Evans, John William v Alto Parts Ltd [1997] FCA 601

GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NI 2283 of 1996 ) GENERAL DIVISION )

BETWEEN: JOHN WILLIAM EVANS Applicant AND: ALTO PARTS PTY LIMITED Respondent JUDICIAL REGISTRAR: TOMLINSON JR PLACE: SYDNEY DATED: 2 JUNE 1997 REASONS FOR JUDGMENT Delivered ex tempore This is an application for compensation brought by John Evans against his former employer arising allegedly from an unfair dismissal and is brought under the Workplace Relations Act formerly the Industrial Relations Act. In his evidence in chief the applicant said he was 61 years of age, that he had always worked in the motor vehicle industry, initially commencing with the Bank of New South Wales, as it then was, as a motor mechanic. The applicant was invited to join the respondent Alto Ford when it learned he was to be retrenched from his then position with the Ford Motor Company. The person responsible for approaching the applicant was Mr John Starling who subsequently became the applicant's direct supervisor and a person who gave evidence to this court on behalf of the applicant. The applicant joined the respondent in January of 1991 and at the date of termination had been there employed nearly six years. At the date of termination Mr Evans was a dealer marketing manager and inclusive of commission had a salary of $38,000 per year and a company car. The court heard evidence the initial base salary was $35,000 and that in the last twelve months a commission bonus system had been introduced thereby earning the applicant a greater base salary. Exhibit 1 was a certificate showing the applicant's qualification in the parts industry. Whilst employed by the respondent it was the job of the applicant to call on various Ford dealerships and to supply and sell Ford motor parts apparently all over New South Wales. It was the evidence of the applicant that it was common knowledge throughout the respondent organisation that the parts section was to move to North Ryde and to that end the applicant was aware a new building was under construction. In cross-examination the applicant agreed that although he was not formally told exactly the details of the move he "only had to ask" and he would be told various details. Those details apparently related to the mechanics of the move, the housing and perhaps the future operations of the organisation. Exhibit 2 was a two page document entitled "Important Notice". It was dated 20 September 1996. It was a business record of the respondent and it was further entitled. "Memorandum to all Parts Employees, Artarmon, Gordon, Pennant Hills and St Leonards". The court heard evidence that those suburbs were the places where the respondent operated parts divisions. The document stated; "By the end of October 1996 the amalgamation of all parts departments within the Alto group will have taken place and will trade under the name of Alto Parts." The document then considered various matters that would occur and stated that certain positions would be available for staffing and those positions were indicated in a list. The document continued to say; "All employees are invited to complete the register of interest form attached to this notice and to return the completed form to the writer by close of business on 27 September." The form itself is signed by Mr Malcolm Ryan, the group general parts manager of the respondent who subsequently gave evidence to this court on behalf of the respondent. The evidence of the applicant was that this document was given to him by Mr Towner and that the applicant was asked to complete it. Mr Towner was not the boss of the applicant but however he was the person in charge of telephone sales. The applicant told the court he thought everyone was given such a document and that in completing it, he felt he was simply reapplying for his own job. There was no space on the document to allow for multiple choice of positions. The applicant completed page 2 of exhibit 2 which was headed "Register of Interest". The applicant noted his current position as being that of dealing marketing administrator. It was the evidence of the applicant that when Mr Towner gave him the document he said words to the effect that it was only formality. When he came to fill in the form with regard to the position he wished to occupy, the applicant said he sought advice from his immediate superior John Starling and with the result that he was advised to fill in the position as the same appeared on his business card. The applicant it seems was not asked to attend for an interview and matters went on as always. On 2 October 1996 the applicant said Malcolm Ryan, the group general manager, came to his office late in the afternoon and said words to the effect, "I have bad news for you, your job has been made redundant". The applicant said that he was shocked and he asked if something was wrong with his work or his personal manner. The reply was nothing was wrong with his performance, however there was other evidence given by Mr Ryan concerning the fact that the respondent was only grossing some 15 per cent on sales in the area in which the applicant operated. The applicant asked when the termination was to take place and the answer was "how about 4.30 this afternoon". The applicant said on that day, he telephoned his boss, John Starling. Mr Starling said he was shocked to hear the news and he had no idea that the applicant was to be terminated. The applicant was shattered. He said he had subsequently been forced to seek medical assistance for related stress problems. The applicant has been on medication to assist with sleeping. The applicant said he has never received a certificate of service from the respondent. Exhibit 3 is a business record of the respondent