Lane and Northern Sydney Central Coast Area Health Service [2006] NSWIRComm 380

Appeal - Leave to appeal - Termination of employment - Unfair dismissal - Employee dismissed for having pornographic material stored in his computer at work - Application dismissed at first instance - Deputy President failed to consider statutory test as to whether dismissal was harsh, unreasonable, unjust - Deputy President's failure to make finding relating to statutory test - Failure to answer questions arising - Whether Deputy President failed to take into account relevant considerations - Whether Deputy President took into account considerations such as the length of service of the appellant; his exemplary service to the community; commendations that he received both from within the Industry and from his employer; the likely impact on the appellant's prospects of finding future employment; the appellant's age; the appellant's impaired hearing and impaired sight; the appellant's very specialised skill base and what impact that may have on his ability to gain future employment - Failure of respondent to adequately take into account all disciplinary options or explain reasons for decision taken - Failure of Commission to take this omission into account - Failure of Commission to adequately have regard to employer's policy and inadequacies in same - Failure to resolve significance of out of hours conduct - Error of law and principle - Appeal upheld - Matter remitted - Industrial Relations Act 1996 (NSW) - Section 84 CATCHWORDS: Termination of employment - Unfair dismissal - Appeal - Leave to Appeal - Employee dismissed for having pornographic material stored in his computer at work - Application dismissed at first instance - Deputy President failed to consider statutory test as to whether dismissal was harsh, unreasonable, unjust - Deputy President's failure to make finding relating to statutory test - Failure to answer questions arising - Whether Deputy President failed to take into account relevant considerations - Whether Deputy President took into account considerations such as the length of service of the appellant; his exemplary service to the community; commendations that he received both from within the Industry and from his employer; the likely impact on the appellant's prospects of finding future employment; the appellant's age; the appellant's impaired hearing and impaired sight; the appellant's very specialised skill base and what impact that may have on his ability to gain future employment - Failure of respondent to adequately take into account all disciplinary options or explain reasons for decision taken - Failure of Commission to take this omission into account - Failure of Commission to adequately have regard to employer's policy and inadequacies in same - Failure to resolve significance of out of hours conduct - Error of law and principle - Appeal upheld - Matter remitted - Industrial Relations Act 1996 (NSW) - Section 84

LEGISLATION CITED: Industrial Relations Act 1996 (NSW)

Australian Workers' Union, NSW (on behalf of Robert Mason) v Incitec Limited [2004] NSWIRComm 1030 Bassam Darwich v Kaal Australia Pty Limited (unreported, AIRC, Duncan SDP, PR 934439, 8 July 2003) Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66 Budlong and NCR Australia Pty Limited [2006] NSWIRComm 1075 Budlong v NCR Australia Pty Limited [2006] NSWIRComm 288 Cassel v Commissioner of Police [2003] NSWIRComm 73 Commissioner of Police v Evans (2006) 153 IR 144 Farquharson v Qantas Airways Ltd (unreported, AIRC, PR 971685, 10 August 2006) Hollingsworth v Commissioner of Police, New South Wales Police Service (2005) 146 IR 285 Hosemans v Commissioner of Police (No 4) (2005) 150 IR 263 House v The King (1936) 55 CLR 499 CASES CITED: Humphries v Cootamundra Ex-Services and Citizen's Memorial Club (2003) 128 IR 37 Ian Ueckert and Australian Water Technologies Pty Ltd [2000] NSWIRComm 123 Lane v Northern Sydney Central Coast Area Health Service [2006] NSWIRComm 176 Lorenzato and Sydney Water Corporation [2002] NSWIRComm 277 Martin Evans v NSW Police [2005] NSWIRComm 404 Massoud v SITEL Corporation Australia Pty Limited [2001] NSWIRComm 218 McManus v Scott-Charlton (1996) 70 FCR 16 Metropolitan Meat Industry Board v Australasian Meat Industry Employees' Union, New South Wales Branch [1973] AR (NSW) 231 Rose v Telstra Corp Ltd (unreported, AIRC, Ross VP, PQ9292, 4 December 1998) Toyota Motor Corporation v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (unreported, AIRC, Watson SDP, T4675, 18 December 2000) Williams v Pigment Dispersions Pty Ltd (2004) 136 IR 178 WorkCover Authority (NSW) (Inspector Moore) v Blacktown City Council (2003) 124 IR 59

