Leanne Brackenridge v Toyota Motor Corporation Australia Limited

(1996) IRCA 605
Decision No: 605/96, (960605), No. NI 1507 of 1996

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(Judgment by: Wilcox CJ, von Doussa J, Marshall J)

Between: Leanne Brackenridge
And: Toyota Motor Corporation Australia Limited

Court:

Judges:
Wilcox CJ
von Doussa J
Marshall J

Subject References:
industrial law
claim of unlawful termination
whether demotion of appellant was termination under Division 3 of Part VIA Industrial Relations Act 1988
whether demotion was a breach of appellant's contract of employment
whether demotion was pursuant to an implied term in the contract of employment
whether demotion resulted in the termination of one contract of employment and the creation of another one
whether misconduct justified termination without notice
whether claim for damages for breach of an implied contractual term to deal with appellant fairly and in good faith

Legislative References:
Industrial Relations Act 1988 (Cth) - s 170CA; s 170CB; s 170DC; s 170EA; s 170EE(2); s Sch 10; s Sch 11

Case References:
Andersen v Umbakumba Community Council - (1994) 1 IRCR 457
Ansett Transport Industries (Operations) Pty Limited v The Commonwealth - (1977) 139 CLR 54
Association of Professional Engineers Scientists and Managers Australia v Skilled Engineering Pty Ltd - (1994) 1 IRCR 106
Bartucciotto v Euro Printing Co. Pty Ltd - (unreported, IRCA, von Doussa J, 21 February 1996)
Blyth Chemicals Limited v Bushnell - (1933) 49 CLR 66
BP Refinery (Westernport) Pty Limited v Shire of Hastings - (1977) 180 CLR 266
Brackenridge v Toyota Motor Corporation Australia Ltd - (1995) 64 IR 77
Brackenridge v Toyota Motor Corporation Australia Limited - (1996) 67 IR 162
Christie v Qantas Airways Ltd - (1996) 138 ALR 19
Codelfa Constructions Pty Ltd v State Rail Authority of NSW - (1982) 149 CLR 337
David Jack Strachan v Liquorland (Australia) Pty Ltd - 41 AILR 3-460
Gooley v Westpac Banking Corporation - (1995) 129 ALR 628
Gunnedah Shire Council v Grout - (1995) 134 ALR 156
Hanley v Pease & Partners Limited - [1915] 1 KB 698
North v Television Corporation Ltd - (1976) 11 ALR 599
O'Connor v The Argus and Australasian Ltd - [1957] VR 374
Quinn v Jack Chia (Australia) Ltd - [1992] 1 VR 567
Siagian v Sanel Pty Limited - (1994) 1 IRCR 1

Other References:
Toyota Australia Vehicle Industry Award 1988
International Labour Conference, 67th Session 1981, Report VIII(1), Termination of Employment at the Initiative of the Employer
Report of the Committee of Experts, Report III (Part 4B) International Labour Conference, 2nd Session 1995, General Survey on the Termination of Employment Convention (No. 158) and Recommendation (No. 166), 1982

Hearing date: 10 October 1996
Judgment date: 13 December 1996

Sydney

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Judgment by:
Wilcox CJ
von Doussa J
Marshall J

On 8 February 1995 the appellant, Leanne Brackenridge, filed in the New South Wales District Registry of the Court an application pursuant to s170EA Industrial Relations Act 1988 ("the Act"). Ms Brackenridge sought the remedies of compensation and reinstatement in respect of what she alleged to be the unlawful termination of her employment by the respondent Toyota Motor Corporation Australia Limited ("Toyota"). She also sought damages in the accrued jurisdiction of the court for breach of contract. Ms Brackenridge had been employed by Toyota as a chef supervisor, but was demoted to the position of canteen assistant on 3 February 1995 as the result of an investigation by Toyota into an incident which had occurred in the work place on 19 January 1995. This demotion constituted the alleged termination of employment. It was also said to constitute one of two breaches of her contract of employment. On 8 July 1995 Ms Brackenridge filed an amended statement of claim in which she sought, inter alia, damages for breach of contract for Toyota's failure to give reasonable notice to her of the termination of her employment. She also sought damages for breach of an implied term of her contract of employment that Toyota would deal with her fairly and in good faith.

