Davis v Portseal Pty Ltd [1997] IRCA 113

DECISION NO:113/97 CATCHWORDS

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - REMEDY for breach of s170DC - COMPENSATION - whether trial judge erred in the exercise of discretion in assessing the appropriate amount of compensation - whether it could be said that if the appellant had been given an OPPORTUNITY TO RESPOND to allegations the prospect of him remaining in employment was so remote as to require substantial discounting of compensation otherwise payable - compensation to be assessed by reference to REMUNERATION not "salary" Workplace Relations Act 1996 ss 170DC, 170DE, 170EE Trade Practices Act 1974 s82 May v Lilyvale Hotel Pty Limited (1995) 68 IR 112 Rigby v Technisearch Limited (1996) 67 IR 68 PHILLIP LLOYD DAVIS v PORTSEAL PTY LIMITED No. NI 96/2309 Coram: WILCOX CJ, LEE AND MARSHALL JJ Place: SYDNEY Date of hearing: 12 MARCH 1997 Date of judgment: 10 APRIL 1997

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. NI 96/2309 B E T W E E N : PHILLIP LLOYD DAVIS Appellant A N D: PORTSEAL PTY LIMITED Respondent CORAM: WILCOX CJ, LEE AND MARSHALL JJ PLACE: SYDNEY DATE: 10 APRIL 1997 MINUTES OF ORDERS THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The order of Moore J of 26 November 1996 be set aside and in lieu thereof it be ordered that compensation be assessed at $31,100. 3. The District Registrar pay to the appellant's solicitors the sum of $31,100 held by the Court, together with any interest accrued on the said sum. 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 NEW SOUTH WALES DISTRICT REGISTRY No. NI 96/2309 B E T W E E N : PHILLIP LLOYD DAVIS Appellant A N D PORTSEAL PTY LIMITED Respondent CORAM: WILCOX CJ, LEE and MARSHALL JJ PLACE: SYDNEY DATE: 10 APRIL 1997 REASONS FOR JUDGMENT THE COURT This is an appeal from a judgment of a Judge of this Court (Moore J), in which his Honour varied an order made by a Judicial Registrar that the respondent, Portseal Pty Limited, pay $31,100 to the appellant, Phillip Lloyd Davis. His Honour ordered that, in lieu thereof, the respondent pay the sum of $5,000 to the appellant. Each sum identified above was by way of compensation pursuant to s170EE Workplace Relations Act 1996 ("the Act"). The Judicial Registrar found that the respondent had breached ss 170DE and 170DC of the Act. His Honour found that a breach of s170DC of the Act had occurred, but not a breach of s170DE of the Act. His Honour found that it was not appropriate to order the reinstatement of the appellant in all the circumstances of the case. FACTUAL BACKGROUND The respondent conducts a Ford motor vehicle dealership in suburban Sydney. The respondent's dealer principal is Mr Dale and its general manager, Mr Keepkie. The respondent employed the appellant as its new vehicle retail sales manager from 8 December 1993 until 15 September 1995. At the time of termination the appellant was almost 46. The termination of the appellant's employment arose in the following way. From about June 1995, Mr Dale and Mr Keepkie became concerned at what they saw as the inadequate performance of one of the salespersons under the appellant's supervision. The salesperson was a Ms Purdie. The appellant was instructed to counsel Ms Purdie about her work performance. When he counselled her, Ms Purdie told the appellant that her work performance problems resulted from illness related to her pregnancy. When the appellant advised Mr Keepkie of the source of Ms Purdie's difficulties, Mr Keepkie said: "Piss her off. We don't want any pregnant females around here". That conversation occurred approximately three weeks prior to the termination of the appellant's employment. After further discussions with Ms Purdie, the appellant was advised by her that she would resign in writing. On Wednesday, 13 September 1995, Ms Purdie told the appellant that she would give him her written resignation by the end of the day. At about 5.15 pm on that day, Ms Purdie telephoned the appellant and told him the resignation would be given "first thing in the morning". Early the next morning the appellant attended a management meeting with Mr Dale and Mr Keepkie. Mr Dale asked the appellant if Ms Purdie had resigned yet. The appellant replied that he had Ms Purdie's written resignation on his desk. In fact the resignation was not on his desk. Later in the day Ms Purdie telephoned the appellant and told him that she would not resign. Ms Peilschmidt is the respondent's financial controller. After his meeting with Mr Dale and Mr Keepkie and his telephone conversation with Ms Purdie, the appellant spoke to Ms Peilschmidt. He told her that he had told Mr Dale and Mr Keepkie a lie when he said he had Ms Purdie's resignation on his desk. He shortly thereafter had a similar conversation with Mr Keepkie's son, Mr Keepkie Jnr, during which he admitted that he lied to Mr Dale and Mr Keepkie Snr. Later on in the