Sengos and Madeleine Trading Pty Ltd v FAI Home Security Pty Ltd [2001] NSWIRComm 175

Industrial Relations Commission of New South Wales in Court Session

CITATION : Sengos and Madeleine Trading Pty Ltd v FAI Home Security Pty Ltd [2001] NSWIRComm 175 APPLICANTS Paul Sheridan Sengos PARTIES : Madeleine Trading Pty Ltd

RESPONDENT FAI Home Security Pty Ltd FILE NUMBER: IRC 1391 and 1392 of 2000 CORAM: Marks J CATCHWORDS : Unfair contract - Aplicants accused of improper behaviour and engagements terminated - Held to amount to unfair conduct - Compensation awarded including an amount for being excluded from attending sales conference, but not in respect of a corporate applicant. LEGISLATION CITED : Industrial Relations Act 1996 s 106 HEARING DATES: 07/16/2001; 07/17/2001; 07/18/2001; 07/19/2001 DATE OF JUDGMENT: 08/02/2001

APPLICANTS Mr J F Hassett Hassett Dixon Solicitors

LEGAL REPRESENTATIVES: RESPONDENT Mr A R Moses of counsel SOLICITORS Browne & Co

JUDGMENT:

INDUSTRIAL RELATIONS OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J 2 August 2001

Matter No IRC 1391 of 2000 SENGOS v FAI HOME SECURITY PTY LTD

Matter No IRC 1392 of 2000 MADELEINE TRADING PTY LTD v FAI HOME SECURITY PTY LTD Applications under s106 of the Industrial Relations Act 1996

JUDGMENT 1 By summonses for relief filed under s 106 of the Industrial Relations Act 1996 ("the Act") Paul Sheridan Sengos and Madeleine Trading Pty Ltd have each commenced proceedings claiming relief against the respondent FAI Home Security Pty Ltd. Each of the summonses alleges as against the respondent, in effect, unfair conduct which arises out of the same set of circumstances. By arrangement between the parties each of the summonses was heard concurrently with evidence in the one being treated as evidence in the other.

2 The applicant Madeleine Trading Pty Ltd is a corporation associated with Mark Aliprandi. That company provided the services of Mr Aliprandi to the respondent. Both applicants entered into an "Independent Agent's Agreement" with the respondent by which they were engaged to sell back to base alarm monitoring agreements and upgraded alarm systems to existing customers of the respondent who already had an FAI security system installed in their premises. Agents were supplied with a list of potential customers by telemarketers who utilised a customer database for this purpose.

3 The Agent's Agreement was in writing. Relevantly it provided that the respondent might terminate the agreement by giving 48 hour's written notice without the need to provide any reason for termination. There was also provision for the agent to terminate upon giving the same notice. The respondent could also terminate summarily and without notice in the event of serious misconduct.

4 Agents were paid by commission only. They were given some training. Agents were required to apply their "full resources to the Business during the Term and will not be engaged or interested (whether directly or indirectly) in any other business without written approval from FAI Home Security. Such approval will not be unreasonably withheld." There was also a non-compete clause to apply after termination of the agreement which had both time and distance restrictions.

5 Mr Sengos commenced as an agent on 23 August 1999. Mr Aliprandi commenced working as an agent through Madeleine trading Pty Ltd on or about 10 January 2000.

6 Mr Sengos soon distinguished himself as being a successful agent earning high commissions and became for a period the respondent's most successful agent in terms of remuneration. He was later promoted to a sales manager's position.

7 These proceedings arise out of discussions between a representative of the respondent and Messrs Sengos and Aliprandi which took place on 24 February 2000. On 15 February 2000 Mr Sengos said that he saw an advertisement in the Sydney Daily Telegraph which read in part: "Corporate Mobile Phone Sales. No experience necessary, we are expanding a new division and need 15 people urgently." Persons were asked to call Jan Vesico on a mobile telephone number. Mr Sengos had already sold mobile phones in the past and thought that he could utilise his contacts and make some sales and that this would not interfere with his agency with the respondent. He said that he felt at liberty to at least make inquiries with regard to the possibility of selling mobile phones. Mr Sengos called the mobile number and eventually spoke to a man named Dean Tomic. He did not know Mr Tomic. He arranged to meet Mr Tomic at an address 64 Lorraine Street Peakhurst. Mr Sengos asked Mr Aliprandi to accompany him to the meeting which he agreed to do.

