Butcher v LKM Retail Stores

The discontinuance of the unfair dismissal application by the applicant was due to her real concern in being found guilty of some criminal act for the misappropriation of funds from the respondent. Case for Ms Butcher. 17 Ms Butcher filed an affidavit (Ex A) and was subject to cross examination. Ms Butcher denied that she had been dishonest or negligent in carrying out her duties. She denied being involved in any misappropriation or that she had failed to bring to the notice of the employer misappropriation of funds or that she had acted in an unprofessional or business-like manner.

Ms Butcher outlined the procedure for the return of goods both under the old ownership and the new. Post 29 August 2005, Ms Butcher was shown how to do the banking. She only carried out this function on the Manager's day off. In January 2006 she started to work every second weekend and she did the banking for these weekends as well as for Thursday morning. She stated that the tills were allocated cash and where the register tills were over at the end of the day's trading, the excess monies, if it was a large amount, was placed in the change draw. This procedure was explained to her by the store manager Ms Harvey-Williams

When she started working weekends the change draw float was $2000. When she worked at weekends the change draw did not always have $2000. That was why she always placed the excess money from the tills in the change drawer to balance the float back again. She brought this variation of the change draw float to the Manager's attention. She said that the Manager stated that if the tills are short she would top them up from the change draw to balance them.

Ms Butcher stated that at the end of January 2006 when she worked the weekends she, with another employee, would count the change draw. She found that the change draw would vary in total from around $1600 to $925. She did not report this to her Manager.

Ms Butcher stated that on one occasion she reported to Mr G. McPherson that one of the registers was $50 down and that she took money from the change drawer to balance the register. She said that she pointed out to Ms Margaret Smith the variations to the balance of the change draw.

In cross examination Ms Butcher stated that with respect to the eight specific transactions as noted in Mr McPherson's statement, she advised that in less than the space of one month she had placed $1200 from the register tills into the cash draw, in accordance with her manager's procedure.

Ms Butcher also stated that as she was becoming suspicious of these large excesses, she would write into the store's diary on the day, that she had made a transfer from the register till to the cash draw and notate the amount. This notating in the store diary she kept to herself. She in fact did not tell anyone of this practise until the day of this costs hearing.

Ms Butcher said that she told Mr McPherson on one occasion that she had taken $50 out of the cash draw and put it into a register so it would balance.

It was also accepted by Ms Butcher that with respect to the transactions that she had been involved in that she had not sighted all the documents at the time the refund was given and/or not asked the check out operator whether such documentation had been raised.

Ms Butcher stated that she noticed a number of large returns being done on weekends. She reported this to the Manager. She said that she did not bring to the Manager's attention large refunds that had been carried out on a Wednesday or a Friday as they were usually done around 6.00pm.

Ms Butcher also advised that she had printed out a number of days' reports that showed details of refunds that had taken place between February and August 2005. These reports were attached to the statement of Mr Waterhouse. An examination of these reports confirms that they were printed out on 14 May 2006. The reports covered a period of time when Mr Waterhouse owned the business. She retained these reports after she had been terminated but later, on 25 August 2006, she sent them to Mr Waterhouse, to bring to his attention the high degree of refunds that had taken place when he owned the store. She said that she had brought to the attention of Mr Burgess on 11 May 2006 some previous reports she had printed off.

Prior to sending the reports to Mr Waterhouse, Ms Butcher had spoken to him and he had replied that he "would love to see the reports."

Ms Butcher said that she became aware of the misappropriation of funds but she wanted to have it clear in her mind before she reported these issues to Management.

As previously expressed in this decision, Ms Butcher eventually reported her concerns to Mr Jim Shepherd on 11 May 2006 and sent him return reports which she believes he then sent on to Mr McPherson on 18 May 2006.

In his statement Mr Shepherd believed it was on 18 May 2006 that she spoke to him.

When investigations did commence Ms Butcher was questioned about a return that was carried out on 11 May 2006 whilst she was on shift. The employee involved was rostered to do a noon to 6.00pm shift, yet sales took place allegedly from 8.00am to 12.50pm. Management were unaware that this person had done a shift change and had worked 7.00am to 3.30pm. Ms Butcher said a notation of this shift change had been put in the diary.

On 29 May 2006 Ms Butcher said that she went to a meeting where Mr Simon Burgess said to her that she was terminated. She did not have anything to say for herself as she was very upset. She was given an envelope and left the store.

Ms Butcher said that she did not take any money. 18 Mr Walsh, on behalf of Ms Butcher, had filed submissions on costs and read to that document. The applicant denied any wrong doing or breach of her contract. She became suspicious and was undertaking investigations and brought her findings to the attention of her managers. She believed she had done no wrong and should not be penalised because she had rejected the respondent's offer and was ready to run her case.

