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Federal Court of Australia |
Crowden v Pickands Mather & Co International trading as Savage Rivers Mines, (Wright J, Supreme Court of Tasmania, 4 July 1996, unreported) considered
Colledge v Bass Mitchells & Butlers Limited [1988] ICR 125 considered
Graham v Baker [1961] HCA 48; (1961) 106 CLR 340 considered
Fryar and Simpson v System Services Pty Ltd (1996) 137 ALR 321 considered
Michel v Ogilvy & Mather Pty Ltd (1997) 71 IR 417 considered
Newton v Goodman Fielders Mills Ltd (unreported, 12 September 1997, Hill J) considered
Poletti v Ecob (No.2) (1989) 31 IR 321 considered
Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415 considered
Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd [1991] FCA 592; (1991) 33 FCR 1 considered
Stocks v Magna Merchants Ltd [1973] ICR 530 considered
Yorkshire Engineering & Welding Company Ltd v Burnham [1974] 1 WLR 206 considered
Baldwin v British Coal Corporation [1995] IRLR 139 considered
Landsal Pty Ltd (in liquidation) v REI Building Society (1993) 41 FCR 421 referred to
Basnett v J & A Jackson [1976] ICR 63 distinguished
Haines v Beddall [1991] HCA 15; (1991) 172 CLR 60 applied
The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 applied
Wenham v Ella (1972) 127 CLR 456 applied
peter james black v BRIMBANK CITY COUNCIL
VI 4284 of 1995
MOORE J
SYDNEY (HEARD IN MELBOURNE)
12 FEBRUARY 1998
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | VI 4284 of 1995 |
|
BETWEEN: | PETER JAMES BLACK
Applicant |
|
AND: | BRIMBANK CITY COUNCIL
Respondent |
|
JUDGE: | MOORE J |
| DATE OF ORDER: | 12 FEBRUARY 1998 |
| WHERE MADE: | SYDNEY (heard in MELBOURNE) |
THE COURT directs THAT:
1. The application be adjourned to Thursday 26 February 1998 at 9.30 for telephone directions.
2. The matter is listed for further hearing on 25 and 26 June 1998 in Melbourne.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | VI 4284 of 1995 |
|
BETWEEN: | PETER JAMES BLACK
Applicant |
|
AND: | BRIMBANK CITY COUNCIL
Respondent |
JUDGE:
MOORE J DATE: 12 February 1998 PLACE: sydney (Heard in MELBOURNE)
This is an application under s 178 of what is now entitled the Workplace Relations Act 1996 which also invokes the Court's accrued jurisdiction. It relates to the termination of the employment of Mr Peter Black with Brimbank City Council ("Brimbank") on or about 5 April 1995. Having regard to the pleadings the essential facts are not in issue. Mr Black was employed as the Chief Executive Officer of the City of Keilor under a written contract of 2 August 1991. The recitals in the written contract stated:
"WHEREAS:
A. The Council wishes to appoint the Manager as its Chief Executive Office [scil. - Officer] for a specified period; and
B. The Manager agrees to accept such appointment and to continue in the same for the specified period or any mutually agreed extension thereof."
The agreement then went on to deal with a range of matters including the term of the contract. Clause 2 provided:
"2. Term
2.1 The term of the employment shall be from the 1st August 1991 and shall continue for five years (unless extended as hereinafter provided) or until earlier terminated as hereinafter provided.
2.2 Such term may at the option of the Council be extended on one or more occasions for periods each of five years (or for such other period as the parties may agree upon) upon such terms as may be agreed upon between the parties."
Clause 5 dealt with the powers and duties of the Chief Executive Officer. Clause 10 dealt with termination and provided:
"10.1 The Manager's employment may be immediately terminated by the Council by the occurrence of:
(a) the death of the Manager;
(b) the Manager being declared bankrupt or insane;
(c) the Manager being convicted of an indictable offence;
(d) any wilful failure or wilful neglect on the part of the Manager in carrying out his responsibilities, duties or functions for the Council under this Agreement;
(e) the Manager being found guilty of misconduct in carrying out or performing his powers, authorities, directions and duties as an officer of the Council; or
(f) the Manager failing to comply with any provision of any legislative enactment which would make it inappropriate for him to continue to be City Manager or an officer of the Council (as the case may be).
10.2 The Manager may by three (3) months notice in writing elect to terminate his employment with the Council at any time after the expiration of the third year of such employment."
The contract also dealt with the possible amalgamation of the Council of the City of Keilor. Clause 11 provided:
"11. Amalgamation
Should by reason of amalgamation or an Order in Council made under Section 24B of the Local Government Act 1958 the position of City Manager cease to be available with the Council or its successors in the form provided for in this Agreement or in any other form acceptable to the Manager, the Council shall offer the Manager redundancy on such terms and conditions as may be agreed upon between the parties."
Mr Black continued in employment as the Chief Executive Officer from August 1991 until the amalgamation of the City of Keilor under the provisions of the Local Government Act 1989 (Vic). By an order made on 15 December 1994 under that Act, the City of Keilor and another municipality were amalgamated on that day to form Brimbank. It was common ground that by operation of that order Mr Black became an employee of Brimbank, that council became a party to the contract of employment with Mr Black in lieu of the City of Keilor and Brimbank was then bound by the terms of the contract.
The restructuring of the City of Keilor was the subject of an industrial agreement ("the Agreement") certified by the Australian Industrial Relations Commission on 30 January 1995 pursuant to Division 2 of Part VIB of what was then entitled the Industrial Relations Act 1988 . A term of the Agreement was that it was to have effect from 5 October 1994. It was common ground that Mr Black was, at all material times, covered by the terms of the Agreement. The Agreement dealt with a range of matters that might arise in the event of the City of Keilor being restructured, amalgamated, abolished or altered in any other way. Clause 5 of the Agreement set out its objects and included:
"(c) A transferred employee shall be transferred to a successor municipality with the benefit of all rights accrued in respect of his or her employment with the respondent council as if the previous service had been with the successor municipality."
The Agreement also dealt with retrenchment which was defined as including the compulsory termination of the service of an employee where the employee's service was not necessary or their position was redundant. Clause 8 of the Agreement dealt generally with the maintenance of employment conditions. Clause 8(a) dealt with the employment classification of an employee under the relevant award. Clause 8(b) dealt with the rate of pay of an employee to be maintained by the payment of an allowance. Clause 8(c) also dealt with that allowance. Clause 8(d) provided:
"If a transferred employee was provided by the respondent council with any benefits not provided for in subclauses (a), (b) or (c) above, the successor municipality shall maintain payment; and
(i) continue to provide to the employee the benefits on no less favourable terms and conditions; or
(ii) ..."
Clause 13 provided for redundancy. Sub-clause (a) said:
"(a) The City of Keilor or its successor municipality shall not, for a period of 1 year from the date of coming into operation of an order, give notice of retrenchment to, or retrench any employee."