APPELLANT Ms P Thew of counsel Solicitor: Mr D Nash Nash Allen Williams & Wooton LEGAL REPRESENTATIVES: RESPONDENT Mr A Searle of counsel Solicitor: Mr P Tumpey Hunt & Hunt

• 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

FULL BENCH CORAM: WALTON J, Vice-President GRAYSON DP STAFF J 8 December 2006

RAYMOND GEORGE LANE AND NORTHERN SYDNEY CENTRAL COAST AREA HEALTH SERVICE

Application by Raymond George Lane for leave to appeal and appeal against a decision of Deputy President Harrison given on 30 May 2006 in Matter No. IRC 6282 of 2005 DECISION OF THE COMMISSION [2006] NSWIRComm 380

1 This is an application for leave to appeal and if granted, to appeal from a decision of Deputy President Harrison given on 30 May 2006 in Lane v Northern Sydney Central Coast Area Health Service [2006] NSWIRComm 176. In that decision, the Deputy President refused the appellant's application for relief from alleged unfair dismissal. Background 2 The appellant was dismissed from his employment as a Post Mortem Assistant at Gosford Hospital on 28 October 2005. The dismissal was based on conduct which the respondent "considered to be so serious a breach of proper behaviour and a breach of our Policies … that your contract of employment has been terminated from the date of this letter". The appellant's conduct involved improperly using the respondent's email system to send, receive and store inappropriate material. The material contained sexually explicit, pornographic and sadomasochistic images as well as graphic images depicting accident victims, suicide victims and massacres featuring body parts and dismemberment (although none of them concerned deceased persons in the Gosford Hospital, or were in the appellant's care). 3 Having satisfied himself that the appellant was aware of the existence, if not the complete detail of the respondent's Policy and Code of Conduct regarding the use of the email and internet systems, the Deputy President rejected the appellant's defence that the images were in some way work related or that they were of educational value to students considering undertaking a course in Mortuary Practice. The Deputy President also rejected the appellant's evidence that, although he indicated affirmatively each time he logged on to the system that he had read the Policy, he had not actually read the Policy. The Deputy President observed, as the evidence disclosed, that the appellant had been advised by his direct supervisor to be careful because the system was monitored as to the content of email messages. 4 In the proceedings below it was submitted for the appellant that termination of employment was harsh in circumstances where the appellant's work record over a period of approximately eleven years was otherwise unblemished and that the appellant had demonstrated contrition including giving an undertaking that there would be no repetition of such conduct. It was further submitted that the appellant's limited familiarity with the detail of the employer's internet and email policies meant that his conduct could not be regarded as wilful such as to justify summary dismissal: Lorenzato and Sydney Water Corporation [2002] NSWIRComm 277. It was also submitted that sending offensive material from the appellant's home computer to his own work computer and to the work computers of his colleagues did not constitute work related misconduct. 5 For its part, the employer relied upon a number of authorities in which termination of employment for breach of internet and email policies was found to have been justified: Australian Workers' Union, NSW (on behalf of Robert Mason) v Incitec Limited [2004] NSWIRComm 1030; Massoud v SITEL Corporation Australia Pty Limited [2001] NSWIRComm 218; Ian Ueckert and Australian Water Technologies Pty Ltd [2000] NSWIRComm 123; Toyota Motor Corporation v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (unreported, AIRC, Watson SDP, T4675, 18 December 2000); Bassam Darwich v Kaal Australia Pty Limited (unreported, AIRC, Duncan SDP, PR 934439, 8 July 2003). The employer also relied upon the first instance decision in Budlong and NCR Australia Pty Limited [2006] NSWIRComm 1075. This case involved the improper use of an employer's email. This decision has since been overturned on appeal in Budlong v NCR Australia Pty Limited [2006] NSWIRComm 288. 6 The Deputy President's conclusions were set out as follows at [50] - [56]: [50] Mr Lane was aware that his employer had a policy and code of conduct for use of the e-mail and internet system provided to employees. Mr Lane chose not to read this policy though was not entirely unaware of its operation or requirements having been told by Mr Kazzi, his direct supervisor, that content was monitored and to be careful. [51] A review of the material transmitted by Mr Lane (Ex 4 to 18) supports the categorisation by the employer as sexually explicit, soft pornography and inappropriate. [52] It can not be supported in any way that any of the images were work related or of benefit to persons contemplating a mortuary qualification. [53] Having regard to Mr Lane's good