PR951364 PR951364 Download Word Document AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION Workplace Relations Act 1996 s.170CE application for relief in respect of termination of employment Gilbert Beagley and Australasian Tourist Park Management Holdings t/a Palms Village Resort (U2004/4043) COMMISSIONER RICHARDS BRISBANE, 25 AUGUST 2004 Summary - termination of employment - jurisdiction - novation of employment - assignment - discussion of authorities - whether employment continuous for purpose of s.170CBA and s.170CE (5A) and (5B) of the Act - jurisdictional case not made out on the evidence - terms of s.170CE A of the Act - application dismissed. DECISION [1] On 28 May 2004, application was lodged in the Australian Industrial Registry by Mr. Gilbert Wayne Beagley ("the Applicant') for relief in respect of termination of employment, pursuant to s.170CE of the Workplace Relations Act 1996 ("the Act"). The Respondent was stated to be Australasian Tourist Park Management Holdings, trading as Palms Village Resort. The Respondent's business is conducted in Darwin. [2] On 25 June 2004, by way of completed Form R21A, the Respondent, through its representative, the Chamber of Commerce Northern Territory, filed for dismissal of the application for want of jurisdiction. [3] This matter was allocated to the Commission as presently constituted on 25 June 2004 and listed for hearing on 3 August 2004. [4] The grounds for the objection were that "the employee has not completed the probationary period of employment [170CCBA(1)(c] nor a qualifying period of employment [170CE(5A) and (5B) as defined in the Workplace Relations Act 1996." 1 (sic) [5] The matter was heard in Brisbane on August 3 2004, with the Applicant's representative appearing in person, and the Applicant, the Respondent and the Respondent's representative appearing via video link from Darwin. RESPONDENT'S SUBMISSIONS IN SUMMARY [6] The Respondent submitted that it purchased the management rights of the Palms Village Resort from Crymere Pty Ltd on 19 April 2004. The assets were purchased on or about the same time by an entity referred to as John Fielding Pty Ltd. It went unchallenged in evidence that the Respondent was the appropriate legal employer for all purposes. [7] It was the Respondent's evidence, through Ms. Yvonne Bristow, Operations Manager for Australasian Tourist Park Management Holding Pty Ltd, that all the former employees of Crymere Pty Ltd had been terminated: "Yes?---Well, the manager of the Park was also a partner of Crymere - the current manager that we have at our new resort, and he has assured me that everybody was paid out their - on their pay slips were paid out all their accrued benefits and entitlements, and that they were finished through the issue of that payment of all dues paid." 2 [8] Ms. Bristow was later to give evidence that no employees were " transferred " from their former employer, but that they were " re-employed " anew. 3 [9] Evidence led by Ms. Marcia Kelly on behalf of the Respondent, which went unchallenged, was that on the final day of Crymere's ownership of the Resort, a barbecue and drinks function was held " for all permanent or core employees that were to be terminated on that day ." 4 [10] The Respondent subsequently submitted that Mr. Beagley "commenced a new contract of employment with Australasian Tourist Park Management Holding Pty Ltd on 20th April 2004." As a consequence, Mr. "Beagley's employment was subject to a probationary period as per 170CBA; 170CE(4A)(5B) of the Workplace Relations Act 1996 commencing 20th April 2004." (sic) 5 [11] Further evidence from Ms. Yvonne Bristow was that on 20 April 2004, all former employees of Crymere Pty Ltd were offered employment with the new employer. They were offered an Australian Workplace Agreement, and in the event they did not elect to have their employment regulated by that instrument, they could "remain under the Hotel, Motels, Wine Saloons, Catering, Accommodation, Clubs & Casino Employees (Northern Territory) Consolidated Award if they wished." 6 [12] It was submitted that all new employees were given position descriptions (which included some seemingly minor alterations to the job they had carried out previously) and corporate information, such as policy documents. [13] Some thirty-five employees elected, it was submitted, to enter into a new employment relationship with the Company, whilst two declined. Mr. Beagley, it was stated, was one of those larger group of employees who elected to commence `new' employment with the Australasian Tourist Park Management Holding Pty Ltd." 7 [14] On 17 May 2004, it was submitted that Mr. Beagley's employment was terminated inside of the " statutory probationary period of three months as outlined in s170CBA and 170CE(4A)(5B) of the Workplace Relations Act 1996" . 