WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES RICHARDSON PACIFIC LTD

APPELLANT

-and-

 DEBORAH ANNE MILLER-SMITH

RESPONDENT

CORAM FULL BENCH

  HIS HONOUR THE PRESIDENT P J SHARKEY

  COMMISSIONER J H SMITH

  COMMISSIONER S WOOD

DATE WEDNESDAY, 9 MARCH 2005

FILE NO. FBA 34 OF 2004

CITATION NO. 2005 WAIRC 00545

CatchWords Industrial Law (WA) - appeal against the decision of a single commissioner - contractual benefits - severance pay entitlements - contract of employment - express term - implied term - admissibility of evidence -  Industrial Relations Act 1979 (as amended) , s26(1)(a), s29(1)(b)(i), s49 - Minimum Conditions of Employment Act 1993 - Industrial Relations Commission Regulations 1985

Decision Appeal dismissed

Appearances

Appellant  Mr D Jones, as agent

Respondent  Mr S Kemp (of Counsel), by leave

Reasons for Decision

THE PRESIDENT:

1                 These are the joint reasons of the President and Commissioner S Wood.

INTRODUCTION

2                 This is an appeal by the above-named company, Richardson Pacific Ltd (hereinafter referred to as “RPL”), against the decision of the Commission, constituted by a single Commissioner, given on 27 August 2004 in application No 980 of 2003.  The appeal is against paragraphs (1) and (2) only of that decision.  The appeal is brought pursuant to s49 of the Industrial Relations Act 1979 (as amended) (hereinafter referred to as “the Act”).  The respondent is Ms Deborah Anne Miller-Smith, a former employee of RPL.

3                 The decision appealed against is constituted by an order of the Commission which, formal parts omitted, is in the following terms:-

“(1) DECLARES that Deborah Anne Miller-Smith was entitled under her contract of employment to a redundancy payment based upon 3.5 weeks’ pay for each year of service with pro-rata for uncompleted years of service.

 (2) ORDERS that Richardson Pacific Limited forthwith pay to Deborah Anne Miller-Smith the difference between the severance payment actually paid to her upon her dismissal on 30 May 2003 and her entitlement in (1) hereof.

 (3) THAT the claim of unfair dismissal is hereby dismissed.”

GROUNDS OF APPEAL

4                 It is against that decision that the appellant now appeals on the following grounds:-

“1. The Commissioner erred in law and fact in finding (Reasons, paragraphs 31-32) that the parties were not bound by a formal contract of employment complete in its terms.

2. The Commissioner erred in fact in failing to find on the evidence (Transcript, page 98) that the contract of employment contained an express term that the parties could terminate by giving one month’s notice.

3. The Commissioner erred in law by applying (Reasons, paragraph 39) the “so obvious it goes without saying” test to circumstances at or prior to the Respondent’s dismissal rather than circumstances that existed or that were presumed to exist at the time that that contract of employment was formed.

4. The Commissioner erred in law in failing to find that the term sought to be implied was contrary to an express term agreed between the parties, it being established, by the evidence, that termination of the contract could be effected on one month’s notice.

5. In the alternative to ground 1, the Commissioner erred in law in finding (Reasons, paragraphs 34 to 37 inclusive) that it was necessary for the reasonable or effective operation of a contract of that [a contract of employment] nature to imply the term sought by the Respondent, when he ought to have found that the contract was not a contract of that nature [or of that class] for which it was necessary to imply the term.

6. The Commissioner erred in law and fact in failing to find that the presumed intention of the parties, on which the importation of the custom or practice rests, must give way to the actual intention expressed in the contract — whether the contract is written or oral.  In so failing the Commissioner incorrectly found (Reasons, paragraph 40) that the Respondent was entitled to a redundancy payment as a contractual right.

7. The Commissioner erred in fact and law by finding (Reasons, paragraph 38) that it was “reasonable to assume” that the parties contracted on the basis of the custom when he should have found that the practice of the Appellant did not represent, on the evidence, an established custom of an industry nor was it notorious or certain when, in fact, the evidence proved that redundancy payments varied within the industry.

8. The Commissioner erred in fact and in law by failing to give sufficient weight to the evidence (Exhibits A, C and D) that by executive decision, effective 1 April 2003, the new owners of the Appellant’s business had changed the practice (redundancy payments).

9. The Appellant seeks an order that:

a) upholds the Appeal and quashes the decision; or

b) suspends the operation of the decision and remits the case to the Commission for further hearing and determination.”

BACKGROUND

5                 Ms Miller-Smith had been employed by RPL since 1988.  She had commenced as a sales clerk and rose through the ranks to become the WA State Manager on 29 March 2000, the position which she held when she was dismissed on 30 May 2003.  The Locker Group Pty Ltd purchased the shares of RPL on 7 May 2003 and management control passed to the Locker Group from 1 April 2003.  However, Ms Miller-Smith remained an employee of RPL until her retrenchment on 30 May 2003.  It is to be explained, as Mr Jones explained it, that RPL remained in existence as a separate legal entity, notwithstanding the purchase of the shares by the Locker Group.  The Managing Director ceased to be Mr Darryl Rainsbury and the General Manager ceased to be Mr Graham Capper.  Mr Anthony Webber of the Locker Group became the Managing Director of RPL.

6                 Ms Miller-Smith made two claims by application filed in the Commission on 26 June 2003.  By that application, she claimed firstly that she had not been allowed by RPL a benefit, namely a severance payment of 3.5 weeks’ pay for each year of service to which she was entitled under her contract of employment (see s29(1)(b)(ii) of the Act).  In relation to her second claim, she alleged that her dismissal was harsh, oppressive or unfair because of the process which was followed on 30 May 2003 (see s29(1)(b)(i) of the Act).