day, the appellant admitted to Mr Keepkie Snr that he had misled him and Mr Dale by saying that he had Ms Purdie's written resignation on his desk. After his conversation with the appellant, Mr Keepkie Snr rang Mr Dale. Mr Dale was upset by what Mr Keepkie Snr told him. The matter was discussed between them later that evening and on the following morning, Friday, 15 September 1995. Mr Dale decided that the appellant's employment should be terminated. He instructed Mr Keepkie Snr to effect the termination. Later that morning, Mr Keepkie Snr terminated the appellant's employment. SECTION 170DC Moore J found that the appellant's employment had been terminated contrary to s170DC of the Act. His Honour said: "There can be no suggestion, in my opinion, that before the decision to terminate Davis's employment was made, he was given an opportunity to defend himself against the allegation concerning his conduct which might lead to the termination." On appeal, the respondent did not seek to disturb his Honour's finding that it had contravened s170DC of the Act nor, therefore, the implied finding that the conduct of the appellant was not serious misconduct justifying summary dismissal. REMEDY FOR BREACH OF S170DC Reinstatement We agree with Moore J that it is inappropriate in all the circumstances of the case and, therefore, impracticable to make an order requiring the respondent to reinstate the appellant. The appellant held a very senior position with the respondent. Mutual trust and respect between the appellant and the two people who were above him in the management structure of the respondent, was essential if the appellant was to perform adequately the duties of his position. The conduct of this litigation has ruptured irreparably the appellant's relationship with Mr Dale and Mr Keepkie and it would be wrong to direct the respondent to reinstate the appellant. Compensation Moore J held that the appellant was entitled to compensation under s170EE(3) of the Act. He found it probable that the appellant's employment would have been terminated even if s170DC of the Act had not been breached. He ordered the payment of compensation in the sum of $5,000, "(h)aving regard to the limited possibility that the termination would not have occurred ...". The sum of $5,000 was determined as the appropriate amount by discounting down from what his Honour held was the salary ($30,000) the appellant would have received for the six months after the termination. His Honour explained "In considering what compensation should be awarded it is necessary to deal with past hypothetical events. That is, it is necessary to make the assumption that Davis was given the opportunity and then assess what might have happened. It is, in principle, no different to the task of assessing damages under Section 82 of the Trade Practices Act 1974 (Cth) discussed by the High Court in Sellars -v- Adelaide Petroleum N. L. (1994) 179 CLR 332 especially 349 to 356 per Mason CJ and Dawson, Toohey and Gaudron JJ. It is appropriate, in my opinion, to assess the compensation by reference to the likelihood of Davis' employment continuing. That is, compensation should be assessed, subject to the limits imposed by s 170EE(3), having regard to the possibilities and probabilities that the employment would have continued if the opportunity contemplated in s 170DC had been afforded to the employee. I have already indicated that it is probable that Davis' employment would have been terminated even if he had been given the opportunity to defend himself. I accept, however, that there is a slight possibility that it would not have been. The salary he would have received for the six months following the termination would have been in the order of $30,000.00. Having regard to the limited possibility that the termination would not have occurred, I assess the appropriate compensation in the sum of $5,000.00. I order that the Company pay Davis the sum of $5,000.00." In so assessing the compensation to which the appellant was entitled, we are of the view that his Honour erred. We are unable to agree that given the opportunity to explain his conduct that there was only a slight possibility that the appellant's employment would not have been terminated. If given an opportunity to explain, it is likely that the appellant would have referred to the fact that his work performance record was good and that he had been put in a difficult position regarding the cessation of Ms Purdie's employment given that the instruction to terminate her employment as soon as possible was likely to render the respondent liable to litigation if carried out. No doubt the explanation would have brought home to the respondent that it had given the appellant an unlawful instruction. In those circumstances it is likely that an apology from the appellant for his conduct and an assurance that the statement he made to Mr Dale and Mr Keepkie