Subclause (h) said:
"(h) Where an employee is to be retrenched following the determination of the successor municipality in accordance with subclause (d) hereof:
(i) the municipal council shall notify the employee(s) concerned, all respondent unions and associations and the Local Authorities Superannuation Board not less than three months prior to the proposed retrenchment."
Subclause (i) conferred on an employee who was to be retrenched certain rights during the notice period including the right to leave within that period without losing an entitlement to severance pay.
The word "order" was defined in the Agreement as meaning an order in Council of the type made on 15 December 1994. Clause 14 of the Agreement dealt with severance entitlements. Several entitlements were identified. The first was an entitlement to severance pay which contained two elements. The first, in cl 14(a)(i)(1), was a payment in lieu of notice prescribed by the award which was a payment dependent upon the period of continuous service of the employee and the age of the employee. The second element of the severance pay was a redundancy payment, provided for in cl 14(a)(i)(2) which again was a payment dependent upon years of completed service. Clause 14(a)(i)(3) entitled a retrenched employee to a lump sum payment for 50% of unused sick leave. Clause 14(a)(i)(4) entitled an employee to what was described as assistance in the provision of individual support to a specified value or payment of $3,500 in lieu of outplacement support. Clause 14(a)(ii) entitled an employee to a lump sum payment for the loss of motor vehicle usage.
Clause 14(f) provided:
"Where an employee received or is entitled to receive equivalent or greater severance payments under any Act, Regulation or Award, (with the exception of the Victorian Local Authorities Superannuation Act), than are available under this agreement then such employee shall not also receive the entitlements under this Clause. Where an employee receives or is entitled to receive severance payments under any Act, Regulation or Award which are less than under this clause, such employee shall receive amounts representing the difference between the severance entitlements under this clause and the severance entitlements under the Act, Regulation or other Award."
It was common ground that Mr Black's employment was terminated by Brimbank on or about 5 April 1995 effective from 1 April 1995. Another person had been appointed to the position of Chief Executive Officer of Brimbank. It was also common ground that Mr Black did not consent to the termination of his employment and that it was a retrenchment within the meaning of that term in the Agreement. It was conceded by Brimbank that the termination of Mr Black's employment was in breach of clause 13(a) of the Agreement.
For reasons which I explain at the conclusion of this judgment, I propose only to consider what I perceive to be the central legal issue that arises in these proceedings. That it is a central issue was conceded by both counsel for Mr Black and counsel for Brimbank. It concerns the role, in assessing damages, of the severance entitlements paid to Mr Black by reference to clause 14 of the Agreement.
It is common ground that at the time Mr Black's employment was terminated in April 1995 he was paid a total of $238,711.23. This was made up of a sum of $114,285.02 as a redundancy payment (clause 14(a)(i)(2)); $18,095.13 as 50% of unused sick leave of 38 days (clause 14(a)(i)(3)); $3,559.50 as a payment in lieu of outplacement support (clause 14(a)(i)(4)); $26,760.00 as a lump sum payment for the loss of motor vehicle usage (clause 14(a)(ii)); $11,904.69 as payment in lieu of notice (clause 14(a)(i)(1)) and a total of $64,106.89 being accumulated entitlements to annual leave, annual leave loading and long service leave. The total paid, apart from this last mentioned amount of $64,106.89, was $174,604.34 which were payments referrable to entitlements under the Agreement.
It is to be recalled that it was common ground Mr Black's employment was terminated effective on 1 April 1995. His contract had commenced on 1 August 1991 and was to be for a five year period. Thus his employment would have concluded by operation of the contract of employment on 1 August 1996 unless the term was extended in the manner contemplated by cl 2. At the time of termination, the contract had a further sixteen months to run. There was a factual issue as to the benefits that were forgone under the contract arising from its premature termination. It was contended on behalf of Brimbank that the value of those benefits (represented by remuneration, the value of a motor vehicle and telephone rental) totalled $132,098.90. It was contended on behalf of Mr Black that the benefits forgone under the contract by its premature termination totalled $170,668.64, representing salary and long service leave. This was the amount particularised in an amendment to the statement of claim. This sum was based on annual remuneration of $123,874.32 which, as calculated by counsel for Mr Black, included the value of the use of a motor vehicle. However on either approach the value of the benefits forgone under the contract did not exceed the amounts paid to Mr Black at the time of his termination.
The damages to which Mr Black might be entitled for any breach of his contract of employment by its termination other than in accordance with its terms, were the benefits foregone under the contract though allowance would have to be made for income earned by Mr Black during the period representing the residue of the contractual term. Consideration would also have to be given to whether Mr Black mitigated his losses during that period. This was accepted by counsel for Brimbank as the prima facie starting point in assessing damages. The critical question is whether allowance should be made, as was submitted by Brimbank, for the payments to Mr Black made by reference to the Agreement, if the termination of his employment constituted a breach of the employment contract sounding in damages. As just noted, the amounts paid exceeded the maximum damages Mr Black might be awarded on the basis just discussed which were particularised in the amended statement of claim.
Counsel for Mr Black submitted that no allowance should be made for the payments to Mr Black by reference to the Agreement. I use the expression "by reference to the Agreement" because the termination of Mr Black's employment was, and was conceded to be, in contravention of the Agreement in that it occurred during a period when Brimbank was precluded from terminating the employment of a redundant employee: see clause 13(a).
Counsel for Mr Black referred to authorities arising in four areas during oral submissions. I propose to discuss in some detail each group of authorities. The first group concerned situations where an employee had been injured at work and sought to recover from his employer damages occasioned by the injury. The most recent was a judgment of Wright J of the Supreme Court of Tasmania in Crowden v Pickands Mather & Co International trading as Savage River Mines (Wright J, Supreme Court of Tasmania, 4 July 1996 unreported). This case involved an employee who, at the time of trial in April 1996, was no longer employed by the defendant employer. The plaintiff had been employed as a mill operator and had been injured on 1 August 1991. After a brief absence from work he returned to work. He underwent several medical procedures from August 1992 onwards. It appears he undertook no work from then until January 1995 when he left the employment of the defendant. He was then retrenched though the circumstances in which this occurred were not discussed in the reasons for judgment. The plaintiff was then paid an amount by way of redundancy pay and an issue arose in the trial as to whether the redundancy payment should be deducted for the sum allowed for loss of past earning capacity. That is, earnings between the date of the accident and the date of the trial. Wright J rejected the suggestion that there should be such a deduction. He did so for the following reasons:
"There is clear authority to the contrary in Clay v Freda a decision of the Full Court of South Australia (as yet unreported) delivered on 1 July 1988. At 1 - 2 King CJ said:
"I think that it is plain from the evidence quoted that the redundancy payment was not in consequence of the appellant's injuries nor a substitute for earnings which he would have received if uninjured. It was in that sense unrelated to the appellant's injuries and incapacity. It was a payment made on termination of employment by reason of redundancy and in consequence of an entitlement under the award arising from his years of service. The fact that the redundancy was contributed to by the respondent's diminished working capacity, in that the employer could not provide work suited to that diminished working capacity, did not change the character of the entitlement or payment. The appellant would have been entitled to the redundancy payment irrespective of the nature of the factors which led to the appellant being `surplus to the company's requirements'. The entitlement and payment were not referable, except in the indirect sense just mentioned, to his partial incapacity or loss of earnings. After termination of his employment he was free to take up any new employment he chose without effect upon his entitlement.
