"Operational requirements"
23 Mr Martin relied on evidence as to what he had been told by the Human Resources Manager of TDR, in answer to his enquiry as to what the term "operational requirements" meant. This occurred prior to the parties' execution of the contract. The Manager replied that it meant major structural change, involving the abolition of the whole department or its activities. The submissions for Mr Martin were not based upon Mr Martin's reliance on this explanation, but upon the statement as reflecting what each of the parties had in mind when they entered the contract.
24 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 350-351, upon which reliance was placed, is not authority for the proposition that a meaning attributed to a term pre-contract will be taken to govern its meaning in the written contract. It recognises an exception to the parol evidence rule, concerning the meaning the parties would attribute to a contractual term, as arising where the term is capable of more than one meaning. In the present case, whilst there is a real question concerning the evidence that there were "operational requirements" which provided the basis for the need to terminate Mr Martin's employment, it could not be said that the term is ambiguous. The general meaning of the term can be readily discerned. The fact that it does not accord with the much wider definition given by the Manager does not establish two acceptable, but different, meanings. Further, the extrinsic evidence which is then allowed to be admitted is not of the meaning itself, but such as would show the facts which the parties would have had in their mind and from which it may be concluded that one meaning is pointed to. It is necessary then to consider what the term can generally be taken to comprehend.
25 The term "operational requirements" is not defined in the relevant legislation or Convention. The requirements are expressed to be those of the employer and in that sense the term is taken broadly to refer to the employer's enterprise and undertaking and how it is to function, for reasons which are thought desirable. In Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370, Lee J referred to the term (at 373):
"The Act does not define the term "operational requirements". Obviously it is a broad term that permits consideration of many matters including past and present performance of the undertaking, the state of the market in which it operates, steps that may be taken to improve the efficiency of the undertaking by installing new processes, equipment or skills, or by arranging for labour to be used more productively, and the application of good management to the undertaking. In general terms it may be said that a termination of employment will be shown to be based on the operational requirements of an undertaking if the action of the employer is necessary to advance the undertaking and is consistent with management of the undertaking that meets the employer's obligations to employees."
26 It may be accepted, that an employer is entitled to considerable latitude in determining the needs of its undertaking and how it should perform. There is nothing in cl 12.3 which restricts the nature of the strategy or change that is said to amount to operational requirements of TDR. What is, however, required by the provision is that there be a factual basis for a conclusion that there were requirements arising from the way in which the undertaking operated which, in turn, necessitated the termination of the employment the subject of the contract. It is difficult then to consider that it would ever be sufficient for an employer merely to rely upon the abolition of the position or cessation of the employment as the operational undertaking itself, since it should be able to say what requirements of finance or efficiency dictated the need for the termination. To say that the position of employment the subject of the contract is no longer required, is simply to state the conclusion.
27 TDR had the right to end the contract of employment, to deny the employee his rights under it and excuse itself from further performance, in only limited circumstances. Clause 12.3 operates to an extent like the doctrine of frustration, except that the events are foreseeable and provided for, and the employer is entitled to create the situation. It is, however, under an obligation to act in good faith both in determining its operational requirements and in terminating the employment on that ground. Articles 4 and 9 of Schedule 10, which were incorporated into the contract, require there to be a valid reason in fact for the operational requirements and envisage that the true reason for the termination may be the subject of determination between the parties. The schedule does not provide expressly that the employer in each case justify its claim, and the advantage taken of cl 12.3 (see eg Tradax Export S.A. v Andre & Cie S.A. [1976] 1 Lloyd's L Rep 416), though its provisions may be thought to go some way towards it.
28 In any event, even if one were to speak of the legal burden of proof as initially being cast upon the employee, a consideration of the shift of evidentiary onus shows that TDR came under an obligation to prove the factual basis for the reason of operational requirements. Mr Martin said that nothing had been said of any changes; there was no plan or strategy in existence; and no particulars were furnished to him when he was told of the termination. From that point it was encumbant on TDR to show that there were nevertheless, in fact, such requirements having regard to whatever plans, aims or objectives it had in mind and that the termination of his employment was thereby necessitated. The defence pleaded recognised this in its assertions, although the particulars provided, of some organisational change which seemed to refer only to Mr Martin's position, was not taken up by TDR's witnesses.
