EASLING v MAHONEY INSURANCE BROKERS PTY LTD No. SCGRG-00-245 [2001] SASC 22

Supreme Court of SA|2001-02-14|Before: Doyle CJ, Bleby JJ, Olsson J

Judgment No. [2001] SASC 22

On Appeal from DISTRICT COURT (HIS HONOUR JUDGE LOWRIE)

2 I agree with Olsson J that the question of whether there was a constructive dismissal on 29 October 1998 does not arise. I agree also that the respondent cannot now rely on the appellant's conduct before 29 October 1998 to justify a dismissal. The issue is whether the letter of 12 February 1999 gave rise to a resignation by the appellant or was an acceptance by him of a prior repudiation by the respondent.

3 In his reasons Bleby J suggests at [148] that, having regard to the nature of the duties performed by the appellant,

"... [T]here was no material variation in the contract for its duration, so far as it concerned the nature of the duties to be performed. The reversion to a single person office suggested in January 1999, with the appellant selling both taxi and other forms of insurance, in itself constituted no material change to the contract of employment."

4 In other words, he suggests that the appellant was always employed under the contract of 11 June 1996, the only variation being an agreed variation as to the rate of remuneration.

5 On that approach it would follow that the proposals advanced by the appellant in late 1998 and in early 1999 did not constitute a repudiation of, or variation of, the existing contract, even if imposed on the respondent.

6 I agree. The question is essentially one of fact, although legal principles play their part. As Ashley J said in Quinn v Jack Chia (Australia) Ltd [1992] VicRp 37; [1992] 1 VR 567 at 575:

"... [T]he facts of a particular case may show that a contract of employment between employer and employee has been supplanted by a new contract between them. Alternatively, the facts may disclose a continuing contract within which variation of circumstances may occur without there being any need for variation of contractual terms, or a contract which has been subject to specific variation."

7 It will often be difficult to tell whether a change in what I will call the working arrangements has given rise to a new contract, to a variation of an existing contract, or merely represents a change to working arrangements which the employer is entitled to require under the terms of the original contract of employment. Obviously enough, the nature of the change in duties will be a relevant matter, and the more significant or substantial the change, the more likely a court is to conclude that there has been a variation of the contract and, ultimately, a new contract: see Quinn v Jack Chia at 576. The matter is summarised thus in Macken, McCarry and Sappideen's "The Law of Employment" (4th edition, LBC Information Services, 1997) at 249:

"An employer can require employees to adopt a different method of doing the work they are engaged to do without precipitating either a variation or a termination of contract. In other words there is a distinction between a variation of contract and a variation in the scheme of working."

8 To my mind, a court should not too readily assume that a change in working arrangements, or in the duties of an employee, involves either a variation to an existing contract, or the making of a new contract. In my respectful opinion Murray CJ stated the matter too widely when he said in Federated Mutual Insurance Company of Australia Limited v Sabine [1920] SALawRp 21; [1920] SALR 284 at 292:

"The true view, I think, is that unless the original agreement gave the employer the right to the services of the employee in any capacity he chose to direct from time to time there would be a new employment whenever a change was made in the duties to be performed, and it would be a question of fact in each case what the terms of the new employment were."

9 In my respectful opinion the issue is whether the original agreement gives the employer the right to make the changes that have been made, and if it does, then neither a varied contract nor a new contract arises.

10 The application of the relevant principles to the facts of a particular case will often be difficult. In some fields of employment changes in the working arrangements and tasks performed will occur gradually. The application of the relevant principles of law may be difficult in such a case.

11 I acknowledge the force of the argument that the appellant entered into a new or varied contract in 1997 under which he was employed as an office manager or branch manager. However, my view is that the circumstances reflect nothing more than a gradual development of the business of the employer, involving appropriate adjustments of the office and working arrangements, with the appellant continuing to work as an insurance salesman in the manner always contemplated. It appears to me that it was always contemplated that the respondent would or might establish an office in Adelaide, with clerical staff, and that the appellant would be involved in the supervision of this office while working as an insurance salesman. That is what occurred. I do not consider that the changes that occurred in 1997 were of such significance as to lead to the conclusion that the existing contract was varied, or replaced by another contract.

12 Accordingly, I am not satisfied that the appellant was entitled, by virtue of his contract of employment, to require that the respondent continued to employ him in an office of about the same size, with about the same level of clerical staff, confining his attention to the activity of insurance in the taxi industry. Just as the employer's business developed in 1996 and 1997, giving rise a need to make appropriate arrangements, so, as the business declined, in my opinion the respondent was entitled to continue to vary the working arrangements, including, within certain limits, the arrangements as to the type of insurance cover that the appellant would sell.

13 If I am wrong on that, I nevertheless agree with the conclusion reached by Bleby J, that when the appellant terminated the contract in February 1999, the respondent employer had not imposed a change of duties against the appellant's will, in such a manner as to amount to a repudiation of the contract of employment. I agree with the analysis of the facts made by Bleby J. The respondent was negotiating with the appellant, and in the direct dealings between the appellant and the respondent the appellant was indicating that the proposed changes were acceptable to him. I do not agree that things had reached a point at which it could be said that the respondent had imposed, or was threatening to impose, changes upon the appellant. That might have come to pass, but things had not yet reached that stage.

