Beith v Racing NSW [2007] NSWIRComm 82 | Case summary

1 Michael Beith ("the applicant") has commenced proceedings against Racing NSW ("the respondent') seeking relief under s 106 of the Industrial Relations Act 1996 ("the Act"). The application, which has proceeded by way of amended summons for relief, seeks orders in the following terms: 1. An order pursuant to section 106(1) of the Industrial Relations Act 1996 declaring void or varying the contract of employment between the applicant and the respondent, either from its commencement or from some other time so as to: a) insert a provision term requiring the respondent to provide the applicant within 6 months notice of termination (or payment in lieu thereof) upon applicant's position becoming redundant and/or in circumstances where the applicant's position ceases to exist; b) insert a provision requiring the respondent to provide the applicant with a redundancy or severance payment of 6 months upon applicant's position becoming redundant and/or in circumstances where the applicant's position ceases to exist; ba) further or in the alternative, insert a provision requiring the respondent to pay the applicant a severance payment in lieu of notice, in a quantum not less than the quantum of severance pay prescribed for an award regulated employee of the applicant's age and length of service as at the date of termination, according to the scale prescribed by the 1994 Redundancy Test case decision of the Industrial Relations Commission of New South Wales; c) insert a provision requiring the payment of the amounts referred to in a), b) and ba) above to be calculated by reference to the value of the applicant's annual salary package at the date of the applicant's termination of employment, namely $183,967; and/or d) delete any provisions in the contract of employment which do not sit comfortably with the above provisions. 1A. An order that the respondent pay the applicant an amount of money consistent with the contract claimed in paragraph 1 above. 2 Orders for interest and costs were also sought. Background 3 By letter dated 23 August 2001, from Mr Mervyn Hill, the Chief Executive Officer ("CEO") of the New South Wales Thoroughbred Racing Board ("NSWTRB"), the predecessor to the respondent, the applicant was offered the position of General Manager, Finance and Administration. It is relevant to set out the terms of the letter from Mr Hill: ... Dear Michael, Thank you for your recent application for the position of General Manager Finance and Administration with the NSWTRB. I am pleased to advise that the TRB offers you this position on the general terms set out below. Annual Salary: $167,000 (total package inc superannuation) Term: 3 years Commencement: 6 September 2001 Your written acceptance of the offer and general terms would be appreciated as soon as possible to effect this, could you please sign and return a copy of this letter. The Board looks forward to welcoming you as a key member of the executive, and to a long and mutually rewarding association. ... 4 Following receipt of this letter, the applicant made the following handwritten notes on the letter, being points that he wished to discuss with Mr Hill. 1. Letter of offer. 2. Term 3. 3. 10 Sept (Monday) 4. Holidays 2 weeks. 5. Gabes dad. 5 The only point relevant for these proceedings is the second item and the reference to "Term 3". The applicant's evidence was that this was a reference to one of the general terms in the letter, that being, a term of three years employment. The commencement date in the letter was amended to read 10 September 2001. 6 The applicant's case is that he had an expectation that he would be employed for longer than three years due to the representations made by Mr Hill on behalf of the respondent to which reference will be made shortly. 7 The respondent's case is that the applicant's contract was one of specified duration, that is three years. 8 The reason why these different approaches to the duration of the appointment with the respondent is important to the proceedings is that on 8 September 2004, two days before the three year anniversary of the applicant's engagement, Mr Peter V'Landys, the CEO of the respondent, having succeeded Mr Hill, advised the applicant that his contract expired the following day, it would not be renewed and he was to pack his bags and leave the office as soon as possible. The applicant was paid one day's notice and six weeks pay on termination for untaken annual leave. The Evidence of Representations 9 The applicant's evidence is that he raised the issue of the three year term with Mr Hill, as he had just concluded employment with a contract that had a specific termination date. However, for the purposes of job security and financial security, he did not wish to have fixed term employment. The applicant's affidavit indicated that he had the following discussion with Mr Hill: Applicant: I am not necessarily comfortable with having a term of three (3) years. Mr Hill: In reality, the term has been included to give you comfort. If you are doing your job the role will be extended. To have a three year term does not mean that it is a fixed term because it will be our intention to renew the contract if you are doing to job. In fact the contract will note that we have to renegotiate the contract well before the date on the letter. 10 The applicant believed that he would do the job properly and hence that his position would continue. The applicant signed the letter of offer, after discussion with Mr Hill, on 23 August 2001, amending his date of commencement to 10 September 2001. A copy of the letter was provided to Mr Hill. 11 Mr Hill gave evidence, without objection, that it was never in his mind that the applicant would do the job for a specific finite period of time. He stated in his affidavit that it was always the case that the applicant would do the job indefinitely and that the job the applicant was to perform was not a job which was only required to be done for a period of three years, but was, in substance, a long-term appointment. Mr Hill said his expectation was that the applicant would be a long-term appointment. Mr Hill stated that the members of the Board who played a major part in operating the respondent (himself and the Chairman) were concerned that the applicant may not accept the job and not "come on board". Other applicants for the position were, in Mr Hill's view, a long way behind the applicant in terms of experience and suitability for the role. 12 According to Mr Hill, the appointment of the applicant was, at the outset, envisaged to be a long term one and whilst the letter of appointment did mention a three year term, this was more to define the terms (and the giving of comfort) rather than to suggest that at the expiration of the term the engagement would cease. I infer that Mr Hill's major concern was to make that possible for the applicant to ensure he accepted the position. 