employment record and the proposition that his duties resulted in a high tolerance to shocking and offensive material, and that Mr Lane had not transgressed in the course of his duties but ancillary thereto, there remains no scope for excuse or condonation of his conduct. [54] Each case will necessarily turn on its own circumstances and, while there is, as Mr Nash put, no direct evidence of other disciplinary action, the Applicant's conduct, considered in its own context, does not warrant the intervention of the Commission. [55] The application for intervention is refused. [56] Matter No IRC 6282 of 2005 is so concluded. The Appeal 7 By an amended application for leave to appeal, the appellant contends the questions raised by the appeal are whether the Deputy President: a) gave adequate reasons for his decision; b) considered or addressed all of the evidence he was required to consider; c) erred by failing to take into account a relevant consideration or relevant considerations; or d) (in the alternative) misapplied the law. 8 The grounds of the appeal were: a) The Deputy President failed to give adequate reasons for his decision and, in particular, failed to articulate the precise conduct relied on to justify summary dismissal; b) The Deputy President failed to make a finding in relation to whether the appellant's conduct in sending inappropriate material by email from his home computer to work colleagues breached the respondent's Electronic Messaging and Email Policy (the Policy), or failed to give any or adequate reasons for such a finding; c) In the alternative to ground (b), the Deputy President failed to consider or address uncontested evidence that the majority of the emails sent by the appellant (allegedly in breach of the Policy) were sent from his home to other persons employed by the respondent (the Home Emails); d) The Deputy President failed to consider or address unchallenged evidence that the appellant did not believe that his actions in sending the home emails was in breach of the policy; e) In the alternative to grounds (c) and (d) above, if the Deputy President did not consider the matters set out in those paragraphs, he failed to give adequate reasons for his findings in relation to those matters; f) In the alternative to grounds (c), (d) and (e) above, the Deputy President fell into error by taking into account conduct engaged in by the appellant at his home and outside work hours as conduct justifying summary dismissal; g) In the alternative to grounds (c), (d), (e) and (f) above, the Deputy President fell into error by taking into account conduct of the appellant which was not wilful misconduct as conduct justifying summary dismissal; h) In the alternative to grounds (d) and (f) above, the Deputy President erred in finding that the sending of the home emails and constituted wilful misconduct. Leave to Appeal 9 A Full Bench recently summarised of the principles governing leave to appeal in Hosemans v Commissioner of Police (No 4) (2005) 150 IR 263 stating at [5]: The law and practice governing leave to appeal is well settled and does not require restatement: see Knowles v Anglican Church Property Trust (No. 2) (1999) 95 IR 380. However, two principles warrant particular mention: first, leave will not be lightly or automatically granted (see King v State Bank of New South Wales (No 2) (2002) 126 IR 407 at [52]-[55] and Knowles at 381 - 382) and, subject to the requirements of s188 (2) of the Act , will not, generally, be granted unless the appellant demonstrates that the appeal "raises substantial issues of principle or law or has wider implications for the jurisprudence of this Commission, including whether the decision has widespread practical application" (see Knowles at 382) or raises issues going to the proper administration of justice. Secondly, leave will rarely be granted where an appeal primarily seeks to challenge findings of fact which are otherwise reasonably open on the evidence: Box Valley Pty Ltd v Price (2000) 97 IR 484; Austin v NF Importers Pty Limited (2005) 146 IR 113 at [5]. 10 In Humphries v Cootamundra Ex-Services and Citizen's Memorial Club (2003) 128 IR 37, an appeal from a decision declining an application for relief from unfair dismissal, the Full Bench held at paragraph [77]: [77] Secondly, the central issue, which we have been asked to consider, is whether the findings of fact in relation to serious misconduct were wrong. If, as in this matter, there is a substantial basis upon which to conclude that such a contention may be made out, there emerges significant basis for the grant of leave in order to ensure the proper administration of justice. As was said by a Full Bench of this Commission in Burge v NSW BHP Steel Pty Ltd (2001) 105 IR 325 at 326:

The extent to which, if at all, those errors be ultimately established is not a matter to be finally determined on the question of leave but only on a full hearing of the appeal. In themselves we are satisfied they raise serious issues to be tested, are reasonably arguable and are of a nature proper to attract leave to appeal.

