FEDERAL COURT OF AUSTRALIA

Crozier, in the matter of an application for Writs of Certiorari and Mandamus against the Australian Industrial Relations Commission [2001] FCA 1031

INDUSTRIAL LAW – whether termination of employment harsh, unjust or unreasonable – whether jurisdictional error in first respondents’ decision – factors to be considered under s 170CG(3) – whether valid reason for termination related to the capacity of employee – meaning of “capacity” – whether there can be valid reason related to capacity when employee is performing to his or her best ability but not satisfying job requirements – failure by employer to provide procedural fairness – matters of evidential weight and cogency for Full Bench

WORDS & PHRASES – “capacity”

Workplace Relations Act 1996, s 170CE(1)(a), s 170CG(3)

Craig v State of South Australia (1995) 184 CLR 163 applied

IN THE MATTER of an application for Writs of Certiorari and Mandamus against VICE PRESIDENT ROSS, SENIOR DEPUTY PRESIDENT ACTON and COMMISSIONER CRIBB (Members of a Full Bench of the Australian Industrial Relations Commission) AND PALAZZO CORPORATION PTY LTD trading as NOBLE PARK STORAGE & TRANSPORT (ACN 006 471 834); Ex Parte PETER CROZIER

V 52 of 2001

GRAY, BRANSON & KENNY JJ

1 AUGUST 2001

MELBOURNE

THE COURT ORDERS THAT:

1.                  The application be dismissed.

2.                  The applicant file and serve written submissions on the question of costs within seven days of delivery of these reasons.

3.                  The second respondent file and serve any written submissions in reply within seven days of receipt of the applicant’s submissions on costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

the court:

1                     This proceeding was commenced in the High Court of Australia and has been remitted to this Court. Peter Crozier seeks writs of certiorari and mandamus directed to the first respondents. On 11 May 2000, the first respondents, as members of a Full Bench of the Australian Industrial Relations Commission (“the Commission”), dismissed an appeal brought by Mr Crozier against a decision of the Commission, constituted by Commissioner Simmonds, made on 13 January 2000. In that decision, Commissioner Simmonds dismissed Mr Crozier’s application for relief pursuant to s 170CE(1)(a) of the Workplace Relations Act 1996 (“the Act”). Having heard the application on 22 May 2001, the Court announced that it would dismiss the application and deliver its reasons for so doing at a later date. These are the Court’s reasons.

statutory framework

2                     Subsection 170CE(1)(a) of the Act provides:

(1)               Subject to subsection (5), an employee whose employment has been terminated by the employer may apply to the Commission for relief in respect of the termination of that employment:

(a)          on the ground that the termination was harsh, unjust or unreasonable.

For present purposes, nothing turns on s 170CE(5).

3                     Conciliation under s 170CF having failed, the Commission proceeded to arbitrate the matter brought by Mr Crozier under s 170CG of the Act. Subsection 170CG(3) provides:

In determining, for the purposes of the arbitration, whether a termination was harsh, unjust or unreasonable, the Commission must have regard to:

(a) whether there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer’s undertaking, establishment or service; and

(b) whether the employee was notified of that reason; and

(c) whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee; and

(d) if the termination related to unsatisfactory performance by the employee – whether the employee had been warned about that unsatisfactory performance before the termination; and

(e) any other matters that the Commission considers relevant.

background

4                     In 1998, the second respondent, who operated a commercial storage facility, advertised for a sales representative who “should be able to source and develop new business opportunities via new and existing clients … ”. Mr Crozier successfully applied for the position. The second respondent’s letter of offer advised him “the main focus of this position is to generate new business … ”. He accepted the offer and began work on 17 August 1998. He was paid a salary of $32,500 per annum and received a vehicle allowance of $200 per week. On 1 March 1999, however, the second respondent terminated his employment. This gave rise to Mr Crozier’s application to the Commission. The employer’s case before the Commission was that Mr Crozier had failed to obtain new business, as his position required.

