2022 WAIRC 00016
WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT


CITATION : 2022 WAIRC 00016

CORAM
: INDUSTRIAL MAGISTRATE E. O'DONNELL

HEARD
:
WEDNESDAY, 3 NOVEMBER 2021

DELIVERED : WEDNESDAY, 19 JANUARY 2022

FILE NO. : M 51 OF 2021

BETWEEN
:
ALAN MAHON
CLAIMANT

AND

B. K ELSEGOOD & D.S ELSEGOOD & D.K ELSEGOOD & ELSEGOOD HOLDINGS PTY LTD & S.M ELSEGOOD & FALCONCREST HOLDINGS PTY LTD
RESPONDENT

CatchWords : INDUSTRIAL LAW – Claim for severance pay – Interpretation of redundancy clause in award – Whether, to avoid liability to pay severance pay, sufficient for employer to say it ‘wished’ for someone to carry out employee’s duties
Legislation : Industrial Relations Act 1979 (WA)
Taxation Administration Act 1953 (Cth)
Magistrates Court (Civil Proceedings) Act 2004 (WA)
Instruments : General Order [2005] WAIRC 01715
Case(s) referred
to in reasons: : Quality Bakers of Australia v Goulding (1995) 60 IR 327
Sealanes (1985) Pty Ltd v John Francis Foley and John Anthony Buktenica [2006] WAIRC 04110
Jones v Department of Energy and Minerals (1995) 60 IR 304
Bampton v Viterra Limited [2015] SASCFC 87
Short v FW Hercus Pty Limited (1993) 40 FCR 511
R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6
Sammut v AVM Holdings Pty Ltd [No 2] [2012] WASC 27
Fedec v The Minister for Corrective Services [2017] WAIRC 00828
City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Excelior Pty Ltd [2013] FCA 638
Result : Claim is proven
REPRESENTATION:

CLAIMANT : MR P. MULLALLY (AGENT) FROM WORKCLAIMS AUSTRALIA
RESPONDENT : MR G. MCCORRY (AGENT)