(See also Hollingsworth v Commissioner of Police, New South Wales Police Service (2005) 146 IR 285 at [121] and WorkCover Authority (NSW) (Inspector Moore) v Blacktown City Council (2003) 124 IR 59). 11 We propose to apply these principles to the question of leave to appeal. Consideration

12 At the commencement of the hearing Ms P Thew, counsel for the appellant, submitted the appeal raises three errors of law and two errors of fact. 13 The errors of law were submitted to be first, the Deputy President failed to make a finding as to whether the employee had been harshly, unreasonably, or unjustly dismissed, as is required in respect of applications made pursuant to Pt 6 Ch 2 of the Industrial Relations Act 1996 (NSW) ("the Act"). In the event that it was found that the Deputy President implicitly came to such a finding, as was submitted by Mr A Searle, counsel for the respondent, it was contended that the Deputy President had failed to give reasons, or adequate reasons for such a finding. 14 Secondly, although it was conceded by the appellant that there had been a breach of the Policy, a further reason advanced for the dismissal of the appellant was that the respondent considered his conduct to be "so serious a breach of proper behaviour" that his contract of employment should be terminated. In respect of this issue, it was submitted that the Deputy President was not entitled to find, on the evidence, that there had been a breach of proper behaviour, such as to warrant summary dismissal. There was no finding by the Deputy President that the entirety of the charge had been made out. 15 Thirdly, it was submitted that the Deputy President had failed to take into account relevant considerations, or gave insufficient weight to such considerations being factors that should have been taken into account in deciding whether the termination was otherwise harsh. These factors included the length of service of the appellant, as combined with the appellant's unblemished employment record; his exemplary service to the community; commendations that he had received both from within the Industry and from his employer; the likely impact on the appellant's prospects of finding future employment; the appellant's age; the appellant's impaired hearing and impaired sight and the appellant's very specialised skill base and what impact that may have on his ability to gain future employment. It was submitted that with the exception of the appellant's employment record, none of these factors were taken into account at all by the Deputy President. 16 The errors of fact were submitted to be whether any breach of the 2003 Policy was wilful and the finding made by the Deputy President that the out of hours conduct breached the 2003 Policy. 17 The appellant's contract of employment was terminated by letter dated 14 November 2005, after an investigation into allegations of breaches of the Area Health Service Policy in regard to inappropriate use of the Area Electronic Messaging System. Relevantly, the letter of termination stated: … It is considered to be so serious a breach of proper behaviour and a breach of our Policies that you are informed that your contract of employment has been terminated from the date of this letter. 18 The respondent observed, in the letter of termination, that the appellant was bound by the Area Code of Conduct and the Area Internet and Email Policy. The appellant admitted sending, receiving, or saving emails containing a total of 100 images as follows: 29 sexually explicit; 5 soft pornographic; 50 inappropriate and 16 graphic. 19 The letter went on to state, based on this information, that the respondent was not satisfied that the appellant's behaviour could be overlooked or condoned. It was of particular concern to the respondent that the sensitivity of the appellant's position involved a high degree of trust with the public and that his actions could have the potential to cause serious damage to the goodwill and expectations of the community. 20 There was no issue between the parties, at first instance, in respect of the nature of the termination. The appellant's submissions proceeded before us on the presumption that it was a summary termination. The respondent sought to call fresh evidence to say that the dismissal was not summary, but rather a dismissal on notice. We deferred ruling on this application at the time so as to allow the appeal to proceed and enable us to assess how this issue was going to manifest itself in the appeal. In light of the decision that we have reached in this matter, it is not necessary to rule on this application. 