8 A few days later Mr Sengos and Mr Aliprandi met with Mr Tomic at Peakhurst. There was no sign on the front of the building indicating the name of any business being conducted within it. During the course of that meeting there was a discussion concerning the proposal for the sale of mobile phones. Mr Sengos formed the impression that Mr Tomic did not know a lot about what was proposed. Mr Tomic confirmed this during the course of giving his evidence in the proceedings. Essentially the mobile phone operation was being handled by Ms Vesico and he knew little about it. There were some differences between the evidence given by Messrs Sengos and Aliprandi and Mr Tomic as to what was said at that meeting. In any event it is clear that during the course of the conversation Mr Sengos mentioned that he was working for FAI Home Security. Mr Tomic said that he used to work for that company but now worked for a company known as Universal Home Security. This was the first occasion on which mention of Universal Home Security had been made. It was asserted by all three persons that there was no detailed discussion concerning the business of the respondent nor was there any detailed discussion about the business of Universal Home Security. There were different recollections as to how long the meeting lasted. The meeting ended inconclusively. On 18 February 2000 Mr Sengos forwarded a facsimile to Mr Tomic expressing interest in obtaining a written proposal about the selling of mobile phones. Mr Tomic did not respond to that facsimile transmission. He said that he gave the document to Ms Vesico who he understood did nothing about it. Mr Sengos said that he had never received a response to that fax.

9 Evidence was given for the respondent by Matthew Rourke a director of a company which operated a distributorship for the respondent. He did not know Mr Sengos but had known Mr Tomic for three years. He said that he called in to Mr Tomic's office at Peakhurst on or about 2 February 2000 to pay a social call. In view of the evidence which he gave, Mr Rourke must have been mistaken about that date. It must have been closer to 18 February 2000. In any event Mr Rourke said that whilst waiting in the reception area he noticed a letter on the desk in front of him addressed to Mr Tomic which he started to skim. On the bottom of the letter was the name Sengos which he had previously heard, and thought that he had heard it in connection with the respondent's business. He recollected that the letter said that Mr Sengos was interested in doing business with Mr Tomic with respect to "some proposal" but that he was unable to do anything until after he had attended a conference being organised by the respondent on Hamilton Island. Mr Rourke asked Mr Tomic about the letter and about Mr Sengos and Mr Tomic said "Oh, it's just some stuff that we are doing."

10 Mr Rourke then had a conversation with a Ms Tamara Hood who worked for the respondent in which he said that he had " …. read some information at another security company that he (ie Mr Sengos) might have been doing some work for them, or something in regards to that." Mr Rourke then received a telephone call from Mr Allan Weller who was then the International Compliance Director of the respondent. After being criticised by Mr Weller for being at the offices of Universal Security Mr Rourke told Mr Weller: "I read a letter at Universal Security from Paul Sengos stating that he and a friend of his were interested in a proposal/discussion that he had with Tomic but that he couldn't proceed any further until the Hamilton Island conference for the VIPs. My interpretation of what I saw, even though I can't remember the exact words I read, was that it seemed like Sengos and another person were doing or were looking to do some work with Universal Security."

11 I should interpolate at this stage that Mr Rourke in his evidence said that sometime after these proceedings had been commenced he met Mr Tomic socially. After discussing the possibility that Mr Rourke would have to give evidence in these proceedings Mr Tomic said: "The letter was in regards to a mobile phone proposal. Paul Sengos was looking at becoming an agent for their mobile phone dealership which they are running from the same premises that Universal Security is operating from and that's all it was in regards to. They feel very confident with the case that they had because it was purely to do with mobile phones."

