Was the contract unfair?
80 As earlier observed, the respondent filed considerable evidence raising a miscellany of complaints, opinions and observations which reflected adversely in one way or another on the manner in which the applicant had performed his duties as General Manager. Not surprisingly, in addresses, counsel for the respondent stated that this material would not feature in the respondent's case - the issue would be the appropriateness of the Council's action in terminating the General Manager following Mr Paparo's defiance of the Council's resolution to stop redundancy payments being made to two employees following a restructure. I propose to deal with the matter on that basis.
81 The respondent pointed out that in the Summons for Relief the applicant had not alleged that he was unaware of the decision of Council that redundancy not be paid to the two employees. The provisions of the Local Government Act 1993 and the provisions of Mr Paparo's contract required him to obey the lawful resolutions of Council - the resolution regarding redundancies was not obeyed but circumvented by the applicant. All that was required of the applicant was to obey this resolution, a resolution which simply sought that the payment of redundancies be delayed pending the Council reviewing the draft report from Ms Carsley, which had been accepted in principle by the General Manager. The resolution did not say that the redundancies be stopped and did not say that the redundancies were not to be paid "full stop". Council was merely trying to look at the situation and examine the facts, as they were entitled to do as the elected representatives. The Court was not asked to deal with the legality or otherwise of the actions of the General Manager on the day the redundancies were paid, or whether there was a breach of fiduciary duty in relation to seeking and obtaining legal advice on the ability to pay the redundancies, because the simple fact was that the resolution of Council was a lawful resolution and one with which the General Manager failed to comply. The General Manager proceeded to do what he wanted to do and did so at a time when he knew he was badly out of favour with the Councillors and that it was likely that his contract would be terminated.
82 The respondent's case therefore centred on the failure of the applicant as General Manager to obey Council's resolution that the two officers not be paid redundancy. The resolution of Council, immediately before it terminated the applicant, sought advice as to the legality of the redundancies, apparently a recognition of the discussion about which Mr Brooks gave evidence wherein he told a number of Councillors that he was unable to stop the redundancy payments because that was a matter under the Local Government Act 1993 that lay within the hands of the General Manager. The respondent insisted that these two resolutions stood separately and were not connected. The Council was entitled to seek advice as to the legality of the redundancies, but it had terminated the General Manager for failing to obey a lawful resolution of Council. The Council had formed the view that the General Manager's conduct on 16 November 2001 resulted in it being able to exercise its right to terminate the contract of employment.
83 It was accepted by the respondent that the resolution terminating the employment of the applicant did not state the reasons for the termination. There was, however, evidence from both the Mayor, Mr Brooks and Cr Dillon which supported the view that the Council had terminated the applicant's employment because of his failure to comply with the resolution withholding payment of redundancies to the two officers. Ultimately, it was accepted that because the Council was a body corporate for the purposes of the Local Government Act 1993, the Court could only look to decisions of Council as a group rather than going through the individual minds of those who made up the body corporate.
84 While the applicant had not, in terms, been given an opportunity to address Council as to why it should not terminate him, Council had asked to be supplied with certain information regarding the redundancies and the General Manager had supplied that information. Having received the General Manager's report and answers to Council's questions, the resolution to dismiss was then passed, but in the absence of the applicant and without the applicant being provided with an opportunity to address Council as to its stated concerns.
85 The contract of employment was not a contract providing for a fixed period of four years but was one which could be terminated on notice at any time during its four year period of operation. The contract had been terminated in accordance with the provisions of Clause 9.1.6 and the Council had paid three months' salary in lieu of notice. It was submitted that there was no unfairness in such a provision. Moreover the applicant was in breach of Clause 4.1 of the contract which went to the heart of the relationship between the applicant and the respondent: that clause, in part, required the applicant to comply with lawful Council resolutions.