21 We turn to consider firstly the errors of law relied upon by the appellant. The central question for determination by the Deputy President, in accordance with the application brought pursuant to s 84 of the Act, was whether the appellant's dismissal was harsh, unreasonable, or unjust. 22 The appellant did not dispute that conduct that results in a conflict between the employee's interest and the duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the confidence of the employer and the employee, gives a right to summarily dismiss: Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66. However, the appellant submitted, correctly in our view, that the matter had to be determined upon a broader basis than whether the respondent had lawfully terminated the appellant at common law. 23 The appellant complained that the Deputy President failed to apply the principles applicable to applications made pursuant to Pt 6 Ch 2 of the Act, in that the Deputy President failed to make a finding as to whether the employee had been harshly, unreasonably, or unjustly dismissed. 24 We have earlier set out the Deputy President's conclusions at [6]. It is clear, in reaching his determination, that the Deputy President failed to apply the statutory test in considering the application. Recently, in Williams v Pigment Dispersions Pty Ltd (2004) 136 IR 178, a Full Bench considering a similar omission stated at [19] - [21] as follows: [19] As has been observed by the Commission on numerous occasions, a dismissal may be capable of being unreasonable but not harsh, or harsh but not unjust; other permutations may apply. In Bankstown City Council v Paris (1999) 100 IR 363 at 371 Wright J President, Peterson J, Bishop C noted at 373: "We would observe that in a case where the conduct of the employer might satisfy one but not all of those heads, a positive and specific finding should be made." [20] A classic exposition of principles applicable to unfair dismissal matters was given by Watson J in Metropolitan Meat Industry Board v Australasia Meat Industry Employees Union, New South Wales Branch [1973] AR 231 at 233, which principle, while stated in relation to proceedings under the Industrial Arbitration Act 1940 (NSW), is equally applicable to the proceedings under the Industrial Relations Act. His Honour there stated: In some cases, the issue of unfairness has been resolved because of the way in which the employer has exercised his right to dismiss or because of the absence of adequate justification for dismissal. But even if there are grounds for terminating the contract of employment, it is still open to the tribunal to examine the severity or otherwise of the step of dismissal. The Commission, commissioners and committees have so acted in the past and have intervened to order reinstatement where because of mitigating circumstances or past good conduct, termination has been shown to be too harsh a consequence. [21] In Entertainment Distributors Co Ltd v Burnard (1993) 49 IR 446, a Full Bench of the Commission ( Hill and Peterson JJ, Connor CC) considered s 246 and s 250 of the 1991 Act which were predecessor provisions to s 84 and s 89 of the 1996 Act. The Full Bench said at (453): In our opinion, having regard to the provisions of Part 8 and in particular ss 246 and 250 it is fundamental to the proper exercise of the jurisdiction that the Commission should first make a finding whether or not the employee has been harshly, unreasonably or unjustly dismissed or threatened with dismissal by the employer and set out the reasons for that finding prior to making any order disposing of an application under s 246. It is not sufficient in our view for this merely to be left as a matter of inference from the fact that the Commission decides to dismiss the application or alternatively make orders pursuant to s 250. In this case the Commissioner made orders under s 250, including an order for re-employment without any finding or conclusion that the employees had been harshly, unreasonably or unjustly dismissed and without setting out any reasons for decision in which such a finding and the reasons therefor were implicit.

