DARBY - v - HI-TEK ROOFING PTY LTD [1997] IRCA 159

DECISION NO:159/97 C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - no appearance at hearing by the respondent - CONSTRUCTIVE DISMISSAL - COMPENSATION - the effect of the applicant's written RESIGNATION on his entitlement to compensation some weeks prior to termination at the initiative of the respondent Workplace Relations Act 1996 s 170EE(5) Industrial Relations Court Rules O7 r2 and r6, Carrigan v Darwin City Council (unreported, Industrial Relations Court of Australia, von Doussa J, 20 March 1997) SHANE DARBY - v - HI-TEK ROOFING PTY LTD No. VI 2619 of 1996 Before: Judicial Registrar Millane Place: Melbourne (heard in Warrnambool) Date: 15 May 1997 INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2619 of 1996 B E T W E E N : SHANE DARBY Applicant A N D HI-TEK ROOFING PTY LTD Respondent MINUTES OF ORDERS Judicial Registrar Millane 15 May 1997 THE COURT DECLARES THAT: 1. On 20 September 1996 the respondent terminated the applicant's employment in contravention of the Workplace Relations Act 1996. AND THE COURT ORDERS THAT within 21 days of the date of making these Orders: 2. The respondent pay to the applicant the following sums less any amount payable to the Commissioner of Taxation pursuant to the Income Tax Assessment Act 1936 and actually paid: (a) compensation in the sum of $2,137.74; (b) damages pursuant to section 170EE(5) in the sum of $485.85. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 2619 of 1996 B E T W E E N : SHANE DARBY Applicant A N D HI-TEK ROOFING PTY LTD Respondent Before: Judicial Registrar Millane Place: Melbourne (heard in Warrnambool) Date: May 1997 REASONS FOR JUDGMENT By an application filed on 8 October 1996, the applicant seeks compensation alleging that on 20 September 1996 the respondent unlawfully terminated his employment as a sales manager of one of its regional building supplies stores. On the return date the respondent did not appear to defend the proceeding. The respondent was called outside the Court and, having examined the Court file, I was satisfied that: 1. Pursuant to Order 7 Rule 2 of the Industrial Relations Court Rules on 14 October 1996 the respondent filed an unconditional appearance identifying its address for service as 2 Currier Street, Breakwater, Victoria, 3219; 2. Pursuant to Order 7 Rule 6 of the Industrial Relations Court Rules no notice of change of address has been filed by the respondent since 14 October 1996; and 3. By a written notice dated 3 March 1997 and sent to the respondent's address for service, the Industrial Relations Court of Australia registry notified the respondent of the hearing date on 5 May 1997 and that notice was returned in an envelope indicating that the respondent had left the address for service. I was further informed by the applicant's solicitor, Mr Andrew Campbell, that mail forwarded to the respondent had been returned to him and he had not had any communication with the respondent since February 1997. In these circumstances the Court proceeded with the application as an uncontested hearing with the applicant giving evidence on his own behalf. BACKGROUND The applicant told the Court that he was previously employed by the Royal Australian Air Force (RAAF) for some eight and a half years. Prior to that employment he had experience in sales and wanted to return to this kind of work as well as move to the Portland area with his fiancee. Some weeks before commencing his employment with the respondent on 24 July 1996, he responded to an advertisement placed by the respondent in a Portland newspaper. He was interviewed by Mark Humphrey, the respondent's managing director and Neville Wright, the respondent's regional business manager. According to the applicant the respondent's head office was then located in Geelong and Breakwater with franchises in other areas. When he was interviewed it was then the respondent's intention to open other regional stores including one at Portland. At that time it had a proposal for a regional store at Hamilton with a manager already appointed for that store. The interview was successful; in that the applicant was offered the management of the Portland store. However, because he was concerned about obtaining confirmation of a firm intention to employ him before foregoing his permanent position in the RAAF, the respondent agreed to facsimile to the RAAF a written offer, which it did. At that time the applicant took two weeks' unpaid leave from the RAAF to undertake training at the respondent's head office in Geelong, whilst renting a flat for two weeks from a friend in Altona. The applicant's RAAF base was at Sale and when he received confirmation of his offer of employment the RAAF paid his removal expenses to Portland. The Hamilton store was due to be opened in early August during an agricultural show week and the applicant was asked to help out at the respondent's display as well as to help train the Hamilton store manager for several days. During this time he was informed by Humphrey and Wright that, as a result of discussions with locals at Portland, they were not convinced that it was worthwhile opening a store at