PR915674

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AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Workplace Relations Act 1996

s.45 appeal against decision

PR910494 issued by Commissioner Hingley on 7 November 2001

A Smith and others

(C2001/6062)

s.170CE application for relief in respect of termination of employment

A Smith and others

and

Moore Paragon Australia Ltd

(U2001/1310 to 1315 and U2001/1328)

VICE PRESIDENT ROSS

  

SENIOR DEPUTY PRESIDENT LACY

  

COMMISSIONER SIMMONDS

MELBOURNE, 21 MARCH 2002

Termination of employment - appeal - whether there was a valid reason for termination - failure to draw the inference that the respondent had regard to the WorkCover and injury status of the appellants and that it had played an operative part in their selection for redundancy. Relevant principles re: drawing of inferences considered. Reviewable error, appeal upheld - no valid reason - terminations were unjust and unreasonable. Question of remedy remitted pursuant to s.45(7)(c).

DECISION

Introduction

[1] This decision deals with an appeal by Messrs A. Smith, T. Perret, L. Rapsey, D. Murphy, B. Kimball, T. Hodge and C. Bakic (the appellants) against a decision made by Commissioner Hingley on 7 November 2001.1

Background Facts

[2] Moore Paragon Australia Ltd (the respondent, or the Company) operates a printing and stationery business from its premises in Wodonga, Victoria. The premises occupy two buildings (known as Wodonga 2 and 3) and feature printing and paper coating functions, collating and finishing and warehouse and dispatch functions. We refer to these premises as the Wodonga Complex.

[3] In early 2001 Mr Patrick McGilly, the respondent's Director of Manufacturing, met with the Company's Chief Executive Officer, Mr Jim MacDonald, and the Directors of Finance and Sales/Marketing, Messrs Duncan and Siva, to discuss the Wodonga Complex's output forecast for 2001. The 2001 forecast predicted that output would be reduced by 20 per cent as a result of the introduction of new technology and product lines. At the meeting a decision was taken to implement a number of cost cutting initiatives in order to accommodate the predicted decline in output. The measures adopted included:

[4] In late January Mr McGilly met with Mr MacDonald and the Chairman of the Company's Board, Mr Harvey Parker. At that meeting it was decided that for the Wodonga Complex to remain viable staff numbers had to be cut by approximately 36 employees. At that time the Company employed about 250 employees at the Wodonga Complex.3

[5] On 30 January 2001 Mr McGilly advised the relevant union (the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU)) and site delegates of the Company's need to reduce the size of its workforce. The next day the Company's Human Resources Manager sent a facsimile message to the National Office of the AMWU in the following terms:

[6] In February 2001 Mr McGilly held two meetings with the employees at the Wodonga Complex. The first was at the change over of morning and afternoon shifts. It was held in the canteen in the building known as Wodonga 3. We refer to this meeting as the morning/afternoon shift meeting.5 The other meeting was held with the nightshift and is not relevant to these proceedings.

[7] The morning/afternoon shift meeting was attended by all of the employees on morning and afternoon shift including each of the appellant's except Mr Bakic who was on annual leave. All of the managers who were subsequently involved in the redundancy selection process were also in attendance. A copy of the overheads used by Mr McGilly in his presentation to the meeting is attached to Mr Rapsey's witness statement.6 During the course of this presentation Mr McGilly:

[8] The Company subsequently received 42 applications for voluntary redundancy, having sought 36. Thirteen of these applications were rejected by the Company and it was decided to implement thirteen involuntary redundancies, thus increasing the total redundancies from 36 to 42.8 The Company did not tell its employees that it had increased the number of redundancies required, or that it had moved to the "involuntary" stage of the redundancy process or otherwise consult with them.9 It did inform the AMWU about the increase in employees to be made redundant.10

[9] After the morning/afternoon shift meeting Mr McGilly met with his Department Managers/Supervisors and told them to undertake a skills audit of all employees in their department. He also approved a memo issued by the site Human Resources Manager to all Department Managers/Supervisors. A skills assessment form was attached to the memo and the managers/supervisors were directed to complete a skills audit of each employee under their direction.11

[10] The involuntary redundancy selection process involved two stages:

1. Skills audit - a skills assessment form was completed for all employees by each employee's manager/supervisor.

2. Self assessment interviews - each employee was interviewed by a manager from another work area. According to Mr McGilly this was done "in order to avoid any existing bias".12

[11] After the skills audits were completed they were returned to the site Human Resources Manager, they were not shown to the relevant employees.13 There was no cross-checking to ensure consistency.

[12] The interviews were conducted on 6-8 February 2001. The interviewers were provided with a pro forma questionnaire14 which involved different criteria from that specified in the skills audit.15 The interviewers did not regard the interview process as being limited to skills criteria.

[13] Each of the interviewers who gave evidence in the proceedings denied taking the WorkCover injury status of an employee into account in the redundancy selection process.16 Mr McGilly's evidence was that the redundancy selection process "did not at any stage refer to whether or not the employee had had at any time a WorkCover claim against the Company."17 The evidence of other witnesses for the respondent was that the management group meeting referred to and discussed the injury status of the employees at the same time as the final nominations for redundancy were determined, but each witness denied that this was taken into account.18

[14] Not all employees were interviewed. Those who had applied for voluntary redundancy were not interviewed; nor were two of the appellants - Mr Smith, who was on annual leave, and Mr Murphy, who was off work with a knee injury.

