Boniface v SMEC Services Pty Limited and anor

Industrial Relations Commission (NSW)|2007-07-13|Before: Marks J, Mr P, Mr J

The applicant's submissions as to unfairness 123 The submissions made by the applicant concentrated on two principal areas. The first concerned the disputed expense claims and the procedures for dealing with them. The submissions were put a little differently to the manner in which the asserted unfairness was described in the summons, which I have earlier summarised at [11]. Nevertheless, the material contained within the submissions covers and comprehends the allegations of unfairness contained in the summons. Ultimately, they both involve a consideration of the methodology used by the applicant for submitting claims, the requirements imposed on him by the Board in its letter of 30 August 2001 and whether the Board was justified in terminating the applicant's services in consequence of his response. 124 The second principal matter referred to in the submissions concerned the four weeks' notice of termination provision in the contract of employment and as to whether this was unfair. Again, this is put somewhat differently to the allegations of unfairness contained within the summons. Nevertheless, in considering this aspect, it is necessary to determine whether or not the respondents were justified in summarily dismissing the applicant. This in turn will involve a consideration of the appropriateness of the processes adopted by the Board, whether the Board members were unduly motivated by a desire to rid themselves of the applicant, whether he was denied some form of procedural fairness and whether, ultimately, there was justification based upon the applicant's response to the Board's letter. Of course, if the applicant fails in all of these matters and fails to establish that the respondents acted unfairly in summarily dismissing him, then no amount of variation of the contract of employment to provide for a longer period of notice of termination will assist him in obtaining any ultimate relief in the proceedings.

Alleged unfairness - no provision within the contract whereby disputed expense claims could be fairly and reasonably resolved 125 The applicant submitted that the failure of the contract to provide for any procedure to resolve disputed expense claims rendered the contract unfair. It was submitted on his behalf that since at least 1993, whilst CEO and Chairman of the respondents, the applicant had incurred expenses for travel, accommodation, meals, entertainment and promotional items and that for many years those expenses were reimbursed upon the submission of claims. It was then said that beginning with a period towards the end of 1999 the respondents' personnel unilaterally sought to change the method of payment, which affected to some extent claims made for expenses incurred before this time and therefore had a retroactive effect. 126 However, whether the failure to make provision for a term of the contract of employment that would enable resolution of differences constituted relevant unfairness for the purpose of s 106 depended upon whether in any event the respondents had conducted themselves unfairly. If there had been no unfair conduct, then the provision of such a procedure would be irrelevant to the ultimate outcome of these proceedings in affording any monetary relief to the applicant. 127 There was tendered into evidence a number of policy statements issued by the SMEC Board dealing with overseas travel, cash advances to staff and entertainment. A policy statement, dated 17 October 1993, created a policy dealing with approval of overseas travel by non-executive SMEC directors. A policy statement issued 23 November 1993 dealing with cash advances to staff made it clear that "claims are to be submitted in the standard format as soon as possible upon completion of the event for which the advance is provided. Submission not later than seven days after the conclusion of travel is considered reasonable. Where travel exceeds one month, a partial claim should be submitted at the end of each month." 128 "Operating instructions" issued 1 January 1998, when dealing with advances for short-term assignments/visits for staff travelling in Australia or overseas, said, specifically, "Staff staying in hotel accommodation on short-term assignments should be instructed to retain all original receipts. Duplicates or copies will not normally be accepted as receipts for the purpose of acquitting advance accounts. Claims for such expenses should be submitted at frequent intervals and in no case less than monthly." 129 An operating instructions form, issued 1 July 1994, dealt with the procedure for claiming reimbursement for claims for entertainment expenses. It made clear that claims for reimbursement should be made on a claim form or a schedule including particulars of the date of entertainment, number of guests, status of persons entertained, type of entertainment, where the entertainment was held and the details of expenditure. Furthermore, the document said, "Receipts should be attached for all items of entertainment expenditure." 130 Although some of these protocols may not have specifically applied to the applicant as Chief Executive Officer, and although he did not receive cash advances as such, it must be assumed that the applicant, as a Board member at all relevant times, was aware of these protocols. Likewise, the applicant should have been aware, in my opinion, that common sense dictates that even though he operated on a basis of acquittal of expenses against advances made after they were incurred, the same approach should have been adopted to the justification of expenses and their validation. 131 The applicant asserted that since 1968 he had claimed entertainment expenses solely on the basis of credit card receipts and without having to tender receipts, dockets or invoices from hotels or restaurants. 132 The applicant was offered a corporate Diners Club card but eschewed this offer on the basis that he remained personally liable for payment of the account even though it was issued in the name of the company. The applicant used his own personal Diners Club credit card for almost all of the expenditure that he incurred in the course of his employment. 133 The methodology that the applicant used was to submit each monthly Diners Club statement of charges to SMEC, which paid it in total, and debited that amount against a notional "advance account" in the applicant's name. As against this advance account, the applicant would then lodge expense claims, which, once accepted, were taken to have "acquitted" the appropriate amount from the advance account. Accordingly, as the respondents submitted, they had loaned the applicant from time to time amounts which enabled him to satisfy his Diners Club credit card payments, and the amount of any claims made for expenses incurred in the course of his employment would be treated as partial repayment of the loan. As I have previously said, the applicant operated since 1968 on the basis that he submitted claims for expenses solely on the basis of the credit card receipts without furnishing any underlying original documentation issued by restaurants, hotels etc. 134 When these claims for expenses were made, the applicant provided a covering memorandum stating that the expenses were incurred whilst travelling on official business and summarising the amounts spent at each location. The amounts were set out in the relevant local currency, converted into US dollars and the aggregate of the US dollars was converted into Australian dollars. 135 I have dealt elsewhere in these reasons for judgment with the basis of the currency conversion used by the applicant and the detriment suffered by the respondents as a result. 136 The first recorded difficulty that the applicant had in submitting these claims occurred in a memorandum dated 29 June 1998 from Manfred Claasz, the then General Manager Corporate Services, addressed to the applicant's personal assistant. The memorandum said "I have recently received nine accounts for payment and presumably they have been sighted by you. Of these only one has an original docket attached. The remaining 8 have photocopies attached. Would you please arrange to have the originals attached and return to this office. Some of these dockets are dated as far back as 1992. Would you please obtain supporting details from your diaries to provide payment justifications for these accounts."

