Appeal against decision and order - termination of employment - valid reason.

[1] This decision deals with an appeal, for which leave is required, under s.45 of the Workplace Relations Act 1996 (the Act) by Intercontinental Ship Management Pty Ltd (the appellant) against a decision[1] and order[2] made by Senior Deputy President Drake on 19 December 2003. Her Honour found that the respondent's termination of employment was harsh, unjust or unreasonable because there was not a valid reason for the termination of his employment, that it is appropriate that there should be an order for a remedy and that reinstatement is the appropriate remedy. The decision and order had the effect of reinstating Mr B Culpeper (the respondent) from 12 January 2004. The termination of employment had resulted from a fight between the respondent and another employee, Mr P Evans, on 22 January 2003.

[2] On 6 January 2004, Marsh SDP heard an application for a stay of Drake SDP's order and on 7 January 2004 she issued the following stay order:

"A. Further to a decision by the Commission dated 7 January 2004 (PR942521) the Commission orders that:

1. The order of Senior Deputy President Drake dated 19 December 2003 [PR942521] will be stayed.

2. The appellant will place the respondent on the pay roll and pay him his full salary pending the outcome of the appeal. (This is on the undertaking that any income received by Mr Culpeper will be refunded to the appellant in the event the appeal succeeds and the Full Bench rescinds the order of Senior Deputy President Drake reinstating Mr Culpeper).

3. The appellant shall pay into an interest bearing trust account in the names of the solicitors of both parties, the accrued monies to be paid to Mr Culpeper as provided for in paragraph 4 of Senior Deputy President Drake's order.

B. This order shall operate from 12 January 2004 and remain in force until the appeal against the order of Senior Deputy President Drake of 19 December 2003 is determined or until further order of the Commission."

[3] On 29 January 2004, the appellant's solicitors filed an application to vary the stay order by revoking the obligation on the appellant to make payments to Mr Culpeper pending the outcome of the appeal. In essence, it was submitted Mr Culpeper had misled the appellant and the Commission as to his circumstances.

[4] Senior Deputy President Marsh heard the application to vary the stay order on 17 February 2004 and decided[3]:

"[16] ... I have weighed in the balance whether I should revoke item A.2 of my order. Given the absence of any evidence that allows me to draw adverse inferences with respect to Mr Culpeper either misrepresenting the fact of his employment to his legal representatives or the reason he resigned and left the ship on 7 January 2004, I have decided not to vary the stay order. ..."

[5] The appeal was heard in Sydney on 24 February 2004. Ms S Zeitz with Mr I Ives appeared for the appellant and Mr I Taylor of counsel with Mr N Keats appeared for the respondent, Mr Culpeper.

[6] An appeal to the Full Bench lies only by leave of a Full Bench (s.45(1)). A Full Bench must grant leave to appeal if, in its opinion, the matter is of such importance that, in the public interest, leave should be granted (s.45(2)). Otherwise, a grant of leave is governed by the conventional considerations for the grant of leave to appeal by an appellate court which include whether the decision is attended with sufficient doubt to warrant its reconsideration or whether substantial injustice may result if leave is refused. It is not appropriate to grant leave unless an arguable case of appealable error is demonstrated.

[7] The need for an appellant to demonstrate error is made explicit in the case of appeals from orders made in connection with an application under s.170CE. In particular, s.170JF(2) provides:

"For the avoidance of doubt, an appeal to a Full Bench under section 45 in relation to an order made by the Commission under Subdivision B of Division 3 may be made only on the grounds that the Commission was in error in deciding to make the order."

[8] In Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission[4], in relation to the nature of an appeal under s.45 of the Act, the High Court said:

"Because a Full Bench of the Commission has power under s 45(6) of the Act to receive further evidence on appeal, an appeal under that section is properly described as an appeal by way of rehearing. And because there is nothing to suggest otherwise, its powers under sub-s (7) are exercisable only if there is error on the part of the primary decision-maker. And that is so regardless of the different decisions that may be the subject of an appeal under s 45."

