Industrial Relations Commission of New South Wales in Court Session CITATION : Ross Sinclair v Hawker De Havilland Pty Ltd [2003] NSWIRComm 413 PARTIES : Ross Sinclair Hawker De Havilland Pty Ltd FILE NUMBER: IRC 4755 of 2003 CORAM: Curtis AJ CATCHWORDS : Notice of Motion - interpretation of s109A LEGISLATION CITED : Industrial Relations Act 1996 Walker v Industrial Court of NSW (1994) 53 IR 121 Beahan v Bush Boake Allen Australia Ltd (1999) 93 IR 1 CASES CITED : Chase Manhattan Bank NA v Israel-British Bank (London ) Ltd [1981] 1 Ch 105 Balsdon v Murray Irrigation Ltd [2003] NSWIRComm 251 Bell and Berg v Macquarie Bank Ltd and Anor [2002] NSWIRComm 235 Bell and Berg v Macquarie Bank Ltd and Anor [2003] NSWIRComm 363 HEARING DATES: 11/18/2003 EXTEMPORE JUDGMENT DATE : 11/18/2003 APPLICANT (RESPONDENT TO MOTION): Mr R Reitano of counsel SOLICITORS: Ross Selvaggio & Associates LEGAL REPRESENTATIVES: RESPONDENT (APPLICANT ON THE MOTION): Mr C Barton SOLICITORS: Freehills JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION Coram: CURTIS AJ 18 NOVEMBER 2003 IRC4755 of 2003 ROSS SINCLAIR v HAWKER DE HAVILLAND PTY LIMITED Application under s106 of the Industrial Relations Act 1996 EX TEMPORE RULING ON NOTICE OF MOTION INTRODUCTION 1 The respondent moves the court for orders that the applicant's summons for relief pursuant to s106 of the Industrial Relations Act 1996 be dismissed for want of jurisdiction. It is the respondent's contention that upon the facts pleaded, an application could have been made under Pt 6 of the Act (unfair dismissal) and jurisdiction is denied by s109A. 2 The Court has power to grant this relief if the s106 application is wholly misconceived or lacks arguable legal foundation, in short, if it is doomed to fail. 3 It is apparent from the facts pleaded in the summons that the dispute between the parties arises out of what may have been a constructive dismissal of the applicant by the respondent on 17 July 2003. 4 The applicant pleads that he either resigned willingly and the severance provisions were unfair, or in the alternative that he was denied procedural fairness before the option of dismissal or resignation was put to him and that his contract of employment was unfair, harsh and unconscionable in that it did not include a term that he be fairly compensated in the event that he was unfairly dismissed. THE APPLICABLE LAW 5 For some years prior to the enactment of s109A it was accepted that the jurisdiction to make orders pursuant to s106, and its statutory predecessors, attached to contracts that were unfair in that relevant omissions in their terms permitted unfair dismissal, (Walker v Industrial Court of New South Wales (1994) 53 IR 121 per Kirby P, Sheller J at 149), and the thirty-six authorities cited in Beahan v Bush Boake Allen Australia Limited (1999) 93 IR 1. 6 Section 109A was inserted into the Industrial Relations Act 1996 by Act No 106 of 1998 Schedule 1 Item 1 and commenced on 1 December 1998. It is in these terms: s109A: (1) This Division [unfair contracts] does not apply to a contract of employment that is alleged to be an unfair contract for any reason for which: (a) an application has been or could have been made by the employee under Part 6 (Unfair dismissal), or (b) such an application could have been made but for the provisions of section 83 that exclude the employee from making an application under that Part. 7 Part 6 of the Act headed "Unfair Dismissals" provides relevantly as follows s84 (1)If an employer dismisses an employee and the employee claims that the dismissal is harsh, unreasonable or unjust, the employee may apply to the Commission for the claim to be dealt with under this Part. s88 In determining the applicant's claim, the Commission may, if appropriate, take into account: (a) whether a reason for the dismissal was given to the applicant and, if the applicant sought but was refused reinstatement or re-employment with the employer, whether a reason was given for the refusal to reinstate or re-employ, and (b) if any such reason was given - its nature, whether it had a basis in fact, and whether the applicant was given an opportunity to make out a defence or give an explanation for his or her behaviour or to justify his or her reinstatement or re-employment, and (c) whether a warning of unsatisfactory performance was given before the dismissal, and (d) the nature of the duties of the applicant immediately before the dismissal and, if the applicant sought but was refused reinstatement or re-employment, the likely nature of those duties if the applicant were to be reinstated or re-employed, and (e) whether or not the applicant requested reinstatement or re-employment with the employer, and (f) such other matters as the Commission considers relevant. 