headed "Termination form", indicating the amount of termination pay computed by the respondent to be paid to the applicant upon termination of his employment. Exhibit 5 was an organisational chart of the respondent dated 22 July 1996, the applicant stating he first saw this document after his employment ceased. This document indicates a young lady known as Samantha Patterson - the "young" I think is my interpretation, we never heard the age of Ms Patterson - was employed as a dealer sales representative and in exhibit 5 she is positioned immediately beneath the applicant. As such, it can be assumed that Samantha Patterson at this point in time, the document being dated 27 July 1996, also reported to Mr Starling. It was the evidence of the applicant that Ms Patterson sold cleaning and car polishing materials to service stations and dealerships and that prior to working with the respondent had only worked for financial organisations, banks and the like. It seems Ms Patterson may have had a social connection with one of the principals of the respondent, however, I place no weight on that evidence. It seems that Ms Patterson only commenced some few months prior to the termination of the applicant. MFI 1 subsequently became exhibit E. It is a business record of the respondent bearing the date of 1 October 1996. That shows Ms Samantha Patterson as appearing on the third level from the top and being noted as a sales and marketing consultant dealer. The court heard some evidence from the respondent witnesses that this document was placed for display on notice boards and the like in the workplace of the respondent, however, that question was never put to the applicant and so I can accord it little weight. It was the evidence of the applicant that he only saw this document after the termination of his employment. However, the court heard subsequent evidence that it was a document created as a result of a brainstorming session by employees and managers of the respondent in order that an organisation chart relative to the new employment situation be created. The applicant said that he had however no reason to doubt the veracity of the document and stated to his knowledge that his former boss John Starling now effectively occupies his position. The applicant commenced work some two weeks after his termination with another motor vehicle organisation. He now received less than half what he formally used to receive, his job is strenuous requiring physical labour and he is forced to work with people half his age. Additionally, the applicant has lost the use of a company vehicle and has to provide his own. On being shown MFI 1 the applicant said that there were at least three or four positions recorded there that he could have performed, however, at the time there was no discussion entered into between him and the respondent as to whether he was suitable for them or not. The applicant said exhibit A was a leave loading paid to him at the time of termination, being money the respondent had owed to him for some considerable time. The applicant said it was his opinion that the employer still required the work that he did previously still to be performed by him. On behalf of the applicant the court heard from Mr John Starling who stated he had some 44 years in the automotive industry. Mr Starling agreed he had originally offered the applicant his job and that he was very shocked to learn of the applicant's termination when the applicant had telephoned him. Mr Starling was a member of the planning committee set up by the respondent to organise the move to the premises at Ryde and said that nothing like retrenchments nor redundancies had been mentioned at those meetings. The only reason for the move to Ryde was space and possible overservicing of clients by competing depots. The witness agreed that at the time of the move and for a short time thereafter, he did perform the job of the applicant and that so did Samantha Patterson. It seemed that that role was perceived as something of a demotion for Mr Starling, however, he told the court that Ms Patterson had no experience in the field that she was initially employed to work in and that she had been given a similar role to Mr Evans. Mr Starling said he gave her time off to read the manuals before she called on a customer. It seemed Ms Patterson very shortly after commencing in her position at Ryde took holidays and that she had not returned to work since that time. After an initial lull due to systems getting up to speed it was the evidence of Mr Starling that business was now picking up and looking busier. Mr Starling said the applicant was well liked and trusted in the industry and that he regarded him as a valuable employee. On behalf of the respondent the court heard from Mr Malcolm Ryan, the group general manager in charge of parts, had joined the respondent in 1993. Mr Ryan said that it was he who terminated the applicant on 2 October 1996 and in that regard the evidence given by the applicant with regard to the final termination conversation was supportive. Mr Ryan said the decision was made to reduce overheads and costs and that therefore the decision was made to reduce staff as productivity had to be increased. The court heard detail of planning meetings, who attended, and the subjects discussed. There was some evidence that staff reductions might have been mooted at those meetings, however, I found that evidence difficult to categorise. Exhibit C was a graph of the performance of the company from 1991 to September 1995/1996. I have no reason to doubt the veracity of the form but it is noted that this form was never made available to the applicant when his redundancy was being discussed. Exhibit 5 was circulated to all department heads and as the decision