[9] The nature of the error that is necessary for a Full Bench review of a discretionary decision of the kind here under consideration was re-stated in Coal & Allied in the following way:

"Because a decision-maker charged with the making of a discretionary decision has some latitude as to the decision to be made, the correctness of the decision can only be challenged by showing error in the decision-making process [See Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 518-519 per Mason and Deane JJ]. And unless the relevant statute directs otherwise, it is only if there is error in that process that a discretionary decision can be set aside by an appellate tribunal. The errors that might be made in the decision-making process were identified, in relation to judicial discretions, in House v The King in these terms:

`If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.' [(1936) [1936] HCA 40; 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ]"

[10] The Full Bench in Barrick v Qantas Flight Catering Limited[5] reviewed leading authorities on appeal principles, including Miller v University of New South Wales[6], and concluded:

"[45] The effect of those cases is that, leave to appeal having been sought on the basis of an alleged error in the decisional process, a Full Bench will need to consider whether it is `seriously arguable' that the decision subject to review was wrong on the point taken, and that any such order was of a kind that causes the decision to be attended with sufficient doubt to warrant its being reconsidered, or that substantial injustice would result if leave were refused. Subsection 45(2) supplies a distinct test for the Commission to apply when determining whether to grant leave to appeal in a particular case on the ground of importance in the public interest."

[11] In Construction, Forestry, Mining and Energy Union v AIRC[7] the Full Court of the Federal Court held, with respect to the granting of leave under s.45, that:

"It can be seen from s.45(1) that an appeal lies to a Full Bench only with the leave of the Full Bench. Section 45(1) confers a power on the Full Bench to grant leave and s.45(2) requires a Full Bench to grant leave if it forms the opinion that the matter is of such importance that in the public interest leave should be granted. The formation of that opinion dictates that leave be granted. Section 45(2) does not prescribe the test for the grant of leave. It requires the Full Bench to grant leave, if the Full Bench forms the requisite opinion. The conventional considerations for the granting of leave, including whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Bench, or whether substantial injustice would result if leave were refused, supposing the decision to be wrong, are not replaced by a different test: rather, s.45(2) provides a further, and obligatory, basis for the grant of leave."

[12] We apply these principles in this matter.

[13] With the exception of ground 7 of the appeal, which goes to her Honour's findings in relation to remedy, the grounds in the appeal are against the discretionary decision of her Honour in finding that Mr Culpeper's termination was harsh, unjust or unreasonable. As such, we are required to apply the principle of whether it was reasonably open to her Honour to make the findings on which she based her determination.

[14] The appellant's grounds of appeal are as follows:

"1. The Commission erred at law in finding that the dismissal of Mr Culpeper was `harsh, unjust and unreasonable'.

2. The Commission's findings were against the weight of evidence and not reasonably open to it.

3. The Commission erred at law by applying the incorrect test and focusing on whether or not the respondent was the aggressor ...

4. The Commission erred at law by finding there was not a valid reason for dismissal ...

5. The Commission erred at law by finding that, if there was a valid reason, then other factors would render the dismissal `harsh, unjust and unreasonable' ...

6. The Commission erred at law by giving weight to an irrelevant consideration being the animosity between the Respondent and Evans in determining whether the dismissal was `harsh, unjust or unreasonable'.

7. The Commission erred at law in awarding re-employment to Mr Culpeper ..."

[15] The appellant's written outline of submissions provides a succinct summary of the facts in the matter which were not in contention:

1. The Appellant employed Mr Culpeper in a senior position of responsibility as a Chief Engineer on board a vessel it managed.

2. Mr Culpeper had a disagreement with another employee, Mr Evans. There were no other witnesses to the incident.

3. Mr Culpeper and Mr Evans both claim that they were attacked without provocation by the other.

4. Mr Evans suffered significant injuries, as a consequence of which he was hospitalised.

5. Mr Culpeper suffered minor injuries that required no treatment.

6. An investigation was carried out on behalf of the Appellant, and the Appellant formed the view that Mr Culpeper had engaged in serious misconduct, being the assault upon Mr Evans.

