WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION. PARTIES JOSEPH PATRICK LYNCH, NORMINGTON WINN, APPLICANT v. TWINSIDE RETAINING WALLS & FENCES, MOUNT WELD NOMINEES PTY LTD TRADING AS TWINSIDE, RESPONDENT CORAM COMMISSIONER J F GREGOR DELIVERED WEDNESDAY, 4 APRIL 2001 WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 1039 81 W.A.I.G. FILE NOS APPLICATION 1477 OF 2000 AND APPLICATION 1483 OF 2000 CITATION NO. 2001 WAIRC 02476 _______________________________________________________________________________ Result Dismissed Representation Applicant Mr C. Fayle appeared on behalf of the Applicant Respondent Mr O. Moon appeared on behalf of the Respondent _______________________________________________________________________________ Reasons for Decision. 1 Joseph Patrick Lynch and Normington Winn (the applicants) were both employed by Mt Weld Nominees Pty Ltd t/a Twinside Retaining Walls and Fences (the Respondent) until 8th September 2000 when they were both dismissed. 2 Each of them received a notice of termination in the following form— “We regret to inform you that the recent downturn in the building industry has resulted in a severe cash flow short- age. We are (and will be) unable to continue to pay your wages. Therefore, you will no longer be employed by Twinside after Friday the 8th of September 2000. We wish you well for the future, Yours Faithfully L.K. Polmear” (Exhibit F4) 3 Each of the Applicants say that the notice of termination was given to them without explanation by Mr Lyndsay Polmear (Mr Polmear senior), the Chairman, of the Respondent. Mr Joseph Lynch was engaged in April 1999 as Administrative and Internal Sales Manager by a predecessor to the Respondent. On or about 13th May 1999 he received a letter from the Managing Director of his then employer advising him that the business had been sold and the new owners would take over from 1st July 1999. All monies due to him on 30th June 1999 would be paid subject to him agreeing he would be engaged by the new owner. In the letter of offer, (Exhibit F1), the writer offered the opinion that he did not anticipate that the new owner would change the fundamental basis of the terms and conditions of employment. 4 That came to pass and the new owners took over with Mr Lynch continuing to work as an Internal Sales and Administration Manager. By letter dated 10th May the terms and conditions of the new contract of employment were specified. The offer was based on Mr Lynch accepting the position of General Manager Twinside Retaining Walls and Fences, it described the role as the day to day running of the operation, including ‘company functions in a financially responsible manner’. In his evidence Mr Lynch disputed that he ever was able to do so. He says that he worked under John Polmear who was the Managing Director. 5 Mr Lynch said that he considered a Job Description Form that had been presented to him, (Exhibit F3) and decided that some changes were necessary to enhance the training position of the company. On his analysis a large sum of money was spent on advertising, he reduced this in both radio and print media, even though the print medium advertising was subject to contract. He also undertook staffing changes by instituting a different scheme of employment. In his evidence in chief he told the Commission that Mr Polmear senior, the father of John Polmear the Managing Director, came into the office on the Tuesday 8th September 1999 he had documents folded under his arm, he placed one on the other Applicant in this proceeding Mr Winn’s desk, and came into Mr Lynch’s office. He handed over the document with the words “I’m sorry I am bearer of bad news” and walked away. 6 Mr Lynch says he was totally shocked by the letter, he could not absorb what was said, he had been told on numerous occasions by Mr John Polmear that he was an asset to the company and that to receive a dismissal letter in the way he did was devastating to him. He asked Mr Polmear, senior for an opportunity to discuss the matter as he thought it may be a practical joke. Mr Polmear, senior assured him to the contrary, Mr Lynch made enquiries about whether other employees were being laid off and he was told that they were. These employees were named. As far as Mr Lynch was concerned he had the intention of serving the company for fifteen or so years until he was ready for retirement. 7 He was aware that the trading situation of the company was not good, on numerous occasions he had discussed the problem with the Accountant. He had spoken to Mr John and Mr Lyndsay Polmear together and individually; every time that he mentioned the financials he was told not to worry and that there was considerable asset backing for the respondent’s operations. 8 After the dismissal Mr Lynch says that he suffered stress such that he attended a medical practitioner, (Exhibit F5), who prescribed him medication which he continues to take. He was paid one weeks pay and two weeks pay for notice, (Exhibit F6), he disputed that he had been paid any money for redundancy as is shown on Exhibit F7. 