These proceedings were commenced by summons on 13 April 2018. An ex parte application was made by Rema Tip Top before the duty judge, Rema Tip Top seeking (and obtaining) a freezing order in the sum of $500,000. (Mr Grüterich notes that the freezing order was obtained on the basis of evidence alleging that Rema Tip Top had previously been unaware of certain payments made to Mr Grüterich, including an amount of $103,210.88 paid to Mr Grüterich in January 2018. He maintains that this was "misleading at best" and that Rema Tip Top failed to explain this "lapse" during the subsequent contested application for a variation of the freezing order (referring to the decision of Rema Tip Top Asia Pacific Pty Ltd v Gruterich [2018] NSWSC 591 (the Freezing Order Variation Judgment) at [76]). (Rema Tip Top disputes that it has engaged in any misleading conduct.)
On 4 May 2018, Robb J varied the amount of the Freezing Order to $250,000. Robb J did not accept (at that interlocutory stage) that Mr Grüterich had acted dishonestly (see the Freezing Order Variation Judgment at [101]-[106]) but maintained the freezing order on the basis of: Mr Grüterich's status as a foreign national without permanent residency in Australia and the possibility, based on the limited evidence before the court, that a subset of the payments may not have been objectively authorised (see the Freezing Order Variation Judgment at [106]-[110], [116]).
[2]
Issues
The primary issue that arises in the present case is as to the terms of Mr Grüterich's employment contract with Rema Tip Top (noting that any contractual arrangement with DBS was terminated with effect from 28 February 2017 and, in any event, no claim is made by or against DBS, which is not a party to these proceedings).
Rema Tip Top relies on the express terms of the 14 February 2017 Employment Contract and implied terms of honesty good faith and fidelity, as well as relying on Mr Grüterich's statutory obligations as a director and employee; and his fiduciary obligations as a director.
Relevant to the validity of Rema Tip Top's termination of Mr Grüterich's employment on 16 March 2018 and, correspondingly to Mr Grüterich's cross-claim for damages for wrongful repudiation, is the question whether his Employment Contract was orally varied to include a fixed term of employment (as he contends) or whether his employment was terminable on notice without cause (as Rema Tip Top contends).
That raises also the claims made by Mr Grüterich as to other oral variations arising out of the alleged representations in February 2017 as to other benefits. Mr Grüterich, in the alternative, claims relief under the Australian Consumer Law for misleading or deceptive conduct as a result of representations allegedly made by Rema Tip Top, on which he says he relied when entering into the Employment Contract.
Apart from the question of the fixed term, there arise for determination the issues as to Mr Grüterich's entitlements under his contractual arrangements as to matters such as his use of one or more company cars and whether even if not provided for under his Employment Contract, such expenditure was authorised as a discretionary benefit or otherwise.
Mr Grüterich disputes each of Rema Tip Top's claims as to unauthorised appropriation of funds. He maintains that the benefits paid to him were proper and were authorised by the appropriate officers of Rema Tip Top (who in some cases he says were officers and/or directors of its parent companies) but, in the alternative, he denies that he knew that, by taking these benefits, he was doing something wrong. It is submitted that, in many cases, the benefits formed part of a "long-standing course of conduct" by Rema Tip Top and its related companies.
That said, for "commercial reasons, and without admissions", Mr Grüterich does not dispute that: 15 days of annual leave were taken (leading to a concomitant overpayment by Rema Tip Top in the amount of $24,751.39); and he concedes "various minutiae" of the credit card claim, in the aggregate amount of $1,547.52.
I deal with each of the categories of funds said wrongly to have been received by Mr Grüterich in turn in due course.
Rema Tip Top makes allegations of wilful and dishonest misappropriation of company funds in relation to three particular categories of payments: the car allowance, the bonus payment (of $103,000) and the double salary payments (see [47A], [54A], [67A]) and that those payments were impressed with a presumed or resulting trust in favour of Rema Tip Top on their receipt by Mr Grüterich. The allegations of dishonesty there made are necessary elements to support its restitution and trust claims. However, Rema Tip Top makes clear that it does not plead dishonesty in every instance and it does not accept that dishonesty is a necessary element to support its claim for breach of contract, breach of fiduciary duty or breach of s 183 of the Corporations Act (see T 510). It is expressly pleaded at [67B] that if the bonus payment was made under a mistake, Rema Tip Top is entitled to restitution of that amount.