had been made to reduce the parts staff by 11, the decision to retrench the staff was probably made on Monday 16 September and ratified at a meeting on 19 September 1996. Mr Ryan said that he was the author of exhibit 2, the "Imported Notice" document and that staff reductions "could have been in the air since June of 1996". On 20 September Mr Ryan said that he discussed the retrenchments with all his managers. However, it is noted Mr Starling was absent at that time. I can find no evidence that Mr Ryan ever satisfied himself Mr Starling was advised of the retrenchments. That issue was not put to Mr Starling in cross-examination. I am therefore unable to accord weight to that evidence from Mr Ryan. Some employees were given special help with regard to the filling in of the form marked exhibit 2 as mentioned earlier, however it is noted that the applicant did seek help which was freely given and generously given by his immediate superior, Mr Starling. Mr Ryan said there was no confusion in his mind and he was fully aware of the fact that the applicant had in fact re-applied for his old position. The respondent finally after making a decision that 11 positions would be made redundant received 9 expressions of interest for voluntary redundancy and therefore the respondent was left with only two staff members in excess of requirements. Mr Ryan stated he used selection criteria for choosing staff to be kept on and those criteria included the length of service and the suitability of further employment. Mr Ryan agreed that Mr Starling had most extensive and vast experience in parts and that Samantha Patterson had only been employed for a few months, however the job she was given was completely different from the job that Mr Starling did. That evidence differed substantially from the evidence of Mr Starling. Mr Ryan used the term "dealer sales marketing" relative to Ms Patterson. I am not convinced that the difference between the work previously performed by the applicant and the work performed by the Ms Patterson was a great one. Length of service was a factor in the choice of persons to be retrenched with regard to Mr Starling. That was the reason it is my view that he was asked to stay on. In light of the criteria and the new strategy to be undertaken by the respondent it is clear that the applicant was denied the opportunity to work under the new strategy under any circumstances. Whichever way it is looked at it seems Mr Evans was not going to qualify for a new position, be it on the sort of product he sold nor his length of service. After receiving the "Important Notice" back from the applicant and noting the information the applicant wrote, Mr Ryan made no effort to contact the applicant. Alternatives were not discussed with the applicant. I accord little weight to the evidence by Mr Ryan that he in fact gave Mr Evans the opportunity to discuss his position when the termination took place on 2 October. Mr Starling told the court he was never given an "Important Notice" to fill in regarding his re-deployment and he was advised that his job was secure. Mr Ryan gave evidence that he left a form for Mr Starling to complete but gave no evidence that he ever collected or checked up with Mr Starling as to his wishes. It can therefore be concluded that Mr Starling's job was never at risk and that the applicant was treated differently. Mr Ryan agreed that shortly after Samantha Patterson commenced, she was performing the same work as the applicant. The court also heard from Mr Steven Towner who stated he was a manager with the respondent and had been so employed for some time. Mr Towner distributed the document that has become exhibit 2. Mr Towner worked out that when the proposed move was mooted, there would be some redundancies, however initially he was sure that there were 85 positions and 85 staff. It was not until Mr Ryan handed out the forms in exhibit 2 that Mr Towner had confirmed in his own mind that some redundancies would be involved with people in the Parts Department. Mr Starling, who it seems is a manager possibly on an equal level with Mr Towner, was not given the benefit of that information. The applicant came to see Mr Towner in relation to exhibit 2 and Mr Towner used words to the effect, "It was just a formal application for a job". There was no discussion that redundancies were involved or that the applicant was ever made aware at that time that his job was at risk. It seems that others were aware of that and that the applicant was not. The applicant stated in submission that the respondent did not have a valid reason for his termination. I agree with the submission of Mr Epstein that now it appears there was only one dealer sales position available, however, the material produced by the respondent at the time of termination indicates that there may have been more than one. Ms Nomchong forcibly argued that the applicant could not be used in the new strategy and that the respondent did have a valid reason for the termination of the applicant. In consideration whether redundancy is genuine, one turns to the decision of Aitken v The CFMEU, decision of Lee J handed down in Perth being decision number WI 0328 of 1994. His Honour stated: "A genuine redundancy occurs when an employee is no longer required to perform the job for which the employee was engaged because of changes made that have been made or suffered by the employer's undertaking." To that end, his Honour cited the case of R v the Industrial Commission of South Australia ex-parte Adelaide Mill Cooperative Limited 44 SAIR 1202. Ryan J, in a decision of this Court, in Jones v Department of Mineral and Energy, 16 June 1995, unreported, at pages 10 and 11 states: "However, it is within the employer's prerogative to rearrange