Australia: Cause not needed to dismiss a senior executive

In Stapleton v City of Parramatta Council [2019] NSWSC 123, Bartier Perry successfully defended the City of Parramatta Council against interlocutory relief sought by its then CEO, Mark Stapleton.

Council appointed Mr Stapleton in June 2018. His employment contract, which was set to run until 2021, included these standard local government senior manager contract clauses:

This contract may be terminated before the termination date by way of any of the following:
10.3.5 Council giving 38 weeks' written notice to the employee, or alternatively, by termination payment under subclause
11.3 On termination of this contract under subclause 10.3.5, where written notice has not been given, Council will pay the employee a monetary amount equivalent to 38 weeks' remuneration calculated in accordance with Schedule C, or the remuneration which the employee would have received if the employee had been employed by Council to the termination date, whichever is the lesser.

Soon after Mr Stapleton's appointment, allegations were made in the media that his CV was incorrect in a number of material ways.

On 7 September 2018, the Lord Mayor of Council called an extraordinary council meeting at which this resolution was passed:

  • That Council does not accept the veracity of the allegations made against the Chief Executive Officer.
  • That an independent external review be conducted to confirm the authenticity of the work experiences, qualifications, references and associated claims provided by Mr Stapleton in relation to his application for the role of Director of Property and Significant Assets and Chief Executive Officer at City of Parramatta Council.
  • That an independent external review be conducted into the accuracy of Mr Stapleton's declaration of interests under section 449 of the Local Government Act 1993.
  • That an independent external review be conducted into all aspects of the recruitment of Mr Stapleton to the roles of Director Property and Significant Assets and Chief Executive Officer at City of Parramatta Council.
  • That Council suspend Mr Stapleton on full pay effective immediately.

...

An independent external review into the allegations was conducted and considered by Council.

On 4 February 2019, following the external review, council passed a further resolution authorising "the Lord Mayor and the Acting CEO (or their delegates) to negotiate with Mark Stapleton in relation to the CEO's contract of employment with Council, within the parameters set out in the Contract and the Local Government Act 1993".

On 11 February, without notifying Council, Mr Stapleton sought interlocutory relief from the NSW Supreme Court, including that Council be prevented from terminating his employment for the term of the contract. Council was able to appear at the proceedings, but with limited information in relation to Mr Stapleton's claim, and so the Court treated the application as having been made ex parte (in the interests of the applying party only).

The Court granted a temporary injunction for one week restraining Council from terminating Mr Stapleton's employment, but said the onus would then be on Mr Stapleton to prove he was entitled to the interlocutory relief.

Mr Stapelton then purported to invoke the dispute resolution clause in his contract (clause 17 of the standard contract).

One week later, Justice Kunc found that Mr Stapleton had not proved he was entitled to interlocutory relief because:

  1. No risk of imminent termination was shown.
  2. There was no evidence to show that Council was departing from its resolution made on 4 February.
  3. There was no prima facie case that Mr Stapleton's employment was about to be wrongfully terminated.
  4. The principles regarding specific performance, which in employment require the existence of exceptional circumstances, could not be enlivened.

The Court ordered that Mr Stapleton pay Council's costs on an indemnity basis.

This was an excellent outcome, and Bartier Perry was pleased to be able to assist in achieving it.

Soon after this decision, Council terminated Mr Stapleton's employment by exercising its express contractual right to do so.

What can be learned?

First, and somewhat obviously, a resolution that Council negotiate on the exit of an employee is not a threat to dismiss.

Second, despite Mr Stapleton arguing that terminating his employment would be wrongful because Council had not engaged in the dispute resolution process, the Court found that clause 17 (even if enforceable) was not pre-requisite to the Council's right to terminate the contract under clause 10.3.5.

Third, the Court considered that clause 10.3.5 of the standard contract was the "complete answer" because the Council could terminate the contract without cause (that is without specifying any reasons) by relying solely on that clause and paying the standard 38 weeks' notice.

Although the decision is an interlocutory judgment, it offers useful guidance for councils. Of course, before deciding to terminate a senior manager contract, councils should seek legal advice, as the circumstances of each case are unique and may involve special considerations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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