Sterling Commerce (Australia) Pty Ltd v Iliff

Federal Court of Australia|2008-05-21|Before: Gordon J

INTRODUCTION 1 Belinda Iliff was the marketing manager for Sterling Commerce (Australia) Pty Ltd (Sterling Commerce), a software and solutions company and a member of the global Sterling Group of companies. She holds a Bachelor of Arts from the University of Melbourne and a Bachelor of Business (Marketing) from the Royal Melbourne Institute of Technology. 2 On 10 December 2004, Ms Iliff went on maternity leave. While on leave, Sterling Commerce engaged Paula Matthews as a contractor to do Ms Iliff's job. Ms Iliff's intention initially was to return to work in April 2005 for one to two days per week and increasing to full time work by the end of December 2005. 3 When Ms Iliff returned from maternity leave, Sterling Commerce was required to appoint Ms Iliff either to the position she held immediately before commencing maternity leave or, if that position no longer existed and there were other positions available for which Ms Iliff was qualified and capable of performing, then appoint her to that position: Sch 1A of the Workplace Relations Act 1996 (Cth) (the WR Act). Breach of Sch 1A is a penalty provision. The maximum penalty is $33,000. 4 Ms Iliff never returned to work. When she tried to return in March or April 2005, Sterling Commerce said her job no longer existed and she was to be made redundant. That statement was wrong. Her job did exist and she should have been reinstated to it. Instead of complying with the provisions of the WR Act, senior management of Sterling Commerce took a deliberate course of conduct to justify their decision to continue to employ Ms Matthews, her replacement, rather than Ms Iliff. Unsurprisingly, Sterling Commerce was found, in proceedings brought by Ms Iliff in the Federal Magistrates Court, to have breached the WR Act. The maximum penalty of $33,000 was imposed. Other consequential orders for interest and costs were also made. 5 Sterling Commerce appeals against the orders made in the Federal Magistrates Court. Sterling Commerce does not challenge the finding by Burchardt FM that it breached Sch 1A of the WR Act and does not challenge any findings of fact. Sterling Commerce submits, however, that the imposition of the maximum penalty for that breach was "manifestly excessive" (Issue 1). 6 In addition to the breach of the WR Act, Burchardt FM concluded that: 1. Sterling Commerce had contravened the Sex Discrimination Act 1984 (Cth) (the SDA). The basis of the contravention was limited to Sterling Commerce's refusal to pay Ms Iliff her payments in lieu of notice and any redundancy payment unless Ms Iliff signed a release (Issue 2); and 2. Ms Iliff was entitled to a severance payment (Issue 3). Sterling Commerce challenges these findings. 7 In the Federal Magistrates Court, Ms Iliff was not wholly successful. Burchardt FM rejected Ms Iliff's contention that: 1. Sterling Commerce had breached the SDA because it had discriminated against her on the grounds of sex, maternity leave or parenthood in failing to reinstate her to her former position (Issue 4); and 2. Ms Iliff was entitled to reinstatement to her former position and full backpay as a result of the contravention by Sterling Commerce of the SDA (Issue 5). Ms Iliff cross-appeals on each of these issues.