[15] A summary of the evidence regarding the skills audit and self assessment interviews in relation to each of the appellants is set out below.

Mr Brett Oliver Kimball: self assessment interview conducted by Mr Jim Ramage, a Production Manager, on 8 February 2001.19 Mr Kimball's evidence about the interview is set out at paragraph 21 of his witness statement, Exhibit A2:

Mr Lindsay William Rapsey: self assessment interview conducted by Mr Tom Griffiths, the Customer Service Manager at the Wodonga Complex, on 6 February 2001.22 Mr Rapsey's evidence about the interview is set out at paragraph 18 of his witness statement, Exhibit A5:

Mr Arthur William John Smith: commenced annual leave on or about 5 February 2001. Skills assessment conducted by Mr Trevor Welladsen, Production Manager.25 Was not invited to participate in a "self assessment interview". Mr Wellardsen did not discuss the skills audit with Mr Smith.

Mr Terrence Keith Hodge: self assessment interview conducted by Mr Andrew Furst, Production Manager.26 Mr Hodge's evidence about the interview is set out at paragraphs 15 and 16 of this statement, Exhibit A11:

Mr Tony Perret: self assessment interview conducted by Mr Tom Griffiths.29 Mr Perret's evidence about the interview is set out at paragraphs 16 and 17 of his witness statement, Exhibit A16:

Mr Darrell John Murphy: Injured his knee in a non-work related accident on 19 October 2000 and was not able to attend work until his employment was terminated in February 2001. Was not invited to participate in a "self assessment interview".33 Mr Murphy's skills assessment is set out at Exhibit A21.34

Mr Corey Marcus Bakic: self assessment interview conducted by Mr Jim Ramage.35 Mr Bakic's evidence about that interview is set out at paragraph 22 of his witness statement:

[16] None of the appellants were told the rating they had been given in the skills audit40 or in the structured interviews. Nor were they told that the answers they gave in those interviews would influence whether they were selected for involuntary redundancy.41

[17] The skills audit and interview scores for each employee were combined and submitted to a meeting of all of the managers who had been involved in the process.42 The meeting nominated thirteen employees to be made redundant and these were approved by Mr McGilly.43

[18] Of the thirteen employees made involuntarily redundant at least nine, including each of the appellants, were either subject to a WorkCover or other injury restriction; or had notified WorkCover claims to the Company.

[19] After the management meeting towards the end of the day shift on 8 February 2001 the employees who had been selected for involuntary redundancy were individually called into meetings and told they had been made redundant. The decision to terminate their employment was presented as a fait accompli, not as a proposal on which their input was sought.44

[20] The two employees who had not been at work - Messrs Smith and Murphy - learned of their redundancies via letters in the post.

[21] Each of the appellants received redundancy payments in accordance with the 2000 EBA. By reason of their WorkCover or injury status some of them (Messrs Smith, Rapsey, Hodge, Perret and Kimball) were entitled to weekly payments following their loss of employment but by reason of s.96 of the Accident Compensation Act (Vic) their weekly payments were suspended.

[22] At the relevant time the respondent was bound by the 2000 EBA.

Decision at First Instance

[23] Messrs Smith, Perret, Rapsey, Murphy, Kimball, Hodge and Bakic filed applications for relief in respect of the termination of their employment, pursuant to s.170CE of the Workplace Relations Act 1996 (Cth) (the WR Act). These applications were heard by Commissioner Hingley on 18 and 19 September 2001. On 7 November 2001 the Commissioner handed down his reasons for decision in which he dismissed each of the applications.

[24] The principal findings in the decision at first instance45 are set out below:

[25] Pursuant to s.170CG(3)(e) and the need to ensure that a "fair go all round" is accorded to both the employer and the employee, the Commissioner considered the individual circumstances of each of the applicants.52

[26] We also note that the Commissioner declined to draw the inference that the WorkCover history or work injury restrictions of the applicants were taken into account in their selection for redundancy.53

The Appeal

[27] The appellate jurisdiction conferred on us by s.45 in relation to an appeal concerning an order arising from the arbitration of an application under s.170CE is conditioned by s.170JF(1) which limits the grounds of an appeal. The only ground is that the member of the Commission who conducted the arbitration was in error in deciding to make an order. That can be an error of fact or an error of law.54

[28] The nature of an appeal under s.45 of the WR Act was the subject of consideration by the High Court of Australia most recently in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission55 (Coal & Allied). Gleeson CJ, Gaudron and Hayne JJ, in a joint judgment, said:

[29] The types of error that may constitute grounds for review of a discretionary decision of the kind here under consideration were re-stated in Coal & Allied in the following way:

[30] The grounds set out in the notice of appeal are as follows:

[31] In view of the conclusion we have reached it is unnecessary for us to deal with each of the grounds of appeal. We only propose to deal with grounds 8, 9 and 11. The appellants contend that, to the extent that the respondent was entitled to rely on the selection processes that it used to determine involuntary retrenchments, it adverted to inappropriate selection criteria in determining that the appellants should be retrenched. The essence of the appellants' submissions in this regard is that the appellants were selected for retrenchment by reason of their WorkCover or injury status or for a reason that included that reason. Consequently, the termination of the employment of each of the appellants was "prejudiced" and not for a valid reason.