7                 When Ms Miller-Smith was first employed in 1988, she was not given any letter setting out her terms of employment.  Two years later, when she was appointed as Sales Representative – Perforated Metal Division Queensland, she did receive a letter (attachment 1 to exhibit D), however the letter did not contain terms of employment other than salary and motor vehicle use.  On 18 January 1994, when she was offered the position of WA Sales Manager (attachment 2 to exhibit D), the following conditions were set out in the letter, namely the hours of work, salary, company vehicle, duties and responsibilities and notice of termination.  That letter also said “all other conditions of employment remain unchanged”.  That letter was tendered and an employee’s handbook was tendered.  Factory employees, of course, had a severance pay entitlement under the relevant Enterprise Bargaining Agreement (“EBA”).

8                 There was evidence that there were no other documents containing her terms of employment.  In evidence, Ms Miller-Smith made no reference to any verbal representation to her by RPL that she would be entitled to 3.5 weeks’ pay per year of service upon being retrenched for redundancy.  However, in cross-examination, she asserted that, in numerous discussions with two previous General Managers, they told her that she did have that entitlement.  She did not call them to give evidence and her evidence on this point was hearsay.  The Commissioner at first instance attributed very little weight to it.  The Commissioner went on to find that the entitlement she claimed was not an express term of her contract of employment.  The question then arose whether there was an implied term of her contract of employment that she had such an entitlement.

9                 Ms Miller-Smith’s evidence was that the entitlement arose out of the practice of RPL paying its employees the same redundancy payment as contained in the EBAs negotiated for the production workforce in the factory at Braybrook in Victoria.  The relevant EBA was then the Richardson Pacific Pty Ltd Redundancy Agreement 1997, 17 November 1997, Print 6422, which contained a redundancy entitlement of 3.5 weeks’ pay for each complete year of service with pro rata for uncompleted years.  This agreement had predecessor agreements.  It was not in issue that the EBAs did not apply to non-production employees including Ms Miller-Smith.  Her evidence was that, to her knowledge, the redundancy payment from the EBA was always paid when any RPL employees were made redundant throughout Australia.  At all material times, the EBA of 1997 contained a clause providing that, on retrenchment, all production employees at the RPL factory in Braybrook, Victoria would be paid an amount equal to 3.5 weeks’ pay for each year of service to RPL.

10              Ms Miller-Smith gave evidence that she was told by Ms Lesley Gillespie and Ms Sharyn Grima, senior payroll employee and the payroll and accounts clerk respectively, that employees who were retrenched for redundancy were paid a severance payment equivalent to the EBA.  Thus, when Ms Miller-Smith was made redundant and paid only two weeks’ pay per year of service, she said at the time that the payment was incorrect and confirmed this opinion in writing.

11              Ms Miller-Smith called Ms Grima to give evidence.  Ms Grima has been the payroll clerk for 16 years and gave evidence that, to the best of her knowledge, any person employed by RPL, regardless of their position or branch, was paid at the equivalent of the existing EBA at the time of redundancy.  Ms Grima had calculated severance payments for a number of people who were retrenched for redundancy as part of her duty.  She did admit that she knew of no written policy conferring redundancy entitlements on non-production staff.  However, Ms Grima said that it was her understanding that there was no different treatment applicable to non-production staff than that afforded to production staff.  It was only, she said, later that she became aware that the EBA applied only to the production employees in the factory at Braybrook. 

12              Ms Lesley Gillespie was the one who made decisions in these matters and she left RPL’s employ in July 2002.  She was not called, but evidence was given by Ms Miller-Smith that Ms Gillespie told her that she was entitled to be paid according to the term of the contract which she says existed (see pages 14-15 of the transcript at first instance).

13              A previous State Manager from Queensland, Mr Robert Gordon Mangelsdorf, gave evidence, his understanding was that the redundancy entitlement would be 3.5 weeks’ pay for each year of service.  The Commissioner attached no weight to the evidence of Mr Nami, a Product Manager from New South Wales whose evidence was tendered in statutory declaration form.

14              There was evidence for the respondent on affidavit from Mr Anthony Webber, Managing Director, Mr Keith Archibald, Victorian State Manager, Mr Edward Sill, Finance Director, Ms Heather Gaye Shears, Payroll Personnel Manager, all from the Locker Group, who were also cross-examined by video link.

15              The evidence before the Commission was that it was not until Ms Miller-Smith queried and then challenged the redundancy payment made to her that the company itself, through its own Payroll Personnel Manager, Ms Shears, investigated the past redundancy payments made by RPL.  Those payments showed that, between February 1991 and June 2003, a number of employees who were non-production staff and including a General and a Branch Manager, received redundancy payments.  RPL continues to operate in its own name, employs its own workforce, and, as at 30 May 2003, was Ms Miller-Smith’s employer.

16              The Commissioner at first instance concluded that the facts in this case distinguished it from the decision in Dellys v Elderslie Finance Corporation Ltd (2002) 82 WAIG 1193 (IAC).  Further, the Commissioner held that this was not a case where Ms Miller-Smith is claiming that she is entitled to a redundancy payment upon redundancy because such a term is to be implied in every contract of employment as a matter of law.  Rather, Ms Miller-Smith claims that it was an implied term of her contract of employment due only to the circumstances of her case.  Thus, where a contract was partly oral and partly written, the actual terms of the contract must first be inferred before any question of implication arises.  Therefore, it is necessary to arrive at some conclusions to the actual intention of the parties before considering any presumed or imputed intentions.

17              There was no actual intention, the Commissioner held, in relation to a redundancy payment upon redundancy because it was never discussed.  Therefore, the issue of implication arose.  Further, the Commissioner held that custom applied, citing Byrne and Frew v Australian Airlines Ltd [1995] 185 CLR 410.  The Commissioner held that Ms Miller-Smith was entitled to a redundancy payment based on 3.5 weeks’ pay for each year of service with pro rata for uncompleted years of service.  There was nothing in the evidence to warrant a finding that the orders sought ought not be made, the Commissioner found.