The matter was heard by Beazley J ("the trial judge") on 16, 17 and 23 November 1995 and 4 March 1996. The trial judge had earlier ruled that a Judicial Registrar had no jurisdiction to hear the matter. See Brackenridge v Toyota Motor Corporation Australia Ltd (1995) 64 IR 77.

On 19 April 1996 the trial judge delivered her reasons for judgment on the merits of the application. The application was dismissed. See Brackenridge v Toyota Motor Corporation Australia Limited (1996) 67 IR 162. Her Honour held that in the events which had occurred Ms Brackenridge's contract of employment with Toyota had not been terminated, nor had there been a termination of her employment within the meaning of Division 3 of Part VIA of the Act ("the Division"). The claim for common law damages insofar as it rested upon an allegation of wrongful dismissal therefore failed, and, absent a termination of employment within the meaning of the Division, the Division and the remedies provided by it had no application. Her Honour also held that there was no breach of the alleged implied term of the contract of employment that Toyota would deal fairly and in good faith with Ms Brackenridge.

The trial judge went on to consider other issues that would have arisen in the proceedings if she were wrong in these conclusions. It will not be necessary to explore these aspects of her Honour,' reasons unless Ms Brackenridge is able to make good her challenge to the conclusions that there was no termination of her employment within the meaning of the Division, and that she has no entitlement to damages under the general law for wrongful dismissal, and for breach of the implied term alleged.

THE FACTS

Toyota, as part of its motor vehicle distribution network in Australia, operates three staff canteens in the Sydney metropolitan area. The appellant at the material time was the chef supervisor at the Woolooware Bay canteen. Ms Kylie Law was the chef supervisor at the Shell Point canteen. The incident which gave rise to these proceedings involved an altercation between Ms Brackenridge and Ms Law which led to Ms Law receiving a lacerated and swollen lip and several scratches.

Shortly before the incident Ms Brackenridge had informed her superior that she disagreed with a management decision to transfer an assistant from her canteen to that operated by Ms Law. She then confronted Ms Law to discuss the transfer. What followed was disputed by those involved, and was explored in evidence at the trial. However it was common ground that immediately following the incident Ms Law alleged that Ms Brackenridge commenced an argument with her in an aggressive manner and that as the argument proceeded Ms Brackenridge struck her in the face with her fist, and then hit her again and scratched her.

Officers of Toyota immediately instigated an inquiry into the incident which led to Ms Brackenridge being suspended the following day on full pay whilst the investigation continued. At the completion of the investigation, on 3 February 1995, Ms Brackenridge was advised by Toyota that it had decided to demote her to the position of canteen assistant. Her salary would be maintained at her current rate, but she would be "red circled" which meant that as award rates increased she would only receive the award increases applicable to the lower reclassified position.

On 6 February 1995 Ms Brackenridge's solicitors wrote to Toyota saying that she did not consent to "this unilateral termination of her employment contract". Nevertheless Ms Brackenridge continued working for Toyota as a canteen assistant, although from May 1995 she was on extended leave of absence.

Central to the claims made by Ms Brackenridge was the proposition that her demotion involved both a termination of her contract of employment as a chef supervisor, and a termination of her employment within the meaning of the Division. Counsel for Ms Brackenridge argued at trial, and on appeal, that her demotion brought about such a fundamental change in her contract of employment that it amounted to a termination of her employment as a chef supervisor, and her re-employment under a new contract as a canteen assistant.

IS A DEMOTION A TERMINATION OF EMPLOYMENT?