There then arises the question as to whether, to the extent that any of the payments or benefits made to Mr Grüterich on his direction were (as Rema Tip Top contends) unauthorised, this amounts to serious misconduct entitling Rema Tip Top to terminate his employment summarily and, if so, what follows from that in circumstances where Rema Tip Top paid Mr Grüterich a lump sum payment on termination. Further, depending on any finding of misconduct, there is Mr Grüterich's claim to long service leave.
As to the restitutionary claim in relation to the Notice Payment, Rema Tip Top contends: that when it made the Notice Payment it was unaware of the alleged misconduct by Mr Grüterich while he was its Managing Director that Mr Grüterich had caused himself to be paid the car allowance, double salary and bonus payment (as defined in the pleadings); had used Rema Tip Top's money to pay the deposit on the Poliform furniture (to which I will refer to in more detail below); had incurred private travel expenses at Rema Tip Top's cost in the sum of $138,063.54; and had made private and unauthorised purchases with the HSBC Credit Card; that the misconduct was serious and would have justified Mr Grüterich's dismissal without notice; and that, had it known of the misconduct by 16 March 2018, it would not have made the Notice Payment. Rema Tip Top seeks the recovery of the Notice Payment by way of a claim in restitution, or alternatively (on its misleading or deceptive conduct claim) as damages for breach of s 18 of Schedule 2 of the Australian Consumer Law.
In closing submissions it was said that the only prospective aspects of Mr Grüterich's cross-claim for loss and damage that were pressed were the salary claim and the long service leave (T 489). Mr Grüterich did not press the loss particularised in his cross-claim at [98(b)] (for prospective long service leave from the termination date up to 31 December 2019); [98(c)] (the car entitlement claim to 31 December 2019); [98(d)] (the net car allowance up to 31 December 2019); [98(e)] (the private business class travel budget up to 31 December 2019); [98(f)] (the bonus up to 31 December 2019); and [98(g)] (the net accommodation benefits up to 31 December 2019). The claim at [98(h)] was pressed - the underpayment said to be a miscalculation of grossing up of amounts referable to the relevant tax rates (see T 489.50).
[3]
Evidence
Before turning to the respective issues, it is convenient here to address issues of credit and the like arising from the evidence adduced by the respective parties in support of the claims made by that party and resisting the opposing party's claims.
Mr Grüterich argues that it is of critical importance that Rema Tip Top did not call any of the "key" witnesses in this case (including Messrs Reiff, Wach, Ubelacker, Malsem - who Mr Grüterich ultimately subpoenaed to give evidence in his own case - and Mr Flohr, notwithstanding the serious allegations here made); and, in this regard, Mr Grüterich submits that adverse inferences should be drawn against Rema Tip Top that their evidence would not have assisted its case.
Rema Tip Top called evidence from the following key players: Mr Zimmer, Mr Kopp, Mr Slattery and Mr Labbé (each of whom was cross-examined) and from what might be referred to (with no disrespect intended) as lesser players in the scheme of things: Ms Fairclough, Ms Thompson, Mr Davison and Mr Cross (none of whom was cross-examined).
Mr Grüterich gave evidence (and was cross-examined at some length on his affidavits). He also adduced evidence during the course of the hearing, as adverted to above, from Mr Malsem (who was not then cross-examined by Rema Tip Top).
As to the principal witnesses who were called and cross-examined (Mr Grüterich on the one hand and Messrs Kopp, Slattery, Zimmer and Labbé on the other) submissions were made as to their credit or reliability by the respective parties. I deal with each in turn.
[4]
Mr Grüterich
As a general observation, Rema Tip Top notes that Mr Grüterich's principal affidavit (affirmed 25 July 2018) contains his account of a number of conversations Mr Grüterich claims to have had with other people, especially in relation to his alleged employment entitlements; and that the majority of the conversations occurred long before he affirmed his affidavit (in particular, reference being made to the key conversations between Mr Grüterich and Mr Wach relating to the negotiation of the Employment Contract that are said to have occurred from about August 2016).