5                     In his reasons for decision, Commissioner Simmonds noted that:

It is common ground that during his employment with the company Mr Crozier was directly responsible for introducing business valued at $1300.00. There is no evidence that his work has led to the introduction of any other business. The employer conceded that Mr Crozier made contact with many potential clients, and there was no criticism of the effort he put into his job.

6                     Nonetheless, he rejected Mr Crozier’s application, saying:

I am of the view that the training, assistance, advice and counselling provided may have been lacking perfection. However, Mr Crozier had considerable previous experience in the area as his application for employment discloses. Thus I consider the shortfall does not affect the validity of the reason for termination, particularly as it relates to the issue of operational requirements. The evidence of Mr Crozier, which was not seriously challenged by the company, is that he was well organised and hard working. He brought a professional approach to his job. Within the constraints imposed by his employer regarding pricing structures and available facilities he did his best, and his best could not be faulted. … .

As noted, there is no dispute that Mr Crozier was responsible for bringing in only $1300.00 (gross) worth of business. Moreover, there can be no dispute that in a little over six months of employment the employer paid to Mr Crozier, directly and indirectly an amount in excess of $22,000.00. To continue that situation, in the absence of any expected return, would be an invitation to economic ruin. There was no evidence of any certainty of future return as a consequence of the work performed by Mr Crozier.

In all of the above circumstances I am satisfied there was a valid reason connected with the operational requirements of the business for the company’s termination of Mr Crozier’s employment.

7                     The Commissioner concluded:

From the above analysis it follows that I consider the company had a valid reason for terminating Mr Crozier and that they informed him of that reason. They did not however, give him any appropriate warning about his performance and there was only a limited opportunity to respond. I am not aware of any other relevant matters for consideration. In ensuring a ‘fair go all round’ as I am required to do it is necessary to weigh up the effect of the failure to warn and to only provide a limited opportunity to respond. The failure to warn Mr Crozier about his performance and the consequent limited opportunities for him to respond, in this case, does not, in my view mean that the termination was harsh, unjust or unreasonable. There was no complaint about his effort, his approach or his demeanour as an employee. The real complaint was that he was not successful as a sales representative. Mr Crozier knew he was unsuccessful and made suggestions for changes to the company’s approach, which the company did not totally accept. He continued to be unsuccessful, and it is not clear what effect a warning would have had. At most, he would have had the opportunity to seek other employment while still employed.

I cannot accept that Mr Crozier believed that he would continue in employment indefinitely despite his lack of success. I am surprised that he did not take the initiative to discuss his future with the company in the circumstances where he made no sales between October 1998 and the date of his termination on 1 March 1999.

On balance I do not consider that Mr Crozier was disadvantaged by the company’s failure to warn him about his performance or to provide him with only limited opportunities to respond to concerns about his conduct or performance.

8                     Mr Crozier sought to appeal to a Full Bench of the Commission. The decision of the Full Bench is reported as Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137. Pursuant to s 45 of the Act, the Full Bench granted leave to appeal upon the basis that (at 144):

[W]e do not think that it was reasonably open to the Commissioner to conclude that there was a valid reason for the termination of Mr Crozier’s employment based on the operational requirements of the [second] respondent’s undertaking. There is no sound evidentiary basis for such a finding.

For this reason, the Full Bench held that there was a reviewable error within the meaning of s 170JF of the Act.

9                     The Full Bench dismissed the appeal, however, holding that there was a valid reason for the termination of Mr Crozier’s employment relating to his capacity as an employee. The Full Bench noted, at 146, that:

In this context [Mr Crozier] submitted that a subjective test should be applied. It was argued that such an approach would allow an employer to lawfully terminate the employment of an employee who was performing below their inherent capacity while simultaneously protecting the position of employees who were performing as well as could be expected.

10                  After rejecting Mr Crozier’s submissions that his failure to obtain sales was “attributable to external factors rather than any lack of endeavour” on his part and that his “limited success in generating new business was caused in part by the failure of the [second] respondent to provide appropriate support or assistance”, the Commission held (at 149-150):

We find that there was a valid reason for the termination of Mr Crozier’s employment related to his capacity. In our view an employee’s performance is an incident of his or her ‘capacity’ within the meaning of that word in s 170CG(3)(a). A consequence of the adoption of the test posited by [Mr Crozier] would be that an employer would never have a valid reason to terminate an employee based on his or her capacity if the employee was doing his or her best. This would be so despite the fact that the employee may be entirely unsuited for their position or they do not fulfil a key requirement of their position which was reasonable in the circumstances, as was the case in the matter before us.