[32] The appellants readily concede, as they did before Commissioner Hingley, that there is no direct evidence that would support a finding that the respondent relied on the WorkCover or injury status of the applicants as a criterion for selection for termination of their employment. However, Mr Armstrong, counsel for the appellants, submitted that the circumstantial evidence supported a finding that such factors were considerations in the selection of the appellants for termination of employment and that Commissioner Hingley's finding to the contrary was erroneous.

[33] The respondent denied that the termination of the appellants' employment, or any of them was for the reason, or for a reason that included the reason, of their WorkCover or injury status.

[34] Commissioner Hingley considered this aspect of the appellants' case at paragraphs 44 to 50 of his reasons for decision. The decision reads as follows:

[35] The question for us is whether the Commissioner was in error in failing or refusing to draw the required inference. The question whether a particular inference can be drawn from the facts found or agreed is a question of law.58

[36] We perceive the test on appeal to be whether it was fairly open to Commissioner Hingley on the evidence before him not to draw the required inference and make a finding in favour of the appellants. Whereas a finding of fact depends on the existence of probative evidence to support it, an inference can (as opposed to whether it should) be drawn if it is reasonably open on the proved facts.59

[37] In G v H60 Brennan and McHugh JJ said:

[38] The facts or circumstances that may be taken into account in determining a fact based on circumstantial evidence were discussed in Martin v Osborne.62 In that case Dixon J said:

[39] Inference must be carefully distinguished from conjecture or speculation; there can be no inference unless there are objective facts from which it might be derived.64 The degree of probability required to provide a basis for the necessary inference will depend on the nature of the proceeding. This was highlighted in Bradshaw v McEwans Pty Ltd65 the relevant extract of which appears in Luxton v Vines66 and reads as follows:

[40] Due regard must be given to issues of importance and gravity in drawing inferences from proved or agreed facts. Where there is an allegation of fraud, an allegation of criminal or moral wrongdoing or an allegation involving serious legal consequences an inference should not be drawn on inexact proofs.67

[41] An inference may be more readily drawn however, in cases where a party, although having it within their power to provide or give evidence on some issue, declines to do so. The principle was thus stated in G v H as follows:

[42] The statement of principles set out above may be summarised as follows:

[43] We now turn to consider the appellants' appeal in the context of these principles.

Relevant Circumstances

[44] Mr Armstrong submitted that the following circumstances are relevant and are circumstances that Commissioner Hingley failed to take into account in determining whether the respondent selected the appellants for retrenchment because, or partly because, of their WorkCover or injury status:

[45] Mr McKeown's submissions on this aspect of the case may be summarised by the following points:

Should the Required Inference be Drawn?

[46] We agree with Mr McKeown's submission to the effect that respondent's WorkCover history is not a relevant circumstance to be taken into account in determining whether the required inference should be drawn in this case. We consider that circumstance to be capable of existence independently of the fact to be proved. The circumstance has no sufficient nexus with the fact to be proved.

[47] In any event it is a factor that is inappropriate to take into account as it is evidence about the respondent's management and their proneness to acts or omissions of a particular description or their reputations. Accordingly, we disregard that evidence.

[48] We do not agree with Mr McKeown's submission that, by inferring the respondent took into account the WorkCover or injury status of the appellants, there will be serious consequences for the respondent in the context of the matter before the Commission. True it is that termination of employment for a reason that includes physical disability is proscribed under the WR Act77, but it is not for that reason alone unlawful.78 A termination of employment in contravention of s.170CK(2) attracts a penalty of up to $10,000 and liability to an order for reinstatement. However, the Commission in the exercise of its powers is not concerned to determine whether the termination of employment was discriminatory in terms of s.170CK(2). And any finding that the Commission makes about the reason for termination of employment is not legally binding for the purposes of s.170CK(2) of the WR Act.

[49] A finding that the reason for the termination of the appellants' employment included their WorkCover or injury status would ground a finding that the termination of their employment was not for a valid reason. The potential consequence for the respondent is liability to orders for reinstatement and lost remuneration as a result of the termination of employment. That does not appear to us to be a serious consequence in the Briginshaw v Briginshaw79 sense. Accordingly we find that the matter is not one that is subject to the caution and exactness in proof that is demanded in issues of importance and gravity.

[50] We think there is no support to be found for Mr McKeown's submission on the weight to be given to the relative advantage of the Commissioner. In no relevant sense did the Commissioner's findings of fact require him to make any assessment of the disputed credit of any witness or to resolve any significant conflict of evidence. The question was whether the required inference can be drawn on the basis of the proved facts in combination with each other fact and the respondent's bare denial. In our view the Commissioner's task in this respect did not enjoy the benefit of an advantage which was denied to us.

[51] We consider as relevant to the fact in issue:

[52] The discussion at the management meeting about the WorkCover and injury status of the appellants is relevant to the determination of the fact in issue. Because the statement was made in the context of the proposed redundancies and was made in the presence of the managers who were to implement the retrenchment selection process. In our view it has, for this reason, the requisite relation to the fact in issue. In any event it is not to be considered as a fact in isolation. Although the respondent suggested in submissions that other innocent inferences are open on the facts, none were suggested

[53] The skills audit is clearly relevant. As is its integrity and the question of whether it alone justified the selection of the applicants for retrenchment.

[54] The respondent did not take issue with the relevance of the selection of a seemingly disproportionate number of employees on WorkCover or suffering injury for retrenchment. Rather it was argued that the respondent had no obligation to explain the circumstance.