REASONS FOR DECISION
1 The Claimant, Alan Mahon (Mr Mahon) was employed by the Respondent as Chief Executive Officer (CEO) of Combined Metal Industries (CMI), the Respondent’s steel product manufacturing business.
2 Mr Mahon commenced in the role of CEO at CMI on 1 June 2015.
3 On 23 March 2020, the Respondent terminated Mr Mahon’s employment with CMI.
4 Mr Mahon’s claim, brought pursuant to s 83(1) of the Industrial Relations Act 1979 (WA), alleges a contravention of cl 4.4 of the General Order [2005] WAIRC 01715 (the Instrument), read in conjunction with cl 4.1 of the Instrument.
5 Specifically, the claim is for payment of the sum of $38,461.54 in severance pay, on the basis that the termination of Mr Mahon’s employment was due to redundancy.
6 The Respondent accepts that Mr Mahon was employed as CEO from 1 June 2015, and that it terminated his employment on 23 March 2020, but maintains that it had no obligation to pay a severance payment because the termination was not due to redundancy.
7 The Respondent accepts that if I find in favour of the Claimant, the quantum of his claim is the correct amount payable.
8 This claim came on for trial before me on 3 November 2021.
9 At trial, Mr Mahon relied upon his statement dated 28 September 2021 as his evidence in chief. He was subject to brief cross-examination.
10 No additional evidence was called or tendered on behalf of the Claimant.
11 For the Respondent, Mr Darren Elsegood (Mr Elsegood), who is a managing partner of the Respondent, relied upon his statement dated 4 October 2021 as his evidence in chief, and he too was subject to brief cross-examination.
12 No additional evidence was called or tendered on behalf of the Respondent.
13 The parties agreed that I should disregard the statement of Mr Lloyd Douglas (Mr Douglas), which had been filed on behalf of the Respondent, and I do so.
The Evidence
14 There is little to no dispute as to the events that led to the termination of Mr Mahon’s employment with CMI.
15 Based on the statements which were tendered in evidence and the cross-examination of the witnesses, I make the following findings on the balance of probabilities.
16 In March 2020, CMI was in a difficult financial position.
17 On the morning of 23 March 2020, Mr Douglas and Mr Elsegood had a meeting with Mr Mahon in Mr Mahon’s office.
18 Prior to their arrival, Mr Douglas and Mr Elsegood had given Mr Mahon no notice of the meeting.
19 During this meeting, Mr Douglas asked why Mr Mahon had not responded to Mr Elsegood’s request for him to accept a reduction in pay. Mr Mahon expressed surprise at this, as he had not received any request from Mr Elsegood to accept a reduction in pay.
20 Although, there was some discrepancy in the evidence on the issue of Mr Mahon being retained conditional upon a reduction in pay, I accept that at the meeting, Mr Douglas and Mr Elsegood put to Mr Mahon twice that he should accept a reduction in pay, but Mr Mahon rejected this proposal.
21 Mr Douglas then said it would be better if Mr Mahon resigned.
22 Mr Mahon said he did not wish to resign, but nor would he accept a reduction in pay.
23 Mr Douglas and Mr Elsegood reiterated that as the business could no longer afford Mr Mahon’s remuneration, and as he would not accept a reduction in remuneration, his employment would be terminated.
24 Later the same day, a termination letter was emailed to Mr Mahon. The letter confirmed that Mr Mahon’s employment had been terminated, effective 23 March 2020, and contained the following reasons for the termination:
(a) The business was unable to afford Mr Mahon’s remuneration; and
(b) He had refused to take a ‘lesser wage’.
25 Mr Mahon left CMI the same day and no severance pay was paid to him.
26 After Mr Mahon’s departure from the business, Mr Elsegood took over his duties, with some assistance from an outside consultancy.
27 After Mr Mahon’s departure, there was no person in the business who held the title of CEO, until August 2021.
The Instrument
28 There is no dispute that the Instrument was applicable to the employment relationship between the parties.
29 Clause 4.1 of the Instrument provides:
4.1 Definition
Business includes trade, process, business or occupation and includes part of any such business.
Redundancy occurs where an employer has made a definite decision that the employer no longer wishes the job the employee has been doing done by anyone.
Transmission includes transfer, conveyance, assignment or succession whether by agreement or by operation of law and ‘transmitted’ has a corresponding meaning.
Weeks’ pay means the ordinary time rate of pay for the employee concerned. Provided that such rate shall exclude:
(a) overtime;
(b) penalty rates;
(c) disability allowances;
(d) shift allowances;
(e) special rates;
(f) fares and travelling time allowances;
(g) bonuses; and
(h) any other ancillary payments of a like nature.
30 Clause 4.4(a) of the Instrument provides that severance pay must be paid to an employee whose employment is terminated by reason of redundancy.
31 At issue is whether the termination of the Claimant’s employment can be properly regarded as redundancy in the sense that, on 23 March 2020 the Respondent had made a definite decision that it no longer wished the job the Claimant had been doing to be done by anyone.
32 The Respondent argues that because the components of Mr Mahon’s role as CEO continued to be performed after his departure from CMI, this demonstrates that it did wish the job Mr Mahon had been doing to be done, and that it was, therefore, not liable to give Mr Mahon severance pay.
33 Further, the Respondent rejects any construction of cl 4.1 which goes beyond the natural meaning of the words of the clause.
The Law
34 There exists a large body of case law which deals with what constitutes a redundancy, where the term ‘redundancy’ is not defined in an award or contract. It is clear from the cases that redundancy can arise in a multitude of circumstances.
35 For example, in Quality Bakers of Australia v Goulding (1995) 60 IR 327.
Beazley J said:
A redundancy will arise where an employer has labour in excess of the requirements of the business; where the employer no longer wishes to have a particular job performed; or where the employer wishes to amalgamate jobs: R v Industrial Commission of South Australia; Ex Parte Adelaide Milk Supply Co-Operative Ltd (1977) 44 SAIR 1202 per Bray CJ at 1205; Gromark Packaging v FMWU (1992) 46 IR 98, per Franklyn J at 105. It is not necessary for the work to have disappeared altogether. As was said in Bunnetts’ Case [Bunnett v Henderson's Federal Spring Works Pty Ltd] (1989) AILR 356:
Organisational restructuring may result in a position being abolished and the functions or some of them being given to another or split amongst others. Quality Bakers of Australia v Goulding (1995) 60 IR 327, 332 - 333.