On 6 September 1998, the applicant handwrote a note on the memorandum, which he forwarded to Mr Claasz "Manfred, I have been submitting my travelling expense claims in the same form for the past twenty years with photocopies of the documentation including the period you were previously GMCS without any problems. Two reasons I used to retain the original is loss of documents by GS personnel and disputes with credit card forms which are missing. If this arrangement has been satisfactory for the past twenty years I don't see any justification for changing it now" 137 There were further exchanges between the applicant, his personal assistants on his behalf and Mr Claasz concerning the manner in which the applicant continued to claim reimbursement of expenses. Mr Claasz continued to seek the originals of documents including hotel and other invoices and the applicant continued to resist using any other methodology as a basis for his expense claims. Typical of the applicant's attitude was, "I have a system that works and if it ain't broke don't fix it." (A handwritten facsimile transmission from the applicant to his personal assistant dated 7 July 1998) 138 There is evidence that Mr Claasz again spoke to the applicant about this matter in October 1999. Furthermore, Mr Claasz declined to approve three overseas travel claims submitted by the applicant in November 1999, on the basis that the total amounts involved exceeded Mr Claasz's delegation. 139 On 24 December 1999, Mr Claasz handed the applicant a memorandum concerning his travel expense claims expressing concern that, in effect, the applicant was fundamentally approving his own expense claims, that the level of expenditure should be subject to approval by the Board, that there was no indication as to who had used air tickets costing approximately $30,000 and advising that the Australian Taxation Office required originals of claimed documents, including hotel accounts for the purpose of consideration whether there was any expenditure of a private nature which in turn would involve payment of FBT. These matters were the subject of a further face-to-face discussion on 25 January 2000 between Mr Claasz and the applicant. 140 To put the problem in perspective, figures provided by the respondents for the purpose of the hearing indicated that for the six month period July to December 1999, the applicant had charged a total of $219,758 to his Diners Club credit card, the bulk of which was submitted for reimbursement by the respondents. 141 In about March 2000, Mr Claasz complained to Mr Peter Busbridge, then the Chief Operating Officer of SMEC Holdings Limited, that he was having trouble dealing with the applicant's travel claims. Mr Busbridge told Mr Claasz that these matters should be raised by him with the audit committee. Mr Claasz did so in early April 2000. 142 Thereafter, Mr Robert Scott, then a non-executive director of the respondents and Chairman of the audit committee, became involved in the matter and in dealing with the applicant. By letter dated 12 April 2000, Mr Scott asked that the applicant comply with the respondents' expense reimbursement procedures. By letter dated 3 May 2000, the applicant responded saying in part that the company's policy was "unworkable and inappropriate requiring Board approval every time a director travels overseas and should be revised." 143 Thereafter, Mr Busbridge sought advice from Baker & McKenzie Solicitors concerning the applicant's expense claims. As a consequence of that advice, the Board met on 5 May 2000 to consider passing a resolution requiring the applicant to provide further details of his travel expenses. At that meeting, the applicant resisted any attempt to require greater specificity and denied that there were any specific guidelines in his terms of appointment as to levels of expenditure on travelling and associated costs. 144 As at that date, there is evidence that the applicant's Diners Club advance account was in debit to the extent of $326,359 because of the extent of outstanding claims that had not been processed by the respondents. However, even allowing for the amount of the then outstanding claims, there was approximately $195,000 worth of payments that had been made by the respondents and with respect to which no claim had been submitted by the applicant. 145 The Board proceeded to pass a resolution requiring the applicant to provide further details including the general nature of each item of travel, how expenses had been incurred and the reasons why, to whom payments had been made and, where appropriate, provision of original invoices. 146 The applicant responded by claiming that there was a general conspiracy against him, repeating that he had used the same format over many years and disputing that the level of detail required was necessary. He asserted that all he needed to produce was "a separate diary which shows the time of travel and the localities and an expense sheet which shows the details of the expenses claimed." 147 The applicant did not respond with any degree of particularity by providing any of the information and documentation required by the Board. 148 At that stage, Mr Alastair McKendrick became involved in dealing with the applicant. After employment for some time, Mr McKendrick had been appointed General Manager Finance on 30 May 2000 and from September 2001 was a director of SMEC Holdings Limited. He endeavoured to process a number of travel claims submitted by the applicant. 149 The question of the applicant's travel expense claims was referred to the audit committee, which met on 2 August 2000. Initially, the audit committee determined to refer certain matters to the respondents' auditors, Price Waterhouse Coopers, for investigation. The applicant objected to this course saying that it went beyond the authority of the resolution of the Board, complaining also that Price Waterhouse Coopers were not independent and that there was some apprehension of bias. The audit committee then determined to meet with the applicant on 7 September 2000. Before doing so, a list of items of expenditure had been forwarded to the applicant asking him to provide further information. At that meeting, the applicant stated that the audit committee was acting outside its authority, and indicated that he had not kept hotel bills and airline tickets. 150 The applicant continued to assert, particularly, throughout September 2000, that he was entitled to continue to claim expenses using the methodology as he always had and that he did not have relevant receipts for production. However, he did provide certain credit card vouchers and the like. The applicant was then asked to sign a letter authorising that information be given to the respondents so that they might write to the travel providers to seek copies of hotel accounts and the like. The applicant declined on the basis that some of the material might be private to him. 151 Despite asserting that he had no further documentation to produce, the applicant asked for a "precise list" of what documents were required on the basis that he would endeavour to obtain them. 152 In early December 2000, the audit committee formulated a report which it presented to the Board and which was considered as an interim report at the Board meeting of 19 December 2000. That report repeated concerns that the information and documentation provided by the applicant in support of travel claims were inadequate and recommended that the Board resolve that the applicant provide further information on or before 15 January 2001. The applicant responded claiming that he had forwarded all of the credit card receipts that he had on file, that he had been using the same method of currency conversion since 1972, that he had been using the same methodology for claiming travel expenses since 1972 and that he had not submitted other travel expense claims while there was an unresolved dispute. He said that he had now submitted claims resulting in him being owed about $84,500 by the respondents. This was the subject of seven claims lodged about that day by the applicant for travel expenses totalling approximately $109,000. Those expenses related to travel undertaken in November 1999, December 1999, February to March 2000 and May to June 2000. The procedure used by the applicant to make these claims was the same procedure that he had previously used and which by then he must have known was unacceptable to the Board. Furthermore, the applicant used the same procedure for converting foreign currency amounts as he had previously done. It was the evidence of Mr McKendrick that, with respect to one of these trips, the interest claimed exceeded the interest ascertainable by reference to the Diners Club card statement by more than $3,000. Furthermore, the periods of travel occurred after the time when Mr Claasz had raised his initial concerns with the applicant about the supporting documentation. Certainly, as at November 1999 and later, the applicant must have been on notice that there were some persons within the respondents' organisation who sought to have him produce original hotel invoices and copies of airline tickets, boarding passes and the like. 153 In January 2001, Mr McKendrick sent all of the applicant's claims paperwork for the period 1 July 1998 to 30 June 2000, including Diners Club statements against which payments had been made, to Price Waterhouse Coopers, the respondents' auditors. In February 2001, Price Waterhouse Coopers advised Mr McKendrick that the documentation showed the duration and destination of travel but in most cases not the reason for the travel. Accordingly, the auditors were unable to carry out a detailed audit of the expenditure to ascertain whether it was of a business nature. The auditors confirmed that the applicant should provide copies of detailed invoices or receipts from organisations who had provided services together with copies of flight tickets and boarding passes and the names of all passengers together with an explanation as to the purpose of each journey to each destination and the nature of the business conducted. Without this information it was said that the auditors would be unable to carry out an appropriate audit of the books of the respondents. 154 In February 2001, the applicant signed, on request, letters of authority allowing the auditors to obtain copies of invoices, receipts and other details of payments from various service providers. Having obtained certain information the auditors prepared a report dated 7 May 2001 with respect to certain expense claims. The report noted that for the period 1 July 1998 to 30 June 2000 the applicant had incurred charges on his Diners Club card of $588,356. Of this amount, $498,907 were expenses incurred in foreign currency. The applicant's claimed currency conversion had resulted in a charge exceeding the actual amount charged to the Diners Club statement in foreign currency by AUD$10,742. Furthermore, there was a total of AUD$73,900 expended on "retail items". 