Industrial Court of New South Wales CITATION: Ricardo Riskalla v The Consulate General of Portugal in Sydney trading as AICEP Portugal (formerly known as ICEP Portugal) [2009] NSWIRComm 185 APPLICANT: Ricardo Riskalla PARTIES: RESPONDENT: The Consulate General of Portugal in Sydney trading as AICEP Portugal (formerly known as ICEP Portugal) FILE NUMBER(S): IRC 14 of 2008 CORAM: Backman J CATCHWORDS: Unfair contract - ex parte hearing - section 106 of the Industrial Relations Act 1996 - applicant employed as field officer by respondent - applicant's contract of employment terminated - applicant's position as field officer made redundant - applicant upon termination receives no payment in lieu of notice and no payment for the last month of his employment - applicant's solid work performance acknowledged by respondent - whether contract of employment was unfair - unfairness found in term of contract and in operation of contract upon termination - relief - orders. Employment Protection Regulation 2001 LEGISLATION CITED: Industrial Relations Act 1996 Uniform Civil Procedure Rules 2005 Brent and Others v Bastian (2003) 124 IR 223 English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129 Henshaw v Sqribe [2000] NSWIRComm 279 CASES CITED: King v State Bank of NSW (No 2) (2002) 126 IR 407 Shop, Distributive and Allied Employees' Association, New South Wales, and W D & H O Wills Holdings Ltd [2000] NSWIRComm 98 Sydney Water Corporation Ltd and Another v NSW Industrial Relations Commission & Another (2004) 61 NSWLR 661 Westfield Holdings v Adams (2001) 114 IR 241 HEARING DATES: 8 April 2009 DATE OF JUDGMENT: 4 November 2009 APPLICANT: Mr J Davis (solicitor) Solicitors: Katherine A. Frost, Solicitor (Ms K Frost) LEGAL REPRESENTATIVES: RESPONDENT: Ms S Corbett (solicitor) Solicitors: Antunes Lawyers & Advocates (Ms S Corbett) JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: BACKMAN J Wednesday, 4 November 2009 Matter No IRC 14 of 2008 RICARDO RISKALLA v THE CONSULATE GENERAL OF PORTUGAL IN SYDNEY, TRADING AS "AICEP PORTUGAL" (FORMERLY KNOWN AS "ICEP PORTUGAL") Application under section 106 of the Industrial Relations Act 1996 JUDGMENT OF THE COURT [2009] NSWIRComm 185 Introduction 1 The present proceedings are brought by the applicant under s 106 of the Industrial Relations Act 1996. The summons for relief seeks orders that the applicant's contract of employment was unfair, harsh and unconscionable and contrary to the public interest. Orders were also sought that certain terms of the contract be varied to remedy the alleged unfairness. The principal grounds relied upon in support of the claim are the failure of the respondent to provide for sufficient notice or payment in lieu of notice and the failure of the respondent to pay the applicant a severance payment on ground of redundancy upon termination of the contract. 2 On the day of the hearing a legal representative for the respondent appeared in court. The Court was informed that attempts to obtain instructions from the respondent as to the conduct of the hearing had not been forthcoming. No evidence has been filed by the respondent in response to the application. No objection was taken by the respondent's legal representative to the hearing proceeding in the respondent's absence. Based on these matters the hearing proceeded as an ex parte hearing. The evidence 3 On 10 March 2003 the applicant signed a contract of employment to work for the respondent as a field officer. Under the contract his gross annual salary was $78,120 plus superannuation. His duties upon commencement of employment were principally in the area of research as well as undertaking marketing activities relating to trade between Australia and Portugal. For the first three years of his employment the applicant was under the supervision of Mr Miguel Fontoura, Trade Commissioner. He was also assisted from time to time by Ms Sharon Stevenson, an administrative assistant. In about March 2006, Mr Fontoura was transferred to another diplomatic mission in Africa. At the same time Ms Stevenson's position with the respondent was made redundant and her employment was terminated. At that time Ms Stevenson had been employed for four years and three months. Upon termination she received a payment representing 10 weeks salary. 4 From about March 2006 until November 2007 the applicant worked for the respondent in its Sydney office alone and without assistance or direct supervision. There was a corresponding increase in his workload and responsibilities. In addition to performing his usual duties the applicant became responsible for all the activities relating to the running of the office, which included accounting and administrative tasks. Termination of employment 5 On or about 18 September 2007 the applicant received a document, sent electronically from the respondent's head office in Portugal. The document which was in the form of a general memorandum addressed to all employees of the respondent worldwide, informed that on 1 October 2007 several of the respondent's offices, including the Sydney office, would be closed. This was the first occasion the applicant had heard of the intended closure of the Sydney office. 