HALL -v- ARTWORKS IN BRONZE PTY LTD [1997] IRCA 131

DECISION NO:131/97 C A T C H W O R D S INDUSTRIAL LAW - Termination of employment - one written warning re performance - "countless" oral warnings - despite written warning and oral warnings Respondent relied on Applicant to perform many tasks allocated to her for 13 months after written warning - relief staff discovered extensive backlogs while Applicant on leave - Respondent prepared written letter of termination and advised Applicant of termination of employment by telephone before Applicant returned from leave - grounds for the termination were not put to the Applicant until telephone call advising dismissal - held the Applicant must have known and did know performance inadequate for a long time - Applicant had no opportunity to respond to formal and final allegations - breach of section 170DC but not appropriate in circumstances to order compensation Workplace Relations Act 1996 ss.170DC, DE, EA, EE. HALL -v- ARTWORKS IN BRONZE PTY LTD No. VI-2400 of 1996 Before: Ryan JR Place: Melbourne Date: 19 March 1997 INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI-2400 of 1996 B E T W E E N : DEBRA ANN HALL Applicant AND ARTWORKS IN BRONZE PTY LTD Respondent MINUTES OF ORDERS Judicial Registrar Ryan 19 March 1997 THE COURT ORDERS: 1. That the Application 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 VICTORIA DISTRICT REGISTRY VI-2400 of 1996 B E T W E E N : DEBRA ANN HALL Applicant AND ARTWORKS IN BRONZE PTY LTD Respondent Before: Ryan JR Place: Melbourne Date: 19 March 1997 REASONS FOR JUDGMENT (Delivered ex tempore) (Revised from transcript) The Applicant seeks compensation for what she claims was unlawful termination of her employment. She appears to have performed a reasonably wide range of office duties for the Respondent company which operates a casting foundry producing fine art often on behalf of other artists. The Managing Director of the Respondent company described the work as "artists working for artists". The Applicant acted as a receptionist. She also was responsible for some but not all job cards, time sheets, personnel and pay for about 13 staff, some job costings and quotations, general office work and banking. She was the Administration Officer for the company. She worked for the Respondent from 26 March 1991 to 26 August 1996. The Applicant was represented by Mr McDonald of McDonald Murholme Solicitor. Eric Hanby, a director, conducted the case on behalf of the Respondent. The Managing Director, Peter De Garis, was present. Messrs De Garis and Hanby and the Applicant gave evidence. It is obvious from the evidence of Mr De Garis that while he was managing director he was not particularly skilled in management. Mr De Garis is a sculptor with post graduate qualifications from the Victorian College of the Arts. The Court has no reason to conclude that he is anything other than skilled and competent in the professional, technical, "hands on", artistic side of the business. His own evidence suggests that he left most of the day to day invoicing and payment of accounts to the Applicant. The Respondent company operated as a small highly specialist business where most, and perhaps all, employees and the two principal directors operated on the basis of mutual trust. I have concluded that Messrs Hanby and De Garis, and especially the latter, placed considerable trust in the Applicant and continued to place considerable trust in her even after she was given a detailed written warning for unsatisfactory work performance on 3 July 1995. I also accept the evidence of Mr De Garis that he gave the Applicant countless verbal, that is, oral warnings. I doubt that these oral warnings were direct or precise. I have concluded that the oral warnings were in general, imprecise, indirect and inadequate terms, but I have nevertheless concluded that Mr De Garis gave such warnings and that he gave them often after the written warning of 3 July 1995. Despite these warnings and, indeed, the dismissive approach to them taken by the Applicant, Mr De Garis continued to place considerable trust in the Applicant. This approach was not justified and reflects poorly on Mr De Garis. His "countless" oral warnings suggest that he had some awareness that the Applicant was failing to perform her duties adequately. Despite that, he continued to rely on the Applicant to perform the many tasks allocated to her. The written warning of 3 July 1995 (Exhibit A2) reads as follows: "Dear Debbie

Re: Unsatisfactory work performance

We wish to make you formally aware that in view of recent events and an overview of tasks not completed to date we are of the belief that your performance as Office Administrator has not been satisfactory and that should these matters not be resolved we will be forced to terminate your employment. In particular we are concerned with continual failure to arrive for work at 9 am. Following numerous discussions with myself you should be aware that it is vital to this company and its employees that you attend this office promptly at 9 am each work day. Our clients expect their calls to be answered at the opening of the business day. I am sometimes not able to be here at this time and therefore it is necessary for you to act for me in my absence. Your failure to do so has meant that on occasion other staff have not been able to proceed with their duties. You can recall, for example, when