155 In May 2001, the applicant was asked by the Board to submit all outstanding travel claims. The applicant did so in about June 2001, again using the same methodology as previously, including the same basis of claiming foreign exchange conversion rates. 156 Since then, there has been disputation between the parties as to the extent of any monies owing by the respondents to the applicant for claimed expenses, which currently remains unresolved. This arises from the exchange of correspondence between the Board and the applicant seeking details concerning particular travel expenses, the nature of which I have previously referred to in these reasons for judgment. 157 There has been tendered into evidence a great amount of documentation concerning the applicant's travelling expenses and the methodology used by him in making claims. Exhibit N is a memorandum from the applicant to Mr McKendrick dated 15 January 2001 for travelling expenses 29 May to 9 June 2000. It is for a total claim of $20,824.34 with respect to "expenses incurred while travelling on official business in Singapore, India, Taiwan and Australia." 158 The "travel diary" shows that the applicant departed Canberra on 29 May 2000 and travelled (presumably via Sydney) to Singapore on the same day. He appears to have stayed overnight in Singapore and travelled the next day to Delhi. On 3 June 2000, the applicant travelled to Taipei and then returned to Australia on 7 June 2000, arriving in Sydney on 9 June. 159 The supporting documentation includes an amount of $11,170.70 paid on Singapore Airlines for travel Canberra-Sydney-Singapore-Delhi-Singapore-Taipei-Singapore-Sydney. This was charged to the applicant's Diners Club. There is a further sum of SGD$2,667 spent on an American Express card in Singapore on 29 May 2000 to purchase a Singapore Airlines ticket. 160 None of the documentation furnished by the applicant to Mr McKendrick contains any clue as to the reason for the purchase of that airline ticket in Singapore on 29 May 2000. In the course of cross-examination, the applicant was asked why he would need to purchase that air ticket in the midst of a trip that was already scheduled to take him to Singapore twice. The applicant then said that ticket was for Mr S T Leong "who had identified the potential venture capitalist in Taiwan and was accompanying me on the trip." It transpired that the trip to Taipei was for the applicant to meet a proposed venture capitalist who would be able to assist, presumably with venture capital for a project. It appeared that Mr Leong did not know the proposed provider of the venture capital but it was thought that he had had some involvement in raising venture capital for the construction of the Sydney Olympic Stadium. It was on this basis, presumably, that the applicant decided to expend time and money in visiting Taipei to meet this person and to pay for Mr Leong to accompany him and to act additionally as translator. Nothing came of that particular visit. There is not one reference to any of these matters contained in the information given by the applicant to Mr McKendrick. 161 Included with the documentation are an American Express voucher and a Diners Club voucher for the York Hotel in Sydney for 30 May 2000 and the Holiday Inn at Potts Point for 9 June 2000, in amounts of $354.60 and $648.75 respectively. There is no copy of any hotel invoice and there is no indication on these payments that the applicant stayed on those occasions at those hotels other than the fact that the cost was purchased on his credit card and that he signed the relevant vouchers. Likewise, there is a Diners Club voucher for the Hotel Imperial in New Delhi and two Diners Club vouchers for accommodation at the Miramar, location undesignated, on 6 June 2000. Presumably, the Miramar is a hotel in Taipei and presumably the invoices relate to accommodation for both the applicant and Mr Leong. One is for an amount NT$13951 and the other NT$13450. 162 It follows that none of the vouchers with respect to hotel accommodation indicates the name of the person who stayed in the establishment, any breakdown between room charge, meals, and any other expenditure or, indeed, the dates on which accommodation was provided and the number of persons who stayed in the room. 163 This narration is typical of the totality of the evidentiary material provided by the applicant to the respondents as a basis for claiming travel expenses. 164 Typical, also, of the lack of detail included in the applicant's claims and the confusion which that might create for the respondents' accountants and auditors, is an account for airline travel on British Airways for the purchase in Singapore of travel from Singapore to Brisbane and return. The voucher is for travel on British Airways, the passenger is shown as the applicant and the cost is for SGD$5,494. The expense was incurred on 17 January 2000. 165 When questioned about this account whilst giving evidence, the applicant said that he was probably able to purchase the ticket at a good rate and that he intended to use the Brisbane-Singapore return part of the ticket on some future occasion "because it was cheaper to buy the return ticket and use it on the next trip than to buy a one-way ticket which usually costs more anyway and probably wasn't a discount." Of course, such an explanation is entirely illogical because the applicant being based in Australia would always be buying a return ticket to wherever he was travelling to overseas. There would never be any occasion for him to buy a one-way ticket. 166 The applicant offered no explanation as to the circumstances in which he would use a one-way ticket on British Airways from Brisbane to Singapore and the manner in which he would account for its cost in the books of account of the respondents. 167 In dealing specifically with the question of expenses, the amended summons by which these proceedings are constituted sought "an Order declaring the contract void ab initio in so far as it permitted the Respondents to fail or refuse to pay expenses incurred by the Applicant in the course of his duties as an employee." In written submissions, the applicant's counsel said "Clearly and unfairly, the contract failed to provide for any procedure whereby disputed expense claims could be resolved." 168 In submissions in reply, the applicant's counsel referred to comments made in opening the applicant's case in identifying unfairness "as the requirement for the production of an original receipt….Now one would have thought that there must be a variety of ways in which the contract could provide for that matter to be dealt with in a way which would not bring about that…unfairness". 169 A brief reference to these submissions highlights the dichotomy that applies to the expenses issues raised in these proceedings. On the one hand, the Board determined to terminate the applicant's employment because of his failure to satisfy it with respect to a number of matters including, presumably, the question of expenses. On the other hand, the applicant asserts unfairness in that his contract of employment did not provide some mechanism for dealing with a dispute about expenses. Whilst both these matters revolve around the question of expenses, they involve a consideration of two distinct aspects of the applicant's expenses claims. 170 The applicant did not suggest, either in the amended summons or during the course of the proceedings, what type of provision he thought should be inserted into his contract of employment by way of variation that would inject the relevant fairness or, put another way, avoid any unfairness. 171 In my experience it is most unusual for a contract of employment to make any provision for a mechanism or process by which any dispute about expenses might be resolved. Indeed, no submissions of any specific kind were put on behalf of the applicant as to the processes adopted by the respondents in dealing with the disputation concerning the payment of the expenses. 172 The focus of attention in the proceedings was not the process for resolution of the controversy but the underlying processes for the submission and substantiation of expense claims. Indeed, a perusal of the applicant's submissions in dealing with the question of expenses is focussed entirely on this matter. 173 A consideration of the evidence about the dealings between the applicant and the respondents concerning his claims for reimbursement of expenses does not, in my opinion, indicate any conduct by or on behalf of the respondents that might be described as unfair. I will shortly consider what is involved in the concept of unfairness and the approach taken by the courts to ascertaining whether unfairness exists in any given circumstances. For present purposes, I refer to the extensive communications between persons on behalf of the respondents and the applicant concerning the methodology used by him for the claiming of expenses and the detailed and even tedious processes of firstly the audit committee and secondly the Board in allowing the applicant every opportunity to proffer such explanation as he wished concerning his claims for expenses. As I have previously stated, the applicant's attitude, in my opinion, has been coloured by his insistence and persistence in relying on what he perceived to be the correctness of his approach over many years without any consideration as to whether that approach may have been inappropriate. In any event, the evidence reveals that the applicant had been given every opportunity to satisfy the respondents, even at Board level, with respect to his disputed claims. 174 I reject any submission that the applicant's contract of employment with the respondents was unfair because it failed to make provision for any mechanism for dealing with disputed claims. Presumably, if such disputation could not be resolved at any level, it would be necessary for one of the parties to have recourse to the courts or some other mutually agreed arbitration process. Of course, it is arguable in these circumstances that any such steps would be more in the nature of enforcement of either expressed or implied contractual terms rather than seeking any particular variation. 175 I will return to the question of expenses when dealing with whether the Board acted unfairly in summarily dismissing the applicant.