8 (sic) [15] In the Respondent's representative's formal written submissions, however, it was stated that Mr. Beagley " was aware of and agreed to the transfer of his employment to Australasian Tourist Park Management Holding Pty Ltd ". This, it was claimed, was consistent with prevailing authorities, which supported the apparent principle that a "contract of employment can be transferred from one employer to another if the employee agrees to the transfer. " 9 [16] In closing submissions, it was put to the Commission that: "[...] in summary, that where an employment contract between two - where an employment contract is transferred, that it is by mutual consent with the employee, but it also is very clear in there that the existing employment comes to an end and a new one commences. "And that seems to be the underlying theme of the two authorities - that, being Marks v Doncaster and the Textile, Footwear and Clothing Union v Bolenik. Those two decisions certainly support the argument that we're proposing to you, Commissioner, in that there was a new employment contract that commenced on 20 April and Mr Beagley was subjected to a new set of procedures, a new company, a new management. His expectations - the expectations of his role changed, and therefore he was also in his qualifying period of employment at that time as well." 10 [17] The two authorities principally referred to (and which are discussed below) were: Re: Peter Daffy and Smart Investments Pty Ltd t/as Badger Creek Holidays ; 11 and Textile, Footwear & Clothing Union of Australia v. Bellechic Pty Ltd and Ors. 12 [18] In essence, notwithstanding Ms. Bristow's witness statement and oral evidence, the Respondent's representative submitted that as a consequence of having consented to have his contract of employment " transferred " (by which was meant " novated " in the context of the authorities as led) to his new employer, Mr. Beagley had brought his previous contract to an end and commenced a new contract of employment, such that the provisions of exclusions relevant to s.170CBA and s.170CE of the Act have application for purposes of the period of the new employment with the new employer. APPLICANT'S SUBMISSIONS IN SUMMARY [19] The Applicant submitted that Mr. Beagley "was a transferred employee and therefore had previously served a probationary period at the commencement of his employment with Crymere Pty Ltd [...]." 13 [20] Mr. Beagley himself also deposed that his employment was " transferred " to a new employer and that " nothing would change. " 14 [21] Mr. Beagley also gave evidence that he understood there was to be an imminent sale of the business. 15 He claimed that the Resort was sold on 19 April 2004 and that on 20 April 2004 he presented for work with the new employer, who " offered employment " to the former employees of Crymere Pty Ltd. The new employees were given a choice as to whether they wished to sign an Australian Workplace Agreement or else continuing to work subject to the relevant award. 16 [22] Despite this, Mr. Beagley acted under the assumption that all his long service leave entitlements and " length of service was transferred to the new company ." 17 [23] Mr. Beagley also submitted a pay slip from his former employer, which he claimed was a " final pay slip " from Crymere Pty Ltd " for annual leave and from - a final payment from the previous owner ". 18 [24] On the assumption that Mr. Beagley's employment was continuous, it was submitted that s.170CE (5A) and s.170CE (5B) do not apply as there was no new period of employment to which the qualifying period of employment could apply. [25] In respect of the submission that Mr. Beagley's employment was continuous, the Applicant claimed that support could be found in the High Court joint judgement in PP Consultants Pty Ltd v Finance Sector Union 19 which concerned s.149(1)(d) of the Act. However, this decision does not itself go to the circumstances affecting continuity of service in relation to contracts of employment. It was nonetheless relied upon for purposes demonstrating that an employee's employment is " transferred " to a new employer by way of a transmission of business, and as a consequence, service with one employer is taken to be service with the subsequent employer. [26] The Applicant also submitted that s.170CBA(i)(c) of the Act, as it relates to the probationary period, could not apply for reason there was no evidence before the Commission that it was " determined in advance ". This submission seemed to have been premised on Mr. Beagley having commenced a new contract of employment with a new employer, or else it may have been an argument in the alternative. [27] The Applicant also led the same submission in relation to the operation of s.170CE (5A) and (5B) of the Act, though the terms of the Act do not support such a submission. 20 [28] Consequently, it was held by the Applicant that the application was not excluded from the Commission's jurisdiction in relation to s.170CE of the Act. FINDINGS [29] The submissions in relation to this application present some difficulties. [30] Notwithstanding this, the jurisdictional objection as put before the Commission by the Respondent's representative is that s.170CBA(1)(c) and s.170CE (5A) and (5B) have application for reason that "[a] s a consequence of [Mr] Beagley's agreement to transfer his contract of employment from Crymere Pty Ltd to Australasian Tourist Park Management Holdings Pty Ltd his contract of employment with Crymere Pty Ltd was terminated at law on 19th April 2004 ." 