Snr was made without intent to deceive in anticipation that a resignation in writing had been received at the time he spoke would have been accepted by the respondent. Whilst it was submitted to his Honour that the appellant's conduct set a bad example for subordinate staff that had to be rectified by termination of the appellant's employment, in fact, if that problem existed, the respondent had a number of courses open to it other than termination of the appellant's employment. It would not have been difficult for the respondent to impose a disciplinary measure appropriate to reinforce the respondent's requirement that employees adhere to principles of proper conduct. In our view, having regard to the course of events that may have ensued if the appellant had been given the opportunity to raise matters in his defence, it could not be said that the prospect of the appellant continuing in employment was so remote as to require substantial discounting of the compensation that otherwise would be payable. As was said in May v Lilyvale Hotel Pty Limited (1995) 68 IR 112, 118: "... the proper approach is for the person assessing compensation, first, to assess the appropriate amount of compensation in the light of all relevant circumstances ... but disregarding the cap; secondly, to consider whether that amount exceeds the permissible maximum award and, if so, thirdly, to reduce the assessed amount accordingly ..." If it cannot be said that if s170DC of the Act had been complied with the appellant would have lost his job the amount of compensation to be assessed must be substantial. Only nine months after termination of his employment the appellant had suffered a loss of about $61,000, being unable to obtain regular employment at the same level, a consequence influenced no doubt by the manner in which his employment was terminated. The permissible maximum award ("statutory cap") is $31,100 and being satisfied that the remuneration likely to have been received but for the unlawful termination would have exceeded that sum it is unnecessary to state precisely what the compensation order would have been but for the statutory cap. It is inappropriate to assess compensation by reference to the "salary" that an employee would have received but for the termination. The relevant word in s170EE of the Act is "remuneration". The remuneration of an employee may exceed the employee's salary, for example, as in the appellant's case, where he was entitled to commissions in addition to his retainer. See also May at 113 and Rigby v Technisearch Limited (1996) 67 IR 68, 90-92. In referring to a "salary" of $30,000 for six months, his Honour did not direct his mind to the amount of remuneration the appellant would have been likely to receive in that period. A reasonable approach, in the absence of any evidence to the contrary, would have been to calculate "pro rata" the commissions earned by the appellant in the preceding year and to add that sum to the appellant's salary making the amount of remuneration likely to have been received at least $50,000. The statutory cap is equivalent to approximately 3 months of that remuneration Having come to the view that his Honour erred in the exercise of his discretion concerning the appropriate amount of compensation, and assessing compensation in accordance with the approach discussed in May, we have concluded that the compensation payable would have been more than the statutory cap and, therefore, that the sum of $31,100 is the amount of compensation that must be paid to the appellant. After the order of the Judicial Registrar was made, the respondent paid $31,100 into Court to be held by the District Registrar pending the hearing and determination by his Honour of the application for review. That sum remains in Court. We will order that this money, and any interest earned on it, be paid to the appellant's solicitors. SECTION 170DE Moore J held that s170DE of the Act had not been contravened by the respondent. The appellant contested that finding before us. We do not find it necessary to decide if s170DE(1) of the Act of the Act was breached by the respondent. Assuming that there was a relevant breach of s170DE(1) of the Act we would not have ordered that the appellant be reinstated for the reasons given above. Having ordered the statutory maximum amount of compensation for breach of s170DC of the Act, it is unnecessary for us to determine the amount of compensation we would have ordered had we found a breach of s170DE(1) of the Act had also occurred. ORDER In the circumstances the order of the Court will be: 1. The appeal be allowed. 2. The order of Moore J of 26 November 1996 be set aside and in lieu thereof it be ordered that compensation be assessed at $31,100. 3. The District Registrar pay to the appellant's solicitors the sum of $31,100 held by the Court, together with any interest accrued on the said sum.