Austin v NF Importers Pty Ltd & Anor

CATCHWORDS: Unfair contract - Contract of employment - Applicant appointed as IT Manager - Use of unlicensed software - Circumstances surrounding applicant's knoweldge and involvement in use of unlicensed software - Applicant's defence was use of unlicensed software raised with management - Applicant's evidence unreliable - Termination of employment - Whether misconduct justified summary dismissal - Whether contract of employment became unfair in its operation - Whether applicant denied procedural fairness - Held contract of employment not unfair - Applicant breached duty and obligations to employer - Duty to act with fidelity - Explanation not available - Summons dismissed - Costs reserved with liberty to apply

Evidence Act 1995 LEGISLATION CITED: Industrial Relations Act 1996

A & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1 Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648, 93 IR 1 Byrne v Australian Airlines Limited (1995) 185 CLR 410 Davies & Anor v General Transport Development Pty Ltd & ors [1967] AR (NSW) 371 CASES CITED: Gow v Cronulla Sutherland Leagues Club Ltd (2002) 119 IR 122 Incitec Limited and Anor v Industrial Court of New South Wales & ors (1992) 45 IR 155 Origin Energy Limited v Smith (2001) 111 IR 476 Mason v Electricity Commission of New South Wales t/a Pacific Power (1995) 62 IR 436 Port Macquarie Golf Club Limited v Stead & Anor (1996) 64 IR 53 Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121

HEARING DATES: 11/15/2004; 11/16/2004; 11/17/2004; 03/02/2005; 03/03/2005; 03/04/2005

APPLICANT Mr R de Meyrick of counsel Solicitor: Mr P Moore Brazel Moore & Daly LEGAL REPRESENTATIVES:

RESPONDENT Mr J Fernon SC Solicitor: Mr P Punch Carroll & O'Dea

• 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

BRUCE AUSTIN v NF IMPORTERS PTY LTD AND WJF HOLDINGS PTY LTD

Application under s 106 of the Industrial Relations Act 1996

Introduction 1 Bruce Austin complains about the fairness of his contract of employment with NF Importers Pty Ltd ("NF Importers") which was terminated on 12 March 2002 for alleged misconduct. Mr Austin was paid four weeks salary in lieu of notice and statutory entitlements. 2 Mr Austin commenced employment with the first respondent on 11 September 1997 as the Manager of the Information Technology ("IT") Department. 3 Mr Austin complained that his contract of employment was unfair in relation to its termination. His claim, as particularised, was that his contract should have provided for nine months notice of termination; procedural fairness provisions; the balance of the novated lease for a motor vehicle of $7,308 plus residual of $6,000 for two motor vehicles and the sum of $100,000 in respect of stress, impairment of employment prospects and reduction in the applicant's quality of life. 4 NF Importers case was that Mr Austin had become aware that illegal copying of computer software was occurring at both the Auburn and Homebush premises of NF Importers and that Mr Austin had failed in his responsibility to bring this matter to the attention of his employer. 5 For his part, Mr Austin acknowledged that he became aware that another employee of NF Importers, Mr Larry Kelly, had been loading Microsoft Office and other software from a single source copy onto the majority of PCs at the Homebush store and the Auburn Head Office from about October 2001. 6 Mr Austin contended that he raised the matter orally with Mr Warren Lee, the General Manager of NF Importers and sent an email to him dated 15 October 2001 stating that he had been informed that "illegal copying of software is occurring at Auburn and Homebush". 7 The alleged conversation between Mr Austin and Mr Warren Lee and the date that the email raising the illegal copying of software was sent to Mr Warren Lee became matters of significant contention in the proceedings. 8 During the course of the proceedings, an amended summons for relief was filed adding WJF Holdings Pty Ltd as the second respondent. It was contended that although Mr Austin was employed by NF Importers, he was paid by WJF Holdings Pty Ltd. The respondents took no issue in respect of this contention. Issues 9 The parties agreed that the following issues required determination in the proceedings.

1. In the circumstances of the case was the Respondent justified in holding the Applicant responsible for unauthorised use of pirated software in its offices?

In the circumstances of the case, did the contract of employment become an unfair contract by reason of conduct of the Respondent's officers in holding the Applicant guilty of misconduct, and terminating the contract as a result?

In the circumstances of the case, did the contract operate in a manner to deny the Applicant the opportunity to defend himself against allegations of misconduct?

In the circumstances of the case, did the contract operate in a manner to enable the Respondent to terminate the contract without a period of notice, and/or severance payment, that was reasonable and appropriate in the circumstances?

In the circumstances of the case, did the contract operate in a manner to enable the Respondent to terminate the contract without a valid reason?

In the circumstances of the case, did the contract operate in a manner to deny the Applicant knowledge of the real reason for his Termination?

The respondent notified the following additional issues: (a) Whether the applicant sent an email to Mr Lee [Annexure "B" to the applicant's affidavit sworn 25 February 2002] on or about 15 October 2001.

(b) Whether the applicant sought to raise with the managing director, Mr Fraser, that there were illegal copies of software on the respondent's computer system.

(c) Whether the applicant met with Mr Fraser and Mr Lee in late October 2001 and attempted to raise the issue of illegal copying of software on the respondent's computer system.

(d) Whether on 18 February 2002 the applicant stated to Mr Lee that he had informed him of the illegal copying of software on the respondent's computer system in October 2001.