[16] It also outlined the `salient features' of her Honour's decision which were not in contention:

"17.1 there had been a fight between Mr Culpeper and Mr Evans on 22 January 2003 (paragraph 4);

17.2 Mr Culpeper and Mr Evans were both Chief Engineers on the same vessel (paragraph 11);

17.3 Mr Culpeper suffered bruising to his chest and neck (paragraph 13);

17.4 Mr Evans had broken bones in his hands, and was bleeding from an injury to his head (paragraph 14)."

"18.1 the employer was in a difficult position and had various difficult choices before it (paragraph 31);

18.2 she could not reliably conclude that Mr Culpeper attacked Mr Evans or that Mr Evans attacked Mr Culpeper (paragraph 37);

18.3 there was insufficient material to conclude on balance that the aggressor was Mr Culpeper (paragraphs 37, 40, 41, 42, 44, 50);

18.4 she could not explain the applicant departing the room with a weapon in his hand unless he intended to defend himself (paragraph 38);

18.5 there was no valid reason for termination (paragraph 46);

18.6 if her Honour was wrong on the existence of a valid reason for the termination, the dismissal would be harsh particularly given the `one off' nature of the offence, and its consequences for the personal and economic situation of the applicant (paragraph 47);

18.7 although termination of both employees in such a situation would usually be the case, in this matter one was the aggressor and the other was innocent. Her Honour said it could only be `one or the other' (paragraph 49)."

[18] We turn to consider whether her Honour erred:

• in not correctly applying the correct legislative test in determining whether the termination was harsh, unjust or unreasonable;
• in finding there was no valid reason for the termination of the respondent; and
• in the remedy she ordered.

[19] Before turning to the first matter, we summarise the proper approach to be taken to a finding in respect of whether the termination based on misconduct was harsh, unjust or unreasonable:

• The Commission is obliged to make a finding as to whether or not there is a valid reason for the termination of the employment.(Edwards v Giudice, Moore J, [1999] FCA 1836; 94 FCR 561)
• The reason must be "sound, defensible and well founded". (Selvachandran v Peteron Plastics Pty Ltd, Northrop J, 62 IR 371)
• The appellant carries the onus of establishing a valid reason.
• In a matter in which the termination is based on the conduct of the employee, the Commission must determine that the conduct took place. (Edwards v Giudice, Moore J, [1999] FCA 1836; 94 FCR 561)
• In determining whether the alleged conduct took place and what it involved, the Commission must make a finding on the basis of the evidence in the proceedings before it. The test is not whether the employer believed, on reasonable grounds after sufficient enquiry, that the employee was guilty of the conduct which resulted in termination. (King v Freshmore, Ross VP, Williams SDP and Hingley C, Print S4213)
• It is not the Court's function to stand in the shoes of the employer and determine whether or not the decision made by the employer was a decision that would be made by the Court but rather it is for the Court to assess whether the employer had a valid reason connected with the employee's capacity or conduct. (Walton v Mermaid Dry Cleaners Pty Ltd, Moore J, 142 ALR 681)
• In deciding whether there is a valid reason, the Commission must look at the applicant's conduct and determine on the balance of probabilities what that conduct was and whether it took place.(Farrugia v Transadelaide, SAIR 6, Stevens DP)
• In matters involving misconduct there is an onus on the employer to establish that the misconduct took place. (YEW v ACI Glass Packaging Pty Ltd, Wilcox CJ, 71 IR 201)
• Misconduct justifying dismissal is conduct that is so serious that it goes to the heart of the contract. (North v Television Corporation, Smithers, Franki and Evatt JJ, 11 ALR 599)
• Serious misconduct will usually justify summary dismissal and will rarely support a finding that a dismissal was "harsh, unjust or unreasonable". (R v Industrial Court; ex parte Mt Gunson Mines Pty Ltd, King CJ, 30 SAIR 504)
• A termination may be harsh because it is disproportionate to the gravity of the misconduct.(Byrne v Australian Airlines Limited, High Court per McHugh and Gummow J, 185 CLR 410)

• The attitude of industrial tribunals to misconduct based on fighting is summarised by a Full Bench in Tenix Defence Systems Pty Ltd v Fearnley[8] (footnotes omitted):

"[22] Before dealing with each of these submissions we wish to make some brief observations on the approach taken by industrial tribunals when fighting or an assault has been established. In AWU-FIME Amalgamated Union v Queensland Alumina Limited Moore J summarised the relevant decisions in the following passage:

`What emerges from these decisions is that whether a dismissal or termination arising from a fight in the workplace is harsh, unjust or unreasonable will depend very much on the circumstances. However, generally the attitude of industrial tribunals tends to be that in the absence of extenuating circumstances, a dismissal for fighting will not be viewed as harsh, unjust or unreasonable. The extenuating circumstances may, and often do, concern the circumstances in which the fight occurred as well as other considerations such as the length of service of the employee, including their work record, and whether he or she was in a supervisory position. As to the circumstances of the fight, relevant considerations include whether the dismissed employee was provoked and whether he or she was acting in self defence.'