the staff including myself were unable to gain access to the building when it was expected that you would be here at the required time. Also there are times when I have had to start elsewhere, I have been made aware that you are not present in the office in my absence. Inability To Keep Up With Time Sheet And Job Reporting Requirements Of Your Job: As you are aware these mechanisms are our main way of accessing the running of individual jobs, of costing and review. I have not been able to look at a consecutive month of job sheets since 1994 and the situation is now critical. Bookkeeping and Financial Records: As you will recall, Eric (ie. Mr Hanby) and I had a meeting with our accountant approximately three weeks ago. I said to you at that time and have reiterated to you weekly since that he requires our monthly figures in order that he can review our financial situation and our management practices. Above all, this task is to give us a clear up-to-date picture of how we are travelling. You have said to me that you are finished up to November which in itself is a highly unsatisfactory situation seeing that we are now in the new financial year. However, we are entering week four, and Mr Don Douglas still has not received the records up to November, and I am concerned as to how and when he will receive those and the rest which are urgently required. In summary, as Office Administrator, you are in a position of considerable trust, being required to work with little supervision and expected to be able to manage your time and complete the tasks allocated to you. We are of the belief that your current work performance falls well short of all these requirements. Within the next few days you will be asked to discuss this notice and you will have the opportunity to put forth your point of view. Yours faithfully Peter De Garis Managing Director." The Applicant concedes that Mr De Garis discussed the letter with her. I found the Applicant vague, unimpressive, and at times, evasive witness. She claimed that when she discussed the warning with Mr De Garis the latter indicated that he really did not have a problem with the lack of punctuality, and that it was Mr Hanby who had a problem with that aspect. When pressed by the Court, the Applicant indicated that Mr De Garis used words to the following effect: "You are fine, you are not late". It is often difficult when a party is unrepresented, and the Court neglected to put the Applicant's claims in this respect to either Mr De Garis or Mr Hanby, but I have to say that the Court finds it inherently unlikely that Mr De Garis would have resiled from his written warning on punctuality and indicated that he had no problem with the punctuality, and it was only a concern held by Mr Hanby. After all, Mr Hanby did not work at the foundry premises in St Kilda. On his evidence he had very little to do with the Applicant. In respect to the other more important concerns set out in the letter of warning, namely, inability to keep up with time sheets, job reporting, bookkeeping and financial records, the Court has noted that the Applicant gave evidence that in the discussion with Mr De Garis soon after 3 July she attributed these problems to the computer "crashing twice", backing up work on a corrupted disk, inadequate time because of telephone interruptions, and receptionist and other duties. The Applicant also gave evidence that during her discussion of the warning letter, in response to a query from Mr De Garis as to what she needed to get these areas up-to-date, she suggested she be provided with additional assistance or overtime or be allowed to take work home with her at the weekends. Her evidence was that Mr De Garis responded that he would see what he could do, but that he did not know whether he could afford anyone from the technical side to help with administration. Again, without professional representation the Respondent did not, through either Mr Hanby or through Mr De Garis, lead any evidence as to what Mr De Garis recalls of the discussion of the warning letter. Mr McDonald was certainly under no obligation to raise this with Mr De Garis and, regrettably, the Court neglected to do so, However, the Applicant's memorandum of 28 July 1995 to Mr De Garis is instructive. It is Exhibit R6. This memorandum appears to result from a request from Mr De Garis, probably a request made when he discussed with the Applicant the written warning of 3 July 1995. The memorandum reads: "TO: PETER DE GARIS FROM: DEBBIE HALL DATE: 28TH JULY, 1995 RE: STATUS OF COMPANY BOOKS YEAR '94 - '95 __________________________________________________________ Peter, As requested, please find hereunder: a) list of duties required for completing accounts ready to hand to Accountant b) list of duties required to complete the financial books - year ending 12994/95 The following are the complete list of duties required to complete. Trust Account Reconciliation Debtors Creditors ` Stock Inventory Work in Progress Annual Leave Liability Schedule Sales Cash Payments Cash Receipts Reconciliation of Cash Payments" The Applicant then sets out what she describes as a list of duties which she still has to complete, and she identifies these duties as: · balance · debtors · work in progress (whatever that might mean) · inventory and stock The Applicant lists these matters as requiring completion for the month December 1994 and for the first six