86 While the respondent's case focused upon the single issue of Mr Paparo's failure to comply with the Council resolution regarding redundancies, it is appropriate, when assessing the fairness of the contract, to have regard to the entirety of the surrounding circumstances. Mr Paparo was well qualified in policy and administration but the respondent Council appointed him with the knowledge that he had no relevant or specific local government knowledge. The Council appeared to accept that it had obtained a highly qualified person for this important position regardless of the fact that the applicant lacked local government experience. Despite continued opposition from a section of Council, initially Mr Paparo's reforms were endorsed by Council, and he was congratulated and encouraged to continue his efforts to change the culture existing at the Council. The first yearly review, resulting in an increase of over 20 per cent in his salary, reflects his success and the Council's acceptance and encouragement of the reforms he had introduced. The evidence also demonstrates that, when the yearly review required by the contract was under discussion, Mr Paparo did not hesitate to offer the attainment of specific goals or performance levels in order to qualify for an increase in salary - he readily accepted that changes needed to be made and was willing to back his capacity to bring about changes to the way in which Council operated to ensure that it was financially stable and administratively effective. Despite Council's formal support for Mr Paparo's workplace reforms, the evidence suggests that opposition to those changes within the community including union opposition began to drain personal support for Mr Paparo amongst Councillors and, indeed, it was accepted by Mr Brooks in his oral evidence that, after Mr Paparo had been removed from the position of General Manager, the capacity for workplace and other reform had largely evaporated.
87 On the view I have formed of the evidence, it appears that over time the strength of the opposition to Mr Paparo's reforms amongst Councillors drained the political will of Council to continue with the process. I accept the evidence of Mr Brooks, who spoke with candour about the difficulty of maintaining support for Mr Paparo in a highly factionalised Council. Mr Brooks had formed the view well before the termination of Mr Paparo that he had lost the confidence of a majority of Councillors and that he was in danger of being the subject of a no confidence motion and removed from his position. Throughout this period, Mr Brooks had remained a supporter of Mr Paparo while attempting to keep his small majority on Council, requiring him to deal with opponents of Mr Paparo, with an eye to maintaining Mr Paparo's dignity and at the same time his own majority vote on Council. On occasions, this involved Mr Brooks telling opponents of Mr Paparo things they wanted to hear and to give them the impression there could be opportunities provided under the provisions of the contract whereby steps could be taken to ensure that Mr Paparo was not re-appointed for a further term as General Manager, or that a payout of his contract might be negotiated in order to bring about a consensual resolution to the differences between members of the Council and the General Manager.
88 It is no part of this Court's role to comment on the political decisions made by members of the Council. However, if the initial support for Mr Paparo had evaporated, Mr Paparo was entitled to be dealt with fairly in the manner in which the relationship between the General Manager and the Council was to be brought to a conclusion. I am not satisfied that this occurred. It is clear from the evidence that a number of decisions made by Mr Paparo raised opposition amongst particular Councillors, such as the Gosport Street By Pass, an issue which had been unresolved for some considerable time prior to Mr Paparo's appointment. There may well be valid reasons for Councillors to oppose such decisions arising from the constituency they represent, but the existence of those issues makes it impossible to determine on what basis Mr Paparo lost the support of Council and precisely why his employment as General Manager was terminated.
89 The variety of issues raised by Councillors opposed to Mr Paparo is indicated by the extraordinary meeting of Council held on 1 November 2001, in which eight issues were raised concerning his performance. Although those eight matters did not represent the concerns of all Councillors or even a majority of Councillors and only represented issues raised by individuals, nevertheless, Mr Paparo was called upon to respond to those matters in a meeting with the Mayor and Deputy Mayor. Mr Brooks' oral evidence was that the explanations proffered by Mr Paparo at this meeting were accepted and those issues regarded as resolved, so permitting the performance review to be undertaken. There does not appear to be any formal report to Council of these matters or any formal acceptance of explanations given by Mr Paparo in relation to each of the issues. The meeting between Mr Paparo the Mayor and Deputy Mayor occurred on 7 November 2001 and was followed by a letter of complaint from the applicant dated 8 November 2001 as to the unsubstantiated nature of each of the allegations. On 19 November 2001, Mr Paparo was terminated.
