CHRISTINE MAY v LILYVALE HOTEL PTY LIMITED

out his period of service. She apparently did so very efficiently. On 28 December 1994, Mr Kawawaki completed a "Performance Appraisal Form" in which he said she "has been performing her duties in effective manner". He praised her professionalism and communication skills. He said that, on many occasions, "she pointed out a number of chances which might have caused loss to the company". He reported that he had "found her to be objective and flexible in solving problems" and concluded: "During my first year in Australia, I have found Christine's support to be invaluable, especially in the early months when I had trouble with the Australian accents. I hold Christine in high esteem with her balanced outlook and maturity." Apparently as a result of this appraisal, Ms May's salary was raised to $42,500 as from 1 January 1995. The General Manager of the hotel, Mr Guido Jonas, wrote a letter to Ms May informing her of the rise in which he said: "The commitment that you have displayed in your position is indeed greatly appreciated. Management trust that you will continue to give your best, not only for your satisfaction, but also for the good of our Hotel. We can all be proud of the success we have achieved in our second year of operation. Your contribution has been a vital part of our success. Congratulations and thank you." Mr Kawawaki left the hotel, apparently to return to Japan, on 31 March 1995. Mr Jonas left the hotel at about the same time. He was replaced, on a temporary basis, by an ANA employee sent from Japan, Colin Moon. The change over was supervised by an ANA executive, a Mr Akiyama. Mr Akiyama discussed with Ms May her situation when Mr Kawawaki left. She pointed out that the position would be similar to that which applied between the departure of Mr Rupp and the arrival of Mr Kawawaki. She offered to assist the General Manager and his secretary, as she had done previously, and to work in other departments of the hotel as required. She mentioned a vacancy for a secretary in the hotel's engineering department. Mr Akiyama said that Mr Moon would discuss the position with her. Mr Moon commenced duties on Friday, 31 March or Saturday, 1 April. Ms May was absent from work on Monday, 4 April through illness. On Tuesday, 5 April Mr Moon spoke to her about her employment. He said: "I have spoken to all the department heads at this hotel and you are held in such low esteem by them all that they are not prepared to work with you or have you work in their departments." Ms May gave evidence that she was "flabbergasted and overwhelmed" by this statement, which she did not believe to be true. She asked Mr Moon what he meant. He replied: "I do not have to discuss it with you". Mr Moon then said: "It's a resignation or a redundancy. There is no difference". She responded: "I think you will find there is and I will certainly not resign". Mr Moon repeated: "I do not have to discuss this with you. This is it." Ms May's evidence continued: "So then I said: Well, look, are we going to be able to negotiate this redundancy? - to which he replied, and he said: Haven't you heard me? He raised his voice in a very intimidating way: You are perceived to have caused all the problems in this hotel. Again, I just - I couldn't really imagine what he was saying because if there were problems in the hotel I don't think it was me who was causing them. There were a lot of people playing games, but he insisted that it was me. So again I said to him: Well, please, can you tell me what you are talking about? He cut me off and said, again: I don't have to discuss it with you. So knowing that I wasn't going to get anywhere further with this conversation, I then asked him when he would like me to leave the hotel, to which he said: I do not have to deal with you. It doesn't bother me." Ms May left the hotel on the following day, 5 April. On that day she received a letter signed by Mr Moon as Acting General Manager of the hotel. It read: "It is with regret that I inform you that effective 5 April 1995 your position of Personal Assistant to the Resident Manager has become redundant. This letter serves as confirmation of the discussion held between us regarding the above on 4 April 1995. Christine you will receive four (4) weeks notice of termination and five (5) weeks severance pay, as well as any outstanding annual leave entitlements. Christine our best wishes go with you." Three observations should be made about this evidence. First, Mr Moon was not called to give evidence. Ms May's account of her conversation with him was not challenged. It stands, uncontested, as a shining example of arrogant and insensitive behaviour; of how not to terminate the employment of a fellow-employee. Second, there is no evidence to support Mr Moon's claim that Ms May was held in low esteem by all the department heads and they were not prepared to work with her. Nor is there any evidence of deficiencies in her conduct or performance. If deficiencies in her conduct or performance had been a reason for the