Mr Crozier knew that a substantial part of his job was to acquire new business in a difficult market. He also knew that the main focus of his position was to generate new business and substantially increase occupancy levels. He was an experienced sales person who listed among his attributes a ‘proven ability to find new prospects in difficult market areas’. Despite his best endeavours Mr Crozier failed to meet the key objective for which he was employed. He only achieved one sale – valued at $1300 – during the six and a half months of his employment. Contrary to the submission put on behalf of [Mr Crozier] we find that the weight of the evidence does not support the contention that external factors or the [second] respondent’s failure to provide appropriate support and assistance were significant factors in Mr Crozier’s lack of success in securing sales.

11                  The Full Bench also found that Mr Crozier was not notified of the reason which led to the termination of his employment; that he was not provided with an opportunity to respond to that reason; and that he was not warned about his unsatisfactory performance prior to termination. It nonetheless concluded (at 152-153):

We have had regard to the matters specified in s 170CG(3)(a), (b), (c) and (d). Pursuant to s 170CG(3)(e) we have regard to the fact that Mr Crozier would have been aware that his employer was unhappy with his performance as a consequence of comments made by Mr Palazzo during a meeting some months after he started work. It is also reasonable to assume that Mr Crozier knew that his employment would not continue indefinitely without an improvement in his sales performance. We have also had regard to the fact that the relevant statutory regime is intended to ensure that ‘in the consideration of an application in respect of a termination of employment a ‘fair go all round’ is accorded to both the employer and the employee concerned’: see s 170CA(2). There are no other relevant matters to which we have had regard pursuant to s 170CG(3)(e).

Taking all of these matters into account we have decided that the termination of Mr Crozier’s employment by the [second] respondent was not harsh, unjust or unreasonable. In this regard we have been particularly conscious of the following features of this case:

·        Mr Crozier had considerable experience as a salesperson and his application for the position with Noble Storage and Transport refers to the fact that he has a ‘proven ability to find new prospects and make sales in difficult market areas’;

·        at the time of his appointment Mr Crozier knew that the main focus of his position was to generate new business in a difficult market;

·        in just over six months of employment Mr Crozier only succeeded in securing one order for the storage of 30 pallets. This order was worth $1300;

·        external factors were not a significant factor in Mr Crozier’s lack of success in securing sales; and

·        in light of Mr Crozier’s considerable experience the training and assistance afforded to him by the [second] respondent, while less than perfect, was not so deficient as to significantly contribute to Mr Crozier’s lack of success in securing sales.

Accordingly, the Full Bench dismissed Mr Crozier’s appeal.

grounds of application

12                  In written submissions, Mr Crozier stated that the grounds of his application for prerogative relief were:

·        that the First Respondent[s] acted upon the wrong principle in relation to the meaning of the term ‘capacity or conduct’ as it appears in s 170CG(3)(a) of the Act;

·        that the First Respondent[s] acted upon the wrong principle in relation to the relative importance of a denial of procedural fairness [as they appear in s 170CG(3) of the Act] in assessing whether a dismissal was harsh, [un]just or unreasonable;

·        that the First Respondent[s] allowed extraneous or irrelevant matters to guide it, namely the biased testimony of representatives of the Second Respondent.

Mr Crozier accepted that, in order to succeed in this Court, he needed to show that one or other of these grounds gave rise to jurisdictional error in the sense described in Craig v State of South Australia (1995) 184 CLR 163 at 179.

the first ground

13                  Mr Crozier submitted that the first respondents erred in holding that there was “a valid reason for the termination related to the capacity … of the employee” for the purpose of s 170CG(3)(a). In written submissions filed on his behalf, it was stated:

The meaning of ‘capacity’ is at issue here. The Macquarie Dictionary defines capacity as the ‘power, ability, or possibility of doing something’. Thus capacity must mean the maximum level of performance achievable by an individual employee.

