Elafchal v Rail Corporation of New South Wales

PROCEEDINGS BEFORE THE BOARD 5In argument before the Board the parties paid considerable attention to the relevance of the decision of Vice President Ross in Rose v Telstra Corporation Ltd [1998] AIRC 1592. That case also dealt with out of normal hours behaviour and the circumstances in which such behaviour could be relied upon by the employer to terminate the services of an employee. Vice President Ross discussed in some detail the changing nature of master and servant relationships and the different circumstances applying under modern contracts of employment. 6In Rose the Australian Industrial Relations Commission was dealing with an application for relief brought under s 170CE of the Workplace Relations Act 1996. That statutory provision required the Commission to have regard to a number of matters, including whether there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer's undertaking. In the course of discussion, Vice President Ross made the following observations: The concept of a duty of fidelity and good faith is used as a matter of convenience to subsume a range of obligations which are intended to ensure that the employee renders honest and faithful service to the employer. They include:

• an obligation not to damage the employer's interests by disclosing or using confidential information obtained in the course of employment;
• an obligation to act honestly in handling the employer's property;
• an obligation not to earn any secret profits and
• an obligation not to engage in employment outside of the hours devoted to their main job where the spare time work is for a competitor of the main employer and may damage the employer's business The obligations imposed by the common law duty of fidelity and good faith operate to prohibit acts outside of the employment which are inconsistent with the continuation of the employment relationship. But as Spender AJ observed in Cementaid (NSW) Pty Ltd v Chambers: an actual repugnance between the employee's acts and his relationship with his employer must be found More recently the implied term of fidelity and good faith has been expressed as an obligation to serve the employer loyally and not to act contrary to the employer's interest. In England this obligation appears to have been subsumed by the more general obligation of mutual trust and confidence The implied term of mutual trust and confidence imposes reciprocal duties on the employee and employer that they shall not without reasonable and proper cause, conduct themselves in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. If conduct objectively considered is likely to cause serious damage to the relationship between employer and employee then a breach of the implied obligation may arise There is some support for the proposition that the existence of an implied term of trust and confidence in contracts of employment has been accepted in Australia The words trust and confidence' in this context are used in a contractual sense rather than as an ingredient of a personal relationship. As McCarry notes: ... the words trust and confidence', just like the employee's reciprocal duties of fidelity and good faith', do not now refer to the ingredients of a personal relationship, even if they once did. The words now represent, in shorthand form, a bundle of legal rights which have more to do with modes of behaviour which allow work to proceed in a commercially and legally correct manner than with ingredients in an interpersonal relationship. The above statement is consistent with the shift in the nature of the employment relationship, from status to contract, referred to earlier. It is clear that in certain circumstances an employee's employment may be validly terminated because of out of hours conduct. But such circumstances are limited: *the conduct must be such that, viewed objectively, it is likely to cause serious damage to the relationship between the employer\ and employee; or

• the conduct damages the employer's interests; or
• the conduct is incompatible with the employee's duty as an employee. 7Vice President Ross then reviewed a number of cases where this approach had been considered and observed that, in each of the cases, there was a clear connection between the out-of-hours conduct of the employee and their employment: the conduct was incompatible with the employee's duty as an employee and was likely to cause serious damage to the employment relationship. 8The evidence before the Board in this case fell within a narrow compass. RailCorp conducted a case based on documents showing the processes adopted in dealing with the conviction of Mr Elafchal, the statutory regime that directed attention to the investigation of a serious criminal conviction, the duties performed by Mr Elafchal as a customer service team leader and policy publications regarding the standards of behaviour required of employees. 9With this focus it was submitted on behalf RailCorp that the role of customer service officer inevitably led to dealing with lost properly in the course of daily duties and Mr Elafchal would be placed in contact with valuable lost property and he would also be placed back in a position of influence over staff. The termination of his employment was in the best interests of the public and was in keeping with the community's expectations regarding the handling of lost property. The terms and requirements of Mr Elafchal's employment and the duties of a customer service team leader were said to be incompatible with his criminal conviction. 10The case for Mr Elafchal also concentrated upon the approach in Rose and emphasis was placed on the confined circumstances in which out-of-hours conduct would justify the termination of employment. An assessment had to be made of the seriousness of the conduct and the Board could not simply focus upon the conviction involving a criminal offence. It was accepted that there was a relationship between that conviction and the contract of employment but on a consideration of the whole of the duties, the connection was submitted to be tenuous. The second aspect of the submission focused upon the two years that Mr Elafchal had been without pay as, itself, being a significant penalty. There was a deal of character evidence and a petition signed by a number of officers attesting to Mr Elafchal standing in the workforce and his competency. He had an otherwise good work record over a period of nine years' employment.

