(c) some other formula.
8. Did the applicant have a duty to mitigate his alleged loss and if so how does this impact on the Commission's exercise of discretion pursuant to s106(5) of the Act in awarding compensation?
12 As will become clear, even this list of issues was further reduced during the course of the hearing. However, it is convenient in this case for the judgment to follow the general structure of the statement of issues identified by the parties.
The Jurisdictional Argument (Issues 1, 2 and 3)
13 Counsel for the respondent, Mr Moses , initially submitted that there was a jurisdictional impediment which would prevent the Court granting the orders sought by the applicant. According to Mr Moses , the case advanced by the applicant appeared to depend upon establishing that a contract of employment had been entered into between the applicant and the respondent following the applicant's arrival in Australia. Mr Moses submitted that there was no evidence which could satisfy the Court that there had been at any time a binding contract of employment between the applicant and the respondent which was capable of being varied by the Court, let alone evidence going to the terms of any such contract. The inference which should be drawn from the uncontested evidence was that the United Kingdom company had at all times a continuing contractual relationship with the applicant. Mr Moses pointed to the fact that the United Kingdom company made an offer to return the applicant to London and that the applicant was having ongoing discussions with the representatives of the United Kingdom company.
14 Further, Mr Moses submitted that the applicant's case was characterised by what he referred to as a shifting sands approach. The applicant's case appeared to assume that there was a new contract formed upon his arrival in Australia, but also sought to establish that there was some alternative form of arrangement which would allow the Court to take into consideration not only the period of employment in Australia, but also the period of employment since 1990. It was submitted that the applicant should have joined the United Kingdom company to the proceedings. Having not done so, the applicant is required to establish that there was a contract formed with the respondent. It was not sufficient, it was said, for the applicant to make general assertions as to the existence of a contract without addressing fundamental questions relating to the terms of the contract and what matters are relied upon as establishing the existence of the contract.
15 However, Mr Moses , later in the proceedings, conceded that, in light of the definition of "contract" contained in s105 of the Act, it was at the very least possible to say that there existed an "arrangement" between the applicant and the respondent whereby the applicant performed work in an industry in New South Wales. He submitted:
It is open to your Honour, I must concede, to find that in the circumstances of this case that there was on the balance of probabilities an arrangement that existed between the applicant and the respondent whereby work was performed in a New South Wales industry. I do not think on any proper analysis one could run away from having to make that concession and I do make that concession.
16 Mr Moses further conceded that the answer to the third question raised in the statement of issues was affirmative and thereby the Court was not required to consider the second question (whereby the issue of jurisdiction had been raised with respect to the contractual relations between the applicant and the respondent).
17 In my view, these concessions were properly made. I consider that the Court has jurisdiction to determine the present application. It is pertinent to repeat that a "contract" for the purposes of s106 of the Act includes "any contract or arrangement, or any related condition or collateral arrangement". For present purposes, once it is established that there was an "arrangement" between the parties, then that arrangement (having regard to the provisions of s105 of the Act) is amenable to the jurisdiction of this Court in the exercise of its powers to make orders declaring contracts void (in whole or in part) or varying those contracts pursuant to s106.
18 Whether there was a contract, in the strict sense, between the applicant and the respondent is irrelevant, at least so far as jurisdiction is concerned, so long as it is found there was an arrangement whereby a person performs work in any industry. Having in mind these considerations, where I use the expression 'contract' in this judgment (including the orders made by the court) I do so in the extended sense arising from the definition of the word 'contract' in s105 of the Act (and in particular, by reference to the arrangement between the parties in this matter).
19 As Mr Moses conceded, any cursory examination of the facts of this case quickly reveals that the applicant was involved, at the very least, in an arrangement whereby he was to perform work in Australia for the respondent. Although his move to Australia was directed by representatives of the United Kingdom company in London, it was immediately envisaged that he would be working for the Australian arm of the company, that is, the respondent. The work he performed whilst in Australia was directly for and to the benefit of the respondent and he was in daily contact with other senior employees of the respondent. He was paid initially from London, but, as soon as could be arranged, was transferred to the payroll of the respondent. The applicant's letter of termination was written on behalf of the respondent. The termination payments were made by the respondent. Deductions for income tax were withheld from the applicant's salary by the respondent.
20 In my view, there was clearly an arrangement for the performance of work between the applicant and the respondent. The existence of the arrangement resolves the jurisdictional objection. It is, therefore, unnecessary to resolve the questions as framed by the parties in issues 1 and 2 of the statement of issues. It is unnecessary to determine any jurisdictional question concerning whether there was a separate contract entered into between the applicant and the respondent upon his arrival in Australia.