14 I do not suggest that situation is clear cut. Things were complicated by the fact that in his direct dealings with the respondent, the appellant was indicating a willingness to enter into the changed arrangements. That is consistent with the evidence to which Bleby J refers. I consider that, in that context, the Court should be cautious before concluding that the employer was intending to require the appellant to submit to the proposed changes come what may. I acknowledge that the events that had occurred had made it plain that the appellant would not be restored to working arrangements precisely the same as those that had existed during 1998. But it does not follow that the working arrangements ultimately implemented would have been so different from those previously existing as to amount to a constructive dismissal, if imposed unilaterally upon the appellant.

16 I should add that if I am wrong in all that, I agree with Olsson J that an appropriate award of damages would be the amount of $40,000 plus interest, the amount which the trial Judge would have awarded had he found for the plaintiff.

17 OLSSON J. This is an appeal against the dismissal, by a District Court Judge, of a claim by the appellant against the respondent for damages for wrongful termination of a contract of employment.

18 It is necessary to review the narrative facts in some detail in order to appreciate the issues which arise.

19 By letter dated 29 February 1996 the appellant was appointed for a probationary period of three months, as the Adelaide "agent" of the respondent. For that period he was remunerated by commission.

20 On 11 June 1996, after some further negotiations between the parties, the appellant entered into a written contract of employment with Michael V Mahoney Insurance Brokers Pty Ltd, which, according to its letterhead, traded as "Mahoney Insurance Brokers_"_. That contract stipulated that the appellant was to be employed by the respondent in Adelaide, as an insurance salesman, for a term of five years which was deemed to have commenced on a date mutually agreed by the parties. There was no evidence as to what that date was. He was to receive a salary package of $50,000 per annum, to be reviewed at least annually.

21 The written contract contained a termination clause expressed as under:-

"The Employee shall have the right to terminate the employment of the Employee pursuant to this agreement forthwith if the Employee shall at any time:

a) commit any serious or continuing breach of any of the provisions herein contained,

b) be guilty of any serious or wilful misconduct or neglect in the discharge of his duties hereunder,

c) be convicted of any criminal offence punishable by a term of imprisonment, or

d) be incapacitated for a period of six (6) months referred to in clause 11.2

and in such event the Employer shall forthwith from such termination be relieved of any liability to make any further payments of any kind to the Employee."

22 The learned trial judge seems to have accepted the appellant's evidence that he had a particular field of expertise in the selling of comprehensive motor vehicle insurance for the taxi industry; and that he was originally engaged because of his background in that type of work. The learned trial judge found that, effectively, the appellant was ultimately employed as the manager of the Adelaide office of the respondent.

23 The headquarters of the respondent were based in New South Wales. The appellant opened the Adelaide office and, very soon thereafter, engaged the services of a Ms Kate Nicholson as a receptionist/filing clerk. In late 1996 a Mr Hubbard transferred from the Sydney office to sell general insurance. It was said that some friction arose between Hubbard and Ms Nicholson, as the latter was engaged in insurance studies and considered that she could attend to the general portfolio. Be that as it may, Hubbard left in September 1997.

24 A letter written to the appellant by the respondent's General Manager ("Norton") on 19 February 1997 indicated that, as a result of a review which had been conducted in respect of the 1996 calendar year, his salary package was increased by $20,000 to $70,000 per annum, including a motor vehicle allowance. At, or shortly after, that time the respondent issued the appellant with personalised business cards, which described him as the "Office Manager" of the respondent. These were later superseded by cards which described him as the "Branch Manager", copies of which are reproduced in the Appeal Book p 475. The evidence suggests that he fulfilled that role.

25 By January 1998 two other persons were employed in the Adelaide office. A Ms McCall took the place of Hubbard. She was involved in the selling of commercial, general, house and car insurance. A Ms Hendry was employed as a receptionist/filing clerk and to assist Ms Nicholson. The latter took a more active role in taxi insurance, by the processing of claims and renewals.

26 It is clear that, by mid February 1998, there were problems in the Adelaide office. On 16 February 1998 Norton wrote direct to Ms Nicholson warning her that her attitude towards training and assistance of other staff members was unsatisfactory. It referred to a specific incident in which she was said to have refused reasonable assistance to a new employee, on the ground that she was being paid more than Ms Nicholson and would have to learn "the best way she could".

27 On 4 October 1998, Ms Nicholson wrote direct to the witness Cooper, the Managing Director of the respondent. This forwarded a lengthy and detailed statement in which she made a variety of complaints concerning the conduct of the appellant, including allegations of the nature of sexual harassment and general inappropriate treatment, by him, of her and another female employee. The evidence indicated that this letter followed a discussion had by Ms Nicholson with the witness Murnane, who was a senior female officer employed at the Head Office of the respondent in Newcastle; and also a subsequent telephone call from Ms Nicholson to Norton at his home. Norton requested Ms Nicholson to put her complaints in writing.

28 It was Norton's evidence that he also received a written complaint from Ms Hendry, relating to statements said to have been made about her by the appellant to the effect that she had not been wearing underwear and "had flashed herself". So far as I can determine, this complaint was not tendered in evidence.

29 There is no doubt that, on 29 October 1998, Norton and Cooper both came to Adelaide. Cooper first spoke with the appellant alone. Norton then spoke with him separately. The learned trial judge preferred their evidence to that of the appellant as to what occurred.

30 There was considerable dispute as to precisely what was said at that time. In the course of his reasons the learned trial judge recited the various versions of what was said to have taken place during these conversations.

