Logan v Otis Elevator Co Pty Ltd

Leave to appeal 13 Counsel for Otis, Mr Peter Hall QC and Mr John de Meyrick, opposed the granting of leave to appeal, basically because of the length of time that elapsed between the delivery of Moore J's reasons for judgment on 20 June 1997 and the filing of the first Notice of Appeal on 19 March 1999. However, until orders were made, it was not competent for Mr Logan to file a Notice of Appeal or Application for Leave to Appeal. Appeals lie against orders of a court, not against reasons for judgment; see Driclad Pty Limited v Commissioner of Taxation (1968) 121 CLR 45 at 641 and Ah Toy v Registrar of Companies (1985) 10 FCR 280. If Otis had felt Mr Logan was guilty of undue delay between June 1997 and January 1999, it could and should have taken up that question with Moore J. Mr Logan acted promptly after 11 March. It is true his first document was misconceived. He should have filed an Application for Leave to Appeal, not a Notice of Appeal. However, he rectified this error with a few days; well within the period of 21 days stipulated in the Rules of the Federal Court: see Order 52 rule 5. The document was filed in the incorrect Court, but this misapprehension of jurisdiction was widely shared. Within a few days of the decision in Dodson, Mr Logan's solicitors made an application in this Court. 14 The matters sought to be raised are substantial. They have been fully argued. It is appropriate to grant leave and so enable this Court to rule on those matters in advance of the projected quantum hearing. We will grant leave to appeal.

The "standing by" claim 15 Clause 11 of the 1989 award provides for a 38 hour week. Clause 14 deals with overtime. It relevantly provides; "Payment for working overtime (other than shift work) (a) For all work done outside ordinary hours the rates of pay shall be time and a half for the first two hours and double time thereafter, such double time to continue until the completion of the overtime work. Except as provided in this subclause or subclause (c) hereof in computing overtime each day's work shall stand alone. For the purposes of this clause ordinary hours shall mean the hours worked fixed in accordance with clause 11 of this award. The hourly rate, when computing overtime, shall be determined by dividing the appropriate weekly rate by 38, even in cases when an employee worked more than 38 ordinary hours in a week. Requirement to work reasonable overtime (b) An employer may require any employee to work reasonable overtime at overtime rates and such employee shall work overtime in accordance with such requirement. The assignment of overtime by an employer to an employee shall be based on specific work requirements and the practice of 'one in, all in' overtime shall not apply. Rest period after overtime (c) … Call back (d) An employee recalled to work overtime after leaving the site (whether notified before or after leaving the site) shall be paid for a minimum of four hours work or where the employee has been paid for standing by in accordance with subclause (g) hereof shall be paid for a minimum of three hours work at the appropriate rate for each time he is so recalled; provided that, except in the case of unforseen [sic] circumstances arising the employee shall not be required to work the full three or four hours as the case may be if the job he was recalled to perform is completed within a shorter period. This subclause shall not apply in cases where it is customary for an employee to return to his employer's site to perform a specific job outside his ordinary working hours, or where the overtime is continuous (subject to a reasonable meal break) with the completion or commencement of ordinary working time. Overtime worked in the circumstances specified in this subclause shall not be regarded as overtime for the purpose of subclause (c) hereof when the actual time worked is less than three hours on such recall or on each of such recalls. (e) … (f) … Standing by (g) Subject to any custom now prevailing under which an employee is required regularly to hold himself in readiness for a call back, an employee required to hold himself in readiness to work after ordinary hours shall until released be paid standing-by time at ordinary rates from the time which he is so to hold himself in readiness." 16 Mr Logan contends it was a requirement of his employment as Otis' local representative at Orange that he be always available for call out. The Further Amended Statement of Claim sought payment at ordinary hourly rates in respect of 48 weeks (excluding four weeks' annual holidays) in each of the six years immediately prior to his termination of employment; for 16 hours per day Monday to Friday and 24 hours for each Saturday and Sunday. The claim totalled $685,977.60. 