As will appear when we turn to the contractual claims made in this case, we are of the opinion that the decision by Toyota to demote Ms Brackenridge involved a termination of her contract of employment as a chef supervisor. However, for the purpose of Division 3 of Part VIA of the Industrial Relations Act, the relevant question is not whether there was a termination of the contract of employment but whether the applicant suffered "termination of his or her employment": see s 170EA(1) of the Act. There is a conceptual difference between the two situations: see Siagian v Sanel Pty Limited (1994) 1 IRCR 1 at 13 - 20. Ordinarily, the conceptual difference does not matter: dismissal will ordinarily terminate both the particular contract of employment and the employment relationship. In this case, however, Ms Brackenridge continued to be employed by Toyota after 3 February 1995. The employment relationship continued albeit under a new contract of employment.

Recognising this, counsel for Ms Brackenridge put her case at trial on the basis that her demotion constituted a "termination of employment" within the meaning of Division 3. We agree with the trial judge that it did not. In reaching her conclusion on this aspect of the matter, the trial judge applied the judgment of Moore J in David Jack Strachan v Liquorland (Australia) Pty Ltd, Industrial Relations Court of Australia, NI 1266R of 1995, 6 February 1996, unreported ("Strachan"). In Strachan, Moore J held that the international instruments upon which the Division is based were not intended to deal with a situation where an employee is demoted but thereafter continues in employment with the same employer. His Honour held that Convention 158 and Recommendation 166 (see Schedules 10 and 11 of the Act respectively), were intended to deal with a loss of employment by an employee. At 13-14 his Honour said:

"... both the Convention and Recommendation contain provisions that suggest that the expression 'termination of employment' has no application to such situations. The first is Article 12 of the Convention which provides that an employee whose employment has been terminated shall be entitled to a severance allowance or other separation benefits or benefits from unemployment insurance subject to certain qualifications in clause 2 of the Article. The Article is expressed in language of general application, that is, it relates to any employee whose employment has been terminated. Both the language and subject matter of this provision are consistent with termination that has brought to an end the employment relationship. While perhaps it might be theoretically possible to have schemes for the provision of severance allowances or separation benefits for employees who are demoted, it is plain, in my opinion, that this is not what Article 12 is concerned with. It deals with payments to employees whose source of income is lost as a result of the termination of their employment. That is, employees who are no longer in employment.

The Recommendation deals with the same matter in paragraph 18 in essentially the same terms. However the Recommendation also contains paragraphs 19 to 26 which deal, in more detail than the Convention, with terminations of employment for economic, technological structural or similar reasons. Paragraph 21 provides:

'The measures which should be considered with a view to averting or minimising terminations of employment for reasons of an economic, technological, structural or similar nature might include, inter alia, restriction of hiring, spreading the workforce reduction over a certain period of time to permit natural reduction of the workforce, internal transfers, training and retraining, voluntary early retirement with appropriate income protection, restriction of overtime and reduction of normal hours of work.'

The reference to 'workforce reduction' is a reference to the reduction in the aggregate number of employees of the employer and is consistent with 'termination of employment' referring to the conclusion of the employment relationship. Some of the measures identified as one to be adopted to avoid terminations are internal transfers, training and retraining and the reduction of normal hours of work. It is unlikely, in my view, that those matters are identified as measures to avoid terminations if 'termination' can include the appointment of a person to another position (even on a reduced salary) rather than the conclusion of the employment relationship itself. The reference in paragraph 24 to 'rehirin.' employees whose employment has been terminated is similarly suggestive of 'termination' referring to the conclusion of the employment relationship itself."

We concur in that approach for the following reasons.

Section 170CA of the Act provides as follows:

"170CA(1)

The object of this Division is to give effect, or give further effect, to:

(a)

the Termination of Employment Convention; and

(b)

the Termination of Employment Recommendation, 1982, which the General Conference of the International Labour Organisation adopted on 22 June 1982 and is also known as Recommendation No. 166, and a copy of the English text of which is set out in Schedule 11.

(2)

Without limiting subsection (1), the reference in paragraph 170DF(1)(g) to sexual preference, age and physical or mental disability, have been included in order to give effect, or further effect, to:

(a)

the Convention concerning Discrimination in respect of Employment and Occupation, a copy of the English text of which is set out in Schedule 1 to the Human Rights and Equal Opportunity Commission Act 1986; and

(b)

the Recommendation referred to in paragraph 170BA(c).