When the applicant found out that the respondent had informed the NSW Police of the results of its investigation of its shop records it was recognised by her solicitor that any evidence or revelation of any material before this Commission could in fact assist in, or lead to, the prosecution of the applicant if action was taken by the Police. The applicant had to carefully consider her position that she could be prosecuted for material revealed before this Commission. As there was no immunity from prosecution it would have been foolish for the applicant to proceed. All the evidence before this Commission would be available to the Police to perhaps prosecute the applicant in criminal proceedings if they so chose.

The applicant then had to consider her position as to whether in fact she would be inadvertently supplying information by way of evidence that led to her prosecution in another area. In those circumstances the applicant chose not to proceed.

Mr Walsh stated that any costs that were "thrown away" in these proceedings were "thrown away" because of the action of the respondent in referring the business records to the NSW Police Service for investigation. Considerations and Decision. 19 Section 181(2) of the Industrial Relations Act 1996 is expressed in the following form: 181(2)[Commission not in Court Session] However, the Commission when it is not in Court Session may award costs only in the following cases: (a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or (b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or (c) The Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or (d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under chapter 7, as provided by sections 357 and 373. 20 If a positive finding is made under this section (the jurisdictional "gateway"), the Commission may then move to the general discretionary powers to award costs. I refer, in this respect, to the provisions of s.181(1) which are set out below:

(1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c ) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Professional Act 1987 or on any other basis. 21 Mr Juhasz submitted that the application of Ms Butcher was both frivolous and vexatious and that she unreasonably failed to agree to a settlement of her claim. Unreasonably failed to agree to a settlement. 22 An analysis of what constituted an unreasonable failure to settle was considered by a Full Bench of this Commission in Bankstown City Council v Paris: "Construing the relevant part of s. 181(2)(c) in its overall statutory context we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies. The criterion set out in the provision is to be applied objectively and requires a consideration of the whole of the conduct of the party against whom the order is sought, or some discrete part of that party's conduct, with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim. We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at least two bases. First, where there was a proposal put by a party, which could be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation in which the criterion could be satisfied is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred. Once the statutory criterion has been met, the Commission's broad powers and discretions under Section 181(1) are available for exercise." and " The relevant part of s 181(2)( c), on the other hand, does not require the Commission to focus upon the circumstances of the commencement of the proceedings, or to consider only the situation of the applicant. Instead the Commission is required to consider in a more general way, the conduct of the party in respect of which an application for costs is made; and, in that regard, to consider the conduct of the party in relation to the question of settlement of the claim." 23 I note also the comments in Phillips v Industrial Relations Commission of NSW & Anor : "The reference to the opinion of the Commission emphasises, if emphasis were required, that the criterion is to be decided by the Commission applying its own perception of what was unreasonable, as distinct from the perception (if any) of the party. This does not permit the Commission to ignore the standpoint or standards of the party concerned, but the Commission must not be captive to those matters." and the comments of Connor C in Luke v Handicapped Children's Centre : " an order for costs on the grounds of an unreasonable failure to settle the matter should be contemplated only where there is such an obdurate refusal to participate in the discussions that there has been a total frustration of the conciliation process…"

and the comments of a Full Bench of this Commission in Copperart v Martin said: 'It is clear that, in a scheme where costs are not the usual regime, the part of the Act contemplates and apprehends two distinct propositions: · that costs are not the automatic outcome of a refusal to settle; · that under certain circumstances costs are appropriate."

and the comments of the Full Bench in Orange Community Accommodation Service Incorporated and Carolyn Vivienne Roddenby said: " In our view, the test of whether a party has unreasonably failed to agree to a settlement of a claim should not be made by reference to the extent of costs expended by the other party. If that was so, a party could incur substantial legal expenses, and simply argue that any offer of settlement which failed to go close to meeting expenses, demonstrated an unreasonable failure to agree to a settlement. This is not the appropriate test under s 181(2)(c) of the Act." 24 As per Ex 1 (Agreed Facts) ,it is stated that on the day of the first and only conciliation on 11 July 2006, the respondent made an offer that the applicant discontinue the proceedings and each party pay its own costs. The applicant made a counter offer of reinstatement with back pay of 13 weeks pay which she claimed to be the balance of her employment contract with the respondent.

Post the exchange of witness statements the applicant made an offer on 10 October 2006 to settle the proceedings on the basis that the application be withdrawn and each party pay their own costs. This was rejected by the respondent on the following day and a counter offer consenting to the withdrawal of the proceedings on the condition that the applicant pay the respondent the sum of $10,000.

The following day the applicant rejected this offer and a Notice of Discontinuance was filed. 25 It is my view that the applicant did participate in the conciliation process be it during the conciliation in July, and in October. I find that the offers made by the applicant were not unreasonable. She did try to settle the matter. She did not seek to frustrate the process.

It would seem neither party then moved from their opening offer for some three months as I note that no evidence was brought before the Commission by either party as to whether any other offers were made during the period between July and October.

I therefore find that the applicant did not unreasonably fail to agree to a settlement. Was the claim frivolous or vexatious ? 26 A vexatious action is one where the party bringing the claim, is not acting in good faith and merely seeks to annoy or embarrass an opponent or which is not designed to produce any practical result. In order to bring a case within the description of frivolous and vexatious it is not sufficient merely to say that the applicant has no cause of action.