13 During cross-examination, Mr Hill said that in discussions around this time, the applicant raised a number of matters with him, including the start date and the salary level. Mr Hill advised the applicant that when he commenced work with the respondent that a contract would be negotiated. Mr Hill informed the applicant that he had an agreement which he referred to as an "executive service agreement", which I infer was a reference to a formal contract and that he would be provided with a copy of that agreement as a basis for discussions. Mr Hill said, as there was some urgency, a document was loosely drawn up. He explained there were areas with the draft agreement that he would be prepared to discuss further, if necessary. Discussions took place with the applicant from time to time in respect of the draft agreement, but no document was ever executed. 14 Mr Hill stated the "executive service agreement" did outline the conditions that some employees were working under with the respondent and that were available. Mr Hill's recollection was that the applicant had a couple of concerns with the agreement, but Mr Hill could not recall precisely as to what they were. Mr Hill reiterated his understanding that the applicant had a long-term engagement with the respondent. Importantly, Mr Hill was not specifically cross-examined in respect of the representations he made to the applicant as to his employment. 15 In re-examination, Mr Hill confirmed that: "... In our discussions with Mr Beith, we touched on the three year term and I said to him, 'don't worry about that. We will cover that in the executive service agreement. I just need this form so that I can get the paperwork done and let the unsuccessful go' ". The latter reference I understand to be advising the unsuccessful applicants. 16 The draft "executive service agreement" provided to the applicant, but never executed, contained the following clause: 3 FIXED TERM: NEGOTIATIONS FOR RENEWAL 3.1 Subject to the provisions for termination of the Employment contained in this Agreement, the Employment will be for a period three (3) years ("Term") commencing on 10 September 2001 and terminating on 9 September 2004. ("Expiry Date") 3.2 Before the Expiry date, the parties will endeavour to negotiate a new contract for the employment of the GM - Finance and Administration from the day after the Expiry Date. The negotiations of and agreement to the terms of the new Agreement must be completed three (3) months prior to 9 September 2004, unless both parties agree otherwise. 3.3 In the event that the parties are unable to agree on the terms of the new Agreement on or before the day three (3) months prior to 9 September 2004, the GM - Finance and Administration employment will end on the Expiry Date. 17 The applicant's evidence is that he recalls probably discussing the draft "executive service agreement" with Mr Hill on occasions. Some of these discussions were after he returned a copy to Mr Hill with the salary corrected. His evidence was that he wanted to get the basics corrected before further discussions occurred. 18 On 22 February 2004, Mr P V'Landys replaced Mr Hill as CEO of the respondent. According to the applicant, from March to May 2004, Mr V'Landys introduced various changes in relation to reporting lines and roles generally. These included: (a) General Managers were advised not to attend Board meetings. (b) Authorisation procedures changed so that Mr V'Landys approved every payment. (c) Mr V'Landys was to attend individual budget meetings. (d) All managers reporting to the applicant were to report to Mr V'Landys on an ad hoc basis. (e) Budgets were controlled by Mr V'Landys. (f) Office administration tasks were delegated to various staff. (g) Officers of the Respondent were to undertake tasks which were historically the applicant's tasks to undertake such as obtaining quotes for renovation of the foyer and enlarging Mr V'Landys' office. (h) Mr V'Landys was to approve all expense and travel requests. This had been previously done by the applicant for Managers. (i) A new Annual Leave approval process was introduced whereby all leave was to be approved by Mr V'Landys. Previously this role was undertaken by Managers. 19 According to the applicant, at no time did Mr V'Landys provide him with any instruction on how he wished his role to operate, or advise him as to what he expected from his position after he became CEO. The Evidence Regarding Termination 20 On 8 September 2004, at approximately 11.30 am, Mr V'Landys telephoned the applicant and asked him to attend his office. The applicant attended Mr V'Landys' office. Also present at the time was Mr John Costigan, a Board member of the respondent and junior counsel for the respondent in this matter. There was no representative from the respondent's Human Resources Department present. 21 The applicant's affidavit evidence of what occurred at this meeting, is as follows: To the best of my recollection, the following conversation took place:- Mr V'Landys: When doing a review of contracts prior to Tony Hartnell's departure (Mr Hartnell was the Chairman of the Respondent and had resigned in June 2004) it was noted that a contract issued to you, although not signed, was due to expire tomorrow. Although it is not signed, I believe that it is still a valid contract. We will not be renewing it. It is a difficult decision and it is purely a commercial decision. The position will not be filled. I have received some advice on the matter. Please pack your belongings and leave the office as soon as possible. The applicant: I would like to keep my phone and phone number. Mr V'Landys: Agreed, I will complete the relevant paperwork. The applicant: I also have personal files on my JT platform. Could they be burnt to a disc and given to me? Mr V'Landys: Agreed. Mr V'Landys: This has been a difficult decision, purely commercial and you are a nice person. Thank you for your efforts and I would be extremely happy to be a referee in the event that you applied for a new job. Applicant: I will be obtaining legal advice. 