18              As to the claim for unfair dismissal, the Commissioner held that the discussion that was required by the Minimum Conditions of Employment Act 1993, had it occurred, could not have brought about a different outcome.  Thus, he held that the unfair dismissal claim should be dismissed, it having not been established.

19              It was not in issue that, at all material times, EBAs, the latest of which was the Richardson Pacific Pty Ltd Redundancy Agreement 1997, a federally registered certified agreement, prescribed entitlements to the production employees at the RPL factory at Braybrook in Victoria so that severance pay was to be paid to them on retrenchment for redundancy at an amount equal to 3.5 weeks’ salary for each completed year of service by the employee in question.

20              The controversy arose about the question of whether managerial and other non-production employees were entitled to be paid at the same rate as factory employees upon retrenchment for redundancy, when they were not covered by the EBA or EBAs which covered production or factory employees at Braybrook.

21              After the purchase of shares in RPL, that company became part of the Locker Group.  Ms Miller-Smith and the other employees remained employees of RPL, but the management of the Locker Group commenced to make decisions.  Indeed, they made decisions before the “takeover” was complete. 

22              It was not in dispute that, in or about November 2002, senior managers and others from the Locker Group engaged themselves in a process called “due diligence”, the phrase whose meaning is not entirely clear.  As we understood it, however, this did mean, inter alia, the terms and conditions of employment of employees were checked, including any policies which applied to them.

23              Mr Edmund Francis Sill, the Locker Group Finance Director, who gave evidence, was involved in the process.  The significance of this was that no policy or term of any contract of employment governing the rights of non-production employees to severance payments were discovered or brought to the attention of the Locker Group employees conducting due diligence.

24              As a result, Mr Sill reported this fact to Mr Webber and other executives of the Locker Group and they decided that that standard condition current in the Locker Group for severance payments would apply.  That was some months, of course, before the change in management of and the completion of the takeover of RPL by the Locker Group.

25              On 25 March 2003, Mr Darryl Rainsbury, the Chairman of RPL, in a written “employee announcement”, advised RPL employees, of whom Ms Miller-Smith was one, that negotiations were taking place for the acquisition of all of the “issued share capital” of the RPL group from Lemvest Limited.  We assume that Lemvest Limited was the holder of the shares in RPL which were acquired by the Locker Group.  Significantly, the announcement also said this:-

“In essence, since only the ownership of the RPL group will change following any sale, as an employee your terms and conditions of employment will remain exactly as they were prior to the sale.  This includes all aspects of your employment from your job specification to your remuneration and leave entitlements (annual, sick and long service leave entitlements).”

26              There was no mention there of severance pay, but not every entitlement is mentioned individually.  Further, we assume that the announcement is one directed to all employees and not merely to production employees because that is what it purports to be.

27              Further, the same advice was given to employees by Mr Capper, the Managing Director, and Mr Rainsbury at meetings which Ms Miller-Smith and Mr Mangelsdorf, formerly the State Manager in Queensland, were present.  These were, of course, separate meetings.  Mr Mangelsdorf was also retrenched for redundancy and was seeking remedies in the Queensland jurisdiction.  Mr Mangelsdorf said that the specific question of severance pay was raised at the meeting which he attended and he was told that that condition would not change.  It was the evidence of Ms Miller-Smith that it was a condition of employment of non-production employees that, when their jobs were made redundant and they were retrenched, they would be paid severance pay at the rate of an amount equal to 3.5 weeks’ pay for every year of service to RPL which was the same amount as production employees were entitled to by virtue of the certified agreement.  Neither Mr Mangelsdorf nor Ms Miller-Smith was covered by any such agreements in any respect.

28              It was also Ms Miller-Smith’s evidence that other staff whose jobs had been made redundant and who were retrenched received these benefits and it was clear to her that this was a condition of employment.  She had also understood this through the office grapevine.

29              Ms Miller-Smith’s case was that it was an express or implied term of the contracts of employment of non-production employees throughout Australia that severance pay would be the same as in the EBA.  It was also the evidence of Ms Grima, who had been the payroll and accounts clerk for RPL for 16 years and was so at the time of the hearing at first instance, that any person who was retrenched for redundancy by RPL, regardless of position or branch in the company, was paid at the rate prescribed by the existing EBA at the time of retrenchment.  She was not shaken in that evidence.  Ms Grima gave evidence that, in May 2003, that amount was 3.5 weeks per year of service.  She also knew that this was the situation from calculating the amounts payable and effecting payment to persons who had been retrenched.

30              More cogently, even, the records of RPL (see pages 150 to 186 of the appeal book (hereinafter referred to as “AB”)) from 15 February 1991 to March 2003, record that all persons retrenched, of whatever occupation, received severance payment of 3.5 weeks’ wages or salary for each year worked from July 2000 and at four weeks or two weeks per year, which was the rate payable under the relevant agreements before that, subject to years of service (see, for example, pages 81-82 (AB)).

31              In these records, there is only one payment noted as “ex gratia” and that is a payment to Ms Val Pedro who, on the uncontroverted evidence, resigned on the grounds of ill health and who was not retrenched.  It is clear that employees were paid by way of severance payment at whatever rate applied in the EBA for factory employees.  It is noted that, apart from the record relating to Ms Pedro’s payment, not one record of payment amongst the records to which we have referred above is recorded as an ex gratia payment ((ie) between the dates 15 February 1991 to 31 March 2003).  All such payments are described as severance pay or retrenchment allowances.  All are made to non-production employees as well as production employees and all effect payments at the rate of the relevant EBA and, from 2000, at the rate of 3.5 weeks’ pay for each year of service.

32              On 19 May 2003, Mr Webber, as the new Managing Director, gave notice of impending job losses because of duplication of roles or positions being declared redundant.