90 It is clear that there were numerous constituency issues, personal issues and policy issues which were combining to erode Mr Paparo's support, especially in the period between September 2001 and his dismissal on 19 November 2001. The reasons for stances taken by the Council were clouded by the terms of the language used, especially in resolutions critical to the termination of Mr Paparo. On 15 November 2001, the Council had resolved that no position in the draft Corporate and Executive Review Report, adopted in principle by the General Manager, was to be advertised and no redundancies were to be paid out until all matters dealt with in the draft Review Report had been dealt with by Council. Councillors were to be given a copy of the Human Resources -Coordinator employment contracts, but not the contracts of the other two positions which the Review Report recommended should be made redundant. This resolution was portrayed in the respondent's submissions as representing no more than an interim measure postponing the payment of redundancies until Council had the opportunity to consider the terms of the Report and its implications. That view of the resolution of 15 November 2001 is inconsistent with the resolution passed on the morning of 19 November 2001, requiring the General Manager to provide information as to whether two or more staff members resigned from Council since the 15 November 2001 meeting, what positions they had occupied and whether the staff members concerned, the payroll staff and senior staff had been aware of Council's resolution "not to offer voluntary redundancy". Significantly, the last part of the resolution asked whether, under Chapter 11 Part 1 Section 332 of the Local Government Act, Council had approved the restructure as outlined in the report on Corporate and Executive Services Review or whether the General Manager had proceeded with re-determination of the structure without Council approval. The first thing to notice about this request for information was that it clearly states that it was Council's intention by its resolution of 15 November 2001 to stop the offers of voluntary redundancy which had already been made by Mr Paparo and accepted by two members of Council staff. Secondly, Council was unsure whether Mr Paparo's acceptance in principle of the Report was something within his statutory powers or whether it amounted itself to a re-structure not otherwise approved by Council.
91 Mr Paparo's view was that the re-structure to achieve a 17 per cent saving had already been approved by Council, and that the implementation of that decision was a matter for him in his role as General Manager. Under s 335 of the Local Government Act 1993, the General Manager was generally responsible for the efficient and effective operation of Council's organisation and for ensuring the implementation without undue delay of decisions of the Council. Section 335(2) provided that the General Manager had a number of particular functions, including the day to day management of Council, the appointment of staff in accordance with an organisational structure and the direction and dismissal of staff. The report he had received from Ms Carsley, a report obtained in pursuance of Council's adoption of the plan to reduce corporate overheads by 17.6 per cent, had advised that there were to be redundancies and, in view of the Council's policy against forced redundancies, those staff who were made redundant would have to be advised that they could take voluntary redundancy or be offered a position on the same conditions as they presently enjoyed. Mr Paparo had not made the decision himself to make these positions redundant but had acted in accordance with the recommendations of Ms Carsley's report and accordingly had notified the three staff members concerned that their positions had become redundant and informed them of their options, including voluntary redundancy. Before the end of October 2001, two staff members had accepted voluntary redundancy and had nominated a last day of service. The Council's resolution of 15 November 2001, if it was a resolution, (as it appears ultimately to be) to prohibit the offering of voluntary redundancy was too late to have that effect. Legal advice had been obtained from the Shires Association to the effect that offers of voluntary redundancy already made could not be affected by the Council resolution. It matters not whether Mr Paparo encouraged the obtaining of that advice or directed that that advice be obtained: the important fact is that it was obtained before any payment was made to the redundant staff members. At this point, Mr Paparo had done no more than confirm that his late October 2001 direction to payroll to process the voluntary redundancies of the two staff members was a decision that was binding and not affected by the later Council resolution. It is also to be remembered at this point that the decision about the redundancy of 15 November 2001 was taken in the absence of the General Manager and without informing him of its terms nor involving him in the process: the resolution seeking information made on the morning of 19 November 2001 followed a full explanation given by Mr Paparo to the Mayor as to the circumstances and, importantly, the time frame in which the decision was made to offer voluntary redundancy and when those redundancy offers were accepted. How much of that information was passed on to Council on 19 November 2001 and what was made of it is unknown.