Furthermore, in our opinion, s 250 requires a finding that it would be impracticable to reinstate the applicant prior to the making of any order of re-employment in lieu of reinstatement ... but having regard to the terms of s 250 considered as a whole, it is necessary in our view, for the Commission when ordering reinstatement or re-employment to give reasons in the case of reinstatement why such reinstatement is appropriate and/or reasonable in all of the circumstances or where re-employment is ordered why reinstatement is not practicable but re-employment is practicable and justified. Similarly in a case where an order is made for compensation, it is necessary that a finding be made that the dismissal was harsh, unreasonable or unjust and the reasons therefor should be set out together with the reasons why in the circumstances it is not practicable to order either reinstatement or re-employment but that it is just an (sic) appropriate to order compensation.

25 The decision under appeal in this case contains no express findings whether or not the appellant was harshly, unreasonably, or unjustly dismissed, nor are reasons directly bearing upon such findings. Nor does the decision, at first instance, demonstrate that, when read as a whole, a conclusion may be comfortably reached that such determinations had been, on balance, adequately made. This, and other relevant issues to which we will turn were simply not addressed. This was an error of law. 26 The Deputy President, on one reading of his judgment, appears to have approached this matter on the basis that an act of misconduct was committed which was of such a nature as to strike at an essential element in the contract of service, thereby excluding any proper basis for intervention by the Commission in relation to the s 84 application. Even though the Deputy President recognised that cases such as these must turn on a consideration of their own facts and circumstances, overall it does appear the Deputy President wrongly approached the determination of the matter on the basis that, if there was a breach of policy which involved the receipt, or transmission of pornographic material of the kind found on the employer's electronic system, this would, of itself, constitute the basis for summary dismissal and effectively exclude countervailing considerations which might otherwise warrant either findings of unfairness or ultimately the exercise of a discretion of the Commission to intervene in the dismissal under Pt 6 of Ch 2 of the Act. 27 These considerations raise a question as to whether cases such as these actually involve the worst type of misconduct or conduct warranting summary dismissal which would ordinarily not obtain relief under s 84. Whilst such cases no doubt attract moral indignation, we consider that such a rigid conclusion would be erroneous. Cases involving the handling of pornographic material need to be assessed in the light of a broad range of considerations. It is, for example, necessary in applying the test of a fairness to assess counteractive considerations, many of which were raised by the appellant in this matter, such as length of service; the consequences for the personal and economic situation of the appellant; whether the Policy was applied inflexibly; the disparity in disciplinary action taken in respect of the appellant by comparison to other employees, the subject of investigation; the appellant's age; the very specialised skills and impaired eyesight and hearing of the appellant, the likelihood of the appellant securing future employment and other relevant considerations. 28 As the Full Bench observed in Budlong at [15]: [15] Moreover, given the statutory basis of the appellant's claim, even if the respondent could demonstrate that the summary dismissal was lawful, in an application such as is the case here, there is nevertheless the opportunity for the appellant to show that, in all the circumstances, the dismissal was harsh, unreasonable or unjust: Pastrycooks Employees, Biscuit Makers Employees & Flour and Sugar Goods Workers Union v Gartrell White (No 3) (1990) 35 IR 70 at 83-84; Bigg and Another v New South Wales Police Service (1998) 80 IR 434 at 455. Indeed, the power of the Commission to order reinstatement or other remedies in the case of an unfair dismissal is exercised regardless of the legal right of an employer to dismiss an employee: see Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648 at 676; Re Loty v Holloway and Australian Workers' Union [1971] AR (NSW) 95 at 99. 29 The comments of Watson J in Metropolitan Meat Industry Board v Australasian Meat Industry Employees' Union, New South Wales Branch [1973] AR (NSW) 231 at 233 should also be borne in mind. His Honour observed: As was succinctly put by Sheppard J in Coccia's case, "the question …comes down to this: was the termination… so unfair as to warrant interference by the Commission?"

I fail to see why in applying this test to determine whether or not he should intervene, and having in mind the consideration referred to by Sheldon J, in Loty's Case, the commissioner (or the Commission on appeal) is precluded from considering whether or not termination was too severe a penalty in all the circumstances - even if the dismissal was legally justified or even if, as Mr McDevitt put it, the point had been reached where at the particular time the employer's representative was faced with a situation which had developed to a stage where he had no other alternative (our emphasis). 30 As we consider the Deputy President failed to fully undertake such an assessment, as we will discuss below, he fell into error. 31 The appellant further submitted that the dismissal was harsh in the circumstances, because the conduct did not justify summary dismissal, in that it was disproportionate to the gravity of the offence. Recently, the Full Bench in Budlong considered whether the dismissal of an employee for having pornographic material on his laptop computer at work was harsh, unreasonable or unjust. The Full Bench observed at [18] - [21]: [18] At the outset, we wish to emphasise that in considering whether the appellant's dismissal was harsh, unreasonable or unjust, the inquiry is not directed towards assessing the degree of obscenity or offensiveness of the pornographic material in question or making a judgment about the appellant's morality in receiving, storing and viewing the material from time to time on his computer. Although, the more obscene the material, the more likely that a fellow employee who is subjected to viewing it, accidentally or otherwise, will be offended by it thereby increasing the risk to the employer of having claims made against it, such as for harassment or discrimination in the workplace.

[19] Whilst we consider it is grossly inappropriate and wholly inconsistent with modern workplace practice and values for employees to engage in accessing, sending, receiving and storing pornographic material on their employers' computer and email systems, the more substantive consideration in determining whether the dismissal was unfair involves a consideration of the nature and quality of his disregard for, or disobedience of, the employer's prohibition against using its infrastructure systems to access pornographic web sites and against the sending, receipt and storage of pornographic material using the respondent's email system and whether in such circumstances the dismissal was unfair. It also involves consideration of the appellant's deliberate breach of his undertaking to abide by the employer's Code of Conduct.

