Integral Energy v Allen - [2001] NSWIRComm 193 - NSWIRComm 2001 case summary — Zoe

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Integral Energy v Allen

[2001] NSWIRComm 193

Industrial Relations Commission (NSW)|2001-02-05|Before: Wright J, Walton J, Boland J, Mr J, Maidment J

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Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2001-02-05

Before

Wright J, Walton J, Boland J, Mr J, Maidment J

Source

Original judgment source is linked above.

Judgment (35 paragraphs)

[1]

Industrial Relations Commission of New South Wales in Court Session

[2]

CITATION : Integral Energy v Allen [2001] NSWIRComm 193 APPELLANT: Intergral Energy Australia PARTIES : RESPONDENT: Jeffrey Nugent Allen FILE NUMBER: IRC 5944 of 2000 CORAM: Wright J President; Walton J Vice-President; Boland J Unfair contract - Interlocutory appeal - Notice of motion seeking declaratory and related relief - Whether Commission in Court Session had jurisdiction to hear claims under s 106 of the Industrial Relations Act 1996 - Generalia specialibus non derogant maxim - Appeal upheld CATCHWORDS : Appeal - Appeal from interlocutory decision - Notice of motion seeking declaratory and related relief - Whether Commission in Court Session had jurisdiction to hear claims under s 106 of the Industrial Relations Act 1996 - Generalia specialibus non derogant maxim - Appeal upheld Energy Services Corporations Act 1995 s10 and Schedule 2 Industrial Relations Act 1996 s106 s154 LEGISLATION CITED : Industrial Relations Commission Rules 1996 Rule 82 Rule 89 State Owned Corporations Act 1989 Schedule 9 Caltex Petroleum Pty Limited v Harmer (1999) 92 IR 264 Jeffrey Nugent Allan v Integral Energy Australia [2000] NSWIRComm 231 CASES CITED : Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 Metrocall Inc v Electronic Tracking Systems Pty Limited (No 2) (2000) 102 IR 309 Nagle (t/as W D & J L Nagle & Sons) v Tilburg (1993) 51 IR 8 Saraswati v The Queen (1991) 172 CLR 1 HEARING DATES: 05/02/2001 DATE OF JUDGMENT: 08/30/2001

[7]

2 The proceedings below were brought by Jeffrey Nugent Allen (the respondent in this appeal) against Integral Energy Australia ("the appellant") pursuant to s 106 of the Industrial Relations Act 1996. Mr Allen had been employed by the appellant (or its predecessor) since 1963 and served as Chief Executive Officer from 24 December 1998 until his removal from office on 24 November 1999. The relief sought in the claim by the respondent, which was brought by way of summons filed on 7 February 2000, was as follows: 1. An order declaring that the Contract of Employment, arrangements, conditions or collateral arrangements under which the Applicant performed work for the Respondent was unfair, harsh or unconscionable and/or contrary to the public interest. 2. An order declaring void in whole - or in part or varying in whole or in part either from its commencement or from some other time the Contract of Employment arrangements, conditions or collateral arrangements between the Applicant and the Respondent under which the Applicant performed work in an industry. 3. Further and in addition an order varying the Contract of Employment between the Applicant and the Respondent ab initio or at some other time prior to its termination by inserting the following terms: (a) "Before termination of the employment for any reason the Respondent shall give to the Applicant two years notice of the proposed termination or payment in lieu of such notice of termination." (b) For the purpose of (a) above payment in lieu of notice shall be calculated by reference to the total value of all benefits that the Applicant would have received during the notice period. (c) The Respondent will not conduct itself in a manner that is likely to damage or destroy the relationship of confidence and trust between the Respondent and the Applicant. (d) The Respondent shall both during the employment and following the termination of employment by them refrain from conduct which undermines or damages or is likely to have the effect of undermining or damaging the personal or professional reputation of the Applicant. 4. Upon termination of the Applicant's employment with the Respondent the Respondent shall pay to the Applicant any bonus payment that to which the Applicant would have been entitled if the employment had not been terminated. 5. An order varying the Contract of Employment by deleting Clause 10.5 thereof and inserting in lieu thereof the following: "Upon termination of the employment Mr Allen shall be paid a maturing/experience allowance in accordance with the relevant terms of the Integral Energy (Conditions of Employment) Award as varied from time to time." 6. Further an order varying the Contract of Employment ab initio by deleting therefrom Clause 17 thereof. 7. Further, in addition, an order that the Respondent pay to the Applicant the following: (a) Two years and one month payment in lieu of notice based on the applicant's total remuneration package at the time of termination of employment ($274,240.00 pa) in the amount of $571,333; (b) An amount of $150,000 as compensation for loss of termination of employment entitlements being sick leave, annual leave and long service leave payable pursuant to Clause 10.6 of the Employment Contract based on the total remuneration package of the Applicant at the time of the termination of his employment; (c) Payment of $363,992 being the maturity allowance pursuant to Clause 10.5 of the Contract of Employment based on the national rate assumed to be the total remuneration package including increase adjustments; (d) Future bonus payments for the years ending 30 June 2000 and 30 June 2001. 8. Further, in addition, an order that the Respondent pay to the Applicant such amount of money in connection with the Contract so avoided or varied as may appear to be just in the circumstances. 9. An order that the Respondent pay to the Applicant interest upon the amount of money ordered to be paid. 10. An order that the Respondent pay to the Applicant his costs of and incidental to these proceedings. 11. Such further or other orders as this Honourable Commission considers appropriate.