9 Later he had seen a relative of the respondent’s owner working in the operation and the advertisements that he had stopped started to appear again in the West Magazine, (Exhibit F9). In the period since he was dismissed, apart from two jobs of four hours each duration, he has not been able to obtain work. 10 During his cross examination Mr Lynch was subjected to detailed questioning from Mr Moon, who appeared for the Respondent, concerning his involvement in the operations of the company. There is no need to summarise that evidence in this part of the Reasons except to say that when dealing with financial documents Mr Lynch claimed that he had on numerous occasions pointed out to the principals that they had to cut back but they continued to go behind his advice, give increases of pay to staff and massive discounts when the respondent was in no sound position to do so. There was also decisions taken to delay regular maintenance. On numerous occasions he also had drawn to the attention of Mr Polmear that there was an excessive interest load. 11 The thrust of the evidence of Mr Lynch was that notwithstanding that he raised the financial position with the respondent’s principals they continued to incur expenses that he was not told about, this made his position as a General Manager extremely difficult. He says that he was reassured many times that there was no problem because of the asset backing. He admitted too that the production figures were not indicative of a healthy position, he was aware even though he was not shown the detailed financials that the Respondent was running at a loss through the year leading up to his termination. He had discussions with Mr John Polmear the Managing Director on a continuing basis about the need to reduce staff because of the build up of stock in store. When he tried to institute staff redundancies the staff would go behind his back and speak to either Mr Polmear senior or Mr John Polmear. He was however able to effect a reduction in the numbers of staff hired through the employment agent being used by the Respondent. 12 The evidence of Mr Nomington Winn is that he is a person of 40 years experience in the building industry, he obtained employment with the Respondent after being referred to it for a clerical job. After an interview on 12th January 2000 he was offered a position as Assistant Project Manager with an initial three month probationary period commencing on 12th January 2000 concluding on 11th April 2000. During that time the contract could be terminated by either party on a week’s notice. 13 By 15th March 2000 he had been offered a promotion, (Exhibit F11), Mr John Polmear the Managing Director wrote that he was pleased to confirm, the appointment as Assistant Project Officer and formally offer the position of Senior Projects Manager, describing it as a newly created role. Mr Winn already performed many of the tasks but there were additional responsibilities which WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 81 W.A.I.G. 1040 included overall control of the project manager’s responsibilities for the correct installation of work and as an arbitrator and coordinator of warranty claims. He also received a pay increase to $31,500. 14 Thereafter Mr Winn controlled installation quotations, building plans submitted from clients and supervised the Sales Project Manager and Installation Project Manager. There were many problems with pricing. When he took over the focus was mainly to relieve pressure on Mr John Polmear, who was also doing quotations. 15 Mr Winn gave evidence that Mr John Polmear had given him lists of prices which showed that some builders received discounts from between 10 and 35% of the recommended retail price which, in the opinion of Mr Winn, was already too low. He attempted to have the prices increased having made a schedule of new prices. Some prices were raised but this did not stop Mr John Polmear giving discounts. Mr Winn described this conduct as trying to achieve jobs regardless of cost. On many occasions he was over ruled on pricing by Mr John Polmear. 16 In the last week of July 2000, some five weeks before his dismissal, his remuneration was increased to $37,500. He related meetings he had with Mr Lynch after he became General Manager, these meetings were held in an attempt to turn around the trading situation. He acknowledged that in June and July there was a general downturn in the building industry which is normal for that time of the year. He had drawn attention of Mr John Polmear to the situation and shown him the installation board which some days was down to one day’s work. He was never given any suggestion from senior management of the respondent that his position was in jeopardy. No director of the respondent made any complaint to him about the standard of his work. On the contrary Mr John Polmear had told him that he would like Mr Lynch and himself to take charge of the company and run it while he was in the Eastern States. 