22 Mr V'Landys disputed the applicant's version of the conversation on 8 September 2004. Mr V'Landys recalled in his affidavit that it was Mr Costigan who informed the applicant that "the Board has directed us not to renew your contract and is exercising the right not to renew". The applicant advised that he was "in a bit of shock" and enquired if he could seek legal advice. According to Mr V'Landys, Mr Costigan advised the applicant that if he wanted to, he should seek legal advice. Mr V'Landys recollection of the conversation was that he advised the applicant that "this is nothing personal. I just don't think you are the man for the position, you are a nice person and I wish you the best for the future." 23 After the meeting, Mr V'Landys instructed the respondent's Human Resources Manager to take the applicant back to his desk to get his personal items and give him time to pack up. His personal files were copied and sent to him within 24 hours. Mr V'Landys arranged for the applicant's mobile phone and number to be transferred to him. Contract under which Work Performed 24 There was no issue that the work performed by the applicant for the respondent as the General Manager Finance and Administration clearly satisfies the jurisdictional prerequisite for work performed in any industry under s 106(1) of the Act. The contract under which the work was performed was not in writing, although the respondent's letter dated 23 August 2001 set out some of the terms of employment. Although the applicant was provided with a draft "executive service agreement", this was not executed. The Alleged Unfairness 25 The applicant's case that the contract was unfair is set out in the summons (see paragraph 26 below). The principal allegation relates to the circumstances of the applicant's termination of employment. The summons then sets out 11 claims of alleged unfairness, which purport to relate to the circumstances of the termination of employment. The principal basis for the allegation that the contract operated unfairly relates to its failure to provide redundancy pay and reasonable notice. 26 The grounds of unfairness said to render the contract, or cause the contract to operate unfairly, are set out in the summons as follows: 38. The contract or arrangement whereby the applicant performed work in an industry was unfair, harsh or unconscionable, or operated unfairly because: a) to the extent that it contained a term or condition that the applicant's employment would be a fixed term, such a term or condition was unfair in the circumstances; b) it failed to contain a term entitling the applicant to a redundancy or severance payment in circumstances where the applicant's position became redundant and/or in circumstances where the applicant's position ceased to exist; c) it failed to contain a term requiring the respondent to provide the applicant with reasonable notice of termination upon applicant's position becoming redundant and/or in circumstances where the applicant's position ceased to exist; d) it contained a term allowing the respondent to terminate the applicant's employment without reasonable (or any) notice in circumstances which did not relate to misconduct or neglect by the applicant of his duties; e) the respondent conducted itself in an unfair manner by making representations (which the applicant relied upon) to the effect that the duration of the applicant's employment would not be limited to a three (3) year (or any other) term; f) the content of clause 3.2 of the unexecuted Executive Service Agreement led the applicant to believe that the respondent was committed to long term employment of the applicant and would negotiate in good faith to arrive at new terms and conditions of employment beyond 9 September 2004; g) the respondent sought to invoke the provisions of a "fixed term contract" to justify the termination of the applicant's employment in circumstances where the contract of employment between the applicant and respondent was not, either in substance or form, a contract for a fixed term; h) in the alternative to the above sub-paragraph, reliance by the respondent on the fixed term contract is unfair in the circumstances; i) the contract operated to deprive the applicant of appropriate and proper notice or payment in lieu of notice which was required as a matter of fairness in the circumstances; j) the contract operated to deprive the applicant of appropriate and proper redundancy or severance payments which were required to be paid to the applicant by the respondent as a matter of fairness in the circumstances; and/or k) any other reason this Honourable Commission think appropriate in the circumstances of the case. 27 The principal areas of contention between the parties as to the alleged unfairness of the contract are namely: (i) to the extent the contract contained a fixed term, whether the respondent held out to the applicant that the position of General Manager Finance and Administration carried with it the prospect of long-term employment and whether such representations were not subsequently adhered to; (ii) the failure to adhere to representations contained in the draft executive service agreement, that either a new contract would be negotiated, or the applicant would have at least three months notice that his employment would be coming to an end; (iii) the contract made no provision for notice and/or redundancy or severance pay in circumstances where if the applicant's position ceased to exist, he would be effectively redundant. 28 There was no issue between the parties that the applicant's position was not filled and that his duties were reallocated to other persons already employed within the respondent. The documentation, which provides part of the evidentiary basis for the existence of the contract, clearly makes no provision for a monetary payment in the event of termination of employment on the grounds of redundancy. There was no issue between the parties that in the circumstances of the applicant ceasing to be employed, the position was not subsequently filled, so the position ceased to exist and the situation amounted in a practical sense to a redundancy, although the respondent strenuously submitted there was no basis for redundancy pay. The failure to make provision for a redundancy or severance payment in a contract may render the contract unfair under s 106 of the Act: see Westfield Holdings v Adams (2001) 114 IR 241. 29 I propose to deal separately with the three principal areas of contention. What is the Contract Operating Between the Parties? 