Rema Tip Top points to the well-known recognition that, as a matter of ordinary human experience, the reliability of memory fades over time and is affected (consciously or otherwise) where a person stands to benefit from acceptance of a particular version of events (see Watson v Foxman (1995) 49 NSWLR 315). Rema Tip Top refers in particular to the discussion of this topic by Davies J in Coote v Kelly; Northam v Kelly [2016] NSWSC 1447 (at [100]-[102]); Evans v Braddock [2015] NSWSC 249 (at [70]-[77]); and to Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) per Leggatt J (at [15]-[21]; [22]).
Although Mr Grüterich has deposed that his "memory of the precise words spoken in many of those conversations is still clear" and that even "where some of the conversations took place some time ago, I still remember those conversations and the effect of what was said in them", Rema Tip Top notes he did not make or keep any diary note or contemporaneous written record of the relevant conversations (other than to the extent that some conversations were followed up with an email to the other person). More pertinently, Mr Grüterich's recollection of events was in a number of instances inconsistent with contemporaneous documents (for example, his recollection of a conversation with Mr Wach on 5 February 2017 in relation to his contractual entitlements). Therefore, not surprisingly, I place greater weight on the contemporaneous documents than on his (or others') recollection of events some years after they occurred.
Rema Tip Top submits that significant aspects of Mr Grüterich's oral testimony were unsatisfactory and that these reflected adversely upon his credit. In this regard, Rema Tip Top points to Mr Grüterich's evidence on the following topics: the 5 February 2017 conversation Mr Grüterich says he had with Mr Wach about his draft contract (since that contract was not sent until 13 February 2017) and similarly, the later conversation deposed to at [201] of Mr Grüterich's first affidavit insofar as it refers to a contract having been supplied to Mr Grüterich on 23 January 2017; Mr Grüterich's claim that he told Mr Wach (and others) he suffered a 30-40% reduction in his net salary by signing the Employment Contract; Mr Grüterich's claim to have been entitled to the use of two cars and to have handed back a second company car in early 2017; Mr Grüterich's explanation as to the Wolgan Valley resort stay and the "potential client" excuses used to justify personal use of the company credit card in various instances.
Rema Tip Top further contends that the following evidence of Mr Grüterich was implausible: Mr Grüterich's claim during cross-examination to have kept a record of what he was spending against his "private travel budget" in his mind; Mr Grüterich's evidence that he "must have missed" the fact that the draft contract which Mr Taylor had prepared for him and which he reviewed and sent to Mr Wach and Mr Kopp on 16 December 2016 made no reference to an entitlement to two company cars (noting that Mr Grüterich agreed it was of the utmost importance to him to ensure that its terms reflected what he wanted); Mr Grüterich's evidence that the compilation of the first version of the spreadsheet of his entitlements prepared by him on 15 March 2018 was a ten minute exercise while he was in "shock" and under "a lot of emotional pain" and only "a rough calculation estimate" of his entitlements or a "rough figure" (when the evidence is that he sent numerous emails attaching documents over the afternoon of 15 March 2018); and Mr Grüterich's evidence that the references in his spreadsheets to the €50,000 2017 bonus and education support allowance were a mistake (it being said that the documents show that he did not believe he had been paid the €50,000 2017 bonus - despite claiming he paid it to himself out of Rema Tip Top's funds on 9 January 2018; and that he believed the balance of his education support was the same as it had been in March 2017 - despite claiming that he had made a payment out of Rema Tip Top's funds to himself on 12 December 2017 thereby exhausting the balance of the support then remaining).
As to the last of those matters, Rema Tip Top notes that Mr Grüterich accepted in cross-examination: that it had been important for him accurately to communicate to Rema Tip Top on 15 March 2018 what he believed his entitlements to be; that the 15 March 2018 Spreadsheet (Exhibit 7) reflected his understanding of his entitlements at the date he prepared it; that he understood and intended the spreadsheet to be "credible and accurate"; and that this was his record of what he considered his entitlements to be at the time he sent his email.
It is noted that Mr Grüterich denied that the €50,000 2017 bonus and the "doctoral support" entries were included in the spreadsheets in order to mislead Rema Tip Top, or as a negotiating tactic. Rema Tip Top attaches significance to the fact that Mr Grüterich referred twice to the first spreadsheet in his affidavits (at [429] of his 25 July 2018 affidavit and [5]-[9] of his affidavit of 10 May 2019), explaining in detail aspects of the spreadsheet; yet said nothing about any mistakes. It is submitted that the obvious inference to be drawn is that Mr Grüterich was hoping they would never be noticed. It is further noted that even when Mr Grüterich was examined orally in chief on day five of the hearing, and asked to look at the 15 March 2018 Spreadsheet and to indicate whether there was "an error in that document", he did not say anything about a mistaken inclusion of the €50,000 2017 bonus and the "doctoral support" entries; rather he identified his "error" as being the omission of the "alternate calculation" (a section that appears in the 16 March 2018 Spreadsheet) from the 15 March 2018 version. It is submitted that Mr Grüterich's further oral evidence in chief was "a belated attempt to lay the groundwork for Mr Grüterich's mistake excuse, in case he needed to deploy it in cross-examination".
