Industrial Relations Commission of New South Wales in Court Session CITATION : Young v Tieman Industries Pty Ltd [2000] NSWIRComm 111 PARTIES : Alan Geoffrey Young v Tieman Industries Pty Ltd FILE NUMBER: 4207 of 1998 CORAM: Peterson J CATCHWORDS : S.106 - unfair contract - termination of employment without notice - managerial employee - reasonabless of one month's pay in lieu - relationship of severance pay - whether annual leave, long service leave and superannuation should be payable for period in respect of which payment ordered in lieu of notice - compensation for car. LEGISLATION CITED : Industrial Relations Act 1996 Sinclair v Anthony Smith & Associates Pty Ltd (Unreported, Industrial Relations Court of Australia, 1 December 1995) David Jones Limited v Cukeric (1997) 78 IR 430 Caulfield v Broken Hill City Council (1995) 60 IR 221 at 231 Starky v Healthcare Corporation Pty Limited (Unreported 24 August 1999, Matter No. IRC97/6613) CASES CITED : Newton v Goodman Fielder Mills Ltd (1998) 81 IR 227 at 232 NSW v Health and Research Employees Association of New South Wales (Unreported, Full Industrial Court 31.3.95) Harcourt Brace & Company (Australia) Pty Limited v Cory (1998) 81 IR 321 at 337 Yetton v Eastwoods Froy Limited (1966) 3 All ER 353 at 362 Payne v Foxboro L&N Pty Ltd and Anor (1998) 81 IR 404 at 408 HEARING DATES: 04/26/2000 DATE OF JUDGMENT: 06/30/2000 Mr P Ginters of counsel SOLICITOR Gregory Harris SYDNEY. LEGAL REPRESENTATIVES: Mr J Atkin of counsel SOLICITOR Smith Monti & Costa FAIRFIELD. JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: PETERSON J DATE: 30 JUNE 2000 Matter No. IRC4207 of 1998 ALAN GEOFFREY YOUNG v TIEMAN INDUSTRIES PTY LTD Application under s106 of the Industrial Relations Act 1996. JUDGMENT 1 This judgment concerns an application brought under s106 of the Industrial Relations Act 1996 ('the Act') for appropriate declarations and also orders for the payment of money in relation to a contract of employment between the applicant and the respondent which was terminated in August 1997. 2 The applicant, who had qualified as a tradesman fitter and turner in approximately 1976 was first employed by the respondent, Tieman Industries Pty Ltd as a mobile service technician in April 1983. The respondent's business includes the on-site service and repair of materials handling equipment, such as scissor lifts, dock levellers, hand pallet fork and trucks and bale presses. He progressed through various appointments with the respondent at its central operations in Victoria. In July 1994 he was approached by the Service Manager and asked whether he would be interested in the position of New South Wales Service Manager. He considered the matter with his wife and shortly thereafter communicated his interest in the position. Later that month he met with the Managing Director of the respondent, Greg Tieman and two directors, Dale and Colin Tieman. Dale Tieman then and now manages the New South Wales operations of the company. Subsequently, the applicant, together with his wife and his eldest son, flew to Sydney and were lodged at company expense so that they might review the New South Wales position and family arrangements in Sydney. 3 The appointment was later made and the applicant commenced to work in Sydney in August 1994, leaving his family behind in Melbourne and commuting weekly. In December 1994 the family moved to Sydney. The respondent met the relocation expenses and a period of rental payments. The applicant in due course undertook the purchase of a home in Sydney. He was supplied with a fully maintained car until February 1996 when he was requested to purchase a vehicle in his own name (in fact, under a lease) with the respondent repaying him in respect of the lease payments over a 36-month period. 4 In April 1996 he was provided by the New South Wales State Manager, Chris Grubba, with a four page document highlighting certain issues, which they discussed. The applicant was requested to supply a written response to various operational issues raised, which he later did. This incident appears to be the only matter in respect of which criticism, however mild, of the applicant's performance was raised in the evidence. 5 On 17 June 1997 Dale Tieman said to him "Would you consider moving back to Melbourne or looking at a different role with the company". The applicant contended that he said "At this stage I do not really want to return to Melbourne, however, I will consider moving to the vacant Service Supervisor's position". This was not resolved. However, later in June 1997 he was instructed at a meeting in Sydney to undertake the Service Coordinator's job. The applicant said "(a)s they felt that I needed to be more in touch with the people on the road and our customers. This entailed doing both the New South Wales Service Manager's duties and also the Service Coordinator's duties for New South Wales. At the time I felt that this was an unreasonable request and said so. The meeting lasted approximately 20 minutes". The applicant's evidence is that he undertook that position and it caused his hours of work to increase by approximately 10 hours per week. Mr Dale Tieman's evidence on this point was that he did not expect