17 Counsel for Mr Logan, Mr Wayne Haylen QC and Mr Rabih Alkadamani, point to the Job Description of local representatives, issued by Otis on 22 July 1994. Item 4 reads: "Maintains a twenty-four hour service for Otis equipment in their territory providing prompt attention to reported problems." Ross Gardiner, New South Wales manager of Otis, agreed it was the responsibility of local representatives "to man a call out facility which was 24 hours per day and seven days per week". He also agreed that local representatives were required to notify their supervisor before leaving their area, even at weekends; although he said permission was not refused if the local representative had arranged for a local contractor to be on standby for emergency calls. 18 In rejecting the "standing by" claim, Moore J said: "It is at least arguable that, apart from the effect of the opening words of para (g) concerning custom, Mr Logan would be entitled to payment under that paragraph. However, in my opinion, there was plainly a custom prevailing at the time the 1989 Award was made, and during the period in which the paragraph might otherwise have applied, that Mr Logan and other local representatives were required regularly to hold themselves in readiness for a call-back. It is thus unnecessary to determine whether the word 'now' directs attention to the time the 1989 Award was made or the time at which the provisions were said to operate and the entitlement was said to arise. In relation to the opening words of para (g), counsel for Mr Logan made two submissions. First, that they were a qualification on an entitlement and it was incumbent upon Otis to establish that the qualification applied and, in particular, prove the existent of the custom. Second, that there needed to be evidence that the custom relied on is well known and acquiesced in, notorious and certain in the way discussed in Con-stan Industries of Australia v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 AT 236 and reference was also made to Byrne & Frew v Australian Airlines (1995) 105 CLR 410. However these authorities concern the existence of custom that would justify the implication of a term in a contract. For my part I do not see why the opening words of para (g) should be approached on the same basis." Moore J went on to discuss a number of authorities relating to the word "custom", always in the context of an argument that a particular matter was implied in a contract. He then said: "However, in the present case, in my opinion, it is only necessary that it be demonstrated that a class of employee, namely local representatives, was required regularly to hold itself in readiness for a call-back. In my opinion, the evidence clearly enables an inference to be drawn that that was feature of the employment of local representative. Mr Bull's evidence was that as a local representative between 1968 and July 1984 he was remunerated for time spent on callouts and other work undertaken outside normal hours. It was a matter that, on his evidence, he raised with Mr Logan when the latter was appointed a local representative in Orange. As earlier discussed, Mr Logan was aware of that aspect of his employment. Moreover the draft job description for local representatives, dated 13 April 1994, which I referred to earlier in this judgment, refers to a duty of a local representative as maintaining ""a 24 hour service for Otis equipment'. Indeed Mr Logan's evidence was that he was required to be on 24 hours callout. From this evidence I can reasonably infer that at the time Mr Logan was appointed local representative in 1985 and before and following that time local representatives were required to make themselves available to attend to emergency breakdowns and the like. It was an ongoing feature of their employment. In my view, the exception found in the opening words of cl 14(g) applied to local representatives. That the award would operate in this was is readily comprehensible. It is intended to confer upon employees a benefit if, on specific occasions, they are required to hold themselves in readiness to work outside ordinary hours. …In those circumstances the employee should be compensated for putting themselves in a position where they are ready to do what might be required of them. The qualification in the opening words is intended to exempt from its operation employees who traditionally and regularly might be required to return to work by way of a callback. As I have just discussed, local representatives were of this latter class. Insofar as Mr Logan was called back after he had ceased his day's work or at weekends, I am satisfied he is entitled to payment under cl 14(d) of the 1989 Award. It is true that the clause speaks of being recalled to work "after leaving the