(3)

Without limiting subsection (1), the reference in paragraph 170DF(1)(g) to other parental leave has been included in order to give effect, or further effect, to the Family Responsibilities Convention and to the Recommendation referred to in paragraph 170KA(1)(b)."

Section 170CB of the Act provides as follows:

"170CB

An expression has the same meaning in this Division as in the Termination of Employment Convention."

In interpreting an international instrument it is permissible to have regard to the preparatory work in relation to such instrument. See Andersen v Umbakumba Community Council (1994) 1 IRCR 457 at 461-462 and Christie v Qantas Airways Ltd (1996) 138 ALR 19 at 36-37. The preparatory work in relation to Convention 158 was undertaken at the 67th Session of the International Labour Conference in 1981. Report VIII(1) of the Conference is entitled "Termination of Employment at the Initiative of the Employer". Chapter II of that report is entitled "The Requirement of Justification for Dismissal" (emphasis supplied). The report is redolent with references to the "dismissal" of employees. Some of the headings contained in the Report are "'Abusive' Dismissal", "Types of Valid Reason for Dismissal", "Prohibition of Dismissal for Particular Reasons" and "Worker's Resignation Due to Certain Conduct of the Employer Assimilated to Unjustified Dismissal".

It is clear from this preparatory work that Convention 158 was not intended to refer to situations where there is no actual loss of employment.

The 1995 General Survey of the International Labour Office entitled "Protection against Unjustified Dismissal" lends further support for the view that the Convention and Recommendation were not intended to deal with demotion situations. At paragraphs 19 and 20 of the General Survey the following is provided:-

"19.

Under Article 3 of the Convention, the terms 'termination' and 'termination of employment' mean termination of employment at the initiative of the employer, which restricts the substantive scope of the Convention to this method of terminating the employment relationship, to the exclusion of others. Under this definition, the instruments cover termination of the employment relationship - and not other business relations - at the initiative of the employer - and not at the initiative of the worker or as a result of a genuine and freely negotiated agreement between the parties.

20.

Furthermore, while the term 'termination' means termination of the employment relationship and not other interruptions, as for example suspension of the employment contract, it should be noted that such suspension, for example, due to illness or maternity, is directly related to termination of the employment relationship in so far as in some countries the worker is protected against termination during the period of suspension of the contract." (emphasis supplied)

Paragraph 22 deals with the area of "constructive dismissal" and provides that:

"22.

The manner in which the termination of an employment relationship is defined is of particular importance. If, instead of dismissal, the termination of the employment relationship though really at the initiative of the employer is wrongly labelled by him for example as resignation, breach of contract, retirement, modification of the contract, force majeure or judicial termination, the rules of protection governing termination might apparently seem not to apply; but the use of such terminology should not enable the employer to circumvent the obligations with regard to the protection prescribed in the event of dismissal. Certain changes introduced by the employer, in particular as concerns conditions of employment and which do not arise out of genuine operational requirements, might place the worker under pressure either to accept such changes or to give up his job or incur the risk of being sanctioned for having disregarded the employer's instructions. It is therefore necessary to be able to verify whether a situation does not constitute a disguised dismissal or a real termination of the relationship instigated by the employer in the sense of the Convention, since otherwise the worker concerned would de facto or de jure be unduly deprived of the protection provided by the Convention." (emphasis supplied)

Counsel for the appellant disavowed any suggestion that what occurred to the appellant was "a disguised dismissal".

In Strachan Moore J referred to Article 12 of the Convention and the various parts of the Recommendation to support his view that demotion was not intended to be covered by the Convention. It is also noteworthy that Article 11 of the Convention refers to the concept of continuing in employment during a notice period. That concept tends against the suggestion that the Convention is intended to apply to a demotion situation. Additionally, the provisions of Article 14 in relation to the notification of certain terminations to competent authorities is not intended to deal with a demotion situation. Further, paragraph 16 of the Recommendation which deals with "time off work during the period of notice" for the purpose of seeking other employment cannot sensibly be read as referring to a demotion.