[23] Not dissimilar views, albeit in a different statutory context, have been expressed by a Full Bench of the Industrial Commission of South Australia in Torbet v Commissioner for Public Employment as follows:

`In considering what was the appropriate remedy for the misconduct a strong push on the chest where both participants were screaming at each other, the employer seems to have regarded dismissal as the only remedy. The evidence of Mr Keeley strongly suggests that the committee of enquiry, having reached the conclusion that an assault had taken place, thought it had no alternative than to dismiss the employee. But what this employer needed to consider was whether, upon weighing up the seriousness of the assault against the mitigating or extenuating circumstances, dismissal should occur, or whether some other and less serious punishment was appropriate. In reaching that decision the employer would also need to take into account the competing necessity to establish and retain discipline amongst its employees.'

[24] The above passages were cited with approval by a Full Bench of the Commission in Mobil Oil v Giuffrida. We also note the following observation by the Federal Court - in another fighting case - Qantas Airways Limited v Cornwall:

`We accept that in this case ... it is necessary to examine the circumstances surrounding the conduct relied on, which constitute the `relevant factual matrix', to decide whether the termination was supported, in the words of the statute, by `a valid reason ... connected with the employee's ... conduct'. As was said in Cosco Holdings and in Allied Express Transport, a valid reason is one which is `sound, defensible, or well-founded'. But it is important to remember that the governing words are those of the statute, and that attempts at judicial explanation should not be substituted for the statutory provision. The question remains whether, the employer having terminated the employee's employment, there was a valid reason connected with the employee's conduct.

We have already stated that the respondent, in the present case, struck his supervisor. That is not now in dispute. Nor is it in dispute that Qantas acted on this conduct as a reason when it terminated the respondent's employment. The question is whether there was a valid reason. In general, conduct of that kind would plainly provide a valid reason. However, conduct is not committed in a vacuum, but in the course of the interaction of persons and circumstances, and the events which lead up to an action and those which accompany it may qualify or characterize the nature of the conduct involved.'

[25] We think these authorities support the view that in determining whether there is a valid a reason for a termination of employment arising from a fight in the workplace the Commission should have regard to all of the circumstances in which the fight occurred including, but not limited to:

- whether the terminated employee was provoked and whether he or she was acting in self defence;

- the employer's need to establish and retain discipline amongst its employees; and

- the service and work record of the employee concerned."

• In deciding whether a termination is harsh, unjust or unreasonable the Commission will have regard to each of the matters in s.170CG and apply the statutory test of a "fair go all round".

[20] We turn next to a consideration of whether her Honour misapplied the correct legislative tests in her approach to determining whether the respondent's termination was harsh, unjust or unreasonable.

[21] Central to the appellant's grounds of appeal was the flawed reasoning of her Honour in focussing exclusively, in making factual findings, on who was the aggressor in the fight as being the test relevant to a decision of whether or not there was a valid reason based on the conduct of the employee (s.170CG(a)). It was acknowledged before her Honour that the question of who was the aggressor was a central tenet of the case:

[PN1779] MS ZEITZ: "The ALH case then talks about, in determining whether there is a valid reason for termination arising from a fight or an assault in the workplace the Commission should have regard to all of the circumstances in which the fight occurred, including but not limited to whether the terminated employee was provoked and whether he or she acted in self defence and that we acknowledge is the issue of self defence and who was the aggressor is the central issue for this Commission to decide."

[22] It was accepted on appeal that her Honour correctly carried out the task she was required to perform in determining whether there was a valid reason for Mr Culpeper's termination:

"[36] I have considered the circumstances surrounding this fight and all of the available evidence. I have not reviewed the decision of Mr Moran as if I was hearing an appeal from his decision. I have considered all the facts and the evidence independent of Mr Moran's review and reports."

[23] It is in contention on appeal, however, that her Honour misdirected herself by confining her review of the evidence and the facts to determining who was the aggressor and in so doing her decision was fundamentally flawed as a matter of law.

[24] In particular, her Honour was in error in:

• finding that, because she could not determine who the aggressor was, there was no valid reason pursuant to s.170CG(3)(a) for Mr Culpeper's termination:

"[40] In my view there is insufficient evidence to draw a safe adverse finding regarding either the applicant or Mr Evans. The factual situation is not able to be satisfactorily or safely resolved."