36 In Sealanes (1985) Pty Ltd v John Francis Foley and John Anthony Buktenica, [2006] WAIRC 04110.
the Full Bench of the Western Australian Industrial Relation Commission noted that:
As stated by Beazley J in Quality Bakers …, it is not necessary for the work which an employee was doing to have disappeared. What is required for a redundancy is that the employer no longer wishes anybody to be engaged to fulfil the position previously occupied; meaning the functions, duties and responsibilities of that position. Sealanes (1985) Pty Ltd v John Francis Foley and John Anthony Buktenica [2006] WAIRC 04110 [30].

37 Additionally, in Jones v Department of Energy and Minerals, (1995) 60 IR 304.
Ryan J said:
[I]t is within the employer’s prerogative to rearrange the organizational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganization of that kind may be achieved. One illustration of it occurs when the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organization, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-operative case. Jones v Department of Energy and Minerals (1995) 60 IR 304, 308.

38 The question arises whether the general principles distilled from the cases mentioned above are directly applicable to a case (such as the case between the parties) in which ‘redundancy’ is defined, or whether a particular approach to construction of a defined term leads to a different conclusion.
39 To determine the answer to that question I have had regard to the case of Bampton v Viterra Limited [2015] SASCFC 87.
(Bampton), in which the Full Court of the Supreme Court of South Australia considered the question of redundancy in the context of a redundancy policy clause that was in very similar terms to cl 4.1 of the Instrument. In doing so, I take careful note of Blue J’s observation in that case that:
The construction of a contractual or statutory provision involves consideration of the text, context, evident purpose and fairness of the provision. Caution is required in having regard to the construction of the word ‘redundant’ in other cases addressing other agreements in other circumstances because the text, context and evident purpose will never be identical. Nevertheless, there is utility in having regard to authorities addressing the meaning of the word redundant when there is sufficient similarity with the text, context and evident purpose. Bampton [206].
(footnotes omitted)
40 In Bampton, the relevant clause in the policy, which was accepted to form a term of the claimant’s employment contract, provided as follows:
An Employee’s position is redundant where the Company has made a definite decision that it no longer requires the job an Employee has been doing, be done by anyone (and this is not due to the ordinary and customary turnover of labour) and that decision leads to termination of the Employee’s employment.
41 In my view, there is sufficient similarity between the text, context and evident purpose of that clause and the one under consideration in the case before me, such that it is both useful and appropriate for me to have regard to the discussion in Bampton.
42 It will be noted that Viterra Limited’s clause referred both to ‘an Employee’s position’ and to ‘the job an Employee has been doing’. In its submissions to the Court, Viterra Limited sought to ascribe different meanings to ‘position’ and ‘job’, thus:
… Viterra contended that an ‘employee’s position’ is the totality of the service by that employee but that ‘the job an employee has been doing’ is any one or more of the particular duties which comprise that service. Bampton [40].