[55] The respondent's failure to explain the circumstance is a matter itself to be taken into account in determining whether the fact in issue is to be inferred. The appellants put the respondent on notice before the commencement of the hearing at first instance that they regarded their WorkCover or injury status as a factor in their selection for retrenchment. The respondent's witnesses were asked about the matter in cross-examination, yet no attempt was made at that time or in re-examination, to explain the reason for discussing the matter when selecting employees for retrenchment. In the circumstances the inference might more readily be drawn that it was a factor in the selection of the appellants.80

[56] Commissioner Hingley in considering whether the required inference should be drawn took into account the WorkCover or injury status of all the appellants81. He also took into account the fact that nine of the thirteen employees compulsorily retrenched were subject to WorkCover restrictions82 and that there is no one left in the Collating section with an injury or WorkCover claim.83 He gave weight to the fact that WorkCover injuries at Wodonga were a major concern to Mr McGilly and that he had raised the matter of work related injuries at the 2 February meeting.84

[57] The Commissioner weighed these factors against the evidence of Mr McGilly and the interviewers that injury or work restrictions were not a factor taken into account and that the respondent still employs individuals who have or have had WorkCover claims.85 He accepted the evidence of the interviewers and concluded that he was not satisfied on the evidence before him that he could reach a safe view or even a reliable inference that WorkCover history or work injury restrictions were taken into account.86 The Commissioner also found that the selection process criteria were sound and defensible and objectively applied.87

[58] In our respectful view the Commissioner erred in his approach to this matter. It appears that he imposed too narrow a test in alluding to the necessity for a "safe view" or a "reliable inference". In circumstantial evidence cases it is not possible to attain entire satisfaction as to the true state of affairs.88

[59] If we are wrong about the test then there were other important facts that ought to have been included in the balance and which the Commissioner unfortunately overlooked. We consider the oversight a significant error, because of the importance of determining all of the relevant facts as a prerequisite to the determination of an issue by inference.

[60] While each proved fact in circumstantial evidence cases might not be, when considered in isolation, a sound basis for making the required inference, each such proved fact may gain support from the others. A combination of all proved facts may provide a compelling basis for making the required inference. What is to be considered is the weight which is to be given to the united force of all of the circumstances put together. Gibbs CJ and Mason J, describing the task of the jury in a criminal case involving circumstantial evidence, stated the position thus:

[61] Although the principle was stated in relation to a criminal proceeding it is equally applicable in civil cases involving circumstantial evidence, as is evident from the terms of the statement of principle itself.

[62] Commissioner Hingley did not, in his consideration of whether the required inference should be drawn, take in account or give weight to the following circumstances:

[63] The respondent made no endeavour to put before the Commission any probative evidence of the integrity of the skills audits or the interviews. Similarly the respondent made no attempt to explain the purpose or depth of the discussions about WorkCover at the management meeting, the relative number of current employees on WorkCover or the apparent discrepancy between the communication to Mr Kimball's service provider and the final assessment of Mr Kimball's skills. On the basis of the principle in Jones v Dunkel90 these factors weigh heavily against acceptance of the respondent's bare denial about the relevance of WorkCover or injury status of employees in the selection process. In O'Donnell v Reichard91 Newton and Norris JJ in a joint judgment explained the principle in the following terms:

[64] In this regard the Commissioner failed to consider a very material matter. The Commissioner effectively discounted the evidence that was available to support the appellants' case.

[65] We have decided that the process of reasoning that the Commissioner adopted was defective and amounted to error. Accordingly, as the only dispute is as to the inference which should be drawn from the proved facts we are in as good a position as the Commissioner to determine the issue.93 We must unfortunately disagree with the Commissioner.

[66] We are satisfied that, on a fair reading of the evidence in its entirety, it is reasonable to infer that the respondent did have regard to the WorkCover and injury status of the appellants and that it played an operative part in selecting them for retrenchment.

[67] In our view the Commissioner erred in failing to adopt such an inference. This amounts to a reviewable error within the meaning of s.170JF of the WR Act. On that basis we have decided to grant leave to appeal.

[68] The appellant submitted that if we decided to grant leave to appeal we should quash the order subject to appeal and make orders for reinstatement in favour of Messrs Hodge and Bakic and reinstate Messrs Kimball, Rapsey, Smith, Perret and Murphy.

[69] Before deciding to grant a remedy of the type contemplated by s.170CH we must first determine whether the termination of the appellant's employment was "harsh, unjust or unreasonable" (see s.170CH(1)). Such a determination requires the Commission to consider each of the matters in s.170CG(3)(a), (b), (c) and (d), as well as any relevant matter within the scope of s.170CG(3)(e). Not only must these matters be considered but the words "must have regard to" signify that each must be treated as a matter of significance in the decision making process. A consequence of this construction of s.170CG(3) is that the Commission is obliged to make a finding in respect of each of the circumstances specified in paragraphs 170CG(3)(a), (b), (c), (d) and (e), insofar as each of these paragraphs is relevant to the factual circumstances of a particular case.

[70] Section 170CG(3)(a) provides in determining whether a termination was harsh, unjust or unreasonable the Commission must have regard to whether "there was a valid reason for the termination related to the capacity or conduct of the employee or the operational requirements of the employer's undertaking, establishment or service".

[71] The application of s.170CG(3)(a) to redundancy situations is not without difficulty.

[72] Two decisions of Full Benches of the Commission provide some assistance.