site" and, impliedly, applies only to circumstances when an employee leaves a particular site and is recalled to work at that site. However it is to be remembered that cl 14(d) is in Part I, which is a part of the 1989 Award dealing with on-site construction. Its application to lift maintenance and repair by operation of Part II renders inappropriate a literal application of the provisions in Part I drafted, as they were, to apply to on-site construction. The purpose of cl 14(d) is to compensate an employee who is required to return to work after leaving it and returning home. By parity of reasoning a lift mechanic who is required to return to work, albeit at a lift that he or she may not have been work on that day, after ceasing work is entitled to payment under cl 14(d). Mr Logan is entitled to such payments. If, however, he was called to an emergency breakdown during his working day and consequently worked excess hours then those excess hours, would simply attract an overtime payment and not the minimum of four hours arising under cl 14(d)." 19 Counsel for Mr Logan contend that Moore J erred in interpreting the word "custom" differently than in cases concerning the implication of a contractual term. They say the word "custom" requires demonstration that the relevant practice is notorious, reasonable and certain. They say it must have existed from time immemorial, or at least from a date before the insertion of a clause like cl 14(g) of the 1989 award in predecessor awards; apparently in the 1930s. The latter proposition stems from the inclusion of the word "now" in the term "custom now prevailing". 20 We do not accept these contentions. We agree with Moore J but do not rest our opinion solely on the word "custom". The clause must be construed as a whole. It seems to us that the purpose of cl 14(g) is to provide compensation to employees for being placed on a specific alert. The sub-clause operates where an employee is "required to hold himself in readiness to work after ordinary hours". The employee shall "until released" be paid standing by time at ordinary rates "from the time which he is to hold himself in readiness". The sub-clause envisages both a requirement by the employer that the employee hold himself in readiness to work on a specific occasion and a release from readiness. Standing by payments apply during the period between those notifications. The sub-clause is to operate on an ad hoc basis, as and when stand by instructions are given by an employer. 21 It seems to us the opening words of the sub-clause do no more than emphasise this interpretation; the sub-clause does not apply where there is a "custom" under which the employee is regularly required to hold himself in readiness for a call back. In this context the word "custom" means no more than a prevailing and accepted practice. Moore J held there was such a practice in relation to Otis' local representatives. 22 We think Moore J acted correctly in dismissing the claims made in paras 10 to 12 of the Further Amended Statement of Claim.

Set-off 23 Moore J held that "to the extent that Mr Logan was paid a salary exceeding the wage to which he was entitled as an electrical mechanic under the 1989 Award, Otis is entitled to off-set that amount against any amount ultimately found to be due to Mr Logan as payment for overtime and … call backs." He said the relevant principle is that enunciated by Sheldon J in Ray v Radano [1967] AR (NSW) 471 and adopted by a Full Court of the Federal Court in Poletti v Ecob (No.2)(1989) 31 IR 321 at 333. Moore J described the principle in this way: "It is that the payment of an amount as wages can be relied on by an employer in satisfaction of an award obligation to pay wages whether in relation to wages for ordinary time, overtime, weekend penalty rates or any other like monetary entitlement under the award. However if a payment is made under a contract either expressly or impliedly for some purpose other than the payment of wages, such as for fares or for a uniform allowance where there is no award entitlement to fares or a uniform allowance this cannot be relied upon as a set off for monies payable under the Award." 