33              On 30 May 2003, Mr Webber and Mr Archibald, the Victorian State Manager, had a meeting in Perth with Ms Miller-Smith at which they informed her that she was to be dismissed because her job was redundant and they handed her a letter and a statement of her entitlements paid.  On receipt of that letter, Ms Miller-Smith told them, and it was agreed that that is what she had said, that the payment of two weeks’ pay for every year of service was wrong and not in accordance with RPL terms and conditions of employment.  They undertook to look into the matter.  Payment at the rate of two weeks’ pay for each year of service was, as Ms Shears, the Locker Group’s personnel and payroll officer for over 20 years, said in evidence, the “Locker standard policy” applicable to all of the group’s workforce (see Mr Sill’s evidence also).

34              After the application for relief was made by Ms Miller-Smith in the Commission, Ms Shears investigated the situation.  Ms Miller-Smith had raised this point at a conference in the Commission in August 2003.  Nothing apparently had been done about her complaint between May and August 2003.  However, Ms Shears produced to the Commission the records of severance payments which her investigation uncovered.  We have referred to them above.  What she ascertained from her enquiries had not been revealed during the due diligence stage.  That was not disputed.  What the records did reveal was that RPL had paid non-production staff the same level of “redundancy payments” as would be paid to production staff, covered by the relevant agreements (see, too, exhibit 11, the RPL redundancy payments from 1991 to 2003 (page 149 (AB)).

35              Ms Shears also made it clear and it remained her evidence that, “These further investigations by me revealed no other information that established the existence of an RPL redundancy policy for non-production staff.  Rather, as explained to me, the payments were made ex gratia to each affected employee” (see page 72 (AB)).  She advised her Finance Director, Mr Sills, of this and she was later informed that the executive did not reverse the decision made in November 2002, of which she had been informed in November 2002, that payments would be made according to the Locker Group standard policy for severance payments.

36              All payments since 1 April 2003, including that to Ms Miller-Smith, have been, on the evidence, made in compliance with that decision.

37              On 2 June 2003, Ms Shears wrote to Ms Miller-Smith reiterating that redundancy pay was two weeks’ pay for each completed year of service.  On 11 June 2003, Ms Miller-Smith wrote to Ms Shears reaffirming her claim.  On 12 June 2003, Mr Webber wrote to Ms Miller-Smith reaffirming his position and the Locker Group’s position.  It is significant that, until 1 September 2003, four months after Ms Miller-Smith’s dismissal, that employees at RPL were advised by Mr Webber for the first time that Locker Group policies in “human resources” and occupational health safety and redundancy procedures would apply as attached to that letter.

ISSUES AND CONCLUSIONS

38              The decision in this matter was a discretionary decision, as defined in Norbis v Norbis [1986] 161 CLR 513 and Coal and Allied Operations Pty Ltd v AIRC and Others [2000] 203 CLR 194.  However, jurisdiction in the matter depended on a finding about the terms of the contract of employment between the parties.  Ms Miller-Smith had to establish that it was a term of her contract, either express or implied, that she was entitled to be paid a severance payment at the rate of 3.5 weeks’ salary per year for the 14½ years of service.  It was common ground that Ms Miller-Smith had been retrenched ((ie) dismissed), because her job had become redundant.

39              There are some observations which we wish to make before expressing our further reasons.

40              First, Ms Miller-Smith was not made redundant and it is wrong to say so.  Her job was clearly made redundant and, as we understand it, abolished.  What happened was that she was retrenched ((ie) dismissed), because her job was made redundant (see, generally, R v The Industrial Court of South Australia; Ex parte General Motors-Holdens Pty Ltd [1983] 35 SASR 161).  The contract ended because Ms Miller-Smith was dismissed.

The Status of the Express Condition Contention

41              On appeal, it was submitted for the respondent that it was an express term of the contract that Ms Miller-Smith be paid a severance payment calculated at the rate of 3.5 weeks’ salary for every year of service.

42              For RPL, it was submitted that this contention could not be made because there was no cross-appeal on the point.  That submission was contested on the basis that one was not required and could not occur.

43              There is no provision in the Industrial Relations Commission Regulations 1985 (as amended) for a notice of contention to be filed and served.  However, provided notice is given in time and it appears in the written submissions as well, no real objection can be taken to such a course.  It should be said that, in order to challenge the appeal, the respondent may rely on an argument that relates to a point to be decided, but cannot appeal against a decision, as defined, unless a notice of appeal is instituted.

44              Thus, there is no other way of defending the decision made, albeit on another point, than by raising by way of informal notice, or alternatively, in the outline of submissions, provided reasonable notice is given to the other side.  It should be noted that, at common law, a respondent may support a judgment on appeal by raising points not taken below (see Cairns “Australian Civil Procedure”, 6th Edition, pages 560-561).  A contention can therefore be clearly made to support the judgment.

Evidence

45              A question of the admissibility of evidence based on hearsay given by Ms Miller-Smith also arose.  It was submitted for the respondent that, although the Commissioner at first instance did not attach weight to this hearsay evidence, it was admissible and implicitly should have been relied upon attributing full weight to it.  The Commissioner at first instance did admit it, of course.  He just did not attach weight to it, or any significant weight.

46              S26(1)(a) of the Act prescribes that this Commission is not bound by the rules of evidence.  However, that does not mean that it should not or does not apply.

47              In this case, the evidence was evidence of what Ms Miller-Smith was told by fellow employees and two General Managers about what she said were the terms of the contract of employment of herself and other non-production employees.  An informal admission by words or conduct made by a party or those in privity with the party is admissible evidence against the party of the truth of its context (see “Cross on Evidence”, 7th Australian Edition, paragraph 33450).