Alleged unfairness - four weeks' notice of termination 176 The second matter of unfairness dealt with in the applicant's submissions concerned the provision in the contract by which termination could occur on four weeks' notice. It was said that this was fundamentally and intrinsically unfair. I accept the applicant's submissions that such a provision was incorporated within his contract of employment on the basis of evidence given in the proceedings. No authority is required for the general proposition that at common law a contract of employment is a contract of indefinite duration terminable upon reasonable notice. What is reasonable will vary according to the exigencies and circumstances of the employment. In my opinion, a contract that seeks to fix a short period of notice in circumstances where that period could not, viewed objectively, be considered as "reasonable" as contemplated by the common law principles, is arguably unfair for the purpose of s 106 of the Act. However, ultimately any decision on this matter must abide a consideration as to whether, in all the circumstances, the dismissal of the applicant by the respondent on a summary basis and without the provision of any notice or payment in lieu was justified. If so, the question of notice does not arise for consideration and the applicant would not be entitled to any consequential relief. Accordingly, I will defer dealing with this matter until I have dealt with the final principal area of unfairness identified by the applicant. 177 The applicant asserts that his contract of employment contained no express provision dealing with any circumstances in which his conduct might be called into question by the respondents. Accordingly, it was submitted that as the contract failed to make any provision for the conduct of enquiries or investigations into alleged misconduct, it was prima facie unfair for the purpose of s 106. Furthermore, it was submitted that the respondents did in fact "engage in conduct which was prejudicial to the applicant's interests" in that he was denied procedural fairness by the respondents and because, in any event, the applicant was not guilty of any misconduct which would have justified summary dismissal. 178 In terms of procedural fairness, the applicant's submissions focussed on the processes adopted by the Board and the manner in which the applicant's responses were received. In particular, the applicant pointed to the letter of termination dated 25 October 2001. It was signed by Mr Busbridge as Chief Operating Officer. It said, relevantly, "At a Board Meeting on 25 October 2001, Board members had the opportunity of reviewing your written response of 27 September 2001 to various allegations contained in a letter from the Chairman dated 30 August 2001. Taking into account the nature of the allegations and your responses, the Board resolved that you have engaged in conduct which is destructive of the employment relationship and that the Board no longer has the necessary level of trust in you as an employee…." The applicant submitted that the letter is defective in that there is no particularisation of the conduct that, it is said, was destructive of the employment relationship. On one view of it, the applicant was left to guess which of the many allegations contained in the 30 August 2001 letter had been responded to in such a way that the Board had concluded that there had been conduct destructive of the employment relationship and that had taken away "the necessary level of trust" in the applicant as an employee. 179 The amended summons alleged that these circumstances created unfairness in that the respondents were permitted to terminate the contract without providing reasons, without allowing the applicant to respond to those particular reasons and in that the contract permitted allegations to be made against the applicant and to be investigated without permitting, as a matter of procedural fairness, the applicant to respond to those allegations. 180 A review of the evidence, which I have earlier summarised in these reasons for judgment, persuades me that the applicant would have been in no doubt concerning those matters about which the Board required information and documentation. Likewise, the applicant would have been in no doubt that these were matters that were viewed by the Board seriously. Accordingly, I would conclude that the applicant was at all times clear about what allegations were made against him in the context of the information and documentation which he was required to make available. Certainly, the applicant had participated in a process with the audit committee and, in addition, the Board had provided detailed documentation to the applicant with its letter of 30 August 2001. I would conclude that the applicant was given a fair and reasonable opportunity to respond to the concerns of the Board detailed in its letter. 181 However, this gives rise to the fundamental issue concerning the lack of specification in the letter of 25 October 2001. 182 The answer to this submission is that having concluded that the applicant could be in no doubt about the matters of concern raised by the Board and having been given an adequate opportunity to deal with each and every one of those matters, the fact that there is no specificity in the termination letter does not create any relevant unfairness because the letter makes it clear that it is only the Board's allegations and the applicant's response that are taken into account in coming to the decision to dismiss summarily. No prejudice can attach to the applicant because he had already had an adequate opportunity of responding to the Board's concerns. Accordingly, whilst one might gain an initial impression that the lack of specification in the Board's dismissal letter had created a degree of uncertainty and therefore unfairness, in reality there is no unfairness because the applicant had already had an opportunity to deal with each and every one of the matters which was comprehended within the Board's determination to summarily dismiss him. 183 For these reasons, I reject the applicant's submissions that there has been any relevant failure by the respondents to afford him procedural fairness in the process adopted by them to consider his conduct and in determining to summarily dismiss him. 184 This, therefore, leaves for consideration the notice question. I have previously observed that this only becomes relevant if it is determined that as a matter of fairness a period of notice of termination should have been given to the applicant. This in turn requires a consideration as to whether, viewed objectively, and taking into account all of the relevant circumstances of the employment, the summary dismissal of the applicant was unfair by reference to community standards and values.