It must appear that the cause of action is, on the face of it, clearly one which no reasonable person could properly treat as bona fide and contend that the applicant has a grievance which she was entitled to bring before the court.

The tests for what is a frivolous or vexatious application focus upon the motive for the institution of the proceeding or its lack of prospects of success.

In Attorney-General v Wentworth, Roden J. of the Supreme Court stated that a proceeding was vexatious if it was instituted with the intention of annoying or embarrassing the respondent, if it was brought for a collateral purpose and not for having the court adjudicate on the issues, or irrespective of motive, if it was so obviously untenable or manifestly groundless as to be utterly hopeless.

The Commission's powers to dismiss a matter on the ground that the applicant's cause of action is frivolous or vexatious must be exercised only with caution. In General Steel Industries Inc v Commissioner for Railways, Barwick CJ summarised the position in the following manner: " I have examined the case law on the subject ....There is no need for me to discuss in any detail the various decisions...It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action-if that be the ground on which the court is invited , as is this case, to exercise its power s of summary dismissal-is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it can not possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action';' to manifest that to allow them (the pleadings) to stand would involve useless expense'. At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument'; 'so to speak apparent at a glance..." 27 Mr Juhasz stated that the applicant had filed a claim not for the bona fide purpose of obtaining a judgement. This comment was based on the applicant's action of abandoning her claim to safeguard her position in criminal proceedings that may or may not arise from the same facts. It was his submission that it was filed to obtain some monetary compensation from the respondent through some settlement of the claim. 28 He went on to say that the claim was also frivolous because of the amount of evidence that was before the Commission. 29 He also raised the issue of the applicant knowingly sending confidential information to a third person (Mr Waterhouse) thereby breaching her contract of employment. 30 In response Mr Walsh stated that Mr Waterhouse had been keen to see the reports and in no way sought to discourage the applicant Ms Butcher from sending the reports.

There was a concern that the transcript from this matter could be used in the criminal matter to differentiate in answers given to the same question. Also the concern that witnesses in this matter may incriminate themselves.

Mr Walsh also stated that just because an applicant does not accept an offer and is subsequently unsuccessful in the substantive proceedings does not of itself give rise to an award of costs pursuant to the Act.

Mr Walsh also denied that Ms Butcher's claim had been vexatious or frivolous and that his client had had an arguable case. 31 Firstly I do not believe that the applicant would have been terminated fairly for directing to the former owner Mr Waterhouse, store records of transactions that took place when he was the owner of the business. What was sent to Mr Waterhouse were reports of his own business.

The respondent may well have had grounds for termination if the records that had been sent to Mr Waterhouse had been for transactions that had occurred after the business had been sold. 32 The matter before this Commission is not one of determining whether the termination of Ms Butcher was harsh, unreasonable or unjust. It is a claim by the respondent for costs of a matter that did not proceed to arbitration. 33 After hearing all the evidence in this costs application I have not been convinced that Ms Butcher's original unfair dismissal claim was either vexatious or frivolous.

If, as Mr Juhasz stated, the application was made on the basis of forcing a monetary settlement, then her tactics were to say the least strange. She made one offer to settle for a thirteen week payment during the first conciliation date, then made no further monetary claim.

If the purpose of her application was to reach some financial settlement then one would imagine that a number of diminishing monetary based offers would have been made to the respondent.

Taking into consideration the descriptions of applications by Barwick CJ as expressed above, I cannot conclude that Ms Butcher's application could be described as fitting one of those categories.

In my view the applicant held a bona fide view that she had been unfairly terminated, that she had not stolen any money nor been a part of stealing any money. She submitted that she had held concerns over high dollar refunds prior to being approached by management. Whilst she did not have answers for all the questions posed to her in cross examination, and some answers as to what she alleges she was told to do by the store manager with respect to excess money, were contrary to my experience, she had at the very least an arguable case.

I note that from the evidence of the respondent, that it was on 15 May 2006 that Mr Shepherd notified Mr McPherson by fax, copies of high dollar refunds from the Evans Head store.

It was the respondent's submission that Ms Butcher first made contact with Mr Shepherd on 18 May as per her concerns over high dollar refunds, only after she witnessed the physical investigations by Mr McPherson and Mr Shepherd taking place at the Evans Head store on 16 and 17 May 2006.

The applicant stated that she had spoken to Mr Shepherd earlier on 11 May with respect to her concerns.

What we do know, and it is agreed between the parties, that Ms Butcher down loaded reports on 14 May 2006 (the reports eventually being sent to Mr Waterhouse) showing high value returns, the day before management commenced their investigation and therefore before she would have known about their investigation. 34 In summary it is my finding that Ms Butcher's application was neither vexatious or frivolous nor did she unreasonably fail to agree to a settlement of her claim. 35 The application for costs in this matter made by LKM Retail Stores Pty Limited trading as Farmer Charlies is dismissed.

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