31 In essence, it was the appellant's evidence that, as soon as Cooper went into his office with him and closed the door, Cooper said that he had received allegations of sexual harassment "from the girls", threw their statements on the appellant's desk and instructed him to read them.

32 Cooper agreed with the appellant that his opening words to the latter were to the effect that "I feel like kicking you fair up the arse, because I didn't need this."

33 Cooper said that he thought that the appellant changed his glasses and read the documents for about three to five minutes. The appellant then said "Some of the stuff in this is a whole heap of crap", although he admitted making the statement about Ms Hendry.

34 The transcript records the following testimony of Cooper:-

"A. He said that some of this was a whole heap of crap. I said 'Why would you even say it about her. Why wouldn't you have asked Lorna to accompany you into a meeting with her and have an interview with her and ask her why would she do it'.

Q. Did you say anything to him about what might happen in relation to these complaints.

A. Yes, I did. I said that there was [a] couple of ways we could deal with this. One, he could either resign and everything would remain in-house, or we would have to take the appropriate action to sort the complaint out.

Q. Were they the words you used 'the appropriate action to sort of the complaint out'.

A. He said 'I would prefer to take the resignation aspect' and that was as far as it went.

Q. My question was did you tell him what you meant by that.

A. He said 'You and Michael have been very, very good to me. I prefer to take the resignation line issue' and he said he would prefer it not to become public.

A. He then asked me what his entitlements would be. I said 'I don't know what your entitlements are as to what your length of service has been, how many holidays you have taken etc. I will get Mr Norton into the office and he will organise what all your staff entitlements are regarding holidays'.

35 The appellant asserted that, when he attempted to express his version of what had occurred, Cooper said that he didn't want to hear his side of it, "either you resign or I'll sack you".

36 As I understand the evidence, Cooper left the appellant's office and Norton then entered. The appellant testified that Norton told him that there was little point in challenging the allegations made, because he would not be believed. He says that, after some discussion, Norton said "Well, you can clean out your desk in your own time, type up a resignation and leave it with the keys to the office at the Hyatt Hotel".

37 The learned trial judge recited that Cooper contended that he gave the appellant the option of either resigning and "everything would remain in-house", or action would have to be taken to "sort the complaint out". He said that the appellant opted for resignation, whereupon he arranged for Norton to discuss the appellant's entitlements with him.

38 For his part, Norton asserted that the appellant admitted the allegations against him and said that he had no option but to resign. The appellant volunteered that he would drop his resignation off at the hotel, together with the keys. Norton conceded in cross examination that he told the appellant that he would have a credibility problem, given that he had a young female complaining about the underwear issue and a married female complaining about the other issues.

39 Cooper then told the remainder of the staff that the appellant had resigned.

40 It was common ground that, later the same day, the appellant did leave the keys at the Hotel, but did not deliver any resignation.

41 The evidence of Cooper and Norton is not entirely consistent with their version of events, because it is plain that they did not, at the time, persist with a stance that the appellant had resigned. Norton testified that, after his return to Newcastle, he had a telephone conversation with the appellant, who advised him that he was seeking legal advice concerning the matter. Norton said that he told the appellant "that's fine, that he was quite entitled to do that".

42 With all due respect, it is impossible to discern from the reasons published by the learned trial judge any cohesive findings as to what thereafter occurred, in detail and sequence.

43 Certain correspondence passing between the parties and/or their solicitors is of vital importance in this regard. It becomes necessary to recite some of it in extenso.

44 On or about 4 November 1998, the appellant's solicitors wrote to Cooper in the following terms:-

We have been consulted by Roderick James Easling of Oakleigh Road, McLaren Flat, in relation to matters arising out of his employment with Mahoney Insurance Brokers Pty Ltd. Our client instructs us that he is currently employed by the company as the Manager of the South Australia [sic] branch, pursuant to a five year contract of employment entered into between our client and the company on 11 June 1996.

We are instructed that on the 29 October 1998 you attended at the Adelaide office of the company and demanded that our client tender his resignation from the company. You advised our client that a complaint had been made against him by other employees, alleging sexual harassment. Details of those allegations against our client were not provided to our client. However, our client strenuously denies any allegations of sexual harassment or misconduct, or any other breach of his contract of employment. Indeed, we are instructed that at that time our client advised you that the allegations were untrue, but that you indicated that the company had already made up its mind about the matter and demanded our client's resignation.

The allegations made against our client appear to be highly defamatory of him. At the present time Mr Easling is taking advice in relation to taking action for damages for defamation against the authors of those allegations. He will certainly commence action in respect of any repetition of them.

The action on the part of the company in demanding our client's resignation appears to be a gross breach of our client's contract of employment. Our client has not been guilty of any serious or unlawful misconduct or neglect in the discharge of his duties, or any other serious or continuing breach of his contract of employment. Our client has been guilty of no conduct which would justify asking for his resignation or the termination of his employment.

The company's behaviour in accepting the complaint without even seeking to hear from our client in relation to it suggests that the degree of mutual confidence and trust necessary to found the employment relationship has evaporated. In those circumstances, our client is prepared to resign from his employment, provided that he is paid an amount equivalent to the balance of any unexpired portion of the contract of employment and that he be provided with a written retraction of the allegations made against him and be given an apology for them. We ask that you give the matter your immediate consideration."