The Adequacy of the Notice Period (Issues 4 and 5)
21 The first substantial argument raised on behalf of the applicant as to the unfairness of the contract concerned the inadequacy of the period of notice given by the respondent upon termination. Mr Gotting submitted that, in the circumstances of this case, the provision of one month's pay in lieu of notice plus an additional month described as an "ex gratia" payment was not adequate.
22 In considering what may constitute a fair and appropriate period of notice, Mr Gotting submitted that it was proper for the Court to take into account the applicant's period of service with the United Kingdom company since 1990. Mr Gotting submitted that a number of authorities indicate that service with related bodies corporate can be taken into account in assessing a fair period of notice for the purposes of s106. He referred specifically to the decision of Schmidt J in Nordby v Barclays Australia Investment Services Limited & Anor (1993) 53 IR 319, the decisions of Hill J in Payne v Foxboro L & N Pty Ltd & Another (1998) 81 IR 404 and Newton v Goodman Fielder Mills Ltd (1997) 81 IR 227. Mr Gotting was unable to refer to any specific authorities which dealt with the circumstance of employment with related overseas companies, but pointed to a number of decisions concerning long service leave in which periods of overseas service had been considered.
23 Mr Gotting cited two documents tendered in the proceedings which supported the view that the respondent treated the applicant in light of his entire service. Firstly, the applicant's original employment contract with Comtext International Limited (dated 1 January 1991) recognised that continuous service could include periods of employment with other companies which were then related to the company. Secondly, Mr Gotting referred to an e-mail from Kay Fairgrieve, Human Resource Manager for GN Comtext in London, to Stephen Cranitch in which she acknowledged that it would be "fair to recognise his [the applicant's] length of service with the whole group."
24 In asserting that the period of notice provided by the respondent was unfair, Mr Gotting referred to a number of aspects of the case. In particular, Mr Gotting cited the applicant's service with the Comtext group of almost eight years and the fact that he had moved around the world during this period of service. Mr Gotting highlighted the difficulties encountered by the applicant in obtaining alternative employment. The applicant did not obtain further employment until 26 April 1999. Mr Gotting contended that the applicant was a senior employee of the respondent and referred to passages from the application for business sponsorship in which the respondent acknowledged the skill and experience of the applicant and his importance to their organisation. The applicant's seniority was said to impact upon the reasonableness of the notice he received.
25 Mr Gotting referred to a number of additional matters which were said to have caused unfairness to the applicant. These included the fact that the applicant was not given the opportunity to serve out the period of notice and potentially transfer his sponsorship for the purposes of his working visa to another employer. As it was, the respondent withdrew its sponsorship of the applicant immediately forcing him to obtain further documentation in order to retain his entitlement to work in Australia. Mr Gotting also indicated that the payments in respect of annual and long service leave were not paid on termination and the applicant was forced to commence proceedings before the Chief Industrial Magistrate in order to recover the money to which he was entitled.
26 Mr Moses contended that in considering the fairness of the notice period the Court should have regard only to his period of service directly with the respondent whilst in Australia. That is, only the period of service commencing 1 January 1998 and ending 1 June 1998. If there was any arrangement with the respondent, the arrangement was limited to that period. He contended that there was no evidence to suggest that there was any representation on behalf of the respondent that there was a guarantee of employment or that the applicant's service in Australia was considered a continuation of his service with the United Kingdom company. Neither was there any express term to that effect in the contract, nor was there any evidence that the applicant was under a misapprehension as to the terms of his employment. In light of service of less that six months duration, Mr Moses submitted that the payment of one month's salary in lieu of notice plus another one month's payment for redundancy was entirely fair and reasonable.
27 In assessing the adequacy of the notice period which was afforded to the applicant, it is firstly necessary to consider whether that assessment should be made in light of the applicant's employment with the Comtext group since 1990. Having considered the circumstances of the case and the submissions advanced by the parties, I consider that it is proper to have regard to the entire period of service. I do not accept the submission advanced on behalf of the respondent that the fairness of the notice period afforded to the applicant should be assessed as though he had been employed only for a period of less than six months. Such an approach plainly ignores the reality of the applicant's employment situation, including his length of service and level or status of his position.
