Industrial Relations Commission of New South Wales CITATION : Forrester v R & B NSW Pty Ltd t/as Noraville Child Care Centre [2003] NSWIRComm 279 APPLICANT PARTIES : Kerry Forrester RESPONDENT R & B NSW Pty Ltd t/as Noraville Child Care Centre FILE NUMBER: IRC 1070 of 2003 CORAM: Harrison DP CATCHWORDS : Application re unfair dismissal pursuant to s84 - termination found harsh unreasonable and unjust - compensation awarded LEGISLATION CITED : Industrial Relations Act 1996 HEARING DATES: 07/21/2003; 07/22/2003 DATE OF JUDGMENT: 08/29/2003 APPLICANT Mr J Wormington of Counsel SOLICITORS LEGAL REPRESENTATIVES: Richardson Burgin Steer RESPONDENT Mr P Moore Solicitor of Brazel Moore and Daly JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: HARRISON DP Friday, 29 August 2003 Matter No IRC 1070 of 2003 KERRY FORRESTER AND R & B NSW PTY LTD T/AS NORAVILLE CHILD CARE CENTRE Application by Kerry Forrester re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996. DECISION [2003] NSWIRComm 279 1 The application in this matter was filed on 28 February 2003 and listed for Conciliation and Directions proceedings on 30 April 2003 before Patterson C. These proceedings did not take place. The matter was reallocated to the Commission as presently constituted on 30 April 2003 and subject to proceedings on 15 May 2003. 2 It was established that the matter could not be settled by agreement between the parties and Directions issued to bring the matter to hearing on 21 and 22 July 2003, on an estimate of two days required for arbitration. 3 On 21 July 2003 Mr J Wormington of Counsel, instructed by Richardson Burgin Steer, Solicitors, appeared on behalf of the applicant, Ms K Forrester. The applicant had previously been represented by Aubrey Brown Partners, Solicitors. 4 Mr P Moore, Solicitor of Brazel Moore and Daly Solicitors appeared on behalf of the respondent, R & B NSW Pty Ltd T/as Noraville Child Care Centre, with Mr R Youngman, owner and director of the respondent. 5 Mr Wormington brought evidence from the applicant. Mr Moore brought evidence from Mr Youngman. THE EVIDENCE 6 The evidence establishes that the applicant was employed at the Noraville Child Care Centre ("the Centre") from March 1987 when it was known as the Bellbird Pre-School. The applicant was initially employed as a child care assistant, then progressed to early childhood teacher subsequent to obtaining her Associate Diploma in Social Sciences (Child Studies) in 1993. 7 Mr Youngman purchased the business from the former owner, a Ms Glenda Morris, with effect from 1 October 2002. The applicant was appointed Director of the Centre from 1 October 2002 and undertook the usual range of duties and functions required of a director. The former owner continued as a paid employee of the Centre during October 2002. 8 There is dispute between the parties on a number of issues. Prior Acquaintance 9 The applicant and Mr Youngman were known to each other prior to the purchase. Mr Youngman asserts that their relationship was one of close friendship involving social occasions. The applicant deposed that the relationship was no more than teacher/parent arising from and conducted on the basis that Mr Youngman had children enrolled at the Centre. Purchase of the Centre 10 It is Mr Youngman's evidence that he took advice and counsel from the applicant in his pre-purchase considerations. His evidence is that an initial arrangement for purchase fell through and that he was approached by the former owner with assistance from the applicant to rekindle discussions, subsequently purchasing the business on advice from his accountant. Mr Youngman's evidence is that he was considering purchase of a truck and associated business as an alternative to the Centre. Mr Youngman deposed that the applicant and Ms Morris put representations to him suggesting he would make significant profits from the Centre resulting in him paying more than he believed was a fair price. 11 The applicant's evidence is that she took little or no part in the sale process and denies making representations to Mr Youngman in respect to future profits. 12 Mr Youngman's evidence is that subsequent to purchase he obtained a valuation for the business which suggested he had paid $100,000 more than the true worth of the business. Mr Youngman deposed that he would often ask the applicant whether the business was worth what he paid for it and she would invariably reply that she did not know. 13 The evidence of Mr Youngman at p63 of transcript, in response to cross examination by Mr Wormington, is that he acted on the advice of his accountant. That evidence is: Q: And what was the advice of your accountant? A: Pardon? Q: What was the advice of your accountant? A: He advised me to go buy my truck. Q: So, you disregarded your accountant's advice? A: Not so - he said - one or the other - he said 'You're not going to make a lot of money, you'll make a living - an existence' - same as the truck - 'If you don't want to work hard, buy yourself a Child Care Centre'. Q: Your accountant's a professional, and he's a specialist, in that area, and he was the appropriate person to advise you? A: Yes. Q: And he did advise you appropriately? A: No - he gave me a choice - drive my truck, or open a Child Care Centre - if you want to go drive a truck - he left it up to me, so I did - I went to the Child Care Centre, and listened to Kerry. Q: Well, didn't you say, he said, that you'd make a living out of it, but not a lot of money? A: Yes. I'd make a lot more money in trucks, though. Offer of employment 14 There is a disagreement between the parties in respect to the initial approach leading to employment of the applicant. It is the applicant's evidence that she was approached by Mr Youngman offering her the position of Director and asking her for a commitment for a period of four years, and that she was reluctant to make that commitment but was encouraged to do so by representation of improved earnings on the basis of business improvement in the following year. 15 Mr Youngman's evidence is that the applicant approached him with the proposition that if he were to buy the centre she would stay on and manage it for him, otherwise she would pursue alternative employment. Mr Youngman deposed he agreed for the applicant to stay provided she was there for the long term. He denies any representation any respect to future earnings. 