12 Both Mr Sengos and Mr Aliprandi had qualified to attend a "Hamilton Island VIP" sales conference conducted by the respondent commencing on 20 February 2000 and ending on 23 February 2000. Qualification for this conference depended upon achieving a certain sales level. Mr Sengos had easily achieved the sales level and had become entitled to business class 'plane travel and to take his partner with him.

13 On 18 February 2000, in the late afternoon, Mr Sengos telephoned Mr Weller in response to an earlier message. There was a conversation between them, the evidence about which differed substantially. In any event it is clear that Mr Weller raised with Mr Sengos concerns about him having attended the offices of Universal Home Security. In that conversation Mr Weller also referred to Mr Aliprandi as having visited the same office. Mr Weller told Mr Sengos that his ticket to the Hamilton Island conference was cancelled. Mr Weller said that Mr Sengos volunteered to tell Mr Aliprandi that his ticket also had been cancelled. Mr Sengos denied that Mr Weller said this. In any event Mr Aliprandi was not advised by anyone that his ticket had been cancelled and he attended the airport only to be told there that his ticket had been cancelled, in circumstances which he said were embarrassing and distressing.

14 On Mr Weller's return from Hamilton Island there was a meeting which was attended by him and Messrs Sengos and Aliprandi. There is some suggestion that another executive of the respondent, Mr Youngman may have been present. Mr Weller said that he was. Messrs Sengos and Aliprandi made no reference to Mr Youngman's presence. Mr Youngman was not called to give evidence.

15 Again, there is a vast difference between the evidence given on the one hand by Messrs Sengos and Aliprandi and on the other by Mr Weller as to what was said at that meeting on 24 February. The thrust of the evidence of Messrs Sengos and Aliprandi was that Mr Sengos asked why they had been "suspended", asserting that they had done nothing and that their meeting with Mr Tomic had nothing to do with the respondent. Mr Weller is alleged to have replied sarcastically and to have asked for their resignations indicating that a severance payment would be made upon their entering into a deed of release.

16 Mr Weller's version is to the effect that Mr Sengos opened the conversation by making some complaints about the operation of the respondent's business as it impacted upon him as an agent. Mr Weller said there was then a detailed conversation about what had happened at the office of Universal Home Security and that he gave both Mr Sengos and Mr Aliprandi an opportunity of putting their side of the story which they declined to do.

17 It was common ground that after the 18 February 2000 neither Mr Sengos nor Mr Aliprandi was given any further leads to follow up and were, therefore, effectively deprived of earning any commission. Both applicants then sought legal advice and there followed correspondence between the respective solicitors for all of the parties culminating eventually in the issue of each of these summonses for relief filed in these proceedings on 31 March 2000.

18 In essence, the applicants asserted that the contractual provisions allowing termination of the agreements upon 48 hour's notice were unfair and that, in addition, there had been unfair conduct on the part of the respondent in terminating the contracts. The respondent countered by asserting firstly that the 48-hour provision was not unfair, secondly that the respondent had been justified in terminating the applicants' contracts and in the alternative that the applicants had abandoned their contracts. In connection with the second of these matters the respondent said that firstly the respondent was entitled to terminate the agreements and secondly even if it had not been so entitled, there was no unfair conduct on the part of the respondent because Mr Weller had given each of the applicants an opportunity to explain the position fully and they had declined to do so.

19 It is obvious from the preceding narrative that the fate of these proceedings depends in large measure upon a determination about what happened during the course of the meeting of 24 February. Mr Rourke was obviously not present during the time when Messrs Sengos and Aliprandi met with Mr Tomic. His only involvement was an opportunity to peruse quickly what must have been the facsimile transmission from Mr Sengos. It is clear from the evidence of the three persons who took part in that conversation that the meeting was called to discuss the mobile phone proposal and was in no way related to the security business of the respondent or that conducted by Mr Tomic. It is also clear that there being no sign on the front of the building at Peakhurst that Messrs Sengos and Aliprandi could have had no forewarning that the business of Universal Home Security was being conducted from within those premises by Mr Tomic. Mr Rourke surmised that their attendance may have been in connection with the Universal Home Security business. It is my impression from the totality of the evidence that he raised this issue with the respondent as a matter of caution and concern and not through any malice towards either Mr Sengos of Mr Aliprandi, who did not know.