Determination of what is unfair for s 106 185 When determining matters of unfairness under s 106 and application of its provisions, it is clear that any value judgement exercised must be made on an objective basis having regard to, and reflecting, contemporary community values and standards. I have discussed my understanding of these matters in Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79 at paragraphs [71- 73] and [81- 82]. "[71] It is a trite observation that a pre-condition for the exercise of any power under s 106 is a finding that the relevant contract is unfair. A helpful discussion as to the approach of the predecessor tribunals to this Court to the determination of whether a contract etc is unfair is contained within the joint judgment of Fisher CJ and Hungerford J in the Industrial Court of New South Wales Full Court in Baker v National Distribution Services Ltd (1993) 50 IR 254. At 271 their Honours said: "The test of unfairness within the meaning of s 88F of the Industrial Arbitration Act, and hence s 275 of the present Act, has received much attention by the Court and by the previous Industrial Commission over very many years, but, in our review of the cases, the approach stated by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 over 26 years ago has endured; his Honour commented (at 374) that unfairness of a contract or arrangement was to be determined according to 'the common sense approach characteristic of the ordinary juryman ….It is a plain matter of morals not law.' His Honour cautioned, however, (at 374,375) that the section's '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'.

The nature of the unfairness attracted by s 88F was considered later by the Industrial Commission in Court Session (Perrignon and Dey JJ, Cahill J dissenting) in A & M Thompson Pty Ltd v Total Australia Limited [1980] 2 NSWLR 1 at 13 as follows: 'It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue ( Davies' case). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement.' (At 271-2). [72] It is my understanding that in determining whether there is unfair conduct for the purpose of proceedings brought under s 106 and especially under sub s(2), the Court is required to exercise a value judgment reflecting contemporary community values. The contemporary values may be derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical 'standard' member of the community. Such a person will be neither an employer nor an employee, must be careful to weigh up the competing interests of the applicant as an employee and the respondent as an employer and those interests must be accommodated and viewed objectively and balanced within the context of the factual matrix which applies to them. Such a process will accommodate the reasonable requirements and understanding of an applicant as an employee and the reasonable requirements and understanding of a respondent as an employer in the context of the needs of the employer to undertake its activities in an efficient, effective and competent manner. [73] Of course the identification of contemporary community values is not without its own difficulties. Some insight as to the difficulties involved may be gained from the discussion by Professor John Braithwaite in the article entitled 'Symposium on Community Values in Law' published in vol.17 of the Sydney Law Review at 351. Professor Braithwaite draws on a body of literature to make a distinction between community attitudes and community values, the former not necessarily assisting a court in determining a matter, the latter having much greater relevance. An obvious example of an attitudinal matter is the debate concerning abortion. The corollary and underlying value against which such debate is conducted is 'respect for human life, health, freedom of choice'." "[81] I have already referred to the process which is involved in determining whether a contract or arrangement etc or conduct is unfair. In the context of this process it is important to observe that there will be many cases where there is no absolute defining boundary which delineates what is fair from what is unfair. Often a range of conduct or activities may be said to fall within the limits of what is assessed to be fair, and, by corollary not unfair. This is because of the lack of absolute and scientifically determined criteria which differentiate the concepts of what is unfair. [82] The assessment which is to be made judged by the standard of the ordinary, reasonable, hypothetical "standard" member of the community is not capable of precise analysis and delineation. There will be a variety of opinions held by such a person. The exercise of a value judgment in these circumstances is obviously made more difficult, but it is a difficulty which is not confined to judges of this Court. By way of analogy, evaluations of what is "reasonable" are made daily by judges in all courts determining claims based on breach of duty of care in negligence, and those brought under certain provisions of the Trade Practices legislation."

186 One of the circumstances that must be taken into consideration is the position that was occupied by the applicant in the respondents' organisations. He was, at relevant times, Chief Executive Officer and a director. 187 There are some authorities that deal with the duties of directors and of directors who are Chief Executive Officers. 188 One such case is South Australia v Marcus Clark (1996) 66 SASR 199. These were proceedings that considered the circumstances of a person who was both managing director and chief executive officer of a bank. His positions of office were governed by South Australian legislation, which applied particularly to that bank, as well as by the common law. The proceedings considered whether that person owed a fiduciary obligation to the corporation and whether he was guilty of negligence at common law. Although there is a statutory basis for the consideration of the Court in those proceedings, there is also a consideration of the duties and obligations of a person in the defendant's position at common law. These obligations are, in my opinion, relevant to a consideration of the circumstances of the applicant's employment in these proceedings and I refer to them and adopt them accordingly. In the course of his judgment in Marcus Clark, Perry J adopted a formulation by Clarke and Sheller JJA in the New South Wales Court of Appeal in Daniels v Anderson (1995) 37 NSWLR 438 where their Honours said, (at 505 - 6) that there was "A general requirement that (directors) exercise reasonable care in the performance of their office." Perry J noted that this general observation was reflected in the provisions of the then Corporations Law, a matter to which I shall make reference later in these reasons for judgment. In assessing the duties of the defendant in those proceedings, Perry J noted that, "rather than having regard to the statutory provisions which applied to his office, or the terms of his contract of service which defines his duties only in the most general terms, it is more important to have regard to the realities and practicalities of the position which he held. As the Chief Executive Officer and Managing Director of a large bank, he was obliged to bring to bear an appropriate level of skill having regard to the responsibilities which that office entailed. No doubt, as is the case with all large corporations, it was necessary for him to delegate responsibility for the operation of different functions of the bank, in circumstances where no further oversight could be expected. But he must unquestionably be regarded as responsible for the overall control of the operations of the bank, both in a day-to-day sense and in giving effect to the broader policies spelt out in the Act and by the Board of Directors. Furthermore, it is clear that the Board of Directors looked to him and relied upon him not only to provide to the Board full and accurate information as to all of the matters which it was proper for the Board to consider, but to see to it that any specific decisions of the Board were implemented in a way which did not expose the Bank to unnecessary risk….There is no question but that the requirements of his office imposed upon Mr Marcus Clark a duty to act in accordance with the highest standards of competence and integrity applicable to the banking industry." (At 221) 189 Many of the cases that deal with the duties of directors arise out of prosecutions for breach of the relevant corporations law. I instance two cases in the High Court of Australia, namely Chew v the Queen (1991-1992) 173 CLR 626 and R v Byrnes (1995) 183 CLR 501. Notwithstanding that those cases dealt with prosecutions for breach of the Corporations Law, observations made by the judges of the High Court are relevant in the sense that it is the same or similar as the Corporations Law which also applies to the applicant in these proceedings and which pervades the discharge of his duties to the respondents. To this extent, and for this reason, I refer briefly to some of the observations contained in those cases. 190 Chew was concerned with provisions of the Western Australian Companies Code. One such provision created an offence for an officer or employee of a corporation to "make improper use of his position as such….to gain directly or indirectly, an advantage for himself or for any other person or to cause detriment to the corporation." 191 In considering "improper" conduct and whether there had been "impropriety" Dawson J considered "the question of what constitutes improper use, on the one hand, of information acquired by an officer or employee of a corporation by virtue of his position and, on the other hand, of the position itself as an officer or employee of an corporation. It seems to me that an objective standard must be applied in determining what amounts to impropriety in either context. It is clear enough that a director of a company may act improperly with no intention of acting dishonestly or otherwise than in the best interests of the company as a whole. Whitehouse v. Carlton Hotel Pty. Ltd. [1987] HCA 11; (1987) 162 CLR 285 is an example where the allotment of shares by a governing director was thought by him to be in the best interests of the company but was held to be for the impermissible purpose of defeating the voting power of the existing shareholders. Where a director does something by the use of his position which is for an impermissible purpose it must, I think, amount to an improper use of that position, however much he believes his actions to be in the interests of the company See Jeffree v. NCSC (1990) WAR 183, at p 194. Notwithstanding that impropriety is to be determined objectively, it has been observed, correctly I think, by Jacobs J. in Grove v. Flavel (1986) 43 SASR 410, at pp 416-417 that what was improper for the purposes of the predecessor to s.229(3), s.124(2) of the uniform Companies Act 1961, 'cannot be determined by reference to some common, uniform, or inflexible standard which applies equally to every person who is an officer, but rather must be determined by reference to the particular duties and responsibilities of the particular officer whose conduct is impugned'. And it should also be said that, whilst impropriety is to be determined objectively, nevertheless the state of mind of the particular officer or employee may be relevant; for example, where a power may be exercised for permissible and impermissible purposes, the purpose for which it is actually exercised will clearly be relevant. ( See, e.g., Harlowe's Nominees Pty. Ltd. v. Woodside (Lakes Entrance) Oil Co. N.L [1968] HCA 37; (1968) 121 CLR 483; Whitehouse v. Carlton Hotel Pty. Ltd. (1987) 162 CLR, at p 294.)" (At 640 - 641) 192 These observations of Dawson J were approved in the joint judgment of Brennan, Deane, Toohey and Gaudron JJ in Byrnes. After considering his Honour's judgment and other authorities, their Honours said, "….Impropriety does not depend on an alleged offender's consciousness of impropriety. Impropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case. When impropriety is said to consist in an abuse of power, the state of mind of the alleged offender is important: the alleged offender's knowledge or means of knowledge of the circumstances in which the power is exercised and his purpose or intention in exercising the power are important factors in determining the question whether the power has been abused. But impropriety is not restricted to abuse of power. It may consist in the doing of an act which a director or officer knows or ought to know that he has no authority to do." (At 514 - 515. Footnotes references omitted.) 193 It follows that even though a director engages in conduct with intentions that are designed to assist a corporation, if the director, viewed objectively, has engaged in conduct that is inconsistent with the discharge of his or her duties according to law, the otherwise "good intentions" will be irrelevant. 194 As will be seen, these observations are relevant to one aspect of the applicant's case. He readily conceded that at all times he was engaged in a process euphemistically called "promotional activities" but which he candidly described as the payment of bribes. It was the applicant's case that this was the only basis upon which the respondents could gain overseas contracts and furthermore some other directors were aware of what he was doing and also participated in the same conduct. I shall deal more specifically with these matters later in these reasons for judgment. However, it is necessary to bear in mind that good intentions and motivation to assist a corporation will not excuse conduct that is otherwise in breach of a director's obligations. Furthermore, in making any necessary assessment about any such conduct, it is important to take into account the realities of the circumstances of both the respondents and the applicant. I shall return to this aspect also later in these reasons for judgment. 195 As I have observed, the conduct of the applicant was the subject of a statutory regime that, until 1 July 2001, was the Corporations Law (Commonwealth). 196 There are a number of provisions of the Corporations Law which impact directly upon the conduct of the applicant. They are contained within ss 180, 181 and 182 which are in the following terms. S 180 Care and diligence - civil obligation only