"[46] For the reasons outlined in my decision I have decided that the termination of the applicant's employment was harsh, unjust or unreasonable because there was not a valid reason for the termination of his employment."

"[47] Should I be wrong in relation to the existence of a valid reason for the termination of the applicant's employment I have considered whether the termination of the applicant's employment, where there can be no certainty as to who was the aggressor in the fight the subject of the termination of employment, would be harsh because it would be disproportionate to the gravity of the misconduct in respect of which the employer acted. I have concluded it would be harsh particularly given the `one off' nature of the offence. It would be harsh in its consequences for the personal and economic situation of the applicant."

[25] The appellant submitted that by confining her enquiry to a determination of who the aggressor was in the fight her Honour failed to consider other aspects of the evidence salient to a consideration of s.170CG(3)(a):

"30.1 the fact that one party instigates the fight, does not mean that the other party is blameless. The reference by the Commission to such a clear-cut assessment misunderstands the test and the realities of the situation ...

30.2 a response may be excessive and inappropriate, and give rise to a valid reason;

30.3 even if it is not possible to identify the `aggressor', this does not mean that a valid reason cannot be established."

[26] It is thus put on appeal that even if Mr Culpeper was acting in self-defence and Mr Evans was the aggressor, there may nevertheless be circumstances which establish a valid reason.

[27] The appellant submitted that her Honour should have applied the test of the balance of probability in her assessment of the evidence in determining that there was a valid reason for Mr Culpeper's termination and in failing to do so she misdirected herself.

[28] We have already set out the task her Honour ascribed to herself (paragraph [22] above). In undertaking that task, her Honour concluded that (paragraph [37]) "it is impossible to reliably conclude that the applicant attacked Mr Evans or indeed that Mr Evans attacked the applicant".

[29] In reaching her conclusion, Drake SDP made clear the standard of proof she was applying was not the (paragraph [37]):

"criminal standard `beyond reasonable doubt', even though the actions alleged by each employee against the other involve criminal conduct. I have considered whether there is sufficient material to conclude on balance that the aggressor was the applicant. I have not been able to draw that conclusion."

"I have found that it is not possible for me to determine that he was the aggressor. I can only safely conclude that he was involved and that there is a fifty percent chance he was the aggressor and a fifty percent chance he was the victim."

[30] Taken in context we are content that the standard of proof identified by her Honour in her inquiry into who was the aggressor was the balance of probabilities.

[31] A full reading of her Honour's decision discloses that she undertook the task she set herself (see paragraph [22] above) and she makes express reference to matters which she took into account in reaching her conclusion. At paragraph [38], her Honour says:

"[38] I cannot explain the applicant departing the room with a weapon in his hand unless he intended to defend himself from attack. I find the explanation provided by Mr Evans for the marks on the applicant's neck unlikely. The past history of complaint by Mr Evans concerning the applicant; the possibility that he had consumed some alcohol, no matter how small; and the injury to his hand, which is in my opinion, consistent with his having punched someone, are factors which might have shifted my conclusion more in the direction of Mr Evans than the applicant as the aggressor. There was no medical evidence as to whether or not the injuries to Mr Evan's hand were consistent with having punched with that hand."

[32] In particular, it is clear that her Honour had express regard, in weighing the evidence, to the likelihood that Mr Culpeper was acting in self-defence and to the extent of the injuries sustained by Mr Evans:

"[39] My attention has been drawn to the conversation between Mr Evans and the applicant prior to the fight erupting. I have been asked to draw inferences from it. However I believe that opposing inferences are equally available from that conversation. It could demonstrate the extent of Mr Evans' discontent which was likely to spill out into violence or it could equally be a statement which provoked the applicant into a violent reaction after years of criticism. Either is possible."

[33] Her Honour also had regard to but dismissed other "subjective matters" raised by the respondent in the appeal:

"[44] He referred me to various subjective matters related to the applicant ie; his long term service, his seniority, the financial and other consequences of termination as well as the fact that the respondent was on notice of the ill will between Mr Evans and the applicant. I do not find this submission persuasive. However I do not believe there is any evidence that supports any safe finding that the applicant was the assailant of Mr Evans."

