WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION. Industrial Relations Act 1979. Adrian Harry Masters and Emporess Pty Ltd. No. 823 of 1998. COMMISSIONER J F GREGOR. 10 December 1998. Reasons for Decision. ON 14 May 1998, Adrian Harry Masters (the applicant) ap- plied to the Commission for an order pursuant to s.29 of the Industrial Relations Act, 1979, (the Act) on the grounds that he had been unfairly dismissed from employment with Emporess Pty Ltd (the respondent). The applicant did not seek reinstatement. Paragraph 22 of his application indicates that he believed that the rapport that existed between the parties had vanished, as had the trust between them. Therefore he sought compensation. The respondent in this matter is a group of business names that operate within the party hire industry. The corporate struc- ture provides for a catering manager, a canvas manager, a marketing and hire manager and an administration manager. Each of these functions does work which, according to the respondent, had the potential of being a 24 hour day 7 day a week operation designed to service all function type events and any canvas or banner jobs particularly anything within those 3 spheres of work. It is common ground between the parties that the applicant was known to the principal of the respondent, Mr David Ham- ilton, for a number of years. A mutual contact had spoken to Mr Hamilton about the applicant and the fact that his employ- ment with Barrett Manufacturing Company was coming to end. The mutual acquaintance suggested if there was a posi- tion of some sort available within the Emporess Group, that the applicant might be a suitable person. The respondent did not take up the suggestion at the time but later it became in- volved with an operation known as Sea Eagle International (Sea Eagle). There were some discussions whether the appli- cant could fit into the marketing structure of that body. A tentative offer was made to the applicant and he commenced an association with Sea Eagle but he received no payment for his involvement. Sea Eagle eventually became inoperative in August 1997 and the respondent offered the applicant what it described as a speculative position associated with marketing within its group of companies. Both parties told the Commission that the relationship was to be remunerated on a performance basis. The applicant was to receive a wage of $20,000.00 plus an incentive to increase group turnover by up to 1.5 million dollars. If he was able to achieve that milestone he had a potential earning figure of $40,000.00 to $45,000.00 per year. The remuneration pack- age was struck to provide an incentive for the business to progress. The applicant’s role in the business was predomi- nately marketing but there were ongoing discussions about the job role and whilst it remained primarily marketing there were other duties required of the applicant. When the appli- cant commenced employment with the respondent, Mr Hamilton’s perception of his abilities was based on the opin- ion of mutual contacts. Mr Hamilton gained the impression from them that the applicant was a competent marketer. In addition, the applicant represented to Mr Hamilton that he had turned a business around to profitability. The respondent’s perception of the applicant changed over a period of time. According to Mr Hamilton, the applicant was quite competent in answering telephones but he was lacking in terms of devel- oping a marketing strategy. Mr Hamilton says that the respondent appreciated the short- comings in applicant’s ability. As an aide some marketing objectives were constructed for him to meet (Exhibit S5). To go with these objectives, the applicant was given a list of cli- ents to approach. There were targets set based on the original $1.5 million turnover. Around about this time there were a series of informal discussions between Mr Hamilton and the applicant. The applicant does not recall those discussions. WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 79 W.A.I.G. 288 The applicant said in his evidence that he was surprised that there were allegations about lack of performance. He had every expectation that he would work with the respondent until he retired or chose to go elsewhere. The respondent never ad- vised him that he may lose his employment due to any faults or misdeeds so that he could have the opportunity to address the problem. His performance was never addressed with him on a personal basis. There were various discussions about how the divisions of the respondent were performing but he did not relate those discussions, which he admitted took place, to a need to uplift his work standards. The respondent, through Mr Hamilton, always spoke to him in generalities about how the businesses were going. The applicant said he was aware that like most small businesses there was a problem with the bot- tom line and a careful watch is needed to be kept on costs. In his view, marketing has to be aggressive but because of a lack of funds he was never able to distribute enough material or fliers out to potential customers. It was the applicant’s opinion that during the course of his employment that the performance of the respondent’s business had improved. The applicant said that the first time he knew something was wrong and that his services were no longer required was when Mr Hamilton told him the respondent could not afford to keep him any longer. When he asked when he should leave, he was told immediately and this shocked him. In his evi- dence he said that he had no idea that his dismissal was a potential. He knew that there had been a cut back on staff but he thought that was not abnormal. The applicant’s impressions about the respondents business and how it was operating were disputed by Mr Hamilton. Mr Hamilton said that the businesses were not going well and the applicant was fully aware of it. It was specifically brought to his attention that the reason for his employment was to market the business, to help turn the company around and improve its financial performance. At various meetings, he was kept aware of the developing financial circumstances. Mr Hamilton had helped the applicant because it was evident to Mr Hamilton that the applicant did not have the skills to market the respond- ents business properly. Mr Hamilton regarded the applicant as inclined to procrastinate, be long-winded and slow to get things done. These deficiencies were brought to the applicant’s at- tention and although Mr Hamilton did not couch the conversations in the form of a formal warning, the applicant was nevertheless counselled regularly over an eight (8) month period about the need to improve his performance. Things came to a head in mid April 1998, when Mr Hamil- ton had dealings with the Australian Taxation Office. This focussed his mind on the fact that the respondent was not do- ing well. Mr Hamilton reviewed the potential income of the respondent for the next few months and the outlook was bleak. He decided that something had to be done to reduce expenses. On a number of occasions, the applicant was told that he was not pulling his weight. There had not been any notable im- provement so Mr Hamilton decided that he would bring the relationship to an end. There were no other positions that the applicant could perform that were available in the respond- ents business. Heavy manual work was not suitable because he had bad back and a hip replacement. Because there was no alternative work, dismissal became