45 Norton responded to that letter on the following day, by writing direct to the appellant, advising that the matter had been referred to the respondent's legal advisers. On the same day, the respondent's solicitors wrote to the appellant's solicitors, inter alia, denying that, on 29 October 1998, Cooper had demanded the appellant's resignation. It was said that the appellant had admitted the accuracy of the allegations.

"... Mr Cooper then indicated to your client that the matters would be investigated and such investigations may suggest that counselling of all parties concerned would be appropriate. Given that your client admitted the matters put to him we cannot see how your client can deny that the conduct did not occur. At no time did Mr Cooper or Mr Norton demand your client's resignation as alleged by your client.

We would respectfully suggest that as the matters complained of are matters which are rightfully and lawfully made to the Employer of the persons concerned that your threat regarding defamatory action is clearly inappropriate. Indeed it would appear that there may well be an ulterior motive in making such a threat.

As you will appreciate, and no doubt advise your client, our client is compelled to fully investigate any allegation of inappropriate activity and where necessary to require the parties to such a dispute to undergo such counselling as may be appropriate.

We deny any suggestions that we have 'accepted' the complaint if the inference is that the Company has made any decision as to the accuracy or otherwise of the complaint except in so far as your client has admitted to certain allegations put to him by Mr Cooper. Our client quite appropriately upon the receipt of the complaint decided to advise your client that such a complaint had been made and that investigations would have to be undertaken in order that the Company as Employer of both persons is able to undertake appropriate action as it may be advised in relation to the matters raised. We assume that your client will fully co-operate in any such investigation and in any counselling or other steps which may be taken by our client to identify a resolution of any such matters.

Notwithstanding the terms of your letter we are instructed by our client that your client has requested that he be able to return to work. Our client has indicated to your client that our client has no objections to that course of action on the basis that your client co-operate fully with any investigation of any allegations and participate in the appropriate steps to resolve any dispute which may arise.

We are instructed by our client that our client agreed to your client returning to his place of employment on 5 November 1998 notwithstanding your client had previously offered his resignation. Such employment would however be subject to the matters outlined above.

47 It is stating the obvious to say that the terms of this letter are somewhat difficult to reconcile with the unequivocal statements undoubtedly made by Cooper to the other members of the staff, after he had spoken with the appellant on 29 October 1998, to the effect that the appellant had resigned. Cooper and Norton also advised certain key Adelaide clients of the respondent to the same effect during that evening.

48 Be that as it may, a subsequent exchange of correspondence occurred as between the solicitors for the parties.

49 The appellant's solicitors wrote in these terms:-

RE: MICHAEL MAHONEY INSURANCE BROKERS PTY LTD - RODERICK EASLING

We acknowledge receipt of your letter of 5 November 1998. Our client disputes much of the contents of your letter and we have been instructed to reply to the matters set out in your letter as follows.

The contract which our client has entered into is clearly a fixed term contract of employment for a period of five years commencing on 11 June 1996. Clause 11.1 of the Agreement provides for a limited right of termination of the employment. It provides, inter alia, termination only if the employee shall at any time have committed a serious or continuing breach of any of the provisions contained in the Agreement, or, is guilty of any serious, willful misconduct or neglect in the discharge of his duties.

Our client reiterates that Mr Cooper demanded his resignation in plain and emphatic terms. On our instructions, Cooper said to Easling 'either you resign or we sack you'.

Our client emphatically denies admitting the allegations. In fact, when presented with a piece of paper which was said to contain the allegations our client attempted to read it, notwithstanding the fact that he did not have his correct spectacles with him, and then said to Cooper 'This is crap' and threw the paper down on to the desk. We fail to see how this could in any way be construed as an admission of the allegations or any concession that the matters complained of were accurate.

On our instructions, far from Mr Cooper indicating that the matters would be investigated, Cooper informed Easling to the effect 'we don't want to hear your side'. Further, we are instructed that Mr Lindsay Norton said to Easling 'you are a white Caucasian male, you won't have a chance in court'. It was made clear to our client that neither Cooper nor Norton were interested in ascertaining our client's response to the allegations.

We do not understand the comment made at the top of page 2 of your letter that 'your threat regarding defamatory action is clearly inappropriate. Indeed, it would appear that there may well be an alterior [sic] motive in making such a threat.' The reference in our letter of 4 November 1998 to taking action for damages for defamation ought not to be construed as a threat. It ought to be regarded as a clear and unequivocal indication on our client's behalf that he will not tolerate defamatory allegations being made against him and will take appropriate steps to protect his personal reputation.

Your client is now well aware that our client emphatically rejects any allegation of sexual harassment or impropriety as is apparently alleged against him. Any repetition of those allegations would almost certainly lead our client to taking action against the author of them. We reiterate that our client is considering his position in relation to the allegations which have been made. Our client is quite entitled to take action for damages for defamation for allegations falsely made about him. There is no ulterior motive in making such a comment. Our client is perfectly entitled to take appropriate and lawful steps to protect his reputation.

We note the comments in your letter that your client is compelled to fully investigate any allegation of inappropriate activity. Would you please advise us immediately of the full details of the allegations made of and concerning our client. We require those details in writing. We also ask that your client advise us when those allegations were first made to it and by whom.