[73] In Windsor Smith v Liu and Others94 (Windsor Smith) the company decided to make around 30 employees redundant as a result of a significant reduction in orders (from 3000 to 1200 per week). The selection of the applicants for redundancy was made by reference to the jobs they performed - they were doing jobs which were least in demand at the relevant time. At first instance the Commission concluded that there was no valid reason for the redundancies and went on to award compensation of varying amounts between $2,600 and $3,000 to M.J. Liu, H.L. Fung, J. Trimble, T. Trimble, L. Kocovska and J. Cordell. On appeal the Full Bench expressed doubts about the appropriateness of the approach taken to the "valid reason" issue in the proceedings below. At pages 9-10 of their decision the Full Bench said:

[74] In our view Windsor Smith is authority for the following propositions:

[75] The second Full Bench decision to which we wish to refer is Lockwood Security Products Pty Limited v Sulocki95 (Sulocki). In that matter it was common ground that the terminations of employment arose out of the appellant's decision to effect changes in its operational requirements. The appellant made the decision that seven warehouse employees were to be made redundant and the respondents (the applicants in the proceedings at first instance) were told that they had been selected for redundancy on the basis of the appellant's "skill matrix".

[76] At first instance the Commission made the following findings:

[77] On the basis of the above findings the Commissioner concluded that the terminations were "harsh, unjust or unreasonable". On appeal a Full Bench of the Commission determined that no error had been shown in relation to this conclusion.

[78] The Full Bench rejected the appellant's submission that because of the size of the appellant's workforce the mere existence of the operational requirement allowed management some degree of latitude in selecting the employees to be retrenched. Specifically the Full Bench rejected the proposition that it matters not that employees were selected for dismissal on the basis of personal characteristics or attributes because the management knows what is best for the business. At paragraphs 19, 28-29 and 33 the Full Bench said:

[79] In our view Sulocki is authority for the following propositions:

[80] In the proceedings before us Mr McKeown contended that to the extent that Sulocki stands for the first two propositions set out above it was wrongly decided. The essence of Mr McKeown's argument is that s.170CG(3)(a) provides for two distinct alternatives.96 The Commission must have regard to whether there was a valid reason for the termination related to:

[81] It is argued that s.170CG(3)(a) provides two distinct, mutually exclusive, options. This construction is said to be supported by the use of the conjunctive "or" between the references to "capacity or conduct" and "operational requirements". In this case it is conceded that the decision to reduce the number of employees at the employer's establishment was genuinely based on the employer's operational requirements. That circumstance is said to be sufficient to establish that there was a valid reason for the terminations related to the employer's operational requirements.

[82] We do not find the respondent's arguments persuasive, for four reasons.

[83] First, the focus of s.170CG(3) is on the termination of employment of the particular employee in question. This is clear from the reference to "the termination" in paragraphs 170CG(3)(a) and (d) and to "the employee" in paragraphs 170CG(3)(b) and (c). In s.170CG(3)(a) the issue is whether there was a "valid reason" for the termination of a particular employee's employment. Whether there was a genuine operational reason to reduce the number of persons employed at a particular enterprise does not provide a complete answer to this question. In practice the termination of an individual's employment due to redundancy usually involves a two stage process:

[84] The construction of s.170CG(3)(a) posited by the respondent only looks at one aspect of the reason why the particular employee was made redundant. It ignores the fact that but for the selection process the individual employee may not have had his or her employment terminated at all.

[85] Second, the use of the conjunctive "or" in s.170CG(3)(a) is not conclusive. The first part of the paragraph refers to a valid reason related to "the capacity" or "conduct of the employee". If the respondent's argument was taken to its logical conclusion then "capacity" or "conduct" of an employee are two mutually exclusive options. In our view such a construction is too simplistic. Employees are often terminated for reasons which relate to both their capacity and their conduct. For example an employee may be both abusive to fellow employees (a conduct issue) and be unable to satisfactorily perform the duties assigned to them (a capacity issue). In a particular case the combination of both aspects of their behaviour may lead to the termination of their employment.

[86] Third, at the heart of Mr McKeown's submission is the proposition that to establish a valid reason related to the employer's operational requirements it is sufficient that there is a genuine causal relationship between the employer's operational requirements and the applicant's termination of employment. This is partially correct. The termination must be genuinely related to the employer's operational requirements in the sense that the termination is a logical response to those requirements. It must not be a contrivance. But that of itself will not always be sufficient. It is important to bear in mind that the reason for termination must be a "valid" reason. Consistent with the approach taken in a number of cases that means that the reason for dismissal of the particular employee was "sound, defensible or well founded" and not "capricious, fanciful, spiteful or prejudiced". The respondent's construction of s.170CG(3)(a) fails to accord sufficient importance to the word "valid".

[87] If the respondent's argument was accepted then a redundancy selection criteria based on a proscribed reason for termination (as set out in s.170CK), or any other reason for which an employer may not lawfully dismiss an employee, would still provide a valid reason for the termination provided that there was a genuine causal relationship between the employer's operational requirements and the applicant's termination of employment. So provided the employer had a genuine operational requirement to reduce the size of it's workforce that is sufficient to provide a valid reason for the termination of an individual employee. In our view such a construction is too narrow. It fails to accord sufficient weight to the expression valid reason and is inconsistent with authority.97

[88] Finally, the Commission has traditionally taken the view that it should only depart from previous Full Bench decisions in limited circumstances. In another context three members of the High Court observed in Nguyen v Nguyen:

[89] While the Commission is not a court the public interest considerations underlying these observations have been applied with similar if not equal force to appeal proceedings in the Commission.99

[90] We are not satisfied that Sulocki is wrong, to the contrary we think it correctly sets out the relevant principles and we propose to apply it to the matter before us.