months of 1995 which she specifically names in the memorandum. The memorandum then continues: "All other duties as contained in the first list are completed." The Court notes that if balance, debtors, inventory and stock have yet to be completed for the first six months of 1995, and for December 1994, then the list of duties on the first page of the memorandum could not possibly be complete. The memorandum continues: "I am trying to do them as quickly as possible in the free time I get during the day. I shall keep you up to date on my progress. As someone has our Cash Payments and Receipts book, could you please obtain our Cash Receipts Debtors value received for the months December '94, January '95, February, March, April, May and June, so I can ensure that the Debtors balance. Don Douglas presently has our July, 1994 completed group of accounts. I shall finish the balance of work required as quickly as I can and forward them to Don, or, as advised. Sincerely, DEBBIE HALL" As Mr Hanby pointed out in a submission to the Court, the second last paragraph of the memorandum is in curious terms suggesting as it does that "someone" has the Cash Payments and Receipts book. The Court has already observed that Mr De Garis through his evidence has demonstrated inadequate management of the office, and inadequate supervision of the Applicant. The written response of 28 July and the lack of evidence of any further remedial action taken by Mr De Garis until the involvement of a bookkeeper or accountant reflects poorly on Mr De Garis. However, if anything, it puts the Applicant in an even less favourable position. She is concedingin writing that she has yet tocomplete debtors balance, inventory, stock and work in progress - whatever that may mean - and that all these aspects of her work for the seven months, December '94 to June 1995, were still all outstanding as at 28 July 1995. Furthermore, she admits in writing that she does not have and presumably does not know the whereabouts of a fundamental and important record, the Cash Payments and Receipts book. The Court observes that the response in writing by the Applicant on 28 July 1995 and the attitude reflected in that response, an attitude confirmed by the Applicant in her evidence on 17 March 1997, might well have justified action against the Applicant at that time which could have led to lawful termination for valid reason. However, apart from the evidence of Mr De Garis of "countless" oral warnings which were never noted or recorded and of which no precise evidence as to time, nature or place was given, no further action appears to have been taken until November 1995. The Applicant gave evidence that between July and November 1995 Mr De Garis told her that her salary would be reduced because the company needed to employ a bookkeeper or accountant and that she could "like it or leave it". She stated that the reduction in salary took place on 5 November 1995 and that she was in no position to leave her employment. In response to a question from the Court as to why no further action of a formal nature was taken after 3 July 1995, in respect to the performance of the Applicant, Mr De Garis replied: "We brought in an accountant. We counselled. There were countless verbal warnings." Mr De Garis gave most of his evidence-in-chief in response to questions from the Court. He stated that in late July 1996 he discussed with the Applicant arrangements to apply while he was on leave from early to mid-August. He agrees with the Applicant that she raised with him a need for minor surgery on her wrist and that they both agreed that, when he returned in August, she would take a couple of days sick leave and two weeks recreation leave and that during that period the Applicant would have and recuperate from the surgical procedure. In the hearing neither Mr De Garis nor the Applicant was precise as to dates. The Court suggested to Mr De Garis that he returned to work on 12 or 19 August. The letter of termination, and the general timetable suggest that Mr De Garis returned to work on Monday, 12 August, not on Monday, 19 August. On the Monday he inspected the workshop or foundry and concluded that the casting he had expected to be done in his absence has not been done. He states that he asked the Applicant why the casting had not been done and that she replied that the main material supplier, Commercial Minerals Limited, had been unable to supply material and without such material the foundry apparently did not have sufficient material to undertake the casting. Mr De Garis deposed that on the afternoon of Monday, 12 August he discussed with the Applicant and a Miss Rebecca Johnson arrangements for the latter to relieve the Applicant during her leave, and that the Applicant and Ms Johnson worked together on the afternoon of 12 August and on Tuesday, 13 August and Wednesday, 14 August. The Applicant began her leave on Thursday, 15 August, and on that day Ms Johnson appears to have discovered what Mr De Garis had failed to discover in the previous 12 months, namely that: (1) the majority of the accounts of the Respondent's 18 suppliers were more than 30 days overdue; (2) Commercial Minerals had stopped supply on 1 July 1996 and on 1 August 1996, and (it was later discovered) that Commercial Minerals had also stopped supply on 15 November 1995 and on 1 February, March, April and May 1996; (3) Commercial Minerals had advised