48              The admissions by the General Managers are admissible as made by agents within authority (see Fraser Henleins Pty Ltd and Another v Cody [1945] 70 CLR 100).  Further, as a representative of the employer, such admissions were made by the General Managers as agents of RPL as part of a conversation or other communication with which the agent was authorised to have with Ms Miller-Smith, as RPL’s employee.  The authority of these gentlemen was impliable from the surrounding circumstances and very clearly so.  Similarly, although she was a relatively junior employee, Ms Gillespie had sufficient authority to have said what the entitlements to severance payments were of an employee such as Ms Miller-Smith, which Ms Miller-Smith said that she did.  Thus, these admissions about the severance payment entitlement is alleged, being a condition of employment, were admissible as evidence of the truth of that statement.

49              As to the evidence of discussions with other employees, adduced as evidence of the terms of the contracts of employment of non-production employees, that is not strictly admissible evidence of the truth, according to the laws of evidence.  However, the evidence is admissible to prove that the statements were made.

50              For the purposes of this matter, insofar as the statements were made by persons paid these amounts, according to the documents evidencing payments of severance payments (exhibits 11 and 12), then that evidence should be admitted as evidence of the truth of these statements even if the laws of evidence forbid it.

51              As to Jones v Dunkel [1959] 101 CLR 298, given the situation, the doctrine does not militate against the respondent because the evidence of submissions by General Managers and by Ms Gillespie was not attacked as not credible.  In addition, there was unobjected to evidence of Ms Grima of payments made in accordance with a condition of employment, that condition of employment being in the terms which Ms Miller-Smith claimed it to be.  It is more likely to have been properly used to the detriment of the case of the appellant (see Jones v Dunkel (HC) (op cit)).

52              Of course, the evidence should have been admitted and given full weight, notwithstanding the rules, because it was consistent with and corroborated by the evidence of Mr Mangelsdorf, Ms Grima and the documentary evidence to which we have referred above.  In any event, if we are wrong in that and the Commissioner at first instance was right, little or no weight could or should be attached to the evidence for RPL which was as follows.  Ms Shears gave evidence that she made enquiries and was told that the payments of severance pay to non-production employees were ex gratia payments only.  As to Mr Sill, Mr Archibald and Mr Webber, their evidence was all second or third hearsay and that was that there was no policy at all in RPL, prior to the takeover, to pay Ms Miller-Smith or the non-production employees, the amount which Ms Miller-Smith claimed.

53              Their evidence also was, of course, via Ms Shears, whose own evidence was of enquiries which she made, without saying of whom the enquiries were made, and whether the statement she received was from the person she enquired only, or from an enquiry made in turn by that person of somebody or a statement made by somebody else to that person.

54              In our opinion, the evidence of Ms Miller-Smith of what she was told by General Managers and other employees of RPL should have been admitted as evidence of the truth of what she was told, as admissions by competent agents and employees of RPL, namely that there was a policy which constituted a term and condition of contracts of employment of non-production employees enabling her to claim the payment of 3.5 weeks’ salary per year for severance pay.

Ex Gratia Payments – What are they?

55              The label “ex gratia payments” was applied in this case to all the previous severance payments to employees of RPL not covered by the EBA, by the RPL executives who took over after the takeover in April/May 2003.

56              “Ex gratia” is a term often applied to severance payments.  “Ex gratia” means “of something granted (as a favour) and not because of a legal obligation” (“The Macquarie Dictionary”, 3rd Edition).  Such a term is often used to describe a payment when litigation or threatened litigation is compromised.  In Edwards v Skyways Ltd [1964] 1 All ER 494 at 500, McGaw J said of such a term this:-

“It is, I think, common experience amongst practitioners of the law that litigation or threatened litigation is frequently compromised on the terms that one party shall make to the other a payment described in express terms as “ex gratia” or “without admission of liability”.  The two phrases are, I think, synonymous.  No-one would imagine that a settlement, so made, is unenforceable at law.  The words “ex gratia” or “without admission of liability” are used simply to indicate – it may be as a matter of amour propre, or it may be to avoid a precedent in subsequent cases – that the party agreeing to pay does not admit any pre-existing liability on his part; but he is certainly not seeking to preclude the legal enforceability of the settlement itself by describing the contemplated payments as “ex gratia”.”

57              An ex gratia payment is one made without any obligation at law and certainly not one made in accordance with a term of a contract of employment.

Is the Term Relied on an Express Term?

58              Before we determine whether the alleged term is an express term of the contract of employment, we wish to consider the nature of the contract, ((ie) whether it is formal and complete, informal but written, formal and incomplete, party oral and partly in writing, oral but evidenced in writing, or any of the above with terms implied by a statute or otherwise).

59              In fact, there was never any written contract, formal or otherwise, to govern Ms Miller-Smith’s employment after 18 January 1994.  When she was promoted to the position of State Manager in March 2000, there was no written contract.  All that was signed was a job description.  That is the only written evidence of the contract tendered to the Commissioner at first instance.  There was nothing before the Commission in writing to provide for remuneration, long service leave, sick leave, annual leave, redundancy or severance pay, or superannuation, maternity leave, compassionate leave, public holiday rates of pay or any other term or condition of an employment contract.

60              There was certainly none which applied to the position which Ms Miller-Smith held at the time of her dismissal, namely the position of State Manager for RPL in Western Australia.  That state of affairs is not atypical of employment contracts which evolve and transform themselves and, with promotion, or just as a matter of course, change, are varied or are replaced by new contracts, are varied by new policies, statutes, an award or by agreements between the parties, often over periods of many years.  In this case, for example, the Minimum Conditions of Employment Act 1993, because of the lack of express terms, implied various conditions into the contract and the Long Service Leave Act 1958 conferred benefits on Ms Miller-Smith.

Express Term

61              We observe that the contract of employment was made in good faith with the object of at least potential mutual benefit by the performance.  It was not in issue that the contract was duly performed, at least insofar as some of its requirements, such as service and remuneration, were concerned.