Care and diligence - directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a)were a director or officer of a corporation in the corporation's circumstances; and (b)occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. Note: This subsection is a civil penalty provision (see section 1317E ). Business judgment rule (2)A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b)do not have a material personal interest in the subject matter of the judgment; and (c)inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d)rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. Note: This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence) - it does not operate in relation to duties under any other provision of this Law or under any other laws. (3)In this section: business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.

Good faith - directors and other officers (1)A director or other officer of a corporation must exercise their powers and discharge their duties: (a) in good faith in the best interests of the corporation; and (b) for a proper purpose. Note 1: This subsection is a civil penalty provision (see section 1317E ). Note 2: Section 187 deals with the situation of directors of wholly-owned subsidiaries. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

Use of position - directors, other officers and employees (1) director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note: This subsection is a civil penalty provision (see section 1317E ). (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. 197 Furthermore, there are provisions of the Corporations Law that impose obligations on the respondents as corporations. The applicant as a director and, for such period as he was chief executive officer, occupied a particular position which both enabled and required him to ensure compliance by the respondents with their obligations under the Corporations Law. His duties and obligations extended to the totality of the operations of the respondents in a general supervisory sense, although, of course, he was required to delegate the discharge of the duties and obligations of the respondents to responsible persons. Nevertheless, as the Chief Executive Officer and a director and, to some extent, as chairman of the Board, his ultimate authority on a day-to-day basis is a matter that must be taken into account. 198 I set out the provisions of ss 286, 297 and 301. S 286 Obligation to keep financial records (1) A company, registered scheme or disclosing entity must keep written financial records that: (a) correctly record and explain its transactions and financial position and performance; and (b) would enable true and fair financial statements to be prepared and audited. The obligation to keep financial records of transactions extends to transactions undertaken as trustee. Note: Section 9 defines financial records. Period for which records must be retained (2) The financial records must be retained for 7 years after the transactions covered by the records are completed.

S 297 True and fair view The financial statements and notes for a financial year must give a true and fair view of: (a) the financial position and performance of the company, registered scheme or disclosing entity; and (b) if consolidated financial statements are required - the financial position and performance of the consolidated entity. This section does not affect the obligation under section 296 for a financial report to comply with accounting standards.

S 301 Audit of annual financial report (1) A company, registered scheme or disclosing entity must have the financial report for a financial year audited in accordance with Division 3 and obtain an auditor's report. (2) A small proprietary company's financial report for a financial year does not have to be audited if: (a) the report is prepared in response to a direction under section 293; and (b) the direction did not ask for the financial report to be audited. 199 It will be seen in particular that by s 286 there is a requirement for the respondents to keep financial records which correctly record and explain their transactions and to enable "true and fair financial statements" to be both prepared and, importantly, audited. This is complemented by s 297, which requires that the financial statements give a true and fair view of the financial position and performance of the respondents. 200 In my opinion, a failure to ensure that the respondents complied with ss 286 and 297 of the Corporations Law would involve improper and inappropriate conduct on the part of a director as contemplated by ss 181 and 182 of the Corporations Law. I shall refer to these matters in more detail later in my reasons for judgment.

Misconduct justifying summary dismissal 201 The relevant principles which apply in this area are the subject of a recent decision of the High Court of Australia in Concut Pty Ltd v Worrell [2000] HCA 64. The principles were summarised succinctly in the joint judgment of Gleeson CJ, Gaudron and Gummow JJ in the following terms. "[25] In Pearce v Foster , Lord Esher MR stated it to be a 'rule of law' that 'where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him'. In Blyth Chemicals Ltd v Bushnell , in the course of considering the position of the respondent, who was the manager of the appellant's business, Starke and Evatt JJ said: 'As manager for the appellant, the respondent was in a confidential position. And it is clear that he might be dismissed without notice or compensation if he acted in a manner incompatible with the due and faithful performance of his duty, or inconsistent with the confidential relation between himself and the appellant.' In the same case, Dixon and McTiernan JJ said: 'Conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal.'" (Footnote references omitted.) 202 In the same proceedings, Kirby J said, "[51.4] It is, however, only in exceptional circumstances that an ordinary employer is entitled at common law to dismiss an employee summarily. Whatever the position may be in relation to isolated acts of negligence, incompetence or unsuitability, it cannot be disputed (statute or express contractual provision aside) that acts of dishonesty or similar conduct destructive of the mutual trust between the employer and employee, once discovered, ordinarily fall within the class of conduct which, without more, authorises summary dismissal. Exceptions to this general position may exist for trivial breaches of the express or implied terms of the contract of employment. Other exceptions may arise where the breaches are ancient in time and where they may have been waived in the past, although known to the employer. Some breaches may be judged irrelevant to the duties of the particular employee and an ongoing relationship with the employer. But these exceptional cases apart, the establishment of important, relevant instances of misconduct, such as dishonesty on the part of an employee like Mr Wells, will normally afford legal justification for summary dismissal. Such a case will be classified as amounting to a relevant repudiation or renunciation by the employee of the employment contract, thus warranting summary dismissal." (Footnote references omitted.) 203 Importantly, also, the joint judgment of Gleeson CJ, Gaudron and Gummow JJ cited with approval the prior decision of the High Court of Australia in Shepherd v Felton Textiles of Australia Ltd (1931) 45 CLR 359. That case is authority for the proposition that an employer may justify the summary termination of a contract of employment on the basis of circumstances which existed prior to the termination occurring but of which the employer was unaware until after the termination. The respondents rely on such a principle in justifying the summary dismissal of the applicant notwithstanding that they did not rely upon those precise circumstances in determining to terminate the services of the applicant on a summary basis.