by letter dated 23 November 1995 (Exhibit R3) as follows - "During a recent review of our customer accounts we have noted that your account has regularly exceeded our agreed trading terms, 30 days from statement. In order to reduce the amount of time spent by both our staff and yours in addressing overdue payments, we shall commence strict adherence to the agreed payment terms from December 1, 1995. This will take the form of stop supply instructions being issued to our warehouses on the first day of the month unless payment is received or agreed prior arrangements are made. Yours faithfully, Commercial Minerals Limited Mike Taylor Foundry Products Manager." (4) Allsafe Safety Industries were holding an account in excess of 30 days. This, was confirmed later on 16 August to be an account held in excess of 45 days - (see Exhibit R1) (5) Wacker Chemicals Australia Proprietary Limited had stopped supply. Details were confirmed by a letter dated 18 September 1996, (Exhibit R2). On her first day Ms Johnson also reported difficulty in retrieving job cards and time sheets from the computer and a lack of evidence of invoices despatched during the period Mr De Garis was on leave. She suggested - and this, by the way, is all the evidence of Mr De Garis - she suggested and Mr De Garis agreed that her mother be engaged to assist in bringing the accounts up to date. On Friday, 16 August, Ms Johnson and her mother began to go through a backlog of job cards on the computer and according to Mr De Garis provided him with information which led him to discover what he described as "12 months job cards not completed or put in hard copy from the computer". Mr De Garis also stated that Ms Johnson and her mother went through a box of time cards, slips of paper in relation to the sand foundry, accounts for sand and metals and hours for the sand foundry and other staff. On Monday, 19 August Ms Johnson and her mother looked at what Mr De Garis described as "every facet of administration" and located superannuation "anomalies". About Tuesday, 20 August they discovered what was alleged to be the incorrect payment by the Applicant of casual rates to a part-time employee, Benjamin John Morieson - (see Exhibit R4). Mr De Garis stated that on Tuesday, Wednesday and Thursday, that is 20 to 22 August, he made a former director, Terry Bird, and an existing director, June or Jane Saunders, aware of the state of affairs. His evidence was as follows: "I made up my mind that it was detrimental to Debbie (the Applicant) to bring her back into the business, to give her a second warning to hope that things would improve. I perceived the business to be in peril. Over that weekend I formulated a letter. I typed it out. I rang her on the Monday night, (i.e. 26 August 1996). I asked her about back-up disks. She said "yes, they are down in the drawer; what is wrong?" I said "unfortunately, I have to let you go." Later in cross-examination Mr De Garis said: "It was a simple short call. I was upset and she was upset. I did say why I was terminating the employment. I said precisely what was in the letter (i.e. the letter of termination). I reiterated what was in the letter." Earlier, in evidence-in-chief, Mr De Garis stated he personally posted the letter of termination to the Applicant after he left the workplace about 6 pm on 26 August. The letter is Exhibit A4 and reads as follows: "Dear Debbie, During your current annual leave I have instituted a re-organisation and clean-up of the office area. It has become apparent that the essential office records, time sheets, job cards and in every part of our operations have seriously fallen behind any form of completion and systematic record keeping. The situation has developed to the point where I must totally upgrade the direction and manner of the business's day to day operations. I regret to inform you that I must terminate your employment as administrator. I realise that you are due to return to work sometime during the week. I am obliged to give you four weeks notice of termination. I suggest it may be of some help to you if I paid you four weeks in advance to give you time to seek other employment. According to the employment records, you are still entitled to 15.25 days annual leave. This will be included in your final pay. I find that this is a difficult decision to make, but one I feel I must make for the long term survival of the business. I am grateful for your help over the years and hope the future brings you success. Yours sincerely Peter De Garis Managing Director." The Applicant's evidence of the telephone call was as follows: "Peter asked me where were the disks. I told him. I asked him why. He said, 'We are just clearing out the computer from when you started.' I presumed they wanted to back-up. I said, 'How are you going?' He said, 'Not too good. I am sorry, but I am going to have to let you go. I am obliged to give you four weeks. It is best that you do not come back. You should take the time to look for a job.' I was shocked. I was speechless. I had worked for 5˝ years and he treated me like that. He said, 'Sorry, that is it.' I rang back 15 minutes later; he was not there. I asked that a message be left on his door and to tell me if he was not going to be there the next day. I telephoned the next day. He was not there. I collected an employment separation certificate about a week later." Neither Mr Hanby nor Mr De Garis