62              It was submitted for the respondent that the evidence led correctly to the conclusion that it was an express term, not an implied term, of the contract that the non-production employees employed by RPL should receive the same severance pay as production workers did under their EBA.  It is open to find, and correct to find, that the severance pay claimed was an express term of Ms Miller-Smith’s contract of employment because:-

(a)          There was admissible evidence by Ms Miller-Smith of admissions by agents and employees of RPL that it was a term of her contract.

(b)          Ms Grima’s evidence was open to the clear construction that it was a term of the contract of employment of employees of Ms Miller-Smith’s type, that is, all non-production employees.

(c)          The fact that every non-production employee retrenched since 1991 was paid severance pay, called in the record of payment for each such person a “severance payment” or “retrenchment allowance”, was clear evidence that it was an express term that non-production employees were paid severance pay at the same rate as production employees.  They were actually so paid.

(d)          There was no evidence, except evidence which was hearsay, and, indeed, second or third rate hearsay, that the payments were ex gratia.  That there was no written contract and that other express terms such as remuneration were complied with and were not said not to be terms of the contract further supports such a finding.

(e)          The one payment which was not a severance payment was specifically marked “ex gratia” in the records of RPL when that payment was made to Ms Val Pedro who resigned on account of illness.  The severance payments were not so identified and it was open to infer that it was because they were not ex gratia payments.  If they were not ex gratia payments, and they were not, it is open to infer and to find correctly that these amounts were paid pursuant to an express term of the contract of all non-production employees, and to which we have referred.

63              It is quite clear that the payment of an amount for severance payments over a number of years consistently to non-production employees at the same rate as production employees was well known enough and sufficient implemented to be accounted as a policy of the company on the evidence to which we have referred above, even though it was not committed to writing and publicised as such.

64              As we have already said, however, that such a policy existed was evidenced by the records of RPL where a retrenchment allowance was recorded amongst all other payments made and duly identified, to retrenched employees.

65              There was sufficient evidence, therefore, to find that there was a policy which became a term and condition of the contract of employment of the respondent and other non-production employees, and was accepted by them as such.  That this was a policy and a term and condition of the contract can be found not the least because a policy is defined in “The Macquarie Dictionary”, 3rd Edition, as:-

“1. a definite course of action adopted as expedient or from other considerations: a business policy.”

(That is the most relevant definition of those provided).

66              That approach is supported by what is stated in Riverwood International Australia Pty Ltd v McCormick (2000-2001) 177 ALR 193 (FC-FC). North J said at page 208:-

“The actual terms of a contract are those which the parties intended to incorporate in that contract.  They comprise the terms expressed by the parties as well as terms which it must be inferred were intended though not expressed.  The law may infer such an intention from the nature and context of the transaction.  The difference between inferred terms based on actual intention, and implied terms based on presumed intention is not always easy to discern:  see Hawkins v Clayton (1988) 164 CLR 539 at 570; 78 ALR 69 per Deane J; Breen v Williams (1996) 186 CLR 71 at 91; 138 ALR 259 per Dawson and Toohey JJ.  Particular terms will be considered in the light of all of the facts which bear upon their meaning.”

(See the discussion of these matters in Riverwood International Australia Pty Ltd v McCormick (op cit) per Lindgren, North and Mansfield JJ, particularly at pages 207-208 per North J, and pages 217-218 per Mansfield J).

67              Thus, further and alternatively, it can and should be inferred on that authority that the severance payment claimed to be a term of the contract of employment entered into in March 2000 for the position of State Manager was such a term.  It was an actual term, it may and should be inferred, which the parties intended, though they did not express it anymore than they did the other terms.  It should also be inferred because the contract was, except for the job description, oral or containing no expressed terms.  Thus, since it was not a written contract of employment or even a contract of which there is evidence of its express terms in any detail, there should be taken into account its factual matrix, genesis and aim, and the common assumption of the parties, which in this case emerges clearly from the evidence as we have expressed it above.  It can then be inferred that that term was intended, though not expressed, and inferred very clearly.  It can be clearly inferred to be an intended term of the contract, even when not expressed, within the meaning of that authority.  Thus, it can correctly be found to be an actual term of the contract as one which the parties intended to incorporate in the contract of employment.

68              In the alternative, such a term was impliable as a term of the contract, as we will explain later in these reasons.

69              It should be borne in mind in considering these matters that the dispute related at first not to whether Ms Miller-Smith had any contractual entitlement to a severance payment, but to its quantum, the new RPL management having decided, without notifying the employees, that for all retrenchments after November 2002, an amount equal to two weeks’ pay for each year of service would be paid to the dismissed employee, which was, on the undisputed evidence of Ms Shears, standard policy for companies in the Locker Group and was therefore applicable to RPL employees.  However, it is quite clear that that condition did not apply at the time of Ms Miller-Smith’s retrenchment.

70              It had not been promulgated as a policy, either formally or informally or at all, and Ms Miller-Smith was unaware of it.  It was and could not be a term of her contract of employment, therefore, when she was not notified of it and neither was anyone else, on the evidence.  Her contract of employment contained the existing RPL severance payment term, to which we have referred above.  That it was not a term or condition of the contract is, of course, borne out by the fact that it was not until 1 September 2003, three months after Ms Miller-Smith’s dismissal that employees of RPL were informed by Mr Webber that Locker Group policies and conditions including the retrenchment policy would apply.  It was therefore erroneous to apply that policy as a term and condition of Ms Miller-Smith’s contract of employment upon her retrenchment.

71              For all of these reasons, it is open to find, and we would find, that it was an express term of the contract of employment of the respondent, Ms Miller-Smith, that RPL would pay her severance pay on the date of her dismissal at the same rate as that payable to production employees, namely an amount equal to 3.5 weeks’ salary for each year of service.