The conduct/misconduct of the applicant 204 Having regard to the general principles to which I have referred, and having regard to the consideration of the position of the applicant as Chief Executive Officer for some period, a director throughout the whole of the period and a person with managerial responsibility for a particular part of the respondents' operations for part of the period, I now turn to consider the conduct of the applicant as revealed in the evidence and to assess whether, in the aggregate, the respondents acted unfairly in determining to summarily dismiss the applicant. 205 In doing so, I shall: a) apply what I understand to be community standard and values; b) consider, objectively, the conduct of the applicant in the context of his position, his roles and the circumstances of the respondents' business; c) the obligations imposed on the applicant at law and by reason of the Corporations Law . 206 In my opinion, the standards that the community expects of a director of a company are those which are contained within the relevant corporations legislation, and which have been recognised authoritatively within the common law. In considering the ultimate question for the purposes of these proceedings, namely whether there is any relevant unfairness as required by s 106, it is necessary to reflect community standards and, where appropriate, community values. The standard of conduct that the community expects of a director by reason of the statutory regime and common law principles to which I have referred compels, in my opinion, behaviour which is in all respects compliant with that regime and those principles. In fundamental terms, where a director seeks reimbursement of monies said to be expended on behalf of a company, it is incumbent upon the director to ensure that proper and appropriate records are available which will allow the company and its auditors to identify the expense as being one that is properly payable by the company. A failure to recognise this fundamental obligation constitutes a breach of a director's fiduciary duty and, where that director is an employee, a breach of the employee's duty to the employer. This fundamental principle compels the creation of a transparent and identifiable method of disclosure. It is not to the point that the subject matter of the disclosure may create some degree of sensitivity. I recognise that in matters involving commercial sensitivities, the protection of intellectual property and the commercial need to facilitate the gaining of business using particular techniques, there will often be a requirement to ensure a measure of confidentiality. Nevertheless, the fundamental principle requires the creation of some means of identifying the expenditure and the reasons therefor, even if undertaken in a manner that is appropriate to the particular circumstances. In making these comments, the Court should not be seen to be condoning the payment of bribes or the undertaking of any other activity of an illegal nature. I am referring, and should be taken only to be referring, to expenses that fall outside those which are in breach of any applicable law. The point is, however, that community standards, as reflected by the statutory regime and the common law principles, require a measure of disclosure. Of course, these observations are directed only to one aspect of the misconduct alleged against the applicant. 207 In reviewing the evidentiary material, I have made, from time to time, comment concerning the applicant's conduct. 208 In my opinion, the applicant misconducted himself in the manner in which he submitted his claims for travelling expenses. It is not to the point that he relied upon a methodology that he said he had used for many years. The fact is that in producing only copies of Diners Club vouchers, he failed to furnish information to the respondents and to their auditors that would have allowed ready identification of the dates during which the applicant actually stayed at the various hotels and other places of accommodation, the fact that it was the applicant who used the accommodation and whether that accommodation was used also by any other person, the fact that it was the applicant who utilised the transportation, particularly by air, the fact that the applicant had actually utilised taxis and other forms of transportation and the details of restaurants and other places used by the applicant for dining purposes. Furthermore, the production of hotel vouchers and the like would have enabled the respondents and their auditors to identify whether there was any expenditure of an unusual kind. As it transpired, it was only after investigations had been carried out by Mr Scott that it was discovered that there was charged to a hotel in London for air transportation, the details of which I have earlier referred to. I also reject the excuse proffered by the applicant that carrying hotel vouchers and the like was burdensome. He could always have asked the hotels to post his invoices back to him in Australia. 209 Not only was the applicant compelled as a matter of common sense and in discharge of his common law and statutory obligations to the respondents to provide such information and documentation, but his failure to do so is compounded because of the extensive nature of the travelling which he undertook and the large amount of expenses that he incurred. The failure of the applicant in many cases to describe the purpose of journeys undertaken by him falls within the same category. 210 I take the same approach with respect to the failure of the applicant to identify the promotional items, to whom they were paid and for what purpose and to identify, at least in some more general way, the purpose of larger payments made in cash to particular persons. 211 There is evidence of a discrepancy of $34,000 disclosed by the exchange rate calculations, which the applicant persisted in undertaking. I do not accept his explanation that this was a more convenient way of him keeping track of the appropriate exchange rate conversion that applied to his travelling and other expenses. There is no logical reason why the exchange rate conversion utilised by Diners Club, as disclosed on his monthly accounts, could not have been used by him. In acknowledging that there was a discrepancy and in persisting to use this methodology right to the very end, the applicant engaged in misconduct. 212 The payments made to Mr Leong, which I have earlier referred to in [62] and following, were not and could not have been made consistent with the written agreement that the applicant entered into with Mercury International. In personally authorising the payment, which was made, the applicant misconducted himself. Furthermore, the applicant did not at any stage justify any arbitrary increase in the amount of commission payable to Mercury International. 213 In establishing a bank account in Singapore over which the applicant had ultimate operational authority and in concealing this from the respondents, as referred to in [81] and following, the applicant misconducted himself. 214 The payment to Dr Caroline, referred to in [88] and following, constituted misconduct. 215 The gold bullion transaction, referred to in [93] and following, seems to have involved the applicant undertaking some "frolic of his own". The transaction, as the applicant conceded in evidence, was not associated with any of the ordinary trading activities of the respondents. The reasons given by the applicant are, in my opinion, of doubtful validity and, in entering into the transaction on behalf of the respondents, the applicant misconducted himself. 216 At [100] and following, I have set out the matters concerning Engineering General Consultants. In the aggregate, for the reasons that I have given, these matters establish misconduct by the applicant.