24 Ray v Radano concerned a claim by a chef for overtime payments. The wages he had received exceeded what was payable to him under the award for ordinary time. A majority (Richards and Sheehy JJ) of the New South Wales Industrial Commission held the employer was entitled to set-off the excess against the amount due for overtime. Sheldon J dissented. At 478-479 he said: "… if by contract, express or implied, the whole or part of the payment made to the complainant has been in respect of matters which are outside the award entitlement, the payment to that extent cannot be set off. This may include amounts allocated, say, for fares or as a uniform allowance where there is no award entitlement in respect of such matters. This, of course, is recognized in the majority judgment. But at this stage I must part company from that judgment because I can see no difference in principle between an amount promised in excess of the award requirement whether the promise is for, say, a uniform allowance or for a payment confined to ordinary time only. In each case, the employee works on the basis that he will receive an extra-award payment and, in my opinion, it is not to the point that in one case its subject matter is clothing and in the other additional remuneration for a nominated period of work. If one cannot be set off, neither can the other because their essential character is identical ie, both are payments in fulfilment of a promise extraneous to the award obligation. The award obligation re clothing may be nil, in regard to ordinary time it may be $X. The extraneous promise is to pay $Y and, whether it is in respect of clothing or ordinary time, it is $Y beyond what the award requires. To put it in more concrete terms, if the award rate for 40 hours work is $40 with overtime payable in addition but the employer agrees to pay a uniform allowance of $5 per week, it is common ground that it is no answer to a claim under s92 for $40 ordinary time and $5 overtime worked to show that in fact $45 went into the employee's' pocket. If this is so, I regard it as equally no answer if he got $45 only because the employer agreed to pay him that amount for no more than 40 hours work. In each case, as I see it, the employer cannot allocate to one subject matter what he has already paid in pursuance of a promise related to another subject matter. That would be approbating and reprobating." 25 In Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415, the New South Wales Industrial Commission in Court Session adopted the view of Sheldon J, rather than Richards and Sheehy JJ, in determining that an amount of money paid to an employee as a "special gratuity" on retrenchment could not be set-off against money payable to him in lieu of notice. 26 A Full Court of the Federal Court (Keely, Gray and Ryan JJ) reviewed these decisions in Poletti v Ecob (No.2). At 332-333 the Court said: "It is to be noted that there are two separate situations dealt with in the passage from the judgment of Sheldon J which has been quoted and in the reasoning of the Commission in Pacific Publications. The first situation is that in which the parties to a contract of employment have agreed that a sum or sums of money will be paid and received for specific purposes, over and above or extraneous to award entitlements. In that situation, the contract between the parties prevents the employer afterwards claiming that payments made pursuant to the contractual obligation can be relied on in satisfaction of award entitlements arising outside the agreed purpose of the payments. The second situation is that in which there are outstanding award entitlements, and a sum of money is paid by the employer to the employee. If that sum is designated by the employer as being for a purpose other than the satisfaction of the award entitlements, the employer cannot afterwards claim to have satisfied the award entitlements by means of the payment. The former situation is a question of contract. The latter situation is an application of the common law rules governing payments by a debtor to a creditor. In the absence of a contractual obligation to pay and apply moneys to a particular obligation, where a debtor has more than one obligation to a creditor, it is open to the debtor, either before or at the time of making a payment, to appropriate it to a particular obligation. If no such appropriation is made, then the creditor may apply the payment to whichever obligation or obligations he or she wishes. See Halsbury's Laws of England, 4th ed, vol 9, pars 505 and 506." The Court went on to observe that the principles discussed by Sheldon J in Ray v Radano and by the New South Wales Industrial Commission in Pacific Publications appeared not to have been discussed in terms by the Federal Court. However, the Court noted two Federal Court decisions that were consistent with those principles: Lynch v Buckley Sawmills Pty Ltd (1989) 3 FCR 503 and Poulos v Waltons Stores (Interstate) Ltd (1986) 10 FCR 429. The Court held it was appropriate to apply those principles which, they said, were "specific applications of general principles relating to contracts and debtors and creditors". 