[34] In her application of the statutory requirements, her Honour in making a finding in relation to s.170CG(3)(e) said (in paragraph [45]):

". In relation to ss.170CG(3)(e) I have considered various subjective matters concerning the applicant including his long term service, his seniority, the financial and other consequences of termination as well as the ill will between Mr Evans and the applicant."

[35] Her Honour balanced other considerations in determining that the termination was harsh, unjust or unreasonable in the context of a finding that there was a valid reason for the termination:

"[47] Should I be wrong in relation to the existence of a valid reason for the termination of the applicant's employment I have considered whether the termination of the applicant's employment, where there can be no certainty as to who was the aggressor in the fight the subject of the termination of employment, would be harsh because it would be disproportionate to the gravity of the misconduct in respect of which the employer acted. I have concluded it would be harsh particularly given the "one off" nature of the offence. It would be harsh in its consequences for the personal and economic situation of the applicant."

[36] We turn to a consideration of whether her Honour applied the correct tests in finding there was no valid reason for Mr Culpeper's termination.

[37] It was argued on appeal that her Honour misdirected herself in not establishing, on all the evidence, whether a valid reason for Mr Culpeper's termination existed. This submission proceeded on the basis that, even accepting her Honour's finding on who started the fight, the evidence revealed that the employer had nevertheless established that misconduct had occurred and thus there was a valid reason for the termination of Mr Culpeper's employment.

[38] On appeal the appellant put that her Honour failed to draw the following inferences from evidence that was not in dispute that Mr Culpeper:

"34.1 had been involved in a fight with another employee;

34.2 had struck the other employee with sufficient force to cause him to be hospitalised;

34.3 was unable to give any plausible explanation as to how Mr Evans came to suffer his injuries;

"35. The only viable inference to be drawn on this evidence was that Mr Culpeper had violently assaulted another employee and, whether or not there was some degree of merit in his claim of self defence, had acted excessively.

36. Had the Commission drawn the appropriate inferences, it could only have concluded that there was a valid reason for termination."

[40] The respondent sought to refute the appellant's arguments:

"66. At paragraph 34 the appellant sets out some matters that it says `were not in dispute'. As to those matters:

a) it is accepted that the respondent was in a fight with another employee;

b) it is accepted that the other employee had to have medical treatment, however it is not accepted that this was necessarily as a result of being struck by the respondent. As noted above, the blow to the head may have been caused when Mr Evans was pushed off the respondent and fell back on to something and the broken finger bones were consistent with Mr Evans punching someone;

c) it is certainly not accepted that the respondent `was unable to give any plausible explanation as to how Mr Evans suffered his injuries'. There were quite plausible explanations, as already noted, and even if the respondent did cause the injuries by striking Mr Evans that occurred in circumstances where he was acting in self-defence;

d) the fact that the respondent suffered lesser injuries is not to the point. He suffered bruising to the neck consistent with being held down and choked by two hands, and bruising to the chest consistent with being punched in. While they were injuries that ultimately (and fortunately) amounted only to bruising, they clearly could have been caused by conduct that was quite dangerous.

67. Further in response to paragraph 34, even if the matters set out there are taken at their highest against the respondent, they do not amount to `proof' of misconduct. They are consistent with self-defence, and accordingly do not provide a basis for concluding that the Commission made an obvious error in finding that on the balance of probabilities the appellant had failed to prove the existence of a valid reason for the dismissal.

68. Certainly those factors, even taken at their highest, do not lead to the conclusion asserted in paragraph 35 of the appellant's submissions that the `only viable inference' is that the respondent violently assaulted another employee."

[41] It was common ground on appeal that the reason for the termination of Mr Culpeper was misconduct and that her Honour was obliged to consider whether the alleged conduct had occurred[9] and that the respondent at first instance had the onus to prove that an act of serious misconduct had occurred.

[42] The appellant argued that it had made out the onus upon it to establish serious misconduct by the respondent even in circumstances where the Commission could not determine who was the aggressor. In other words, there was evidence on which to make a finding that Mr Culpeper became the aggressor even if he didn't start out being the aggressor.

[43] The respondent argued that the evidence must be sufficient to enable a positive finding that Mr Culpeper fought with Mr Evans other than in self-defence:

"27. The effect of the authorities set out in the paragraphs above is that in this particular case the respondent had the onus to prove to the Briginshaw standard of satisfaction that the respondent fought with Mr Evans other than in self-defence."