[10]

6 After canvassing the submissions of the parties, Maidment J said: 9 Schedule 2 of the Energy Services Corporation Act 1995 has effect in the present circumstance by force of s.10 of that Act. Sch.2(2)(2) provides as follows: The board may remove a person from office as chief executive officer, at any time, for any or no reason and without notice, but only after consultation with the voting shareholders. 10 M r West accepts that Mr Allen's contract of employment is amenable to a remedy under s.106 of the Industrial Relations Act 1996 should requisite unfairness be demonstrated, however, he contends that the remedy is not at large. 11 The nub of the jurisdictional attack is the proposition that sch.2(2)(2) would conflict with any orders of this Court of the nature of those sought by paragraphs 3(a) & (b), 5 and 7 of the s.106 summons. It is submitted that this Court has no jurisdiction to make an order which would derogate from the power exercised under Schedule 2 of the Energy Services Corporation Act 1995 to remove Mr Allen from office as chief executive officer without notice. 12 An order requiring a payment in lieu of notice, it is said, would be in conflict with that power. Any provision in Mr Allen's contract of employment requiring payment in lieu of notice would, it is argued, be unenforceable as, being inconsistent with the terms of sch.2(2)(2). 13 I do not quarrel with the propositions of law which have been advanced in support of the motion, the issue really turns upon the proper interpretation of the terms of sch.2(2)(2). 14 It seems to me that, in order to succeed on the motion, Integral Energy needs to demonstrate that the words "the board may remove a person from office as chief executive officer . . .without notice" in sch.2(2)(2) manifest a parliamentary intention that the board may not only remove the chief executive officer without notice but may also do so without paying compensation irrespective of any contractual term to the contrary. I am not convinced that the parliamentary intent is thus. 15 I accept that this Court has no authority to fetter the right of the board to remove Mr Allen from office and to do so without notice. However it seems to me that a provision in Mr Allen's contract of employment which was to the effect that he was to receive compensation if he was removed from office without notice would not necessarily fetter the rights of the board to remove him from office without notice. I do not accept that such a provision would derogate from the power to remove him from office without notice. Accordingly, subject to the requirements of s106 otherwise being met, it is my view that this Court is empowered to vary Mr Allen's contract of employment by inserting such a provision. 16 As to the claim for the insertion of a contractual provision requiring the giving of two years notice of termination Mr Hodgkinson argued that Mr Allen's employment was separate from his office and that, although he might be removed from office without notice the same did not necessarily attach to his contract of employment. Prima facie I do not accept this argument, however, on account of the conclusion I reach it is not necessary for me to deal with it. 17 I note that the relief sought by Mr Allen includes payment in lieu of notice as opposed to termination pay or compensatory pay and recognise that the use of the term "payment in lieu of notice" raises the spectre of some requirement to give notice, however, the relief available to him is not confined by the terms of the orders sought. Having reached the view that the contract could, with effect, require the payment of compensation upon removal from office without notice it seems to me that the summons is substantially within jurisdiction. 18 For and upon the above reasons I reach the view that the Notice of Motion must be dismissed, I so order. 19 In the absence of agreement the parties will be heard as to costs.

[21]

17 The "basic rule of construction" referred to by Gaudron J has some similarities to the maxim generalia specialibus non derogant - general provisions do not derogate from special provisions. It is unnecessary, in our view, to canvass this rule and its origins and purpose in any detail because it was not in dispute between the parties that the rule applied to the statutes that are the subject of the present appeal. Indeed, Mr Hodgkinson conceded that subject to the question of costs, if the declaration sought did not include the words "and the notice that he might be entitled to receive", he would not oppose such a declaration. In other words, as we understand Mr Hodgkinson's position, he would not oppose a declaration to the effect that: upon the proper construction of sub-section 10(2) and sub-clause 2(2) of Schedule 2 to the Energy Services Corporations Act 1995 on the one hand, and section 106 of the Industrial Relations Act 1996 on the other hand, the Commission has no jurisdiction to hear and determine any claims that the applicant has made in these proceedings with respect to the time at which the applicant was removed from office and the reasons for which that was done. 18 Mr Hodgkinson's position was that, whilst the provisions of the later general statute (s 106 of the Industrial Relations Act) could not derogate from the power under the earlier special legislation (subs 10(2) and subcl 2(2) of Schedule 2 of the Energy Services Corporations Act) to remove the chief executive officer from office "at any time for any or no reason and without notice, but only after consultation with the voting shareholders", there was no conflict between the two statutes in relation to the contract of employment applying to the chief executive officer. In other words, whilst s 106 could not derogate from the power to remove a person from the "office" of chief executive officer this was not to say that s 106 had no work to do in respect of any unfairness relating to the termination of the contract of employment of the chief executive officer; the "office" of chief executive officer was one thing and his contract of employment was another.