[20] In this context, it is appropriate to consider the consequences. We have already touched upon one of those and that is the affront likely to be caused to other employees if they were to see the pornographic material and the implications of that for the employer. There is also the time and attention taken up by the appellant in sending, receiving, storing and viewing the pornographic material and the inconsistency that arises between that conduct and the employee's common law duty of fidelity and good faith. The essence of this duty is perhaps best captured in the observations of Dixon and McTiernan JJ in Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66 at 81-82: 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 ( Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch. D. 339, at pp. 357-8 and 362-4; English and Australian Copper Co. v. Johnson (1911) 13 CLR 490 ; Shepherd v. Felt and Textiles of Australia Ltd (1931) 45 CLR 359). But the conduct of the employee must itself involve the incompatibility, conflict, or impediment, or be destructive of confidence. An actual repugnance between his acts and his relationship must be found. It is not enough that ground for uneasiness as to its future conduct arises. [21] Nevertheless, the critical question is whether, in all the circumstances, the dismissal was harsh, unreasonable or unjust. 32 And later observed at [83]: [83] Nevertheless, we wish to stress that we do not intend to convey an impression that dismissal for accessing pornographic images would, in all instances, be harsh, unreasonable or unjust or that we condone, in any way, the appellant's actions. In breach of the employer's policies, the appellant accessed and stored extensive pornographic material on the respondent's IT infrastructure. This is patently unacceptable. However, the circumstances of this case appear somewhat unique: a culmination of issues specific to that workplace and the appellant and the actions of the respondent meant that a finding that the dismissal was harsh, unreasonable and unjust was appropriate. We do not expect that this conclusion would necessarily follow in dismissals for conduct similar to that engaged in by the appellant. 33 We readily accept that each case must be determined on its own facts and circumstances and endorse generally these observations by the Full Bench. Based upon this analysis, we consider, for reasons we shall now develop, the Deputy President has failed to undertake an evaluation of the conduct as was required to be done. 34 The appellant contended that neither the respondent, nor the Deputy President had regard to the effect of the dismissal on the personal circumstances of the appellant, including the effect of the appellant's age, various specialised skills, impaired eyesight and the likelihood of the appellant securing future employment. We agree with this contention. 35 Further, it was contended that the respondent had failed to adequately assess the alternative disciplinary outcomes open to it and had failed to properly apply its own policy. The Deputy President in turn had failed to consider these matters. The evidence established that Ms Derley provided a report to the respondent's Human Resources Department, containing a recommendation about disciplinary action proposed for the appellant. The report stated: It is recommended serious disciplinary action be undertaken against Mr Lane. 36 In cross-examination, Ms Derley stated that "serious disciplinary action" could have included action ranging from a final warning, through to termination of employment, although Ms Derley did not recommend termination of employment. It was contended that no adequate explanation had been advanced as to why the most severe disciplinary outcome had been chosen from this range. Nor had it been explained why this outcome was consistent with the respondent's policy which itself contained significant ambiguities (we shall refer to this issue further below). 37 As earlier mentioned, a further issue that arose during the proceedings was whether the Central Coast Health Internet and Electronic Messaging Usage Policy dated April 2003 applied to the appellant and whether out of hours conduct breached the Policy (the factual errors). Clause 3.7 of the Policy is in the following terms: 3.7 Pornography and other Offensive material CCH's electronic messaging systems, and access to the Internet may not be used for intentionally transmitting, communicating or accessing pornographic or sexually explicit material, text or other unacceptable material at any time. Unacceptable content includes "sexually explicit messages, images, cartoons or jokes". If misuse is proven, staff will be subject to disciplinary action as outlined in the Appendix. It is stressed that the Area Health Service, not the employee determines what is unacceptable. 38 The Appendix referred to in cl 3.7 purports to deal with what are described as category one or category two breaches of the Policy. On one reading of the Policy, regardless of whether an employee is classified as category one or category two and is a first or second offender, the recommended disciplinary action is dismissal. The issue, albeit confusing, is important because it raises the question: how did the investigating officer (who of course, it will be recalled, did not recommend dismissal) report upon the conduct of the appellant? These issues emerged in the proceedings at first instance, but were not resolved by the Deputy President. 