The relationship between the appellant's incapacity and the redundancy payment is so tenuous and indirect that the payment cannot be regarded, in my opinion, as diminishing the loss resulting from the incapacity. It was paid in recognition of his previous service, not in substitution for earnings, and the entitlement was not dependent on the loss of earning capacity.
Whilst in Clay v Freda the redundancy appears to have been an award entitlement and there is no evidence in the present case as to the exact source or nature of the plaintiff's payment, the principle appears to me to be the same in any case where there is a payment which is apparently based on past service and which does not fetter the plaintiff's entitlement to seek alternative employment forthwith."
This authority is to be contrasted with a decision of the English Court of Appeal referred to by counsel for Brimbank. In Colledge v Bass Mitchells & Butlers Limited [1988] ICR 125 the Court of Appeal concluded that in an action for damages for negligence against the employer, credit should be given for redundancy pay when assessing damages. The plaintiff had been injured at work on 15 May 1983. The trial took place in 1986. The plaintiff had earlier been retrenched in February 1985, when he had been offered and accepted a voluntary redundancy and paid the sum of 9,000. As to the relationship between this payment and the damages to which the plaintiff was entitled, Sir John Donaldson MR said at 129:
"The 9,000 represented as to about 1,000 the sum to which the plaintiff would have been entitled by statute if he had been made redundant compulsorily. The balance of 8,000 was an inducement to him and other workers to accept redundancy, the intention to be to reduce the work force by about 300 over a two year period. However, I do not think that the composition of sum is a material consideration.
In my judgment the starting point is Lord Reid's classic judgment in Parry v Clever [1969] UKHL 2; [1970] AC 1,13. In effect Lord Reid states an equation a - b = c where a represents the sums which the plaintiff would have received but for the accident, but which by reason of the accident he can no longer get, b represents the sums which he did in fact receive as a result of the accident, but which he would not have received if there had been no accident and c represents the compensation to which he is entitled. On the judge's findings, but for the accident the plaintiff would have been unlikely to have ever to have been made redundant and would have worked for the defendants until his retirement. Whilst the judge did say that if the plaintiff's employment by the defendants ended prematurely, he would have been able to obtain other employment, he did not suggest that such a change would have benefited the plaintiff by enabling him to take a redundancy payment and immediately obtain other employment without loss of wages. Prima facie, therefore, the 9,000 is part of b, but no part of a and accordingly falls to be deducted."
His Lordship then referred to authorities dealing with income tax, pension contributions, receipts from health insurance schemes and receipts from the benevolence of third parties. He went on to say at 130-131:
"So what about redundancy payments? This is not free from authority and that of the House of Lords at that. In Wilson v National Coal Board, 1981 SLT 67, the whole colliery closed down and all employees other than the plaintiff were offered and accepted alternative employment, thus disqualifying them from receiving redundancy payments. The plaintiff, who had been injured by the accident for which the defendants were responsible, was declared redundant and received such a payment. In calculating damages for his injuries the House of Lords held that credit should be given for the redundancy payment on the application of the principles laid down in Parry v Cleaver [1969] UKHL 2; [1970] AC 1 and, in particular, the public policy consideration that otherwise employers would be tempted to dismiss workers on grounds of incapacity rather than redundancy, where those alternatives were open.
Mr Walker, appearing for the plaintiff, sought to distinguish this decision and was assisted in this endeavour by the fact the Lord Keefe of Kinkle, Lord Scarman and Lord Lowry, with the agreement of Lord Roskill, expressly stated that it was a decision on its special facts and the essential purpose of a redundancy payment was to compensate for the loss of a settled job and not to compensate for loss of earnings. He also submitted that, in any event, any deduction should be limited by reference to the facts that (a) the 9,000 represented an accrued compensation for loss of a job which would have been unaffected if, contrary to the facts, the plaintiff despite the accident had been able to obtain immediately after being made redundant, whether or not at a lower wage, and (b) in any further employment the plaintiff would have to build up a new entitlement to redundancy protection.
I confess that I was much attracted to these arguments, but I fear that there are insuperable difficulties. The only way in which, as it seems to me, this argument can be put is that the plaintiff suffered a head of damage which one can describe as "loss of the job" and that the redundancy payment was exclusively designed and intended to compensate him for this head of damage. Loss of future earnings was something distinct and fell to be compensated separately. So far so good, but if this is correct every workman who loses his job in consequence of an accident but is not redundant should receive damages for "loss of the job," the measure presumably being the amount which he would have received if he had been made redundant. This does not happen. The plaintiff in fact would have suffered no additional loss by being compulsorily declared redundant and in fact suffered no additional loss by (reasonably I assume) accepting voluntarily redundancy."
His Lordship then referred to an argument about "loss of redundancy rights" and went on to say:
"I would only add this, since their Lordships regard Wilson's position as exceptional, it must be possible to construct a scenario in which the amount of a redundancy payment would not fall to be deducted. Nevertheless there is only one case in which I can foresee this, namely, where the plaintiff would have been made redundant regardless of the accident. But the true analysis there is surely that the payment features in both parts of the equation and is either ignored or allowed to cancel itself out."
Blidewell LJ and Sir Denys Buckley agreed with the reasons of Sir John Donaldson MR.
The last authority relied on involving an action arising from personal injury was Graham v Baker [1961] HCA 48; (1961) 106 CLR 340 which was referred to by both counsel for Mr Black and counsel for Brimbank. The plaintiff sustained an injury at work on 26 May 1956 and was compulsorily retired on 18 October 1957. The plaintiff would, in the ordinary course, have retired on 7 November 1960. The proceedings in which his claim for damages for negligence was heard and determined in October 1959. An issue arose about the quantification of the damages and the High Court was called upon to consider how two amounts should be treated in calculating damages. The first was 170 days sick leave payments paid to the plaintiff after the accident and before his compulsory retirement. The second was the payment of a pension between the time of compulsory retirement and the time at which he would have otherwise been due to retire.
As to the pension payments, Dixon CJ and Kitto and Taylor JJ concluded that no account should be taken of the pension payments. Of those payments their Honours said at 343:
"Indeed, this conclusion follows, if not expressly, then by implication from the decisions of this court in The National Insurance Co of New Zealand Ltd v Espagne [1961] HCA 15; (1961) 105 CLR 569 and Paff v Speed [1961] HCA 14; (1961) 105 CLR 549. Quite clearly, in the language of Dixon CJ in the former case the pension rights of the respondent had the "additional" and "distinguishing characteristic namely that they are conferred on him not only independently of the existence in him of a right of redress against others but so that they may be enjoyed by him although he may enforce that right: they are the product of a disposition in his favour and intended for his enjoyment and not provided in relief of any liability in others fully to compensate him." This and other observations in the cases referred to are sufficient, in our opinion to conclude this question in favour of the respondent."