6 After receiving the document he telephoned Dr Joao Perestrello, who was the Portuguese Consul-General at the time. The following conversation ensued: Perestrello: They have decided to close the AICEP office in Sydney. Your contract will be terminated. Applicant: Do you mean I'm losing my job? Perestrello: Yes, I'm afraid so. Applicant: This is such a bad time for this to happen. As you know we have a new baby and my wife is not working. But I'll get a redundancy payment, right? Perestrello: I'm not sure how the law works here in that regard. Send me a letter setting out your entitlements and I'll liaise with the people in Portugal to make sure you get what you're entitled to. Draft a letter as if its to yourself from AICEP. 7 The applicant duly sent a letter by email on 20 September 2007 to Dr Perestrello setting out what he understood his entitlements to be. In the letter he asked for 16 weeks gross salary by way of a severance pay, his accrued annual leave entitlement (seven days), and outstanding salary and superannuation for October 2007. 8 On about 25 September the applicant received a letter dated 24 September 2007 informing him that his contract would be terminated from 1 November 2007. The letter which was personally addressed to the applicant stated: As part of the implementation of a new organisational model for the external network of AICEP, the Executive Committee, in its meeting of 18 September, resolved to shut down the Sydney office, this decision having been ratified by the Administraive [sic] Council today, 24 September. Accordingly, pursuant to clause 7.3 of the employment contract of Your Excelency [sic] of 10 March 2003, I convey, in the name of the Administraive [sic] Council, the recission [sic] of said contract, with effect from 1 November 2007. On this occasion, and because this decision is not related to the professionalism with which Your Excellency performed your functions, the Administrative Council expresses its recognition of your worthwhile contribution and wishes you the best of luck both personally and professionally. 9 The applicant did not receive any reply to his letter of 20 September 2007. Between the end of September 2007 and the end of December 2007 he telephoned the AICEP office in Portugal on several occasions as well as the Consulate in Sydney enquiring about a redundancy payment. Each time he was informed that the respondent was "... still looking into it. We'll get back to you shortly". 10 After a further period of some three months and having still not received a satisfactory response the applicant commenced proceedings in this Court. The contract of employment 11 The contract of employment under which the applicant performed work contained a number of standard terms relating to the applicant's remuneration, hours of work, statutory leave entitlements as well as confidentiality and intellectual property provisions. Clause 7 dealt with termination of employment. It provided: 7.1 You may terminate this contract by giving not less than two weeks notice in writing. In the event that you give such notice, ICEP, at its absolute discretion, may elect to make payment to you for the period of your notice and require you to cease employment immediately. Where you and ICEP agree upon a lesser notice period ICEP will only be required to make payment to you for the lesser period of notice. 7.2 ICEP may terminate this contract: 7.2.1 Without notice in the case of serious misconduct or where you have continually failed to adequately perform your duties or obligations. Examples of serious misconduct include (but are not limited to): 7.2.1.1 The commission of a criminal offence. 7.2.1.2 Failure to comply with lawful reasonable, but not trivial, instructions of ICEP. 7.2.1.3 Being guilty of conduct which may bring ICEP into disrepute. 7.2.2 At any time for no reason by the giving of four (4) weeks' notice or payment in lieu of such notice. 7.3 Notwithstanding any other provision of this contract, you acknowledge that the office or operations of ICEP may be closed or may cease at any time. You agree that if this occurs (for any reason) this contract will come to an end and you will not be entitled to any notice of such ending, or payment in lieu of notice. 12 The contract contained no terms or conditions dealing specifically with a redundancy payment. Whether the contract of employment was unfair 13 The applicant's summons for relief alleged that the contract became unfair at the time of his termination of employment, primarily because of the express terms in the contract relating to notice as well as the failure of the contract to make provision for a redundancy payment. The summons also set out allegations of unfairness on the ground of discrimination against the applicant under the contract principally by reason of the termination payment made to Ms Stevenson. 14 I have come to the view for reasons which will be stated shortly that the applicant's contract of employment was unfair on two bases. First because it permitted the respondent to terminate the applicant's employment without sufficient notice or payment in lieu of notice and secondly because it permitted the respondent to terminate the applicant's employment (on the ground of redundancy) without making a redundancy payment. Having come to this view it is unnecessary to consider whether the fact that Ms Stevenson secured a termination payment constituted discriminatory conduct against the applicant on the part of the respondent referable to a term, or terms, of the contract. 