decision to terminate her employment, it would have been necessary for her to have been informed of the alleged deficiencies and given an opportunity to defend herself against them: see s.170DC of the Act. Third, at the hearing before the Judicial Registrar, no serious attempt was made to establish that there was a situation of redundancy. The only evidence in relation to that matter is that: (a) immediately before her termination, there were no vacancies for secretarial staff, a new secretary having just commenced; and (b) one week after Ms May's departure, a new secretary/office assistant was engaged. There was no evidence that Ms May's position was surplus to the hotel's requirements. During the course of his submissions, Mr Rogers placed emphasis on the fact that Mr Kawawaki's departure created a vacancy in the position of Resident Manager. He said this necessarily meant that there was no need for a Resident Manager's secretary. I suggested that it did not follow that there was a diminution in the total secretarial workload in the hotel. He accepted this and, after brief further discussion, requested a short adjournment to obtain instructions. I granted this request. On resumption, Mr Rogers stated that his client now accepted that the termination was unlawful but wished to contend that the compensation assessed by the Judicial Registrar was excessive. The permissible limit of compensation: the law In relation to compensation, Mr Rogers put two contentions: (a) the amount allowed by the Judicial Registrar exceeded the maximum allowable award under s.170EE(3) of the Act; and (b) having regard to the evidence, a figure of $25,000 was excessive. Section 170EE(3) applies where the Court finds that a termination of employment was unlawful (other than for breach of s.170DB) but reinstatement is impracticable. In such a case, by s.170EE(2), "the Court may make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate". Section 170EE(3) provides: "In working out the amount of the compensation for the purposes of subsection (2), the Court is to have regard to the remuneration that the employee would have received, or would have been likely to have received, if the employer had not terminated the employment, but the amount of compensation: (a) must not exceed, in respect of any employee, the amount of the remuneration that would have been received by the employee in respect of the period of 6 months that immediately followed the day on which the termination took effect if the employer had not terminated the employment and the employee had continued to receive remuneration in respect of the employment at the rate at which he or she received remuneration immediately before the termination took effect; and (b) must not exceed, in respect of an employee who is not employed under award conditions, the applicable amount on the day on which the termination took effect." As the award was $25,000, there is no problem about compliance with para. (b). When the termination took effect, the "applicable amount" was $30,000: see s.170EE(4). But Mr Rogers said that para. (a) limited compensation to $21,125, being one half of Ms May's $42,250 annual salary. He accepted that she was entitled to some non-salary benefits but argued that the word "remuneration" embraces only cash payments, salary or wages. In several decisions in this Court, the contrary has been assumed. Non-salary benefits have been taken into account in assessing the employee's "remuneration" under s.170EE(3). An example is my own decision in Messervy v Maldoc Pty Limited (30 June 1995, not reported) where I included the value of the employees' board and lodging in assessing their "remuneration". But the point was not argued in that case; nor, so far as I know, has it been argued in any other case. It is a question of some importance to the application of the legislation. In support of his contention, Mr Rogers cited a decision of Abadee J in the Supreme Court of New South Wales, Leighton v Australian Telecommunications Commission (18 October 1990, not reported). That was a personal injuries case. Counsel for the plaintiff submitted that, in assessing damages for loss of earning capacity, the Court should take into account the difference between certain allowances received by the plaintiff (travelling, accommodation and meals) and the actual cost to him of those items. The difference was described by counsel as part of his "remuneration package". In dealing with this submission, Abadee J observed that the plaintiff was to be compensated for loss of his capacity to derive reward from his efforts. He held that, in assessing that compensation, there was no reason to disregard the allowances. He posed the question: "Now what does a man earn?" He answered: "He earns the sum which is the fruit of his labour; whatever he receives by way of remuneration for the service he gives." Abadee J cited two cases where non-salary receipts (admittedly, in money) had been held to be "earnings". He also referred to Skailes v Blue Anchor Line Limited [1911] 1 KB 360, a