21 [31] In essence, the Respondent relied on Noakes v Doncaster Amalgamated Colleries Ltd 22 as applied in the decision of SDP Lacy in Re:Peter Daffy v Smart Investments Pty Ltd t/a Badger Creek Holidays . 23 The Respondent's written submissions also support such a view, as do the Respondent's representative's oral submissions. [32] Reliance was also placed on Textile Footwear & Clothing Union of Australia v Bellechic Pty Ltd & Ors 24 (" Bellechic "), which was again applied in the decision of SDP Lacy in Re:Daffy. 25 [33] The thrust of these authorities as they were construed by the Respondent was that by agreeing to " transfer " as the Respondent persistently put it (again, by which, the Commission understands " novate ") his employment, the Applicant's employment contract ceased with Crymere Pty Ltd and a new one was established with the subsequent employer. Consequently, Mr. Beagley's employment was able to be terminated pursuant to s.170CBA and s.170CE (5A) and (5B) of the Act because he was within a qualifying period or a probationary period in the new employment with Australasian Tourist Park Management Holdings Pty Ltd [34] The authorities cited by the Respondent are conveniently cited in Re:Daffy : 26 "It is a well established principle of law that, in line with the personal nature of the contract of employment, a contract of employment is not assignable without the consent of the employee. This principle was established in Noakes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014, where Viscount Simon LC said at 1020: `...a free citizen, in the exercise of his freedom, is entitled to choose the employer whom he promises to serve, so that the right to his services cannot be transferred from one employer to another without his assent' . Viscount Simon LC further stated at 1018: `It is, of course, indisputable that (apart from statutory provisions to the contrary) the benefit of a contract entered into by A to render personal services to X cannot be transferred by X to Y without A's consent, which is the same thing as saying that, in order to produce the desired result, the old contract between A and X would have to be terminated by notice or by mutual consent and a new contract of service entered into by agreement between A and Y'. The decision in Noakes has been referred to and applied by the Federal Court in Textile Footwear and Clothing Union of Australia v Bellechic (unreported, Federal Court of Australia, 19 November 1998), Finance Sector Union of Australia v Commonwealth Bank of Australia [2001] 111 IR 241 at 267 (this point was not overturned in the subsequent Full Bench decision) and most recently in McCluskey v Karagiozis [2002] FCA 1137 (12 September 2002) Merkel J. In the Bellechic decision, Ryan J referred to a passage of Fridman, The Modern Law of Employment, which stated that: "Hence assignment of a contract of employment will determine the relationship, unless what has taken place is not in fact an assignment, without the consent of employer and employee, but a novation of the contract, i.e., the extinction of the original contract and the creation of a new one by and with the consent of all three parties." (Emphasis added) [35] The Respondent sees in the extinction of one contract of employment and the creation of another, by way of a novation of the employment contract, grounds for the application of s.170CBA(1)(c) and s.170CE (5A) and (5B) to the new employment contract. [36] This is not the view taken by Lacy SDP in the decision in Re:Daffy. 27 In that decision, His Honour found that a novation of employment occurred as a result, seemingly, of the inference able to be drawn from the facts that the Applicant had consented to the novation of his employment to a new employer. But the effect of the novation was not such as to establish a new contract of employment to which s.170CBA and s.170CE (5A) and (5B) applied. Rather, His Honour found that a novation gave rise to, or else was in some other way deemed to be, a period of continuous employment: "However, within the context of my findings as to the novation of the contract I am not satisfied that the employment is properly to be regarded as employment for a short period within the meaning of sub regulation 30B(3) of the Regulations. The petition for dismissal of the application is refused." 28 [37] This view of the implication or consequence of a novation of employment is supported, seemingly, by Deputy President Hamilton: "If anything it may be open to me to accept the applicant's evidence, which was not really contradicted, and on the basis of it to form the view that in fact there was a novation of employment, that the new employer took on the old employees with their consent, and with that continuity of service should be found to exist, with the result that each applicant had more than twelve months service for the purposes of the regulation." 