additional hours to be put in but that the applicant should undertake service coordination work for the reason indicated above and thereby get the service function back to basics with the sales team undertaking some of the Service Manager's functions in relation to liaison with customers. It is sufficient for present purposes to indicate that whatever be the position in that respect the applicant and Mr Tieman did not appear to be ad idem in June 1997 about the means by which the objective would be actually achieved. On Thursday 21 August 1997 he was advised that there would be a meeting in the boardroom at the Milperra offices at 3pm on the following day. At about 4pm on Friday, 22 August 1997 the applicant was asked by the newly appointed Site Manager at Milperra to attend the meeting in the boardroom. Mr. Dale Tieman entered the boardroom and sat diagonally opposite him "looking very uneasy", according to the applicant. Mr Tieman said: "Due to major restructuring within the Milperra operations of Tieman Industries, the position of New South Wales Service Manager is to be made redundant." 6 The applicant was handed a manual payment advice slip with details of his payout together with a letter of termination. He was then introduced to a person from an outplacement agency. Although his evidence is that he was in shock, he received advice from this person that he should attend their offices on the following Tuesday to discuss his job options and receive some counselling. The Site Manager then re-entered the boardroom and escorted him to his office where he collected his personal belongings. He then waited in reception for Mr Tieman to take him home as he did not have a vehicle. He returned to the premises on Monday, 25 August, when he removed some further things with Mr Tieman's approval. He was asked by Mr Tieman if he could be phoned at home if they had any questions about jobs, to which he said "No". 7 The applicant did not have a contract of employment which provided express terms going to the termination of service or redundancy or severance payments. He was paid the following: In lieu of notice 4 weeks pay $4,801.20 Redundancy 16 weeks pay 19,204.80 Long service leave payment 498.80 hours 14,967.74 Unused annual leave 338.5 hours 10,157.54 171/2 % loading 1,218.30 TOTAL 5,349.58 Less tax and other deductions 10,476.58 NET AMOUNT PAID 39,873.00 8 There is no contest between the parties that the matter raises issues appropriate for determination pursuant to s106; the real and substantial issue, as it was conceded by Mr Atkin of counsel for the respondent, relates essentially to quantification of compensation, a matter about which the parties have been unable to agree. 9 Mr Ginters of counsel for the applicant has urged the view that the Commission should make declarations which meet the circumstances of the case and order the payment of money under the headings and in the amounts as follows: 1 13 months payment in lieu of notice $88,731.63 2 Redundancy payment at 3 weeks per year x 14 years 66,154.94 LESS 16 weeks paid 19,204.80 46,950.14 3 Adjustments to long service leave, annual leave and superannuation giving credit for additional 13 months notice: Long Service Leave 1,590.87 Annual Leave 7,277.04 Superannuation 4,537.60 4. The payment of car allowance for the 18 months remainder of the lease period 24,108.00 10 Whether one treats the unilateral imposition of notice and fixation of redundancy payments as unfair, as was contended for the applicant, and then examines that fixation in the circumstances of the case of the quantum thereof, or goes straight to the quanta seems to matter little, but may differ from case to case. The unilateral imposition of a generous amount may well brook no interference. Alternatively, consultation will not necessarily make fair an inadequate response to the circumstances. What the section calls for, however, is an examination of the circumstances established in the particular case, without the adoption of fixed precepts of fairness, what is fair in one case being potentially unfair in another. 11 Although the question of liability was not put in issue, the unfairness in the present case seems to me to be manifold, relevant aspects including: · the failure to warn the applicant that his disinterest in returning to Victoria might be fatal to his continued employment; · the almost cursory way in which the dismissal was effected. In no sense was the idea of consultation given any opportunity to operate. No attempt was made to investigate, with the applicant, any alternative. A decision was made and implemented immediately, that is within minutes. In the context of 13 years of progression with the respondent, this was clearly inadequate. Indeed, it reflects a lack of managerial concern in the interests and well-being of an employee at a managerial level which I find reprehensible. 