It was submitted by counsel for Ms Brackenridge that the judgment of Gray J in Association of Professional Engineers Scientists and Managers Australia v Skilled Engineering Pty Ltd ("APESMA") (1994) 1 IRCR 106 at 116 supported his submission that the Division encompassed a demotion. However, we agree with Moore J in Strachan at 12, that Gray J did not directly address that issue in APESMA. We are therefore in agreement with the trial judge that the demotion of Ms Brackenridge did not result in the termination of her employment so as to entitle her to a remedy under the Division.

CONTRACTUAL ISSUES

Counsel for Ms Brackenridge contends that the contractual claims raise issues which are independent of the claim under the Division. Counsel submitted that the demotion terminated the contract of employment, and that the termination was in breach of an implied term that the employment would only be brought to an end on reasonable notice. He further submitted that in carrying into effect the termination Toyota acted in breach of an implied term to deal fairly and in good faith towards Ms Brackenridge. Counsel for Toyota put in issue the jurisdiction of the Court to entertain the contractual claims in the event that the Court held that there was not a termination of employment within the meaning of the Division. It was not disputed that the issues raised by the contract claims arise out of the same substratum of facts as the application under s170EA of the Act. In both aspects of this matter the facts surrounding the demotion of Ms Brackenridge were relevant: see Gunnedah Shire Council v Grout (1995) 134 ALR 156 at 159. In our opinion the Court plainly has jurisdiction to deal with the contract claims under its accrued jurisdiction.

(i) Reasonable notice

The trial judge held that the demotion did not constitute a termination of the contract of employment because there was an implied term in the contract of employment which permitted the demotion. Accordingly the change in Ms Brackenridge's terms and conditions of employment brought about by the demotion was a change pursuant to the contract of employment, and not in breach of it. The trial judge noted, correctly, that there was no express term of the contract of employment which permitted demotion, nor was there any term of the Toyota Australia Vehicle Industry Award 1988 ("the award"), which applied to the parties, which would entitle Toyota to effect a demotion. However her Honour considered that in accordance with the principles enunciated by the Privy Council in BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266 ("BP Refinery") a term should be implied which permitted the demotion. Her Honour said that whilst there was no evidence directed to the circumstances which might give rise to the implication of such a term, it was known that Toyota is a large national motor vehicle distributor employing a large number of employees from management level to unskilled persons, and that its operation included the three Sydney canteens in which there were employees in at least three levels - chef supervisor, chef and canteen assistant - under the supervision of a canteen manager. Her Honour said:

"When the nature of a large business is considered, with large numbers of employees performing different duties, involving different skills and different levels of skills, with numerous circumstances arising in the employment situation, including disciplinary matters, I am of the opinion that a term enabling the employer to alter the terms of employment including the downgrading of the terms and conditions of employment, satisfies the requirements of an implied term."

The relevant statement of principle in the BP Refinery case appears in the following passage at 282 -

283:

"Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied:

(1)

it must be reasonable and equitable;

(2)

it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3)

it must be so obvious that 'it goes without saying';

(4)

it must be capable of clear expression;

(5)

it must not contradict any express term of the contract."

The second of these conditions requires that the term be necessary in order to make the agreement work, or conversely, in order to avoid an unworkable situation. Contracts of employment, generally speaking, are not rendered unworkable by the absence of a term which permits demotion or the exercise of some similar sanction as a disciplinary power by the employer. On the contrary, the common law has recognised that contracts of employment are workable without such a power. The employer, in the event of serious or wilful misconduct by the employee, is not without a remedy. That is illustrated by the following observations of Rowlatt J in Hanley v Pease & Partners Limited [1915] 1 KB 698 at 706:

"...the employer has no implied power to punish the workman by suspending him for a certain period of his employment, the contract subsisting all the time. He has power if the occasion arises ... to dismiss a workman and propose a new employment to begin on the next day which the workman may or may not accept."

The fact that the employer is a large organisation with many employees may provide a reason why it would be reasonable for the employer to have in place a disciplinary process that included a power to demote, but "it is not enough that it is reasonable to imply a term; it must be necessary...": Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346 per Mason J.