16 Mr Youngman puts a number of allegations of poor management and administration failure by the applicant. These are detailed in Mr Youngman's evidence. The applicant's evidence provides explanation and denial in respect to each of the allegations. The particular issues raised by Mr Youngman include: · Enrolment Records 17 A failure to maintain proper records of students enrolled resulting in a requirement for Mr Youngman to repay the sum of $8,000 to the Family Assistance Office, which he is undertaking by instalments. 18 In cross examination Mr Youngman conceded that the applicant had not created this situation, putting that she should have discovered it and rectified the problem in the four months of her employment. 19 The applicant denies the assessments were incorrect, advising that any overpayment was made on an assessment by the Family Assistance Office (FAO) on quarterly figures provided by the previous owner and not her responsibility. · Provision of a motor vehicle to the applicant 20 Ms Forrester and Mr Youngman are in dispute over the provision of a motor vehicle to her for business and private use. 21 The initial application for finance made by the applicant as a Director on behalf of the respondent was declined and the vehicle, a Hyundai Sante Fe 4WD automatic, was subsequently purchased by the applicant on finance in her own name. However, Mr Youngman deposed that the applicant was not a Director and misrepresented herself in that capacity. At p48 of transcript Mr Youngman describes the applicant's position as Managing Director and later at p49 puts that she was both Manager and Director of the Centre. This is at odds with the assertion that the applicant was not entitled to represent herself as a director. There is no evidence to confirm or deny whether the applicant is or was a director of R & B NSW Pty Ltd in whose name she first sought finance for the vehicle. 22 There remains an issue between the applicant and Mr Youngman as to whether this was to be funded by the employer by way of salary sacrifice arrangements. 23 Mr Youngman's evidence is that he intended to purchase the vehicle from the applicant and continually asked her to sign the vehicle over to him or the respondent. The Applicant's understanding of those approaches is that Mr Youngman sought ownership of the vehicle but not responsibility for the associated debt. Mr Youngman's evidence is that the vehicle was to be by salary sacrifice to fit within a $600 p.w. net pay to the applicant by reduction in weekly payment to an amount of approximately $540 p.w. to accommodate the cost of the vehicle. 24 In the event, the applicant retains possession of the vehicle and continues to be personally responsible for the finance thereof. · Staff numbers 25 The applicant denies that the centre was overstaffed, deposing that post acquisition by Mr Youngman enrolments and staffing levels continued unaltered with the exception of the employment of two persons in a job share arrangement to attend to children with special needs, which was appropriately within the staff to enrolment ratio and funded accordingly. 26 In cross examination at p69 of transcript Mr Youngman conceded that he had agreed to the employment of two additional staff members, noting that one had been selected by consensus of the staff and that he had selected the other person. Mr Youngman put that he did not understand anything about the process but accepted the applicant's explanation of need for additional employees. 27 The applicant's evidence is that the wages of the special needs teachers were fully subsidised and imposed no cost on the Centre. · Maintenance costs and financial administration 28 The applicant acknowledges discourse with Mr Youngman concerning expenditure on repairs and maintenance, which she deposed was excessive and unaccounted for as a result of Mr Youngman's practice of employing friends and associates to undertake this work. The applicant's evidence is that her responsibilities did not include advising the owner of the financial position of the Centre. It is the applicant's evidence that she was absent from the Centre for three weeks over the Christmas period and during this time the respondent employed three to four workmen daily making improvements. Her evidence is that she returned to the Centre in early January 2003 and discovered that the operating account, which had been well funded prior to Christmas, was $4,000 overdrawn. The applicant deposed that she drew this to Mr Youngman's attention who then accused her of writing cheques in favour of the former owner (Ms Morris), asserting that there were a number of cheques missing and there appeared to be $15,000 missing from the account. The applicant denies this assertion, putting that Mr Youngman often failed to