92 There is also significance in the view of these matters formed by the Mayor, Mr Brooks, especially as expressed to Councillors on or about 16 November 2001. Mr Brooks' evidence was that, after the resolution of 15 November 2001, on the following day he had fielded many calls from members of Council concerned that the redundancies would be implemented and severance payments made to the two officers concerned. In his oral evidence, Mr Brooks described how he informed those Councillors and members of staff that he was powerless to intervene because the issue of the offer of voluntary redundancy and the payment out to the officers concerned was an operational matter resting within the jurisdiction of the General Manager. Mr Brooks gave the appearance of being a careful person who had closely studied the provisions of the Local Government Act 1993, especially the financial recording and reporting provisions. He had satisfied himself as to his powers and the extent of his capacity to give directions to the General Manager but, on 16 November 2001, felt unable to interfere with the payment of redundancies which had been arranged in late October 2001 by Mr Paparo. Mr Brooks could only have come to that view on the basis that the requirement to achieve savings in excess of 17 per cent in the Corporate Services area required a restructure, and that Ms Carsley's report and recommendations had in effect been sanctioned by Council in mid 2001 in order for those savings to be achieved. It seems implicit in Mr Brooks' approach that Mr Paparo was not attempting to determine the structure in a section of the Council's operation but was acting in accordance with an authority already given by Council. While he thought that Mr Paparo was acting imprudently he was not prepared to give him a direction to cancel the redundancy payouts or to rescind the offer of voluntary redundancy made to and accepted by the two staff officers. It may well have been this clearly expressed view as to the powers of the General Manager which prompted Council on 19 November 2001 to firstly question whether, under Chapter 11 and s 332 of the Local Government Act 1993 Council had approved the restructure in the Corporate Services area or whether the General Manager had proceeded with a redetermination of the structure without Council approval and, secondly, later on that day, resolving to seek immediate advice as to the "legalities of the redundancies".
93 These resolutions demonstrate that Council was unclear about what it had resolved at its 15 November 2001 meeting and in doubt about the legality of the redundancies and their payout having regard to the Council's resolution on 15 November 2001. In those circumstances, it does not appear to have been open to the Council, as suggested in its submissions, to proceed to terminate the General Manager because he had flouted a resolution of Council - Council were still in an uncertain state even after terminating Mr Paparo as to whether the redundancies were authorised and whether its resolution of 15 November 2001 had any effect on the offers already made and accepted by the redundant staff. Council was not even certain whether it had resolved to implement changes in Corporate Services or to what extent that had occurred. The more likely explanation is that this event triggered another step in the loss of confidence in Mr Paparo and a majority was now available to terminate his services. That opportunity was taken.