15 The summons also alleged that the contract was unfair because it caused the applicant, "stress, hurt and suffering and reduced his quality of life". No adequate evidence was directed to this alleged head of unfairness. I am therefore unable to consider it. The applicant's affidavit records that the termination of his employment occurred in circumstances when his daughter was only two months old and his wife was not working. A further factor, namely the respondent's refusal to address the issue of a redundancy payment caused the applicant, he said, considerable stress and hardship for both himself and his family. 16 I have little doubt that the particular period concerned would have caused the applicant some degree of hardship and stress. I note however that in late September 2007 Dr Perestrello contacted the applicant and informed him that a position had become available in the consular office and invited him to apply. The applicant applied for the position and was successful, although it was only temporary (six months), and was not within his field of experience. In addition, the salary offered was half the salary he had been receiving working as a field officer in the respondent's Sydney office. The applicant, following the cessation of his employment in the Sydney office, applied for other work. He was unsuccessful and eventually established and worked in his own business from 3 March 2008. These matters are relevant to the issue of mitigation which will be addressed in more detail later in this judgment. For present purposes this material is not sufficient to enable the Court to make a proper assessment as to whether the terms and operation of the contract caused the applicant stress, hurt and suffering. In any event orders based on stress and hardship occasioned to an applicant by reason of circumstances surrounding the employment relationship are not commonly made in this jurisdiction following successful applications under s 106 of the Act: see King v State Bank of NSW (No 2) (2002) 126 IR 407. 17 A further head of unfairness relied upon by the applicant in the summons was that it permitted the respondent to breach the contract. No details were forthcoming in submissions as to why this should be so. This Court, however, cannot entertain an application under s 106 on the basis that the impugned contract has been breached. Allegations of unfair conduct, or unfairness in the terms of the contract which are said to constitute a breach of contract place the contract outside the jurisdictional reach of s 106: Sydney Water Corporation Ltd and Another v NSW Industrial Relations Commission and Another (2004) 61 NSWLR 661. Notice 18 The applicant's contract of employment contained notice provisions. Under Clause 7.1 the applicant was required to give in writing not less than two weeks notice prior to the termination of the contract. Clause 7.2 dealt with the respondent's obligations under the contract with regard to notice. Under sub-clause 7.2.1 the respondent could terminate the contract without notice on the ground of serious misconduct. Under 7.2.2 where serious misconduct was not an issue between the parties the contract required the respondent, upon termination to give the applicant four weeks notice or payment in lieu of such notice. Clause 7.3 provided: Notwithstanding any other provision of this contract, you acknowledge that the office or operations of ICEP may be closed or may cease at any time. You agree that if this occurs (for any reason) this contract will come to an end and you will not be entitled to any notice of such ending, or payment in lieu of notice. 19 Clause 7.3 was invoked against the applicant in the correspondence sent by the respondent on or about 25 September 2007. The applicant until receipt of this correspondence had received no notice of the impending termination of his employment. He commenced negotiations with the respondent in an attempt to secure a termination payment. Although the respondent's letter advised the applicant that his contract would come to an end on 1 November 2007, it appears from the material tendered by the applicant that he was not paid his salary for the month of October 2007. The circumstances of the termination of the applicant's contract, therefore, were such that he was not given the opportunity to work out his remaining period of employment while in receipt of his salary, and he secured no payment in lieu of notice. Clause 7.3 in my view was an unfair term of the contract since it, both in its terms and its operation, deprived the applicant effectively of any notice of his termination and it failed to make provision for any payment in lieu of notice. Redundancy 20 The applicant's contract of employment also failed to provide for any reasonable payment by the respondent upon termination of employment on ground of redundancy. 21 A failure of a contract of employment to make reasonable provision for redundancy benefits upon termination may render the contract unfair: see Henshaw v Sqribe [2000] NSWIRComm 279 at [33]. 22 The evidence indicates that the applicant's position in the Sydney office was made redundant on 2 November 2007. The letter dated 24 September 2007 sent by the respondent to the applicant advised that its Sydney office would be shut down and that the applicant's employment would cease, accordingly, on 1 November 2007. According to the letter, the reason for the closure of the Sydney office involved the implementation of, "a new organisational model for the external network of AICEP". No further details of the impending closure were provided to the applicant. 