27 In the present case, Otis may not have realised that the 1989 award (or any other award) would apply to Mr Logan in his position as local representative at Orange. Before he was appointed to that position, Mr Logan was treated as an award employee and paid for overtime and call-backs. When he was offered the position at Orange, it was on the basis of an annual salary, higher than ordinary time wages calculated in accordance with the award. There was an issue before Moore J as to the content of the discussions at that time. However, his Honour accepted that Mr Logan and the relevant Otis officers were all aware "the salary included an amount intended to compensate for all overtime including call-outs". His Honour did not find this compensation accounted for the whole of the difference between an award wage and the agreed salary. He would not have been able to make such a finding; there was no evidence to that effect. None of the witnesses attempted to apportion the excess between overtime and call-backs, on the one hand, and the responsibilities, additional to those of an electrician special class under the award, being undertaken by Mr Logan as a local representative, on the other hand. These additional responsibilities were significant. They included administrative work and sales activities and ensuring an emergency service 24 hours per day, 365 days per year, either by making himself available for call-out or arranging for a local electrical contractor to be available. Mr Logan was the local "face" of Otis with important public relations responsibilities. 28 No doubt the reason why no witness sought to apportion the excess is that nobody considered that question at the relevant time, when the appointment was made. It is in the interests of the parties now to adopt contrasting positions about apportionment of the excess. This was demonstrated during argument. When we asked Mr Hall how the Court should determine what part of the excess was attributed to overtime and call-outs, as distinct from Mr Logan's status and responsibilities as a local representative, he asserted it was reasonable to attribute almost all the excess to overtime and call-outs. Mr Haylen suggested the opposite. The truth is the Court has no basis for preferring one view to another; for doing what the parties refrained from doing until they found themselves in court. In this situation it is important to pay attention to principle. We think it is appropriate to follow Poletti v Ecob, this being a decision of a strong industrial court made after consideration of all the relevant authorities. Moreover, the decision is carefully founded on relevant principles of contract and common law. 29 We do not, with respect, think the principle applied in Poletti v Ecob was correctly enunciated by Moore J in the passage from his reasons we have quoted in para 23 above. That passage propounds a dichotomy between an obligation to make a money payment in respect of wages (whether for ordinary time, overtime, weekend penalty rates or otherwise) and an obligation relating to a matter such as fares or uniform allowance. That dichotomy attracted the majority in Ray v Radano but was rejected by Sheldon J and subsequent decisions have endorsed his dissenting view. The subsequent decisions focus on the matter of designation and appropriation rather than the nature of the outstanding obligation. 30 The present case is not the "first situation" discussed in the passage from Poletti v Ecob quoted in para 26 above; the parties did not agree that the difference between the moneys that would be due under the award and the moneys actually paid "will be paid and received for specific purposes over and above or extraneous to award entitlements". The case is that of the second situation: "there are outstanding award entitlements, and a sum of money is paid by the employer to the employee". However, prior to the hearing of the appeal, neither party sought to designate or appropriate the excess, or any part of it, to any particular obligation owed by Otis to Mr Logan. The whole of the excess was paid and received as an amount appropriate to reflect the difference between the position of a local representative, with all that entails, and an ordinary electrician special class. It is not open to Otis now to change that situation by asking the Court to make a retrospective designation between the various elements that differentiate the situation of a local representative and an ordinary electrician special class. Without such a designation, none of the excess can be reasonably identified as a payment on account of overtime and call-backs and, accordingly, set-off against the overtime and call-back payments due to Mr Logan under the 1989 award. 31 In our opinion Moore J erred in holding that the excess is available for set-off against the overtime and call-back payments. In the absence of an agreement or timely designation, there is no basis for holding that any part of the excess is available for set-off.

