Redman v Verticon Group Limited

Redman v Verticon Group Limited - [2009] NSWDC 43 - NSWDC 2009 case summary — Zoe

[43]

24 This allegation is alleged to have arisen from the situation where the New South Wales branch was interpreting the requirements placed on it by Head Office as to the way in which the incurring of costs should be reported in a way that seemed to differ from the interpretation of Mr Hipwell, the Chief Financial Officer of the group. Mr Redman, and Mr Sokialis, who was the financial controller of the New South Wales branch at the relevant times, both gave evidence that their understanding was that whenever the New South Wales branch incurred a cost, for example by ordering goods or services, this was to be done by way of the relevant operations manager notifying Mr Sokialis of the order. Mr Sokialis would then raise a purchase order on the current accounting system. This purchase order would be reported to head office in Melbourne, so that the central administration of the company was aware of projected costs, and was able to estimate accurately the financial position of the group. Mr Hipwell, who was appointed financial controller of the defendant in February 2003, and became chief financial officer and company secretary in May of that year, gave evidence that he saw this aspect of the purchase order system as secondary. He said that the main purpose of the requirement that purchase orders be raised was to control costs and to ensure that the senior managers approved any expenditure that was to be incurred. He placed greater weight on the invoices in determining the financial position of the group, because the purchase orders did not always reflect the actual cost incurred. If this was his view, it is not clearly reflected in the accounts payable policy of the company, and there is no evidence that he ever communicated it to Mr Redman or Mr Sokialis. Mr Redman's evidence was that he insisted on the raising of purchase orders where the business it was operating as Fire-up under his ownership, and well before the Timberline accounting system was introduced. He was most emphatic that purchase orders should be raised whenever the business committed itself to an expenditure, and regularly pressed this on his senior managers. Mr Sokialis corroborated this evidence.

[55]

36 In a matter such as this, the onus of proof that there were valid grounds for summary dismissal rests squarely on the employer. I have previously set out the relevant principles of law. The evidence offered in support of the employer's position is the evidence of Mr Hipwell, and to some extent, the evidence of Mr Hadley. I have no reason to doubt Mr Hadley's evidence as to matters of fact. I have already commented on the defendant' s forensic choice not to call evidence from Mr Torrington, and draw the inference that his evidence would not have assisted the defendant, even though, in my view, he was the only person who could give evidence about certain highly relevant matters. I appreciate that Mr Hipwell was placed in a position where he was, to all intents and purposes, the face and voice of the defendant. It was clear from his evidence, both in his affidavit and his oral evidence, that he took a particular view of the defendant's requirements as to accounts payable and other financial matters. It is equally clear to me that he did not always communicate his views to staff in the regions in an adequate way, so that his purpose and his understanding of those requirements were perfectly clear to staff in the regional offices. I also appreciate that Mr Hipwell had particular responsibility for the financial management and accounting records of the defendant, and to the extent that these could be shown to be wrong or inaccurate, these matters would reflect adversely upon Mr Hipwell's competence and efficiency. Nevertheless, I found both the plaintiff and Mr Sokialis to be totally reliable witnesses, and there are a number of aspects of Mr Hipwell's evidence which cause me to doubt the reliability of his evidence as a whole. In particular, I am concerned that his evidence about when the Melbourne office was finally informed of the outstanding invoices, to be in conflict with the evidence of Mr Hadley, and I do not accept Mr Hipwell's evidence that the failure of the New South Wales regional office to send invoices to Melbourne in a timely way meant that the Head Office was totally unaware that there was a backlog of unpaid and outstanding invoices in New South Wales.

[76]

57 In Rankin's case (above), Gillard J considered the law of condonation at [352 ff]. He said: "352 An employer who has full knowledge of the misconduct of an employee, and who makes a decision to continue to employ the employee, cannot at a later date, unless of course other facts come to his knowledge, dismiss him summarily on the basis of the employee's known misconduct. It is said that the employer has waived his right to dismiss the employee summarily, and thereby condones the misconduct. 353 In Phillips v Foxall (1872) LR 7 QB 666, Blackburn J said (at 680): 'Now the law gives the master the right to terminate the employment of a service on his discovering that the servant is guilty of fraud. He is not bound to dismiss him, and if he elects, after knowledge of the fraud, to continue him in his service, he cannot at any subsequent time dismiss him on account of that which he has waived or condoned. This right the master may use for his own protection.' 354 It is noted that his Lordship used the words "elects", "waive" and "condone" as meaning the same thing. There has been much written in the past 100 years concerning those three expressions in the law, and it is not for me to add to the material, on what each word means and their application. It is clear that no such waiver, condonation or election can take place until the employer has full knowledge of the misconduct. Hence, it must follow that an employer would not be held to have condoned the wrongdoing, where he believed the employee's denial and subsequently found out the truth. See Federal Supply Co v Angehrn (1910) 103 LT 150 (PC). 355 In that case, the Privy Council said (at 152): 'The word "condonation", though used in some of the authorities cited by most distinguished judges, is not quite happily chosen. In the cases of Phillips v Foxall and Boston Deep Sea Fishing and Ice Co , so much relied upon by the respondents, the word is used as applicable to a case where a master with full knowledge of a servant's misconduct continues to retain him in his, the master's, service. It is likened to the case of a man who, knowing he has a legal right to do either of two things, determines or elects to do one of them in preference to the other, and also likened to the case of a man who, knowing that a forfeiture has been worked, and that he has the legal right to take advantage of it, deliberately abandons that right - that is, waives the forfeiture . In these cases, however, to which " condonation" is compared, the burden of proving that the election had been made or the forfeiture was waived would rest upon him who relied upon the one or the other, and so it is with condonation. The master must be fully aware that the servant has by his misconduct forfeited the right to be continued in his master's service, which is the correlative of the master's right to dismiss him, before he can be held to have waived that forfeiture.' (Emphasis added)"

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