29 [38] For purposes of the above two decisions, a novation in relation to employment appears to involve the transfer of the relevant suite of obligations relating to an employee from one employer to another, with the consent of all the parties, both employers and the new employee. By so doing, it further appears that the employee's continuity of employment is taken to have remained unbroken and the bundle of rights accrued with one employer is unaffected by the consensual substitution of one contract of employment for another, as if it had been an assignment. [39] While continuity and seamlessness may be features of an assignment, is it the case that a novation, with the consent of all the parties involved, is, in some way, the equivalent of a consensual assignment? [40] The academic legal commentary on novation 30 is suggestive of a clear distinction between the legal concept of assignment and novation in contract law: with the later providing for continuity of obligations, but with the obligations commencing anew with the new contract: "Where an assignment occurs, there is considerable scope for pre-existing rights and defences against an assignor to be transferred with the assignment so that they are effective against the assignee. This flows from the fact that, broadly speaking, the assignee takes only from the assignor what the assignor has to give, warts and all. Hence, an assignee will receive his or her assigned rights subject to any countervailing right of set--off or other equity, which the relevant obligor had against the assignor up to the time that notice of the assignment was given to that obligor. Novation, on the other hand, does not ---- as a matter of law ---- involve a transfer of rights and obligations. One contract is rescinded and replaced by a new contract; the rights and obligations of the parties to that new contract are not determined by what the rights and obligations of the parties to the original contract were. In each case, it is up to the parties to the new contract to decide what they want their respective rights and obligations to be under that contract. The original contract merely provides a springboard for the creation of the new contract. It does not shackle the content of the parties' rights and obligations under that new contract . It is for this reason that, after a novation has occurred, the new or continuing obligee will take his or her rights free from any equity which may have existed under the old contract." 31 [41] Further: "The requirement that an existing contract be rescinded, the need for the creation of a new contract in substitution, and the unwavering insistence upon consent, all serve to mark novation as a unique obligation-adjusting device of the law of contract." 32 [42] This notion that in a novation the previous contract is extinguished is reflected in Hospitality Group Pty Ltd v Australian Rugby Union Ltd, 33 in which Hill & Finkelstein JJ stated that: "The notion of novation involves tripartite participation. There must be an extinguishment of the original obligation and substitution therefore of a new obligation and in the same terms to or by a different party. The requirements of novation in the common law can be satisfied by a tacit agreement to extinguish the former obligation, to be inferred when an inconsistent obligation is by agreement substituted. 34 [43] This would appear to be the same view as that of Fridman, The Modern Law of Employment as quoted approvingly by Ryan J in the Bellechic 35 decision cited above. [44] Reinforcing this, it also appears that where a question of time arises, a novation, because it involves he creation of a new contract, is treated differently than a novation from an assignment: "The fact that novation does, unlike assignment, involve the creation of a new contract also affects the rights and obligations of the parties to the novation differently from the rights and obligations of the parties to an assignment where the issue of time is concerned. The time at which the question is asked as to what contractual damages were foreseeable or foreseen is, in a novation, the time that the novation took place. With an assignment, the existence of contractual rights is unaffected by the assignment, so the remoteness of contractual damages is determined with reference to the time that the original contract (the rights of which have been assigned) was entered into. The fact that a contract has been assigned does not increase or vary the obligor's liabilities under it. Similarly, where a cause of action on a contract arises at the time the contract was entered into (for example, in certain cases where a loan is expressed to be repayable on demand), time will begin to run for the purpose of a statute of limitations from the date of the formation of the original contract in the case of an assignment of the contractual benefit, whereas in the case of a novation time begins to run from the date of the novation . " 36 [45] Arguably, the application of contract