[91] In the circumstances of this case - where the appellants were selected to be made redundant on the basis of their WorkCover history or injury status - we are not satisfied that their employment was terminated for a reason that was "sound, defensible or well founded". In our view there was no valid reason for the termination of the appellants' employment within the meaning of s.170CG(3)(a).

[92] As we have already noted, in determining whether or not a termination of employment is harsh, unjust or unreasonable, the Commission must consider each of the matters referred to in paragraphs 170CG(3)(a) to (e). But the Commission is only required to have consideration to such matters in so far as they have application100 or are relevant to the factual circumstances of the particular case.101 If there is no valid reason then paragraphs 170CG(3)(b) and (c) have no application. This is because these paragraphs refer to "that reason" and "any reason related to the capacity or conduct of the employee". In the context of s.170CG(3) these references are clearly to the "valid reason" referred to in s.170CG(3)(a).102 Similarly, unless the termination is related to unsatisfactory performance paragraph 170CG(3)(d) is of no relevance. In this case we have concluded that the terminations were related to the appellants' WorkCover history or injury status, not their performance. Hence s.170CG(3)(d) is not relevant.

[93] If we are wrong about the relevance of paragraphs 170CG(3)(b), (c) and (d) to the matter before us and we assume that the terminations were procedurally fair (a matter about which we have strong reservations but do not need to decide) those circumstances would not affect the result in the context of the matters before us. Indeed we find it difficult to conceive of the circumstances in which it could reasonably be said that despite the absence of a valid reason for termination the employee had been accorded procedural fairness and therefore the termination was not "harsh, unjust or unreasonable". As the Full Bench in Steggles Limited v West observed:

[94] In relation to other relevant matters (s.170CG(3)(e)) we have had regard to the matters identified by Commissioner Hingley (insofar as they are consistent with our earlier findings) at paragraphs 57, 61, 63, 66-69, 72-73 and 76-77 of the decision subject to appeal. We note that these matters were not challenged on appeal.

[95] We have had regard to matters referred to s.170CG(3) insofar as they are relevant to the factual circumstances of the applications before us. We have concluded that the termination of each of the appellants' employment was unjust and unreasonable. Accordingly we have decided to uphold the appeal and quash the Commissioner's decision.

[96] During the course of the appeal proceedings we foreshadowed that in the event that we upheld the appeal and the issue of remedy became relevant we may require further submissions.104 Given the passage of time since the proceedings at first instance and the consequent possibility that the factual circumstances relating to the matters to which the Commission is required to have regard (pursuant to s.170CH) may have altered and the fact that some of the new material upon which the appellants wish to rely is contested,105 we have decided that the appropriate course is to remit the question of remedy to Senior Deputy President Lacy for determination.

[97] In conclusion we have decided to grant leave to appeal and quash the Commissioner's decision. Further we have determined, pursuant to s.170CG(3), that the termination of each of the appellants' employment was unjust and unreasonable. Pursuant to s.45(7)(c) we direct Senior Deputy President Lacy determine the question of remedy in each of the matters before us.

BY THE COMMISSION:

VICE PRESIDENT

Appearances:

L. Armstrong of Counsel for the appellants.

G. McKeown of Counsel for the respondent.

Hearing details:

2001.

Melbourne:

January 21.

Printed by authority of the Commonwealth Government Printer

<Price code G>

1 PR910494.

2 Exhibit MP2 at paragraphs 3 & 4, Appeal Book 2 at pp.431 - 432.

3 Exhibit MP2 at paragraph 5, Appeal Book 2 at p.432.

4 Attachment PM3 to Exhibit MP2, Appeal Book 2 at p.468.

5 Transcript of 18 September 2001 at PN 1184.

6 Attachment LR-3 to Exhibit A5, Appeal Book 2 at pp.70-82. See transcript of 18 September 2001 at PN 1039 to 1040, Appeal Book 1 at p.110.

7 Transcript of 18 September 2001 at PN 1129, Appeal Book 1 at p.118; Exhibit MP2 at paragraphs 8-9, Appeal Book 2 at p.432. We note that in his evidence Mr McGilly qualified some of Mr Murphy's evidence as to what was said about work related injuries at this meeting. See Transcript of 18 September 2001 at PN 1079-1080, Appeal Book 1 at p.114.

8 Transcript of 18 September 2001 at PN 1158 and 1168, Appeal Book 1 at p.121.

9 See Mr McGilly's evidence in transcript of 18 September 2001 at PN 1178, 1185 and transcript of 19 September 2001 at PN 1820, Appeal Book 1 at pp.122, 123 and 132.

10 Transcript of 18 September 2001 at PN 1174.

11 See Exhibit MP2 at paragraph 10, Appeal Book 2 at p.433; transcript of 18 September 2001 at PN 1145 to 1152, Appeal Book 1 at pp.119 - 120.