30 Mr J Phillips SC, who appeared for the respondent with Mr Costigan of counsel, submitted that the applicant's contract was one of specified duration, which was terminated by the effluxion of time upon its end date having being reached. Senior counsel also submitted that the proper construction of the contract between the applicant and the respondent needed to have regard closely to the provisions of the letter dated 23 August 2001, particularly in respect of the question of the term of the contract. The respondent further submitted that the three year term was unambiguous and the applicant cannot modify or vary the explicit terms of the contract. To do so, it was contended, would breach the parol evidence rule. If, as it was submitted by the respondent, it was permissible to have regard to the surrounding circumstances, then it accepts regard may be had to the draft employment service agreement. In particular, it contended cl 3 "Fixed Term: Negotiations for Renewal" was consistent with what was contained in the letter of 23 August 2001. 31 The respondent then sought to rely on purported comments made by the applicant in respect of the term of his employment to employees during his period with the respondent. 32 I do not agree that such an approach to the issue is correct or otherwise warranted. The issue that I have to decide is whether the contract operated unfairly against the applicant by reason of certain representations made to the applicant which induced him to enter into the contract with the respondent, such representations being that the applicant had long term employment prospects with the respondent 33 It is no answer for the respondent to rely upon the terms of the contract and submit, as it does, that the contract cannot be modified or declared void. This ignores any representations made to the applicant collateral to the contract. 34 It is inappropriate when embarking upon a consideration of these issues to adopt an overly technical approach to whether the respondent falsely represented to the applicant his employment prospects and whether or not it was relied upon by the applicant. As Mr A Hatcher of counsel, who appeared for the applicant, correctly submitted, these are questions not necessarily determinative of the issue of unfair contract, but rather fall to be decided by reference to characteristics drawn from the common law of contract. 35 The applicant's evidence is that he questioned the reference to the term for 3 years in the letter of 23 August 2001, which set out the general terms of the position. The applicant noted, among his concerns, on a copy of the letter the reference to the term of employment. His evidence, which I accept, is that he raised these concerns with Mr Hill. The applicant was not cross-examined in respect of the list of concerns. In my view, the contemporaneous document listing the applicant's concerns lend support to his evidence. It was not challenged. 36 The evidence of Mr Hill, the then CEO, was that the letter of appointment was signed in order to confirm that the employee had commenced working and in order to have a document in place that the respondent could work from. Mr Hill provided the applicant with the draft "executive service agreement" to give the applicant some comfort, as he observed, racing authorities are somewhat infamous for acting on a capricious whim in respect of employment matters. 37 Mr Hill recalled discussing the draft agreement on a number of occasions with the applicant. It was not a priority to sign it. Mr Hill's evidence was that it was never in his mind that the applicant would do the job for a specific finite period of time. It was always the case that he would do the job indefinitely. The job he performed was not a job that was only required to be done for a period of three years, but in substance, a long-term appointment. From Mr Hill's point of view, the expectation was that the applicant would be a long term-appointment. There was no issue in the proceedings that Mr Hill was able to make representations on behalf of the respondent, or that the representations made by him were made on behalf of the respondent. 38 The applicant's evidence was that in respect of the reference to "Term: 3 years", he had just completed a contract which did have an end date which he was happy with at the time. However, for the purposes of job security and financial security, he did not wish to have a fixed term arrangement. The applicant's evidence was that he had a discussion with Mr Hill during which he raised the three year term. He also gave evidence that Mr Hill said to him: "In reality the term has been included to give you comfort. If you are doing your job the role will be extended. To have a three year term does not mean that it is a fixed term because it will be our intention to renew the contract if you are doing the job. In fact the contract will note that we will have to negotiate the contract well before the date on the letter." 39 It is clear from the evidence that Mr Hill's understanding of the contract was entirely consistent with that of the applicant, in respect of the representations he received. 40 The respondent never directly put to Mr Hill whether or not the particular representations alleged by the applicant had occurred or not. In my view, and I find, Mr Hill did make representations in relation to the long-term appointment of the applicant. During cross-examination, Mr Hill confirmed that he certainly thought at the time that the applicant had a long-term engagement with the respondent. Later, in cross-examination, Mr Hill, after being questioned about the applicant's contract being a fixed term, gave this evidence: "[W]hen Mr Beith raised that with me I told him not to be concerned about it because we would be drawing up a contract in the same terms as mine." 41 The representations made by Mr Hill were, of course, consistent with the reference in the letter of 23 August 2001 to "a long and mutually rewarding association." 42 It is no answer to submit, as the respondent did, that no unfairness arose because the applicant knew the term stated in the contract was three years. Of course, he knew that. It was the reason that he approached Mr Hill, which resulted in the representations made by him regarding his future employment. 