23 The applicant had received no notification of the respondent's intention to close the Sydney office prior to receipt of the letter. There was therefore no discussion between the parties of the proposed changes consequent upon the closure of the office. The applicant was not presented with any options or alternatives by way of other comparable employment opportunities, such as deployment or relocation. It follows from this that no regard was paid by the respondent to the applicant's interests or to his period of service: see generally for discussion of the relevant principles on this issue Shop, Distributive and Allied Employees' Association, New South Wales, and W D & H O Wills Holdings Ltd [2000] NSWIRComm 98. 24 There can be little doubt that had the respondent afforded the applicant an opportunity to engage in discussions about the impending closure of the Sydney office and his employment prospects, the applicant would have willingly entered into discussions. As it happened the applicant was forced to take the initiative, securing a position elsewhere with the respondent but on half his salary and on a short-term basis, for six months. 25 The applicant also made all reasonable attempts to secure a termination payment. The respondent failed to respond, at all, to those attempts. As a result the applicant was placed at a significant disadvantage. His salary was effectively cut-off, he received no termination payment and his employment was terminated at a time when his wife had ceased working, having recently given birth. Relief 26 Given these reasons, which ground the basis of my findings that the applicant's contract was unfair and became unfair in its operation upon termination, it is appropriate to make compensatory orders based on an assessment of what in the circumstances might constitute a reasonable period of notice and a reasonable severance payment on ground of redundancy. 27 In the summons the applicant claimed 20 weeks gross salary, (a figure of $32,966.80). In oral submissions the applicant explained that this gross figure included both notice and redundancy payments. 28 The applicant was employed by the respondent for a period of 4.5 years. By all accounts he worked diligently and was an exemplary employee. After Mr Fontoura's departure, and the departure of Ms Stevenson, in March 2006, the applicant worked alone and was unsupervised in the respondent's office. During that period, which was about 18 months, his workload increased significantly, as did his area of responsibility. He undertook a number of additional duties, apparently without complaint, which included accounting and administrative tasks. Upon his termination he secured other employment with the respondent and commenced work the day after his termination, on 2 November 2007. The work undertaken from that day, however, was at half his former salary and offered him no secure employment, being work for a period of only six months. While performing the work he attempted unsuccessfully to obtain more permanent employment, and eventually established his own business. 29 These matters indicate that the applicant took reasonable steps to mitigate his loss. The fact that the applicant was in temporary employment immediately following his termination, although at half pay, will be taken into account in mitigation. I assess a reasonable period of notice, taking into account the October 2007 income to which the applicant was entitled for work performed but for which he was not paid, at 16 weeks. I also take into account the applicant's length of employment (4.5 years), his solid work performance acknowledged by the respondent in its letter of 24 September 2005, the circumstances of his termination and his age at the time of termination. The Court was informed that the applicant's age at the time of these proceedings was 45 years. The amount, representing 16 weeks gross salary, will be reduced, having regard to the principles relating to mitigation by eight weeks. This means the applicant is entitled to a compensation payment of eight weeks representing his gross salary for October 2007 (four weeks) and four weeks gross salary following his termination, in lieu of notice. 30 The applicant is also entitled for the reasons expressed in the judgment to compensatory orders by reason of the failure of the contract of employment to make provision for a redundancy payment. In assessing the level of a redundancy payment I take guidance from the scale of severance payments in Schedule 1 of the Employment Protection Regulation 2001, which was tendered by the applicant during the ex parte hearing. According to the scale of payments the applicant is entitled to 12 weeks severance pay by reason of the length of his continuous service (4.5 years) and his age at termination (under 45 years of age). 31 A decision to award compensation by way of a redundancy payment is a separate and distinct consideration from a decision to award a payment in lieu of notice. The rationale for this distinction was explained in English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129 at [73], where the Full Bench, following the reasoning in Westfield Holdings v Adams (2001) 114 IR 241 said: As was pointed out by the Full Bench in Westfield Holdings v Adams , the terms of the Termination, Change and Redundancy Case identify the purpose of severance pay and the different role performed by periods of notice. In Westfield Holdings the Full Bench at [144] stated that the numerous authorities referred to established that the focus of redundancy or severance pay was to compensate an employee for the loss of non-transferable benefits and for the inconvenience and hardship imposed by the termination. Those authorities identified some of the hardship flowing from redundancy, including the loss of secure employment, the hardships necessarily inherent in retrenchment and the competitive disability of the long term employee as a result of opportunities foregone, whether in the continuous service of the employer and the loss of legitimate employment expectations through no fault of the employee. These considerations arise in the circumstances of the appellant following the sale of the Bathurst office by the respondent. 