12 This second aspect of unfairness was referred to by von Doussa J in Sinclair v Anthony Smith & Associates Pty Ltd (unreported Industrial Relations Court of Australia, 1 December 1995), in finding unfairness in relation to a dismissal without notice: . . . to put it into colloquial terms, it is desirable, as the Award recognises, that employees whose security of employment is about to be shattered be let down gently. If they are forewarned and counselled they are more likely to be able to accommodate to their new situation, to adjust themselves to the search for other work, and the like. Moreover, it is generally recognised that if an employee is in work and is given time off to go and look for other work, the prospects of finding new employment are somewhat better than if the person concerned is required to seek work as an unemployed person on social security. 13 Although this view was expressed in the context of a termination held to qualify under a test of "harsh, unjust or unreasonable" the coincidence of the facts causes me to consider the observations of von Doussa J pertinent to a consideration of whether the contract here was "unfair, harsh or unconscionable". 14 The claims in relation to long service leave and annual leave must, in my view fail. The right to such leave is a statutory right, the amount of which depends on and is directly referable to service. In the ordinary course of termination of employment, a payment in effect in lieu of notice cannot, and should not in this context, qualify as service. Further, when it is recognised that the applicant achieved alternative employment, although at a lesser salary, soon after he was terminated, with attendant superannuation rights, this aspect assumes lesser significance. 15 While the period of notice referred to is the means enabling calculation of the money sum ordered to be paid, it does not represent an actual period of notice but a payment therefor. It is a payment in lieu of notice. It follows that entitlements under the contract or under statute which depend upon a continuity of service such as annual leave and long service leave have no automatic place as an additional factor of compensation referable to the period in lieu of notice. This case has none of the extreme attributes of, for example, David Jones Limited v Cukeric (1997) 78 IR 430, which (at 460) dealt (relevantly here) with unfair aspects of the superannuation deed and its surrounding circumstances and (at 462) with the monetary order which would be made, in these terms: We also conclude that it would be just in the circumstances to make a monetary order in favour of Mr Cukeric in connection with the arrangement as varied by us. The Company is to pay to Mr Cukeric an amount of money (additional to that already paid) to reflect entitlements in respect of a further period of six months notice of termination. We have adopted this approach having regard to the payments already made to Mr Cukeric, the evidence in relation to his instant dismissal and the difficulties which flowed therefrom, matters such as Mr Cukeric's position in the Company, his personal circumstances, his seniority in the Company's structure, his satisfactory performance over a period of 35 years. Further, we have taken into account the evidence as to the Company's approach to restructuring, the demonstrated inadequacy of that approach and the period over which the new structure was devised. The monetary order we propose will reflect all elements of Mr Cukeric's package on termination, including salary, all non-salary components of the package such as motor vehicle and other benefits, superannuation contributions, statutory entitlements in respect of the further six months period and a sum to reflect what his early retirement payment from the superannuation fund would have been had his employment so continued for a period of 18 months from 18 October 1994. Although the material available to us does not permit an actuarial calculation to be made, it enables the fixation of an amount which we consider just in the circumstances and which will give effect to our decision. 16 I consider the claim for superannuation payment in respect of the period of extended "notice" should be treated in the same way as annual and long service leave. There seems to be no logical reason why, in the circumstances of this case, superannuation should be extended to the period in respect of which payment in lieu of notice is required. This is particularly so when the applicant obtains, as here, employment during that period, in respect of which superannuation would be payable. To order a payment of that character here would be to effectively double count. 17 I turn to the claims for increased pay in lieu of notice and redundancy. In determining these claims, the Commission may either assess a composite order, as the applicant's submissions were predicated, which takes into account both elements or maintain a separateness in both consideration and assessment. I propose to follow the latter course, the respondent having followed the same approach in its payments to the applicant upon termination. However, one must exercise care not to engage in double counting of the considerations to which each subject attends. In Caulfield v Broken Hill City Council (1995) 60 IR 221 at 231, Marks J observed: . . . to consider what is an appropriate period of notice and payment in lieu without taking into account the fact that redundancy payments have been made will involve a degree of double counting. 