Custom and Practice

72              The Commissioner at first instance found that the term asserted by and on behalf of Ms Miller-Smith was impliable into and should be implied into the contract of employment as a custom and practice.  For a custom and practice to be incorporated into a contract of employment, by implication, it must be so notorious that everybody in the industry or trade enters into the contract on the basis that the custom is presumed to have been incorporated in the contract (see Con-Stan Industries of Australia Pty Ltd and Another v Norwich Winterthur Insurance (Australia) Ltd [1985-1986] 160 CLR 226 at 236).

73              Furthermore, the custom or practice to be incorporated must, because of the requirement of notoriety, be an industry custom or practice, not the practice of an individual employer within the industry.

74              It follows that, since there is no evidence that the undoubted practice of paying RPL production employees at same rate as non-production employees covered by agreements is an industry custom or practice in the metal products industry, and not merely the practice of an individual company and employer within the industry.  No custom or practice to that effect can be implied as a term of the contract of employment, and the Commissioner erred in finding otherwise (see RRIA v AMWSU and Others (1987) 67 WAIG 1097 (IAC); see also Breweries and Bottleyards Employees’ Industrial Union of Workers of WA v Kirin Australia Pty Ltd (2002) 82 WAIG 412 (FB); Byrne and Frew v Australian Airlines Ltd (op cit) at page 413; and Burswood Resort (Management) Ltd v Cranswick  (2004) 84 WAIG 3111 (FB)).

75              There was evidence that this amount has been paid only to employees of RPL.  A different amount is paid to employees of Locker Group mainly, but there is no evidence of any notorious custom or practice or custom or practice outside RPL or Locker Group.  There is therefore no evidence, within those principles, to establish that the term claimed to exist in the contract should be implied as a matter of custom and practice.

Other Observations

Implying a Term

76              Because of those findings, the other grounds of appeal fall away.  However, having regard to the grounds of appeal, we would observe that there was no formal agreement and there was no written agreement which related to Ms Miller-Smith’s employment at the time of the dismissal.  There was certainly no formal agreement complete in its terms.  Therefore, if there was no express term providing for the severance payment claimed, the question is, “Could the same be implied?”

77              Accordingly, if such a term were to be implied, then the test applicable is that laid down in Hawkins v Clayton and Others [1988] 164 CLR 539 at 573 per Deane J and approved in Byrne and Frew v Australian Airlines Ltd (op cit).  That test is as follows:-

“The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case.  That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties.”

78              This reason was applied in Byrne and Another v Australian Airlines Ltd (op cit) at pages 427–428 per Brennan CJ, Dawson and Toohey JJ.

79              It is clear that a term cannot be implied by reference to the imputed intention of the parties if it is contrary to an express term of the contract.  In this case, it was submitted that there was an express term requiring notice of termination of the contract to be given by either side and that period of such notice was prescribed to be one month.  In fact, there was no evidence that there was such an express term.  There was such an express term in the agreement of 1994, but there was no written contract in 2000 relating to the position of State Manager in Western Australia for Ms Miller-Smith.  Even if there was a term providing for a period of notice, that is not the same as a term providing for severance and redundancy payment and there would be no conflict between two such terms.  There may be some set off of the amounts claimed under each such term, but that is a different matter.  The difference between severance pay entitlements and entitlements to notice of termination has been recognised by all industrial tribunals and this Commission in awards, industrial agreements, however described, etc.

80              The foundation case in the Australian Industrial Relations Commission clearly recognised this.  That case was the Termination Change and Redundancy case decided over 20 years ago (1984) 8 IR 34 at 53 et seq, where Moore P, Maddern J and Brown C said at page 62:-

“Moreover, the reason for the granting of additional notice to employees and the purpose of redundancy payments apply equally to redundant employees whatever be the cause of their termination.  Employees, no matter what the reason for the redundancy, equally experience the inconvenience of hardship associated with searching for another job and/or the loss of compensation for non-transferable credits that have been built up such as sick leave and long service leave.  In particular, to make a distinction granting severance pay only in cases of technological change, notwithstanding the equality of hardship on employees in all redundancy situations, would be to penalise an employer for introducing technological change.”

81              Severance pay also compensates an employee for disruption to the employee’s continued social contacts and the competition disability to long term employees arising from opportunities foregone in the continued service of the employer (see Food Preservers Union of Australia v Wattie Pict Pty Ltd (1975) 172 CAR 227; and Fryar v System Services Pty Ltd (1996) 137 ALR 321 at 331 (FC)).

82              We would also add that, whilst in the past, it was reasonably rare for an employee to have an express contractual entitlement to severance pay, such provisions are now much more frequent and common.  There are a number of examples in this Commission (see, too, Esanda Finance Corporation Ltd v Kenghington (unreported) SASC 3962 (Supreme Court of South Australia), 21 May 1993, per Prior J; and Ridley v Tioxide Australia Pty Ltd (unreported) Industrial Relations Court of Australia per Parkinson JR (12 November 1996)).

83              All of that supports the proposition that, whilst there may be a set off between elements of a redundancy payment and a payment in lieu of notice, the two entitlements are different altogether (see AWI Administration Services Pty Ltd v Birnie (2001) 81 WAIG 2849 (FB)).

84              The requirement to make a severance payment is therefore in addition to and stands on its own in relation to any express or implied provision for notice of termination.  The two are entirely distinct (see Fryar v System Services Pty Ltd (FC) (op cit) at page 331).