Rema Tip Top submits that the way Mr Grüterich gave his oral evidence on this topic was consistent with him having come to court with a rehearsed answer to questions about the inclusion of the €50,000 2017 bonus and the "doctoral support" entries in the spreadsheets. It is said that Mr Grüterich was quick to offer in support of his "mistake" claim that he had been in shock and suffering emotional pain on learning his employment was to be terminated and therefore must have made many mistakes. Rema Tip Top argues that Mr Grüterich may well have been upset by the news that he had lost his position but says that on Mr Grüterich's own "very detailed and comprehensive account" of his actions on 14-16 March 2018 those actions are not consistent with him having so little presence of mind as to have made the many "mistakes" he claims he made in the preparation of these very important spreadsheets, which were to support claims in relation to "entitlements" he valued at in excess of $1.7 million. It is submitted that Mr Grüterich's "mistake" evidence was not credible and it should not be accepted.
Rema Tip Top also argues that Mr Grüterich's evidence displays an idiosyncratic reading of documents, pointing to the following: Mr Grüterich's denial that he was hiding cars in his garage despite his email of 18 August 2016 (sent at 3.36 pm) clearly stating that he was going to do precisely that; Mr Grüterich's denial that he was only driving an (Audi) A5 at that point in time, despite saying so in the same email and his denial that he was not driving the [BMW] X6, or the Mini (in his garage) despite saying so in that email (noting that he then accepted that he had in fact been driving four company cars at that point in time); Mr Grüterich's denial that his words "this stinks and seems very sneaky" in his email of 2 March 2017 (sent at 12:23am) to Mr Slattery and Mr Philpotts were a reference to conduct he was attributing to Mr Malsem; and his suggestion that what he meant to convey by words (translated from German) he used in the email he sent to Mr Zimmer on 22 September 2017 (in relation to the "history about my contract") (namely: "the current points of discussion with T Wach"; and "Bonus - Draft of the DBS, but never with the Rema Tip Top AG/AP") was that he actually had an agreement with Mr Wach to be paid the €50,000 2017 bonus by Rema Tip Top or Rema Tip Top AG.
Next, Rema Tip Top points to evidence of Mr Grüterich that it says is inconsistent with contemporaneous documents: Mr Grüterich's evidence that the Poliform furniture was the best value for money (cf his email exchanges with Poliform in which Mr Grüterich claimed to have a quote for furniture that he described as "alternative very similar products from similar manufacturers or the same" for 15-20% cheaper); Mr Grüterich's affidavit evidence that he had no cause to rush the approval of the payment of the deposit for this furniture (said to be inconsistent with his email to Poliform of 26 February 2018 (at 3.45 pm) in which he said that he had the impending price increase in mind and could pay the deposit ASAP); Mr Grüterich's attempt in his 25 July 2018 affidavit at [607] to blame Ms Thompson for not picking up certain personal charges when reviewing his credit card statements (when at least one - the Shaver Shop purchase - had occurred prior to Ms Thompson commencing that review and checking function); Mr Grüterich's denial in cross-examination that all office functions had moved from Chullora to Newcastle by October 2016 (cf [169] of Mr Grüterich's first affidavit); Mr Grüterich's denial at first in cross-examination that the 22 January 2017 draft letter from DBS about the €50,000 2017 bonus was related to his involvement in the integration of the ConvaTech business with Rema Tip Top's business (cf [191] of Mr Grüterich's first affidavit) which he then corrected in the witness box.