FACTS 8 Before turning to consider the issues on appeal and cross-appeal, it is necessary to say something about the facts of this case and, in particular, the conduct of Sterling Commerce. As I have noted, Sterling Commerce did not challenge any finding of fact of Burchardt FM. 9 Without in any way diminishing from the extensive findings of fact of Burchardt FM and recognising that any summary is in danger of inaccurately reflecting what was found, the key findings of Burchardt FM may be summarised as follows: 1. Ms Iliff commenced working part time for Sterling Commerce in March 2002. Her salary was about $50,000 per annum. In April 2003, Ms Iliff was promoted to Marketing Manager. Her job description described the role as "Marketing Specialist-Australia". Her salary was $80,000 per annum. On 1 April 2004, Sterling Commerce increased Ms Iliff's package to $86,400 comprised of a base salary of $82,000 and a target incentive of $4,400. Ms Iliff was also entitled to superannuation at a rate of 9% of her base salary. 2. In mid April 2004, Ms Iliff told Mr Vulcan, her superior, that she was pregnant. Arrangements for her maternity leave were discussed by Mr Vulcan and Ms Iliff on 15 September 2004. An email from Ms Iliff to Mr Vulcan on the same day recorded that: a) a Marketing Coordinator would be employed to work 4 days per week on a 6 month contract from January to June 2005 to replace Ms Iliff; and b) Ms Iliff proposed to return to work for 1 to 2 days per week in April to June 2005 increasing to full time by the end of December 2005. 3. After obtaining legal advice, Mr Vulcan replied on 19 October 2004 approving Ms Iliff's proposal saying he would be happy to accommodate Ms Iliff's requests wherever he reasonably could. The approval was, however, qualified. It went on to say that he would need to continue to evaluate the arrangement against the ongoing and changing needs of the business. In particular, Mr Vulcan could not at that time anticipate what, if any, changes would occur to the structure of the marketing operations. Mr Vulcan asked Ms Iliff to contact him at least four weeks before she intended to return to work so that Sterling Commerce could "re-evaluate the situation and discuss a suitable structure for [Ms Iliff's] return to work at that time". On 26 October 2004, Ms Iliff replied stating that if agreement could not be reached, she proposed to return to work in exactly the same position and for the same hours. Mr Vulcan did not respond. 4. Towards the end of 2004 and the beginning of 2005, Sterling Commerce decided to branch out into the financial services industry in the Asia-Pacific region (APO). Ms Iliff was involved in the early stage of the expansion before she went on maternity leave and, in fact, met Mr Simon Lacey who had been employed by Sterling Commerce as an expert in the financial services industry. The expansion took place in the ordinary course of business and would have occurred regardless of whether Ms Iliff went on maternity leave. 5. In early December 2005, Ms Iliff and Mr Vulcan interviewed Ms Paula Matthews. It was agreed that Ms Matthews would commence as a contractor. Ms Matthews commenced work in early December 2004 pursuant to a contract that was due to be reviewed in April 2005. Ms Iliff went on maternity leave on 10 December 2004 and her first child was born on 10 January 2005. 6. Ms Matthews was perceived by the senior management of Sterling Commerce to be a superior employee. In terms of formal qualifications there was no disparity between them. Ms Iliff did have less experience than Ms Matthews. However, if Ms Iliff had not gone on maternity leave, there is no reason her employment would not have continued. 7. By early February 2005, Mr Visscher (a marketing manager based in Singapore and at that time employed by a Singaporean subsidiary of the global Sterling Group) wanted to employ Ms Matthews and Mr Vulcan agreed. From March 2005, Mr Visscher was formally appointed to be the marketing head of APO. Both Mr Vulcan and Mr Visscher wanted to provide support to Mr Lacey. The need to provide support was both "pressing and present". In late January / early February 2005, Mr Vulcan and Mr Visscher discussed using Ms Matthews in that capacity. 8. By 7 February 2005, Mr Vulcan sought to extend Ms Matthews' hours of work. It was agreed that she would work an extra one to two days per week for about three months. On 25 February 2005, Mr Visscher emailed Mr Vulcan about Ms Matthews' rates and went on to ask "When is [Ms Iliff] coming back?" No response to that email was in evidence. 9. On 15 March 2005, Ms Iliff met Mr Vulcan at his office. She wanted to return to work 4 days per week. Mr Vulcan told her there had been a restructure and the reporting arrangements had altered. Mr Vulcan said Mr Visscher would contact her about her return to work arrangements. 10. On 16 March 2005, Mr Vulcan sent Mr Visscher and the in house legal adviser (Mr Soughan) an email recording his discussion with Ms Iliff. The email records that it was Mr Visscher who was to discuss Ms Iliff's future with her. Nothing further occurred until 30 March 2005 when Mr Vulcan sent another email to Mr Visscher stating he needed to talk to him about Ms Iliff and Ms Matthews. The issues were clearly interrelated in Mr Vulcan's mind. 11. Mr Vulcan was restricted in the number of people he could employ at any one time. The head count was strictly controlled from the United States. He could not employ two people to do one person's work. Some time in early April 2005, Mr Vulcan and Mr Visscher agreed that Ms Matthews would be the person they retained. It was a foregone conclusion that the job would be offered by Sterling Commerce to Ms Mathews and they wanted her to take it. 12. However, as late as 1 April 2005, an organisation chart issued by Sterling Commerce after the restructuring showed Ms Iliff as the marketing specialist for Australia reporting directly to Mr Visscher. The restructuring per se was therefore not the reason her position was made redundant. 13. On 20 April 2005, Ms Iliff sent an email to Mr Vulcan indicating she intended to return to work one day per week in May or June 2005. The email was forwarded to Mr Visscher and Mr Soughan and from the terms of that email it is clear that the further employment of Ms Matthews was seen by Mr Vulcan as directly interrelated with Ms Iliff's return. 