8 Pursuant to s89, the relief available to an applicant pursuant to s84 included reinstatement, together with the payment of lost wages, or payment to him of an amount of compensation not exceeding the amount of remuneration paid to him during the period of 6 months immediately before his dismissal. 9 The operation of s109A was considered by the Full Bench in Beahan v Bush Boake Allen Australia Limited. The Court there rejected the view that s109A applied to exclude from the provisions of s106 all claims resulting from termination of employment which termination was "harsh, unreasonable or unjust". 10 Relying upon a reply by the Minister to a question in a Parliamentary debate upon the Bill, the Full Bench was of the opinion (at 42) that: . . .s109 operates to exclude a contract of employment from the operation of s106 only where the unfair contract claim is an unfair dismissal claim in disguise and where essentially it is of the nature of an unfair dismissal. 11 The words "disguise" or "essentially" are unhelpful. Which of the thirty-six cases cited in the judgment would be struck down by the section? Some practical guidance is necessary. The very word "disguise" illustrates the nature of the problem. If an application for relief pursuant to s106 looks like an application pursuant to s84(1), when and why is it not? 12 Some assistance as to what the Full Bench meant is to be found in their Honours' citation (at 28) of remarks by Goulding J in Chase Manhattan Bank NA v Israel-British Bank (London) Limited [1981] 1 Ch 105 at 124 where his Honour said: Within the municipal confines of a single legal system, right and remedy are indissolubly connected and correlated, each contributing in historical dialogue to the development of the other, and, save in very special circumstances, it is as idle to ask whether the court vindicates the suitor's substantive right or gives the suitor a procedural remedy as to ask whether thought is a mental or a cerebral process. In fact the court does both things by one and the same act. 13 Their Honours in Beahan pointed out at 35: "the respective schemes for unfair contracts and unfair dismissal are quite disparate in terms of both entitlement and remedy." 14 If there be no basis to distinguish right from remedy, the answer to the question posed must lie in the identification of the remedy. Section 84 entitles an employee to relief without any necessity to find his contract unfair. Section 106 entitles an employee to relief only when his contract is found to be unfair. The remedy pursuant to s84 is limited by s88 to reinstatement or six months pay. Section 106 permits money orders without limit. 15 In a practical sense, few if any contracts of employment provide as specific terms those requirements of procedural fairness which may be considered pursuant to s88 in consideration of a s84 application. However, by force of s88, it is unnecessary to vary the terms of a contract of employment to include such terms as a condition precedent in order to grant the relief of reinstatement or six months remuneration. 16 Where the justice of the situation demands greater relief than Pt 6 (Unfair Dismissal) affords and it is necessary to vary the terms of the contract of employment to effect that relief, then the entitlement, and the remedy, lie pursuant to s106. Conversely, where the justice of the situation may be accommodated within the relief available pursuant to Pt 6 (Unfair Dismissal), the entitlement and the remedy lie pursuant to that section. Section 106 is not available because of the operation of s109A. 17 It follows that an applicant for relief pursuant to s106 must plead facts and circumstances which make his contract unfair in failing to entitle the applicant to the larger remedy. Such matters may include length of service, seniority, age, salary, promotion, or the vesting of collateral benefits, such as long service leave, share options or bonus payments. The existence of such factors or contingent rights may make the contract unfair if it does not include terms preventing unfair dismissal, requiring procedural fairness before dismissal, or providing for the award of monetary relief in excess of six months remuneration. 