Although in your letter you deny that your client has accepted the allegations made, we and our client are troubled by the references in your letter to 'counselling' when, according to your letter, your client has not yet considered whether the behaviour complained of has taken place. That comment in the light of what has occurred only confirms that your client has already formed its view of the matter.

We refer to your letter dated 10 November last. We note the outline of your client's instructions and we do not intend to respond further thereto as there does not appear to be any point in further exacerbating this difficult matter.

We should not be understood however to be making admissions to any of the matters you have raised in your letter.

As to your request for full details of the allegations concerning your client, we are instructed to advise that it may not be appropriate to provide such details because:-

(a) Our client does not intend to act on the complaints, other then [sic] to have brought them to your client's attention in general terms so as to receive his response; and

(b) To conciliate between the complainants and your client;

(d) The fact of having received the complaints does not provide grounds for terminating his employment;

(e) Save for your concern about defamation; there is to our knowledge no threat of proceedings against or concerning your client;

(f) The complaints were made to our client on a basis that in general terms they be brought to your client's attention, which has been done.

Your client has been a valued employee, and it is our client's intention to provide your client with every reasonable opportunity to fulfil his talents as an insurance salesman within the company.

As the allegations concerning the harassment have been made, our client is not in a position to ignore them. Would you please advise us (on the basis of being without admissions by your client), whether he is prepared to enter negotiations to attempt to conciliate this matter, and if so would you provide us with your suggestion as to how this could be best achieved so that this matter can be brought to a satisfactory conclusion as soon as possible.

51 It is by no means clear precisely when the appellant was, or was not at work. The learned trial judge seems to have accepted that he returned to work for a time as from 5 November 1998. He commenced consulting a medical practitioner as from 2 November 1998.

52 On 17 November 1998 the appellant was instructed by Mr Norton, by facsimile, to come to Newcastle on 18 November, returning on 19 November for the purpose of 'discussing various issues including your role and the performance of the Branch'.

53 On the same day, the appellant's solicitors wrote to the respondent's solicitors in response to their letter of 16 November. That letter included the following:

"We also note that your client says that it is its intention to provide our client with a 'reasonable opportunity to fulfill his talents as an insurance salesman within the company'. However, it appears to us that the events which have transpired since 29 October 1998 have led to a situation where the necessary degree of confidence and trust between employer and employee no longer exists. Those events include the following:-

* Serious complaints have been made against our client. It appears from your recent letter that your client company no longer accepts that these allegations are true. However, these allegations have been made to senior management who have put them to our client.

* Your client requires ours to work in constant contact with persons who have made untrue allegations of sexual harassment against him.

* The Adelaide office staff, having made baseless allegations, have without notice to our client now failed to attend for work on 6, 16 and 17 November. Apparently before doing so they advised officers in the Newcastle office of their intention not to attend for work, but no one in that office thought it appropriate to inform Mr Easling of their intended absence. On those days our client arrived at the office for work only to find it empty. He was required to telephone the Newcastle office in order to learn the movements of his own staff, notwithstanding that it is our client who has the responsibility for management of the Adelaide office.

* On 29 October 1998 Ms Nicholson advised at least one client of the company that our client's employment was to be terminated. We enclose a statement provided by Mr Michael Bullock. It appears clear that either Ms Nicholson has fabricated the events or that management had informed her that it intended to terminate Mr Easling's employment on 29 October 1998. In either case it is obvious that the employment situation is intolerable for Mr Easling."

The letter then included a without prejudice proposal to resolve the matter and concluded:

"We point out that our client has an ongoing contract of employment with your client as an insurance salesman. He has not been in breach of the contract."

54 On 19 November 1998, a meeting took place at the Newcastle office of the respondent between Mr Norton, the appellant and Ms Murnane. Comprehensive minutes of the meeting were prepared and admitted into evidence. The appellant did not challenge the accuracy of the record.

55 It was pointed out that the taxi insurance business in Adelaide was suffering increasing losses, although the general insurance losses were reducing. It was acknowledged by all that there was little prospect of increasing taxi insurance revenue for a variety of identified reasons. There was discussion about the prospect of increasing revenue both in general insurance and in life insurance. The appellant had conducted some life insurance business before joining the respondent, and had since become accredited with National Mutual. The record of the meeting continues:

"We then discussed that maybe the only area for real growth would be in the Life area. Rod agreed that he would like to get back into the life area. He had done 2 and a half years in life insurance prior to joining Mahoney's and he enjoyed that area. He still had agencies with Zurich, Legal and General (possibly as they were now owned by Colonial) and Lumley's up to next month.

He also said that he was accredited with National Mutual, Royal Sun and A C & L. He also said that working only on a part time bases (sic) before joining Mahoney's his Life Income was approximately $20,000 in the 2_nd_ year. He had kept his other job going at that stage as a taxi driver so that he did not have to depend fully on Life Insurance Commission as a living.

Rod said that he felt quite comfortable selling life insurance as he had learnt quite a bit from being with Mahoney's on how to talk to the clients....

Rod agreed that he was prepared to commit to be the Life Insurance Representative for Mahoney Insurance Brokers and that with cost cutting in the sponsorship and conferences that perhaps in 2 years Adelaide would be in a profit area.

Rod was then asked what Role he would like to have he confirmed the following

He would be full time in the Life area and try to be fully accredited by 1_st_ January, 1999. He also advised that it would be reasonable for him to achieve $30,000 in commission in the first year....