law, as discussed above, to contracts of employment may produce a different outcome. [46] Awards and agreements can, in their own right, make arrangements for how benefits will be managed (or assigned) in business transmission or outsourcing situations. Indeed, even in novations, the parties, consistent with the discussion above, may chose to re-arrange their obligations consensually. Further, courts and tribunals and have shown some reservations in providing for redundancy benefits in transmission of business situations in which employees, in effect, have been deemed to have retained continuity of employment, though their former employer has initiated unilaterally a termination of employment and a later employer employs him\her anew. This is similarly the case in circumstances in which alternative employment is offered but refused. [47] But these are different scenarios as to that in which a new contract of employment is put in place to which s.170CBA and s.170CE (5A) and (5B) of the Act may have application. [48] On the face of it, there are grounds to advance a submission, as the Respondent has in this case, that s.170CBA(1)(c) and s.170CE (5A) and (5B) may have application in respect of the new contract of employment that has been created as an agreed condition of the extinguishment of the original contract of employment. [49] Equally, it is not readily ascertainable that any issue of continuity of the employment relationship, by contrast with the employment contract, is sustainable in such circumstances. [50] That all said, the foundation to a novation of a contract of employment is undeniably satisfactory evidence of the consent of all the parties to the novation. The jurisprudence that sits behind the adequacy of evidence is discussed in Novation. 37 It is not clear what evidentiary standard needs to be met as to whether consent has been given to a novation of a contract of employment. Regard would need to be had to the information that was put to the employee party by the employer prior to the novation before, for example, it could be inferred that the employee had passively consented by compliance with the novation. [51] In the current circumstances, has the Respondent met the burden of proof necessary to establish, in the first instance, that a novation has taken place? More particularly, can the Commission reach a concluded view that there was a novation of employment in relation to the sale of the business from Crymere Pty Ltd to Australasian Tourist Park Management Holding Pty Ltd on 20 April 2004? [52] It is the Respondent's onus to establish the prohibition to the Commission exercising jurisdiction. The Applicant's onus only arises after such time as the Respondent has made out its case and discharged its responsibilities in this regard. [53] What facts can the Commission identify and what inferences from those proven facts can the Commission draw in respect of the application? [54] From what is before the Commission, the following observations of the evidence in this matter may be made: the Respondent's representative repeatedly submitted that the employees' contracts of employment had been " transferred " to the new employer; 38 the Respondent's witness evidence claimed that the vendor had been instructed to pay out all entitlements, the vendor had confirmed that this was the case and the new owner subsequently made a choice as to whom it wished to employee from amongst the former employees; 39 the contract of sale seemed to hold two options for managing the vendor's employees (one relates to terminating employees and other to transferring employees and their entitlements), and no evidence was able to be led from the vendor as to which option had been put in train to corroborate the Respondent's submissions to this end; · The Commission was not provided a formal copy of the complete contract of sale; the Applicant claimed he was under an expectation from his former employer, presumably, that he could " continue on " and that he had an expectation of continuity of employment, seemingly: this could not be set against any evidence from the former employer; the Applicant claimed he had received a " pay out " by way of his final payslip, which may be suggestive of his employment having been terminated, with his entitlements having been paid out, prior to the contract of sale being given effect. But the Applicant's evidence in this regard was unclear, neither party took the Commission to the composition of the relevant pay slip, and the vendor was not called to give evidence in these regards; 40 the Applicant, seemingly, had received no notice of termination, if indeed he had been terminated; the vendor was not brought forward by the Respondent for purposes of the giving of evidence that a novation had been consented to (or in fact whether a termination had been effected as per the Respondent's witness evidence); and the Applicant provides no evidence of any express consent to the apparent novation. [55] Generally speaking, there was little evidence of a probative kind on which the Commission