14. Sterling Commerce did not contact Ms Iliff until 26 April 2005. On 26 April 2005, Ms Iliff met Mr Vulcan again in his office. Mr Vulcan told Ms Iliff her position was to be made redundant under the proposed restructure. After the meeting, Mr Vulcan sent an email to Mr Soughan, Mr Visscher and others stating that Ms Iliff wanted a copy of the new position description along with information about how she could apply for that position and information about the redundancy of her current position. 15. Mr Vulcan was too busy to deal with Ms Iliff and did not get back to her. 16. By that date, Mr Vulcan had clearly formed the view that he did not want Ms Iliff to return to work but wanted to keep Ms Matthews instead. The reason was that he felt Ms Matthews was better qualified. 17. On 4 May 2005, Mr Vulcan did send an email to Mr Visscher asking him to let Ms Matthews know of Mr Visscher's intentions about further work for Ms Matthews because she was likely to accept a different role. 18. At the same time, Sterling Commerce was preparing a new job description for what was felt to be the new job. The new job description was created first by Mr Visscher. He sent a proposed job description for the position of Marketing Manager-Australia to Mr Vulcan which contained a number of differences to Ms Iliff's previous position description. The minimum qualifications were a degree in marketing or 7 to 10 years of related experience. Ms Iliff possessed both. It also contained requirements relevant to the evolving duties relating to the APO finance sector. 19. Mr Vulcan replied stating "Looks good … to make this more of a change to the existing do we need to make more of an emphasis including the title around this being a regional role and not just an Australian role … I know you mention both." (emphasis added). Burchardt FM found, and I agree, that Mr Vulcan consciously sought to distinguish the new description from Ms Iliff's former position at a time when it was clear to Sterling Commerce that Ms Iliff was likely to take issue with what was happening to her, with a desire to produce a document that would sustain Sterling Commerce against legal challenge and when there was no need for the job description to be different. However, Burchardt FM did not find that the change in job duties was fabricated after the event. 20. On 17 May 2005, Ms Iliff sent Mr Vulcan a further email about her return to work. Ms Iliff complained she had heard nothing for 3 weeks about the proposed restructure. She asserted she wanted to return to work under the original arrangement - 1 day per week followed by 4 days per week from late July. She asked Mr Vulcan and / or Mr Visscher to contact her. 21. Later that day (17 May 2005), Mr Vulcan wrote to Ms Iliff telling her she was redundant with effect from 3 June 2005. The letter said there were no other suitable roles for her. The letter invited her to apply for the new position of "Marketing Manager, Financial Services Solutions APO". However, the letter went on to state that "I [Mr Vulcan] do not consider the role of Marketing Manager, Financial Services Solutions APO to be a suitable alternative position for your current role". Finally, the letter stated Ms Iliff would be paid a redundancy payment of $22,211.54 gross less tax. However, the letter stated that "[t]his offer is conditional upon you signing a release in terms suitable to Sterling Commerce which confirms that you have no further claims against Sterling Commerce and that you have returned all company property". 22. On 18 May 2005, Ms Iliff wrote to Mr Vulcan seeking clarification. She asked whether the position or any other position in the new marketing structure was part time / job share eligible and asked for a break down of the proposed termination payment. The answer to the first question was "no". The proposed termination payment was broken down. It comprised Ms Iliff's statutory entitlement to 4 weeks pay in lieu of notice and a further redundancy payment. 23. On 1 June 2005, Mr Vulcan wrote again to Ms Iliff. He repeated that her position "is to be made redundant". The letter recorded that Ms Iliff had not responded to requests for a meeting and provided a final opportunity for Ms Iliff to meet Mr Vulcan. The letter concluded by stating that "if you [Ms Iliff] elect not to take advantage of this opportunity, I [Mr Vulcan] will have no option but to formally advise you of the fact that your position has been made redundant and effect a termination. Obviously, if this decision is made, you will be paid appropriate termination payments and any statutory entitlements". 24. Ms Iliff was never formally notified that her employment with Sterling Commerce had ceased. Ms Iliff never went back to do any further work for Sterling Commerce. Ms Iliff never executed the release and was never paid any termination payments or statutory entitlements. Ms Iliff did not apply for the new position. 25. Ms Matthews was a contractor. Sterling Commerce was under no obligation to renew her employment contract. In late August 2005, Ms Matthews entered into a formal contract of employment with Sterling Commerce. 26. Sterling Commerce knew of Ms Iliff's maternity leave entitlements. It had sought and obtained legal advice from as early as October 2004. Mr Vulcan and Mr Visscher, senior employees of Sterling Commerce, did not honour Ms Iliff's entitlements for reasons wholly unrelated to any misconduct or inadequacy on the part of Ms Iliff. They made a commercial decision in order to increase profit and to improve their own career prospects. 27. Sterling Commerce did what it did to Ms Iliff deliberately. Ms Iliff's position still existed and she should have been reinstated to it. It was no oversight. Sterling Commerce sought to hide its tracks by the manipulation of the new job description. It showed no contrition and did not submit otherwise. Although this was Sterling Commerce's first contravention of the WR Act, the course of conduct was unattractive and in part dishonest. 28. The effect upon Ms Iliff was dramatic. She has not progressed in her career. 10 It is now necessary to consider each issue.