Rema Tip Top also points to the oral evidence given by Mr Grüterich in chief to the effect that the ConvaTech delegation of authority matrices (produced by Mr Malsem under subpoena issued by Mr Grüterich during the course of the hearing) meant that he could act alone as a director in approving items of expenditure referred to in those matrices. Rema Tip Top says that Mr Davison's evidence in his 15 May 2019 affidavit (read in reply) established that these ConvaTech matrices were replaced by a later matrix that Mr Grüterich had signed and which was approved for use by Rema Tip Top (and that that matrix required dual director sign off where a purchase was to be made above the expenditure limit set out in the matrix). It is noted that Mr Grüterich did not mention the later (operative) matrix in his affidavit evidence and did not take up the opportunity to give further evidence on the topic.
Rema Tip Top submits that Mr Grüterich's recollection of many key matters was quite poor (noting that Mr Grüterich said in the witness box that he did not know if his recollection of conversations referred to in his evidence was entirely good; and that on Monday, 13 May 2019, Mr Grüterich could not recall his own Counsel asking Mr Labbé in cross-examination (on Tuesday 7 May 2019) whether it had been important to confirm Mr Grüterich's entitlements in the period 14-16 March 2018). (As to the latter, I do not know that I can place much weight on Mr Grüterich's attention or otherwise to the detail of what was occurring in the courtroom during the course of the hearing - since it is not always clear how much parties in the well of the court can see, hear or follow the proceedings.)
By reference to the above matters, Rema Tip Top submits that there is cause to treat Mr Grüterich's evidence with caution if it is not corroborated by any other independent and reliable evidence (unless it goes against his interests).
It is submitted for Mr Grüterich that he performed well as a witness; that his answers were clear and direct; and that he made concessions where appropriate. It is noted, by way of example, that he was willing readily to concede that he had made mistakes in relation to dates in his affidavit; and that documents he had prepared contained errors. It is said that, rather than make up explanations in the witness box, he was willing to admit when he was unable to recall why he had done something; and it is noted that he gave his evidence without the benefit of an interpreter (though English is his second language). It is submitted that the cross-examination did not demonstrate that he lacked credibility as a witness, and that there ought be no hesitation in accepting his evidence as honest and to the best of his recollection.
I make no adverse credit finding in respect of Mr Grüterich. He did, to my observation, attempt to answer the questions put to him and he did concede matters (where his evidence was clearly inconsistent with the contemporaneous documents such as the errors in the March 2018 spreadsheet items). And I accept that there was scope for some imprecision or misunderstanding in the course of his cross-examination (as is often the case for a person whose first language is not English and who is being cross-examined in English), though I should make clear that it was not my impression (as perhaps implicit in Mr Grüterich's submission on this) that any of the Rema Tip Top witnesses who gave oral evidence with the assistance of an interpreter were in doing so using the interpreter as a shield).
That said, the inconsistencies in his evidence (in particular as to the 5 February 2017 conversation with Mr Wach) mean that I am by no means able confidently to accept that his account of events is a reliable account; and the implausibility of certain of his evidence (particularly, the explanations proffered at least at some stages for expenses incurred on his company credit card - such as the Wolgan Valley stay and the Shaver Shop purchase) suggests a tendency on his part to provide a retrospective justification for events, or to explain away events, for which he has no real justification. That does not mean that his conduct in claiming and retaining funds referable to personal expenses was intentionally dishonest at the time. However, it is consistent with a cavalier attitude (or, to adopt the language used elsewhere in the authorities, "morally obtuse") to the expenditure of, and accountability for, company funds (exemplified by his suggestion to Ms Thompson, however jocular or jesting that may have been, that she should feel free to be "creative" in reconciling his credit card expenses).
That means that I must approach Mr Grüterich's account of other events (particularly his account of conversations with Mr Wach and Mr Reiff as to his contract entitlements) with caution (even accepting that some comment may fairly be levelled at the fact that Rema Tip Top chose not to call evidence from the latter - as to which see further below).
[5]
Mr Kopp
Mr Kopp gave his evidence with the assistance as required from time to time of an interpreter. On occasion during his cross-examination it seemed to me that he and the cross-examiner were genuinely at cross-purposes (such as the questioning as to whether he had removed something from Mr Grüterich's draft contract, when Mr Kopp's evidence as I understood it was that he had put Mr Grüterich's draft to one side and simply prepared a standard form contract (in accordance with Mr Ubelacker's instructions)). It is fair to say that there were a number of questions in relation to the process of drafting Mr Grüterich's contract to which the response was that Mr Kopp could not remember but it seemed to me that this was not inconsistent with the fact that this was one contract out of no doubt a number that were prepared worldwide for employees in the Rema Group and this was some time ago. It is not surprising that Mr Kopp would not remember what it was that Mr Wach was asking him to do in relation to particular aspects of the drafting of the contract. For example, Mr Kopp could not remember what issue Mr Wach wanted to clear up about the €30,000 2016 bonus; his affidavit deposing to his understanding that when he received the 4 February 2017 email there were some issues regarding the bonus but that this was a matter for Mr Wach (see also T 176.26 - "[y]es, but I don't know in detail what they were. I didn't want to clarify those. That was up to Mr Wach").
