Industrial Relations Commission of New South Wales in Court Session CITATION: David Huddlestone v QBE Management Services Pty Ltd [2007] NSWIRComm 53 APPLICANT David Huddlestone PARTIES: RESPONDENT QBE Management Services Pty Ltd FILE NUMBER(S): IRC 7333 of 2004 CORAM: Marks J CATCHWORDS: Unfair Contract - applicant gave written notice to terminate employment to return to United Kingdom - whether agreement reached that applicant could take 12 month unpaid sabbatical - whether respondent did provide notice - whether applicant entitled to bonus. HELD: On basis of applicant's claim respondent gave 12 months notice - applicant did not discharge burden of proving existence of contract of employment in terms asserted - contract of employment terminated when applicant gave written notice - no unfairness found in bonus scheme - summons dismissed. LEGISLATION CITED: Industrial Relations Act 1996 HEARING DATES: 28 February 2007; 1March 2007 DATE OF JUDGMENT: 23 March 2007 APPLPICANT In person LEGAL REPRESENTATIVES: RESPONDENT Mr A B Gotting of counsel SOLICITOR: Ms M Skinner/ Mr B Heddle Clayton Utz JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: Marks J Friday, 23 March 2007 Matter No IRC 7333 of 2004 David Huddlestone v QBE Management Services Pty Ltd Application under s 106 of the Industrial Relations Act 1996 JUDGMENT [2007] NSWIRComm 53 1 The applicant in these proceedings David Huddlestone seeks relief under s 106 of the Industrial Relations Act 1996 ("the Act") against the respondent QBE Management Services Pty Ltd ("QBE"). Ss 105 and 106 of the Act are in the following terms: s 105 Definitions In this Part: "contract" means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. "unfair contract" means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. s 106 Power of Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 2 The applicant was employed by the respondent initially on a 12-month fixed term contract commencing 21 January 2002 and subsequently on 17 January 2003 on a contract of indefinite duration. This latter contract was for the position of Portfolio Manager in the Professional Liability Division of the respondent. 3 The summons asserts, and the evidence in the proceedings confirms, that the applicant discharged his employment duties in a commendatory fashion and was well regarded by those for whom he worked within the respondent's organisation. The summons further asserts, and the evidence in the proceedings confirms, that in the latter half of April 2004, the applicant gave nine weeks written notice of his intention to resign his employment because he and his family wanted to return to the United Kingdom for family reasons. The notice of termination was effective 18 June 2004. 4 The applicant alleges, but the respondent denies, that some time towards the end of May 2004 he reached an agreement with the respondent that his employment would not come to an end on 18 June 2004, and that he would be given a year's sabbatical leave without pay and that in June 2005 he would return to his position of Portfolio Manager. The summons alleges that the respondent reneged on this agreement and that some time in early June 2004 the applicant was informed that the respondent would no longer allow him to return to the position of portfolio manager in June 2005. 5 The summons alleges that the applicant's contract of employment was unfair because: "a) it allowed the respondent to terminate the applicant's employment without providing the applicant with any payment in lieu of notice or other compensation; b) it allowed the respondent to agree to allow the applicant a sabbatical and then resiled from this agreement without any compensation; c) it allowed the respondent to terminate the applicant's employment part way through the 2004 year, without making any pro rata payment for bonus for the part of the year for which he had worked." 6 There are other allegations of unfairness with which it is not necessary to deal. 7 A monetary claim was contained in the summons seeking 12 months' salary in lieu of notice of $121,264 together with superannuation, a bonus said to be payable for the 2003 year and a pro rata bonus for the 2004 year. The total amount claimed was $195,178. Payment in lieu of notice 8 The claim brought by the applicant based on the summons must, as a matter of logic, be postulated on the basis that there was a contract of employment which contained a provision enabling the applicant to be absent from duty without pay for a year commencing June 2004 and allowing him to continue to work in his designated position from June 2005 thereafter. As a matter of logic, the summons can only assert that that contract of employment was terminated in June 2004 when the applicant was given notice that he would not be permitted to return to work in his position in June 2005. 