32 I consider that there are good reasons for not reducing any amount to be awarded to the applicant by reason of redundancy on the basis that the applicant, at least partly, mitigated or avoided his loss. The applicant worked diligently during a relatively lengthy period of employment. After the departures of Mr Fontoura and Ms Stevenson, the applicant, working alone, assumed all responsibilities and duties associated with the running of the Sydney office. His salary which remained at the same level during that time did not reflect the additional responsibilities and duties undertaken by him. He received no notification of the impending closure of the Sydney office, and consequently was deprived of the benefits of consultation with his employer with regard to his employment prospects following the closure of the office. Inexplicably he was not paid his October 2007 salary while he remained working for the respondent. This was so despite his solid work performance, acknowledged by the respondent, and despite his considerable efforts to negotiate with his employer for a termination package. He also suffered some hardship as a result of his position being made redundant without prior notification. Because of his personal circumstances he was constrained to take employment immediately following his termination at half his salary level and on a short term basis with no long-term prospects of future employment with the respondent. In all the circumstances the applicant acted reasonably, given his limited choices and the unsatisfactory position in which he found himself, a state of affairs directly attributable to the conduct of the respondent in invoking Clause 7.3 of the contract against the applicant. 33 The Court has a discretion as to whether or not to reduce compensation by reason of redundancy on the ground that an applicant has mitigated his loss. I exercise that discretion, taking into account the factors raised above, in the applicant's favour: see Brent and Others v Bastian (2003) 124 IR 223 at [32] - [37]. 34 The applicant is also entitled to a payment representing seven days of accrued annual leave at a figure of $2,307.67 as well as superannuation for October 2007 at a figure of $741.75. Interest should also be payable on the monetary amounts assessed from the date of filing of the summons for relief, that is, from 7 January 2008 until the date of judgment. Orders 35 I make the following orders consequent upon the findings of unfairness which I have made, and in accordance with the orders sought in the summons for relief: (1) The contract between Ricardo Riskalla, the applicant, and the Consulate General of Portugal in Sydney, Trading as "AICEP Portugal" (Formerly known as "ICEP Portugal"), the respondent, is varied ab initio as follows: (i) Clause 7.3 is varied from the commencement date of the contract by deleting the phrase (as it applies to the applicant), "you will not be entitled to any notice of such ending, or payment in lieu of notice"; (ii) the contract is varied from its commencement to include the following terms: (a) the respondent cannot terminate the contract unless it pays to the applicant the equivalent of four (4) weeks gross salary, representing his salary entitlement for the month of October 2007 plus superannuation in the sum of $741.75 and four (4) weeks payment in lieu of notice, the amounts calculated by reference to the applicant's gross annual salary earned at the time of the termination of the contract of employment with the respondent on 1 November 2007, a total of eight (8) weeks; (b) the respondent cannot terminate the contract unless it pays the applicant twelve (12) weeks severance pay representing a redundancy payment, calculated by reference to the applicant's gross annual salary earned at the time of the termination of the contract of employment with the respondent on 1 November 2007; (c) the respondent shall pay the applicant $32,966.80, representing twenty (20) weeks gross salary, plus superannuation in the sum of $741.75, to be paid to the applicant's nominated superannuation fund, calculated by reference to the applicant's gross annual salary earned at the time of the termination of the contract of employment with the respondent on 1 November 2007; (d) the respondent shall pay the applicant his outstanding annual leave entitlements, being seven (7) days accrued annual leave in the sum of $2307.67; (e) the respondent shall pay interest on the amounts specified in Order 1 (ii) (c) and (d) above in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of filing of the summons for relief on 7 February 2008 until the date of judgment; (2) The proceedings are set down for a directions hearing at 9:30 am on Friday, 13 November 2009 in relation to the issue of costs. _____________________ 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.