Issue 1: Imposition of the maximum penalty 11 The applicable principles were not in dispute. First, the imposition of a penalty for a breach of the WR Act involves the exercise of a discretion: Commonwealth Bank of Australia v Finance Sector Union of Australia (2007) 157 FCR 329 at [181]-[182]; Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [127]. 12 Secondly, an appeal court can only interfere if Sterling Commerce can identify that the exercise of that discretion by Burchardt FM miscarried as a result of a specific error or, in the absence of a specific error, the penalty was so excessive as to manifest an error: House v The King (1936) 55 CLR 499 at 505 and Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [10]. A specific error need not be identified in the reasoning of the primary judge to find that a penalty is either manifestly excessive or inadequate: Australian Opthalmic Supplies at [105] - [107]. 13 Thirdly, the factors usually relevant to the amount of a penalty were usefully summarised by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14 at [14] as: • The nature and extent of the conduct which led to the breaches. • The circumstances in which that conduct took place. • The nature and extent of any loss or damage sustained as a result of the breaches. • Whether there had been similar previous conduct by the respondent. • Whether the breaches were properly distinct or arose out of the one course of conduct. • The size of the business enterprise involved. • Whether or not the breaches were deliberate. • Whether senior management was involved in the breaches. • Whether the party committing the breach had exhibited contrition. • Whether the party committing the breach had taken corrective action. • Whether the party committing the breach had cooperated with the enforcement authorities. • The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and • The need for specific and general deterrence 14 Fourthly, in relation to the imposition of the maximum penalty, the principles were enunciated by French J in Fox v St Barbara Mines Ltd [1998] FCA 621 in the following terms: There is ample authority in the area of criminal law for the proposition that the maximum penalty is reserved for the worst type of cases. But, as was pointed out in Veen v R [No 2] (1988) 164 CLR 465, this does not mean that a lesser penalty must be imposed if it be possible to envisage a worse case. Ingenuity can always imagine a case of greater heinousness. A sentence which imposes a maximum penalty offends the principle only if the case is recognisably outside the worst category. Broadly speaking the same approach can be applied to the imposition of penalties under the Workplace Relations Act. Whether paid to the Consolidated Revenue or to the employee, they are punitive in character and must be assessed having regard, inter alia, to the gravity of the conduct complained of, the existence of mitigating circumstances and the need to deter repetition of the conduct whether by the employer in question or generally. See also Dinsdale v R (2000) 202 CLR 321 at [6] per Gleeson CJ and Hayne J; Markarian v R (2005) 228 CLR 357 at [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ and R v Tait and Bartley (1979) 24 ALR 473 at 484. 15 Sterling Commerce has not shown and cannot show that Burchardt FM: 1. acted upon a wrong principle; 2. allowed extraneous or irrelevant matters to guide or affect him; 3. mistook the facts; and / or 4. failed to take into account some material consideration. 16 How Burchardt FM reached the result embodied in his order is apparent and having regard to the facts upon which the order is based, it cannot be said that the result is so unreasonable or plainly unjust as to indicate that there was some error made in fixing the penalty. Sterling Commerce submitted that "having regard to all the relevant circumstances, a meaningful penalty of some significance should be imposed". In my view, that is precisely what Burchardt FM did do. This ground of appeal fails.