articulated at the hearing in precise terms why the Applicant was terminated on the evening of Monday 26 August. However, Mr De Garis is quite open. He had decided by Sunday night, 25 August (at the latest), that the performance of the Applicant warranted dismissal. He personally typed out the written notice of termination during that weekend, either on Saturday 24 August or Sunday 25 August. He dated the notice 26 August 1996. He stated in the second sentence of his letter: "It has become apparent that the essential office records, time sheets, job cards and in every part of our operations have seriously fallen behind any form of completion and systematic record keeping." He clearly, and in the Court's view correctly, held the Applicant responsible for the inadequate records including time sheets and job cards. He stated in his second-last sentence: "I find that this is a difficult decision to make, but one I feel I must make for the long term survival of the business." The Court does not find it necessary to touch in any detail on claims by the Applicant that she was grievously overworked and under-resourced. On the basis of the evidence the Court does not accept that to be so. To the extent that there is a conflict between the evidence of the Applicant and the two Respondent witnesses, the Court prefers the evidence of the latter. The Court is not satisfied that the Applicant should bear responsibility for alleged mistake in paying Mr Morieson casual rates. The Court does not attribute inadequate performance to the Applicant in respect of what was described earlier in the judgment as "superannuation anomalies". The Court does not accept that the Applicant should bear the entire burden and responsibility for the regular late payment of supplies. Mr De Garis as Managing Director and as the Applicant's direct supervisor simply failed to come to grips with, or perhaps even face, the consequences of the undoubted inadequacies in the Applicant's approach to job cards, invoices and accounts payable and accounts receivable. Eventually Mr De Garis did come to grips with these matters. Eventually he faced the consequences. It seems that the credit lies not with him but with Rebecca Johnson and her mother, Anna. The Court has already indicated that it accepts that Mr De Garis gave the Applicant countless, but imprecise, oral warnings. The Court is not convinced that, in these oral warnings, Mr De Garis laid it on the line in the sense that he had spelled out the consequences in the letter of 3 July 1995 when he stated: "Should these matters not be resolved, we will be forced to terminate your employment." On the other hand, in cross-examination, Mr De Garis responded firmly as follows: "I strongly disagree I never said her employment was in jeopardy. I said it once or twice a month as I reviewed the work she had not done." The Court has said more than once that, in general terms, it prefers the evidence of Mr De Garis over that of the Applicant. The Court accepts that while he probably approached his oral warnings obliquely and inadequately, the Applicant must have known and did know her performance was inadequate and had been inadequate for a long time. Be that as it may, when matters came to a head because of the work of Ms Johnson and her mother, the Applicant was given no opportunity to respond to the serious and final allegations written by Mr De Garis on 24 or 25 August in a letter dated 26 August and conveyed to the Applicant by telephone about 6 pm on 26 August and presumably received by her in written form a day or so later. Section 170DC of the Work Place Relations Act 1996 reads as follows: "An employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless (a) the employee has been given the opportunity to defend himself or herself against the allegations made, or (b) the employer could not reasonably be expected to give the employee the opportunity." I find that the Applicant was given no opportunity to defend herself against the formal and final allegations conveyed to her by telephone on the evening of 26 August. I do not find that the circumstances were such that her employer could not reasonably be expected to give the Applicant that opportunity. In that sense I find that the Respondent breached s170DC, but only in relation to the final allegations conveyed on 26 August. The Applicant had been on written notice in respect of performance from 3 July 1995. She had been warned on a number of occasions, albeit obliquely and inadequately, and without precision or record. While I have found a breach of s170DC, for the reasons already outlined, I do not consider it appropriate, in the words of s170EE(2), "in all the circumstances" of the case, to make an order requiring the employer to pay compensation to the employee. It follows that the application for compensation pursuant to s170EA of the Work Place Relations Act 1996 should be dismissed. The order of the Court is that the application be dismissed. MINUTES OF ORDERS THE COURT ORDERS: 1. That the application 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 11 pages are a true copy of the reasons for judgment of Judicial Registrar Ryan. Associate:

Dated: 9 April 1997 Solicitors for the Applicant: McDonald and Murholme

Counsel for the Applicant: Mr A McDonald For the Respondent: Messrs E Hanby and P De Garis Date of hearing: 17 and 18 March 1997

Date of judgment: 19 March 1997