APPEAL TO THE COURT 11The questions of law raised pursuant to the provisions of s 23A in the Transport Appeal Boards Act was stated as follows: G.Grounds of the appeal are: 1.The Appellant appeals against the decision of the Board on a question of law being that the Board apparently defined its own powers and jurisdiction in a way that ignored relevant evidence of: (i)the nature of the offence with which the Appellant was charged; (ii)the proportionality of the punishment to the offence with which the appellant was charged. 3.The Appellant appeals against the decision of the Board on question of law being that the Board apparently defined its own powers and jurisdiction in a way that allowed its finding at [37] that the actions of the appellant had caused serious damage to the relationship between the applicant and the respondent to be determinative of the appeal. 4.The appellant appeals against a decision of the Board on a question of law being that the Board did not provide proper reasons for its decision in determining the proper scope of the Tribunal's power and jurisdiction. 12In oral submissions on appeal it became apparent that the question of law identified was essentially a failure of the Board to exercise its jurisdiction by, firstly, failing to give consideration to the personal circumstances of Mr Elafchal by concentrating only upon the approach in Rose. Secondly, by adopting that approach there was a failure by the Board to give reasons why the personal circumstances of Mr Elafchal were inadequate to overcome the alleged tenuous connection between the duties performed and the conviction such that a return to employment was an appropriate result. 13In framing the appeal to this Court in that fashion, Mr Elafchal accepted that the right of appeal to the Board was relatively unstructured and broad in scope: it was not confined to a consideration of a valid reason for termination nor specifically were findings required that the decision was harsh, unfair or unreasonable, although all those matters were relevant or could be relevant to the decision-making process. Further, it was accepted that, in attacking the lack of reasons given by the Board, such an attack was not one to be based upon fine technical points or upon an overly zealous scrutiny of the decision or the decision-making process. Those concessions were well made. The appeal in this Court, therefore, requires an analysis of the Board's decision to establish how it reached the conclusion that Mr Elafchal's application to be returned to employment should be dismissed. 14The Board's decision noted the positions held by Mr Elafchal during his employment with RailCorp and the period of that employment. Reference was made to the period during which Mr Elafchal had been suspended without pay and also to the terms of the indictment to which he had entered a plea of guilty. The Board referred to the statutory regime and the provisions of the Regulation that permitted RailCorp to take disciplinary proceedings in relation to an officer who was convicted of a serious criminal offence, noting that it was common ground that this offence came within the definition of a "serious criminal offence" specified by the Regulation. The disciplinary process undertaken by RailCorp was set out and reference was made to the responses provided by Mr Elafchal. RailCorp noted that, in his response, Mr Elafchal had submitted that the offence he had committed was "best described as being passive" as he did not take any active part in the storage of the items although aware that they were there and allowing his brother to store them. RailCorp had determined that the offence committed was not passive in any relevant sense and that the stolen mobile telephone was found in the top drawer of Mr Elafchal's bedside cabinet and other items were located within his residence. There was an analysis of the submissions as to the nature of the duties and broadly the requirement for honesty and trust, both in relation to RailCorp and the travelling public. 15The Board then summarised the case presented by Mr Elafchal. There were a number of character references provided and a number of those statements were subject to cross-examination. A petition had been signed by a large number of employees who attested to Mr Elafchal's leadership qualities and referred to his work ethic as well as his integrity and honesty. 16The Board referred to Mr Elafchal's evidence and his description of the duties he performed, noting that he had limited involvement with lost property. The Board found that the customer service team leader did have to safeguard lost property even though Mr Elafchal said that this was not a major part of his duties. 