94 Some indication of what was in the mind of Council, however, is available from the terms of the resolution to terminate Mr Paparo. Having resolved to seek legal advice as to whether the redundancies were authorised thus accepting that they were in a state of uncertainty about that matter Council then resolved to terminate Mr Paparo's contract "under Clause 9.1.6" of the contract. Under Clause 9 of the contract, the Council could terminate Mr Paparo's employment on one month's notice or the payment of one month's salary where he did not meet performance measures or the terms of a performance agreement. The Council was clearly not operating under this provision. Clause 9 also permitted the Council to dismiss without notice if Mr Paparo committed any act which would entitle the employer to summarily dismiss the employee, in which case the employee would be entitled to the payment of benefits and remuneration up to and including the date of termination or dismissal. Clearly, the Council did not act under this part of Clause 9. The Council specified Clause 9.1.6 as the provision under which it was acting: under that provision it could terminate the contract "for any reason other than those previously specified" and in such a case the Council would give notice calculated at the rate of three months for each year of service remaining under the contract from the date of notice or, in the absence of notice, the payment in lieu thereof of three months remuneration or the balance of the term of the contract remaining, whichever was the lesser. Applying that provision, Mr Paparo was to receive and did receive three months' salary in lieu of notice. In submissions for the respondent, it was argued that Mr Paparo's failure to comply with the resolution of 15 November 2001 concerning the redundancies was a breach of Clause 4.1 of his contract and went to the heart of the relationship between the General Manager and the Council. If the Council had taken that view then it would have proceeded to summarily dismiss him without notice - Council chose not to act under that part of Clause 9, but specified the provisions of Clause 9.1.6 being termination "for any reason other than those previously specified". The resolution in those terms seems to be a recognition that they simply no longer wanted Mr Paparo as the General Manager, that the differences between General Manager and Council were such that it was preferable for Mr Paparo to leave the position and he would therefore be paid out in accordance with his contract as provided in Clause 9.1.6.
95 Having formed those views, I am therefore unable to accept the respondent's submission that Mr Paparo was dismissed because he breached a fundamental duty to Council, namely, to obey a resolution of Council. It also follows that I am unable to accept the respondent's submission that it was justified on that ground to terminate the applicant's employment and no unfairness was involved because of that fact. The applicant's case therefore comes to be considered on the basis of whether or not the termination for "any other reason" was unfair because the contract provided for the payment of a maximum of three months' salary having regard to Mr Paparo's length of service. So stated, the question becomes one of assessing what was reasonable notice in all the circumstances surrounding Mr Paparo's situation.
96 Mr Paparo was 51 years old when he was terminated. He had held policy and administrative positions in the public sector in Western Australia before taking up similar duties in New South Wales. It is an open inference that Mr Paparo came to the eastern states to seek better employment opportunities and his decision to seek and take up the position of General Manager in local government might be seen as a decision to take a different career path in the hope of bettering his position until retirement. Mr Paparo exhibited many of the attributes necessary to manage the difficult finances of a Council which had experienced economic problems. He had moved his family to Moree and, whether or not he had an ambition to improve his financial position by seeking appointment to larger Councils is a matter of speculation, it is clear that his termination effectively deprived him of that opportunity. Mr Paparo may well have been prepared to spend the rest of his working life at Moree Council but it is undoubtedly true that, having been terminated as the Council's General Manager, a future in local government was a bleak prospect. The evidence demonstrates that he had financially committed himself to the Moree area and had purchased a home for his family. It is not contested that after being terminated he made many applications for employment but was unsuccessful in obtaining a position. Those circumstances appeared to have forced Mr Paparo to reconsider his career and led to a decision to take up the study of law. Over a period of two years after his termination he was able to earn a total of approximately $20,000, mainly from part-time work, but the evidence did not specify how much of that was earned in the first year after his termination and how much was earned in the second year. Counsel for the respondent noted the modest earnings and indicated that in the circumstances mitigation of the applicant's loss was not a real or significant issue.
97 I accept the respondent's submission that this was not a fixed term contract but I also accept that it was a contract that was renewable and, subject to satisfactory service, might continue until retirement where the applicant was 51 years old on termination. Having regard to all of these matters, I am of the view that appropriate reasonable notice in Mr Paparo's circumstances would have been 12 months: allowing for the three months' notice already paid by the respondent, there should be an order for the payment of an additional 9 months' salary.
98 The applicant's Summons for Relief, amongst other things, raised as unfairness the respondent's capacity to terminate the employment prior to the expiration of four years' service without paying the applicant the balance of the term of the contract and, generally, raised the lack of reasonable notice, having regard to the applicant's position with the respondent, the term remaining on his contract with the Council, the applicant's remuneration level, his ability to obtain suitable alternative employment in the near future, his family responsibilities and financial commitments and the applicant's substantial achievements during his employment with the respondent.