85              For those reasons, it is clear that any express term of notice does not conflict with the severance condition, express or implied.  In Dellys v Elderslie Finance Corporation Ltd (IAC) (op cit) at page 1197 per Anderson J (with whom Hasluck J agreed), said as follows:-

“A redundancy payment clause is, in my opinion, even less necessary and even less obvious than an unfair dismissal clause. The contract of employment is entirely effective without such a clause and, as to obviousness, it cannot be postulated that contracting parties would regard a redundancy clause as so obvious as to go without saying. The employer is bound at general law as a matter of implied agreement to terminate only on giving reasonable notice (Byrne v Australia Airlines Ltd (supra) at 429). It is therefore quite unlikely that the employer would regard it as obvious that, in the case of a redundancy but not otherwise, he should also make a payment called "reasonable redundancy". Neither does it appear reasonable, or equitable, that an employer should be obliged to both give reasonable notice and, as well, pay a redundancy sum. As a general rule, length of service is a consideration in determining the reasonableness of the period of notice: Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567 at 580. Any additional reward for length of service is a matter for express agreement, generally speaking.”

86              In our opinion, that case is distinguishable from this because, as the Commissioner at first instance observed, this case was not a case where a severance payment was claimed because it should be implied in every contract of employment.  Rather, this was a claim by the respondent that she, Ms Miller-Smith, was entitled to a severance payment because it was a term impliable into her own contract of employment.  (For the purposes of this argument, we put aside the fact that it was an express and/or actual term of the contract).

87              This case can also be distinguished from Dellys v Elderslie Finance Corporation Ltd (IAC) (op cit) because whilst any additional reward, as Anderson J said (op cit), is a matter for express agreement, he qualified it by saying “… generally speaking”.  In any event, in a case such as this where it can readily be found that the parties both saw such a clause as necessary and obvious, the contract was not effective without such a clause as at 2002.  Indeed, such a term was so obvious as to go without saying, just as was the case with the failure to express as express terms leave or salary entitlements or notice of termination.

88              Next, of course, where notice of termination were for example one month on either side, which it was not in this case, it might correctly be held to be entirely inadequate in the absence of an entitlement to a severance clause for someone who has given 16 years service to merely have the benefit of one month’s notice without the proper entitlements that a severance condition would confer on a long serving employee who had been retrenched for redundancy.  That would be a clear case of a contract not being entirely effective without such a term and such an obvious gap in the contract that it would require such a term to be implied.

89              Further, since the new contract of employment as State Manager for Western Australia commenced on 29 March 2000, it is necessary, if the term is to be implied, to imply it at that date.  Put shortly, at that time, for years persons employed in similar positions to that of Ms Miller-Smith, namely non-production employees, were paid a severance payment calculated at the same rate as that applicable to production employees.  It was therefore necessary to imply the severance term in the form to which we have referred because, given that this contract, like other contracts, was concluded verbally and consisted, it would seem, of nothing more than the signature on a job description and a verbal offer of work for wages, to be workable or effective, all the terms which one might expect in such a contract ought to be implied to make it effective, and this, according to the appellant’s own recording of severance allowance payments, was one such term.

90              Therefore, a term can be implied on the authority of Coles/Myer Ltd t/as Coles Supermarkets v Sweeting and Others (1993) 73 WAIG 225 (FB), to which unfortunately the Industrial Appeal Court in Dellys v Elderslie Finance Corporation Ltd (IAC) (op cit) was not referred.  Whilst Coles/Myer Ltd t/as Coles Supermarkets v Sweeting and Others (FB) (op cit) was overturned on appeal, it was not overturned on the implication of a severance payment term in the contract of employment in that matter.  We quote from that case in which the facts were similar (at pages 230–231):-

“The objective evaluation of the circumstances of this case are that management persons, such as these, who begin with a career in front of them of some years, would, objectively viewed, be entitled to expect the implication of a term that a redundancy "package" would be paid, and that there would be such a package which, in its provisions and quantum, would recognise the service of long term non-award and managerial employees. It is fair to say that the objective framework of the facts is that these were contracts of employment not in writing subject to variation over long periods of employment. In that their salaries would be greater and the reasonable notice required to be given greater than that paid to wages employees, it would be necessary and reasonable to imply an obligation to provide a redundancy package commensurate with the salary paid and the length of service, and which would otherwise be fair and equitable.

Insofar as it was necessary to imply the term as at the date the contract was entered into, that can be done. Whilst there was no custom as such, an objective evaluation of the circumstances, including the conduct of the parties, applying Mears v Safecar Security Ltd (op cit), support the conclusion that a term be implied in terms of the assertion to that effect by the respondent. To do so in a flexible long lasting employment contract is reasonable and necessary.

However, we are of opinion that employment contracts not committed to a written document lasting over a long period, and subject to all sorts of variations, are distinguishable from that sort of contract which require a term to be imputed as at the date of the contract, or at least require it to be done without considering all of the conduct of the parties. The conduct of the parties here, as it has been outlined above, clearly support an implication of a term providing what the respondents claim it provides.

…

The question is whether an obligation to make payments in redundancy cases can be implied as an incident of terminating by giving notice.

In our opinion there is, and it can be implied in the relationship in the following circumstances:-

 (1) Where an employee is retrenched, his or her job having become redundant.

 (2) Where the employee is a person of managerial or non-award rank and has been employed for a substantial period of time.

 (3) Where other employees of the same employer entity or a related employer entity receive redundancy payments or a right to them is recognised.

As to the question of payments being made ex gratia, the evidence clearly demonstrated that they were not. We have already set out that evidence of Mr Hankins in detail above and the Commission at first instance was entitled to find as it did.”

91              Thus, in our opinion, in the alternative, the term referred to could have been correctly implied as a term of the contract of employment.  However, because we have found that it was an express term, that argument was not directly made in this matter and it is not necessary to decide the point, for the purposes of deciding the appeal, save and except to observe that it was open, were it ever necessary to do so, to find accordingly.

FINALLY

92              For all of those reasons, we would dismiss the appeal.

COMMISSIONER J H SMITH:

93              I have had the benefit of reading the reasons to be published by the President.  For the reasons His Honour gives, I agree the Appeal should be dismissed and I have nothing to add.

THE PRESIDENT:

94              For those reasons, the appeal is dismissed.

Order accordingly