43 Rejecting Viterra Limited’s construction of the clause, Kourakis CJ observed:
On Viterra’s construction [of the redundancy clause] the termination of a long serving senior executive after devolving his or her responsibilities to several junior employees is not a redundancy because the ‘job’ is still being performed by others. That construction eviscerates the manifest purpose of Viterra’s redundancy provision. It is to be observed in this respect that in its second decision in the Termination, Change and Redundancy Case the Australian Conciliation and Arbitration Commission did not exclude reclassifications from the scope of redundancy provisions. A construction which attempts to salvage some work for it to do depending on the extent to which the devolved duties approximate the dismissed employee’s former position gives the clause an arbitrary and uncertain operation. Bampton, [44].
(footnotes omitted)
44 The Instrument in the case before me refers only to an employee’s ‘job’, and not ‘position’; in that sense it is different from the clause under consideration in Bampton. However, in light of Kourakis CJ’s rejection of Viterra Limited’s attempt to distinguish the two terms, I consider that his Honour’s construction of that clause is equally applicable to the definition of ‘redundancy’ found in cl 4.1 of the Instrument.
45 Blue J, with whom Vanstone J agreed, outlined the historical origin of the text in Viterra Limited’s redundancy policy. Bampton [189].
One of the cases referred to in that outline is the case of Short v FW Hercus Pty Limited (1993) 40 FCR 511.
(FW Hercus), in which the Full Court of the Federal Court of Australia considered the redundancy provisions of the Metal Industry Award 1984. In circumstances that echo the factual scenario of the case before me:
Mr Short was one of two employees who performed drafting work together with Mr Hercus. Mr Short was dismissed by the company due to a downturn in trade. Drafting work thereafter was performed by the remaining draftsman and Mr Hercus. Mr Short claimed severance pay under the award. The company denied entitlement on the ground that it did not ‘wish’ Mr Short’s job no longer to be done and this was forced on it by external economic circumstances. The Full Court rejected the company’s argument. Burchett J (with whom Drummond J agreed) said:
The clause… is concerned with the fact of the change brought about by the making of a decision in circumstances unrelated to the ordinary and customary turnover of labour. The wide spectrum of technological and economic reasons for the decision is restricted only by the exclusion referring to the ordinary and customary turnover of labour.… The clause simply postulates the cessation of the employers wish to have the particular job done by anyone. That may be because some delightful alternative has enticed the employer; because the job has just come to an end; because of the employer’s insolvency; or for any one of a number of other reasons.
…
The starting point may be taken to be the decision of the Full Court of the Supreme Court of South Australia in R v The Industrial Commission of South Australia; Ex Parte Adelaide Milk Supply Co-Operative Ltd and Others… Here the expression containing the words no longer wishes was first composed. In its original setting, it is plain that it was not meant to convey the limitation for which the respondent contends. On the contrary, it was meant to capture the full breadth of the concept elaborated by Bright J referred to in the passage quoted by Mitchell J. Bampton [195].
(emphasis added)
46 In R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-operative Ltd, (1977) 16 SASR 6.
Bray CJ drew a distinction between the redundancy of a position and dismissal arising out of a position being made redundant. His Honour said:
[T]he concept of redundancy in the context we are discussing seems to be simply this, that a job becomes redundant when the employer no longer desires to have it performed by anyone. A dismissal for redundancy seems to be a dismissal, not on account of any personal act or default of the employee dismissed or any consideration peculiar to him, but because the employer no longer wishes the job the employee has been doing to be done by anyone. R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6, 8.