case in which the United Kingdom Court of Appeal dealt with the meaning of the word "remuneration" in the Workman's Compensation Act 1906 (UK). The Act defined "workman" in such a way as to exclude employees "whose remuneration exceeds 250 l. a year". The word "remuneration" was not defined. The deceased was a ship's purser. He received a regular bonus and was entitled, as an aspect of his employment, to retain for himself the profit on sales of nips of whisky. The Court held that both the bonus and the whisky profit formed part of his "remuneration". Cozens-Hardy MR commented at 363 that "'remuneration'" is not the same thing as salary or cash payment by the employer ... remuneration involves precisely the same considerations as earnings". He referred to Dothie v Robert Macandrew & Co [1908] 1 KB 803, a case that is of particular present relevance because it involved non-cash benefits. Dothie was also a workers' compensation case. The deceased was a sea captain who lived on board his ship. Cozens-Hardy MR said at 806: "He got his food on board there, whether he was actually at sea or not; and it is not disputed, and it could not be disputed ... that, in considering whether he is a 'workman', you must have regard to the fact that his remuneration was not merely 216 l. in cash, but also board and lodging on board ship". The other members of the Court, Fletcher Moulton LJ and Buckley LJ, agreed. The latter commented at 810 that Captain Dothie "was remunerated partly in cash and partly in kind". It seems to me that the approach taken in these workers' compensation cases is consonant with the contemporary Australian understanding of the word "remuneration". The Macquarie Dictionary defines the noun "remuneration" as "1. the act of remunerating, 2. that which remunerates; reward; pay". The verb "remunerate" is defined, more helpfully, as "1. to pay, recompense, or reward for work, trouble etc; 2. to yield a recompense for (work, services, etc)". There is nothing in either definition that suggests that remuneration is confined to cash payments. Contrary to Mr Roger's submission, Leighton does not assist his argument; indeed it points against it. That Parliament intended "remuneration" in s.170EE(3) to cover more than salary and wages is suggested by the Act itself. The amending legislation that inserted the present s.170EE (Act no. 97 of 1994) also inserted s.170CD. That section excludes from Subdivisions B, C, D, E and F of Division 3 employees whose "relevant wages" exceed particular amounts. Plainly, the word "remuneration" was chosen, for s.170EE(3), in order to denote a concept wider than wages. Non-monetary benefits are not wages: see Ardino v Count Financial Group Pty Limited (1994) 1 IRCR 221 at 228-229. But they fall within the concept of remuneration. In my opinion, it is erroneous to argue in the present case that the maximum permissible compensation is $21,125. Account has to be taken of the non-salary benefits provided by Lilyvale to Ms May. The permissible limit of compensation: the facts Ms May's letter of appointment mentioned five non-salary benefits provided by the employer: free meals while on duty, free dry cleaning and laundry up to a limit of $200 per month, a 50% discount in all retail outlets within the hotel, a company superannuation contribution equal to 5% of salary and a life insurance policy providing a benefit of four times annual salary. Ms May only took lunch at the hotel, at an estimated normal cost of $15 per day or $75 per week. In evidence, she did not quantify her use of the dry cleaning and laundry services. Although she occupied a position in which she needed to be smartly groomed and dressed, $200 per month might overestimate her actual use. I will adopt a figure of $150. As to discounts, she said she spent about $100 per month, so this was worth $50 per month to her. If one simply multiplies the weekly and monthly items, the result is $6,300. But some allowance should be made for absences on holidays, sick leave etc. So I will reduce the figure to $5,800. The superannuation contributions (5% of $42,500; $2,125) would take the annual remuneration to $50,175 and the leave loading would add a further $569. The cost of the life policy is not established but it is reasonable to assume that it was enough to take annual total "remuneration" over $51,000. It follows that it is safe to adopt $25,500 as the maximum compensation award available in this case. Mr Rogers argued that it is erroneous to assess the value of items of non-salary remuneration by reference to their normal cost. He said they should be valued according to the saving they achieved for Ms May. Thus the value of the lunches was not the hotel's ordinary charge for the selected lunch, which Ms May did not have to pay, but what Ms May saved by not having to provide for herself. Mr Rogers said she could have brought her lunch from home; the value of the lunch was the saving in not having to do so. On this basis, it would seem, the value of the benefit is the cost of a Vegemite sandwich. Mr Roger's parsimonious