18 The significant consideration in the decision by Boland J to strike out a s106 application in Balsdon v Murray Irrigation Limited [2003] NSWIRComm 251 was his finding that "the summons in the present proceedings did not specify why it was that the contract of employment was unfair" (at 30). 19 To put it in another way, an application for relief limited to reinstatement or six months of remuneration may be made pursuant to s84 of the Act and s109A prevents such application being brought pursuant to s106. An application for relief seeking a payment in excess of six months remuneration is not one which, in the words of s109A, "could have been made by the employee under Pt 6 (Unfair Dismissal)". 20 An application for relief pursuant to s84 is "disguised" as a claim pursuant to s106 if the relief to which the applicant is entitled is available to him pursuant to a s84 application with no addition or variation to the terms of the contract. 21 Put yet another way, an employee who has been dismissed harshly, or unjustly, cannot be heard to complain solely of the manner of the dismissal in an application brought pursuant to s106, but only of its consequence. If the consequence is a financial loss which exceeds the relief available under s84, the employee may assert that his contract was unfair in failing to provide either, or both, procedural fairness or a greater remedy in the event of an unfair dismissal than is available pursuant to Pt 6 (Unfair dismissal). 22 If an applicant for relief pursuant to s106 has no reasonable basis upon which he or she may claim relief beyond that available under s84, there will be no basis upon which the Commission may find that the contract or arrangement operates unfairly, even in the absence of a term preventing unfair dismissal because the unfairness is obviated by the provisions of Pt 6. Upon the denial of relief a cost penalty will apply. 23 It follows that an application for remedy for unfair dismissal in which time has expired, may not be resurrected by an application brought pursuant to s106 if the relief claimed, or claimable, is less than six months remuneration. THE MERITS 24 The respondent to the present summons argues that the summons identifies no facts or circumstances from which it may be concluded that the contract was unfair. 25 The applicant, in response, answers that the summons pleads that at the time of the events leading to the cessation of his employment he had been employed for fourteen years. He pleads that in that time he had been promoted to a number of positions and was appointed to a new position, planning/reporting analyst, to commence on 1 April 2003 upon a salary of $91,200 per year. It is the applicant's contention that those facts are sufficient to give rise to an inference that the contractual terms, pursuant to which the respondent was able to terminate the applicant's contract of employment, upon giving four weeks notice, were unfair. He seeks relief by way of payment of a sum in excess of six months remuneration. 26 Mr Barton for the applicant on the motion, relying upon passages contained within the judgment of Schmidt J in Bell and Berg v Macquarie Bank Limited and Another [2002] NSWIRComm 235, submits that, as a matter of law, issues relating to procedural fairness in the dismissal of an employee cannot be considered in a s106 application because such matters are within the province of the bar created by s109. Although Her Honour's judgment in the matter denying relief to the applicants was upheld on appeal (Bell and Berg v Macquarie Bank Ltd and anor [2003] NSWIRComm 363, 23 October 2003), some doubt was then expressed by the Full Bench as to the opinions of Schmidt J relating to s109A. 27 In order that I grant the relief to strike out this application, it is necessary that I be persuaded that, as a matter of law, those factual circumstances pleaded by the applicant could not possibly justify inferences that the contract was relevantly unfair and that the relief sought is justified. I am of the opinion that the facts pleaded may permit those inferences. Whether in fact they are sufficient is a matter for the trial judge. ORDERS 28 The motion is dismissed. 29 The applicant on the summons and the respondent to the motion is to have his costs paid by the respondent to the summons. 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