Mr Crozier’s case was that if an employee worked to his or her full capacity and was “the best worker that he or she can be”, then an employer could have no valid reason “related to the capacity … of the employee” to terminate the employee’s employment. Since the second respondent accepted that Mr Crozier had put all the effort he could into his job, then, so this argument ran, the second respondent could have no valid reason related to Mr Crozier’s capacity to dismiss him.

14                  As already noted, Mr Crozier had pressed, unsuccessfully, much the same argument on the Full Bench. The word “capacity”, as used in s 170CG(3)(a), means the employee’s ability to do the work he or she is employed to do. A reason will be “related to the capacity” of the employee where the reason is associated or connected with the ability of the employee to do his or her job. The terms of s 170CG(3)(a) provide no support for Mr Crozier’s contention that there can be no “valid reason … related to the capacity … of the employee” where an employee is working to his or her personal best, even though this personal best is less than what is required to do the job for which he or she is employed. Plainly, there can be a valid reason for the termination of an employee’s employment where he or she simply does not have the capacity (or ability) to do the job. In this case, the Full Bench found that Mr Crozier knew that “the main focus of his position was to generate new business”; that he failed to meet this objective; and that his failure was not due to external factors but to a lack of capacity (or ability) as a sales representative (at 150 & 152-153). In making these findings it acted within jurisdiction, and we detect no jurisdictional error in its approach.

the second ground

15                  In written submissions, it was said on Mr Crozier’s behalf that:

[T]he First Respondent[s] erred in failing to give sufficient weight to the lack of procedural fairness afforded to the Applicant. It is submitted that in contemporary Australia the concept of procedural fairness (a ‘fair go’) is so highly valued that it constitutes a right (or at least a legitimate and reasonable expectation) such that its denial in the context of the termination of an employee’s employment represents a gross affront to our shared moral sensibilities … . It is submitted that the First Respondents failed to give sufficient weight to the denial of procedural fairness in this case.

By virtue of pars 170CG(3)(b), (c) and (d), the Full Bench was required to have regard to aspects of procedural fairness accompanying the termination. This it did, as its reasons for decision record. The Act does not, in subs 170CG(3) or elsewhere, require the Commission to give any want of procedural fairness conclusive weight. It is for the Commission to determine what weight it will give to such a matter, bearing in mind all the circumstances of the case. In this case, the Full Bench not only took into account the matters referred to in pars 170CG(3)(b), (c) and (d), but also, under par 170CG(3)(e), the further fact that, notwithstanding the procedural deficiencies, “Mr Crozier would have been aware that his employer was unhappy with his performance” and that it might be assumed that he “knew that his employment would not continue indefinitely without an improvement in his sales performance” (at 152). The Full Bench acted within its jurisdiction in adopting this approach, and we detect no jurisdictional error.

the third ground

16                  It was submitted, on Mr Crozier’s behalf, that the first respondents:

failed to properly consider the issue of external factors because of their reliance on the biased evidence of the representatives of the Second Respondent.

It was submitted that the Full Bench erred in accepting the evidence of the second respondent’s witnesses as to the competitiveness of the second respondent’s business. It was said that “they had a motive to exaggerate the management and performance achievements of the company … and to downplay the role of ‘external factors’ in their decision to dismiss the Applicant”. It was further submitted that the Full Bench ought to have preferred the evidence of the applicant as to why potential customers had declined to give their business to the second respondent.

17                  This ground cannot succeed. It was for the Full Bench to determine the facts on the evidence before it. In so doing, it was for the Full Bench to determine whether it preferred some evidence over other evidence, and other matters of cogency and weight. The ground relied upon discloses no jurisdictional error.

summary

18                  For the reasons given, the Court dismissed the application for prerogative relief. When the decision of the Court was announced on 22 May 2001, counsel for the second respondent applied for costs. The Court indicated that, before it determined that question, it would allow the applicant to make written submissions on the question of costs within seven days of delivery of these reasons, and would accord the second respondent a further seven days within which to make any reply.

Associate:

Dated: 1 August 2001