Issue 2 - Contravention of Sex Discrimination Act (Grounds 3 to 5) 17 Burchardt FM concluded that Sterling Commerce contravened the SDA. The basis of the contravention was limited to Sterling Commerce's refusal to pay Ms Iliff her payments in lieu of notice and any redundancy payment unless Ms Iliff signed a release. 18 Two issues were raised on appeal: first, it was argued that the contention that Sterling Commerce's refusal to pay Ms Iliff her payments in lieu of notice and any redundancy payment unless Ms Iliff signed a release was a contravention of the SDA was not an issue raised on the pleadings, in evidence or in submissions before Burchardt FM; and secondly, it was submitted that, as a result, Sterling Commerce had no opportunity to respond to such an allegation and was therefore denied procedural fairness. 19 In support of these contentions, Sterling Commerce contended that if the issue had been a live issue at trial, it would have led evidence before Burchardt FM to show that Ms Iliff's sex was not the reason, or a reason, that Sterling Commerce required Ms Iliff to sign a deed of release. 20 This ground of appeal also fails. 21 In considering this ground of appeal, "the philosophy of the Federal Magistrates Act and the intention of the Attorney-General at the time of the introduction of the Federal Magistrates Bill" in establishing the Federal Magistrates Court cannot be ignored (per Lander J in Rana v University of South Australia (2004) 136 FCR 344 at [34]): see also Granada Tavern v Smith [2008] FCA 646 at [106]. As Lander J stated in Rana at [37]: The Federal Magistrates Court has abandoned pleadings in favour of affidavits. In doing so, it has recognised that the Court has been created to offer relatively inexpensive and expeditious justice. It is a court which should proceed without undue formality and should ensure that the proceedings are not protracted: s 42. It has abandoned the formal procedures of superior courts. That course is consistent with the Act and the FMC Rules. See also O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 where the Full Court of the Federal Court (Carr, Moore and Marshall JJ) said at [16]: We are prepared to accept that in a case such as the present MBF was entitled to know, as a matter of procedural fairness, that s 51A was relied on either expressly or by clear implication. It is unnecessary to address the question of whether it needed to be pleaded in this case particularly having regard to the comparative informality created by the legislative scheme governing the Federal Magistrates Court including its Rules. 22 What then did the Federal Magistrate do? His Honour made the following finding at [147]: On one view [Sterling Commerce] might be thought to have been likely to have sought a release from any employee with an enforceable entitlement to return to work who had ended up in dispute about that return. Nonetheless, it seems to me that the return to work provisions in the WR Act, involving civil penalties as they clearly do, is more probably than not the reason why the Respondent required a release from Ms Iliff. Even if it was not the only reason, it was clearly part of the reason, and this is enough (s. 8 - SDA) 23 Sterling Commerce submitted that the finding of Burchardt FM that Sterling Commerce contravened the SDA in the manner outlined above (see [17]) involved a breach of procedural fairness. It relied on what was said in Kioa v West (1985) 159 CLR 550 (at 588 per Mason J, 628 per Brennan J and 634 per Deane J). It may be doubted that the analogy with an administrative decision maker is wholly apt. It is true that a party to proceedings in the Federal Magistrates Court must be put on notice of the case against it and have an opportunity to respond. That obligation is not of the same kind as the obligation of an administrative decision maker to accord procedural fairness. It is a fundamental principle of justice that a Court must not determine an issue that is not raised by the pleadings, or in the evidence or submissions before it. 24 In the end, however, whether one approaches the obligation as one of procedural fairness or as one that turns upon the character of judicial proceedings is immaterial in this case because the issue now in question was a live issue before Burchardt FM about which Sterling Commerce had an opportunity to lead evidence at the trial. 25 It is true that the conditional redundancy payment which his Honour found to be discriminatory conduct in breach of the SDA was not enunciated as a separate ground of discriminatory conduct. It was, however, raised by Ms Iliff's counsel in both written and oral submissions as an act or element of the wider alleged discriminatory conduct of Sterling Commerce. For example, in Ms Iliff's written submissions before the Federal Magistrate, under the heading 'Sex Discrimination Claim', the broad allegation was made that Sterling Commerce discriminated against Ms Iliff in not returning her to her previous position or the asserted new position. Sterling Commerce is correct in its contention that the conditional redundancy payment was not specifically detailed at this point in the submissions. Nonetheless, Sterling Commerce's "failure to pay termination entitlements" was not only referred to but expressly relied upon in Ms Iliff's written submissions when her actual treatment is compared to the treatment that an imagined comparator would have experienced. Further, in the oral submissions, Ms Iliff's counsel submitted that Ms Iliff had been treated less favourably by reason of the failure of Sterling Commerce to pay her termination entitlements. In those circumstances, it was open to the Federal Magistrate to find that only one act or element of the conduct that constituted the general course of the conduct alleged to be discriminatory was in fact discriminatory. 26 Sterling Commerce submitted that if the issue had been raised before the Federal Magistrate, it would have led evidence contrary to his Honour's finding that Sterling Commerce would not have sought a release from any employee with an enforceable entitlement to return to work who had ended up in dispute with the company about that return. As a result, when the Federal Magistrate came to apply the proper comparator test in accordance with the approaches set out in Purvis v State of New South Wales (Department of Education and Training) (2003) 217 CLR 92 (Purvis) and Thomson v Orica Australia Pty Ltd (2002) 116 IR 186 (Thomson), the inevitable conclusion would have been that Sterling Commerce would have sought a release from any employee whose right to return to work had been breached by Sterling Commerce. 27 Burchardt FM's finding that Sterling Commerce's conduct in refusing to pay Ms Iliff any redundancy payment unless she signed a deed of release had contravened the SDA was made on the basis of evidence of the general course of conduct taken by Sterling Commerce in relation to Ms Iliff's dismissal. Sterling Commerce led evidence generally to refute the allegation that it had breached the SDA in dismissing Ms Iliff. Sterling Commerce was well aware that Ms Iliff alleged that a general course of conduct, including the refusal to pay termination payments, was discriminatory. Evidence of Sterling Commerce's practices and policies in relation to redundancy payments was before the Federal Magistrate as was evidence relating to the conditional redundancy payment. Sterling Commerce had an opportunity to lead evidence in relation to any of the points specified in Ms Iliff's Outline of Submissions and his Honour was satisfied on the evidence before him that Sterling Commerce had discriminated against Ms Iliff.

