respondent regarding the above mentioned matter. He did however write to the board in the following terms on 5 July 1996. 'You are also aware that the board of Tasmanian Univalve Pty Ltd dediced (sic) to cancel the terms of my remuneration (thus effectively dismissed me from my employment) effective from the 31/3/96. You should note that whilst I have continued to perform the duties of managing director of the company, not only have I received no remuneration for the period since 31/3/96 but monies are still owing for the period to 31/3/96. Whilst the board has said that I should make a proposal re remuneration, given the level of disputation within the parent company I feel that in fact the offer should come from the other directors to me.' The Applicant in his evidence claimed that his wife had written the letter when he was in an emotional state. He did not deny that he signed the letter. However he claimed that he did no know that it had ever been sent. The Applicant also gave evidence that he did not manage to negotiate to work part time as a Public Servant, although he had a number of days leave around this time. Throughout this period various negotiations took place regarding the sale of the Respondents assets. The Applicant was involved in some of those negotiations. Mr Abbott gave evidence that by July, when he was appointed a Director of the Respondent Company, the Board were uncertain as to whether the Applicant was still employed or whether he was carrying out duties just in his role of Director. At a meeting of the Board on 2 August 1996 it was minuted as follows; 'The directors considered the managing director's position. It was noted that no contract between the company and Alex Petrovsky has been sighted. In any event Alex Petrovsky's salary as Managing Director had been terminated on or about March 1996. Failing any new contract it would appear that his appointment as Managing Director ceased at the same time. It was considered by the directors that Alex Petrovsky has a potential conflict of interest in that he has expressed an intention to tender for the company's remaining business interests, including the ocean cage, and this may impact upon his decision making in respect of whether or not the company should invest more funds on completing these projects. It was resolved that the secretary should write to Alex Petrovsky and request his resignation as Managing Director, failing receipt of which within 24 hours, Alex Petrovsky's appointment as Managing Director be terminated forthwith and the secretary to notify Alex Petrovsky of same.' A letter was sent to the Applicant on 2 August 1996 requesting that he resign and pointing out the conflict of interest. The letter also conveyed that.... 'in view of the present timetable to dispose of the company's assets and wind down its operation it has been decided that the board as a whole should supervise this function in direct liaison with Mr R. Sharkie.' The decision of the Respondent to terminate the Applicant's employment was communicated to the Applicant by letter dated 16 August 1996. It seems to me that the decision of the Board to terminate the services of the Applicant was entirely appropriate and justified. The Respondent was in an untenable position without the financial means to continue employing the Applicant. I therefore find that there has been no breach of Section 170DE of the Act. QUANTUM MERUIT CLAIM It is apparent on the evidence beforeme that the applicant has no contractual right to be paid for the work performed by him between April and August 1996 in the absence of any agreement between the Respondent and him following the meeting of 1 April 1996. The decision of the High Court in Pavey and Matthews Pty Ltd v Paul (1986) 162 CLR 221 decided that an action on a quantum meruit for the value of work done does not depend upon an express or implied contract, but is available where work has been done and accepted by the defendant. I refer to the Judgment of Mason and Wilson JJ at p.227: "Deane J, whose reasons for judgment we have had the advantage of reading, has concluded that an action on a quantum meruit, such as that brought by the appellant, rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment, arising from the respondent's acceptance of the benefits accruing to the respondent from the appellant's performance of the unenforceable oral contract. This conclusion does not accord with the acceptance by Williams, Fullagar and Kitto JJ in Turner v Bladin (1951) 82 CLR 474 of the views expressed by Lord Denning in his articles in the Law Quarterly Review, vol 41 (1925), p.79, and vol 55 (1939), p.54, basing such a claim in implied contract. These views were a natural reflection of prevailing legal thinking as it had developed to that time. The members of this Court were then unaware that his Lordship had, in his judgment in James v Thomas H. Kent and Co Ltd (1951) 1 