fill in cheque butts and had adopted a practice of providing blank cheques to tradesmen for hardware purchases. Mr Youngman denies this. 29 In cross examination at pp 59 and 60 of Transcript Mr Youngman's evidence is that he had his accountant carry out an audit of the Centre administration and found no discrepancy or cause for concern; at p61 of transcript Mr Youngman, in response to Mr Wormington, put: Q: So, you said the accountant carried out an audit and there were no cheques missing? A: He was quite happy with what's gone down. Q: So, paragraph 15 - that all resolved itself. You're not suggesting that the applicant had done anything wrong, with butts not being filled out in the cheque book? A: No, I've got no problems with Kerry - the way she's wrote cheques, and that - no - the accountant's backed that up. 30 This evidence exonerates the applicant. 31 There is no evidence in the form of bank statements or corroborative testimony to support either contention, however, on the balance of probabilities I am compelled to favour the version offered by the applicant. · Failure to call staff meetings 32 The applicant denies that she refused to call staff meetings, deposing that attempts to do so were avoided by Mr Youngman who on one occasion walked out of a discussion in which a relevant training video was being screened, asserting: "This is women's stuff, I do not need to watch this". Mr Youngman denies this assertion, putting that he intended to watch the video at a more convenient time. · Failure to hold fire drills 33 The applicant denies that fire drills were not undertaken as required. The evidence is that the Department of Community Services (DOCS) require fire drills to be undertaken quarterly, however, Mr Youngman put that fire drills should be undertaken monthly and obtained endorsement from DOCS for this practice. There is dispute between the parties as to the availability of a piece of rope and a whistle needed for the fire drill; Mr Youngman putting that this equipment was at the Centre, however, he then purchased additional rope and whistles and insisted that fire drills take place. The applicant's evidence is that fire drills were scheduled within the regulatory requirements and the principles of early childcare suggest that the children be allowed to settle into the routine of the Centre during January prior to the imposition of such arrangements. A written warning in respect to the conduct of fire drills was provided to the applicant on 5 February 2003. Fire drills took place on 6 and 7 February 2003. · Failure to publish newsletters on a monthly basis 34 The respondent's complaint in respect to newsletters is that only three were produced in a period of five months. An examination of that five month period reveals that the applicant was only employed for a full three months in that time, and had produced a newsletter in each full month of her employment. 35 The complaints made by the respondent in respect to staff meetings, fire drills and publication of newsletters are tenuous. There is no evidence to support the applicant's view as to the efficiency of fire drills during the early weeks of settling in to first term, however, the view is available that fire drills should be undertaken sooner rather than later and particularly in the usually extreme temperatures of January. This was capable of specific rectification by the respondent by direct instruction that a fire drill take place on a specific date and time. The warnings issued on 5 February 2003 in respect to fire drills resulted in immediate compliance. 36 This remedy was also available to the respondent in respect to staff meetings and the publication of newsletters. 37 The resort to specific management direction was not taken in respect to any of these matters. · Housekeeping and propriety issues 38 There are further complaints put by the respondent in respect to the cleanliness and hygiene of the facility and the discovery of a dildo on the premises. 39 The applicant denies any responsibility or failure to maintain appropriate hygiene standards. The applicant's evidence is that the dildo had been brought to the premises by another person as a prop for a surprise hen's night preceding the wedding of the former owner's daughter some two years prior and had been left in the storeroom and forgotten until she discovered it in there during the course of a clean up. The applicant's evidence is that immediately upon discovery she contacted the person who had brought the item in for the hen's night and arranged for her to attend the Centre and remove it. Whilst waiting for that to occur the applicant concealed it in the office area, underneath the photocopier, where it was discovered by Mr Youngman. The applicant deposed that she was confident that neither children nor parents would attend the office and if that were the case the item was well concealed from view. 40 In the event, the item was removed from the Centre within twenty four hours of discovery by the applicant. · Consumption of alcohol 41 A further complaint enunciated by the respondent is that he discovered the applicant and another employee drinking alcohol at the Centre. The respondent conceded that he had permitted alcohol at the Centre for the 2002 Christmas function but had done so reluctantly as he strongly opposed the consumption of alcohol at any time. Mr Youngman deposed that the applicant was aware of his views but nevertheless had brought alcohol on to the premises. 