the organisational structure by breaking up the collection of functions, duties and responsibilities attached to a single disposition and distributing them among the holders of other positions including newly created positions. It is inappropriate now to attempt an exhaustive description of methods by which a reorganisation of that kind may be achieved." The most recent decision dealing with valid reason and redundancy I feel is relevant in this case is the matter that has been cited by Ms Nomchong in Thomas v Lynch t/as Bellingen Grocery. It is a decision of the Chief Justice of this Court, Wilcox CJ: "A redundancy situation arises where an employer has labour in excess of the requirements of the business. There is no longer a need for anybody to carry out the work the employee was performing see Quality Bakers at 332/333. That was not the situation here. The supermarket was continuing to operate. In Howarth v Babin, 30 September 1996, not reported, I observed that a desire to reduce costs may constitute a valid reason for the termination of an employee's employment. Whether it does so in a particular case depends upon the circumstances of that case. It is important to recall what was said about section 170D sub-section 1 by Northrop J in Salvechandran v Peteron Plastics 62 IR 371 at 373: "In its context, section 170DE(1) that the adjective, "valid" should be given the meaning of sound defensible or well founded, a reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of section 170DE(1)." His Honour continues: "See also the decision of Lee J in Nettlefold v Kim Smoker, 4 October 1966 unreported. A case like the present case where a satisfactory employee was terminated in order to reduce costs. The job remained but was performed by others. Lee J thought it arguable that the phrase, "valid reason" imposed a requirement that in all the circumstances a termination of employment at the initiative of an employer must not be unjust or unfair. He referred to section 170C of the Act which says that the object of Division 3 of Part 6A is to give effect to the termination of employment convention". And later on: "Marshall J followed Nettlefold in Kerr v Jeroma Pty Limited on 7 October 1996. There his Honour said a reason which is based on the operational requirements of an undertaking does not thereby become valid because of it becoming so characterised from the subjective view of the employer. The question remains as to whether the employer has satisfied its onus of proof in showing that a reason it alleges to be based on operational requirements in fact was justified or objectively defensible in all the circumstances. The court will in each case determine in the particular circumstances that exist whether any termination alleged to have been taken due to operational requirements was nonetheless effected for a valid reason i.e. one which is defensible or justifiable in an objective analyses of the relevant facts." On the basis of that case, having considered the matters before the court today, it is my conclusion that the respondent did not have a valid reason for the termination of Mr Evans. His Honour continues: "One of the purposes of Division 3 of Part 6A of the Act was to improve the way employers treat their employees. It is conducive to that purpose to interpret sub-section 1 of section 170DE in a situation like this as requiring that before a notice of termination of employment is given the employer attempted a real discussion with the employee about the best way of handling the problem confronting both of them." In the case today, Mr Evans was an older man; he was some 61 years of age - he had had some six years seniority - there was no consultation with him - others knew of the forthcoming redundancy possibility, he did not. It is my conclusion that it cannot be conclusively argued the decision to terminate was solely an economic one. Other factors were taken clearly into consideration. Other factors that the applicant was denied the opportunity of dealing with. Accordingly, it is my view that compensation is due. Having considered the matter, I make the following orders. It is my conclusion for the first two weeks that the applicant was unemployed, his losses were in the vicinity of $2,002.64. I make that on the basis of $1,001.32 per week being made up of $732.09 of base salary and $269.23 car allowance. I make three orders in this case. I first order the respondent to pay to the applicant the sum of $2,002.64 within 28 days of today's date. I further order the respondent to pay to the applicant compensation for the balance of 24 weeks being the amount of time that he has not received his full salary at an amount that I have assessed at $10,810.08, that is made up of 24 weeks at what he would have received minus 24 weeks at what he did receive which I note as being $550.90, so I reached the $10,810.08 by subtracting the sum of $13,221.60 from the sum of $24,031.68 which the amount I perceived he would have earned at Alto Ford. I come now to the statutory entitlement of the applicant to compensation for distress or injured feelings arising from termination of employment. In that regard I rely on the Full Court of the Industrial Relations Court of Australia in Burazin v Blacktown City Guardian Pty Limited, unreported, 13 December 1996. In that case the shock humiliation and distress suffered by the applicant were taken into consideration in respect of the unlawful termination. It is my conclusion that that is appropriate in these circumstances. To that effect, I award to Mr Evans the sum of $7,500. I award the total sum of $20,312.72 payable by the respondent to the applicant within 28 days of today's date. I further grant the parties leave to restore the matter at short notice. Orders: