C A T C H W O R D S
INDUSTRIAL LAW - termination of employment - legal corporation under administration - three positions made redundant - operational requirements - selection of redundant position not based on performance - no consultation prior to decision to terminate - consultation after decision to terminate - consultation prior to decision to terminate employment not a rigid requirement - requirement for consultation (if any) depends on the circumstances
Workplace Relations Act 1996 ss 170DC, DE, EA
Aboriginal Councils and Associations Act 1976 s 76 and s 77A
CASES:
Byrne v Australian Airlines (1995) 131 ALR 422
Victoria v The Commonwealth (1996) 138 ALR 422
Puccio v The Catholic Education Office (1996) 68 IR 407
Nettlefold v Kym Smoker Proprietary Limited, (1996), 69 IR 370
Kerr v Jaroma Pty Limited, (unreported, IRCA, Marshall J, 7 October 1996)
Thomas v Lynch, (unreported, IRCA , Wilcox CJ, 20 December 1996)
Westen v Union Des Assurances De Paris, (unreported, IRCA, Madgwick J, 17 December 1996
Morison v Honda Australia, (unreported, IRCA, Millane JR, 21 February 1997,
Selvachandran v Peteron Plastics (1995) 62 IR 371
Carydias v The Greek Orthodox Community (unreported, IRCA, North J, 20 February 1997).
HULTHEN -v- TOWNSVILLE & DISTRICT ABORIGINAL AND TORRES STRAIT ISLANDERS CORPORATION FOR LEGAL SERVICES
No. QI-1146 of 1996
REUBEN -v- TOWNSVILLE & DISTRICT ABORIGINAL AND TORRES STRAIT ISLANDERS CORPORATION FOR LEGAL SERVICES
No. QI-1148 of 1996
Before: Ryan JR
Place: Townsville
Date: 16 May 1997
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QI-1146 of 1996
B E T W E E N :
HARRIET HULTHEN
Applicant
AND
TOWNSVILLE & DISTRICT ABORIGINAL AND TORRES STRAIT ISLANDERS CORPORATIONFOR LEGAL SERVICES
Respondent
QI-1148 of 1996
B E T W E E N :
JOYCE REUBEN
Applicant
AND
TOWNSVILLE & DISTRICT ABORIGINAL AND TORRES STRAIT ISLANDERS CORPORATIONFOR LEGAL SERVICES
Respondent
MINUTES OF ORDERS
Judicial Registrar Ryan 16 May 1997
THE COURT ORDERS:
1. That both applications be dismissed.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QI-1146 of 1996
B E T W E E N :
HARRIET HULTHEN
Applicant
AND
TOWNSVILLE & DISTRICT ATSIC FOR LEGAL SERVICES
Respondent
QI-1148 of 1996
B E T W E E N :
JOYCE REUBEN
Applicant
AND
TOWNSVILLE & DISTRICT ATSIC FOR LEGAL SERVICES
Respondent
Before: Ryan JR
Place: Townsville
Date: 16 May 1997
REASONS FOR JUDGMENT
(Delivered ex tempore)
(Revised from transcript)
This judgment is ex tempore in the sense that it has not yet been reduced to writing but the judgment will be settled from the transcript of proceedings today and copies of the written judgment will be provided to the legal representatives of the parties.
On 10 September 1996, Gary John Hamilton, Administrator, Townsville and District Aboriginal and Torres Strait Islanders Corporation for Legal Services, (the Corporation), terminated the employment of Harriet Hulthen, Joyce Reuben and Cathy McClennan. These three Corporation employees were respectively a Senior Field Officer, a Legal Secretary and a Solicitor.
Mrs Hulthen and Ms Reuben have applied for remedy alleging unlawful termination of employment. Both sought reinstatement but during the hearing the Court was advised that neither now seeks reinstatement.
Mr Hamilton was appointed as administrator of the Corporation pursuant to section 71 of the Aboriginal Councils and Associations Act 1976. The instrument of appointment is dated 27 August 1996 and is stated to be effective from 30 August. The Corporation is the respondent in both these proceedings and the parties agreed that the matters be heard together.
Mr Daniel Williams appeared as counsel for the respondent. Mr Patrick Meikle, North Queensland Organiser, PSU Group, Queensland Branch, Community and Public Sector Union appeared for both applicants.
The respondent called two witnesses, Mr Hamilton and the Corporation's financial officer, Maria Torrisi.
Both applicants gave evidence and evidence was also given on their behalf by two Corporation employees, Selena Bennetts and Phillip Charles Alley.
Witness statements were tendered and reduced the time spent on evidence in chief.
Mr Hamilton is a solicitor of the Supreme Court of Queensland and the High Court of Australia, a certified practicing accountant, a chartered accountant and a registered liquidator. Within the last three years he has been administrator of two other Aboriginal and Torres Strait Islander Corporations for Legal Services; one in Cairns and the other at Dalipi, outside Brisbane. Mr Hamilton was and is responsible for the conduct and the affairs of the Corporation while remaining administrator and public officer.
The positions of management traditionally occupied by the members of the Corporation's governing committee are vacant during a period of administration. (See section 73 of the Aboriginal Councils and Associations Act 1976).
Mr Hamilton secured the assets of the Corporation, changed signatures on the bank accounts, effected adequate insurance cover, changed locks on Corporation premises and assessed the financial position. He quickly formed the view that the financial officer, Maria Torrisi, was extremely competent in matters of financial accounting and control. He stated:
“She was, in effect, doing the work of Chief Executive Officer as well as her own job. She had detailed and precise knowledge of the respondent's affairs and I have found her forecasting, budgeting and accounting work to be accurate at all times.”
Mr Hamilton placed considerable reliance on a report of 6 September 1996 in which Miss Torrisi recorded predicted recurrent expenditure on salaries for financial year ending 30 June 1997 at $561,759, other non-salary recurrent expenditure at $227,500, a list of creditors with accounts outstanding in the sum of $18,133.20 and an annual notional allocation for financial year ending '96/97 of $736,008. Miss Torrisi advised that it was her understanding that the ATSIC Regional Council intended to reduce this allocation because of federal budget cuts. (See paragraph 4 of the finance report which is annexure E to Exhibit R1).
Mr Hamilton concluded that the Corporation was in serious financial difficulty with 80 per cent of expenditure on wages. His experience as an accountant, a solicitor, a liquidator and an administrator of other Aboriginal and Torres Strait Islander Corporations for Legal Service, suggested that an appropriate expenditure on wages in such a legal service should be in the range of 30 to 35 per cent. Mr Hamilton was also informed by Miss Torrisi of debts to barristers of approximately $30,000. These debts did not appear in the consolidated reports.
Mr Hamilton formed the view the Corporation would need a minimum of $975,000 with existing staff levels and no expectation of receiving more than the predicted recurrent expenditure of $789,259 (i.e. wages of $561,759 and other recurrent expenditure, $227,500). It was quite obvious at that stage that the Corporation might, in fact, receive considerably less than the 789,000 against a minimum expenditure 975,000. Mr Hamilton was also faced with outstanding liabilities and an urgent need for capital upgrading and maintenance for library, computers, vehicles and furniture.
The assessment of minimum operational budget of 975,000 took account of allocating, at least notionally, $25,000 to library and CD ROM facilities, 66,000 to replace and maintain vehicles; 60 to $70,000 to replace computers and $15,000 to obtain basic furniture.
In his statement of evidence at paragraphs 13 and 14, Mr Hamilton states:
”In my capacity as administrator, after investigating the financial situation of the respondent and finding a deficiency in funds against budget in the vicinity of approximately 200 to $300,000, I came to the conclusion that unless there was a reduction in staff, I would have no alternative but to recommend the Corporation be placed in liquidation, otherwise the Corporation would be trading whilst it was insolvent.
On the morning of 10 September 1996, I addressed the Board of Directors of the ATSIC Regional Council on the issue of funding. I had with me a copy of annexure E1 and I spoke to those projections of recurrent expenditure and required capital. I advised that the recurrent expenditure for each year, excluding capital expenditure, was $789,259 in addition to $30,000 fees to barristers that had remained unpaid for several years. Of this expenditure $561,759 was for salaries.”
Mr Hamilton advised the Regional Council of the urgent capital expenditure outlined above and has stated in paragraph 15 in his statement of evidence:
“I advised the ATSIC Regional Council of the following capital expenditure required urgently; library and CD ROM facilities $25,000, upgrade and maintenance vehicles, $66,000, replacing computers 60 to $70,000, basic furniture $15,000.”
The steps taken by the administrator on the afternoon of 10 September 1996, after the Regional Council indicated that it was unable to immediately provide funds to counter a deficit estimated at between 200 and $300,000, are the substance of the claims by both applicants that the termination of their employment on that afternoon was unlawful.
The general nature of the action taken by the administrator is not in contest. However, the two applicants and their witnesses, Ms Bennetts and Mr Alley, disagree with certain evidence given by Mr Hamilton and Miss Torrisi and there are inconsistencies in certain of the evidence given by and for the applicants and some inconsistencies between the evidence of those four witnesses.
Prior to trial the representatives of the applicants and the respondent agreed to exchange witness statements and confirmed that agreement at a telephone directions hearing conducted at my initiative on 8 May 1997. The statements are dated as follows: Hamilton and Bennetts, 9 May; Alley, 10 May; Torrisi, 11 May and the applicants Hulthen and Reuben, 12 May. The trial began on 12 May and presumably the statements of the applicants could have only been provided to the respondent on the morning of the trial. It seems that the parties and their representatives could not have had much, if any, time prior to the trial to consider, compare and contrast the respective statements.
That is of no moment but the Court observes some remarkable points of similarity in the statements of the two applicants and in some areas in the statements of all four applicant witnesses. The areas of similarity can be, in part, explained by the fact that four witnesses are giving evidence of certain events on 30 August and 10 September and, in some cases, events on 2 September.
The degree of similarity would also be less remarkable if the four witnesses had given general instructions and the statements had been drafted on their behalf and perhaps by the one person. However, Mr Meikle specifically asked each of the four witnesses whether they had individually prepared their statements and in each case the witnesses responded that they had made and/or prepared their individual statements. If this is what occurred the points of similarity are so great as to suggest the possibility of rehearsal or even collusion. The Court has not reached such a conclusion.
Firstly, it is possible that the witnesses misunderstood the purport of Mr Meikle's questions on statement preparation and that the statements, or some of them, were prepared on their behalf on their instructions.
Secondly, the remarkable similarity in certain aspects of the four statements is not of great moment in assessing on the balance of probabilities whether the version of events given by Mr Hamilton and Miss Torrisi is to be referred or rejected when compared with the version of events given by Mrs Hulthen, Miss Reuben, Miss Bennetts and Mr Alley.
Of course, what I have described as “remarkable similarity” is of some moment, but the inconsistencies in the evidence of the last four mentioned witnesses is of more significance. Where the evidence of the latter conflicts with that of Mr Hamilton and Miss Torrisi, I am inclined to prefer the evidence of Mr Hamilton and Miss Torrisi.
I note that the applicants could have called but did not call as witnesses any of the members of the governing committee of the Corporation or members of the community present at the meeting on 30 August with the Registrar and the administrator. I also note that all four of the applicant witnesses refer to such persons being present at the meeting on 30 August.
Having said that, and accepting that the version of events on 30 August and 10 September given by Mr Hamilton and Miss Torrisi is more likely than that given by the applicant witnesses, I doubt that the different versions, whichever be accepted, makes much difference in determining whether the terminations were lawful and for valid reasons.
Mr Hamilton's account of the afternoon of 10 September is generally covered in paragraphs 16 to 25 of his statement of evidence and paragraphs 16 to 21 and 23 to 25 and extracts from paragraph 22 are as follows:
“I therefore decided that for the Corporation to survive, I would have to reduce staff. In fact I regarded that as inevitable. I also regarded it as critically urgent. I was concerned that the Corporation was trading while insolvent.
At that stage I had no knowledge of the Corporation's employees relative skills or abilities. I also did not think I had any reliable way of assessing those skills and abilities in a short space of time, and I did not believe I had time to carry out a proper or fair process in that regard.
Therefore I did not take any performance criteria into account when making my selection.
So that the structure of the Corporation, and the relativities as between professional staff, field staff and administration staff was kept intact, I decided to make one administrative position redundant, one field officer position redundant and one solicitor position redundant.
Maria Torrisi provided me with a schedule of staff wages, a copy of that is in fact contained in the report which is annexure E.
I decided that I would make redundant the position of the most junior administrative staff, Joyce Reuben, and the field officer on the highest salary, Harriet Hulthen.
On 10 September 1996, I informed the staff that I had just been that morning to address the ATSIC Regional Council and a rough estimate of a required budget, prepared conservatively, disclosed that the Corporation would be between two hundred and three hundred thousand dollars short at the end of the year. This would mean that the respondent would be insolvent. I informed staff there were really only three solutions: try to get more funding, struggle on and eventually let one of the creditors wind up the respondent, rationalise the staff which required putting off several persons. I informed staff that I had decided to put off one administration person, one field officer and one solicitor to ensure that the structure of the respondent would remain intact.
I said that to make things certain and to make the decision as quickly and painlessly as possible, I would interview relevant staff in those positions during the course of the afternoon. Marked F and annexed to this statement is a file note of that staff meeting.”
(The Court notes that the file note was prepared that day, 10 September, and is dated 10 September.)
“I spoke to Joyce Reuben on 10 September 1996. I advised her that I had selected her position for redundancy and that my selection was based on the fact that she was the most junior administrative person. Miss Reuben agreed that she was the most junior and told me that she completely understands it referring to her redundancy. Miss Reuben said very little to me. I recommended that she take a cash cheque and she said she would remove her personal items that day. The duration of the meeting was approximately ten minutes. A copy of notes I made at that meeting and the breakdown of Miss Reuben's termination pay is marked G and annexed to this statement.”
(The Court notes that Miss Reuben started on 30 May 1994, worked two years, fourteen weeks and three days and was paid $2169.45 net, representing annual leave entitlements and four weeks notice.)
“When I interviewed Mrs Hulthen on 10 September 1996, I advised that I had selected her position for redundancy and that my selection was based on the fact that she was the most highly paid field officer, a fact which was confirmed during the meeting. Mrs Hulthen brought to my attention the possibility of a part time position on Palm Island. I then invited Miss Torrisi to a meeting to discuss this possibility and she confirmed the position was available. I offered Mrs Hulthen the new part time position which involved 20 hours per week working on Palm Island with a car. Mrs Hulthen lived in Townsville at the time and it was agreed that the Corporation would pay the cost of her flights to and from Palm Island each week. She would be required to live on Palm Island during the week as the respondent could not afford to fly her back daily at a cost of $80 return trip.
After initially querying the amount of holiday leave due to her, Mrs Hulthen accepted that she had accrued five weeks and after Miss Torrisi's explanation, she accepted a cheque for $2086.05. (It is probablya mistake in Mr Hamilton's statement, that she accepted a cheque of $2086.05, because that represented annual leave entitlements and did not include notice.) The duration of the meeting was approximately 25 minutes. A copy of notes I made of that meeting and the breakdown of Mrs Hulthen's termination pay is marked G1 and annexed to this statement.”
(The Court notes that Mrs Hulthen started on 23 October 1991, worked four years and forty-six weeks and one day, and was paid $3763.65 net, representing annual leave entitlements and four weeks notice.)
There is a dispute as to what Mr Hamilton said at the staff meeting at 1.30 pm on Tuesday 10 September. Miss Torrisi generally supports Mr Hamilton and states in paragraph 30 to 32 of her statement of evidence:
“About 1.30 pm Gary Hamilton addressed the staff at the Legal Services Office in relation to the meeting that had occurred at the ATSIC Regional Office that morning. He discussed the options that were open to him as administrator, namely the following:
· involve the administration which with so many creditors was not viable
· more funding with budget cuts also was not viable
· retrenchment of three staff members.
Gary Hamilton made it clear that unless staff members were made redundant, every employee of the legal service would be without a job, and the legal service would face liquidation.
Gary Hamilton proposed to make three positions redundant, one legal, one field officer and one administrative position. He proposed to interview persons falling into those categories.”
Mrs Hulthen, in her statement of evidence, paragraph 12, Exhibit A1, and in her oral evidence, is adamant that Mr Hamilton said that he would speak to the section heads. Paragraph 12 of her statement reads as follows:
“Mr Hamilton stated that he would have to let some staff go. I asked how many staff would be put off and he replied three. One from each section, and that he will speak with the section heads from each section.”
Neither Miss Reuben or Mr Alley support this allegation in relation to section heads in their statements of evidence. Paragraph 10 of Miss Reuben's statement, Exhibit A2, reads as follows:
“Gary Hamilton then went on saying that there will have to be cut-backs in staff members. He then said that he will be speaking to those people straight after the meeting.”
Paragraph 9 of Mr Alley's statement, is Exhibit A4, reads as follows:
“Gary Hamilton stated that he had three options for dealing with the deficit, but that only one would allow the legal service to continue operating. He stated that he had decided that the only option that would address the financial situation was to let some staff go. He further stated that he proposed to terminate one staff member from each section immediately after this meeting.”
In oral evidence, Miss Reuben departed from the evidence in paragraph 10 of her statement, and asserted (in evidence in chief) that Mr Hamilton had said that he would speak to the section heads. In cross-examination, Mr Williams, for the respondent, pointed out that this assertion was inconsistent with her written statement in that Mr Hamilton was there stated to have said:
“There will be cut-backs in staff members and he will be speaking to those people straight after the meeting.”
Miss Reuben's reply was not convincing. She said:
“Okay. He was going to section heads to see what staff were to go. What I meant was - section heads.”
Mr Alley too was unconvincing on this aspect, at least in the sense that he admitted that he had no accurate recall of what Mr Hamilton said. He did not support Mrs Hulthen's claim that Mr Hamilton had referred to discussions with section heads. In fact, in oral evidence Mr Alley said:
“I can't recall exactly what he said. I think he said that one in each section would lose their position.”
Mr Alley also said in oral evidence:
“He said he wanted to have a meeting with staff members individually.”
The Court also notes that Mrs Hulthen and Miss Reuben gave evidence which conflicts with Mr Alley in respect of the order in which Miss Reuben, Mrs Hulthen and Miss McClennan were individually interviewed by Mr Hamilton, and that the evidence of Mrs Hulthen and Miss Reuben generally accords with that of Mr Hamilton in terms of the order of interview.
Mr Hamilton himself is uncertain as to exactly what he said about the interviewing, of what he describes in paragraph 22 of his statement as "relevant staff in those positions". He is certain that he said he would put off one person in each of the three sections, and Torrisi, Hulthen, Reuben and Alley support him in this.
It seems clear, and I have concluded, that he stated that he would put off one person in administration, one field officer and one solicitor. I have also concluded that, in administration, he intended to put off a legal secretary and that he had decided before the 1.30 pm meeting that it would be the most junior legal secretary as legal secretary, namely Miss Reuben, and that he had also decided before the 1.30 pm meeting that he would dispense with the services of the most junior solicitor, Miss McClennan and the most highly paid field officer Mrs Hulthen (see written reasons for termination 11 September 1996, annexe H, Exhibit R1.
Mr Hamilton was generally an impressive witness, and I have no doubt that he and Miss Torrisi are witnesses of truth. However, Mr Hamilton is confused and uncertain and less impressive in his evidence as to when he decided to terminate the most junior legal secretary, the most junior solicitor and the most highly paid field officer. There are some suggestions in his evidence that he may, in general terms, have fixed on his strategy before the morning meeting with the Regional Council, and as a contingency, if funds were not forthcoming, which of course was what occurred.
Mr Hamilton was equivocal. At times he suggested he determined the positions to be made redundant after the meeting at 1.30 pm. If that be so, he would have had to have made the decision in a matter of minutes. At other times he conceded it was a decision he made before the 1.30 pm meeting.
I have concluded that he had made his decision before the 1.30 pm meeting, and it was probably a decision he had in contemplation before the meeting with the Regional Council, and a decision he took as soon as he knew no additional funds were immediately forthcoming from the Council.
What is absolutely clear is that at the 1.30 pm meeting he did not identify the persons he planned to interview and advise of their redundancy. In many ways that is understandable. This was a decision he wanted to convey in private to the employees affected.
It is also clear that the applicants and Miss McClennan were not really in a position to suggest other options at the meeting at 1.30 pm. After all they did not know and were not told that they, or any particular person, had actually been selected for redundancy. All they knew was that one person in their respective areas would be made redundant.
It also follows that if Mr Hamilton had made his decision before he interviewed the applicants, that the die was cast in terms of the redundancies. The die was not necessarily cast in terms of alternative employment and that was offered to Mrs Hulthen, but the die was cast before the interviews in the sense that the positions occupied by Mrs Hulthen and Miss Reuben were to go.
In other words, neither applicant was consulted before the decision was made. The union was not consulted, but Mr Hamilton states that he did not regard the union as relevant to a decision he felt he had to make immediately, because of the actual insolvency of the corporation at that time. I also record that I am not satisfied that Mr Hamilton knew that the applicants were members of the CPSU at that time. I say that, despite the evidence of the applicants and Miss Bennetts and Mr Alley, in which they assert that this information was given to the administrator at the staff meeting on 30 August 1996.