In the case of a large employer even if it were appropriate to imply a power to reclassify employees, or to vary their duties, to accommodate changing demands or other market forces outside the control of the employer, that would be very different to implying a term that empowered the employer to demote an employee as a disciplinary measure. In our opinion there is no need to imply into Ms Brackenridge's contract of employment a term giving Toyota a power to demote as a disciplinary measure. The contract would not be rendered ineffective or unworkable without such a term.

A disciplinary procedure which includes a power to demote, with consequential effect on remuneration, in the case of a large employer could be expected to be complex, and probably the result of protracted industrial negotiation. In the United Kingdom when procedures of this kind are incorporated into contracts of employment, the publication of a handbook setting out the terms of the disciplinary procedures and powers is common: see Halsbury Laws of England, vol. 16, 4th Edition Reissue at para. 299. The types of matter which might be covered in provisions providing disciplinary procedure are extensive: for example, the kinds and degrees of conduct that attract the disciplinary power, the circumstances in which the power may be exercised (who may initiate the exercise of disciplinary procedures and whether on complaint and if so from whom), how the power is to be exercised (the form of notice to the employee, whether there is to be an inquiry or hearing of some sort, and who is to be the decision-maker), whether there is a right of appeal or review to a higher authority, and the range of sanctions that can be imposed in the event of a disciplinary transgression being established. The complexity and extent of these matters all tell against the implication of a general power of demotion which lacks the "clear expression" required by the fourth of the conditions stated by the Privy Council: compare the reference to "lack of precision" in the judgment of Gibbs J in Ansett Transport Industries (Operations) Pty Limited v The Commonwealth (1977) 139 CLR 54 at 62.

The evidence as to the general nature of Toyota's operation and its size do not provide an evidentiary basis that justifies the implication of a power of demotion by Toyota. In our opinion the demotion of Ms Brackenridge cannot be justified as a variation of the terms and conditions of her contract of employment made pursuant to the contract.

The change of duties and the change in classification of Ms Brackenridge were of such a degree that it should be held that a new contract of employment replaced the old one, and that Toyota terminated the old contract: see Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567 at 575 - 577, and O'Connor v The Argus and Australasian Ltd [1957] VR 374 at 388 - 389.

This conclusion sets the scene for the submission of counsel for Ms Brackenridge that she should have been given reasonable notice of termination, and is entitled to damages for breach of contract because no notice was given.

Notice is only required if there is no contractual or other reason which entitles an employer to terminate the contract of employment without notice. Under the general law if an employee is guilty of serious or wilful misconduct which amounts to a repudiation of the contract, or one of its essential conditions, the employer may terminate the contract without notice. Included in the circumstances where this will be so is the situation where the employee is guilty of "conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty": Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66 at 81 per Dixon and McTiernan JJ.

Moreover, in the present case, Ms Brackenridge's employment was governed by the award. Clause 5(c)(i) of the award deals with the topic of termination on notice, and it includes the following provision:

"This shall not affect the right of the Company to dismiss an employee without notice for malingering, inefficiency, neglect of duty or misconduct, and in such cases wages shall be paid up to the time of dismissal only."

In North v Television Corporation Ltd (1976) 11 ALR 599 in the Australian Industrial Court, Smithers and Evatt JJ said in relation to a similar Award provision at 608 - 609:

"It is of assistance to consider the expression 'misconduct' by reference to subject matter to which it is related and the context in which it appears. The subject matter is the termination by one party against the will of another of a continuing contract of employment on the ground of breach of one of the terms of the contract. And the context is such as to indicate that certain breaches of a non-serious nature, some of which would be within the connotation of misconduct, are not regarded as grounds for termination. In such a situation it is reasonable to interpret the expression 'misconduct' as referring to conduct so seriously in breach of the contract that by standards of fairness and justice the employer should not be bound to continue the employment. This situation would arise if there were conduct inconsistent with the fulfilment of the express or implied conditions of service. It is conduct of that kind which will justify dismissal at common law. And it was decided by a Full Bench of this Court in Crosland v John Fairfax and Sons Pty Ltd, (unreported save in 14 IIB at 610), that the test of misconduct for the purposes of a clause identical with cl 10(e) was the same as the test of misconduct at common law. No reason has been advanced to challenge the validity of this decision. We respectfully find ourselves in agreement with it. For the purposes of the application of the common law principles to the facts of this case, the remarks of the Master of the Rolls in Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285 at 287 and 289, are in point. He said:-