the only option. The ap- plicant was not told in anticipation that he would be dismissed because Mr Hamilton was absent from the workplace. As a matter of commercial prudence, Mr Hamilton did not wish to advise the applicant until he returned to the office. Mr Hamilton told the Commission that at the start of the 1997/98 financial year, the respondent was barely solvent. Turnover had decreased from the previous year. It had bank loans which it was required to refinance. It was in this context that attempts were made to get the applicant to approach the total marketing function in a professional manner. The appli- cant sat in on meetings with the respondent’s bankers and he must have been aware that there were attempts made to refi- nance the respondent’s business and there were funding problems. The outcome of the meeting with the bank was ex- plained. It was basically that the respondent had to examine its operations and devise how it could operate more efficiently. Mr Hamilton said that he endeavored to change the way he managed the business and budgets and there were weekly management meetings. By December, the situation was so bad that the respondent had to take radical action in order to sur- vive. In order to focus the minds of the employees upon the need for economy in their effort, the respondent produced a Hit List Summary (Exhibit S4). The point of which was to explain to the staff that costs needed to be reduced as a way to improve the finances generally. The preceding recitation is a sufficient scan of the evidence to give the flavor of the issues for determination before the Commission. It is for the applicant to establish that the dismissal was in all the circumstances unfair. The test for ascertaining whether a dismissal is harsh, oppressive or unfair is that outlined by the Industrial Appeal Court in Undercliff Nursing Home v. Federated Miscellaneous Workers Union of Australia (1985) 65 WAIG 385. The question to be answered is whether the right of the employer to terminate the employment has been exercised so harshly or oppressively or unfairly against the applicant as to amount to an abuse of the right. A dismissal for a valid reason within the meaning of the Act may still be un- fair if, for example, it is effected in a manner which is unfair but if the employment has been terminated in a manner which is procedurally irregular that will not of itself necessarily mean the dismissal is unfair (see Shire of Esperance v. Mouritz (1991) 71 WAIG 891 and also Byrne v. Australian Airlines (1995) 65 IR 32). In Shire of Esperance v. Mouritz, Kennedy J also ob- served that whether an employer in bringing about a dismissal adopted procedures which were fair to the employee, is but an element in determining whether the dismissal was harsh or unjust. The Commission heard evidence from the applicant. I have no reason to believe that he did not give what he considered to be a truthful recitation of the facts as he recalls them. I say the same about the only witness for the respondent, Mr Hamilton. What is at issue here is the interpretation of the same set of facts. Clearly, the applicant did not see the same urgency in the respondent’s financial situation as Mr Hamilton did. I dis- cuss the competing points of view in the analysis that follows. On the balance of probabilities I find that the relationship between the parties evolved from one where the respondent, through Mr Hamilton, had heard about the applicant through a mutual acquaintance. Mr Hamilton saw some of his work when he worked with Sea Eagle, a separate organisation from that of the respondent. When Sea Eagle ceased trading the appli- cant was given a job by the respondent in the hope that he had marketing expertise which could be used to generate an in- crease in turnover in the respondent’s business. However, that never came to pass. The financial situation became worse and worse. The applicant ought to have known about the financial situation. It was clear from the evidence that had been presented to the Commission (See Exhibits S2, S3, S4 and S5), that the respondent took reasonable action to draw to the applicant’s attention its requirements and the seri- ousness of the situation confronting it. This is not a situation where the applicant had been so remiss in his performance that the respondent would have been justified in giving him what is normally regarded in an industrial context as a formal warning. What he was doing was working away to the best of his ability but those best efforts were not producing the result that the respondent desired or as it developed, desperately re- quired. It was this that was drawn to his attention on a number of occasions during management meetings. It is not a defence for the applicant to say that he did not realise the complaints were addressed to him, after all, he was the only employee in the position to influence increases in turnover. That was what he was employed for. If the respondent was referring to the need to increase turnover and possible dire consequences if that did not happen, it must have been referring to the appli- cant. The applicant is an experienced and mature person and should have known, and I find that he did, that the complaints of the respondent were addressed to him Even if I am wrong about that finding, I accept from the evidence of the respondent that by the time the Australian Taxa- tion Office became involved because of the respondent’s failure to deduct group tax, there was a serious, if not terminal finan- cial problem in the respondents operations which necessitated the respondent taking stringent action to rescue the company. That action, amongst other things, included the termination of WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 289 79 W.A.I.G. the services of the applicant. This was done for bona fide op- erational reasons. The respondent was entitled to try and secure the ongoing financial health of its business. I accept the evi- dence of Mr Hamilton that the respondent was unable to continue to pay the applicant, given the general financial situ- ation and given the respondents lack of acceptance that the applicant was making a contribution to keeping the company operating or was capable of making a contribution which would allow it to trade out of its severe financial position. In such circumstances, termination of applicant’s contract of service was not contrary to the rules established in the Undercliffe Case (ibid). Taking all the surrounding matters into account, the employer was entitled to reach the conclu- sion that it was essential for the ongoing health of the business that the applicant’s position be terminated. To do so in the way it did was not inconsistent with the obligations upon an em- ployer as they are set out in the Shire of Esperence v. Moritz (ibid). Based on the above analysis, I find that there has been no unfair dismissal and the application will be dismissed. The application by the respondent indicated a claim for con- tractual benefits. The issues were discussed during the proceedings and as far as I can glean, there are no outstanding benefits to be paid. Any benefits payable at the time of termi- nation were apparently made good following intervention by a third party sometime after the termination. Therefore, that part of the application of contractual benefits will also be dis- missed. Appearances: Ms G Sharp appeared on behalf of the appli- cant. Ms M Saraceni, of Counsel, appeared on behalf of the re- spondent.