43 It is significant that the hurdle of the three year term was overcome in the discussions between the applicant and Mr Hill. 44 The respondent sought to rely upon a discussion between Mr A Hartnell, the Chairman of the respondent at the time, and the applicant in respect of the applicant's understanding of his contract. In December 2003, the applicant met with Mr Hartnell. Mr Hartnell advised the applicant that Mr Hill was leaving the organisation that day and the applicant was asked, and agreed, to act as the CEO of the respondent. According to Mr Hartnell, during the discussion about the applicant acting as the Chief Executive Officer, he asked him how long his present term of employment would last and the applicant replied "until September 2004". Mr Hartnell also asked the applicant for a copy of his contract. The applicant advised Mr Hartnell that he did not have one. This conversation is disputed by the applicant whose evidence is that Mr Hartnell did not mention the term of his employment and reference to his contract. It was suggested to Mr Hartnell during cross-examination that the applicant's version of the conversation was quite possibly correct. However, Mr Hartnell's evidence was that during the discussion, the central feature in his mind was whether he had to negotiate from the applicant's present terms of employment, or whether he had to negotiate an entirely new contract with the applicant for the position of CEO. I found Mr Hartnell to be a fair witness who made concessions when appropriate. 45 I accept Mr Hartnell's evidence that what the terms of the applicant's contract was at the time that he was offering him the position of Acting CEO was important. However, Mr Hartnell's evidence in cross-examination was that the applicant was "on terms for employment at the time". He was not asked what he meant by this expression. On balance, it seems to me that the terms of the applicant's employment would have been a relevant matter to Mr Hartnell. It seems to me that Mr Hartnell may well be correct in his recollection that the applicant advised him that the present term of his employment lasted until September 2004. Such a response by the applicant would have been entirely consistent with what was contained in the letter of 23 August 2001, however, his understanding was that his contract of employment would continue beyond the expiry of the notional three year term which was consistent with the representations made to him by Mr Hill. Mr Hartnell was of the view that the present term of the contract depended on whatever happened in the future. This is not inconsistent with the applicant's case. If anything, it was an indication that the applicant's employment was not going to be terminated in September. Far from looking for an opportunity to terminate the contract, Mr Hartnell was enquiring to ensure the applicant's contract was ongoing. 46 I am satisfied that both the applicant and Mr Hill have made an honest attempt to identify the understanding and arrangement that they reached in 2001. I find the applicant presented as a truthful witness. He made genuine efforts to answer questions asked of him and made admissions against his own interests to questions put to him, in particular, relating to his applications for alternate employment. 47 The applicant's case is that his contract provided for ongoing employment and that the contract was unfair in that it failed to provide him with a payment in lieu of notice and severance payments upon being retrenched. In my view, based on the evidence, the applicant initially entered into a contract expressed to have a three year term from its commencement. Representations made to the applicant by Mr Hill, collateral to the contract, resulted in the contract or arrangement becoming an ongoing contract of employment. Such representations were designed to assure the applicant of his ongoing employment. This was the "contract", in its widest sense, that was operating at the time of termination.

48 I have reached the conclusion that the contract became an ongoing contract and the respondent acted contrary to the representations made collateral to the contract. The contract or arrangement became unfair as the representations collateral to the contract created by what was said by Mr Hill and the provision to the applicant of the "executive service" document, gave him an expectation that he would have a greater measure of security and be given a greater notice period if the employment was to finish, or the contract was not renewed. In circumstances where the applicant was made redundant, it was unfair that he did not receive notice and/or redundancy pay. Did the contract become unfair because the representation regarding negotiations was not adhered to? 49 A further representation made to the applicant was the terms of cl 3.2 and cl 3.3 of the draft agreement (set out earlier in these reasons) would be collateral to the contract. Mr Hill represented to the applicant that his concerns about a three year term would be addressed in the "executive service agreement". What was proposed in the agreement was that steps would be taken to negotiate a new contract before the term expired and if negotiations failed, that must be known three months before the expiry date. This would result in the provision of three months notice. The applicant was given one day's notice of the termination of his contract. Clause 3 envisaged that negotiations must occur for a new contract. This, of course, is consistent with the position reached between the applicant and Mr Hill that the applicant's contract would come to an end only if agreement on further terms could not be reached and in such circumstances three months notice would be provided. It did not envisage that the respondent would ignore this provision. In my view, the draft contract was intended to provide comfort to the applicant and was consistent with the representations, which I have found were made to the applicant that his employment would be long-term. 50 There were, of course, no negotiations. The respondent made no attempt to initiate such negotiations, nor was the three months notice envisaged by the clause in the draft agreement ever provided. The applicant contended, in the context of the draft executive agreement, which was represented to be the basis of the arrangement between the parties that the respondent demonstrated further unfairness by its conduct at the meeting on 8 September 2004 when the applicant was advised of his termination. The respondent relied not only on the letter of 23 August 2001, but the draft "executive service agreement". 