'To my mind the proper conclusion to be drawn from the passages which I have cited and the cases to which we were referred is that, since a contract of service is but an example of contracts in general, so that the general law of contract will be applicable, it follows that, if summary dismissal is claimed to be justifiable, the question must be whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service.

...

'I do, however, think (following the passages which I have already cited) that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think that one finds in the passages which I have read that the disobedience must at least have the quality that it is 'wilful'; it does (in other words) connote a deliberate flouting of the essential contractual conditions.'"

This passage was referred to with approval by Wilcox CJ in Gooley v Westpac Banking Corporation (1995) 129 ALR 628 and applied by von Doussa J in Bartucciotto v Euro Printing Co. Pty Ltd (unreported Industrial Relations Court of Australia, 21 February 1996). It is plain that Toyota, following its investigation of the incident, acted against Ms Brackenridge because of the opinion of its investigating officers that Ms Brackenridge had been guilty of misconduct. By letter dated 24 January 1995 Toyota had advised her that information ascertained to that point in the investigation included evidence of an obvious injury to Ms Law's mouth which she alleged was caused by an unprovoked assault by Ms Brackenridge. The letter continued:

"Leanne, a very serious allegation has been made against you. This company has a statutory responsibility to provide a safe workplace for its employees. Therefore, incidents of this nature are treated very seriously.

I would like you to respond to these allegations in writing, by midday on Monday, 30th January 1995. When I have your reply, a decision will be made as to what action should be taken. I must advise you that if it is proven that you provoked a fight which caused injury to Kylie Law, then the Company will consider whether you should continue to be employed in your present, or any other role."

Ms Brackenridge by her solicitor did respond. Then, by letter on 3 February 1995, Toyota advised Ms Brackenridge of her demotion. The reasons given for Toyota's action were:

"1.

On the basis of the statements that were taken from the staff involved we are still of the opinion that you engineered the confrontation with Kylie, as a direct response to your displeasure that Dot Fish was being transferred.

2.

You clearly did not accept the decision made by your Manager (Jacqui Booth) that the staff rotations were to take place. This refusal to accept your Manager's decision is tantamount to insubordination, and this is not the first time you've exhibited such behaviour.

Both of these points demonstrate that you have difficulty maintaining behaviour which is appropriate to someone occupying a supervisory position."

At trial the conclusions of Toyota that Ms Brackenridge had engineered the confrontation and had been guilty of insubordination were challenged as being factually incorrect. Ms Brackenridge also denied that she had assaulted Ms Law.

However the trial judge held that Toyota had established the correctness of these conclusions. Her Honour said:

"In my opinion, the respondent has satisfied the onus that there was a valid reason for the termination. From the information the respondent had obtained in its investigation, the applicant had confronted Ms Law in an inappropriate way. I am of the opinion that the evidence establishes that the applicant acted aggressively. Her admitted comments to Ms Law were of an aggressive nature including her invitation to Ms Law's remark to 'have a go'. She admitted that she had 'egged [Ms Law] on and had laughed at Ms Law, which provoked her'. The issue about which the applicant confronted Ms Law related to a staff matter and in particular to a proposed staff rotation. The particular matter about which she confronted her was Ms Law's relationship with Ms Dawes. This was not a matter which concerned the applicant whatever the applicant,' personal views on the matter.