Notice of termination 32 In relation to this issue, Moore J said: "It is contended by Mr Logan that he was entitled to reasonable notice and the payment in lieu of notice he received, one month's pay, does not represent reasonable notice. The evidentiary foundation for the contention is not made out. At one stage Mr Logan conceded, in effect, that one month's notice would be adequate. Counsel for Mr Logan has not demonstrated the position was one for which a longer period of notice would, by implication, have been adopted by the parties had they turned their mind to it when formulating or considering the contractual arrangements between them." 33 His Honour's reference to a concession seems to be a reference to the following evidence of Mr Logan in cross-examination: "Well, now had you given notice in February '95 instead of being dismissed, what notice would you have given?---Well, I would've presumed I was to give a month's notice but I would've given more notice than that. But you would have presumed you would have given a month's notice?---Yes. Was that your understanding of the notice that other local representatives and other salaried employees of Otis gave?---Well, I don't know. I never discussed it with them because I didn't see it as an imminent thing. In my opinion it was something that wasn't necessary. Was that common knowledge as far as you are concerned?---Was what common knowledge? That a month's notice was the custom and usage within Otis?---I presumed that was, yes. I presumed that was the situation. " However, Mr Logan was asked further about this matter in re-examination: "Yesterday you said you would have given more notice but you presumed one month's notice; you presumed something about one month's notice. Why did you presume one month's notice?---The only reasoning I had was when I was on a weekly wage it was my opinion - well, it was my understanding, I should say, that it was a week's notice, and because I was being paid on a monthly basis I presumed that the reasoning would be a month's notice." 34 Particularly having regard to Mr Logan's explanation, we are unable to read his evidence in cross-examination as a concession that one month would constitute reasonable notice of the termination of his employment. On the contrary, he said he would have given more than a month's notice; obviously because he would have thought one month to be unreasonably short. The reference to one month seems merely to be a reflection of the common misapprehension that the length of reasonable notice is directly related to pay periods. Anyway it is for the Court to determine what length of notice would be reasonable under the circumstances; even a direct concession by an applicant would not determine that issue. Compare the Full Court's treatment, in Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 487-488 and 504, of a concession by an applicant that his conduct had been "dishonest", "deceptive" and "misleading". 35 We do not agree that the question of what constitutes reasonable notice is to be determined as if the Court were considering what term ought to be implied into the contract of employment at the time it was made. In the absence of agreement between the parties on the subject, their contract is to be taken as importing a requirement of reasonable notice of termination. What is reasonable is a matter to be considered in the light of the circumstances applying at the date of notice, not the date of the original contract: see Martin Baker Aircraft Co Limited v Canadian Flight Equipment Limited [1955] 2 QB 556 at 581. 36 Counsel for Mr Logan contend the Court should determine that six months' notice was required. They point out that, at the date of the notice, Mr Logan had been Otis' representative in Orange for about ten years and was earning about $44,000 per annum. He had worked for Otis throughout his whole career, except for two relatively short breaks assisting his father. He was resident, with his family, at Millthorpe. Employment opportunities for elevator electricians are more limited in rural areas than in major cities. 37 Counsel for Otis note that the 1989 award requires only one weeks' notice. They do not suggest this provision has contractual or other decisive significance but say it is a matter that ought to be taken into account in determining what constituted reasonable notice. They also observe that Otis offered to transfer Mr Logan to Sydney, rather than terminate his employment, but he refused that offer. Counsel argue Moore J was correct in determining that one month constituted reasonable notice. 38 All of the matters mentioned by counsel are relevant to making a judgment, which is really a matter of impression, as to the appropriate length of notice. We think one month is too short a time; it would have been extremely difficult to Mr Logan to have found suitable employment during that time. On the other hand, six months is too long. We think the appropriate allowance is three months. We need not consider any effect of this determination on the award of compensation for unlawful termination. There is no appeal or cross appeal in respect of that item, so Moore J's decision about it remains unaffected.

Orders 39 We propose to grant leave and uphold the appeal to the extent that order 4 will be set aside. We will add an order that compensation be assessed on the bases that: (i) Otis was bound to give to Mr Logan three months' notice of termination of employment or to pay three months' salary in lieu of notice; and (ii) Otis is not entitled to set-off against its liability to make payments in respect of overtime and call-backs, pursuant to clause 14(a) and (d) of the 1989 award, the difference between the salary paid to Mr Logan from time to time and the amount payable to him under that award for ordinary time. The appeal will otherwise be dismissed. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Wilcox and the Honourable Justices Marshall and Madgwick.

Counsel for the Appellant: W Haylen QC and R Alkadamani

Counsel for the Respondent: P M Hall QC and J de Meyrick