As to the sick pay, their Honours said at 345-346:
"In our view the respondent's contract says no more and no less than that, if he becomes unable by reason of sickness or other specified causes to perform his ordinary duties, nevertheless his right to "full pay" or, in other words, his ordinary wages, shall continue to be payable, subject to the limits specified during the period of his absence. If, therefore, the claim be made, as it was, that the respondent lost the whole of his wages between the date of the accident and the date of trial then the appellant was entitled to answer it by showing that for a period of 178 days he received his full wages.
The conclusion that the respondent's so called "sick pay" constituted wages in every sense of the word is completely in accord with a long line of authority concerning the right of an employee to receive his ordinary wages in respect of a period during which he is unable, by reason of sickness or accident, to perform his duties."
Their Honours went on to point out that they were not concerned with two separate matters namely the loss of wages up to the time of trial and estimated future loss because of diminished earning capacity. Rather the task of the court was to assess the probable economic loss flowing from the injuries as if the assessment was being made at the time of injury.
The next line of authority referred to by counsel for Mr Black in oral submissions concerned the assessment of compensation in circumstances where a finding has been made that an employee's employment has been terminated harshly, unjustly or unreasonably or otherwise contrary to statute or the contract under which they had worked should be varied or voided for the same reason. The first was a judgment of von Doussa J in Fryar and Simpson v System Services Pty Ltd (1996) 137 ALR 321. The employer was a company formed by a consortium of mainframe computer users in South Australia. Mr Simpson had been employed by one of them and on 16 September 1985 transferred his employment to the respondent. Mr Fryar had been employed by another consortium member and his employment transferred to the respondent in March 1991. In April 1994 both Mr Simpson and Mr Fryar were informed that their employment would terminate on 13 January 1995 and 23 November 1994 respectively. Both worked through the period of what, on one view, was a period of notice. In fact Mr Simpson's employment was terminated on 17 February 1995 though Mr Fryar's employment was terminated on the foreshadowed date. Von Doussa J considered what compensation should be awarded to both employees as a result of the termination of their employment in contravention of Division 3 of part VIA of the Act. Neither employee received severance payments and his Honour concluded that the amount of compensation to be awarded under s 170EE should include an amount to compensate for the failure to make severance payments. In reaching this conclusion his Honour drew a distinction between a period of notice and severance payments. His Honour said at 331:
"There is a distinction between the nature and purpose of a period of notice or payment in lieu, and a severance payment. This distinction is reflected in Arts 11 and 12 of the Termination of Employment Convention. While the two are often treated together to arrive at a global redundancy package, the separate nature and purpose of the two entitlements remains, and assume importance in this case.
A period of notice is to give an employee the opportunity to adjust to the change in circumstances which is to occur and to seek other employment; Mathews v Coles Myer Ltd (1993) 47 IR 229. The period may be worked out, as s 170DB allows, and it often is, as it is recognised that the employee's prospects of obtaining other employment may be better if the search is undertaken while the employees remain in employment: see for example Sinclair v Anthony Smith & Associates Pty Ltd (IRC of A von Doussa J, 1 December 1995, unreported at 8).
A severance payment, however, is intended to provided a payment as compensation for the loss of non-transferable credits and entitlements that have been built up through length of service such as sick leave and long service leave, and for inconvenience and hardship imposed by the termination of employment through no fault of the employee: Termination, Change in the Redundancy Case (1984) 8 IR 34 at 62, 73. The inconvenience and hardship includes the disruption to the employee's routine and social contacts and the competitive disability to long term employees arising from opportunities foregone in the continuous service of the employer: Food Preservers Union of Australia v Wattie Pict Ltd (1975) 172 CAR 227. Such a payment is taxed on the favourable terms which apply to an eligible termination payment. It is quite inconsistent with the nature and purpose of the payment, and the taxation regime, that the severance entitlement should be worked out as if the number of weeks used to calculate the entitlement were weeks of notice.
In the present case, in the events which happened, the applicants worked until the nominated termination dates and received no severance payments on leaving ...
In my opinion the amount which should be awarded under s 170EE to compensate for the failure to make severance payments should be calculated be reference to the original periods fixed by the respondents, less 13 weeks."
The thirteen weeks was the period his Honour treated as the true notice period.
This and other cases were referred to by Glynn J in Michel v Ogilvy & Mather Pty Ltd (1997) 71 IR 417. Her Honour was considering an application under s 275 of the Industrial Relations Act 1991 (NSW) for an order declaring void or varying contracts under which Michel had worked for the respondent employer. Michel had been employed by the respondent from February 1990. His employment was terminated in October 1995. Her Honour characterised the application as one in which it was sought to re-write a contract to include a term ab initio that would, effectively in the contract at the time of termination, have required the payment, at that time, to the applicant of an amount in lieu of a specified period of notice. In that context her Honour said at 432-33:
"There is no room in these proceedings to discount payments allocated to payment in lieu of notice by the amount of payments allocated to severance payments, either in whole or in part.
The minority view of Sheldon J in Ray v Radano that an employer cannot allocate to one subject matter what he had already paid in pursuance of a promise related to another matter, was expressly preferred by the then Commission in court session in Pacific Publications Pty Ltd v Cantlon. The contract the appellant held with the respondent makes a clear distinction between payments for notice of termination when either party wishes the contract to conclude and the payment for severance pay in the event of retrenchment. It was there stated:
"Severance payments, in the event of retrenchment, shall be at the rate applicable in current legislation pertaining at the time."
In all the terminations the applicant has administered he said it has been fundamental, following advice from the company's solicitors to break up the payments in relation to notice and severance payments.
In Lavings, Hill J provided a change to the contract in that he altered the termination clause to provide three months money in lieu of notice and he added a redundancy clause.
In coming to his conclusion in O'Donnell v GIO Australia Ltd Maidment J stated that "although having been paid an amount said to be redundancy payment it is obvious that Mr O'Donnell was not redundant in any true sense...", and:
"In performing of my function under s 275(3) it seems to be appropriate to assess a reasonable period of notice and to make an order which caters for the failure of GIO to make payment in lieu of such notice. To that extent, if any, that payment in lieu of a period of reasonable notice exceeds that afforded Mr O'Donnell, I consider that he is entitled to the benefit of an order under s 275(3).
Although having been paid an amount said to be redundancy payment it is obvious that Mr O'Donnell was not redundant in any true sense ..."
That case, therefore, does not assist the applicant, in that Maidment J did not characterise the payments made by the GIO as true redundancy payments. In setting them off against the order for payment of reasonable notice he did not make the distinction relied upon by the applicant.
In this case it is clear that the applicant's position did become redundant. According to Mr Wallace the applicant's function has been split amongst three key people."