18 This statement was cited with agreement by Maidment J in Starky v Healthcare Corporation Pty Limited (unreported 24 August 1999, Matter No. IRC97/6613) in a useful discussion of the factors going to the assessment of a reasonable notice period, and the relationship with redundancy or severance payments. 19 As paragraph 7 hereof shows, the applicant received four weeks' pay as a representation of what was, presumably, the respondent's view of what was "reasonable notice". There can be no doubt, in the circumstances of the applicant, with 14.3 years employment and occupying the NSW Service Manager position, that four weeks was patently unreasonable. Equally, however, the claim advanced by Mr Ginters of 13 months cannot be justified. The amount is referable to a period of notice of termination of contract of employment which the court determines is necessary to establish fairness between the parties. It is akin to the notion of reasonable notice which operates under a contract subject to common law considerations; it is now well recognised that the aspects of a case relevant to consideration and determination of that question are similar to the concepts relevant to assessment of the reasonableness or fairness of the notice provision in the context of s106. I consider a proper and fair range is of the order of four to six months. I assess the period of notice necessary to make the contract fair as five months; that is, a further four months, or 17 weeks. I take into account in particular the length of the applicant's service; the nature and status of the position; the circumstances of the termination, and the view I express in relation to the redundancy payment made. 20 I turn to the claim for increased redundancy pay. The payment made by the respondent was sixteen weeks, again without particular justification. That amount was, according to the Commission's standard for award-based employees, that payable to an employee with six years of service although that is the top of the award-related scale. On any view the payment made to the applicant was not generous. However, there is in my view no basis upon which I could rationally interfere with the payment itself. Where the Commission has established a minimum standard, the fact that the payment accords with that standard may not avoid a finding that the contract was unfair in that respect. The discussion by Hill J of the changed position with respect to notice for a long-serving but award-based employee, in Newton v Goodman Fielder Mills Ltd (1998) 81 IR 227 at 232-3) illustrates the matter sufficiently for present purposes. However, the matter of the quantum of redundancy payments is a varied experience, with no clear pattern which I consider could, or should, be applied in this case. I prefer to rely on the merely basic quantum paid as assisting in justifying the level of notice period I adopt for purposes of quantifying the order to be made. 21 Next I turn to the matter of the claim for additional car allowance. This relates to the 18 months remainder of the period of lease which the applicant entered into at the request of the respondent, the respondent undertaking to pay the relevant car allowance for the period of the lease. This lease arrangement was largely unexplained in the evidence. So far as one can infer from such evidence as is available, the idea was that the applicant would enter into a personal lease and be compensated for it fully by the respondent making the payments during the term of the lease. The motor vehicle, a Toyota Tarago wagon, was to be available for use by the applicant in the respondent's business. The evidence is the payout figure paid by the applicant in order to acquire the vehicle outright after his termination was $27,000, including a penalty (as opposed to $24,108 outstanding lease payments, with apparently no residual), which he chose to pay out of the respondent's payments to him on termination. That approach has obvious features of loss induced by the applicant's choice, which I consider should be discounted in the respondent's favour. At the date of termination the vehicle had a value of approximately $20,000. It follows that by the payment of $27,000 he acquired a motor vehicle which I am prepared to accept was worth approximately $20,000. His superficial "loss" was thus the difference between that value and the payout figure. Mr Atkin suggested that any loss calculated by this approach should not relate to the $27,000 payment made by the applicant but rather the difference between $20,000 and $24,108, being the total cost of the outstanding lease payments. 22 I consider that a cautious approach should be taken to the concept of additional compensation in respect of the motor vehicle. The adoption of this leasing arrangement presumably had benefits for the respondent in that it was required to meet ongoing payments under a lease arrangement but did not itself have to carry the burden of the lease or some other financing arrangement. The respondent achieved the availability of a motor vehicle as was necessary in its business but on the other hand it was providing a substantial benefit for the applicant. The applicant had the use of the vehicle in non-work times, which contrasted with the prior arrangement in which he was provided with a company vehicle for use only on company business. What is uncertain, indeed unknown, is what arrangements were in place for the applicant's personal motor vehicle requirements at the time he entered into this lease. There is no evidence about the likelihood of his having a need to purchase a private motor vehicle at the time of the lease. On the other hand, it is clear the applicant, although no longer required to use the vehicle in the respondent's business, was denied the continuing financial support for its purchase which the arrangement had envisaged. 