(e) Whether, s109A of the Industrial Relations Act, Div 2 of Pt9 of the Act does not apply to the contract of employment that is alleged to be an unfair contract by the applicant. 10 These issues are addressed and determined in this judgment. Discussion of Evidence and Findings of Fact 11 Evidence was called from Mr Austin, Mr J Randy, a computer supplier, Mr F G Thomas, a Chartered Accountant and Mr Larry Kelly (who appeared in response to a subpoena) for the applicant. 12 NF Importers called evidence from Mr W Lee, the General Manager; Mr W Fraser, Managing Director; Mrs E Lee, Human Resources Manager; Mr C Norman, the former Warehouse Manager of NF Importers during part of Mr Austin's employment; Mr D Page, Financial Controller of NF Importers; Mr J Forsyth, Manager, Forensic Technology Team of KPMG Australia; Mr L F Kelly, a solicitor retained by NF Importers and Mr R McKemmish, Director for Forensic Technology Services, KPMG. 13 Mr Austin has numerous computer certificates including the Controlled Data Computer Technology Certificate, plus programming qualifications and operating systems qualifications. Mr Austin has been working with computers since about 1981 when he graduated with honours from the Control Data Institute. Over the last 20 years, Mr Austin's positions have included Analyst Programmer; Database Designer; Team Leader; Project Manager; Systems Analyst; Staff and Business Unit Stakeholders Trainer; Personal Computer Specialist; Business Analyst; Systems Technical Writer and Information Technology Manager. 14 During Mr Austin's employment with NF Importers, he redesigned and co-ordinated a number of hardware and software upgrades including implementing a planned technology strategy to replace ad hoc methodology. In addition, Mr Austin was actively involved in setting up a corporate Internet and Intranet at NF Importers; setting up a regulated system of tendering for computer hardware and software and telecommunications by suppliers; writing several IT user manuals including the NF Importers Vehicle Workshop Maintenance Service System User Guide, a manual of over 150 pages. 15 Mr R de Meyrick of counsel, who appeared for the applicant, submitted that Mr Austin's knowledge of personal computers was to some degree sketchy and, no better than most average users. It was contended that Mr Austin's main level of expertise and skill was in mainframe computing. 16 In applications for employment after his termination, Mr Austin stated to prospective employers that he had excellent skills in MS Word, Excel, MS Access, Microsoft Outlook and the Internet, plus a good understanding of Microsoft Powerpoint. 17 When asked in cross examination about these skills, Mr Austin stated he considered his skills were not as good in MS Access and Microsoft Outlook when compared to his knowledge in other areas of technology. However, Mr Austin agreed that his knowledge in these areas would be more than adequate to a prospective employer who required a knowledge and use of such software. 18 I am satisfied that the applicant's expertise was more than satisfactory in PC related areas, in light of his qualifications, experience and particularly as he has spent over half of his working life involved with computers. 19 Mr Larry Kelly worked with Mr Austin in the IT Department of NF Importers. Mr Kelly's position was Personal Computer (PC Administrator). In this role Mr Kelly was responsible for the maintenance, support installation upgrades, repairs and training of staff in the use of PCs and the day to day running of them. Mr Austin was Mr Kelly's immediate supervisor. 20 Around the latter part of 2001, communication between Mr Austin and Mr Kelly became strained when Mr Austin became aware that NF Importers were proposing to introduce a new operating system which would be PC based and which would lead to Mr Austin ultimately being made redundant by approximately August 2002. When Mr Austin became aware of the new system, he accused Mr Kelly of undermining his position. 21 The change in attitude was not based on anything that Mr Kelly had done to Mr Austin but rather based upon the way in which Mr Austin understood the company was approaching his employment in the future. This led to an uncomfortable environment between Mr Austin and Mr Kelly. Mr Kelly's evidence was that he raised this matter with Mr Lee and also with Mrs Lee seeking conflict resolution. However, these witnesses did not recall such a matter being raised. On balance, I am not prepared to find that Mr Kelly raised this matter with senior management. 22 On or about October 2001, Mr Austin became aware that Mr Kelly had been loading Microsoft Office and other software from a single source copy onto all PCs at the Homebush Store and the Auburn Head Office. A single purchase copy of Microsoft Office or any Microsoft product only entitles the owner to install that copy on one PC and one PC only and not on multiple PCs without purchasing an additional licence. 23 Numerous copies of software were installed on PCs by Mr Kelly without the appropriate licence permitting this to occur. Over a period of time, Mr Kelly advised Mr Austin that he was installing the additional software but not from unlicensed copies. Mr Kelly was required to obtain authorisation from Mr Austin or David Page to purchase PCs or additional software. 24 Mr Austin's evidence was that he orally raised the use of illegal software with Mr Warren Lee in late September 2001 or early October 2001. This was denied by Mr Lee. Mr Austin's evidence was that he then forwarded an email to Mr Lee dated 15 October 2001 formally raising the matter. Mr Lee stated that he never received the email and Mr Forsyth, a forensic expert in IT stated that the email dated 15 October 2001 had in fact been forwarded by Mr Austin to Mr Lee on 19 February 2002. I will return to Mr Forsyth's evidence shortly. 25 When Mr Austin did not receive a reply to the email dated 15 October 2001, he stated he travelled to the Homebush office a few days later to discuss the matter directly with Mr Fraser, the Managing Director. Mr Austin contended that when he attempted to speak to Mr Fraser, Mr Fraser walked away. Mr Fraser denied firstly that the applicant had ever informed him that there had been any illegal copying of software and secondly that he ever walked away from the applicant when he was attempting to speak to him. Mr Fraser's recollection was that he saw Mr Austin once or twice a week in the office, however, he rarely had need to discuss work related matters with him as he had no knowledge or expertise whatsoever in computers. For reasons that I expand upon later in this judgment, I prefer the evidence of Mr Fraser. 26 Mr Austin believed that in about late October 2001 he again attempted to raise the issue of illegal copying of software with both Mr Fraser and Mr Lee during a meeting he had with them. Both Mr Lee and Mr Fraser had no recollection of a meeting with Mr Austin in late October 2001 but did recall a meeting taking place on either 8 or 9 November 2001. 27 Mr Austin contended that he again attempted to raise the issue of illegal copying of software at the meeting on 8 or 9 November 2001. Both Mr Fraser and Mr Lee denied that the applicant had ever informed them of any illegal copying of software either at this meeting or on other occasions. Mr Fraser and Mr Lee's evidence was that the topic of conversation raised by Mr Austin was the purchasing of a new computer system and the role that Mr Austin would play during the installation of the new system. Mr Austin was informed by Mr Lee that upon the new system becoming functional around July-August 2002, there would be a need for redundancies which would include Mr Austin. 28 In general, Mr Austin was unable to provide corroboration in respect of his evidence, apart from the email of 15 October 2001. The evidence of Mr Larry Kelly does not assist Mr Austin in respect of his meetings with Mr Lee and Mr Fraser. The evidence of his accountant, Mr F Thomas, was that Mr Austin raised with him on 16 November 2001 that illegal copying of software was occurring and what action Mr Austin should take. Mr Thomas was not asked what advice he gave Mr Austin. 29 Mr Kelly's evidence was that a conventional form of address within NF Importers had been set up for each employee. Mr Warren Lee's email address was warren_lee@nfimporters.com.au. In order to send an email, it was necessary only to click on a particular employee's name which would automatically result in the employee's address appearing, which would enable the sender to then type in the message and forward it. This method involved using the Intranet. The NF Importers Intranet contains the names of the various employees of NF Importers. 30 The alternative method to initiate an email was to utilise the addresses of NF Importer employees that were stored within the individual employee's personal computer. These addresses were contained in the address book and were identical to those set up on the Intranet. 31 Each email recorded the date and time that it was sent. 32 It was clear from the evidence of Mr Kelly, Mr Forsyth and indeed Mr Austin that it was a simple procedure to change the date and time on an individual's personal computer, resulting in a reconfigured date and time appearing on any email that was sent. 33 NF Importers computer system provides for the time to change on daylight saving changeover. The computers were configured in such a way that they automatically adjusted the time from the beginning of daylight saving and again recorded the change in time from the conclusion of daylight saving. 34 Mr Lee would receive emails from Mr Austin on an average of once or twice per month. His email address was contained in the global address list in the Outlook system on each employee's computer. Mr Lee's address is selected by simply clicking on his name. Emails were received by Mr Lee from Mr Austin on 24 September 2001 and 18 December 2001. 35 In November 2001, Mr Austin, without the knowledge of his employer, filed a report concerning the use of illegal software on the respondent's computer system with the Business Software of Australia Association ("BSAA"). The BSAA represents a number of leading overseas and Australian software developers and distsributors. 36 In mid December 2001, Mr Austin was interviewed by Mr G Hanson, a solicitor representing BSAA. 37 In early January 2002, Mr Austin executed an affidavit which had been prepared by Mr Hanson on Mr Austin's instructions. 38 In early February 2002, Mr Austin went on annual leave. 39 On 14 February 2002, Mr Lee received a letter dated 11 February 2002 from the BSAA advising that they believed NF Importers had unauthorised software on their computers. 40 On Friday 15 February 2002, Mr Lee sent an email to Mr Austin in the following terms: "Bruce, A very serious issue has arisen during your absence from the office on leave. On Thursday 14th we received a letter from a solicitor representing a few software companies including Adobe, Autodesk, Macromedia, Microsoft & Symantec, re alleged unauthorised copying of computer programs by our company. They indicate that their clients have received information to the effect that our company maybe using software of their clients on our computers in numbers that exceed the copies our company is authorised to use with particular reference of Microsoft Office and Microsoft Windows 2000 server. Naturally we are very concerned with these allegation (sic) and upon receiving the letter, and in your absence, we immediately requested that Larry Kelly conduct an audit of company PC's to establish the status of these allegations. As IT Manager it would be your responsibility to ensure that such activities do not occur and therefore we require to meet with you urgently on your return to the office on Monday February 18th to discuss these allegations. To the best of our knowledge, our company has from time to time purchased many and varied software and user level packages based upon the advice, requests, requirements and recommendations of our company staff and the IT Department. Therefore if in fact such activities have occurred, it will be necessary for you to explain how they have occurred and why they have not been detected and removed as part of the routine audits your IT department conducts on company PC's. It would then also be necessary to prepare an appropriate response to these allegations and should the company suffer any losses as a result, the company will then explore and decide what compensation and employment actions it will take. 41 Upon his return from annual leave on Monday 18 February 2002, Mr Austin went to Mr Lee's office at about 9.30 am - 10.00 am. When Mr Austin arrived at Mr Lee's office, Mr Lee left his office and asked Mr D Page, the Financial Controller, to join both he and Mr Austin in his office. Mr Lee informed Mr Austin that in his opinion, as Manager of the IT Department, it was Mr Austin's responsibility to manage staff and ensure that the type of breach alleged by BSAA did not occur. The discussion also included the reasons why only one audit had been done in the recent past. Mr Lee's recollection was that Mr Austin volunteered to resign during the meeting. This recollection was confirmed by Mr Page. Mr Lee and Mr Page had no recollection of Mr Austin stating to Mr Lee that he had informed him about the use of illegal software in October 2001, or there being a reference to receiving a communication from Mr Austin. 42 There is a significant difference in the account of what occurred at the meeting of 18 February 2002. Mr Austin contends in his affidavit evidence that during the meeting he said to Mr Lee:

"I informed you about this problem back in October 2001", or words to that effect and that Mr Lee responded: "I don't have any record of ever receiving this communication", or words to that effect. 43 Mr Lee denied that the above conversation occurred on 18 February 2002, or at all. 44 It is difficult to reconcile this evidence which appears to be dealing with different subject matters. It was not until the meeting on 21 February 2002, according to the evidence of Mr Lee and Mr Lincoln Kelly, a solicitor retained by NF Importers, that Mr Austin produced the email of 15 October 2001. I will return to consider the evidence surrounding this meeting later in these reasons. 45 Mr Austin sent an email to Mr Lee approximately two hours after the meeting concluded on 18 February 2002 in the following terms:

Dear Warren Thank you for your time this morning. As I stated to you in our conversation I did not authorise the installation of any "copy" software on either the P.C. Network or the individual personal computers within our wholesale / retail group of companies. As you are no doubt aware, this type of action is highly illegal and I would be leaving myself open to criminal prosecution if I had authorised anything such as this. I would also like to re-state that I informed you that "I always ensure that any personal computer purchased by myself on behalf of the company has 'all' copies of the requested software included." This may easily be confirmed by checking with our main supplier, John Randy (Alphanumeric). I would also like to place on the record that I had suspected that this type of breach had been occurring (outside the realms of authority) for some time. I would like to reiterate to you my advice that if any "copy" software is found during the audit currently being undertaken then the purchase of legal versions of same, along with an explanation that the management were kept "in the dark", should go a long way to appeasing the complainants. Kindest Regards Bruce Austin 46 Curiously, Mr Austin's email to Mr Lee makes no reference to firstly the earlier discussions that Mr Austin contends he had with Mr Lee (in October 2001) and Mr Fraser regarding the illegal use of software and secondly the email that Mr Austin contends he forwarded to Mr Lee on 15 October 2001. If Mr Austin had in fact raised the email of 15 October 2001 during the meeting of 18 February 2002, it seems highly likely he would have referred to it in his email of 18 February 2002, particularly in circumstances where his employment was in jeopardy. Furthermore, the email is deliberately misleading. Mr Austin had known from mid October that computers were using illegal software. It was not a question of "if any copy software is found during the audit." Mr Austin had already found it and reported it to BSAA. 47 On 21 February 2002, Mr Lee again, at the request of Mr Austin, met with Mr Austin. According to Mr Lee, Mr Austin had also requested that NF Importers solicitor, Mr Lincoln Kelly be present. During this meeting, Mr Lee's recollection was that Mr Austin said:

"This type of thing will f... me." 48 Mr Austin alleged that during this meeting he reminded Mr Lee he had informed him in October 2001 that illegal copying of software was taking place. Mr Austin then produced three copies of an email dated 15 October 2001 which he contended he had sent to Mr Lee. A copy was provided to Mr Lincoln Kelly. 49 Mr Lee's evidence was that this was the first occasion that he had ever seen the email. He immediately checked the "deleted items" and "in box" folders on his personal computer for any record of the email. Both Mr Lincoln Kelly and Mr Austin watched Mr Lee undertake this exercise. Mr Lee could find no record of ever having received the email and said so to Mr Austin. Mr Lee's practice is not to delete any email received or sent by him for at least one year after its receipt. Mr Lee's recollection was that Mr Austin appeared nervous and continued to insist that he had informed Mr Lee of the illegal copying of software. 50 A copy of the "deleted items" folder from Mr Lee's computer for the period 12 October 2001 until 16 October 2001 contained no reference to Mr Austin's email. Mr Lee's practice was to delete all emails on an individual basis from his "in box" and his "sent items" folder. This resulted in all emails sent and received being located in one folder which was known as the "deleted items" folder. 51 I thus reach the conclusion that I should not rely on Mr Austin's evidence where it conflicts with evidence of NF Importers witnesses, each of whom I found to be reliable witnesses. Email dated 15 October 2001 52 Mr Forsyth, who was called as an expert in Forensic Technology, gave evidence that emails sent from personal computers at NF Importers are transmitted via a centralised email server which is configured to record each email passing through the server including the time and date of each email and store this information on a log file. 53 A log file usually records events or actions that have occurred. These log files may contain the time and date stamps appended by both the desktop computer and the email server. 54 A search of the NF Importers Mercury Email server found an entry for the subject email (dated 15 October 2001). The log entry shows the time and date the email was received by NF Importers Mercury Email server as 09:47 hours on Tuesday, February 19, 2002. 55 This is inconsistent with the time and date appended to the email by the originating client desktop computer, which was 11:11 hours on Monday, 15 October, 2001. 56 A comparison of the time and date between the subject email obtained from Mr Austin's computer system and the Mercury Email server log entry reveals a variance of approximately 126 days, 22 hours, 34 minutes. 57 Mr Forsyth's evidence was that it was a simple task to change the time and date on a personal computer. This evidence was not disputed by both Mr Austin and Mr Larry Kelly. 58 Searches were conducted by Mr Forsyth to locate log entries for emails addressed from Bruce Austin on Monday, 15 October, 2001 and Tuesday, February 19, 2002. 59 Examples of selected log entries of emails sent by Bruce Austin on these days were provided to the Court. These log entries show minor variances between the times and dates appended by the client desktop computer and the Mercury Email server times and dates. 60 Mr Forsyth's evidence was that the email was not received by Mr Lee because the address used in the subject email was not correct. The explanation in the delivery failure report explained the non delivery as follows:

"User not known at this site." 61 This would indicate that the email address used for Warren Lee in the subject email (warren.lee@nfimporters.com.au) was an incorrect email address. A search of the NF Importers Mercury Mail server reveals numerous references to the email address (warren_lee@nfimporters.com.au). This naming convention for email addresses at NF Importers is consistent with email addresses for other employees found on the NF Importers Mercury Mail server. 62 Mr Austin agreed that if in an email address including the underscore (being identified by the symbol -_) was substituted by a dot, the effect of that would be that the email would not be delivered. However, this evidence was contradicted by Mr Larry Kelly who stated that the email would be received by the intended recipient and also bounce to the System Administrator (Mr Kelly) as an incorrect format email. 63 An examination of the delivery failure report shows the email was generated with a Greenwich Meantime (GMT) of + 1100, while an examination of the subject email shows a GMT of + 1000. These GMT's, coupled with the dates recorded on the respective versions of the email are both consistent with the calendar periods for daylight saving. 64 The Mercury Email server entries of other emails addressed to Warren Lee on 15 October 2001 and 19 February 2002 show emails addressed to Warren Lee utilising the underscore convention. I am satisfied, on the balance of probabilities, that an email was forwarded from Mr Austin's computer on 19 February 2002 at 9.47 am to warren.lee@nfimporters.com.au (an incorrect address) bearing the date 15/10/01 at 11:11 a.m. 65 Mr Austin's personal computer recorded the receipt of numerous "joke" emails from friends, in particular, a Mr Kotteakos, a personal friend of Mr Austin's. Mr Austin's personal computer recorded that many of these emails were on forwarded. 66 One such email was on forwarded from Mr Austin's computer to a Mr L Manttan who was a former work colleague at NF Importers. Although Mr Austin conceded that he communicated with Mr Manttan by telephone, he rejected ever communicating with him by email and in particular forwarding on "joke" emails to him. 67 Mr Austin's evidence initially was that he had no knowledge or memory of ever communicating with Mr Manttan by email. When pressed, Mr Austin conceded that he may have forwarded emails to Mr Manttan. However, by way of further explanation, he suggested the emails may have been on forwarded by Mr Larry Kelly who had administrative access to the network. 68 Mr Austin was taken to a "joke" email that was forwarded to his email address from a Christian Purdue on 11 March 2002. On 12 March 2002 at 9:47 a.m. Mr Austin's personal computer records this email being on forwarded to six persons including Mr Manttan and Mr Cameron Norman, an employee of NF Importers at that time. Mr Austin's evidence was that there was only one person amongst the six that he would send any emails to, that being, Cameron Norman. 69 A search of Mr Austin's personal computer by Mr Forsyth revealed 12 emails sent between 5 October 2001 and 26 October 2001 from Mr Austin's computer to Mr Manttan. Mr Austin was taken to each of the above emails in cross examination by Mr Fernon and his evidence was as follows:

Q: You know, don't you that you sent all these emails that we have just discussed. Isn't that the case?

Q: And it is certainly the case that you did from time to time send emails to Mr Manttan, didn't you?

Q: You did send some emails to Mr Manttan from time to time?

A: He never sent me emails, I never sent him emails.