could rely on in this matter, and similarly so for purposes of drawing inferences. [56] On the evidence before the Commission, there can be no conclusion based on the facts, or inference drawn from those established facts, that enables the Commission to determine, if even in prima facie terms, the jurisdictional objection alleged by the Respondent. That is, the Commission is unable to be satisfied whether there was a novation of employment as the Respondent claimed, let alone with the consequences for the Applicant's continuity of employment as submitted. [57] In particular terms, the Commission is not satisfied there was the necessary consent by all the parties involved that there was a novation, or else that there was agreement to pursue such an end in the first instance. The Commission does not know what information was conveyed by the former employer to the employee whose contract of employment was allegedly novated. [58] Equally so, the Commission, for its own purposes, is unable to be satisfied that a jurisdictional bar may arise as a consequence that there had been a termination of the Applicant's employment by the former employer or vendor. Whilst such an argument may be implied in some of the materials before the Commission, particularly by way of the Respondent's witness evidence, little was made of it, and appeared to be at cross purposes to the primary submission in relation to novation. [59] The Respondent, of course, is at liberty at any point during the progress of the application before the Commission to file again in relation to jurisdiction, if it believes such an application, on whatever terms, can be properly evidenced. In this regard, section 170CE A of the Act reads: "170CEA Motions for dismissal of application for want of jurisdiction (1) A respondent may move for the dismissal of an application under section 170CE on the ground that the application is outside the jurisdiction of the Commission at any time, including a time before the Commission has begun dealing with the application. (2) If: (a) the respondent moves for the dismissal of an application on such a ground and has not previously so moved; and (b) the respondent so moves before the matter is referred for conciliation by the Commission; the Commission must deal with the motion before taking any action, or any further action, on that application, unless the respondent indicates that the matter may be dealt with at a later time. (3) If the respondent moves for the dismissal of an application on such a ground, having already so moved on a previous occasion, the Commission must deal with the motion but may do so at any time it considers appropriate . (Emphasis added) CONCLUSION [60] The application in relation to a jurisdictional objection has not been made out and, consequently is dismissed. [61] The file will be allocated to conciliation. BY THE COMMISSION: COMMISSIONER RICHARDS Hearing details: Brisbane, 3 August 2004. Appearances Ms. Lane of The Australian Workers' Union for the Applicant. Mr. Humphries of the Northern Territory Chamber of Commerce and Industry for the Respondent. Printed by authority of the Commonwealth Government Printer <Price code {C}> 1 See R21A Motion to dismiss the application for want of jurisdiction. 2 Transcript. PN125. 3 Transcript. PN134. 4 Exhibit A2 - PN7. 5 Respondent's written submissions PN7-8. 6 Exhibit A1 - PN4. 7 Transcript PNS364-366. 8 Respondent's written submissions PN8 9 Respondent's written submissions PN6. 10 Transcript - PN364-365. 11 Lacy SDP, Re:Peter Daffy and Smart Investments Pty Ltd t/as Badger Creek Holidays, Melbourne, 23. 12 Ryan J, Textile Footwear & Clothing Union of Australia v Bellechic Pty Ltd & Ors , [1998] FCA 1465. 13 Applicant's written submissions PNS5 and 18. 14 Exhibit R1 PNS2 and 6. 15 Ibid PN5. 16 Ibid PN12. 17 Ibid PN18. 18 Transcript PN339. 19 Gleeson CJ, Gaudron, Gummow and Callinan JJ, PP Consultants Pty Ltd v Finance Sector Union [2000] HCA 59. 20 Transcript PN385 and PN388. 21 Respondent's written submissions PN6. 22 Viscount Simon LC, Noakes v Doncaster Amalgamated Colleries Ltd [1940] AC 1014. 23 Lacy SDP, Re:Peter Daffy and Smart Investments Pty Ltd t/as Badger Creek Holidays, Melbourne, 23 September 2002, [PR922700]. 24 Ryan J, Textile Footwear & Clothing Union of Australia v Bellechic Pty Ltd & Ors, [1998] FCA 1465. 25 Re:Peter Daffy and Smart Investments Pty Ltd t/as Badger Creek Holidays. 26 Ibid. 27 Ibid. 28 Ibid at 29 Hamilton DP, Belena and Ors v. Datatime Services Pty Ltd , Melbourne, 13 May 2004 [PR932016]. 30 J Bailey, Novation; Journal of Contract Law Volume 14, 5 May 1999. 31 Ibid PN40. 32 Ibid PN80. See also Olsson v. Dyson [1969] HCA 3; (1996) 120 CLR 365 see judgment of Windeyer J PNS14-15. 33 Hill and Finkelstein JJ, Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040 at PN138. 34 Ibid PN138. 35 Re: Textile Footwear & Clothing Union of Australia v Bellechic Pty Ltd & Ors. 36 J Bailey, Op Cit PN 42. 37 Op Cit PNS46-74. 38 Respondent's written submissions PN4. 39 Transcript PNS118, 121, 123 and 125. 40 Transcript PN339.