Furthermore, I do not accept the evidence of the applicants and Miss Bennetts and Mr Alley which was generally to the effect that, on 30 August at the meeting with the Registrar of Aboriginal Corporations, Noureddine Bouhafs, the Registrar gave an unequivocal assurance that: "no one would lose their jobs". Those are the precise words which Mrs Hulthen, Miss Reuben and Mr Alley used in each case in paragraph 4 of their respective statements of evidence. In each case they attribute those words to the Registrar.
Miss Bennetts does not use those words in her statement, but in oral evidence claimed that the Registrar used those words. The last sentence of paragraph 3 of the statement of evidence of Miss Bennetts, Exhibit A3, reads as follows:
“The Registrar stated at this meeting that ‘Mr Hamilton was not here to terminate positions’".
Mr Hamilton agreed, in evidence, that the Registrar did say: "Mr Hamilton is not here to terminate positions". It seems more likely that the Registrar would make a statement like that, rather than that: "No one would lose their jobs". In circumstances in which an administrator has just been appointed effective that day, I am not prepared to accept a claim that the Registrar gave an unequivocal assurance that, "No one would lose their jobs" when the Registrar has not been called to confirm that he gave such an unequivocal, and in my view, unlikely assurance. I also do not accept the claims made by the applicants and Miss Bennetts and Mr Alley that, in the second meeting with staff on 30 August, Mr Hamilton "assured everyone that no support staff would lose their job".
For that quote I refer to Reuben's statement, paragraph 5, Hulthen's statement, paragraph 6, Bennetts statement, paragraph 6 and Alley's statement, paragraph 5.
Mr Hamilton denies that he gave such an assurance, and it is inconceivable that an experienced administrator would give such a cast iron assurance on the day his appointment became effective. However, Mr Hamilton does concede that, at this meeting, staff were concerned about their job security and that he indicated, as administrator, an intention to keep trading and that he did say that it was not his intention to terminate positions.
The expression of such an intention is not a cast iron assurance of absolute job security, and I cannot envisage that it was so interpreted by the staff present at the meeting. In this respect, the minutes of a staff meeting on Thursday 29 August are revealing. The minutes were taken by Miss Bennetts. They appear in annexure D of Miss Torrisi's statement of evidence, Exhibit R2. In paragraph 15 of her statement, Miss Torrisi states:
“On 29 August 1996 a staff meeting was held to discuss the appointment of an administrator. I was absent from the meeting, but had read the minutes of the meeting and discussed with staff what was said at the meeting. The minutes of that meeting are marked D and annexed to this statement.”
The first three paragraphs of the minutes, annexure D read as follows:
“David, (i.e. David Smallwood) advised the meeting that the Registrar of Aboriginal Corporations had ordered that an administrator be appointed. The Registrar and the administrator would be arriving at 11 am on Friday 30 August 1996 to talk with staff, board members and interested persons.
Under the administrator's control, staff should be aware that there will be many changes. The administrator would be in no way as lenient as David had been. Late starts, continued absence, long lunches, extended chat times, all these allowances will not be allowed. All staff will be required to do more than what is achieved now. Do what you are getting paid for - work.
The administrator is here to do a job, David does not expect to be here for much longer. Those staff members involved in the process of getting the investigation here should now be satisfied. He has taken time, but ultimately they have achieved their goal.”
The first paragraph of the second page of the minutes reads as follows:
“Staff cut-backs are definite. The arrival of an administrator will not guarantee job security. Previously the board has considered cutting back the following positions - outer laying field officers, one administration officer and one professional officer. Legal service budget will be known after ATSIC Regional Council meet on week commencing 9 September 1996.”
Mr Meikle has not challenged the accuracy of the minutes, and the author, Miss Bennetts, was not asked to comment on them when she gave evidence. The minutes clearly record advice to staff on Thursday 29 August by the executive officer, David Smallwood.
In such circumstances I do not accept that Mr Hamilton gave a cast iron assurance, the next day, that no jobs would be lost, and more importantly I do not accept that the applicants or Miss Bennetts or Mr Alley, all of whom are recorded as present at the meeting on 29 August, could have concluded the next day that an expression of intention to keep trading and not to terminate positions, amounted to an assurance that no jobs would be lost.
The applicants, and possibly Miss Bennetts and Mr Alley, referred to a meeting with Mr Smallwood in June or July, in which Mr Smallwood apparently stated that at least five positions would have to be made redundant.
I cannot accept that the applicants were completely unaware of the possibility of redundancies affecting them, given the statements apparently made by the executive officer in June or July and on 29 August.