17 Mr Winn says that on the day he was dismissed Mr Polmear senior came into his office, he did not have his normal cheerful disposition. Mr Polmear senior handed Mr Winn a folded piece of paper and said “I’m sorry” he made no other explanation, the paper was a notice of dismissal (Exhibit F4). Later Mr Polmear senior told him that if there was a possible chance he could use him as a contractor he might be able to. The Applicant rang Mr John Polmear and requested a reference. On 18th September 2000 he received the following reference over the signature of John Polmear— “I have the greatest pleasure in writing this letter regarding the integrity, work loyalty and personal- ity of Norm Winn. At Twinside Retaining Walls and Fences, Norm was employed as Senior Project Manager. This is a posi- tion that relies on the incumbent being reliable, diligent and personable. I will address each of Norm’s qualities, Reliable: Norm was reliable in all elements of his work regime. He consistently produced an outstanding level of work, and I could al- ways rely on him to go the extra distance when the situation required it. Diligent: Norm was not only diligent but also fastidious in ensuring all elements of his job were done correctly. If he discovered some- thing was overlooked, he would not rest until he had resolved the problem. Personable: The Senior Project Manager must wear several hats; mediator, site supervisor, etc. In each role, Norm had no problems. He was well liked and he mediated exceptionally well, always ensuring Twinside’s position was not compromised. Norm left Twinside Retaining Walls and Fences due to the downturn in the building industry after the implementation of GST. There is no doubt in my mind that Norm is a valuable employee for who ever he is employed by and I strongly recommend, if you have the opportunity to utilise his services, do so. Please do not hesitate to contact me if you wish to discuss anything about Norm. It would be my hon- our to speak with you about his qualities. Yours sincerely, John Polmear Managing Director” (Exhibit F13) It is relevant to record that a reference in exactly the same terms with a different identification was given to Mr Lynch by Mr John Polmear. 18 Later in his evidence Mr Winn told the Commission that he had seen that the Respondent had employed other people in work which he recognised as that which was previously done by himself. He also gave evidence of his attempts to achieve employment. 19 The preceding is a sufficient summary of the evidence presented on behalf of the Applicants in this matter. 20 The position of the Applicants is encapsulated in the schedule to its Notice of Answer and Counterproposal. In substance the answer forms the basis of the opposition to the claim as presented by Mr Moon. 21 The Respondent agrees that both the Applicants were employed, in the case of Mr Lynch between 1st July 2000 to 8th September 2000 and in the case of Mr Winn from 12th July 2000 to 8th September 2000. More likely than not the terminations took place on 8th September 2000. It is agreed that Mr Lynch was employed in the position of General Manager at the time of his employment and Mr Winn was Senior Projects Manager. It is claimed that the Respondent terminated the services of both of the men on 5th September 2000 for economic reasons. 22 It is submitted that following the introduction of the Goods and Services Tax on 1st July 2000 that the housing industry suffered a dramatic downturn in activity which severely impacted on the operations of the Respondent. Given the severity of the downturn and the level of activity in housing sector the Respondent’s level of work was similarly affected and as a consequence it was forced due to the economic impact of the downturn to reduce its workforce. There was a reduction in the number of persons employed from about 23 in early 2000 to 11 by 27th September 2000. 23 The Respondent rejected the assertions of the Applicants that their duties have now been undertaken by members of the family of the respondent’s Directors as it rejected the allegation of the Production Manager had assumed duties in the employer’s office previously performed by Mr Lynch. 24 The Respondent contended that due to the pressing economic circumstances it was forced to down size its workforce. In doing so it reduced its office staff numbers with the work being allocated to the remaining staff. It has employed no one since the termination of each of the Applicants. 