20 It is my impression also based on the totality of the evidence that Mr Weller was understandably concerned and anxious about what he had been told. This caused him, in my opinion, to react in a manner protective of the respondent's business and not from the standpoint of having a completely open mind about the matter. Mr Weller also gave evidence of previous concerns about the activities of Universal Home Security. He said he had become suspicious that confidential evidence about the activities of the respondent had been provided to that organisation, that he knew that that organisation was "directly attempting to poach (the respondent's) sales agents" and that some had already gone to work for Universal and that "I had a particular suspicion that Universal had obtained information regarding the SG III alarm system and (the respondent's) strategic plans."

21 There are inconsistencies in the evidence of all of the witnesses, which is not an unusual situation in any litigation. The ability of different persons to recollect events and conversations with precision differs markedly, particularly over periods of time. In his affidavit Mr Weller related his conversation with Mr Sengos on 18 February 200 in great detail, and the same detail is set out in his recollection of the meeting of 24 February. Some of the matters of detail in Mr Weller's affidavit are not consistent with his evidence. For example in referring to a telephone conversation with Mr Rourke Mr Weller said that he referred to Mr Rourke's friendship with Dean Tomic, however in oral evidence he asserted that he did not know that Mr Tomic was a friend of Mr Rourke. Whilst I do not assess the totality of Mr Weller's evidence on this one inconsistency alone, having regard to the totality of the evidence, having regard to Mr Weller's concern to protect the respondent and having regard also to the evidence of Messrs Sengos and Aliprandi as to what was said which is substantially corroborative, I prefer the recollection of Messrs Sengos and Aliprandi to that of Mr Weller as to what was said and what occurred at the meeting on 24 February. That is, it is more likely than not that Mr Weller asserted that Messrs Sengos and Aliprandi had erred in connection with their responsibilities to the respondent and that he was looking for their resignation. They were not given an adequate opportunity to explain the situation and their innocence of any wrongdoing, and this conduct was unfair.

22 I find also that the conduct of the respondent in depriving the applicants of any further leads on or after 18 February 2000 deprived them of the opportunity of earning any moneys at all pursuant to the respective agreements and effectively brought the relationships to an end. In that I uphold the applicants' submissions that both Messrs Sengos and Aliprandi were innocent of any wrongdoing, it follows that the decision to withhold leads and to deprive them of the opportunity of attending the Hamilton Island conference was unfair. As I have previously stated, they had no means of knowing that the offices which they attended were those from which the business of Universal Home Security was conducted, nor was there any discussion which could have compromised the respondent's business.

23 Consequent upon these findings of unfair conduct it is then necessary to determine what consequential relief the applicants are entitled to under s 106. I would propose varying the respective agent contracts by requiring that, in all the circumstances, termination should be effected upon giving reasonable notice or payment of remuneration which may have been earned during that period.

24 What is reasonable will depend upon all of the circumstances. Neither applicant was an employee at law, or, alternatively, sought to enter into an employment relationship with the respondent. Nevertheless this is not a case of independent business organisations dealing with each other. The relationship is analogous to that of an employment situation in that in effect the applicants were expected to devote their energies exclusively to the respondent's business unless they had obtained consent otherwise.