Application Of The Law To The Facts
47 As to the following points I do not understand the Respondent to make any argument to the contrary, but for clarity I state:
(a) Mr Mahon’s employment was not terminated due to serious misconduct or ‘on account of any personal act or default … or any consideration peculiar to him’.
(b) The Respondent terminated Mr Mahon’s employment because it could no longer afford his remuneration.
(c) Although the Respondent offered to retain Mr Mahon as CEO on a lower salary, and although Mr Elsegood and Mr Douglas were somewhat surprised when he rejected that offer, there was no obligation upon Mr Mahon to accept that lower salary. That was so, even though he had accepted lower remuneration for a period of approximately nine months in 2016 - 2017.
48 The fact that the Respondent was willing to pay Mr Mahon a lower salary in order to retain him as CEO does not mean that the subsequent (and swift) termination of his employment, when he declined to accept lower remuneration, was not due to redundancy.
49 In circumstances very similar to those that befell the respondent employer in the case of FW Hercus, the Respondent was constrained by ‘external economic circumstances’ to terminate the employment of their CEO, Mr Mahon. As FW Hercus did when putting its case, the Respondent argues that the termination of Mr Mahon’s employment did not constitute redundancy as that term is defined by the Instrument, because in fact it did ‘wish’ the job Mr Mahon had been doing to continue to be done. But, as pointed out in FW Hercus, ‘The [redundancy] clause does not say that the employer must be happy about his decision; only that he must have made it’.
50 Further, the cases establish that, after an employee’s employment has been terminated, parsing the employee’s job into its component parts and demonstrating that those tasks are still being carried out by others within the employer’s business is not sufficient to avoid an obligation to pay severance pay. Rather, what matters is whether there are any duties left for the employee to perform.
51 At paragraph six of their submissions, the Respondent seeks to distinguish this case from others in which successful redundancy claims have been made, where the tasks previously performed by the Claimant employee have been taken over by several employees. The Respondent points out that in this case, Mr Mahon’s duties and tasks were taken over only by Mr Elsegood, with some assistance from a consultant.
52 As to that submission, I return to the observations of Ryan J in Jones v Department of Energy and Minerals, (1995) 60 IR 304.
in which his Honour made it clear that there was no exhaustive description of the methods by which a reorganisation might be achieved. His Honour said that one illustration of it occurs ‘when the duties of a single, full-time, employee are redistributed to several part-time employees’; but that, in any event, ‘[i]f there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-operative case’. Jones v Department of Energy and Minerals (1995) 60 IR 304.

53 There is no evidence that in March 2020 the Respondent was implementing a carefully planned overhaul or restructure of CMI. Nonetheless, the difficult financial position in which it found itself at that time led to a reorganisation of sorts, and specifically to the termination of Mr Mahon’s employment when he declined to accept a reduction in pay.
54 Aside from the meeting attended by Mr Elsegood, Mr Douglas and Mr Mahon on 23 March 2020, there was no attempt to find any solution to the predicament. As Mr Elsegood accepted during cross examination at trial, there had been no prior discussion with Mr Mahon about termination of his employment, and yet, the Respondent had clearly taken a view that either Mr Mahon had to accept a reduction in salary, or his employment would be terminated.
55 I accept Mr Mahon’s evidence that at the meeting, he requested Mr Elsegood repeatedly for a proposal about salary in writing, but this was never forthcoming. I also accept his evidence that it was not evident at the meeting that the Respondent wanted to keep him employed.
56 Further, on the basis of the materials and the evidence of Mr Elsegood at trial, I find that the Respondent did not even attempt to put any proposal around salary in writing to Mr Mahon. In my view, even if Mr Mahon had not asked for this to be done, it should have been.
57 All of this leads me to draw an irresistible inference that as at 23 March 2020 there was no longer any function or duty to be performed by Mr Mahon, and the Respondent had decided that it no longer wished the job Mr Mahon had been doing to be done by anyone. This is further supported by the fact that no person then held the position of CEO until August 2021.
58 As an aside, in my view there must be some doubt as to whether the Respondent properly complied with cl 4.2 of the Instrument, which concerns consultation before terminations. However, the claim is not brought on that basis, and I make no specific finding with respect to that matter.
59 On careful consideration of the facts of this case, and by reference to the cases on interpretation of redundancy clauses almost identical to that under consideration here, I conclude that the termination of Mr Mahon’s employment was by reason of redundancy as that term is defined in the Instrument.
Findings
60 The Respondent failed to comply with cl 4.4 of the Instrument.
61 The Respondent is liable to pay severance pay to the Claimant.
Orders
62 Subject to any liability to the Commissioner of Taxation under the Taxation Administration Act 1953 (Cth), the Respondent shall pay to Mr Mahon $38,461.54 in severance pay pursuant to cl 4.1 and cl 4.4 of the Instrument, within 30 days of the date of this order.
63 I will hear further submissions from the parties in respect to the claim for interest and the claim for a penalty.