17In considering the evidence and the submissions the Board commenced by citing what was regarded as relevant paragraphs from Vice-President Ross' decision in Rose. In that context the Board briefly summarised the submissions for the parties and then raised questions as to what might be the duties of Mr Elafchal if he was stationed somewhere else. 18The critical finding of the Board then followed: the Board found that the actions of Mr Elafchal were incompatible with duties of a customer service team leader. There was a finding that the charge to which he had pleaded guilty had a direct connection with one of the duties of the position, namely, the securing and holding of customers' property. The Board then found that the level of trust required by RailCorp for Mr Elafchal to carry out these duties no longer existed. The actions of Mr Elafchal had caused serious damage to the relationship between the employer and himself. The Board found that there "must exist" such a degree of trust between the employer and the employee that everyday tasks should be able to be carried out without the employee being subject to suspicion or concern and that was no longer the case. The appeal was therefore dismissed. 19Accepting, for the purposes of argument, that the appeal in this Court raised an assessment of the proper scope of the Tribunal's power and jurisdiction and thus there was an implied decision on a question of law as referred to in Brown, what may be said of the Board's decision? It seems apparent that the Board was much influenced in its approach by the parties' joint concentration upon the decision in Rose. In those circumstances it is highly significant that the Board decided that the actions of Mr Elafchal were incompatible with his duties as a customer service team leader and that there was a direct connection between a duty undertaken in that position and the offence to which Mr Elafchal entered his plea of guilty. Those findings, in combination, meant that RailCorp could no longer have any trust in Mr Elafchal and that a necessary element of the contract was no longer in existence. 20Significantly, in this Court, those findings as to merit were accepted and were not subject to challenge as involving an erroneous decision on a question of law. Mr Elafchal's case in this Court was that the Board should have then specifically addressed personal facts regarding Mr Elafchal such as his long service with an otherwise unblemished record, his competency, the support provided to him by a number of fellow officers to continue in employment and the fact that he had already been sufficiently penalised by having his salary withheld for a period of two years. Having not addressed these issues it was asserted that no reasons were given for rejecting those matters that would otherwise support a return to employment. 21The insurmountable difficulty for this argument is the nature and strength of the findings made by the Board as to the direct link with Mr Elafchal's employment and the conviction, the incompatibility of the duties in that context and the finding that there was now an absence of trust between the employer and the employee. When that decision was made against the background of both parties placing a great deal of weight on the approach in Rose, it is clear that the Board accepted that approach and determined what it regarded was a fundamental issue and one that could not be overcome by the personal factors relied upon by Mr Elafchal. It is not open to Mr Elafchal to argue that these personal factors were not taken into account because they were properly and fairly summarised in the Board's decision. Having regard to the substance of the decision it seems clear that, taking all the arguments into account, the Board reached the determination that the issues of incompatibility and lack of trust could not be overcome by the personal factors relied upon by Mr Elafchal. Having regard to the nature of the findings, this is an unsurprising result. Approached in this way there was no failure by the Board to take into account the personal factors put forward by Mr Elafchal and that the reasons, in the circumstances, were adequate. While it might be said that the Board's reasons were brief, they were concise and to the point. It might be expected that, in other circumstances, some more direct reference would be made to this second aspect of the appellant's case in the conclusions and that more detailed exploration of the issues in other circumstances might be required but in this case there was no error of law in the decision of the Board. 22Having regard to the nature of the issue raised on appeal in this Court and the terms of the decision of the Board, it is appropriate, to the extent necessary, that leave to appeal be granted. However, for the reasons outlined above, the order of the Court is that the appeal be dismissed. 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. Decision last updated: 24 August 2012