23 I consider a balanced view should be taken such that both parties interests are taken into account in achieving fairness on this count. Such an approach suggests the applicant should receive more than the mere difference between the value of the vehicle, which I find was $20,000, and $24,108. After discounting the $27,000 payment for the amount of the penalty, which I accept was the difference between $24,108 and $27,000, I conclude that the applicant should be entitled to one-half the outstanding liability, accepted by the applicant at least in the joint interest of the parties, which I assess at $12,054. 24 In this matter I accept the submission for the applicant that it would be inappropriate to impose any reduction or any benefit to which the applicant might be held entitled on the basis of the principles of mitigation. While the applicant obtained alternative employment within three weeks of his being terminated by the respondent, it was only after many unsuccessful applications and then as a Field Service Technician, at a salary level of $673.50 per week, compared with $1,200.25 in his former position. While the relevant aspects of the principles of mitigation at common law, applicable here, are that the applicant cannot recover avoidable loss or avoided loss but can recover loss incurred in reasonable attempts to avoid loss (see New South Wales v Health and Research Employees Association of New South Wales (unreported, Full Industrial Court 31.3.95, agreed in by the Full Bench of the Commission in Court Session in Harcourt Brace & Company (Australia) Pty Limited v Cory (1998) 81 IR 321 at 337) there is an aspect of the duty to mitigate which was referred to by Blain J in Yetton v Eastwoods Froy Limited (1966) 3 All ER 353 at 362: Moreover if he can minimise his loss by a reasonable course of conduct, he should do so, though the onus is on the defaulting defendant to show that it could be, or could have been, done and is not being, and has not been, done. Thus, the opportunity to reduce damages by finding reasonable (I repeat reasonable) alternative employment, should be taken and, indeed, sought, whether such employment is by the same defaulting employer or someone else; in either case the test being whether it is reasonable to refuse it or not in the circumstances of each case. 25 The concept of reasonable alternative employment was referred to by Hill J in Payne v Foxboro L&N Pty Ltd and Anor (1998) 81 IR 404 at 408 as follows: In this case the [applicant's] alternative employment with Sencon was obtained solely as a result of the applicant's own efforts. It appears on the evidence that no attempts were made by the employer to find suitable alternative employment within the group structure or elsewhere. The employment which he did obtain did not in fact prove satisfactory and he left in about November 1996. The base salary was $3,500 per annum less than the applicant's former base salary with the respondents and the employer superannuation contribution was only six per cent per annum compared with the former 17.5 per cent per annum. This results, assuming parity of car allowance, is an immediate loss of total remuneration by Mr Payne of approximately $11,000 per annum - a significant amount. But, in fact, the evidence is that the employer, Sencon, did not pay any superannuation contributions - which could well result in an overall loss of approximately $15,000. I have grave doubts that such employment can be said to be reasonably suitable alternative employment. 26 In the present matter, the applicant has been reduced to almost 55 per cent of his former salary level; to a position broadly equivalent to that he started in with the respondent in 1983. This can only be regarded as not 'reasonably suitable employment' within the meaning of the principle. It is apparent on the evidence that the applicant was left to find his own way to this new level with absolutely no assistance from the respondent. 27 I find that the contract of employment between the applicant and respondent is unfair and declare it void on and from 21 August 1997 except in respect of payments made thereunder or in relation thereto. 28 I order that the respondent pay to the applicant within 28 days the sum of $32,458, together with interest thereon at the rate/s applicable from time to time under s.94 of the Supreme Court Act 1970 (NSW), on and from 3 August 1998 (the date of application herein) until the date of this judgment. 29 I reserve the question of costs of the proceedings. That matter will be dealt with, if necessary, on application. 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.