argument is similar to one put, and rejected, in Dothie. After dealing with the question whether board and lodging was "remuneration", Cozens-Hardy MR disagreed with the trial judge's view that the value of the board and lodging should be determined by reference to what the deceased captain saved by his allowance of food. He said at 808: "The true test is not, therefore, what Captain Dothie actually saved by his allowance, but what was the actual value to the workman of the reasonable board which was provided for him by the shipowners." Mr Rogers also submitted that, in determining the maximum available compensation, regard must be paid to the redundancy payment to Ms May; in other words, a redundancy payment comes off the cap. If it were not so, he said, an employer who made a redundancy payment might be exposed to a greater total pay out than one who did not. A redundancy payment must clearly be taken into account in considering the extent of the employee's loss, and therefore the amount of compensation that would be appropriate in the absence of the s.170EE(3) cap. As has been pointed out more than once, the proper approach is for the person assessing compensation, first, to assess the appropriate amount of compensation in the light of all relevant circumstances (including any redundancy payment) but disregarding the cap; second, to consider whether that amount exceeds the permissible maximum award and, if so, third, to reduce the assessed amount accordingly: see Perrin v Des Taylor Pty Ltd (1995) 58 IR 254 at 258, Cox v South Australian Meat Corporation (von Doussa J, 13 June 1995, not reported) and Messervy. It is wrong to deduct the amount of any redundancy payment from the cap fixed by s.170EE(3). There is no warrant in the legislation for that course. I accept that this may expose an employer who makes a redundancy payment to a greater total pay out than one who does not; but arbitrary legislative limits usually cause anomalies and unfairness. Assessment of compensation Mr Rogers argued that the appropriate amount of compensation in this case falls short of $25,000. He pointed out that Ms May has obtained fresh employment, as a secretary in the office of the Royal Blind Society at Enfield. Her salary in that position is $42,000. She does not have any of the fringe benefits she enjoyed at the ANA hotel, other than a 5% superannuation contribution and annual leave loading. Mr Rogers suggested that the proper measure of Ms May's compensation is the wages she lost between her termination by Lilyvale and the commencement of her employment by the Royal Blind Society. Ms Howell made a calculation of the extent of that loss. Allowing for everything she received from Lilyvale (payment in lieu of notice and the redundancy payment) and for earnings in casual employment by others, Ms May sustained a loss of $1,368. Since she commenced with the Royal Blind Society, she has been disadvantaged (after taking into account fringe benefits) to the tune of about $6,335 per year. This represents an estimated $51,000 all up benefits with Lilyvale against $44,665 ($42,000 salary plus $2,100 superannuation and $565 leave loading) with the Royal Blind Society. In addition, she now incurs the cost of travelling to Enfield, rather than the city, from her home at Crows Nest. This must add at least $15 per week (say $700 per year) to her outgoings. Simply making a direct comparison between Ms May's financial position whilst employed by Lilyvale and her present position, she is worse off to the extent of about $7,000 per year. She is only 45 years of age. She might work for another 15 to 20 years. The evidence suggests that the gap between what Ms May earned at the ANA hotel and her earnings at the Royal Blind Society would have increased with the passage of time. She sought employment by Lilyvale because she was interested in a career in the hospitality industry, which she saw as a growth industry. There was at least one higher paid position prospectively open to her - secretary to the General Manager. There is no prospect of promotion at the Royal Blind Society. She already occupies the most senior position open to a person with her skills and experience. When one considers all these matters, I think it is apparent that a reasonable assessment of compensation in this case would well exceed $25,000. It is not necessary to determine the extent of that excess. Compensation should be assessed at one half the total annual remuneration earned by Ms May whilst employed by Lilyvale. As I have said, that amounts to about $25,500. I propose to substitute that figure for the $25,000 ordered by the Judicial Registrar and otherwise dismiss the application for review. I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment of the Honourable Chief Justice Wilcox. Associate: Dated: 1 December 1995 APPEARANCES Solicitor for the Applicant: Ms C Howell Solicitors for the Applicant: Geoffrey Edwards & Co Counsel for the Respondent: Mr A Rogers Solicitors for the Respondent: A J Macken & Co Date of hearing: 20 September 1994