In a more recent application under s 275, Newton v Goodman Fielders Mills Ltd (unreported, 12 September 1997, Industrial Relations Commission of NSW) Hill J restated the proposition that provisions providing for severance payments are different in character from provisions governing notice of termination. His Honour noted that an employee is ordinarily entitled to fair and reasonable notice of termination irrespective of the reasons for it and that special considerations have attended termination of employment on the grounds of redundancy.
The next line of authority referred to by counsel for Mr Black in oral submissions concerned the recovery of entitlements under an award and when and to what extent prior payments by an employer can be relied on to satisfy or offset any liability under the award. They were adverted to in the passage I earlier quoted of Glynn J in Michel v Ogilvy & Mather Pty Ltd. A comparatively recent consideration of this matter was undertaken by a Full Court of this Court in Poletti v Ecob (No.2) (1989) 31 IR 321. The principle applied by the court was that it is only payments of the same character as payments required to be made under an award that can be relied upon to satisfy the obligation under the award to pay. The Full Court cited with approval the decision of the Industrial Commission of New South Wales in Court Session in Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415. In that latter case an employee whose employment had been terminated had been paid a "special gratuity" on his retrenchment. It was determined that this payment could not be treated as part satisfaction of the entitlement under an award to pay in lieu of notice. The Full Court cited with approval the following passage from the Commission's judgment at 421:
"Despite the subsequent allocation and the suggestions in argument to the contrary, we do not think the payment designated a "special gratuity" was intended to be a payment in lieu of award notice on termination. The company clearly appropriated the payment, at the time of making it, as a "special gratuity" in the special circumstances of the retrenchments then occurring and not as a payment in respect of any obligation which had arisen or might arise under clause 12."
The last line of authority referred to by counsel for Mr Black in oral submissions concerned whether in awarding compensatory damages either in tort or in contract or under s 82 of the Trade Practices Act 1976 payments made to the applicant could be called into account to offset the amount that might otherwise be awarded. Many of the relevant authorities were discussed in the judgments of the members of the Full Court of the Federal Court in Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd [1991] FCA 592; (1991) 33 FCR 1. An Australian commercial carpet wholesaler, retailer and installer had successfully brought proceedings against an American company engaged in a similar undertaking. It had been held that the American company had engaged in conduct in contravention of s 52. The relevant issue raised in the appeal, for present purposes, was whether an amount paid to the Australian company by a New Zealand company towards an advertising campaign promoting the products of the Australian and the New Zealand companies could be called in aid to reduce the damages payable by the American company. While the members of the court differed in their views how the payment by the New Zealand company should be dealt with, there was no real divergence in the principles to be applied. Monies received as a result of an independent, collateral or disconnected transaction could not be deducted from damages which were otherwise payable: per Beaumont J at 12; or payments not made to relieve liability in others: per Burchett J at 26.
It is necessary to refer to several other authorities not referred to in oral submissions. The first is the decision of Arnold J sitting in the Queens' Bench Division in Stocks v Magna Merchants Ltd [1973] ICR 530. My attention was drawn to this authority when preparing these reasons. I then invited written submissions on it and other matters. The facts in that case were these. The managing director of a company, Mr Stocks, had been employed by a contract dated 9 September 1968 for a fixed term expiring on 31 July 1971. His employment was terminated on 30 June 1970 when the company ceased trading. The company was liable to pay and paid a redundancy payment of 1140 under the Redundancy Payments Act 1965 (UK). Stocks sued the company for damages for wrongful dismissal. In issue was whether allowance should be made for the redundancy payment. After observing that there appeared to be no authority on the question, Arnold J considered in detail the decision of the Court of Appeal in Parsons v B.N.M. Laboratories Ltd [1964] 1 QB 95 and the decision of the House of Lords in Parry v Cleaver [1969] UKHL 2; [1970] AC 1. His Honour concluded at 534:
"The present question, in my judgment, falls to be answered in favour of the plaintiff if the redundancy payment in quality and, in particular, as regards its remoteness or proximity in relation to the dismissal of the plaintiff is analogous to a retirement pension, or predominantly analogous to that, but in favour of the defendants if it is analogous, or predominantly analogous, in those respects to unemployment benefit.
The redundancy payment fell to be made because of the dismissal of the plaintiff for the motives which underlay that dismissal, for that is the determinant factor under the statute. It was not a payment which was inevitably going to be made at whatever time, and in whatever circumstances, the plaintiff's employment should come to an end, whether during, or at the end of, or later than the end of, the contractual period under the contract current at the date of dismissal, but only if the employment came to an end for the same reasons, or for other comparable reasons, as those for which it was, in fact, brought to an end by the dismissal.
Unemployment benefit is payable on the dismissal of the plaintiff not inevitably and irrespective of the events which happen, but only if, in fact, on that dismissal a period of unemployment ensues. A retirement pension is payable, except to the extent that its conditions prescribe otherwise, whenever the employment is terminated, irrespective of whether that event comes about by dismissal, by resignation, or by retirement in due course, and irrespective of the event, or intended event, which prompts that dismissal or that resignation if those be the facts.
My view is that there is a closer analogy, as regards remoteness or proximity to the dismissal of the plaintiff, between the payment of unemployment benefit and the payment of a sum for redundancy under the Act of 1965 than there is between the payment of a retirement pension and a redundancy payment. Consequently, in my judgment, consistently with the authority of Parsons v B.N.M Laboratories Ltd., the right conclusion here is that the amount of the redundancy payment does fall to be deducted in calculating the damages payable by the defendants to the plaintiff which I accordingly assess at the sum of 409.88."
The request for written submissions on the judgment of Arnold J in Stocks v Magna Merchants Ltd gave rise to lengthy written submissions by counsel for Mr Black referring to numerous English authorities which had distinguished or not followed Stocks v Magna Merchants Ltd. I will discuss in detail three of them and refer only to the others.
Stocks v Magna Merchants Ltd was considered by the National Industrial Relations Court in Yorkshire Engineering & Welding Company Ltd v Burnham [1974] 1 WLR 206. An issue arose as to what allowance should be made for payments made under the Redundancy Payments Act 1965 (UK) when assessing compensation under the Industrial Relations Act 1971 for an employee who had been unfairly dismissed. The National Industrial Relations Court was critical of the judgment of Arnold J in Stocks v Magna Merchants. The Court said at 209-210:
"The essence of the cause of action for wrongful dismissal is that the employee is dismissed prematurely. If it is a fixed term contract, he is dismissed before the end of the term. If it is a running contract, his contract is terminated without notice or with less notice than that to which he is entitled under the contract. The damages to which he is entitled consist of the net loss flowing from the premature nature of the dismissal. Prima facie the measure of damage is what the employee would have earned between the time of dismissal and the earliest moment at which he could properly have had his contract terminated, less any benefits which he has received and which he would not have received if he had been properly dismissed, i.e. had been allowed to work until the end of the notice or the end of the fixed term contract. We are unable to agree with and follow Stocks v Magna Merchants Ltd. because it appears to overlook the fact that Mr. Stocks would have received his redundancy payment even if his contract had been allowed to run to the end of its term, that being the earliest date on which it could properly have been determined. If, contrary to our view, the decision in Stocks v Magna Merchants Ltd. is correct and of general application, it would produce some very startling results. To take simple figures, suppose that a man aged 40 or over is dismissed on account of redundancy. He is then entitled under the Act of 1965, to a lump sum calculated at the rate of one-and-a-half weeks' wages for every year of his service, provided only that he has a minimum of 104 weeks' continuous service. If one assumes a man with only four years' service, his redundancy payments will amount to a sum equal to six weeks' pay and his entitlement to notice will be only two weeks: see section 1(1)(b) of the Contracts of Employment Act 1972. Accordingly, if the decision in Stocks v Magna Merchants Ltd. is right, any employer can dismiss such an employee summarily without wages in lieu of notice, because the redundancy payment will be set off against and exceed the amount of money due in lieu of notice."