51 As the evidence set out earlier discloses, there is a dispute between the applicant and Mr V'Landys regarding what occurred on the day the applicant was terminated. I consider the evidence of the applicant to be preferred in respect of these matters. A contemporaneous handwritten note of the conversation dated 8 September 2004 supported his evidence and the applicant was only cross-examined in a very general way on this evidence. In addition, Mr Costigan, who was present as junior counsel for the respondent was not called to give evidence. Also, in respect of this issue, on 9 September 2004, the solicitors for the applicant forwarded a letter to the respondent, which contains an account of the meeting that occurred on 8 September 2004, that is generally consistent with the evidence of the applicant. 52 I accordingly find that in the conversation at the time the applicant's employment was terminated, Mr V'Landys referred to the "executive service agreement" and thus, the respondent, in terminating the applicant's employment, relied upon part of the terms of the unexecuted "executive service agreement" (specifically that part governing the terms relating to the termination of the applicant's employment), but without giving any regard to the obligation in cl 3 of the document, which, if observed, would have obligated the respondent, in a practical sense, to give the applicant three months notice of the termination of his employment. 53 In light of the uncertain legal situation with which the applicant was left as to the precise terms of his employment, and in light of the representations made on behalf of the respondent at the time his employment commenced and the failure of the respondent to formalise a formal written agreement, at least generally, in the terms of the "executive service agreement", I find that the applicant had the reasonable expectation that his employment would continue past 9 September 2004, unless he was given three months notice of the renegotiations of the terms of his agreement, or the termination of his employment. I therefore find that the relevant contract or arrangement between the applicant and the respondent was unfair and operated unfairly to the extent that it did not contain terms reflecting that reasonable expectation. 54 After the applicant's termination, a review was conducted of his computer records. The respondent relied upon records that the applicant was seeking employment from February 2003. When cross-examined about this matter, the applicant gave evidence, which I accept, that although he made attempts, he did not seriously commence seeking other employment until February 2004, after Mr V'Landys took up the position as CEO. At this time the applicant became dissatisfied in the way in which Mr V'Landys carried out his duties, the manner in which he treated staff and the steps he had taken to reduce his role and responsibilities. I also accept the applicant's evidence that he was not looking for alternative employment on account of any terms or provisions contained in his contract, or because he thought his employment would be terminated sooner rather than later; he had made up his mind to secure a good alternative position; if he had found such a position, he would have given the respondent reasonable notice. 55 Mr Phillips submitted that the applicant therefore did not come to these proceedings with "clean hands". He was busily going around taking time off to go to interviews and using the employer's resources to type letters and send emails. Senior counsel further submitted that fairness is a two way street and the applicant was not giving fairness once he formed the view he could not work with Mr V'Landys. 56 In my view, this matter does not bear upon the unfairness of the contract, either during 2003, or when it was terminated. Further, I do not consider that the matter raised by the respondent in this area, disentitles the applicant to appropriate relief in respect of the unfair contract. 57 Additional unfairness is demonstrated by the conduct of the respondent in that, although a decision was taken almost four months before the intended date of termination, it was only revealed to the applicant one day before his termination. The applicant sought to rely on this ground of unfairness as being entirely independent of the unfairness arising from the representations made to the applicant. The applicant contends that absent the representations, the letter of 23 August 2001 was either unfair on its face, or became unfair because the respondent simply failed to give the applicant any notice whatsoever, apart from the 24 hours notice, that it did not intend to extend his employment. 58 There was no issue as to the jurisdiction of the Court to rely upon unfairness of this kind in considering whether relief should be granted. 59 It was also conceded that there was no issue in respect of the applicant's performance. He received salary increases during his employment, despite there being no provision to this effect in the letter of 23 August 2001. He was appointed Acting CEO and invited by the then Chairman, Mr Hartnell to apply for the position of CEO, which he declined. In addition, the applicant was paid, in accordance with the usual practice, one month's salary in advance at the end of August 2004. 60 These matters were also relied upon by the applicant for the contention that he could have reasonably expected his employment would be extended, or continue after 9 September 2004, irrespective of any representations that were made. I have already found that the applicant had a reasonable expectation of continuance of his employment. I consider these matters provide further grounds for this expectation. 61 It is also necessary to resolve a conflict in the evidence between Mr Hartnell and Mr V'Landys regarding when the decision was taken to terminate the applicant's employment. Mr Hartnell gave evidence that at a Board meeting of the respondent in May 2004, the Board endorsed Mr V'Landys decision not to renew the applicant's contract of employment on the grounds raised by Mr V'Landys that the respondent could not function effectively with a chief financial officer in whom the CEO did not have confidence. 