29 Mr Kelly, in his statement of evidence, said that he formed the view that the positions of Mr Martin and another employee were redundant. As stated and with no further explanation, it stands as little more than indicative of an intention to act; what it does not show is any connexion between such a view and the needs he saw on the part of TDR, with respect to its functioning. After having invited comment on this proposed course of action from the managers involved, about which nothing is reported, Mr Kelly went on:
"I made the decision that the positions I have mentioned should be abolished. I took steps to that end …".
He then went on to explain that the decision was taken by him "after due consideration of the organisational structure and the resources of TDR". It was in this connexion that he then identified the two bases for his decision to which his Honour referred as: "flattening" the management structure and a change of focus to inward trade missions.
30 With respect to the second basis, at no point did Mr Kelly identify how the difference in the type of trade missions, which may be taken to reflect a matter of policy, would affect how TDR would operate in the future and, in particular, how the position of Mr Martin then came to be unnecessary. Given the finding by his Honour, that Mr Martin was already the officer responsible for such positions under the Corporate Plan and was well qualified to manage them, this may have been somewhat difficult. It elsewhere appeared that Mr Kelly had not made reference to the Corporate Plan. If, as he suggested, it was not applicable to a new administration, he did not explain what replacement organisational structure was relevant to the new requirements of TDR.
31 It does not seem possible to me to conclude that Mr Kelly was speaking of the functioning of TDR and its "operational requirements" when he spoke of its organisational structure and the change he made to it by the act of termination of employment. The need for any change and the basis for it was not gone into at all in evidence. Mr Kelly's reference to his consideration of the organisational structure was that "the new structure has one less level," which states the obvious effect of his decision but not the rationale for it. That the "re-organisation" of the Department "did away with a function" takes the matter no further towards the conclusion TDR contended for.
32 In my respectful view, the evidence did not disclose a basis in fact for the termination being part of the operational requirements of TDR. Mr Kelly's evidence was that he had an intention, unexplained and not apparently related to some changes to the functioning or structure generally of TDR, to remove Mr Martin's position. Put at its highest it was equivocal, and called for further explanation. The policy shift to inward trade missions might have had some result in structure, but he did not descend to discuss this nor to connect it to Mr Martin's contract of employment. It was capable of being viewed as something of an afterthought. There was no other evidence capable of shedding light on any changes. An understanding of them, and the need to terminate Mr Martin's employment, apparently lay solely with Mr Kelly.
33 His Honour was obliged, in light of the issues raised, to make findings as to whether Mr Kelly had acted with malice in effecting the termination of Mr Martin's employment. He found that he did not and there was no challenge on the appeal to that finding. His Honour went on to accept the two bases given by Mr Kelly as reasons genuinely held by him. The evidence would not in my view have supported an inference that Mr Kelly was to be taken thereby to show that the reasons were in fact referrable to, or arose out of, operational requirements. I do not, however, think his Honour was intending to convey this. Rather, his Honour equated the purpose or the policy stated by Mr Kelly with operational requirements. For the reasons earlier given, in my respectful view, this was not sufficient for TDR to satisfy the obligation that the factual basis for the requirement and the causal connexion with the termination be shown.
34 His Honour had earlier indicated the need for there to be some difference of approach to the meaning to be given to the term in the context of an individual contract such as that in question; one which would give greater latitude to the employer in determining what the organisation required. That would not however, in my view, overcome the need for it to establish the matters referred to above. To hold otherwise would be to permit the employer to assert without challenge or further consideration, the conclusion to be reached. Insofar as his Honour's approach was affected by a difference of meaning, and not just of proof, in my respectful view there was no warrant for concluding that the parties intended a narrower meaning to be given to a term known to industrial law and which had a discernible meaning.