39 Furthermore, if the Deputy President took into account out of hours conduct when forming the conclusion that the appellant's conduct did not warrant the intervention of the Commission (as he must have done), he ought to have identified that conduct and stated the principles that apply to termination, based on an employee's out of hours conduct: see Cassel v Commissioner of Police [2003] NSWIRComm 73; McManus v Scott-Charlton (1996) 70 FCR 16; Commissioner of Police v Evans (2006) 153 IR 144 (where the majority dismissed an appeal from Boland J); Martin Evans v NSW Police [2005] NSWIRComm 404; Rose v Telstra Corp Ltd (unreported, AIRC, Ross VP, PQ9292, 4 December 1998) and Farquharson v Qantas Airways Ltd (unreported, AIRC, PR 971685, 10 August 2006). 40 Furthermore, the investigation, conducted by the respondent, included an investigation into other employees who had received or transmitted images from the appellant. It is clear that a number of employees who were investigated for the receipt or sending of pornographic material did not have their employment terminated. Although Ms Derley, when asked in cross-examination if "[t]he reality is that none of the other health employees investigated were terminated" responded "[n]o that's not true", no further evidence was provided to the Deputy President in this regard. Although it must be inferred that some employees who were investigated were terminated, this does not emerge from the evidence. Indeed the names of the other employees investigated were deleted from the report prepared by Ms Derley and tendered in the proceedings. The evidence as to how these employees were treated was not before the Deputy President. 41 This led the appellant to advance a submission that the Deputy President should have had regard to the disparity in disciplinary action taken in respect of the appellant by comparison to other employees, the subject of the investigation. 42 A further matter raised by the appellant, which remained unresolved, was that the material received from the appellant by other employees was not seen as being offensive by those involved in the transmission process. 43 Evidence indicating that the recipients of the emails were not offended and were in fact willing participants in the conduct also ought to have been taken into account. The appellant also contended that regard ought to have been had to whether the respondent took positive steps to educate its employees in the content and consequences of breaching the relevant Policy. These being relevant considerations, given the serious ramifications of failure to comply with the Policy and the appellant's evidence that his work was often high pressure and that he did not have time to familiarise himself with the entire volume of the respondent's workplace practices. 44 The appellant also raised the failure of the Deputy President to have regard to the respondent's delay in implementing the dismissal upon discovering the emails constituting misconduct: Budlong at [102]. It was submitted that the respondent had waived its right to terminate in circumstances where there was a 3½ month period between when the respondent notified the appellant that it had commenced an investigation into certain conduct, this being in June 2005, with the termination occurring on 14 November 2005. The appellant continued to perform the duties in the same way he had done beforehand. The appellant submits that the respondent condoned the behaviour and waived its rights to summarily terminate. 45 All of these matters referred to in paragraphs [23] to [44] above were relevant to the consideration by the Commission at first instance of the s 84 application brought by the appellant. The failure to adequately consider them, as occurred in the decision at first instance, represented an error in accordance with the principles in House v The King (1936) 55 CLR 499. 46 The appeal raises a significant issue as to the proper principles to be applied in determining whether a dismissal was harsh, unreasonable, or unjust, which warrant the grant of leave to appeal. We also consider that the decision of the Deputy President demonstrates significant errors of law and principle which, when combined with the interests of justice in this case, warrant the granting of leave to appeal and ultimately upholding the appeal. 47 We have, however, formed the view that the appropriate course is to remit this matter for rehearing by a Member of the Commission. Apart from the absence of rulings upon significant issues below, we consider that this course should be taken as the adjudication of such issues may require the assessment of the credit of witnesses whom we have not had the opportunity to see give evidence. We have the view, however, that it will be appropriate for the record of the proceedings at first instance to be before the Member of the Commission now allocated the matter. Decisions as to the recalling of witnesses or the taking of fresh evidence will be a matter for the Member. We have also had regard to the respondent's application to call further evidence. 48 In these circumstances, leave to appeal is granted, the appeal is upheld and the matter is remitted to a Member of the Commission for rehearing. ORDERS 49 We make the following orders: 1. Leave to appeal is granted. 2. The appeal is upheld. 3. The matter is referred to a Member of the Commission for hearing.

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