62 Mr Hartnell was strongly pressed about this matter in cross-examination and at one stage was unsure whether Mr V'Landys, at the May 2004 Board meeting, went any further than expressing dissatisfaction in the applicant and a desire to cause the applicant to leave the organisation. During his evidence, a further matter Mr Hartnell said he was unsure about, was whether at its May 2004 meeting the Board endorsed a decision to terminate the applicant's employment at its May 2004 meeting, or whether the Board simply endorsed and supported Mr V'Landys in whatever action he chose to take. The Minutes of the May 2004 Board Meeting do not assist in respect of this issue. Mr Hartnell was sure that, at that time, Mr V'Landys did not think highly of the applicant and that he wanted to terminate his employment. Mr Hartnell was confident that, and I find that when his evidence is considered overall, that Mr V'Landys had, as at May 2004, already made the decision to terminate the applicant's employment. I also find that as a result of the May meeting, Mr V'Landys either expressly, or impliedly, had authority to terminate the employment of the applicant. 63 It follows that I do not accept Mr V'Landys evidence that he did not make a decision to terminate the applicant's employment until late August 2004. Mr Hartnell resigned as Chairman of the respondent in June 2004. Mr V'Landys evidence was that his decision to terminate the applicant was made well after Mr Hartnell resigned as Chairman. Having regard to the whole of the evidence of Mr V'Landys and Mr Hartnell on this issue, I consider it most unlikely, or improbable, that Mr V'Landys made a decision to terminate the applicant's employment after Mr Hartnell ceased to be Chairman and a member of the Board. This decision was of course not conveyed to the applicant until 8 September 2004. 64 The applicant was advised in his letter of termination, handed to him on 8 September 2004, that: "You will be on gardening leave until Thursday 9 September 2004. You are not required to continue to perform your current services and duties or attend the office during that period but you must be available to attend the office or assist with any enquiries as required during business hours during that period. Notwithstanding this, you will continue to be paid your current remuneration during that period." 65 Such conduct is hardly in keeping with community standards of fairness or in the public interest. 66 In my view, and I find the letter of 23 August 2001 containing some of the terms of the contract, became unfair. I also find there was unfairness where the respondent made a decision to terminate the applicant's employment, four months prior to the expiry date. It was also unfair that the respondent made a decision four months before the expiry date and did not inform the applicant that such a decision had been made. Did the Contract Operate Unfairly by Failing to Make Provision for Severance or Redundancy Pay? 67 A further issue that I have to decide is whether the contract operated unfairly by reason of its failure to make any provision for redundancy or severance pay. The applicant did not receive any redundancy payment upon termination. 68 Where the contract failed to make adequate provision for redundancy pay, the applicant claimed that the contract was also unfair by failing to make provision for reasonable, fair and adequate or just redundancy payments. There was no dispute between the parties that the applicant's position was not filled. An article published in the Sydney Morning Herald in October 2004, was admitted into evidence, without objection. The article relevantly stated: Ruling body flags big changes Racing NSW chief executive Peter V'Landys produced the cost-cutting club this week when Michael Beith, who was the general manager of finance administrator, did not have his contract renewed. "In keeping with the strategic plan we are setting an example for everyone else to reduce expenses," V'Landys said on Thursday. 69 Although there are other reasons that led to the cessation of the applicant's employment, to which I have already referred, I also find that part of the rationale for the abolition of the applicant's position with the respondent appears to be related to the restructure, or reorganisation of the management of the respondent and the efficiencies, or savings, that were sought to flow from such an exercise. 70 I find that, in the circumstances of this case, which include that the applicant had a reasonable expectation of continuity of employment and his position was abolished, thus making him redundant, his contract of employment was unfair in failing to make provision for a reasonable redundancy payment. 71 The Full Bench in Westfield Holdings v Adams, after considering various authorities, discussed the issue of redundancy at [154]: We consider that the following principles may be derived from these cases: 1) Whether or not a contract or arrangement is unfair within the meaning of ss 105 and 106 is a matter to be decided upon examination of the facts of each particular case; the sections deal largely with private rights inter partes ; the focus of attention is the contractual relationship between a particular employer and employee. 2) Subject to the primary focus being the particular circumstances of the individual contract or arrangement concerned, in assessing whether unfairness has occurred general standards or levels, including standards of redundancy pay applying to employees covered by industrial awards or legislation, of what is considered to be fair will be factors to be considered. 3) Despite that a general and relevant industrial prescription governing benefits payable to employees in termination of employment situations may exist, unfairness in relation to a particular contract of employment may nevertheless arise in a situation of redundancy or termination of employment for reasons unrelated to or not relevant to the basis of award prescription of an objective and fair benefit. 4) The scale fixed in the Redundancy Awards Case was fixed on a "safety net" basis. In making money orders under s 106(5) the Court may have regard to the Redundancy Awards Case scale but is not bound to apply it in the context of the case before the Court. 72 Although I am mindful that employees on fixed term contracts are not generally entitled to redundancy pay, in my view, bearing in mind the circumstances of this case, and the findings that have been made, it is appropriate to remedy the unfairness by including compensatory orders in respect of redundancy. In my view, this case should be treated as an exception, because of its particular circumstances, to the general principle that would normally apply. 73 The applicant was a senior employee, experienced in his field of expertise and accorded a high degree of responsibility by the respondent in the position of General Manager Finance and Administration. 