25 Mr Sengos had been an agent for some six months and had performed well. He had won a number of prizes and had been congratulated by the respondent. There was suggestion in the evidence of Ms Celestine Reid the respondent's Sales Manager that Mr Sengos had failed to comply with the respondent's sales protocols in a number of areas. This may have been so, but the evidence adduced by Ms Reid was never suggested to warrant termination of the agreement with Mr Sengos. There may have been a number of complaints regarding a number of discrete sales but given the totality of the sales effected by Mr Sengos and making allowance for aggressive marketing, I would not expect there to be no complaints concerning the activities of Mr Sengos. As I have said, the evidence of the complaints was certainly not directed towards the maintenance of his relationship with the respondent. They were raised solely as background circumstances to be taken into account in assessing reasonable notice. In all the circumstances I do not propose to take these matters into account in determining what should have been reasonable notice in the case of Mr Sengos.

26 Having taken into account his length of service, the circumstances in which the relationship came to an end, and the position achieved by the applicant I conclude that reasonable notice was in the case of Mr Sengos one month. I would propose that his agreement be varied accordingly and that he be compensated by reference to an average of one month's earnings net of overheads earned by the applicant during the course of his engagement with the respondent. Figures produced by the applicant indicate that his profit per week net of expenses was $3,629.15 on an average basis and that this would have resulted in lost net earnings over six months of $94,357.90. On my calculations one sixth of this amount is $15,730.

27 The position of Mr Aliprandi through his company Madeleine Trading Pty Ltd is somewhat different. He had been engaged for a much shorter period. However, he had not had an opportunity of earning moneys to the same extent as Mr Sengos. During the first two weeks of his work he received $1,645 in commission payments but he said that he was observing rather than working during the first week. His earnings rose to $890 for the week 27 January to 3 February, $1,730 for the week from 3 February to 10 February 2000 and in the following week he earned $1,480. From this the applicant company had paid certain expenses. Given the much shorter period of the engagement of this applicant, a shorter period of notice would be reasonable in my opinion. I would assess the period as two weeks in all the circumstances. However in assessing monetary compensation under s 106(5) I take into account that the earnings of this applicant were increasing in general terms. I assess the amount of earnings as the sum of $3,650 which, incidentally represents one month's earnings net of expenses and is slightly more than twice the amount that was earned for the week 3 February to 10 February 2000.

28 Each of the summonses claims an order varying each of the contracts so as to include the following term: "In the event the respondent offers prizes as incentives for the achievement of nominated sales levels, and those sales levels are met, if the respondent does not give the prize or prizes, the respondent shall pay to the applicant the dollar value of those prizes."

29 There was much debate between the parties concerning compensation for the withdrawal of the opportunity to attend the Hamilton Island conference. The conference extended over four days including travel time on the first and fourth day. The itinerary for the conference indicates that some seven hours on one day were spent in a conference, but otherwise there appear to have been a number of leisure activities, no doubt directed to enhancing relationships and feelings of wellbeing associated with conferences of this kind. My impression of the evidence is that there would have been a requirement for participants to attend conference activities, whether of a leisure kind or not so that it would not be appropriate, as claimed by the applicants, to award any compensation in this respect on the basis that attendance at the conference should be assessed as though it were a holiday simpliciter.

30 In all the circumstances I decline to vary the contracts in the manner claimed by the applicants. However I am prepared to take into account the disappointment experienced by each of Messrs Sengos and Aliprandi in having their entitlements to attend the conference withdrawn at short notice and for a reason which I have held to be unfounded in all the circumstances. I would award Mr Sengos additional compensation in the sum of $500 to cover this aspect of his claim. However, the claim by Madeleine Trading Pty Ltd cannot comprehend compensation for disappointment suffered by Mr Aliprandi. I am not prepared to put a dollar value on attendance at the conference for the reasons already given and because Mr Aliprandi is not an applicant personally, he is not personally entitled to any compensation under s 106(5).

31 Interest is claimed in each of the summonses and I would propose that each applicant be entitled to interest on the amounts which I propose should be awarded by way of compensation calculated in accordance with the provisions of the Supreme Court Act and running respectively from date of issue of the summonses to the date of judgment.

32 The respondent specifically asked that costs be reserved and I accede to this request.

33 I direct that the applicants file and serve within fourteen days short minutes of orders reflecting these reasons for judgment. I grant liberty to apply with respect to the form of the orders. _________________

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