Issue 3 - Implied right to redundancy payment 28 The Federal Magistrate found that Sterling Commerce had a policy to pay redundancy payments to their employees as a matter of course and that this policy was sufficiently widely adhered to and disseminated throughout the company as to make it an enforceable implied term in Ms Iliff's employment contract. Sterling Commerce has appealed against this finding. It claims this was an erroneous finding of law and fact and that the evidence at trial did not support the finding. 29 Having regard to my dismissal of Issue 2, it is unnecessary for me to decide this ground of appeal. I will however make some brief observations. In my view, his Honour erred in finding that Sterling Commerce had a contractual obligation to pay Ms Iliff a redundancy payment, such obligation implied by law into Ms Iliff's employment contract. 30 I do not consider that the requirements for a term to be implied in a contract as laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3 were satisfied. In particular, I do not consider that it was necessary to imply the term to give business efficacy to the employment contract. 31 His Honour referred to the comments of Allsop J in Thomson at [146]. However Allsop J does not explicitly state whether he is discussing incorporation by reference of the Family Leave Policy in question into the employment contract or the implication by law of the policy. His comments, being both brief and obiter, relied on the majority judgments in Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193 (Riverwood), both of which deal primarily with incorporation by reference, not implication by law. I do not consider that either case is of great assistance in the resolution of the issues in the present case. 32 In Riverwood, the majority judgments of North and Mansfield JJ explicitly stated that they would not deal with the principles relating to the implication of a term into a contract because they both upheld the decision of the trial judge that the relevant company policy manual was incorporated by reference into the contract at issue. The judge at first instance had found that the policy manual was both incorporated by reference and implied, however, having first decided that incorporation by reference applied, neither North nor Mansfield JJ addressed the question of whether the policy manual was implied by law. Lindgren J dissented in Riverwood. Lindgren J stated the questions to be asked when seeking to imply a term into a contract in the following terms at [67]: The grounds on which a term is to be implied in a contract have been variously stated and, with respect, I do not think that any of them support the implication of such a term. I do not think, for example, that if asked in October 1993 whether the term in question formed part of their contract, both parties would unhesitatingly have said "Of course" or "It goes without saying" or "Obviously": cf Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 per Mackinnon LJ; Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 121; 55 ALR 417; Byrne v Australian Airlines Ltd at CLR 442. Nor do I think it was necessary to give business efficacy to the contract to imply the term in question; the contract operates reasonably and effectively without it: cf BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3; 16 ALR 363 (PC); Hawkins v Clayton (1988) 164 CLR 539 at 573; 78 ALR 69. A court must not find a term to be implied merely in order to make the contract "reasonable or fair or prudent" and it is important to recall that "[t]he necessary foundation for the creation of contractual rights and obligations is the agreement of the parties": Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 401; 41 ALR 367 per Brennan J. Asking the same questions in the present case can only lead to the same conclusion. At the time the parties entered into Ms Iliff's contract of employment, it is unlikely that the parties would unhesitatingly have assumed that Ms Iliff was entitled to a redundancy payment, over and above her statutory entitlements. Nor do I think that the implication of the term is necessary to give business efficacy to the contract. Whilst it may well be reasonable, fair and prudent to imply such a term, that is not the question before the court. 33 Finally, the evidence of Sterling Commerce's senior management that generally employees of the company being made redundant are paid severance pay is inconclusive. There was no written policy and management sought legal advice in relation to each employee on a case by case basis. At the highest, employees may have had an expectation, based on the custom of the company to pay redundant employees a severance payment, but that does not and cannot give rise to a legal entitlement to receive such a payment should the company make them redundant. 34 I would uphold this ground of appeal. However, as I noted earlier (see [29]), the result does not affect the outcome because Ms Iliff is entitled, in any event, to a redundancy payment.