Portland and had decided not to proceed with the original plan for the time being. The abovementioned turn of events caused the applicant some concern, however, the respondent took steps to reassure him by telling him not to worry because the respondent would look after him. He was then asked to run the Hamilton store for a short period, with the respondent terminating the employment of the incumbent manager of that store to keep the applicant on. It was the applicant's understanding that his position at Hamilton was a temporary one whilst his employer decided whether or not to open another store either at Portland or Warrnambool. Despite the need to travel some eighty to eighty-five kilometres each day to and from work, he accepted this situation because he was concerned about being unemployed and he had by then rented a home in Portland. The arrangements for work were that the store manager remained with the store as its sole operator and Wright was to attend Hamilton as a sales representative to promote the business and seek new business. The applicant's hours of work each week were 8.00am to 5.00pm Monday to Friday and 8.00am to 12.00pm on Saturday. He was unclear about his salary, however, he appears to have accepted that the salary referred to in the correspondence detailing his termination pay (Exhibit A5) was $484.85 gross per week ($25,212.20 per annum). The application filed with the Court also sought recovery of underpaid wages, however, this application was not pursued at hearing as particularisation of the claim and the precise nature of the claim had not been notified to the respondent. In the weeks that followed his appointment to the Hamilton store the applicant found business very slow and he was frustrated by the respondent's refusal to spend money on advertising and promotion of the business. As its sole operator the applicant was very much tied to the store and reliant on Wright, whose visits were infrequent, to perform the sales and promotional work needed to interest the local businesses and community in the respondent and its products. In mid September 1996 the applicant was informed that all the respondent's regional operations were to be franchised including the Hamilton and the Portland operation, the latter of which had been partly set up but not opened. At that time the applicant could not afford to move to Hamilton and perceived an opportunity for him to return to Portland and work there if he could purchase the franchise. It was his judgment that he could develop the business himself. To this end he sought bank finance. He obtained a good reference from Humphrey, who undoubtedly had an interest in the outcome of the loan application, in support of his application. The application was unsuccessful because of the bank's concerns about the profitability of the proposed stores. When Humphrey was informed of this outcome his response was to say "look's like we're stuck with you now". Even at that stage the respondent was still encouraging the applicant to stay, although by then, there were difficulties with the head office supplying orders on time and the loss of at least two of the Hamilton customers as a consequence. According to the applicant by mid September he was very stressed and physically run down and, in his words, "did not want to be there". Money was tight, he had some outstanding loans to meet from his days with the RAAF and he was spending some $100 per week on petrol commuting to Hamilton. In the week preceding his attendance on his local doctor, Dr Lee, on 23 September 1996 the applicant told the Court that he felt irritable and stressed by what had happened and then decided that he might have to resign. In fact, on Tuesday, 17 September 1996 he faxed a long message to his employer confirming his telephone advice to Humphrey that he intended to resign. The facsimile offered between four to six weeks' notice to allow the respondent time to hire and train a replacement store manager. The facsimile goes on to set out the applicant's reasons for his decision to resign as follows (Exhibit A2): "Mark, As per our telephone conversation, here is my written resignation. My timeframe is between 4-6 weeks giving you time to hire and train my replacement. My reasoning is as follows: I feel that business here is going to be slow and take quite some time to pick up to the level that you expect. I have tried all the tricks I know to increase our patronage, however I feel that I can do no more, and the feelings that I get from head office is that it is my fault. I truly believe that Hi Tek needs to rethink its policies and approaches to new areas. For starters, there needs to be more advertising. Hi Teks presence is not being felt in Hamilton. On a personel (sic) level, I feel that I am expected to forget all other concerns in my life, and live only for Hi-Tek. I'm sorry, but I cannot make that sort of committment (sic), as my family is far too important. I'm sure that I made this point quite clear to you from my job interview. The main reason I wanted to leave the air force was for that very reason. Also, I understand your reasoning for not openning (sic) the Portland store. But