[22]

19 There is no dispute that the respondent had been appointed to the position of chief executive officer from 24 December 1998 and that he continued to hold that office until his removal on 24 November 1999. It is also not in dispute that there was in existence a written agreement between the appellant and the respondent that contained the terms and conditions of the respondent's employment. The agreement contained the following relevant terms: 1. Appointment: The employer appoints the employee as its Chief Executive Officer and the employee accepts that appointment. 2. Term: 2.1 Term of Appointment : Subject to the rights of earlier termination set out in clause 10 of this agreement, the employee's employment begins on 24 December 1998 and continues until 24 December 2001. … 3. Duties of Employee: 3.1 General Duties The employee must: 3.1.1 devote the whole of the employee's time, attention and skill during normal business hours, and at other times as reasonably necessary, to the duties of office. 3.1.2 faithfully and diligently perform the duties and exercise the powers: · Consistent with the position of Chief Executive Officer and · Assigned to the employee by the Board or its delegate; and · Specified in Schedule 1 of this agreement; 3.1.3 promote the interests of the employer. … 10. Termination: 10.1 Termination during term of employment 10.1.1 Subject to subclauses 10.1.2, 10.1.3, and 10.1.4 the employee's employment may be terminated at any time and for any reason by the employer upon giving three months' notice in writing, or by the employee giving one month's notice in writing. 10.1.2 Notwithstanding subclause 10.1.1 the employer may terminate the employee's employment without notice or payment in lieu of notice if the employee: · Commits any act of dishonesty, fraud, wilful disobedience, misconduct or serious or persistent breach of the terms of this agreement; · Commits any act of bankruptcy or compounds with creditors; or · Is of unsound mind or becomes liable to be dealt with under any law relating to mental health. 10.1.3 Notwithstanding subclause 10.1.1 the employer may terminate the employee's employment on the ground of redundancy upon giving 6 week's notice in writing. 10.1.4 The employer may at its absolute discretion terminate employment by making a payment in lieu of the notice periods set out in subclauses 10.1.1, 10.1.3 and 10.2. Any payments due upon termination under 10.6 will only be made up to the date which is the start of the notice period.

[24]

21 The letter terminating the contract of employment and removing the respondent from the office of chief executive officer was dated 24 November 1999 and signed by Mr Bill Hilzinger, Chairman. The letter to the respondent relevantly stated: Please be advised that the Board of Integral Energy Australia has determined that you have committed a serious breach of the terms of your contract of employment. Accordingly, it has resolved that your appointment to the Office of Chief Executive Officer of, and your employment with, Integral Energy Australia be terminated in accordance with powers under Clause 2(2) of Schedule 2 of the Energy Services Corporations Act and clause 10.1.2 of your contract of employment. Please be advised that in accordance with authority vested in me by the Board I confirm that this termination is effective immediately. 22 It seems to us that the respondent was employed in the office of chief executive of the appellant and in no other, or no additional, capacity. The terms and conditions of his employment as a holder of that office were spelt out in the contract of employment to which we have already referred. Further, the board's power in cl 2(3A) of Schedule 2, to fix the chief executive's conditions of employment, in this case by agreement with the respondent, must in our view, be read as being subject to the power in cl 2(2) to remove the chief executive from office "at any time for any or no reason and without notice, but only after consultation with the voting shareholders". We consider that this is so for three reasons. Firstly, we consider that the word "may" in cl 2(2) of Schedule 2 is used in the sense of conferring a wide authority and discretion on the board to remove the chief executive in the manner provided for in the subclause. It is not therefore open to the board to exercise its power to make a contract of employment under cl 2(3A) on terms that rendered cl 2(2) nugatory or limited its operation. We do not regard such an outcome as being consistent with parliament's intention. Secondly, the generalia specialibus principle applies to the interpretation of provisions within the same statute. Clause 2(2) of Schedule 2 makes special provision relating to the removal of the chief executive officer. Clause 2(3A) is a general provision giving the board power to fix the employment conditions of the chief executive. In our opinion, cl 2(2) is not derogated from by cl 2(3A). Thirdly, if it were the case that cl 2(2) and cl 2(3A) stood alone and that cl 2(3A) was not subject to cl 2(2), the absurd situation could arise where the chief executive was removed from office but the contract of employment relating to the holder of that office, and the rights and obligations arising from it, remained on foot. Again, we do not consider such an outcome was parliament's intention.