25 On behalf of the Respondent the Commission heard evidence from Mr Lyndsay Keith Polmear who is the principal of Mt Weld Nominees. He related how he had made a decision to in conjunction with other Directors, to acquire the Respondent’s business on the assessment that it would become a viable asset. As originally structured his son Mr John Polmear was to run the business. Mr Polmear senior considered that with his military and business experience his son would be able to handle the position. Mr Polmear senior gave evidence that his son continued in that role until about four weeks after the termination of the Applicants when he was dismissed as the Managing Director for lack of performance. The lack of performance related to financial and a general management of the business. The lack of performance of Mr John Polmear coupled with a similar deficiency in senior management was sending the Respondent bankrupt. For the good of the other members of the Mt Weld Nominees Mr Polmear senior had to intervene and intervene rapidly to deal with the problem. WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 1041 81 W.A.I.G. 26 Mr Polmear senior gave evidence that since the changes have been made there have been new and skilled people involved to do the work previously done by the Applicants and his son. The structure of the company is quite different. It has continued to operate with an overall reduction of 11 people employed. However at one stage the factory was down to four or five key personnel. 27 Mr Polmear senior gave evidence that he decided to restructure the business and make employees redundant. He had allowed his son as much management latitude as possible but the position was reached where the operation was continuing to go down hill to an extent that on a particular day the bank would not cash cheques. He managed to deal with that situation at the time, but he realised after making enquiries at the bank that the Respondent had reached the bottom of the barrel, he had to do something. He agonised over it. Eventually he rang his son and told him to return from Queensland and that he was going to start laying people off. He says that two weeks before he had mentioned to Applicant Lynch that the operation was top heavy and inside staff would have to go. He says Mr Lynch objected to this but he did not tell Mr Lynch that he would be one of the persons who would be leaving. As far as Mr Polmear senior was concerned what he meant was the Applicants Lynch and Winn and anyone else whose work was not essential for the ongoing operations of the company would have to go. The situation was desperate, it was almost at the point of no return and he had to do something. There was no way that the operation could be kept going paying the wages and operating costs under the structure that it had. The banks would have most definitely foreclosed on the operations, if that had happened the very large mortgages against the family properties would have meant a forced sale, the breaking up of investments that he and his family had laboured for over forty years to build. 28 There were financial documents put to the Commission concerning the losses. Pursuant to the powers in s.33(3) of the Act as that information related to trade secrets and profits and financial position of the Respondent the Commission ordered that there be non disclosure. For that reason though those documents will not be summarised in these Reasons, however suffice to say that the evidence of Mr Polmear senior is that the figures show the restructuring was bearing fruit. All pricing had been revised, the discounts had been refused and everything concerning the finance had been revamped to replace what Mr Polmear senior assessed as a shambles. 29 The proceeding recitations are sufficient summary of the evidence for the purposes of these Reasons for Decision. 30 I have had the opportunity of seeing and hearing the witnesses give their evidence. I find no reason to disbelieve the story presented to the Commission by each of the Applicants nor have I any reason to not accept the version of events given to me by Mr Polmear senior who described the events leading to his interventions in a powerful and positive way. In assessing the evidence being put to the Commission in this case the creditability of the witnesses, apart from the reservation I express later, is not an issue; it is the emphasis on the events and the inferences that should be drawn from those events which will decide this matter. 31 It is said by the Respondent that the terminations occurred as a result of a restructure of the Respondent’s operations that had been thrust upon it by the financial position. It is said at law that there it is a term implied into a contract of employment that where an employer decides to restructure a job or to make a person redundant he will be entitled to be informed as soon as reasonably practical after the decision has been made to restructure or it is decided that there will be a redundancy. It is also clear that individuals are entitled to discuss with the employer the likely effects of the restructure upon him or her and the likely effects of redundancy upon him or her and the measures that may be taken by the employer to award or minimise the effects of the restructure. These are requirements flow from the Minimum Conditions of Employment Act 1993 and have been discussed by the Industrial Appeal Court in FDR Pty Ltd v Jacob Gilmore and Jacob Gilmore v Cecil Bros FDR Pty Ltd Cecil Bros Pty Ltd (1998) 78 WAIG 1099 where the Industrial Appeal Court considered the effect of a failure to follow the terms of that Act. 32 On the other hand there is a question here about whether reducing the number of employees in these circumstances constitutes a redundancy. According to the dicta of the