Ground 7 - Interest 35 Having failed in relation to Issue 2 (grounds 3 to 5), this ground of appeal also fails.

Ground 8 - Costs 36 This ground of appeal also fails. Sterling Commerce relied upon two grounds. First, success in relation to grounds 3 to 5 of the Amended Notice of Appeal (Issue 2). Sterling Commerce's appeal in relation to that issue was dismissed. 37 Secondly, even if grounds 3 to 5 fail (as they have), Sterling Commerce contended that his Honour's order was fundamentally inconsistent with the failure of Ms Iliff's primary claim - that the failure of Sterling Commerce to re-employ Ms Iliff breached the SDA. Sterling Commerce submitted that costs should have followed the event and that the matters relied upon by his Honour to justify an order that Sterling Commerce pay 80% of Ms Iliff's costs of the proceeding did not constitute special circumstances. 38 This alternative argument also fails. An award of costs involves the exercise of a discretion. Consistent with the authorities listed in [12] above, an appeal court can only interfere if Sterling Commerce can identify that the exercise of that discretion by Burchardt FM miscarried as a result of a specific error or, in the absence of a specific error, the order made was of such a kind as to show that there was some error of principle. Neither species of error is made out.

CROSS APPEAL 39 As noted earlier, Ms Iliff cross appeals and seeks findings that: (1) Sterling Commerce breached the SDA because it had discriminated against her on the grounds of maternity leave or parenthood (Issue 4); and (2) Ms Iliff was entitled to reinstatement to her former position and full backpay as a result of the contravention by Sterling Commerce of the SDA (Issue 5).

Issue 4 - Discrimination claim made out (Grounds 1 and 2) 40 Burchardt FM found that Sterling Commerce had not discriminated against Ms Iliff on the grounds of maternity leave or parenthood. In assessing Sterling Commerce's failure to reinstate Ms Iliff to her former position on her return from maternity leave, Ms Iliff contends that his Honour applied the wrong comparator to the question of whether that conduct was discriminatory and in breach of the SDA. 41 Ms Iliff urged the Court to apply the test adopted by Allsop J in Thomson. Allsop J adopted a 2 stage or 2 prong test. First, his Honour chose an appropriate comparator. The basis upon which Allsop J arrived at the relevant comparator was explained in the following extract: 121 As I said above, the relevant person the treatment of whom is to be compared with the treatment of Ms Thomson is someone who is not pregnant, `in circumstances that are the same or are not materially different'. The effect of that phrase, requiring equivalence, throws up the following possibilities here: (a) a similarly graded account manager with Ms Thomson's experience at Orica who did not take any leave (in this case the equivalence being limited to the relevant status of account manager); (b) a similarly graded account manager with Ms Thomson's experience who, with Orica's consent, took twelve months leave and wanted to return (in this case equivalence being the status of the account manager and taking twelve months leave and returning); and (c) such a person as in (b) but who had a right to return on the same basis as Ms Thomson. His Honour goes on to identify the appropriate comparator as person (c). 42 Adopting this approach, the appropriate comparator to Ms Iliff is a similarly graded Marketing Manager with Ms Iliff's experience at Sterling Commerce who, with Sterling Commerce's consent, took twelve months leave, wanted to return to work and who had a right to return on the same basis as Ms Iliff, that being a right under statute. 43 Next, Ms Iliff submitted I should adopt Allsop J's approach of applying the comparator to the treatment as his Honour did at [138]. Adopting his Honour's approach in [138], the application of that reasoning to Ms Iliff would read as follows: I assume that [Sterling Commerce] would not treat the posited [comparator] contrary to any [statutory obligation]. There was no evidence that it would do so. Thus the comparison called for does, in point of practical application, reduce to the question of whether [Ms Iliff] was treated unfavourably, but only because of the identification of the person whose treatment is compared to [Ms Iliff's]. She was thus treated less favourably than someone who was not pregnant and who was returning after twelve months leave and with rights of the kind reflected in the [statutory WR Act Return to Work provisions]. 44 It is apparent on the basis of this analysis that Ms Iliff was treated less favourably than the comparator would have been treated. However, the analysis does not stop there. There is a further issue to resolve. The issue is whether Allsop J's finding that the employer would not have treated the comparator contrary to any other company policy was premised on the factual finding in that case that the Orica supervisor was prejudiced against women taking maternity leave. In my view, that factual finding did inform Allsop J's assessment that Orica treated the employee in question contrary to its own company policy (which was the relevant issue in that case) because of the maternity leave. 45 In the present case, there was nothing to suggest that the management at Sterling Commerce had a negative attitude towards maternity leave. On the contrary. His Honour found that Mr Vulcan had been supportive of Ms Iliff taking leave. In that context, I am less likely to find that a reason Sterling Commerce failed to reinstate Ms Iliff was that she took maternity leave. Moreover, the evidence did not suggest that Sterling Commerce would have treated the comparator with an equivalent right to return to work any differently than it did Ms Iliff. This ground of the cross-appeal fails. 46 This finding is by no means an endorsement of Sterling Commerce's conduct. The fact that it submitted in this Court that it would follow the same course of action, to deny an employee his or her statutory right to return to work after a period of legitimate leave, is a remarkable admission of bad corporate responsibility. Nonetheless, in the application of the comparator, it is clear that none of Ms Iliff's sex, maternity leave or family commitments was a reason underlying the company's poor conduct towards her. The reason for the company's poor conduct was driven by (and continues to be driven by) its own commercial interests.