KB 551, as reported in the authorised reports, discarded his earlier views in favour of the restitution or unjust enrichment theory. Since then the shortcomings of the implied contract theory have been rigorously exposed (see Goff and Jones, The Law of Restitution, 2nd ed (1978), pp 5-11) and the virtues of an approach based on restitution and unjust enrichment, initially advocated by Lord Mansfield and later by Fuller and Perdue (see "The Reliance Interest in Contract Damages", Yale Law Journal, vol 46 (1936-37), pp 52, 373, esp at p.387) widely appreciated (Goff and Jones, op cit p.15 et seq; and see Deglman v Guaranty Trust (1954) 3 DLR 785 at 794-795. We are therefore now justified in recognising, as Deane J has done, that the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract. Once the true basis of the action on a quantum meruit is established, namely execution of work for which the unenforceable contract provided and its acceptance by the defendant, it is difficult to regard the action as one by which the plaintiff seeks to enforce the oral contract." The Applicant claimed that he should have been paid at $3000 per month for the period from 1 April 1996 until the termination of his employment. At that time he was working full time as a Public Servant He had a number of days leave without pay from his Public Service job. He gave evidence that he worked for the Respondent in his lunch hour and in the evening. In reaching my conclusion about what is reasonable remuneration in this claim I have considered whether the amount the Applicant should be payed should be based on the amount of time he alleges that he spent or on some value that can be ascribed to the work performed. It seems unlikely that the Applicant worked as long as he claims. His evidence was often vague and apart from his Public service job which he was performing full time in the relevant period, he was also involved in some other companies related to the Respondent Company. He also appears to have suffered a significant amount of ill health, considering his sick leave records. He also had to cope with the death of his father around this time. From his diary, which was tendered in evidence he seems to have been involved in protracted legal battles that involved the connected companies and members of his family. I formed the impression from the manner in which the Applicant gave his evidence and the lack of any documentation relating to the work that he says he performed that he was exaggerating the amount of work he had done for the Respondent . This case takes place against a background of bitter disputation with his family, who are also involved in this and a web of surrounding companies. Mr Bartholemew gave evidence for the Respondent, my impression of him was that he was a straightforward witness. His estimation of the amount of time that he Applicant spent at the office designated to him was less than that of the Applicant. It is impossible to say how much of the Applicant's time was spent on his duties as the managing director as opposed to his other business involvements. Having regard to the Applicant's evidence which I regard with some suspicion I must look largely to what he is supposed to have done during this time . It is the evidence of Mr Bartholemew that he took over the pay management duties of the Applicant over the period from January 1996 to March 1996 . The Applicant had some contact with the general manager and he had some involvement with the sale of the business. There was no submission on the true value of the work performed by the Applicant. Ought he as managing director be paid according to some external yardstick? There was no evidence of the level of skill at which he discharged his duties. There was no evidence of his ability or experience that would assist in the assessment of the value of his work. Ought I compare him with the managing Director of Coles Myer or should he be compared the managing director of a market stall? It is important to consider the Respondent's financial position as well as its obligations to its shareholders. Having regard to all these matters I have decided to award the Applicant the sum of $5000 in relation to this part of his claim. APPLICANT'S EXPENSE CLAIM The Respondent agreed that the Applicant was entitled to be reimbursed the sum of $1677.30 for his expenses incurred in Tasmania. The Respondent did not dispute those expenses. The Applicant also claimed expenses relating to travel to Sydney and Melbourne. There was no documentation authorising the Applicant to incur those expenses. On the evidence before me I am not satisfied that the Applicant was entitled to those expenses in his role as Managing Director of the Respondent. I certify that this and the preceding 5 pages are a true copy of the reasons for my judgment. DATE OF HEARING : 12 FEBRUARY 1997 FOR THE APPLICANT : MR McELWAINE FOR THE RESPONDENT : MR GRAY