I hope you can appreciate that I cannot break contracts and deals that I have made to live in Portland. I am now spending at least $100 a week in fuel (gas), just travelling. The pressure of also worring (sic) about getting to work on time, with enough fuel, or not having mechanical problems. This stress is starting to put pressures on my relationship with my fiance. My health has also deteriated (sic), however I'm too worried to take sick leave, as there will be no-one to run the store. Finally, the fact that I have been unable to raise funds to purchase the Portland franchise will put further pressure on you and me in our employer/employee relationship. I am very sorry to be doing this, as I appreciate what a chance you have given me, but I'm afraid that I'm not happy in the present circumstances, so to rectify that, I must leave. As I said earlier, I will help in any way I can in the hiring and training of my replacement, and my commitment to the job at hand will remain until I finish up. Thank you once again." The applicant told the Court that Humphrey accepted the resignation and informed the applicant that he was not "cut-out" for the position anyway. Wright contested the concerns raised in the facsimile and indicated that it was better that the applicant was leaving. I understood from the applicant's evidence on these matters that, in effect, the respondent accepted his resignation and his offer to remain in employment for some four to six weeks, which would have continued the employment contract and relationship to approximately 29 October 1996. By 23 September 1996 the applicant did not feel well enough to drive to work and on consulting his doctor was diagnosed as suffering from stress. He was told he was "burnt out" with stress. His doctor provided him with a medical certificate for the period 23 September 1996 to 29 September 1996 inclusive (Exhibit A3) and a copy of that certificate was faxed to the respondent's head office with a note indicating that the applicant was unable to commute to Hamilton due to his medical condition and, further, indicating that he would contact the respondent during that week. The applicant at the relevant time did not have the telephone connected to his home. On the Friday of that week he says that a taxi arrived at his home with a facsimile (which bears the date 26 September 1996) containing the following message from his employer (Exhibit A4): "We write to advise that we are terminating your employment with one week's notice. As you have already notified us that you will be resigning in 3-5 weeks, we feel that it would suit both parties if we parted company as soon as possible. As you have failed to contact anyone at our office as you indicated in your fax last Monday, and we are unable to reach you by telephone, we have undertaken to communicate this way. We would appreciate your contacting either myself or Neville as soon as possible to discuss your plans." On receipt of the facsimile message the applicant telephoned Humphrey who told him that the store in Hamilton had not been opened until Tuesday after a customer contacted them. He also complained that the applicant had been leaving the store unattended and leaving early for the day. These were the only reasons proffered for the early termination of the employment. In his evidence the applicant told the Court that he responded to Humphrey by telling him that he had resigned and it was "better this way". He then asked for his correct termination pay and a notice to enable him to apply for unemployment benefits. By a letter dated 27 September 1996 the respondent forwarded a cheque for "termination payment" comprising one week's salary in lieu of notice of $485.85 (less tax totalling $386.95), and an unused annual leave payment less tax of $230.00. The cheque for $616.95 was cashed by the applicant at the Commonwealth Bank and the proceeds applied to his debts. Shortly afterwards, however, he was visited by his bank manager who told him the respondent had stopped the cheque. The applicant was required by the bank to enter into a loan agreement to repay the cheque sum and at the date of hearing was still paying off that debt. By a letter dated 30 September 1996 (Exhibit A6) the respondent informed the applicant that it had stopped the cheque payment pending an explanation from him of the telephone account for the Hamilton store. According to the applicant there were no instructions given to him limiting his use of the business telephone and after enquiries made by him he arranged to repay some $200 of the $700 account the respondent had received. Since the termination the applicant has been unemployed other than as a travelling salesman from January 1997. He moved to Mount Gambier on the advice of the Commonwealth Employment Service because of better employment opportunities but as yet has not found permanent work. The travelling salesman position is one that pays only a twenty per cent commission and to date he has earned approximately $6,000. The applicant argues that because of the unfair way in which he was treated and the pressure placed on him to commute each day, the resignation was, in fact, a