Lindsay also advised Rod that a lap top computer would be available and Liz discussed how Rod would not need to be in the office very much as he could operate from home or he would be out seeing clients. If he did not have to be in the office then he would be able to work much more efficiently as client's (sic) for Life Insurance rarely come to visit the office rather the Life Insurance person goes to their home."

56 There was then discussion concerning the problem of friction in the Adelaide office and the use of Ms Fleming to assist in resolving the problems. The record concludes:

"Rod agreed that he would like to become the Life Insurance person and focus totally on that area of insurance."

57 The witness Fleming commenced a series of counselling sessions involving both the appellant and other staff (both individually and collectively) on 18, 24 and 25 November 1998. However, these did not resolve the problems in the office. If anything, they seem to have exacerbated the tensions between staff members.

58 On 26 November, the appellant went on sick leave and thereafter received medical certificates of sickness until at least 31 January 1999.

59 On 30 November 1998, the appellant wrote to Cooper reviewing the situation from his perspective. His letter reads as under:-

I refer to previous communications including communications between my solicitors and the company's solicitors.

Kate Nicholson and Lorna Hendry have made allegations of a very serious nature apparently involving sexual harassment against me. I do not know when these allegations were first made, but I do know that on the 29_th_ October you attended at the Adelaide Office and demanded my resignation on the basis of them. It appears clear from Mr Bullock's statement that Ms Kate Nicholson was aware well before I was that the company intended to demand my resignation from 29th October.

Although my solicitors have requested details in writing of these allegations, they have not been provided to me or to my solicitors. It now appears from the comments made to me and from the correspondence from your solicitors that you will not provide details of them. It is impossible for me to fully refute the allegations without knowing exactly what they are. I repeat what I have said from the outset - that I have not been guilty of any sexual harassment.

Up to the present time I have remained at work and carried out my responsibilities to the best of my ability. I have found this extremely difficult. As you well know, on a number of occasions and without warning to me, Kate Nicholson and Lorna Hendry failed to attend for work. On making inquiries, it became clear to me that they had informed the Newcastle office and presumably yourself of their intentions. No one saw fit to advise me of their proposed absence. On those occasions I was instructed to man the office. This made it difficult for me to carry out the full range of responsibilities as set out in my contract of employment and in my job description.

At the request of the company, I met with Ms Suzanne Fleming of Cutcher & Neale Consultants both in Newcastle and Adelaide. It appears clear to me that she had been instructed not to carry out any detailed inquiry into the truth of the allegations, but merely to provide some counselling. I cannot accept that counselling is appropriate where the allegations against me are entirely untrue.

From what little I know of the nature of the allegations made against me, the situation appears to me to be relatively straightforward. Either the allegations are true or they are not. If they are not true, they have clearly been falsely made against me. They are not, to my knowledge, allegations of innocent behaviour. It now appears to me that the company intends to avoid taking any steps to determine whether the allegations are true.

As a result, the situation has now become quite intolerable. It is apparently expected of me that I run the Adelaide Office in order to carry out my contract of employment, and to work closely in an unsupervised situation with those very staff members who have falsely accused me of sexual harassment. Of course in such a setting, I remain completely vulnerable to further false claims.

I am unable to return to work while this situation persists. Clearly, I cannot be offered an appropriate or even safe working environment. It is obvious to me that no-one in my position could be expected to put up with continuing to work with staff who have made such false complaints.

The company must take immediate steps to investigate the truth or falsity of the complaints made against me. If the company finds the allegations made against me to be false, then the company has no alternative but to terminate the employment of those persons who have made false accusations against me. I must, in the circumstances, treat the failure to take such effective action as a dereliction of the company's duty to me and an obvious sign of its complete lack of the appropriate faith and confidence in me. My job description requires me to supervise Adelaide staff. Quite frankly, it is impossible for me to carry out this and other tasks in the current environment.

I must advise you that I am unable to return to work until or unless this situation is resolved. It obviously requires prompt and effective action to do so. Unless I hear from you within the next 48 hours indicating that the company intends to take proper steps to investigate and deal with the allegations, I will have to take appropriate legal action. In that regard it appears to me that the actions of the company must amount to a breach of my contract of employment. I would also be required to commence action for defamation in respect of the allegations made against me.

I believe that I have made numerous attempts to resolve the matter. The allegations made against me are serious, but entirely false. They have caused me and my family great distress. I ask again that you take prompt action to resolve the matter.

60 This letter evoked the following response, dated 30 November 1998, from Norton:-

I refer to your confidential letter to Mr Robert Cooper dated 30_th_ November 1998 re employment issues.

I am deeply concerned that the current situation is causing you a stress related illness and am concerned that this in turn is having an adverse effect upon your family.

The situation is of course quite stressful to all. Please be aware that the Company is doing all that it legally can within its power to resolve the current situation to everybody's satisfaction. It is not within our ability to determine whether the allegations are true or not, but believe that such deliberation will be made in the appropriate form by somebody who has the authority to make such a determination.

You advise that it is our duty to provide you with a safe working environment, and in fact it is our duty to provide all of our employees with a safe working environment. To this end, the Company engaged Suzanne Fleming to independently mediate with the hope that a resolution could be achieved. Suzanne thought that she had achieved this position. However, I gather that this is not so from the information provided in your letter.