E. O’DONNELL
INDUSTRIAL MAGISTRATE


Schedule I – Jurisdiction of the Western Australian Industrial Magistrates Court
[1] The Western Australian Industrial Magistrates Court (IMC) has the jurisdiction conferred by the Industrial Relations Act 1979 (WA) (IR Act) and other legislation. Section 83 and s 83A of the IR Act confer jurisdiction on the Court to make orders for the enforcement of a provision of an industrial agreement where a person has contravened or failed to comply with the agreement. If the contravention or failure to comply is proved, the IMC may issue a caution or impose a penalty and make any other order, including an interim order, necessary for the purpose of preventing any further contravention. The IMC must order the payment of any unpaid entitlements due under an industrial agreement.
[2] The powers, practice and procedure of the IMC are the same as in a case under the Magistrates Court (Civil Proceedings) Act 2004 (WA). The onus of proving a claim is on the claimant and the standard of proof required to discharge this onus is proof ‘on the balance of probabilities’. The IMC is not bound by the rules of evidence and may inform itself on any matter and in any manner as it thinks fit. In Sammut v AVM Holdings Pty Ltd [No 2] [2012] WASC 27 [40] - [47], Commissioner Sleight examined a similarly worded provision regulating cases in the State Administrative Tribunal of Western Australia, noting:
[T]he rules of evidence are [not] to be ignored … After all, they represent the attempt made, through many generations, to evolve a method of enquiry best calculated to prevent error and elicit truth …
The more flexible procedure provided for does not justify decisions made without a basis in evidence having probative force.

Schedule II – Relevant Principles of Construction
[1] This case involves construing industrial agreements and statutes. Similar principles apply to both. The relevant principles to be applied when interpreting an industrial instrument are set out by the Full Bench of the Western Australian Industrial Relations Commission in Fedec v The Minister for Corrective Services [2017] WAIRC 00828 [21] - [23]. In summary (omitting citations), the Full Bench stated:
(a) ‘The general principles that apply to the construction of contracts and other instruments also apply to the construction of an industrial agreement’;
(b) ‘[T]he primary duty of the court in construing an instrument is to endeavour to discover the intention of the parties as embodied in the words they have used in the instrument. [I]t is the objectively ascertained intention of the parties, as it is expressed in the instrument, that matters; not the parties' subjective intentions. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean’;
(c) ‘[T]he objectively ascertained purpose and objective of the transaction that is the subject of a commercial instrument may be taken into account in construing that instrument. This may invite attention to the genesis of the transaction, its background and context. [T]he apparent purpose or object of the relevant transaction can be inferred from the express and implied terms of the instrument, and from any admissible evidence of surrounding circumstances’;
(d) ‘[A]n instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience. However, it must be borne in mind that business common sense may be a topic on which minds may differ’;
(e) ‘[A]n instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation’; and
(f) ‘Industrial agreements are usually not drafted with careful attention to form by persons who are experienced in drafting documents that have legal effect’.
The following is also relevant:
(g) Ascertaining the intention of the parties begins with a consideration of the ordinary meaning of the words of the instrument. Ascertaining the ordinary meaning of the words requires attention to the context and purpose of the clause being construed: City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813 [53] - [57] (French J) (City of Wanneroo).
(h) Context may appear from the text of the instrument taken as a whole, its arrangement and the place of the provision under construction. The context includes the history of the instrument and the legal background against which the instrument was made and in which it was to operate: City of Wanneroo [53] - [57] (French J); Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Excelior Pty Ltd [2013] FCA 638 [28] - [30] (Katzmann J).