Mr Meikle asserts the termination of the employment of each applicant was unlawful for any one or more of six reasons. In fact he asserts that the terminations were unlawful for all six of those reasons, which he described in his final address as “six issues”.
He identified the six issues as:
(1) assurances to staff that they would not lose their jobs.
(2) failure to consult the CPSU.
(3) failure to follow adequate process.
(4) no valid reason for either termination.
(5) no genuine redundancies.
6) lack of procedural fairness.
I have dealt with the first issue and found that no assurances as asserted were given.
Mr Hamilton did not consult the union. I am not satisfied that he knew that the applicants were members of the union, but even if he did, it does not follow that a termination of employment based on operational requirements will always be invalid if a decision maker does not consult the union. On 10 September, Mr Hamilton knew no additional funds were forthcoming. He had concluded the corporation was insolvent. He bore personal liability. He considered immediate action essential.
The third and sixth issue are really the same. They amount to an assertion that procedural unfairness rendered the terminations unlawful. Following the decisions of the High Court in Byrne v Australian Airlines (1995) 131 ALR 422 and Victoria v The Commonwealth (1996) 138 ALR 422, invalidity on procedural grounds can only be addressed in terms of section 170DE(1). I am mindful of the comments of McHugh and Gummow JJ at 462 in Byrne that the distinction between procedure and substance is elusive. Puccio v The Catholic Education Office, Von Doussa J, (17 May 1996) has confirmed, following Byrne, that the focus should be on the substance of a decision rather than on procedural failings.
In Victoria v The Commonwealth at 171 the High Court noted that the terms "harsh, unjust and unreasonable" are not merely a synonym for valid. There are of course a series of cases since Victoria v The Commonwealth in which the Industrial Relations Court of Australia has had occasion to consider more closely the meaning of the phrase "valid reason". A line of authority has emerged which broadly speaking supports the view that an employer must justify the decision to terminate and in determining whether the decision is so justified the Court must take into account the effect of the termination on the employee. Nettlefold v Kym Smoker Proprietary Limited, Lee J, 4 October 1996, Kerr v Jaroma Pty Limited, Marshall J, 7 October 1996, Thomas v Lynch, Wilcox CJ, 20 December 1996, and Westen v Union Des Assurances De Paris, Madgwick J, 17 December 1996.
In respect of Westen, Millane JR in Morison v Honda Australia, 21 February 1997, said:
“In his recent decision in Westen, Madgwick J had occasion to consider the meaning of the phrase "valid reason" generally as well as specifically considering its meaning in a case where the employees position was abolished by reason of a bona fide reorganisation undertaken by the employer.
In effect his Honour took the view after a detailed analysis of the legislation, the Convention and established authorities that, in determining whether a reason for termination is valid, the appropriate standard of conduct is one that ensures both parties receive “a fair go all round.”
In terms of all these cases post Victoria and the Commonwealth the starting point still remains Selvachandran v Peteron Plastics (1995) 62 IR 371. Those cases still follow Northrop J’s formulation in Selvachandran at 373 that "valid reason" refers to a reason that is “sound, defensible and well founded and a reason which is capricious, fanciful, spiteful or prejudiced could never be valid reason for purposes of section 170DE(1).”
Those cases do not depart from his Honour's further injunction that:
“In considering whether a reason is valid it must be remembered that requirement applies in a practical sphere of the relationship between the employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must "be applied in a practical common sense way to ensure that" the employer and the employee are each treated fairly.”
Mr Meikel's third and sixth assertions of lack of procedural fairness are bound up with alleged inadequate consultation with the applicants by Mr Hamilton prior to termination. I am not aware of any authority which states that a termination of employment cannot ever be lawful without consultation with the employee prior to the decision to terminate the employment. The post Victoria v Commonwealth cases have stated that in a variety of circumstances consultation was necessary to establish validity of termination within the terms of section 170DE(1). None of these cases state that consultation prior to the decision to terminate, and consultation by the decision maker prior to the decision to terminate, are absolutely and always necessary.
In my view there are circumstances in which a termination can be for valid reason that is sound, defensible and well founded and where the decision maker does not consult prior to the decision to terminate. It should be noted here that Mr Hamilton did consult both applicants before their employment was terminated albeit after he had made the decision. He was clearly open even at that stage to alternatives. At Mrs Hulthen's suggestion and after confirmation of a vacancy by Ms Torrisi, he offered Mrs Hulthen a part-time position at Palm Island. After consulting her husband and for perfectly understandable personal reasons Mrs Hulthen declined that offer. Nevertheless, Mr Hamilton considered and offered an alternative and prior to Mrs Hulthen's actual termination.