Rod, as I see it there are several options available to you and they are as follows:

1. You are free to return to your current position in the Adelaide Office at any time that you feel that you are able.

2. You are of course able to accept the role of selling life insurance products as discussed with Liz Murnane and myself on your last visit to Newcastle. This would enable you to work unsupervised from your home office where you would feel comfortable. The company will provide you with all of the necessary tools and assistance to enable you to perform this function.

3. If you are continuing to suffer from the stress related illness, and your medical advisors claim that you are unfit for work, then you can stay on extended sick leave and the matter will be handled by the insurers of our Sickness and Accident Insurance Scheme.

4. Another alternative of course, is that you press on down the path of litigation.

Your advices to me today by telephone that you would be prepared to work if the Company dismisses Kate and Lorna, is simply not an option.

61 Norton also sent a separate fax to the appellant on the same date. This indicated that the respondent proposed to accept a recommendation from Fleming to conduct a full administration organisation audit of the Adelaide office.

62 This prompted the following response, dated 1 December 1998, from the appellant:-

I refer to your fax of 30 November 1998 dealing with matters arising out of my letter to Mr Robert Cooper.

I do not believe that the company is taking appropriate steps to 'resolve the current situation'. It is not a matter which can be resolved 'to everybody's satisfaction'. False allegations have been made against me of a very serious and damaging kind. The company has given every indication to me that it accepts that there is some basis for these allegations. However, when I have pressed the company to provide me with details of them so that I might take appropriate steps to refute them the company has refused to provide me with them. In addition the company refuses to withdraw the allegations and to apologise to me for them.

In the circumstances I can only assume that the company believes that there is some basis for the allegations.

As long as that situation continues it is obvious that senior management of the company has no confidence and trust in me. It is equally clear that I can have no confidence and trust in management.

I simply do not understand the claim made in your fax that 'it is not within our ability to determine whether the allegations are not true or not'. Allegations of the most vile kind have been made against me that have damaged my reputation not only at work but in the community generally and which threaten my future. It appears to me that the company is taking no steps to protect my position. Instead it suggests that I return to work alongside those very people who have caused harm to me.

The options which you suggest in your fax are not acceptable to me. Of course I am not free to return to my current position in the Adelaide office. The reasons are clearly set out in my fax to Bob Cooper of 30 November 1998.

Secondly, it is quite inappropriate that I should completely change my job. I was not employed by the company to sell life insurance products. I am currently employed as the South Australian Branch Manager. My duties are described in my contract of employment and in my job description.

I indicated to Cooper that I would be able to return to work if the company terminated the employment of the persons who had made false accusations about me. This is an option which must be considered by the company in order to protect my reputation and provide me with a safe place of work.

I am anxious for the matter to be resolved as quickly as possible. If the company is not prepared to take appropriate action to deal with the allegations made and to allow me to return to my employment I have no real option but to treat the company's actions as a breach of my contract of employment.

63 A series of letters was exchanged between the respective solicitors for the appellant and the respondent between 7 December 1998 and 4 March 1999.

64 A letter written by the appellant's solicitors to the respondent's solicitors on 7 December 1998 indicated that the appellant adopted the stance that a refusal to further investigate the complaints made or to withdraw them, coupled with a requirement to work alongside the complainants placed him in an intolerable position in which he could not carry out his responsibilities, including those involving the management of the Adelaide office and the supervision of its staff. It was said by the appellant's solicitors that the attitude of the respondent was such that it "has been calculated or is likely to destroy or seriously damage the relationship of confidence or trust between employer and employee. It is conduct which ... [the appellant] ... cannot be expected to put up with".

65 The appellant's solicitors demanded that, by 9 December 1998, the respondent withdraw the allegations against him, apologise and take action against those who had made the false allegations, failing which he would treat the contract as being at an end.

66 This letter was not responded to until 18 December 1998.

67 In the meantime, the respondent had received advice from a business consultant that, because the Adelaide office was then incurring continuing losses, it should be closed.

68 On 15 December, Norton wrote direct to the appellant raising a series of budgetary issues and asking him to advise when and how the Adelaide branch would achieve a profit. The appellant replied to the effect that the then recent events had caused damage, and that it would take considerable time to repair it. He also pointed out that it had always been accepted that a profit had not been expected in the first three years; and that there had, in fact, been a reducing loss each year.

69 On 17 December 1998 the appellant met Cooper at the Hyatt Hotel, at the request of the latter.

70 The sole comment made by the learned trial judge concerning this was that they "discussed work issues. The plaintiff said he was aware of a proposed major restructuring of the business because of lower commission rates dictated by Zurich. The plaintiff was on sick leave during this period".

71 The significance of this situation is, of course, that, as at that time, both parties obviously considered the contract of employment to be still on foot. This was said to have been a "without prejudice" meeting and there was little evidence as to what transpired. As a result, the appellant, at Cooper's direction, had some discussions with an officer of Zurich concerning future financial relations between that company and the respondent.

72 On the following day the respondent's solicitors wrote a lengthy letter in response to the letter sent by the appellant's solicitors on 7 December. No reference was made to the discussion of 17 December. The response sought to traverse various of the assertions made in the earlier correspondence and asserted that the respondent's conduct had, at all times, been appropriate.

73 In the response it was pointed out that the appellant's sick leave was due to expire on 31 December 1998.

"Our client has at all times confirmed that it is willing to comply with the terms of the employment contract that exists between our respective clients. However, your client must also comply with those terms. In his unwillingness to co-operate and comply with the reasonable directions of his employer your client has clearly demonstrated an unwillingness to comply with the terms of his employment.