That case concerned the payment of compensation for unfair dismissal. However the correctness of Stocks v Magna Merchants arose again in Basnett v J & A Jackson [1976] ICR 63 which was a case in which the plaintiff was seeking damages for wrongful dismissal. It is, in many respects, an authority on all fours with the present case. Crighton J concluded that no deduction should be made from the damages payable to the plaintiff of the redundancy payment made to him under the Redundancy Payments Act 1965 (UK). Basnett had been employed as a works manager at a brickyard by a company which made bricks. He had commenced with the company at the age of 18 and was 59 at the time of the termination of his employment. He was a valued employee but, as a result of the closure of the brickyard at which he worked, his employment was terminated effective 1 October 1974. At that time he was employed under a contract of 1 November 1972 under which he had agreed to work as the works manager for five years. When dismissed he had been paid a redundancy payment of 1,609.68. The salary he would have received for the residue of the contractual term was 8,811. It had been agreed between the parties that the damages to which Basnett was entitled was 9,977.95 which included the 8,811. In issue was whether the 1,609.68 should be deducted from that sum.
In his reasons for judgment, Crighton J set out at length the arguments of the parties. His conclusion was, in substance, to prefer the argument of the plaintiff. The submissions of the plaintiff had been that the decision of Arnold J in Stocks v Magna Merchants had been based on notions of remoteness. It was submitted that the question of the deductibility of the redundancy payments should depend on a policy of justice and reasonableness as discussed in Parry v Cleaver. Submissions were also made that the policy of Parliament evident in the Redundancy Payments Act 1965 (UK) was one that militated against deductibility. While it is difficult to follow entirely the arguments that had been put on behalf of Basnett and adopted by Crighton J, they appeared to turn on the character of the redundancy payments made under the Redundancy Payment Act 1965 and that such payments cannot be viewed as compensation for future loss of earnings. Rather they are an accrued right reflecting, in part, past employment.
The last authority to which I should refer is Baldwin v British Coal Corporation [1995] IRLR 139. Baldwin had been a coal mine deputy and his employment was terminated in March 1988 when he accepted a voluntary redundancy. He had not been given the full twelve weeks notice to which he was entitled under his contract of employment. He alleged that his employment had been wrongfully terminated and sought damages equivalent to twelve weeks wages plus other amounts which are not presently relevant. His employment had been terminated with some urgency so that he would be entitled to payment of 5,000 as a special redundancy payment for employees in his position. The twelve weeks wages approximated 3,000 and in issue was whether the payment of 5,000 could be brought into account in determining damages. The argument that allowance should be made for the payment of 5,000 was summarised by Garland J in the following passage at 141:
"Should the plaintiff give credit for the 5,000? Mr Falconer QC accepted that the general rule was that a redundancy payment did not fall to be deducted from damages for personal injuries or wrongful dismissal. The nature of a redundancy payment puts it, save in exceptional cases, firmly within the category of collateral benefits defined in Parry v Cleaver [1969] UKHL 2; [1970] AC 1, as reconsidered and affirmed in Smoker v London Fire and Civil Defence Authority [1991] IRLR 271, and a fortiori where the plaintiff would have been redundant in any event irrespective of personal injury or wrongful dismissal. I had the advantage of a full and careful review of all the authorities, particularly Mills v Hassall [1983] ICR 330, Hodgson v Trapp [1988] UKHL 9; [1989] 1 AC 807; Smoker; and in particular Wilson v National Coal Board 1981 SLT 67. Mr Falconcer QC submits that where the legal wrong (short notice) led to the plaintiff receiving a redundancy payment he would not otherwise have received, it should be deducted relying on Wilson and Mills v Hassall. This submission is, of course, the other side of the coin to where the plaintiff would have been redundant in any event."
Garland J appears to have accepted these submissions and concluded at 142:
"I am in no doubt that if it has to be assumed that there was a breach of contract, this is an exceptional case falling within the Wilson principle: because of the breach the plaintiff gained 5,000, albeit he lost approximately 3,000 gross. Had he been given contractual notice, he would have lost the 5,000 and gained 3,000 in return for 12 weeks' work, taking any holiday entitlement during that period."
The other authorities referred to in the written submissions of Mr Black were not directly in point in that they dealt with either the assessment for damages for personal injury or whether payments other than redundancy payments should be taken into account in assessing damages for wrongful dismissal or compensation for unfair dismissal. They were: Millington v T.H. Goodwin & Sons [1975] ICR 104; W Wilson v National Coal Board 1981 SLT 67; Mills v Hassell [1983] ICR 331; Smoker v London Fire & Civil Defence Authority [1991] ICR 449; Hopkins v Narcross PLC [1994] ICR 11.
The Agreement was certified under federal industrial laws. Provisions in federal awards or industrial instruments requiring the payments of severance pay have, in a general sense, their genesis in a decision of the Australian Conciliation and Arbitration Commission in the Termination ,Change and Redundancy Case (1984) 8 IR 34; 294 CAR 175.
The rationale for the payment of severance pay was discussed by the Commission in the following passage at IR 72 - 73:
"In overseas publications the purpose of redundancy pay has been expressed in a more limited way, akin to the views expressed in the CITCA Report previously referred to. For instance, in the publication "Workforce Reductions in Undertakings" edited by Edward Yemin, which deals with policies and measures for the protection of redundant workers in seven industrialized market economy countries, the author concludes:
"Severance allowance payable at the time of termination of the employment relationship appears generally to be intended more to indemnify workers for the loss of their jobs or to compensate them for past services than to provide income protection during unemployment (since it is payable whether or not unemployment ensues and is generally proportionate to length of service), although it no doubt in fact serves an income maintenance function during any period of unemployment that arises."
In the survey of the effects of the Redundancy Payments Act (United Kingdom) carried out by the Department of Employment (United Kingdom) the aim of redundancy payments was set out as follows:
"The purpose of redundancy pay was to provide compensation to the worker for loss of job, irrespective of whether it leads to any unemployment. The losses which the individual may suffer as a consequence of redundancy, such as loss of security, possible reduction in earnings and fringe benefits and the uncertainty and anxiety of changing jobs, may all be present in the redundancy situation even if he has managed to find another job immediately."