28 There are a number of cases in which it is clear that periods of employment with related entities has been considered in determining the fairness of an employee's treatment. In Payne v Foxboro L & N Pty Ltd , for example, Hill J considered the case of an employee who had been employed by a number of related companies over a period of 27 years, all of which had been under the direction of two United States parent companies. In determining the fairness of the notice of termination provided by the employer, Hill J clearly considered the entire period of service. His Honour concluded (at 407 - 408):
So far as notice is concerned, it seems to me that the provision in the contract and/or arrangement for a period of one months notice of termination plus one months pay in lieu (the unilateral general policy of the respondents and their US parent/s) is patently unfair in the case of the applicant having regard to his length of service and the status of his position. He had been the National Sales Manager of the respondent/s since 1993 and prior to that the NSW Sales Manager since 1982, and with overall service in excess of 27 years. During the latter periods of his employment he was the most senior "technical" employee of the company in Australia and reported directly to the US parent; and it was his responsibility to ensure that its policy of "Business as usual" was complied with in order to make the business as attractive as possible so that the US parent could achieve its objective of sale. In my view, a period of 12 months notice (or payment in lieu) would have been fair and reasonable.
29 It is true that no authorities were cited in which the applicant had been employed by a related entity outside Australia. However, I do not consider that this fact alters the approach which may properly be adopted. The evidence in this case established that there was at all times a close relationship between the United Kingdom company and the Australian operations. The applicant took up the position in Australia at the behest of the United Kingdom company and presumably to best serve the interests of the Comtext group. His appointment in Australia followed assignments within the group in Saudi Arabia and Indonesia. The United Kingdom company was closely involved in the supervision of the respondent's operations in Australia and its relations with staff. It is clear that the United Kingdom company controlled the group's worldwide operations. Furthermore, at the time of the termination the United Kingdom company indicated its willingness to repatriate the applicant to a position in London and make him redundant under United Kingdom law. That act confirms that the respondent itself viewed the applicant as involved in a continuous period of service. To treat the applicant's period of service in Australia in isolation would be artificial and would result in obvious unfairness.
30 This conclusion does not involve, as Mr Moses at one point suggested, an unwarranted lifting of the corporate veil. The task of the Court in a matter such as the present one is to determine whether the contract between the applicant and the respondent or the operation of that contract or arrangement was, amongst other things, unfair, harsh or unconscionable. That determination must be made in light of the entire circumstances of the case: see Port Macquarie Golf Club Limited v Stead & Another (1996) 64 IR 53 at 67. The relevant circumstances in this case must, in my view, include the fact that the applicant had been employed by the respondent's parent company for a period of almost eight years prior to taking up the position in Australia. It would not have been conscionable for the respondent to treat the applicant as if he were a new employee coming to the company from an unrelated position. The respondent should, in my view, have treated the applicant as a person with a history of continuous service to the group of companies and recognised that factor in the operation of the contract or arrangement entered into with the applicant.
31 In considering whether a contract is unfair the Court will have regard to the legal relations between the parties, and therefore, the question of legal form. However, by its very nature, the jurisdiction of the Court is not necessarily limited by legal forms. So much is the case where the Court is required to consider arrangements between parties. Further, the Court should look to, in my view, the reality of the relationships existing between the parties and not merely to the legal form. I note that, in this case, the legal form was not created for the benefit of the applicant.
32 I now turn to consider whether the contract was unfair in view of the period of notice which was provided to the applicant by the respondent. There was no serious dispute concerning the kind of factors which may be relevant in assessing whether a period of notice given on termination is fair or unfair. In Lavings v Barclay Mowlem Construction (New South Wales) Pty Ltd (unreported, Hill J, CT93/1233, 15 September 1994), for instance, Hill J stated (at 12 - 13):
As to the period of notice the authorities demonstrate that the period of 'reasonable' notice to be implied in a contract of employment which is silent on the matter depends upon all relevant circumstances of the particular employment, including (but not limited to) the nature and status of the position, the degree of responsibility and authority involved, the qualifications and experience necessary, the availability of suitable alternative employment, the amount and form of the remuneration and the basis upon which it is expressed, any relevant trade custom or practice and the length of service of the employee. In the present case, of course, the contract contains express provision for notice of termination and the issue is whether it is fair or unfair in the context of the contract as a whole, the circumstances in which it was made and the circumstances of its application and operation.
33 This passage was endorsed by the Full Bench in Port Macquarie Golf Club v Stead (at 65). With respect, I adopt the summary of the approach to be adopted in Barclay Mowlem Construction for the purposes of considering the fairness of a notice period in this case (see also Pullen v R & C Products Pty Ltd (1994) 60 IR 183 at 210).
34 In this matter, I have formed the view that the provision of one month's pay in lieu of notice plus a payment of an additional month, described as an "ex gratia" payment, was inadequate when tested against the standards of fairness. When assessing the fairness of the notice provided by the applicant a number of features of the case stand out. The applicant was, as mentioned, employed by the Comtext group, of which the respondent formed part, in a variety of positions for a period of almost eight years. Whilst this period does not represent anywhere near the entirety of the applicant's working life, he nonetheless devoted a substantial period of time and effort to the corporate group. This is, in itself, a significant factor calling for the respondent to provide the applicant with a substantial period of notice upon redundancy.