42 The applicant's evidence is that alcohol was never consumed at any time when children were present and on the occasion referred to by the respondent she and a co-worker had stayed back to attend to administrative tasks following the close of business and had consumed one or two beers each. · Remarks concerning perception of conduct 43 The catalyst for the termination of the applicant's employment on 7 February 2003 was an event which took place on the afternoon of 4 February 2003 in which the applicant made remarks concerning Mr Youngman's conduct, which he found highly offensive. 44 The circumstances are that the applicant had left the Centre to attend to a personal matter involving her own children and on return observed Mr Youngman in innocent play with two young boys and a young girl enrolled at the Centre. Mr Youngman was taking care of the children who were awaiting collection by their parents. 45 The applicant's evidence is found at page 7 of her affidavit of evidence (Ex 1) in the following terms: … As I was walking through the door I looked over to the mat area and Richard Youngman was lying on the cushions with the children and he said words to the effect: "Come and give Rick a cuddle." I walked over to him and said words to the effect: "Do you think that is appropriate behaviour?" Richard Youngman said to me words to the effect: "What?" I said to him words to the effect: "Her mother will be arriving in a minute and will not be happy if you are seen lying on the floor with her daughter." 46 Mr Youngman took significant offence at these remarks. 47 The applicant's evidence is that she was at pains to emphasise to Mr Youngman that she trusted him implicitly with the children and that her comments should not be taken in any way as a criticism of him, but simply as constructive advice to avoid any misinterpretation of events by the parents involved who may not know Mr Youngman as well as the applicant. 48 Mr Youngman's evidence is found at para 16 of his affidavit of evidence (Ex 3) in the following terms: On 3rd January 2003 [SIC] I was at the Centre with two (2) other staff members, Lyn and Jody. I was wrestling with three (3) male children on the floor when I noticed that a little girl by the name of Katie was going to sleep sitting up. Before she tipped over and hit her head on the tiled floor, I put my arm out flat and she laid her head in my elbow as a pillow. Either Lyn or Jody said - "Boys be gentle with Rick he is trying to get Katie to sleep". The applicant walked in with her sunglasses on and said - "I wouldn't be letting her mother see you do that". With that remark I got up and said to the Applicant - "Can I see you in the office please". The Applicant declined my request. I said - "I am going to call my Solicitor to find out where I stand with you making that remark in front of staff members and children". I then had a telephone conversation with my Solicitor and having regard to his advice and taking into account the poor work performance of the Applicant I terminated her duties. 49 In cross examination Mr Youngman conceded that the date of 3 January 2003 could not be correct and that he was unaware of the exact date, accepting that it could have been 4 February 2003. 50 The applicant was provided with a written warning in respect to this event on 5 February 2003. The applicant's employment was subsequently terminated on 7 February 2003. · Conspiracy theory 51 Mr Youngman's evidence is that he regarded the comments of the applicant and the presence of the dildo as part of a plot to discredit him. The relevant evidence is found at p85 of transcript in the following terms: Q: And are you able to explain, what the motivation was in setting you up, or what the outcome --- ? A: Because I heard a rumour down the road -'Rick's got all this money - five months he'll come in, do the Centre up, and we'll get him out. Buy it off him for $30,000 and I paid $140,000. Q: Who was going to buy you out? A: Kerry, Glenda - all walk back in and take it from under me. Q: Right, is this something you think was going to happen? A: No. I know it for a fact - like a warning - a letter that I got. Q: And you've got that here with you today, have you? A: No. 52 This assertion is emphatically denied by the applicant. METHOD AND DETAIL OF TERMINATION OF EMPLOYMENT 53 Termination of the applicant's employment was effected by Mr Youngman in the presence of and with the support of his accountant. Mr Youngman approached the applicant at the end of the working day, Friday 7 February 2003. 54 The applicant's evidence is that Mr Youngman called out to her as she walked through the car park with the words "Kerry, do you want your pay?" In response to the applicant's affirmation Mr Youngman replied, "Its your termination pay". The applicant's evidence is that she then informed Mr Youngman that she would return for her personal belongings on Monday, to which he replied, "No you won't, you better get them now girlie because they will be on the rubbish heap out the front by then". The applicant asserts that she was underpaid on termination of employment. 55 Mr Youngman denies the exchange attributed to him by the applicant, deposing that he attended the Centre with his accountant to effect the termination of the applicant's employment and when offered her termination pay the applicant said she would be back in ten minutes, subsequently returning to collect her pay and personal effects. SUBMISSIONS 56 Mr Wormington submitted that the applicant is not guilty of any wrongdoing and has at all times discharged her responsibilities in a proper manner, putting her responsibility to the care and well being of the children at the Centre above all considerations. Mr Wormington submitted that the respondent had failed to put the applicant's comments of 3 February 2003 in proper perspective, had failed to understand that the applicant was being supportive of him and the Centre in the comments made, and that there was no valid reason for the termination of the applicant's employment. 