9 Having regard to the factual circumstances pertaining to the applicant's claim, it must be deduced, as a matter of logic, that the respondent had in fact given 12 months' notice to the applicant in June 2004 that his employment would come to an end with effect from June 2005 because there was never any contemplation that the applicant would perform his normal work duties in the intervening year nor receive any payment during the course of that year. Accordingly, on this basis, the applicant has been given 12 months' notice of termination of employment. To this extent, therefore, the allegation of unfairness based on notice of termination cannot, as a matter of logic, be sustained. 10 Of course, this is postulated on the basis that the applicant will have succeeded in establishing that his contract of employment made provision for a sabbatical entitlement, as asserted by him. 11 The applicant alleged that the agreement was made as a result of email communications between himself and Mr Peter Laming, the then acting General Manager of the Division to whom he directly reported. Unfortunately, he had deleted his emails from his system on leaving QBE in June 2004 and the respondent does not hold copies of all emails within its system covering that period. Mr Laming denied that he had engaged in email communication with the applicant the effect of which was to extend the applicant's contract of employment and make provision for a sabbatical leave as asserted by the applicant. 12 The applicant maintains that the agreement for the sabbatical entitlement was confirmed at a meeting conducted on or around 26 May 2004 in the office of Mr Laming. Present at that meeting also were Ms Doreen McKellar, the Finance and Administration Manager of the Division and Mihaela Serban, a Scheme Administrator in the Division. The applicant said both in affidavit evidence and orally that at that meeting there was a confirmation of the agreement that he had made with Mr Laming. Such confirmation was denied in affidavit and oral evidence given by Mr Laming, Ms Serban and Ms McKellar. Mr Laming's evidence was to the effect that he reached an understanding with the applicant, whom he regarded highly as an employee, that if the applicant wished to return to QBE after spending time in the United Kingdom with his family and there was a position open, the applicant would be favourably considered for any appropriate position. 13 I am unable to conclude on the basis of the evidence given by the several witnesses that the applicant has discharged the burden, which rests on him, of proving the existence of a contract of employment in the terms that he asserts. Part of the difficulty with the evidence is that the respondent's witnesses have a distinct recollection of contemplation that the applicant might be returning to QBE at some stage in the future, but no impression or understanding that there was any contractual entitlement to do so. Whilst the applicant may well have thought that he had a contractual entitlement and appears genuinely to believe so, I cannot accept his evidence to the exclusion of the contrary evidence given by the three witnesses called by the respondent. This is particularly so in the absence of any documentary evidence which would support the contentions of the applicant. 14 There is some support for the applicant's assertion in an email from Ms Serban to the applicant dated 5 July 2004. That refers to the meeting which occurred on about 26 May 2004 saying: "Coming out of that meeting with Doreen and Peter, I had the same impression that you'll be coming back in a year's time but then we had the farewell party I wasn't too sure." 15 To the contrary effect is an email of 10 June 2004 from the applicant to Marcia Grant, Human Resources Manager of the respondent, which commences "Thanks for helping to terminate me. I feel a bit like an extra in a Schwarzenegger movie! My move back to the UK is for family reasons, and I am very much looking forward to introducing my new daughter to my parents." The applicant then makes reference to obtaining finalisation of his Australian tax position. The subject matter of the email is said to be "Resignation and forwarding address." 16 Certainly, there is no mention in that letter of anything that might convey an impression that the applicant had negotiated a period of unpaid leave. Nor is there anything to indicate that there had been any reneging of any negotiated period of unpaid leave. The subject matter clearly refers to, as I have said, "Resignation and forwarding address." 17 On the basis of the evidence given in the proceedings I am not persuaded for the reasons given that the applicant's contract of employment was extended in the manner that he asserts. Accordingly, I find that his contract of employment came to an end on or about 18 June 2004 as a result of a resignation tendered by him. On this basis there can be no question of any unfairness in the respondent refusing to consider the applicant for further employment in June 2005. Incidentally, there was no evidence that the applicant approached the respondent for any employment after leaving in June 2004. 