35 In addition to the period of time which he was employed, it is, in my view, relevant to note that the applicant was moved to different positions around the world. Prior to taking up the position in Australia, the applicant was employed in long term appointments in Saudi Arabia and Indonesia. Where employees are compelled or encouraged to relocate to a new country in pursuance of their work, a reasonable employer would extend even greater consideration should it become necessary to make that employee redundant. Certainly, the respondent should have borne in mind this consideration in its treatment of the applicant in the arrangements it made with the applicant for the performance of work in Australia. The evidence also established that upon arriving in Australia the applicant was permitted to form an expectation that his employment would continue for some period. The applicant was sponsored for a working visa which was valid for a period of two years and relied upon an ongoing position in Australia. He had, for instance, leased a rental property shortly before he was informed of his redundancy.
36 The applicant occupied a relatively senior position in the respondent's organisation, although perhaps not in the highest echelon of seniority. The applicant's evidence, which does not appear to have been challenged, was that when he arrived in Australia he occupied the position of Acting Country Manger, before reverting to his appointed position as Business Development Manager. The responsibilities of that position were considerable and the applicant possessed a high level skills and experience. Although the applicant certainly possessed skills which would make him attractive to alternative employers, there is no doubt that his immediate capacity to obtain employment in Australia was restricted by a number of factors. To the knowledge of the respondent, the applicant was required to obtain sponsorship from any future employer until his visa situation was resolved. He had also arrived in a new country only a matter of months before. These are further factors which should have weighed upon the decision of the respondent as to the notice to be given upon his termination.
Severance Pay (Issue 6)
37 The second element which was said to evidence the unfairness of the contract or arrangement concerned the failure to provide for a reasonable severance payment on termination. Mr Gotting submitted that the failure to do so caused the contract to be unfair to the applicant. He indicated that an appropriate basis upon which the Court could determine a fair period of severance payment would be in accordance with the formula set down in Re Redundancy Awards (1994) 53 IR 419. Mr Gotting pointed out that the formula propounded in that case has been applied in proceedings under s106 or its predecessors: see Gala v State Bank of New South Wales (1998) 84 IR 216 at 226. In calculating an appropriate severance payment, Mr Gotting again contended that it was appropriate to have regard to the applicant's entire period of service with the Comtext group.
38 Mr Moses submitted that there was no entitlement to a severance payment of any nature. He once more submitted that because the application was made only against the respondent, not the United Kingdom company, any entitlement to a severance payment could be assessed only in light of the service in Australia. As such, the applicant had been employed for a period of less than six months. Established principles set down in Re Redundancy Awards and Gala v State Bank would not support any payment in addition to the two months' salary which has already been paid to the applicant. Mr Moses also noted that there were no allegations made in this case of bad conduct on the part of the respondent, of any misrepresentation being made or any attack on the bona fides of the redundancy.
39 There have been many cases in which the Court has seen fit to include a payment in the nature of a redundancy within the scope of the payment which is just in the circumstances of a case pursuant to s106(5) of the Act. In Gala v State Bank , for instance, the Full Bench concluded (at 226 - 227) that it was reasonable for the appellant to be awarded an amount referable to the lack of notice in that case, as well as to the failure of the respondent to extend to the appellant benefits which would normally be expected upon a termination on account of redundancy. Other cases in which it has been deemed appropriate to order for a payment in the nature of a redundancy or severance pay include ICI Operations Pty Ltd (T/as Dulux Australia) v Hutton (1993) 47 IR 288 at 309, Baker v National Distribution Services Limited (1993) 50 IR 254 at 278 - 279, Day v Lumley Life Limited (1997) 90 IR 70 at 94 - 95, Starkey v Healthcare Corporation Pty Limited (unreported, Maidment J, IRC 97/6613, 24 August 1999), Caine v LEP International Pty Limited (unreported, Glynn J, IRC 98/2441, 27 October 1999) and Martin v National Textiles Limited (unreported, Schmidt J, IRC 98/5100, 21 February 2000).
40 Although the function of a notice period, or a payment made in lieu of notice, and a severance or redundancy payment overlap to some extent, the purposes of such payments are conceptually distinct. In Fryar v System Services Pty Ltd (1996) 137 ALR 321 at 331, Von Doussa J explained:
There is a distinction between the nature and purpose of a period of notice or payment in lieu, and a severance payment. The distinction is reflected in Arts 11 and 12 of the Termination of Employment Convention. While the two are often treated together to arrive at a global redundancy package, the separate nature and purpose of the two entitlements remains, and assume importance in this case.