12 Exhibit MP2 at paragraph 14; Appeal Book 2 at p.433.

13 Mr Hodge's evidence, transcript of 18 September 2001 at PN 425, Appeal Book 1 at p.57; Mr Murphy's evidence, transcript of 18 September 2001 at PN744, Appeal Book 1 at p.84; Mr Bakic's evidence, transcript of 18 September 2001 at PN 889-896, Appeal Book 1 at p.97.

14 Annexure BK-8 to Exhibit A2, Appeal Book 2 at p.47.

15 See Mr McGilly's evidence, transcript at of 18 September 2001 PN 1295-1299, Appeal Book 1 at p.133.

16 Mr Welladsen, transcript of 19 September 2001 at PN 1488-1490 and 1520, Appeal Book 1 at pp.158 and 160; Mr Griffiths, transcript of 19 September 2001 at PN 1659-1669 and 1685-1686, Appeal Book 1 pp.172-174; Mr Furst, transcript of 19 September 2001 at PN 1782, Appeal Book 1 at p.183; Mr Gasperov, transcript of 18 September 2001 at PN1890, Appeal Book 1 at p.193; Mr Kennedy, of 19 September 2001 transcript at PN 2074-2075, Appeal Book 1 at p.210; Mr Ramage, transcript of 19 September 2001 at PN 2199-2202, Appeal Book 1 at p.221.

17 Exhibit MP2 at paragraph 16, Appeal Book 2 at p.433.

18 See footnote 16 above.

19 Exhibit A2 at paragraph 20 and annexure BK-8 of that exhibit, Appeal Book 2 at pp.11, 46-47; Exhibit A3, Appeal Book 2 at p.54; Exhibit MP10 at paragraphs 3-5 and annexure JR1 to that exhibit, Appeal Book 2 at p.491; transcript of 19 September 2001 at PN 2128-2131, Appeal Book 1 at p.215.

20 Appeal Book 2 at p.11.

21 Mr Kimball's oral evidence is set out in transcript of 18 September 2001 at PN 77-219, Appeal Book 1 at pp.25-38.

22 Exhibit A5 at paragraph 18, Appeal Book 2 at p.60; Exhibit A7, Appeal Book 2 at p.152; Exhibit MP4 at paragraphs 4-8 and annexure TG-1 of that exhibit, Appeal Book 2 at p.473; transcript of 19 September 2001 at PN 1577-1582, Appeal Book 1 at p.165.

23 Appeal Book 2 at p.60.

24 Transcript of 18 September 2001 at PN 309-311, Appeal Book 1 at p.47.

25 Exhibit MP3 at paragraph 3 and annexure TW1 to that exhibit, Appeal Book 2 at p.469; transcript of 19 September 2001 at PN 1434 and 1466, Appeal Book 1 at pp.153 and 156.

26 Exhibit A11 at paragraphs 15 and 16, Appeal Book 2 at p.212; Exhibit A12, Appeal Book 2 at pp.232-234; Exhibit MP5 at paragraphs 3-5 and annexure AF1 of that exhibit, Appeal Book 2 at p.476; Exhibit MP9 at paragraphs 3-5 and annexure AK1 of that exhibit, Appeal Book 2 at p.488; transcript of 19 September 2001 at PN 1709-1710, Appeal Book 1 at p.177.

27 Appeal Book 2 at p.212.

28 Transcript of 18 September 2001 at PN 448-460, Appeal Book 1 at pp.60-61.

29 Exhibit A16 at paragraphs 16-17, Appeal Book 2 at pp.252-253; Exhibit A18, Appeal Book 2 at pp.293-294; Exhibit MP4 at paragraphs 4-8 and annexure TG2 of that exhibit, Appeal Book 2 at p.473; transcript of 19 September 2001 at PN 1562-1565, Appeal Book 1 at p.164.

30 Appeal Book 2 at pp.252-253.

31 Transcript of 18 September 2001 at PN 642-650, Appeal Book 1 at pp.76-77.

32 Exhibit MP6 at paragraph 3 and annexure JG1 of that exhibit, Appeal Book 2 at p.480; Transcript of 19 September 2001 at PN 1937, Appeal Book 2 at p.197.

33 See Exhibit A19 at paragraphs 20-29, Appeal Book 2 at pp.299-301.

34 Appeal Book 2 at p.348.

35 Exhibit MP10 at paragraphs 6-8 and annexure JR2 to that exhibit, Appeal Book 2 at p.491.

36 Appeal Book 2 at p.355.

37 Transcript of 18 September 2001 at PN 935-937, Appeal Book 1 at p.100.

38 Appeal Book 2 at pp.376-377.

39 Transcript of 18 September 2001 at PN 882-893, Appeal Book 1 at pp.96-97.

40 Mr Welladsen, transcript of 18 September 2001 at PN 1466, Appeal Book 1 at p.156; Mr Gasperov, transcript of 19 September 2001 at PN 1853, Appeal Book 1 at p.190; Mr Kennedy, transcript of 19 September 2001 at PN 2038, Appeal Book 1 at p.207.

41 For example, see Mr Kennedy's evidence, transcript of 18 September 2001 at PN 2029-2030, Appeal Book 1 pp. 206-207.

42 Mr McGilly's evidence, transcript of 18 September 2001 at PN1393, Appeal Book 1 at p.142.

43 Transcript of 18 September 2001 at PN 1278 and 1393 and transcript of 19 September 2001 at PN 2103, Appeal Book 1 at pp 131, 142 and 213.