constructive dismissal. The question that must be answered "... is whether the (respondent's) conduct as a whole is such that its effect, judged reasonably and sensibly, is such that the employee could not be expected to put up with it." (see Carrigan v Darwin City Council (unreported, Industrial Relations Court of Australia, von Doussa J, 20 March 1997)). In my view it is clear from the applicant's evidence that the applicant's resignation was one that came about because of his dissatisfaction with certain aspects of his working conditions including his employer's refusal to take the steps he felt were necessary to improve and develop the Hamilton store and its failure to develop an outlet closer to the applicant's residential address. In these circumstances I am not satisfied that this is a case where the applicant had no option other than to resign because of his employer's unreasonable conduct. In my view, the applicant's argument is misconceived for a number of reasons. The first is that it is clear that the respondent by its facsimile dated 26 September 1996 initiated or acted to bring to an end the applicant's employment contract and the employment relationship. Its conduct on that occasion directly brought about the termination of his employment from 27 September 1996. The respondent carries the burden of proving in this Court that at the date of termination there was a valid reason or reasons for termination. It's failure to discharge its legal and evidentiary burden leads to a finding that the termination was affected in contravention of the Act. The only other matter the Court must address is the question of remedy. In this case the applicant argues that reinstatement is impracticable and I accept this is so by virtue of the applicant's relocation to Mount Gambier in an effort to find other work and mitigate his loss. In determining whether in all the circumstances of the case the payment of compensation is appropriate and, further, in determining what the amount of that compensation should be, the question of whether the resignation tendered on 17 September 1996 limits the period over which any remuneration can be treated as a loss is a relevant consideration. As I have already indicated above I am not satisfied that this is a case where it can be said that the applicant's resignation was an involuntary one and he was, on 17 September 1996, faced with no alternative but to resign. There was clearly dissatisfaction with his conditions of employment and his employer's failure to accept his advice on how to promote and develop the business. Nevertheless, at that time there was no store operating in Portland or Warrnambool and the position the applicant held with the respondent required him to commute to Hamilton. On his own evidence he appears to have accepted this situation, at least temporarily, but once it became clear that the Portland store was not to be opened by the respondent and the franchise of that store was not within his reach, he made the decision to leave. The case was not argued in the alternative as one of breach of contract and so far as the claim pursuant to the Act is concerned, the applicant took steps to end his employment within an agreed time frame and such time frame necessarily limits his entitlement to claim remuneration he would have received or have been likely to receive but for the termination on 29 October 1996. Compensation under the Act, whilst it is limited by the cap, is not confined to remuneration lost. However, the applicant's case was not put to me on any other basis which would enable me to assess other aspects of any alleged loss. The applicant is entitled to pursue any claim for unpaid wages and; for instance, his unpaid annual leave. These were not matters for my consideration at the hearing. It was never open to the employer to offset any claim for a debt against unpaid wages and its failure to pay the one week's notice permits the Court to make an order for damages pursuant to section 170EE(5) of the Act in the sum of $485.85. So far as compensation is concerned I find that a payment of compensation is appropriate in all the circumstances of this case. I assess the loss at four weeks' and two days' pay giving a gross figure of $2,137.74. MINUTES OF ORDERS THE COURT DECLARES THAT: 1. On 20 September 1996 the respondent terminated the applicant's employment in contravention of the Workplace Relations Act 1996. AND THE COURT ORDERS THAT within 21 days of the date of making these Orders: 2. The respondent pay to the applicant the following sums less any amount payable to the Commissioner of Taxation pursuant to the Income Tax Assessment Act 1936 and actually paid: (a) compensation in the sum of $2,137.74; (b) damages pursuant to section 170EE(5) in the sum of $485.85. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. I certify that this and the preceding ten (10) pages are a true copy of the reasons for judgment of Judicial Registrar Millane. Associate: Dated: 15 May 1997 Solicitors for the Applicant: Stringer Clark Appearing for the Applicant: Mr A. Campbell No appearance for the respondent. Date of hearing: 5 May 1997 Date of judgment: 15 May 1997