I also note that Mrs Hulthen gave evidence of personal responsibilities which would only allow her to work part-time and she has just accepted a part-time position 20 hours a week.
Miss Reuben also gave evidence that she has been employed since 17 March. Both gave evidence that these circumstances influenced their decision not to continue with their claims for reinstatement.
I am fortified in my conclusion that consultation after the decision to terminate but before termination is put into effect can avoid invalidity of termination by the recent decision of North J in Carydias v The Greek Orthodox Community (unreported, IRCA, North J, 20 February 1997). His Honour considered Nettlefold v Smoker and Thomas v Lynch and stated at 40:
“In my view the failure to consult Mr Carydias was not harsh, unjust or unreasonable in the circumstances of this case. The need to consult is not a rigid requirement, the extent to which it is required, how it is to be satisfied and even whether it is required at all depend on the circumstances of the case.”
The fourth ground or issue by which Mr Meikle asserts invalidity goes to the heart of section 170DE(1). It embraces all of his six issues. It is the basic assertion that there was no valid reason for either termination and this assertion also embraces his fifth issue which is that in neither case was there a genuine redundancy. I have no doubt that in terms of the operational requirements of the Corporation, it was necessary to immediately reduce the very high expense of the Corporation on wages. Mr Hamilton chose to do that by making redundant the most junior positions of legal secretary and solicitor, and the most senior, or at least most highly paid position, of field officer.
The decisions were not based on the performance of the occupants. Although Mr Meikle suggested indirectly in the course of the trial that the terminations were in some way based on performance and that the applicants were not given an opportunity to respond to allegations of poor performance, he did not pursue such a claim in his final address. The terminations were not in any respect based on performance. There was no possibility of a breach by the respondent of section 170DC. It was not alleged by Mr Meikle that the respondent had breached section 170DC. Section 170DC did not apply. These terminations are based on the very essence of operational requirements.
The alternative was, as Mr Williams suggests in his final address, the liquidation of the corporation and the termination of all employees. It may still come to that. I agree with counsel for the respondent that there was an urgent and critical need to reduce staff. Mr Hamilton adopted a selection criteria which did not relate to performance. The Court is not to sit in the employer's managerial chair.
I have concluded that these two terminations were for valid reason, were not only based on the operational requirements of the business but the very survival of the corporation which is still not assured.
Mr Hamilton has stated that he has recently, that is between 5 and 9 May 1997, reviewed the Corporation budget and cash flows and that despite the redundancies on 10 September 1996, wages for financial year '96/97 have exceeded budget by approximately 60 to $70,000. Mr Hamilton estimates a deficiency in excess of $100,000 at 30 June 1997.
Prior to the three redundancies, and in the absence of extra funds and/or reduced expenditure, Mr Hamilton predicted a deficit of $230,000. The Court is of the view that the likely deficiency at 30 June 1997 has been conservatively estimated at in excess of $100,000. The list of creditors and the schedule of staff wages in attachment E to exhibit R1, and other estimated recurrent expenditure in attachment E1 to exhibit R1, suggest the possibility of a deficit at 30 June 1997 well in excess of $100,000.
The Court also notes that Mr Hamilton expressed the view in evidence in chief and cross-examination on 12 May 1997 that the corporation as at 12 May 1997 may be trading while insolvent.
Mr Meikle suggested in the course of the trial that the terminations were in breach of sections 76 and 77A of the Aboriginal Councils and Associations Act 1976 and were unlawful on that account. I am not satisfied that the terminations were in breach of either section. In any event, section 77A(2) provides that any failure to comply with subsection (1) does not affect the validity of the decision. I also note the decision under section 77A(1) only applies if the administrator makes a decision under section 76.
I find that the terminations were for valid reason and were lawful terminations. The order of the Court is that both applications be dismissed.
MINUTES OF ORDERS
THE COURT ORDERS:
1. That both applications be dismissed.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding 16 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan.
Associate:
Dated: 30 May 1997
Mr Patrick Meikle, North Queensland Organiser, PSU Group, Queensland Branch, Community and Public Sector Union appeared for both applicants.
Solicitor for the Respondent: Mr Daniel Williams
Date of hearing: 12 and 13 May 1997
Date of judgment: 16 May 1997