57 Mr Wormington was critical of the two written warnings provided on 5 February 2003. He notes that, whilst one of the written warnings dealt with fire drills, two such drills were carried out on 6 February 2003 and one on 7 February 2003, and accordingly it could not be said that the applicant failed to heed the warning issued. 58 Mr Wormington submitted that all other issues raised were "furphies or red herrings". 59 In seeking compensation at the higher end of the scale Mr Wormington submitted that in all, the applicant has been employed in child care for sixteen years and despite significant efforts has failed to find other employment. Mr Wormington put that the applicant is 46 years of age and asked that judicial notice be taken of the difficulty of finding employment by people in the mid to late 40's. Mr Wormington added that in addition to the loss of employment, the applicant continues to hold responsibility for a debt of $55,000 against a motor vehicle of significantly lesser value as a consequence of her employment and dealings with the respondent. 60 Mr Moore submitted that the issue of the motor vehicle was irrelevant to the present consideration, putting an alternative submission that if the motor vehicle were to be included in consideration of the matter, the value to the applicant would take her remuneration beyond the statutory limit. 61 Mr Moore submitted that the respondent had afforded the applicant a clear choice in respect to the motor vehicle, which afforded her the option to retain it or return it to the business. Mr Moore submitted that the proper course of action would be for the applicant to sell the vehicle or back trade it and "cut her losses", and any failure to do so does not impose the responsibility upon the respondent. 62 Mr Moore submitted that the allegations of mismanagement and failure to properly direct the Centre enunciated by the respondent had been made out and in cumulation justified the termination of the applicant's employment. 63 In respect to the events of 3 February 2003, Mr Moore acknowledged the evidence that Mr Youngman was not engaged in any improper conduct. 64 It was Mr Moore's submission that the applicant had dealt with the situation inappropriately and should have sought opportunity to confer with Mr Youngman in private rather than making her comments in the hearing of children and staff. CONSIDERATION 65 I find that the applicant's employment was terminated in response to her remarks of 4 February 2003. I accept Mr Wormington's submission that all other matters are irrelevant distractions to the instant proceedings. To the extent that the respondent held genuine concerns in respect to any of these issues, and I fail to find substance to any of them, it was open to him in the ordinary course of management direction in reasonable and lawful terms, to rectify any and all of those issues. It is not open to hold the applicant responsible for the financial affairs of the business, which are appropriately the responsibility of the respondent on advice from his accountant. 66 The respondent apparently became concerned with the loyalty of the applicant, however failed to address this in any way, preferring to rely upon unsubstantiated rumours of some collusion between the applicant and the former owner, none of which is made out in the evidence before me. 67 I am compelled to find that Mr Youngman encouraged the purchase of the vehicle by the applicant and failed, by indecision or inability, to put in place the intended salary sacrifice arrangement, causing the applicant severe financial hardship. There is no evidence to suggest that the financing arrangements of the vehicle played any direct part in the decision by the respondent to terminate the applicant's employment. 68 Any financial consequences in my view fall within the same category as the assertion by the applicant that she was underpaid on termination as being outside the jurisdiction of the present matter. 69 I find on the evidence in this matter that there is no substance to any of the allegations put against the applicant. I further determine that the respondent failed to deal appropriately with remarks made by the applicant on 4 February 2003 which he manifestly misunderstood and failed to investigate or enquire into in any reasonable way. 70 I find the termination of the applicant's employment to be harsh, unreasonable and unjust. I find that neither reinstatement nor re-employment are practical and assess compensation at ten weeks pay at the rate of $775.00 per week and order accordingly. oo0oo INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: HARRISON DP Friday, 29 August 2003 Matter No IRC 1070 of 2003 KERRY FORRESTER AND R & B NSW PTY LTD T/AS NORAVILLE CHILD CARE CENTRE Application by Kerry Forrester re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996. ORDER Pursuant to section 89(5) of the Industrial Relations Act 1996 R & B NSW Pty Ltd trading as Noraville Child Care Centre is ordered to pay Ms Kerry Forrester the amount of $7,750.00 (seven thousand seven hundred and fifty dollars) within 21 days of the date of this decision. I so order. The Hon. R W Harrison Deputy President DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.