The CITCA Report summarizes the elements in monetary compensation for retrenchment as:
"- compensation for non-transferable 'credits' that have been built up, such as: accrued benefits like sick leave and long-service leave; loss of seniority, and loss of the employer's contribution to pension or superannuation
- compensation for the inconvenience or hardship imposed and assistance to the retrenched employee to make the change, with aims such as: to act as temporary income maintenance while the retrenched employee searches for another job; and to allow for the possibility of retraining or relocation to take up a new job
- an element that has a compensation component to the extent that it may allow the retrenched employee to take a share of the benefits that the employer expects from the change, and in which, if still employed, he or she could expect to share; alternatively, this element might be considered as the price of industrial peace."
Having regard to the other aspects of our decision and having regard to what we have said about the existence of, and reason for, unemployment benefits we do not believe that the primary reason for the payment of severance pay relates to the requirement to search for another job and/or to tide over an employee during a period of unemployment.
Furthermore, we do not believe that it is appropriate, having regard to the equity considerations and the fact that we are prepared to make the redundancy provisions effective in all cases of redundancy no matter what the cause, to have regard to the third consideration referred to by CITCA.
We prefer the view that the payment of severance pay is justifiable as compensation for non-transferable credits and the inconvenience and hardship imposed on employees. In this respect we agree with the conclusions contained in the CITCA Report but would indicate, at this stage, that in fixing the quantum we have been prepared to take into account the standards established in recent decisions of this Commission and the State Industrial Tribunals."
However it must be borne in mind that these observations were made in a context where federal awards generally prescribed that an employee's employment could be terminated on one week's notice: see (1984) 8 IR at 39. This is of some significance in the present case. The Commission, in the preceding extract, was not saying that severance pay could in no way nor in any circumstance be referable to the loss of future income. Rather it was saying that because the community had assumed the burden of making payments to the unemployed whose employment, as a broad generalisation, could be terminated on one week's notice or payment in lieu, the rationale for awarding severance pay had to be founded on considerations other than income maintenance at least as a primary reason. The considerations are those identified in the final paragraph of the preceding extract. However, in rejecting the notion of income maintenance being the primary reason, the Commission cannot be taken to be impliedly characterising the payment of severance payments to an employee on a fixed term contract of considerable length, as a payment entirely different in character and unrelated to the income that would have been earned during the residue of the contractual term. It was simply not an issue the Commission was called upon to consider. Indeed, it appears to me that the scheme adopted by the Commission was to confer an entitlement to severance pay in circumstances where the employer had a pre-existing award right to lawfully terminate the employment on short notice which probably, in many if not most cases, would have corresponded with the contractual right to terminate on notice. That is, on one week's notice.
Brimbank's liability for damages arises because, it is to be assumed for present purposes, it breached the contract of employment by terminating it other than in the manner contemplated by the contract itself. This act would expose it to damages which, prima facie, are the benefits Mr Black would have derived while employed for the residue of the contractual term. However, the act which constituted the breach was also the act that founded the entitlement of Mr Black to the payment of severance entitlements under the Agreement. Had the contract not been breached by its premature termination and it had run its course and the employment terminated by the effluxion of time, there would have been no payment under the Agreement. The purpose of compensatory damages, whether in actions in tort or contract, is to place the injured party in the same position he or she would have been in had the contract been performed or the tort not committed: see Haines v Beddal [1991] HCA 15; (1991) 172 CLR 60, Mason CJ, Dawson, Toohey and Gaudron JJ at 63. In contract, that is the embodiment of the principle in Robinson v Harman (1848) 1 Ex 85: see The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 80 per Mason CJ and Dawson J, at 98 per Dawson J, at 134 per Toohey J, at 148 per Gaudron J and at 161 per McHugh J. The payment of severance entitlements arose directly from the act which constituted the breach for which compensatory damages are now sought. It would, in my opinion, be inconsistent with the purpose for which compensatory damages are awarded to ignore the payment of severance entitlements directly arising from the act which constituted the breach when assessing damages flowing from it. Putting the matter slightly differently the damages are designed to put the party not in default in the same position as he or she would have been in had the contract been performed: see Wenham v Ella (1972) 127 CLR 456 at 460 per Barwick CJ and 471 per Gibbs J.
Moreover, it can be assumed that had Brimbank not terminated the employment in breach of the contract, it would have given effect to its contractual obligations in the way most beneficial to it: see Amann Aviation at 92 per Mason CJ and Dawson J. Thus Brimbank would have allowed the contract to run its course and conclude by the effluxion of time and not, with some four months to run, that is after the 12 months period in which retrenchments could not be effected, made payment of the severance entitlements which exceeded by a considerable margin, the cost of retaining Mr Black in employment.
When I invited written submissions on Stocks v Magna Merchants Ltd, I also raised with the parties whether clause 11 of the Agreement might have operated in the following way if Mr Black's employment had not been terminated in April 1995. When, consistent with clause 13 of the Agreement, Brimbank was able to retrench lawfully an employee, agreement could have been reached with Mr Black under clause 11 of the written contract. The minimum severance entitlements that could have been agreed to would have been those payable under the Agreement. On this basis, Mr Black's employment would have been terminated in the way contemplated by, and consistent with, clause 11 of the written agreement. Thus, on this approach, Mr Black would have remained in employment until probably March 1996 and then been retrenched and paid, under the Agreement, at least the amount he was paid in April 1995.
The response of Brimbank to this proposition was first that this was not a matter alluded to by counsel for Mr Black and its case had not been conducted on the basis that clause 11 may have applied. There is force in this submission. Moreover I accept, as submitted by Brimbank, that I can proceed on the basis that probably no agreement would have been reached in December 1995 (when notice could be given under clause 13) to pay Mr Black in March 1996 (when the notice period would have expired) or earlier at Mr Black's option (see clause 13(i)(iii)), a sum approximating the sum he had, in fact, earlier been paid under the Agreement. Brimbank would have permitted Mr Black's contract to run its course and would not have retrenched him.