44 See the evidence of Mr Welladsen, transcript of 19 September 2001 at PN 1538-1540, Appeal Book 1 at p.162; Mr Griffiths, transcript of 19 September 2001 at PN 1691-1692, Appeal Book 1 at p.175; Mr Furst, transcript of 19 September 2001 at PN 1766-1769, Appeal Book 1 at p.182; and Mr Kennedy, transcript of 19 September 2001 at PN 2083-2084, Appeal Book 1 at p.211.

45 Print PR910494.

46 Ibid at paragraph 36.

47 Ibid at paragraph 51.

48 Ibid at paragraph 43.

49 Ibid at paragraph 42.

50 Ibid at paragraph 53.

51 Ibid at paragraph 54.

52 Ibid. See paragraphs 57-60 (Mr Kimball); 61-65 (Mr Rapsey); 66-71 (Mr Smith); 72-75 (Mr Hodge); 76-79 (Mr Perret); 80-85 (Mr Murphy); 86-92 (Mr Bakic).

53 Ibid at paragraphs 50, 59, 64, 70, 74, 78, 84 and 91.

54 Edwards v Giudice [1999] FCA 1836 per Moore J.

55 [2000] HCA 47.

56 Ibid at paragraph 17.

57 Ibid at paragraph 21.

58 Australian Broadcasting Tribunal v Bond and others (1990) 170 CLR 321 at 355.

59 See Roads Corporation v Dacakis [1995] 2 VR 508.

60 (1994) 181 CLR 387.

61 Ibid at 390.

62 (1936) 55 CLR 367.

63 Ibid at 375.

64 Seltsam Pty Ltd v McGuinness [2000] NSWCA 29, [85] - [89]; (2000) 49 NSWLR 262.

65 (1951) HCt unreported.

66 (1952) 85 CLR 352.

67 G v H, supra at 399; Briginshaw v Briginshaw (1938) 60 CLR 336; Macedonian Teachers' Association of Victoria Inc v Human Rights and Equal Opportunity Commission [1998] FCA 1650; (1998) 91 FCR 8; (1998) 160 ALR 489.

68 (1994) 181 CLR 387 at 402.

69 Mr McGilly's evidence at PN 1242-1244 of Transcript of 18 September 2001, Appeal Book 1 at pp.128-129.

70 For example in relation to Ms Millard see PN 1281-1286, Mr McGilly's evidence, transcript of 18 September 2001, Appeal Book 1 at p.132.

71 Annexure BK-6 to Mr Kimball's witness statement, Exhibit A2, see Appeal Book 2 at p.42.

72 Mr Kimball's witness statement, Exhibit A2 at paragraph 7, Appeal Book 2 at p.7.

73 Mr Hodge's witness statement, Exhibit A11 at paragraph 8, Appeal Book 2 at p.210.

74 Mr Murphy's witness statement, Exhibit A19 at paragraphs 6 and 33, Appeal Book 2 at pp.296 and 302.

75 Mr Bakic's witness statement, Exhibit A24 at paragraphs 13-15, Appeal Book 2 at p.354.

76 Osman v Toyota Motor Corporation Australia Ltd, PR910409, 17 October 2001 per Ross VP, Lacy SDP and O'Connor C at paragraph 56.

77 WR Act, s.170CK(2)(f).

78 WR Act, s.170CO.

79 (1938) 60 CLR 336.

80 See G v H, supra.

81 PR910494 at paragraph 45.

82 Ibid at paragraph 46.

83 Ibid at paragraph 47.

84 Ibid at paragraph 48.

85 Ibid at paragraph 49.

86 Ibid at paragraph 50.

87 Ibid at paragraph 51.

88 See Girlock (Sales) Pty Ltd v Hurrell (1982) 149 CLR 155 at 169.

89 Chamberlain v R (No. 2) (1984) 153 CLR 521 at 535.

90 (1959) 101 CLR 298.

91 [1975] VR 916.

92 Ibid at 929.

93 See Warren v Coombes (1979) 142 CLR 531 at 551; Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525 at 531.

94 Print Q3462, 13 July 1998 per Giudice J, Polites SDP and Gay C.

95 PR908053, 23 August 2001 per Giudice J, Lacy SDP and Blair C.

96 See PN 271-362 of the Transcript of 21 January 2002.

97 See Cosco Holdings Pty Ltd v Thu Thi Van Do (1997) 77 IR 94 at 120 per Lindgren and Lehane JJ.

98 (1960) 169 CLR 245 at 269.

99 Re Furnishing Industry Association of Australia (Queensland) Limited Union of Employers Section 111AAA application, Print Q9115, 27 November 1998 per Giudice J, Watson SDP, Hall DP, Bacon C and Edwards C.

100 Chubb Security Australia Pty Ltd v Thomas, Print S2679, 2 February 2000 per McIntyre VP, Marsh SDP and Larkin C.

101 King v Freshmore (Vic) Pty Ltd, Print S4213, 17 March 2000 per Ross VP, Williams SDP and Hingley C.

102 Tenix Defence Systems Pty Ltd v Fearnley, Print S6238, 22 May 2000 per Ross VP, Polities SDP and Smith C; Crozier v Palazzo Corporation Pty Limited t/as Noble Park Storage and Transport (2000) 98 IR 137 at paragraph 64.

103 Print S5876, 11 May 2000 per Watson SDP, Williams SDP and Smith C at paragraph 9.

104 Transcript of 21 January 2002 at PN 116.

105 Transcript of 21 January 2002 at PN 163.