In any event, there was no evidence that the relationship was as the applicant believed it to be. Nor was it appropriate that the applicant confront Ms Law about the staff rotation. Ms Law had not made the decision to rotate the staff. At the time the applicant confronted Ms Law, she had been made aware by Ms Ruppe (if she had not already been made aware by Ms Booth) that there were financial reasons for the decision to rotate staff. In my opinion, the applicant's behaviour was so inappropriate that it provided a valid reason for termination. In coming to this view, it has not been necessary to determine who 'threw the first punch'. However, if it was necessary to do so, I would have found that it was more likely that the applicant commenced the physical encounter between the two women. Accordingly, if there was a termination, it would have been lawful unless the applicant could have established that the termination was harsh, unjust or unreasonable."

Whilst these conclusions were expressed in relation to the claims under the Division, they record general findings of fact made by the trial judge. On these findings Ms Brackenridge was guilty of wilful misconduct that justified termination of her contract of employment without notice both under the general law and pursuant to the award. On our analysis of the effect in law of the demotion, i.e. that the contract of employment as a chef supervisor was terminated, and a new contract of employment as a canteen assistant was offered and accepted, the first contract was lawfully terminated by Toyota without notice.

The claim for damages for dismissal without notice must therefore fail.

(ii) Fair dealing and good faith

The Amended Statement of Claim pleaded that it was an implied term of the contract of employment that Toyota would in its dealings with Ms Brackenridge act fairly and in good faith. The trial judge assumed for the purpose of the case that such a term was to be implied, although her Honour noted that the basis for such an implied term had not been addressed by counsel. Her Honour held that the claim nonetheless failed as Toyota had acted fairly and in good faith in the manner in which it carried out its investigation into the incident and in its subsequent dealings with Ms Brackenridge.

Before this Court counsel for Ms Brackenridge argued that Toyota had acted in breach of the implied term because in the letter advising her of her demotion one of the reasons advanced was one which Ms Brackenridge had not been given an opportunity to answer. The second of the reasons given said that the refusal to accept the decision of the manager to transfer a canteen assistant was "tantamount to insubordination, and this is not the first time you've exhibited such behaviour" (emphasis added).

The allegation of earlier acts of insubordination had not been raised with Ms Brackenridge in the course of the investigation, and was not a matter on which her response was requested in the letter of 24 January 1995.

In written submissions provided by counsel for Ms Brackenridge on this issue, it is submitted that damages for mental distress should flow from a finding that Toyota breached its duty of good faith to Ms Brackenridge by demoting her in part reliance on the allegation of previous insubordination which was not put to her. The submission continues:

"It is conceded that there is no direct evidence of the portion of mental distress that was suffered by the appellant as a result of the act of the respondent of relying on the allegation of insubordination as a basis for her termination. However there is medical evidence that the appellant suffered mental distress etc. as a result of the incidents and events leading to the termination of her employment. It is submitted that this also includes the fact that the employer relied upon an allegation for termination of her contract of employment that was not made out and that was not put to her."

There is a question whether the implied term that the employer would act fairly and in good faith applies to the manner of termination of an employment contract, as distinct from matters germane to the ongoing employment relationship: see Burazin v Blacktown City Guardian Pty Limited (Wilcox CJ, von Doussa and Marshall JJ, 13 December 1996). However, for present purposes and without deciding the point, we will assume that it does. If so, we accept that such a term would be breached by the employer taking into account a matter not raised with the employee in making a decision to dismiss her from its employment. But is there any evidence of damage flowing from this breach, as distinct from the other traumas suffered by Ms Brackenridge at that time?

It is true, as counsel claims, that there is evidence of mental distress resulting from the "incidents and events leading to the termination". But the allegation regarding previous insubordination was not one of these. This allegation was made at the same time as the demotion decision was made. It was first raised in the letter of 3 February 1995 from Toyota to Ms Brackenridge advising her of her demotion. Not only is there "no direct evidence" that any part of Ms Brackenridge's mental distress was causally related to Toyota relying on the allegation of other insubordination as a basis for her termination, there is no evidence at all which establishes such a relationship. The matter is not mentioned in any of the three medical reports that were admitted into evidence.

In the absence of proof of a causal relationship between the suffering of damage by Ms Brackenridge and the allegation of previous insubordination the claim for damages must fail.

ORDER

It follows that the appeal should be dismissed.