In my opinion, there is no reason in principle why severance payments should, in a case such as the present, not be brought to account in assessing damages even though the rationale for severance payments has been said to be, at least as a primary reason, not to provide income during a period of unemployment. The awarding of damages at common law for wrongful dismissal (putting aside questions of damages for physical harm arising from psychiatric illness) in relation to a contract for a fixed term has the practical effect of providing the aggrieved employee, who has sought to mitigate his or her loss by seeking other employment, with the income and other monetary benefits that would have been earned or received for the residue of the contractual term but during which the employee was unemployed or underemployed in the sense of employed in less remunerative work. The practical effect of the severance payments to Mr Black in the present case was to provide him with compensation for the loss of a job, with a corresponding loss of the opportunity to earn income, and the associated trauma. It was a job which, in terms, had a finite period to run and for which he would derive finite financial benefits. In my opinion, certain of the payments made by reference to the Agreement were made to compensate for losses sufficiently similar in character to the loss for which damages are awarded (and claimed in this case) to warrant those payments being brought to account in assessing damages. They are the severance payment of $114,285.02 (though some discount might need be made for that component in it that is intended to relate to inconvenience and hardship of a non material kind as that component may be materially different in character to the loss for which damages are awarded at common law), the payment of $18,095.13 for unused accumulated sick leave that might have been taken during the residue of the contractual term, the payment of $11,904.69 for a period of notice that otherwise would have been worked had the contract run its course and the payment of $26,760.00 for loss of motor vehicle usage which would have been enjoyed during the residue of the contractual term and by reference to which the claimed damages have been calculated. Each of these amounts broadly reflects a component, arising directly or indirectly, in the sum claimed by way of damages. The sum $3,559.50 for outplacement support is in a slightly different position. It is not entirely clear to me what this payment is for. If it becomes necessary, I can give further consideration to its status in computing damages.
The authorities referred to by counsel for Mr Black are distinguishable. Both Crowden and Clay v Freda , involved damages for personal injury. The redundancy payment did not arise from, and was only indirectly linked to, the act that founded liability and the entitlement to damages. That is to be contrasted with the present case and the severance entitlements paid to Mr Black. As to Graham v Baker, the pension payments were of an entirely different character. They were "not provided in relief of any liability in others". As just discussed, the severance entitlements of Mr Black were paid, in significant part, to compensate him for the loss of his job flowing from the premature termination of his employment by Brimbank and the loss of the benefits he would otherwise have derived from the continued occupation of the redundant position. They were, in substance, paid to compensate Mr Black for the loss of his job flowing from the conduct of the employer. While they were not to satisfy a liability in a narrow sense, they were, in substance, to compensate for the action of the employer.
Cases such as Fryar, Michel and Newton do not, in my opinion, assist Mr Black. It may be accepted that payments equivalent to reasonable notice have been treated as being of a different character to redundancy payments. However, as just discussed, damages representing the forgone benefits under a fixed term contract are not. Poletti and Pacific Publications turn on the characterisation of a payment and the resolution of the question whether it was or was not made in satisfaction of an award obligation to make a payment of a particular type. By broad analogy, the same is also true of Monroe Schneider which concerned payment by a third party. Apart from that distinguishing consideration concerning the source of payment, the judgments of the Court nonetheless point to the characterisation of the payment as being decisive. So it is, for the reasons just given, in this case.
While I have some difficulties with the reasoning of Arnold J in Stocks v Magna Merchants Ltd, the basis on which the National Industrial Court said in Yorkshire Engineering that case was wrongly decided, namely that the redundancy payment would have been made even if the fixed term contract had run its course, does not apply in the present case. If Mr Black's employment had ceased at the end of the contractual term by the effluxion of time, there would have been no compulsory termination of his employment. Compulsory termination is an element in the definition of retrenchment in the Agreement and payments under it are conditional on there having been a retrenchment. Crighton J's judgment in Basnett appeared to turn, at least in part, on the policy underlying the Redundancy Payments Act 1965 (UK). It cannot be assumed, as I have endeavoured to explain, that that policy can be taken to underpin the rationale for the payment of severance pay in the circumstances of this case at least for the purpose of determining their relationship to losses suffered as a result of the premature termination of a fixed term contract. In a sense, the judgment of Garland J in Baldwin is unhelpful to Mr Black. The statement of principle that generally there is no deduction of redundancy payment appears to depend on redundancy payments being made in any event. In the present case it can be said, by parity of reasoning with what Garland J said in relation to what were perceived to be the special circumstances in Baldwin, Mr Black lost $170,668.64, accepting his figure for present purposes, but gained $174,604.34. Had he remained employed for the residue of his contractual term he would have lost the $174,604.34 but gained $170,668.64 by way of income and other benefits.
In my opinion the assessment of damages in the present case should proceed on the footing that the severance entitlements earlier identified which were paid to Mr Black have to be brought into account in determining the loss, if any, occasioned by what is presently assumed to be the unlawful termination of his employment in breach of his contract. If, as contended by counsel for Mr Black, the terms of the Agreement were terms of the contract of employment, the result would be the same for the reasons I have just given.
In giving judgment in these terms I have not determined a separate issue in the way contemplated by Order 29 of the Federal Court Rules. Rather I have followed the course referred to in Landsal Pty Ltd (in liquidation) v REI Building Society (1993) 41 FCR 421. I am conscious that it is often undesirable to isolate preliminary questions of law: see Rocklea Spinning Mills Pty Ltd v Anti Dumping Authority (1995) 56 FCR 406. In the present case the consideration of the preliminary legal issue was based on facts that were not in issue. It substantially resolves an issue that may well result in the disposition of the entire application which may be a course preferred by the parties. Indeed, I do not discount the possibility that the application may be settled by agreement. Moreover, the case had been listed for hearing for three days in Melbourne and it was obvious towards the end of that period that the time allocated would be insufficient to enable both the evidence to be led and full submissions put on all issues. As it transpired some additional time was found to enable submissions to be put on the issue I have dealt with in this judgment. There would have been insufficient time for all issues to be addressed and further time would have to have been found or extensive written submissions prepared. Either course would have probably resulted in significant additional costs in a jurisdiction where, prima facie, no costs are awarded: see s 347. It is for these reasons that I have dealt with the matter in this way.
However, I accept that if the application cannot be resolved on an agreed basis, Mr Black is entitled to have me determine all contentious issues of fact and law and for formal judgment to be given. I put it this way because, apart from an argument based on the effect of s 178(6), the conclusion I have reached would mean that his application, in substance, would fail in the sense that damages, if any, awarded would bear little relationship to the amount of approximately $174,000 particularised in his amended statement of claim. The course I propose to follow is to publish these reasons and list the matter for further hearing later this year. Regrettably the earliest dates I can resume the hearing, for the purposes of enabling the parties to put submissions on all residual issues, is the week commencing 22 June 1998. I propose to fix the matter for further hearing on 25 and 26 June 1998. Those dates can be vacated if the application is settled in the meantime. I also propose to list the matter for directions on 26 February 1998 to ensure that any steps that might need to be taken prior to 25 June 1998 can be considered by me and directions given.
|
I certify that this and the preceding twenty-six (26) pages are a true copy of the Reasons for Judgment herein of the Honourable
Justice Moore. |
Associate:
Dated:
|
Counsel for the Applicant: | B D Lawrence and C B O'Grady |
| Solicitor for the Applicant: | A J Macken & Co |
| Counsel for the Respondent: | C N Jessup QC and T Ginnane |
| Solicitor for the Respondent: | Coltmans Price Brent |
| Dates of Hearing: | 13, 14, 15 and 16 October 1997 |
| Written submissions complete: | 5 December 1997 |
| Date of Judgment: | 12 February 1998 |
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