A: I think you are grasping at straws, Sir. 70 Mr Austin's evidence in respect of the sending of emails in my view was unsatisfactory and unconvincing. 71 Mr Austin was also involved in a project called the Y2K Project. This project involved ensuring that the correct date was recorded within the computer system at NF Importers upon the commencement of the new millennium. Mr Austin was responsible for and directed this project. 72 Mr Lee estimated that he had discussions with Mr Austin on two to three occasions each week in relation to work related matters, particularly in respect of issues which arose with the computer system operating within the office. 73 In early 2001, as a result of certain employees using their computers for non work related matters, it was agreed, at the suggestion of Mr Austin, that audits of all office computers should be carried out by Mr Austin. Mr Lee regarded Mr Austin as an expert in computer technology and acknowledged that he had been employed to manage the IT Department of NF Importers. 74 Upon receipt of the letter from the BSAA Mr Lee requested Mr Austin complete the audit of personal computers, which he had requested Mr Larry Kelly to commence, to ascertain the extent of illegal copying of software. The audit disclosed that there were over 100 pieces of software which had been illegally copied. This subsequently resulted in a fine of $34,000 being imposed on the company. 75 Mr Lee was provided with the result of the audit carried out by Mr Austin on 25 February 2002. It was at this stage that he became aware of the full extent of the illegal copying of software which had been occurring. The audit disclosed that Mr Austin's personal computer contained unlicensed software. Mr Austin believed the unlicensed software had been installed by Larry Kelly but conceded it may have been installed by himself. 76 Mr Austin's services were terminated on 12 March 2002. Mr Kelly was also terminated on that day. 77 On 14 March 2002, a meeting occurred at the offices of the BSAA's solicitor. Mr Lee and Mr Page, together with Mr Lincoln Kelly attended this meeting. It was during this meeting that Mr Hanson disclosed that Mr Austin had been the informant. Neither Mr Lee nor Mr Page were aware of this prior to the meeting. 78 Mr Larry Kelly's recollection was that he attended a meeting with Mr Lee, Mr Page and Mr Lincoln Kelly on or about 12 February 2002. At that meeting, Mr Kelly's recollection was that he informed those present that he was responsible for putting the illegal software on the PCs and that he should be dismissed straight away in order to give the company some breathing space. This was rejected by Mr Lee and Mr Page because according to Mr Larry Kelly he was too important to the changeover of the computer system. 79 It seems unusual that if Mr Larry Kelly had advised that he was responsible for the placing of the illegal software on the computers that management would consider it appropriate to have him conduct an audit in respect of the illegal software, particularly in light of the letter from the solicitors for the BSAA. It seems to me that Mr Larry Kelly may have been mistaken about when in time he informed management that he was responsible for the illegal copying of software. Furthermore, the meeting between Mr Larry Kelly, Mr Lee, Mr Page and Mr Lincoln Kelly must have occurred on either 14 or 15 February 2002 as Mr Lee did not receive the letter from the solicitors for the BSAA until 14 February 2002. 80 Part of Mr Austin's responsibilities was the authorisation to pay invoices that recorded the purchase of new computer equipment. During the period 5 July 2001 until 15 October 2001, Mr Austin authorised the purchases of the following computers: Celeron 766 mhz personal computer, invoice notation: "No software, CD Rom"; Intel Pentium III 866 mhz with the notation: "No software, CD Rom, No monitor"; and Intel Pentium III 866 mhz with notation: "No software, CD Rom, No monitor"; and Intel Pentium III 866 mhz with notation: "No software, CD Rom, no monitor"; and Intel Pentium III 866 mhz with notation: "No software, no modem"; a P III 866 PC system with notation: "No software or modem". 81 Mr Austin's evidence was that two purchases related to servers which did not require software and the other invoices related to replacement computers for older units which had appropriate software in place to be loaded on to new PCs. This evidence is at variance with what Mr Austin stated was his practice in his email to Mr Lee dated 18 February 2002. 82 Mr Kelly was issued with a certificate as required under s 128 of the Evidence Act 1995 in order that the evidence he gave could not be used against him in any criminal proceedings which may arise from his conduct. Consideration 83 Mr de Meyrick contended that, in essence, Mr Austin's contract of employment was unfair as there was absolutely no fairness in the termination process. The contract had therefore operated unfairly in not providing the applicant with procedural fairness. Mr de Meyrick went further and invited the Court to conclude that the reasons for dismissal as determined in the termination letter were not appropriate or proper in the context of the evidence and that even if the Court was minded to find that the applicant had concocted the email of 15 October 2001 to Mr Lee that such conduct is not sufficient to negate the unfairness identified in the contract. 84 The case pressed on behalf of NF Importers, in effect, invited me to take a global view of the facts in determining whether Mr Austin's contract had operated unfairly and that the reasons giving rise to the termination of the applicant's employment negated any unfairness. 85 Mr J J Fernon SC, who appeared for the respondent, contended that the applicant was in charge of the respondent's IT Department. The applicant knew, in late September 2001 or October 2001, that software was being used in an illegal way, knew that Mr Kelly was responsible for it, knew it was a serious breach and that it was his duty to report it. His conduct, Mr Fernon submitted, was more than sufficient justification for terminating Mr Austin's employment. 86 A contract may be an unfair contract within the meaning of s 106 of the Industrial Relations Act 1996 either because of what it provides, or fails to provide, or because of surrounding circumstances and/or from the manner of performance or operation of the contract: Incitec Limited and Anor v Industrial Court of New South Wales & ors (1992) 45 IR 155 at 157 - 158; Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 at 148; Port Macquarie Golf Club Limited v Stead & Anor (1996) 64 IR 53 at 59; Beahan v Bush Boake Allen Australia Limited (1999) 93 IR 1 at 32. 87 The question as to what is an unfair contract under legislation is, as the authorities show, to be approached in a practical and common sense way. In making the assessment, the judge must apply standards which appear to him or her to provide a proper balance or division of advantage or disadvantage between the parties who have made the contract, bearing in mind the conduct of the parties, their appreciation of the bargain they had made and their comparative bargaining positions: A & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1. 88 The approach to be taken in this matter, in determining whether there was unfairness, is to consider the operation of the contract. This means looking at the conduct of the parties, how the terms of the contract operated at the time of termination and the terms of the contract itself. In weighing up the evidence, I am mindful of the long-standing observation of Sheldon J in Davies & Anor v General Transport Development Pty Ltd & ors [1967] AR (NSW) 371 at 374 that unfairness of a contract or arrangement is to be determined according to "the common sense approach characteristic of the ordinary jury man ... It is a plain matter of morals not law." 89 His Honour cautioned, however at 374, 375 that the sections "massive power makes it imperative that it should be exercised with proper restraint... it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms... the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes." Those words by his Honour echoed what had been said earlier by Beattie J in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89 that it was a matter of deciding "in each particular case by the application of the tribunal's common sense and sense of justice whether a particular transaction is unfair, harsh and unconscionable." 90 According to the statement of issues, an important issue to be resolved in these proceedings is:

In the circumstances of the case, did the contract of employment become an unfair contract by reason of conduct of the Respondent's officers in holding the Applicant guilty of misconduct, and terminating the contract as a result. 91 It is well settled that, in determining whether a contract (as defined in s 105 of the Act) is unfair for the purposes of s 106, regard may be had to both the terms of the contract itself and the manner in which the contract was performed or operated between the parties. 92 In Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648 at 685; 93 IR 1 at 35, a Full Bench of this Court concluded:

"What emerges from the above authorities, we think, is the now settled view that s 106 (as with the previous s 88F of the 1940 Act and s 275 of the 1991 Act) is directed to an impugned contract of employment, whether existing or terminated, as to the fairness of its express or implied terms. Such unfairness will depend upon the facts of each particular case by focusing attention on the contractual relationship between a particular employer and employee and where the unfairness may arise from the terms of the contract itself, the surrounding circumstances and/or the manner of performance or operation of the contract. The section, we emphasise, is not concerned with re-establishing an employment relationship which has ended nor with compensating an employee for the loss of his employment contract. In other words, the section is properly concerned with the fairness of the terms of a contract of employment in its various respects and, if relevantly found to be unfair, to provide remedial relief by avoiding or varying the terms of that contract and to order the payment of money in connection with any contract so avoided or varied as is considered just in the circumstances of the case." 93 When considering whether the conduct of an employer in terminating an employee is sufficient to warrant a finding of unfairness, it is important to reinforce the notion that what is being challenged in an application under s 106 is the fairness of a contract, be it due to its terms on their face, or by omission, or as performed, either in breach or pursuant to its terms. As the Full Bench of this Court stated in Origin Energy Limited v Smith (2001) 111 IR 476 at [19]:

We would add one final observation. It was undoubtedly open to her Honour to deal with the matter in the way she did; that is as a "conduct" case. It may be that she had little alternative to doing so in view of the way in which the respondent framed his case. Nevertheless applicants, in framing their proceedings, and judges in hearing and deciding them, should not overlook the consideration that s 106 is directed to the fairness, etc of contracts and arrangements and with the fairness, etc of their terms, either in themselves as to what they actually provide or fail to provide. There is nothing in the Full Bench judgment in Reich that should lead to any different approach. It would have been preferable for the case before her Honour to have been framed and dealt with in that way. 94 Before turning to resolve the above issue, I note that the respondent raised an issue under s 109A of the Act. However, no submissions were put to the Court in respect of this issue. In any event, I do not consider that the section precludes the applicant's claim for relief in these proceedings under s 106. 95 The applicant's contract made provision for its termination by the provision of four weeks written notice. This provision, on its face, is not unfair. 96 The common law relating to summary dismissal for misconduct is summarised in The Law of Employment, Macken, O'Grady, Sappideen and Warburton, 5th Edition:

"Invariably the starting point for discussion of misconduct has been the statement by Lord James of Hereford in Clouston & Co v Corry [1906] AC 122 at 129 that "there is no fixed rule of law defining the degree of misconduct which will justify dismissal". Nor is there any rule of law defining what constitutes misconduct for this purpose. As mentioned earlier the cases indicate a tendency to combine two tests for determining whether the misconduct is such as to warrant summary dismissal, that is, that there be a breach of contract by the employee and that the breach be sufficiently serious to warrant the employer dismissing the employee or the conduct of the employee demonstrates an intention no longer to be bound by the contract". 97 In my view, the applicant's position under the employment contract was as favourable to him as the common law. It could not be said, without more, that the mere term reflecting the common law was unfair. 98 The issues succinctly put are, was the conduct of Mr Austin, in not informing his employer of the use of illegal software, grounds for summarily terminating his employment and was Mr Austin denied an opportunity to defend himself? There are two important considerations here. The first is whether the punishment fitted the crime, noting that the consequences for Mr Austin have been quite severe. The second is whether Mr Austin was provided with an opportunity to raise his side of the story. I turn to deal with the first issue. 99 In the circumstances of these proceedings, I take into account, in particular, the obligations, responsibilities and duties incumbent upon the applicant as the Manager of the IT Department of the respondent. I am satisfied on the evidence that the applicant had extensive experience in computer technology and computer programming. I therefore find that the applicant was an expert in information technology, was the supervisor of the Information Technology Department to whom all officers including Mr Larry Kelly reported and was responsible for the email system. 100 The applicant became aware in late September 2001 or early October 2001 that computer software was being used in an illegal way and on the evidence arguably should have been aware as early as 5 July 2001 when he authorised an invoice to purchase a new personal computer without software or CD Rom. 101 The applicant's evidence is that he raised the issue of illegal copying of software orally with Mr Lee in October 2001 which is denied by Mr Lee. 102 In my view, the overall evidence of the applicant must be approached with caution. The applicant gave no evidence as to what he specifically raised with Mr Lee nor where or when he raised the matter. On balance, I am not satisfied that the applicant did raise the matter orally with Mr Lee in October 2001. I have earlier determined that where there is a conflict between Mr Austin's evidence and Mr Lee, I prefer the evidence of Mr Lee. 103 The applicant then contends that on 15 October 2001 he forwarded an email to Mr Lee which was as follows:

Dear Warren Confirming our conversation in which I informed you that I believe that illegal copying of software is occurring at Auburn & Homebush B Austin 104 There is no dispute that there was no response by Mr Lee to this email which I will return to deal with more fully later in this judgment. 105 The applicant's evidence was that in about late October 2001 he again attempted to raise the issue of the illegal copying of software with Mr Lee and Mr Fraser during a meeting with them. I have already found that no meeting occurred in late October 2001. 106 It was during the end of October 2001 that Mr Austin became aware that the company proposed to introduce a new computer system. I accept the evidence of Mr Fraser that a meeting was instigated by Mr Austin with Mr Lee and Mr Fraser which due to the unavailability of Mr Fraser did not take place until either 8 or 9 November 2001. Both Mr Fraser and Mr Lee, who I accept as reliable witnesses, rejected the applicant's contention that he raised the question of the illegal software during the meeting on 8 or 9 November 2001 or indeed attempted to raise that issue. This meeting was described as affable by those in attendance. 107 The meeting of course occurred at a time when the applicant knew that the illegal software was being used on computers and that Mr Kelly was responsible for its installation. 108 I find that the meeting was instituted by Mr Austin because he was concerned that his employment was going to be terminated some time in the future due to the introduction of a new computer system. This was the matter that was of concern to him at the time although, clearly, a matter of greater concern should have been the use of the illegal software. 109 Mr Austin accepted that there was no impediment to him in raising the subject of the illegal copying of software. After all, Mr Austin described the meeting as affable and it therefore would seem to be unlikely that on two or three occasions that if Mr Austin sought to raise the issue of the illegal software, Mr Lee changed the subject back to the new computer system. I therefore, find that the applicant did not raise or attempt to raise the issue of illegal software during the meeting on 8 or 9 November 2001. 110 When pressed about his attempts to raise the issue of the illegal copying of software at this meeting Mr Austin contended that he had already raised the matter with Mr Lee and he was not used to having to repeat himself. At no time during this meeting did Mr Austin refer to the email allegedly forwarded to Mr Lee on 15 October 2001, nor did he immediately after the meeting forward a copy of this email again to Mr Lee or Mr Fraser. 111 Furthermore, the applicant's evidence is that he attempted to also raise the matter with Mr Fraser at this meeting. Mr Fraser's evidence, which I accept, is that the applicant did not seek to raise the issue with him at this meeting. Of course, the applicant contends that prior to the meeting on 8 or 9 November 2001, he had thought the matter was of such importance that he drove from Auburn to Homebush to raise the matter with Mr Fraser although on his evidence he was "fobbed off". Mr Fraser denied that this occurred and I accept Mr Fraser's evidence on this issue. Once again it would seem to me if this had occurred, the applicant, a skilled computer operator, would have forwarded an email to Mr Fraser. 112 In light of the finding that, on the balance of probabilities, the applicant did not attempt to directly or indirectly raise the issue of illegal copying of software with Mr Lee or Mr Fraser during the meeting on 8 or 9 November 2001, the applicant has, in my view, seriously failed in his duty and responsibility to his employer. 113 The most obvious step for the applicant to take was to report the illegal copying of software to both Mr Lee and Mr Fraser. Instead, the applicant chose to report the use of unlicensed software to the BSAA, depriving the employer of any opportunity to rectify the anomaly. Furthermore, prior to reporting the matter to the BSAA, Mr Austin had satisfied himself by examining a number of PCs that they were using illegal software. In my view, it fell within the scope of Mr Austin's duties and responsibilities to report such use to his employer but he failed to bring it to the attention of his employer. 114 The applicant then went on annual leave and returned on Monday 18 February 2002 when he received an email from Warren Lee dated 15 February 2002. 115 At approximately 12:00 noon on 18 February 2002 Mr Austin forwarded Mr Lee an email. Mr Austin was not able to satisfactorily explain why this email states that "I would also like to place on the record that I had suspected that this type of breach had been occurring (outside the realms of my authority) for some time." It is difficult to reconcile Mr Austin wishing to "place on the record" his suspicions in light of his evidence that he had done this both orally in October 2001 in a discussion with Mr Lee and subsequently confirmed this in an email of 15 October 2001. Mr Austin's email of 18 February 2002 makes no mention of previously raising the matter. 116 Mr Austin's evidence is that during the meeting on 18 February 2002, he stated that he had informed Mr Lee about this problem "back in October 2001". 117 I have already noted that I have accepted the evidence of the NF Importers witnesses who were not shaken despite close cross examination. However, Mr Austin did not fare so well under cross examination and was in difficulty on a number of occasions. 118 I prefer the evidence of Mr Lee and Mr Page who deny that Mr Austin said that he had previously informed Mr Lee about the illegal copying of software at the meeting on 18 February 2002. Had it occurred, there could be no reason why Mr Austin would not have included it in his email of 18 February 2002, forwarded after the meeting. 119 Furthermore, this email does not state that Mr Larry Kelly was responsible for the copying of illegal software, or that an audit had been carried out by Mr Austin in October 2001 or late November 2001 which confirmed the illegal copying of software. This would have been relevant and in my view it was appropriate for Mr Austin to advise his employer, particularly given the specific terms of the email from Mr Lee of 15 February 2002. 120 Mr Lee's evidence was that Mr Austin sought a meeting with him on 21 February 2002 requesting that the company's solicitor also be in attendance. 121 Mr Austin contended that he had told Mr Lee about the illegal copying of software to which Mr Lee had no recollection. 122 Mr Austin then produced three copies of the email dated 15 October 2001. This was the first occasion, according to Mr Lee's evidence that he had ever seen the email and he immediately checked his computer and could find no record of ever having received the email. 123 The evidence of Mr Forsyth, a forensic expert in information technology, was that the email of 15 October 2001 was sent through the server on 19 February 2002. 124 In order for the email to have been forwarded on 19 February 2002, it would have been necessary to change the date and time on Mr Austin's computer. 125 Mr de Meyrick submits that this would have been very cunning. The evidence of Mr Forsyth and indeed of Mr Austin was that it is an easy exercise for a skilled computer operator, which I have found Mr Austin to be, to change the date and time including the configuration on the computer that recognises daylight saving. In my view, having heard and reviewed the evidence in this matter, such an exercise would have been within the skills of Mr Austin. 126 The evidence before me, overwhelmingly, points to the conclusion, on the balance of probabilities, that the email of 15 October 2001 was a fabrication. I find that it was concocted by Mr Austin. I have earlier found that the email was sent on 19 February 2002. 127 It was the applicant's conduct, that is, knowing and allowing the illegal copying of software to take place as the IT Manager, that in my view, and I so find, amounted to a serious breach of Mr Austin's duty, responsibilities and obligations to his employer which justified summary dismissal. 128 Mr de Meyrick submitted that a further unfairness relied upon was the conduct of the respondent in failing to address the deteriorating relationship between Mr Kelly and Mr Austin, submitting that it was part of the factual matrix of the case. 129 Mr Fernon submitted that it was not part of the applicant's case. No amendment was made to the summons to change the nature of the case or the nature of the unfairness that was alleged against the respondent to include a claim that unfairness arose as a result of the respondent failing to address this issue. It was submitted that therefore it should not be taken into account. 130 Mr de Meyrick submitted that Mr Austin was the Manager of the IT Department in name only and that his relationship with Mr Kelly had disintegrated to the extent that neither communicated with each other. The applicant believed that Mr Kelly was undermining his position. However, in my view, this does not explain or excuse the conduct of Mr Austin. He had an obligation to his employer to raise what he regarded as a very serious matter. 131 Mr de Meyrick submitted that during the period September 2001 to February 2002, Mr Austin did not have any meaningful supervisory role or any practical supervisory role over Mr Larry Kelly. It was further submitted that the breakdown in the relationship between Mr Austin and Mr Kelly was mishandled by NF Importers by its complete failure to intervene when appraised of the conflict between the two employees. However, although Mr Austin and Mr Kelly gave evidence of this conflict, the evidence of Mr Fraser and Mr Lee was that they were not aware to any meaningful extent of a breakdown in the relationship. 132 In any event, I fail to see how, even accepting that there may have been a breakdown in the relationship that this in any way excuses the failure of Mr Austin, the Manager of the IT Department to bring to the attention of his employer that illegal software was being utilised. Whatever the reality of the relationship, Mr Austin became aware in September 2001 and should have arguably been aware from at least July 2001 that illegal software was being used throughout the company and he did nothing about it. 133 There were a number of further submissions made by Mr de Meyrick which I will address. 134 It will be recalled that it is the applicant's case that he forwarded an email to Mr Lee on 15 October 2001 raising the issue of the illegal copying of software. 135 Mr de Meyrick further submitted that I could not be satisfied that Mr Austin's computer had not been tampered with. However, the evidence of Mr Lee was that immediately after Mr Austin's termination, a sign was attached to his computer containing the words "Please don't touch this computer without authorisation by me, (sgd) Warren Lee". Mr Page gave evidence that he observed the sign on the computer from time to time. It remained on the computer until it was provided to Mr Fosyth for forensic examination by Mr Page. 136 Furthermore, during the period after Mr Austin's termination, the company was moving to a new system and the computer became obsolete. Although the evidence regarding the security of the computer may be capable of giving rise to doubt, in the criminal context, the evidence in this matter establishes that a systematic investigation was carried out by Mr Forsyth in accordance with the usual forensic protocols which resulted in Mr Forsyth's conclusion that the email of 15 October 2001 went through the server on 19 February 2002. 137 Mr Austin denied sending emails to Mr Manttan and this again raises, at least by implication, that his computer was tampered with. 138 As I have previously stated I find Mr Austin's evidence in this regard implausible and unsatisfactory. On the balance of probabilities, I am satisfied that Mr Austin's computer was not tampered with. 139 In any event, these were matters which were not relied upon by the respondent as a basis for the termination of Mr Austin. 140 The conduct which I have found to warrant termination was that as Manager of the IT Department, Mr Austin detected the use of illegal software and did nothing about it. 141 Mr Austin, no doubt, did not expect that the fabrication of the email would be discovered. It was only as a result of these proceedings that the respondent took the step of having a forensic expert examine Mr Austin's computer. The applicant, it seems, after he sent the email of 18 February 2002, determined that he required more material to justify his failure to take any steps to protect his employer from the use of illegal software. Upon Mr Austin's return from leave, it appears that he realised that his employment may be in jeopardy when he was called upon to explain his failure to detect the use of illegal software. Mr Austin had of course detected such use and reported it to the BSAA but not to his employer. 142 I agree with Mr Fernon's submissions that it is not necessary for the respondent to rely on the concocted email. The conduct of the applicant is sufficiently serious to have justified the termination of his employment. However, the evidence of Mr Forsyth adds an additional dimension to this matter which confirms that the Commission should not intervene. The conduct of Mr Austin went to the heart of the relationship of trust and confidence that exists in each employment contract. 143 In respect of the second important issue, that being whether Mr Austin was given an opportunity to defend himself, Mr Austin was provided with three opportunities to raise his side of the story. Firstly, by the email of 15 February 2002 from Mr Lee. Secondly, in the meeting with Mr Lee and Mr Page on Monday 18 February 2002 and thirdly, at the meeting that he sought with Mr Lee and Mr Lincoln Kelly on 21 February 2002. 144 Mr Austin was called upon to explain if illegal software had been used, how that had occurred and why it had not been detected during routine audits. 145 In my view, Mr Austin was being given an opportunity to explain, as the IT Manager, how the use of illegal software may have occurred. I have already found that he made a deliberately misleading statement in his email of 18 February 2002 when provided with an opportunity to explain. 146 Mr de Meyrick submitted that it was incumbent upon the respondent even if they disbelieved Mr Austin to consider if they were acting fairly and appropriately by providing Mr Austin with an opportunity to put his side of the events and whether he was really the culprit. 147 Mr Austin's defence was to inform his employer that he had told his employer about this problem and it had done nothing about it. Clearly, Mr Lee did not accept that he had been informed by Mr Austin of the use of illegal software. He regarded Mr Austin's failure to raise the matter with him as being a serious breach of his duty and responsibility as IT Manager, as I have found it was. 148 In passing, it should be observed that it was not until 14 March 2002, two days after Mr Austin was terminated, that the solicitor for the BSAA informed Mr Lee that Mr Austin was the informant. The evidence of Mr Lee, Mr Fraser, Mr Page and Mr Lincoln Kelly was that they were not aware of who was responsible for informing the BSAA. Some of these witnesses said they had not turned their mind to this question. Mr Fraser, whose evidence was that he knew little about computers, thought that BSAA may have detected the use of illegal software themselves. I accept that it was not a matter that the employer took into account in determining to bring Mr Austin's contract to an end. 149 It was impermissible, in my opinion, for a person in the applicant's position to fail to raise what was a very serious matter, that is, the use of illegal software, with his employer. 150 The respondent was entitled to expect that the applicant would not only carry out his duties and responsibilities but would lead by example. A manager of an IT Department who is informed by an employee that illegal software is being used and who fails to act upon this information commits a fundamental breach of his duty of fidelity towards his employer. The breach was such that the respondent's reaction cannot be characterised as constituting unfair conduct or as rendering the contract of employment in some way as being unfair. 151 For these reasons, I am unable to characterise the actions of the respondent in terminating the applicant's services summarily as constituting or creating an unfair contract for the purposes of s 106. 152 I reach this conclusion notwithstanding an allegation that the respondent failed to follow appropriate processes during the investigative and determinative aspects of the respondent's process. Viewed objectively, the termination of the applicant's employment by reason of his conduct did not, in all the circumstances, constitute relevant unfairness. The alleged failure to follow these provisions, even if established, could have no effect on this conclusion. 153 As Hill J said in Mason v Electricity Commission of New South Wales t/a Pacific Power (1995) 62 IR 436 at 442 (which was endorsed by Walton J, Vice-President, in Gow v Cronulla Sutherland Leagues Club Ltd (2002) 119 IR 122 at 204):