18 Assuming that there was an understanding between the applicant and the respondent that he would be favourably considered for re-employment in June 2005, and assuming that the applicant's case were to be considered on this basis (which it was not), any such claim as made would fall outside s 106 for the reasons given and could not result in any award of monetary compensation because there is no evidence that he suffered any loss or detriment as a result of the failure to be offered employment. Bonus 19 The applicant claimed in his summons that he should have been paid a bonus, which was described in the summons as "12 months' bonus in lieu of notice", together with "pro rata entitlement to annual bonus for 2004." As I understand the manner in which the claim is framed, the first portion is said to be payable as part and parcel of an ordinary incident of the applicant's remuneration during the 12 months' pay in lieu of notice to which he claimed entitlement. The second part of the claim was said to be based on the fact that the applicant was employed for approximately half of the 2004 year. 20 The first part of the claim falls to be determined, therefore, on the same approach taken with respect to the claim for payment in lieu of notice. I have earlier concluded that even if there was in existence a contract of employment as claimed by the applicant, he has no such claim available to him either as a matter of contract or as a matter of fairness because he would have in effect been given 12 months' notice of termination of that contract and, pursuant to his arrangement with the respondent, would have earned no monies during that period. On this basis the claim that an allowance should be included within the remuneration to cover a bonus must fail. 21 Having determined, however, that the applicant has failed to establish that any such contract as alleged exists, and the applicant's contract of employment therefore coming to an end in June 2004 at his instigation, there can be no entitlement to any bonus beyond that period. 22 This lead to an examination as to whether, as a matter of fairness, the applicant should be awarded payment of a pro rata bonus for the 2004 year. 23 The terms of the profit share incentive scheme, which applied to the applicant's employment with the respondent, were in evidence in the proceedings. It was a condition of the scheme that eligibility for bonuses would be subject to: "individuals remaining employed until entitlement is calculated and paid, not being under notice to resign when entitlement is calculated and paid;…." 24 The bonus was fixed by reference to a calendar year 1 January to 31 December. It was to be declared by 31 March in the following year. In determining entitlement to payment of bonus, it was necessary for the responsible person (in the case of the applicant, Mr Laming) to have regard to the applicant's contribution to the performance of the Division during the relevant year. It was Mr Laming's evidence that the applicant was not entitled to any bonus for the 2004 calendar year because he had not been employed for all of that year and was certainly not in employment as at 31 December 2004. 25 On a prima facie basis I am unable to detect any unfairness in the scheme as formulated and applied by the respondent. Obviously, an ex post facto determination of part entitlement to bonus of employees who may have left employment during the relevant calendar year would create difficulties for the administration of the scheme. There may be circumstances where an employee deprived of entitlement to participate in a bonus for all or part of a relevant year by circumstances outside his or her control or by arbitrary and unfair removal from employment by an employer may, as a matter of fairness, demonstrate entitlement to a favourable order under s 106. There are decided cases within this category. However, in my opinion, there are no circumstances that pertain to the applicant's situation that would warrant the interference in the administration of the respondent's bonus scheme by this Court in terms of any unfairness. The applicant voluntarily left the respondent's employment in June 2004 for personal and family reasons. In these circumstances, it is not unfair that he would have foregone any entitlement to participate in a bonus scheme that is intended to reward performance over a whole calendar year. On this basis, the applicant's claim to pro rata bonus entitlement must fail. Costs 26 The respondent sought an order for costs to which, in my opinion, it should be entitled in the ordinary course of events. In circumstances where it is arguable that on its face the summons discloses no ultimate entitlement to any order for compensation under s 106(5), there is no reason why costs should not follow the event. In the context of costs, the sum of $3,000 had been paid to the Registrar of the Court by the applicant by way of security for costs. The respondent has sought, and the applicant has not opposed, that those monies be released to the respondent in partial satisfaction of a costs order. Orders 27 For the reasons given, I make the following orders: 1) the summons is dismissed; 2) the applicant is to pay the respondent's costs to be assessed in default of agreement; 3) the sum of $3,000 held by the Registrar of this Court is to be released to the respondent's solicitors in partial satisfaction of the costs order. 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.