74 The applicant seeks a payment for redundancy equivalent to six months salary calculated by reference to his salary package and six months notice. In the alternative, the applicant claimed 12.5 weeks redundancy pay based on his salary package and six months notice. The amount claimed in respect of redundancy was further amended during oral submissions by the applicant's counsel to the scale fixed in the Redundancy Awards Case (1994) 53 IR 419, which I was told equated to seven weeks plus 25 per cent. Taking into account the applicant's experience, the seniority of his position, his responsibilities, the restructure of the respondent's organisation, and the applicant's belief encouraged by representations from the respondent that he would be engaged in long-term employment, I consider an amount of nine weeks based on the applicant's salary package is an appropriate compensatory order to be made in respect of a severance or redundancy payment. Such a payment, as was explained in Westfield Holdings v Adams has as its purpose compensation for the loss of non-transferable credits and entitlements, as well as for inconvenience and hardship imposed by the termination of employment through no fault of the employee. 75 In addition to other factors already referred to, I consider a most pertinent matter is the failure of the respondent, notwithstanding a decision, or decision in principle was made at the May 2004 Board Meeting, that that decision was not conveyed to the applicant for almost four months. 76 I consider an amount reflecting four months of the applicant's salary package should be ordered in respect of this matter. This amount should be reduced by the amount earned by the applicant in mitigating his loss over that period for the reasons that follow. Although I have earlier expressed the view that leaving advising the applicant of his termination to the last day, was not the appropriate approach and unfair, no doubt, part of the reason for this was that Mr V'Landys did not think he had to give notice. In substance, what he did was to wait. Mitigation 77 I turn to consider the question of mitigation. Section 106(6) of the Act, provides that in making any order under s 106(5), the Commission must take into account whether or not an applicant took any action to mitigate loss. It was common ground that the applicant was unemployed for two months. He subsequently obtained work as a consultant and earned $79,655, being $11,379 per month to 30 June 2005. The applicant's annual salary at the time of his termination was $183,967, or, $14,151 per month. The difference between the applicant's pre monthly earnings and after he commenced employment, two months later, was $2,772. 78 In dealing with the question of mitigation, the respondent accepted that the applicant was actively looking for work during the period immediately after his termination. The matters Mr Phillips referred to on the assessment of mitigation were six weeks holiday pay received on termination of employment, the success fee received in early 2006 for work done in 2005 and the fact that the applicant could more effectively structure his payments as a consultant. 79 I do not consider these matters should be taken into account on mitigation. The six weeks holiday pay is clearly not relevant as it relates to money the applicant was legally entitled. As to the success fee, I was not provided by the respondent with full details of this fee, which would enable me to conclude what amount was referable to the four-months after the applicant's employment. There is, therefore, no basis to bring it into account on mitigation. A similar comment may be made about the tax arrangements referred to, but in any event, I would not consider it to be an appropriate exercise of discretion to take this matter into account on the limited information available. 80 A different situation, of course, arises in relation to the monies earned by the applicant during the third and fourth months after his employment with the respondent ceased. I consider monies earned must be taken into account in accordance with the general principles and s 106(6) of the Act. The applicant successfully mitigated his losses and to that extent his earnings should be taken into account. In my view, in the circumstances of this case, it is just to do so. However, in light of the principles discussed by the Full Bench in Brent & Ors v Bastian (2003) 124 IR 223 at [34] - [39], I do not propose to apply the principles of mitigation to the redundancy payment. ORDERS 81 The Court is therefore prepared to make Orders along the following lines, but is prepared to permit the parties to confer, in light of this judgment, and to bring in final orders. 1. The contract of employment entered into between Mr Beith and Racing NSW under which the applicant performed work as the General Manager, Finance and Administration for the respondent is declared to be an unfair contract on the grounds that the contract or arrangement failed to provide for reasonable notice and severance pay. 2. The contract, or arrangement, is varied from its inception to include a term that upon termination of employment for reasons of redundancy, the respondent shall pay the applicant a redundancy payment equivalent to nine weeks remuneration calculated by reference to the applicant's full salary package. 3. The said contract, or arrangement, is varied from its inception to include a term that upon the termination of employment, the respondent shall pay the applicant reasonable notice equivalent to four months remuneration calculated by reference to the applicant's full salary package, less any amount earned by the applicant in mitigating his loss over that period of four months. 4. The respondent is ordered to pay to the applicant, amounts calculated in accordance with the variation to the contract, or arrangement, as set out in Orders 2 and 3. 5. The respondent is to pay interest on the amount specified in Orders 2 and 3 above in accordance with Sch 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of the filing of the summons for relief being 14 October 2004. 6. The respondent shall pay the applicant's costs of the proceedings as agreed, or failing agreement, as assessed in accordance with the Rules of the Court. 82 The applicant is directed to file short minutes of order within 14 days of today.

Beith v Racing NSW

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Judgment (11 paragraphs)

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Cases Cited (3)

Cited By (1)