We are instructed by our client that our client requires your client to resume his employment following the expiration of the time specified in the medical certificate that he has made available to our client. Should your client not resume his employment and comply with the reasonable directions of his employer both as to the continuation of his employment and our client's continuing endeavours to resolve all outstanding issues our client will consider your client to be in breach of the terms of his employment with our client.

Would you kindly confirm or have your client confirm that your client will return to work following the expiration of the term referred to in his medical certificate."

75 It is apparent that, as at 13 January 1999, the appellant was still absent on sick leave. On that date Norton sent him a fax advising of a pending company restructure and requesting him to advise when he anticipated being well enough to return to work.

76 On 14 January 1999 the appellant's solicitors wrote a long letter to the respondent's solicitors, in effect, traversing a series of issues which had been raised by them in their letter of 18 December. The final portion of that letter was expressed as follows:-

"8. On 17 December 1998 Mr Cooper had a discussion with our client in which he advised that the company shortly intended to close its Adelaide office and from that time to offer Mr Easling work selling various forms of insurance from the offices of Zurich Insurance Limited and from his home. To date no written confirmation of that proposal has been received by us or by our client. If indeed it is intended that some further or other proposal of employment is to be made to Mr Easling such as that raised by Mr Cooper on 17 December, would you please provide the details in writing as soon as possible.

The request obtained [sic] in the final two paragraphs of your letter is a request which no one could reasonably be expected to comply with. We reiterate the views expressed in our letter to you of 7 December 1998 that Mr Easling is unable to comply with your requirement that he return to work and supervise Ms Nicholson and Ms Hendry.

Unless we hear from you or your client about this matter within the next seven days our client will have no option but to treat your client's actions as a repudiation of the contract of employment"

77 Remarkably, the next development was the receipt by the appellant of the following fax from Norton:-

I confirm my telephone advices that due to enforced changes to our commission structure for our Taxi Insurance facility the Board of Directors has conducted a complete review of the company's operating structure. Each individual office and business unit within each office has been reviewed and will be restructured, if necessary, to ensure that losses are eliminated and profits maximised.

As a result of the review it has been decided [to] take the following action:

1. Reduce the staffing level from three (3) to one (1), thereby

4. Relocating the office to a much smaller and less costly office (perhaps your home office)

5. Ask you to concentrate your efforts in retaining and developing the Taxi Insurance portfolio, and

6. Commence developing a Life Insurance portfolio.

This action is, as discussed, to take place as soon as your Medical Advisors advise that you are fit to return to your normal duties.

You will need to take the following action as soon as you return to work:

Ø Hand Mrs Nicholson the enclosed private and confidential letter terminating her employment

Ø Hand Miss Hendy [sic] the enclosed private and confidential letter terminating her employment

Ø Determine (subject to HO approval) the location of the new office

Ø Retain one (1) computer, one (1) printer, one (fax machine), the dial-up modem, your mobile 'phone and all Taxi Insurance files

Ø Pack and return all other computer equipment to Newcastle Office

Ø Obtain quotes for relocation of the telephone and the incoming call re-direction (to your mobile when you are out of the office)

Rod, would you please advise when you expect to return to work. We are asking you to perform the above tasks to save on the cost of a Head Office executive having to travel from Newcastle to Adelaide.

78 The appellant's solicitors replied to this by letter to the respondent's solicitors. They made the points that:-

. the proposal represented a fundamental change to his "existing contract of employment"; and

. the appellant was not in a position to terminate the employment of Ms Nicholson and Ms Hendry, as he had no power to do so and, having regard to the past history, it would be clearly inadvisable and inappropriate for him to deliver letters of termination to them - these could be sent by post.

79 On 27 January 1999 Norton further wrote to the appellant in these terms:-

I have attempted to contact you by telephone today to discuss the issues concerning Adelaide Office. You did advise me that you would send me confirmation that you intend to return to work, however as I have not yet received it, the following decisions have been made.

Notice has been given to Kate and Lorna that the staffing level of Adelaide Office will be reduced from three to one effective from 1_st_ March 1999. If you are not well enough to return to work by that date the office will be temporarily closed with all business conducted by telephone from this office. It is however most likely that the actual closure will take place on 5th February 1999 as Kate is entering hospital for treatment and will be unfit for work for some time after that. It would be unreasonable to expect Lorna to run the office by herself, given her age and inexperience.

When you return to work it will be from a smaller and less expensive office.

80 On 28 January 1999 there were two further developments. The appellant personally wrote a reply to Norton. This was to the following effect:-

I refer particularly to our telephone conversations of 22_nd_ & 25th January and to your fax of 28th January. I understand that your solicitors have not responded to the letter from Stanley & Partners of 14th January, nor to their letter of 19th January.

The detail of the changes and the effect of those changes as proposed in your letters of 18_th_ and 28th January are not really clear. What is clear is that they represent a very substantial change in the role that would be expected of me. I understand that what is proposed is that the office staff be reduced from three to one, and that much of my duties be changed to selling life insurance. These changes are substantial and fundamental and I would certainly not be prepared to undertake them unless and until there was a specific agreement in writing about the details of them.

At a glance

Court

Decision date

Before

Source

Judgment (335 paragraphs)

Parties

Cases Cited (2)