[44] Whilst we agree with the respondent that if the employer fails to prove the misconduct occurred then there is no valid reason for the dismissal, it cannot be decided only on the narrow test of whether or not he was the aggressor or acting in self-defence. All the circumstances of the fight must be taken into account. This much is clear from authorities. (See Tenix quoted in paragraph [19] above.)

[45] The respondent relied on Yew v ACI Glass Packaging Pty Ltd[10] where (p.205) Wilcox CJ said:

... But, as Moore J recognised, it is too simplistic an approach to say that any employee involved in a fight is guilty of serious misconduct and, therefore, there is a valid reason for that employee's dismissal. The employee may have been the victim of an unprovoked attack and have acted in self-defence. If a `no fighting' policy is to be enforced fairly, the employer must look behind the fight itself and examine its causes. It is also essential, I think, to ensure there is nothing in the work environment, or the conduct of other employees, that might incite an employee to resort to violence."

"... If, as I must, I have to determine the question whether ACI has established the existence of a valid reason for the termination by reference to Mr Yew's, and not Mr Swadling's, account of the incident, I must conclude that ACI has not discharged the onus it bears."

[46] In the circumstances of this matter it has been put that relevant circumstances to which the Commission should have regard are as set out in paragraph [19] above.

[47] The appellant identified a number of considerations arising out of the evidence which her Honour should have taken into account in determining whether the appellant had met the onus of proof with respect to misconduct by Mr Culpeper. It argued that even if it is not possible to identify who was the initial aggressor, the appellant discharged its onus in establishing an act of misconduct had occurred and a valid reason existed for Mr Culpeper's termination. In summary, it submitted:

[PN354] MS ZEITZ: "... What the appellant established before her Honour was the seriousness of the injuries to Mr Evans; that it had conducted an investigation; and had concluded or had ascertained a number of facts that were inconsistent with Mr Culpeper's account."

• the existence of blood splashes on the Chief Engineer's side of the desk and on a stapler that was located in the office;
• a failure by Mr Culpeper to establish how Mr Evans sustained his injuries;
• the unchallenged factual evidence set out in Mr Moran's report, such as the location of blood stains;
• Mr Evans'evidence that he was hit by a stapler;
• Mr Evans' reporting of the incident;
• Mr Culpeper's action in leaving the vessel and his failure to give a reasonable explanation of why he did not report the matter; and
• the evidence of Mr Azim which was unchallenged and which sets out what occurred after the incident.

[49] We have formed the view that her Honour, in deciding a valid reason did not exist for the termination of the respondent's employment because she could not decide who was the aggressor, failed to take into account relevant considerations and make an explicit finding on whether the applicant's involvement in the fight constituted misconduct, which she was required to do before deciding whether or not there was a valid reason. As the authorities make clear, the Commission is obliged to have regard to all the circumstances in which the fight occurred. Her Honour concentrated her consideration to the issue of who was the aggressor and in doing so did not have regard to all the evidence, including a number of factual issues raised by the appellant.

[50] In relation to her Honour's fallback position, if she was wrong on her finding that there was no valid reason for the termination (paragraph [47]), we have formed the view that she erred because she failed to have regard to factors which could have led her to make inferences that, regardless of who the aggressor was, Mr Culpeper's conduct was excessive and inappropriate and was an act of misconduct substantiating the existence of a valid reason.

[51] Having determined that her Honour erred in her approach to establishing the existence of a valid reason, we are not required to consider whether it was open to her to find that the termination was "harsh" or her failure to apply the principle of a "fair go all round".

[52] It was argued by the appellant that Drake SDP made an error of law by failing to take into account the legislative requirements of s.170CH. We accept that her Honour correctly set out those requirements in the body of her decision. However, she failed to expressly have regard to each of the factors identified in s.170CH.

[53] We are satisfied that her Honour provided reasons which led her to exercise her discretion and order reinstatement. We are further satisfied that these reasons reflect some of the requirements of s.170CH, but not all. By failing to make specific findings with respect to each of the requirements her Honour erred.