Ground 3 - comparator misapplied 47 Ms Iliff contended that the Federal Magistrate misapplied the comparator test by focussing on "the real reason" the company failed to reinstate Ms Iliff. 48 The test of discrimination is not whether the discriminatory characteristic is the "real reason" or the "only reason" for the conduct, but whether it is "a reason" for the conduct. The Federal Magistrate found that the "real reason why Ms Iliff was not permitted to return to work was because [Sterling Commerce] wanted Ms Matthews to do the work instead". This may well be the case but that was not the correct question. The correct question was whether Ms Iliff's sex, pregnancy or family responsibilities were a reason that Ms Iliff was not permitted to return to work. 49 Whilst the Federal Magistrate's application of the comparator test impermissibly emphasised the motive or driving reason behind Sterling Commerce's conduct, instead of focussing on whether the conduct occurred because of Ms Iliff's sex, pregnancy or family responsibilities, I do not consider that the outcome his Honour arrived at is affected by the change in emphasis. As I have already said, Sterling Commerce would have treated the comparator similarly because the comparator was on leave at a time when the company's needs were changing and the company was impressed by the temporary replacement leading to a decision to employ the replacement. It was not appropriate conduct but it was not a breach of the SDA. 50 This ground of the cross-appeal also fails.

Grounds 4, 5 and 6 - remedy wrongly restricted 51 Ms Iliff contended that the finding by Burchardt FM that Sterling Commerce had discriminated against her entitled her to not only the sum of $22,212.54 (the redundancy payment) but what she described as "the full remedies sought" including reinstatement and back pay. 52 Having dismissed Ms Iliff's wider claim for discrimination under the SDA, I consider that there was no basis for her to be reinstated. The next issue - full back pay - is more complex. 53 Her principal contention was that Sterling Commerce did not actually terminate her employment but treated her employment as ongoing and wrongfully failed to pay her salary. Burchardt FM held that although there was no unequivocal act by Sterling Commerce to terminate Ms Iliff's employment until it filed its defence in the proceeding, the employment had in substance come to an end. As a result, his Honour found that Ms Iliff was not entitled to claim unpaid salary from June 2005 onwards. I agree. 54 Ms Iliff's contract provided that she was not entitled to be paid without doing any work: cll 3(a) and 4 of her last employment contract. On 17 May 2005, Sterling Commerce told Ms Iliff that as of 1 June 2005 her position was abolished. From that point in time, Ms Iliff never did any work for Sterling Commerce. The solicitors for both parties became involved and in September 2005, Ms Iliff lodged her claim with the Human Rights and Equal Opportunity Commission. Subsequently, Ms Iliff had a second child. On any view, during the relevant period Ms Iliff did not do any work and was not, at all times, ready, willing and able to work. 55 Moreover, Ms Iliff's submission is contrary to authority. First, it ignores the distinction between the employment relationship and the contract of employment: Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410 at 427. Sterling Commerce repudiated Ms Iliff's contract of employment by refusing to employ her and refusing to provide her work. The contract of employment was at an end. She was not entitled to payment for work she did not do: Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 451-452 and 465; (cf APESMA v Skilled Engineering Pty Ltd (1994) 122 ALR 471). 56 Secondly, none of the other authorities referred to by Ms Iliff supported her contention. Each was concerned with a peculiar or particular factual situation. Australian Workers' Union v Bluescope Steel Ltd [2007] NSWIRComm 1002 and Csomore v Public Service Board of New South Wales (1986) 10 NSWLR 587 involved the application of the "no work, no pay" principle in the context of a stop work meeting and the suspension of an employee. FJ Walker Ltd v Thomas Francis Casey [1989] FCA 409 and Australian Bank Employees Union v National Australia Bank Ltd (1989) 31 IR 436 turned on the construction of particular Industrial Awards. Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 involved an industrial award where remuneration was payable in return for employees being ready and willing to work. Finally, Clark v Chief of Defence Force (1999) 59 ALD 506, concerned a statutory right to remuneration without the need for actual work. This ground of the cross-appeal also fails.

COSTS 57 There is no basis for awarding costs in respect of those grounds of appeal concerned with the WR Act: s 347 of the WR Act. 58 That leaves the question of costs in relation to the balance of issues raised on appeal and by way of cross-appeal. Given the outcome of those appeals, the manner in which the appeals were conducted and the extent to which the issues raised overlapped, I consider that the appropriate order is that Sterling Commerce should pay 80% of Ms Iliff's costs of the appeal and that each party should bear their own costs of the cross - appeal.

ORDERS 59 It has not been shown that the orders made below should be varied in any respect. In the circumstances, the appropriate orders are that: 1. The appeal be dismissed. 2. The cross appeal be dismissed. 3. The Appellant is to pay 80% of the Respondent's costs of the appeal. 4. There be no order as to costs on the cross-appeal. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

Associate: Dated: 21 May 2008 Counsel for the Appellant: Mr T. Jacobs

Workplace Relations Act 1996(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (14 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (29)

Cited By (5)