Applicant's submissions with respect to misconduct 217 The applicant denied that he had engaged in misconduct which would justify summary dismissal. For reasons which I have given, it is plain that I reject any such submission. However, the applicant in submissions raised a number of other matters with which it is necessary to deal. a) It was said that what the applicant did in terms of promotional expenses and bribes was in the interests of the respondents as these were the only means by which the respondents could gain business in certain parts of the world. Such a submission might be relevant if the respondents relied solely on the payment of bribes and promotional expenses as justifying summary dismissal. However, this is not the case. What is relied upon by the respondents is the failure on the part of the applicant to create or implement some system that would enable the transactions to be reflected in some appropriate manner in the books of account and records of the respondents. There needed to be some transparency so that the respondents, through their personnel, would be able to validate the payment of those monies, and the projects with respect to which they were paid. The applicant appears to have gone about this aspect of his work in a clandestine fashion. He failed to make any, or, at the least, he made insufficient disclosure to his fellow directors of what he was doing. b) The applicant also submitted that there were others in the respondents' organisation who knew what was going on and that there was, presumably, general acceptance, condonation or connivance in these types of activities. The difficulty about any such submission is that it needs to be accompanied by some evidence. There was a suggestion in evidence that Mr Busbridge had boasted at a meeting in Indonesia of having bribed Indonesian generals. However, that evidence quickly fell away because it was clear that Mr Busbridge was not in Indonesia during any period when this conversation is said to have occurred. Mr Busbridge vehemently denied any involvement in and knowledge of activities of this kind. However, there is evidence given by Mr Hitt that there was a general awareness of promotional payments and promotional type activities, which were related to certain projects. These activities were left to the agents appointed by the respondents in the particular locations referrable to these projects. Apart from the evidence of this general kind, there was no other evidence that would justify the applicant's assertion. The evidence of Mr Hitt is equally capable of being accepted on the basis that the promotional activities were of a benign and acceptable kind. In the absence of any specific evidence to the contrary, I am unable to draw any inference favourable to the applicant's case concerning this evidence. Indeed, it is to be observed that much of the commercial world, and in particular in Australia, is centred around marketing and promotional activities. c) It was submitted on behalf of the applicant that the real motivation for the actions of the Board was a desire to bring about the departure of the applicant. There was evidence in the proceedings that the applicant had clashed with Mr Busbridge and Mr Scott concerning his conduct of the affairs of the respondents, particularly as Chief Executive Officer and with Mr Scott in particular concerning the manner in which the applicant claimed his travelling and other expenses. Furthermore, there was evidence of disquiet amongst senior managerial staff about the applicant's managerial style, the fact that the division that he was overseeing was making a substantial loss and the fact that the applicant seemed to spend most of his time out of the country during a period when the respondents were suffering something of a liquidity crisis. It was the evidence of Mr Busbridge that he had not made up his mind that the applicant's employment should, if at all possible, be terminated until the final decision of the Board taken at the meeting on 25 October 2001. Having regard to the evidence as a whole and the background to the actions taken by the audit committee and the Board, I do not accept the evidence of Mr Busbridge about this matter. I prefer the evidence of Mr Scott and others. Having regard to the totality of the evidence, it may be inferred that the applicant was unpopular with some of his fellow directors and did not enjoy the confidence of a large number of managerial staff. However, the drawing of such an inference does not, per se, lead to the conclusion that the processes undertaken by the respondents were flawed. For reasons which I have earlier expressed, the applicant was given every opportunity to be made aware of the matters that the audit committee and subsequently the Board wished to raise with him and to respond to those matters. In determining, for the reasons which I have expressed and on the basis which I have applied, that viewed objectively the Board was justified in summarily terminating the applicant's employment, whether and to what extent any one or more members of the Board may have had an underlying desire to see the end of the applicant's involvement in the respondents is, in my opinion, irrelevant unless it can be demonstrated that no such decision would otherwise have been made. That qualification cannot, in my opinion, be made out. d) The applicant complained that the audit committee initially and the Board subsequently had demanded of him that he produce documentation which was no longer in his possession or alternatively not accessible to him, that documentation being many years old. It was said that he should not be punished for his failure to present that documentation. There are a number of responses to this submission. Firstly, the evidence is that in 1999 the applicant submitted a bundle of claims dating back to 1993. Furthermore, it was the applicant who chose and insisted upon using the methodology that he did. In doing so, he breached his obligations to the respondents, both as an employee and as a director. If he had kept the documentation, which as a matter of law he was compelled to keep (and indeed submit to the respondents), then such failure must be borne by him in terms of his inability to produce the documents when finally compelled to do so. Also, it is not just the lack of documentation that is significant. The evidentiary material to which I have referred exposes a number of areas of misconduct that are not confined only to the failure to keep appropriate records. They extend to the opening of false bank accounts, the authorisation of the payment of commissions and the like without any valid reason and certainly without authority and the entry into transactions such as the gold bullion transaction, which, on all accounts, cannot be justified in any circumstances. Each of these matters individually and, certainly in the aggregate, constitutes misconduct justifying summary termination of employment. It follows that this submission is rejected. e) It was submitted on behalf of the applicant that some of the payments, which he had made, had been the subject of endorsement by the former managing director, Mr Barry Ireland, in May 1992. The applicant gave affidavit evidence about the particular transaction, which was said to be the subject of this endorsement. He said that SMEC had been pursuing the Lahore-Islamabad Motorway Project ("LIMP") for many years. I observe that all of these matters occurred prior to the acquisition of the business by the current respondents. The applicant said that in January 1992, as a result of a communication from Mr ul Haq of Engineering General Consultants, the then SMEC agent in Pakistan, he flew to Islamabad and met a person to whom he was introduced by Mr ul Haq. The applicant was told that if the company wanted to win the project, it would be required to make payments to certain people. The applicant said that he agreed to this and that a letter was to be forwarded to him once he had returned to Australia. Upon return to Australia, he said he had a conversation with Mr Ireland and told him that a letter of intent was to be sent but that there was a need to make some payments to people in Pakistan to get the job. The applicant said, "As best I can recall, he (Mr Ireland) did not reply, but nodded to acknowledge what I had said." Shortly thereafter, a letter of intent arrived and the applicant returned to Pakistan to negotiate the contract. A payment of about PKR27 million was discussed and, after negotiations, the billing rate to be charged on the project was increased to cover the cost of those payments. On 5 April 1992, Engineering General Consultants issued an invoice in the amount PKR27.5 million for "management, promotional and mobilisation expenses." The invoice stated "payment to be made in rupee foreign exchange certificates." The applicant said that the additional payment was to cover bank charges and currency exchange costs. The applicant then attended in Pakistan and arranged for the payment to be made from a bank account operated by the then company in Islamabad. The applicant said that on 28 May 1992, he had a telephone conversation with Mr Ireland and discussed with him what had been arranged, giving him the names of the people who were to receive payment on a confidential basis. He alleged that Mr Ireland told him that, "The decision in principle to make these payments was made years ago before you or I were in management positions and were effectively made once SMEC decided to engage in this type of business overseas. We are only carrying out existing policy." The applicant then arranged for an internal invoice to be raised so as to secure payment of the monies to Engineering General Consultants in Pakistan. This is the only evidence of the particular involvement of any other person in the various activities undertaken by the applicant. Taking this evidence at its highest in favour of the applicant, it demonstrates condonation by the then managing director of the then company of that activity. However, the activity was undertaken not by the respondents but by the company that operated the business prior to it being acquired by the respondents. Furthermore, the evidence of the applicant indicates that it was he personally who agreed to the payment of bribes to secure the project and it was he personally who was intimately involved in the negotiation of the process. There is no suggestion in the evidence of the applicant that he involved anyone else in the decision making process and the involvement of the managing director was undertaken merely by way of acquiescence of a transaction initiated by the applicant. It seems the applicant was the instigator of what later occurred. There is no evidence that would link Mr Ireland with the respondents to these proceedings. Accordingly, the evidence is not indicative of any acquiescence by any particular person in or the condonation by any particular person of the conduct of the applicant in agreeing to the payment of bribes undertaken on behalf of any person associated with the respondents. Furthermore, the evidence is, as I have said, indicative of the willingness and desire of the applicant personally to become involved in transactions of this kind. 218 I do not regard any of these submissions as affecting the conclusions that I have earlier reached concerning the misconduct of the applicant and the justification on the part of the respondents in summarily terminating his employment. 219 For the reasons that I have earlier set out, the applicant has failed to make out any of the grounds of unfairness that he has asserted against the respondents either within the amended summons or in the course of submissions. Furthermore, for the reasons that I have given, I have concluded that the respondents were justified in summarily dismissing the applicant from employment having regard to the response that he gave to the Board letter dated 30 August 2001. In these circumstances, the applicant's claims against the respondents must be dismissed. 220 The parties specifically agreed that costs should be reserved and I shall do so.

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

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Chew v The Queen (1991-1992) 173 CLR 626 Concut Pty Ltd v Worrell [2000] HCA 64 Daniels v Anderson (1995) 37 NSWLR 438 CASES CITED: R v Byrnes (1995) 183 CLR 501 Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79 Shepherd v Felton Textiles of Australia Ltd (1931) 45 CLR 359 South Australia v Marcus Clark (1996) 66 SASR 199

At a glance

Court

Decision date

Before

Source

Judgment (17 paragraphs)

Parties

Cases Cited (12)

Cited By (1)