"Clearly the employer must be a judge in its own cause, may be biased and indeed may have prejudged the matter. But these considerations will not affect a dismissal which is otherwise justified on the merits." 154 Any procedural faults of the employer must be considered in light of the seriousness of the misconduct of the dismissed employee, as was observed by Walton J Vice-President in Gow at 209 - 210. 155 The principal consequence of a deficient disciplinary procedure would have been the denial of the opportunity for the applicant to advance an innocent explanation for his conduct or some other reason why summary dismissal was not warranted. The applicant had that opportunity in his email of 18 February 2002 and at the meetings with Mr Lee on 18 and 21 February 2002. A further opportunity has been afforded by these proceedings. I have found that the explanation provided by the applicant cannot be accepted. 156 In respect of this issue, I observe that in Byrne v Australian Airlines Limited (1995) 185 CLR 410 at 430, Brennan CJ, Dawson and Toohey JJ made the following comments:

Save for the prescription of periods of notice, cl 11 does not require the adoption of any particular procedure for the dismissal of an employee. However, it is clear that the use of an unfair procedure may result in a dismissal being harsh, unjust or unreasonable. For example, the failure to afford an employee the opportunity to explain apparent misconduct where there is an innocent explanation available would result in the dismissal of the employee being in breach of cl 11(a) ( Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 471, 473 per Wilcox and Ryan JJ; Wheeler v Philip Morris Ltd (1989) 97 ALR 282 at 306 - 307, per Gray J). On the other hand, if an employer were to observe the actual misconduct of an employee in circumstances which allowed no innocent explanation, a summary dismissal might not be in breach of cl 11(a). And facts which existed at the time of a dismissal, but which come to light only subsequently, might justify the dismissal when otherwise it would be harsh, unjust or unreasonable (see Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427 at 456). It was not, therefore, a permissible approach for the Full Court to reach a conclusion adverse to the respondent based upon the procedure employed in dismissing the appellants without considering whether the trial judge was correct in reaching the conclusion that there was sufficient evidence to establish that the appellants were involved in the misconduct alleged against them. 157 Mr Austin did not have an innocent explanation for his conduct. The reasons offered by Mr Austin why summary dismissal was not warranted have not been made out. 158 Mr de Meyrick further submitted that but for the termination of the applicant's employment, he would almost definitely have received a redundancy payout. 159 It was acknowledged by Mr Lee that upon the completion of the introduction of a new computer system which was expected to be finalised by approximately August 2002 that Mr Austin would be offered a redundancy package. Mr de Meyrick postulated that at the time Mr Austin was terminated he was superfluous to the employer's requirements and that his termination was orchestrated to avoid any payment of redundancy to him. 160 In order for me to accept this contention, it is necessary to determine that Mr Austin's termination was not justified on the grounds of misconduct. 161 For the reasons that I have already given, I am not persuaded that the termination was not justified on the grounds of misconduct. In any event, Mrs Lee, the Human Resources Manager, gave evidence that she believed a casual employee was engaged upon the termination of Mr Austin. In addition, it was Mrs Lee's recollection, although somewhat qualified, that a new IT person was employed. 162 In my view, the employment contract was not unfair in its terms, performance or termination. 163 For these reasons, the applicant's case must fail and the summons should be dismissed. I shall reserve the question of costs. ORDERS

1. The summons is dismissed.
2. Costs are reserved.
3. Liberty to apply granted with respect to costs.

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