[54] In the Federal Court judgement in Edwards v Giudice[11], Moore J said:

"11. ... In my opinion the subject matter of the power to arbitrate under s170CG, when taken together with the conditional right of appeal conferred by s45 and the grounds of appeal in s170JF, point to the conclusion that the Commission is, when determining an application under s170CE by arbitration, obliged to give reasons for its decision which deal with the material legal and factual issues presented for determination and which deal with the matters the Commission must consider because of s170CG(3) and the relevant provisions of s170CH. The power conferred by s45(6)(b) is, in my opinion, not directed to the provision of reasons by the primary decision maker against whose decision or order an appeal is brought. That provision is intended to facilitate the hearing of an appeal where the Full Bench seeks to investigate itself issues that were not investigated or investigated fully at the original hearing."

[55] In AHL Group Pty Ltd t/a Royal Exchange Hotel v Mulhall[12] the Full Bench said (footnotes omitted):

"[51] Each of the pars (a) to (d) of s.170CG(3) requires the Commission to have regard to `whether' a circumstance existed. Whether it existed must then be taken into account, considered and given due weight as a fundamental element in determining whether the termination was harsh, unjust or unreasonable. A consequence of this construction of s.170CG(3) is that the Commission is obliged to make a finding in respect of each of the circumstances specified in ss.170CG(3)(a) to (d) in so far as each of these paragraphs is relevant to the factual circumstances of a particular case."

[56] The same consideration applies to the statutory requirements under ss.170CG and 170CH.

[57] In P&O Catering Services Pty Ltd v Kezich[13], the Full Bench said:

"[15] We agree, with respect, with Justice Moore's view that the use of the words `have regard to' (and variants thereof) indicates that each of the matters listed immediately after that expression `must be treated as a matter of significance in the decision-making process'. Although Justice Moore was directly concerned with the operation of s.170CG(3), the same approach is required in discharging the obligation imposed upon the Commission by s.170CH. In giving consideration to the various matters set out in the subsections each of the steps involved must be properly considered. In particular the matters specified in s.170CH(2) and, if relevant, s.170CH(7) must be treated as matters of significance."

[58] In Henderson v Department of Defence[14] the Full Bench said:

"[24] We consider that it is clear that, in reaching his decision as to what, if any, remedy was appropriate, the Commissioner did not treat each of the circumstances as a matter of significance in deciding that reinstatement was not an appropriate remedy but that a sum in lieu of reinstatement was. Failure to do so constitutes error for the purposes of s.170JF(2)."

[59] It follows that in failing to expressly have regard to each of the matters in s.170CH her Honour made an error at law.

[60] We grant leave to appeal. We uphold the appeal in respect of her Honour's findings in relation to valid reason and reinstatement. The order of Senior Deputy President Drake[15] will be set aside[16]. The effect of this will be that the stay order of Senior Deputy President Marsh[17] will no longer be in force.

[61] We have given consideration as to how to dispose of the matter. Both parties indicated to us that in the event we upheld the appeal in whole or in part that they wished to be heard in respect of the matter. Pursuant to s.45(7)(c) of the Act, we issue a direction that another Member of the Commission hear and determine the matter in accordance with this decision.

[62] We are mindful of the need to bring this matter to finality. Commissioner Hoffman will conduct a conciliation conference as soon as practicable if both parties consider there is merit in endeavouring to resolve the matter in that way.

Ms S Zeitz with Mr I Ives appeared for the appellant, Intercontinental Ship Management

Mr I Taylor of counsel with Mr N Keats appeared for the respondent, Mr Culpeper

Printed by authority of the Commonwealth Government Printer

4 [2000] HCA 47; 74 ALJR 1348 (2000) (Gleeson CJ and Gaudron and Hayne JJ)

5 PR913634 (2002) (Munro J, Lacy SDP and Hoffman C)

6 104 IR 415 (2001) (Beaumont ACJ, Ryan and Madgwick JJ)

7 159 ALR 1 at p.20 (1999) (Spender, Moore and Branson JJ)

8 Print S6238 (2000) (Ross VP, Polites SDP and Smith C)

9 Edwards v Giudice [1999] FCA 1836; (1999) 94 FCR 561 at 564 (Moore J)

11 FCA 1836 (1999) (Moore, Marshall and Finkelstein JJ per Moore J)

12 117 IR 357 at 369 (2002) (Ross VP, O'Callaghan SDP and Redmond C)

13 Print S5158 (2000) (Giudice J, Ross VP, Gregor C)

14 Print S8591 (2000) (Giudice J, Williams SDP and Huxter C)