There was also some apparent (and understandable given the documents in question) confusion on the part of the witness as to questions in relation to the bonus payments - there being an agreed 2016 bonus that Mr Kopp confirmed had been paid (T 178.30; 37); but also a second bonus for 2016 that was paid after 2016 (T 178.40); and then some debate as to the discussion of the bonus that was going to be paid for 2017 and whether that was to be reduced or not (see T 178-180). Ultimately, what I took from Mr Kopp's evidence in this regard was that there were two bonuses that had been paid in respect of the 2016 year (one paid in 2016 and one paid in May 2017), each in the amount of €30,000 (see T 182.10); and that the draft letter sent in 2017 related to the 2017 bonus and Mr Kopp did not know whether that 2017 bonus was paid (see T 183.18).
I formed the view that Mr Kopp was not being obstructive and (without any criticism of the cross-examiner) that any difficulties in the giving of his evidence related to confusion on Mr Kopp's part as to what precisely he was being asked.
[6]
Mr Zimmer
As to Mr Zimmer, Mr Grüterich says that Mr Zimmer was an unimpressive witness in general. It is said that, despite being CEO of Stahlgruber AG, Mr Zimmer professed not to know key information in relation to the operations of the company, including its legal function; and that he was also less than forthcoming in his responses to questions. By way of example, Mr Grüterich points to the exchange in cross-examination where Mr Zimmer was asked who the shareholders of Stahlgruber OWG AG were - Mr Zimmer initially answering "[f]rom my best knowledge, there are a couple of shareholders in there. But I don't know them personally"; when pressed as to their names, saying "[n]ot really"; and then finally saying, amongst other things, "another shareholder is Mr Reiff" (T 63).
My impression of Mr Zimmer in the witness box was that he displayed a concern to understand precisely what he was being asked (see for example his request for clarification of what was meant by "ultimately" at T 61.28) and that he adopted what might be labelled as a technical somewhat dogmatic approach to answering questions put to him (his answer that he did not know the shareholders personally being an example of that approach). I certainly formed the view that Mr Zimmer was not being particularly keen to assist the cross-examiner; but I did not consider him to be obstructive in that regard; nor did he strike me as acting as an advocate for Rema Tip Top's case.
[7]
Mr Labbé
Mr Labbé gave his evidence in a matter of fact manner. He responded directly to questions. There is no basis for criticism of his evidence. Relevantly, he confirmed that (at the time of the hearing before me) there was a legal proceeding on foot in relation to Mr Wach and "it's with our lawyers" (T 142.43); and said that he was not privileged to have information in relation to Mr Wach (see T 142.47).
Mr Labbé said he had a professional relationship with Mr Wach but that he stopped being in contact with him when Mr Wach resigned (T 142). He accepted that it was important to get to the bottom precisely of what Mr Grüterich's employment arrangements were; and that Mr Grüterich had claimed to have verbal agreements with Mr Wach; but said that Mr Wach was not employed by Rema Tip Top anymore and was in a legal proceeding so he was not able to contact him (T 145). He agreed that he could not be certain what Mr Grüterich's entitlements were as at 15 March 2018 (T 146), given that he did not call or contact Mr Wach in any way; and he accepted that it was possible that he did not know what written or oral contracts Mr Wach entered into on behalf of the Rema companies with Mr Grüterich (T 147).
Mr Labbé impressed me as a straightforward and courteous witness. Relevantly, he gave evidence that he had queried with Mr Grüterich aspects of the spreadsheet items (particularly the doctorate allowance).
[8]
Mr Slattery
Mr Slattery seemed to me to be a matter of fact and co-operative witness. So, for example, while he was adamant that he disputed that Mr Grüterich had an entitlement to the use of two cars ("absolutely not"); he readily conceded that without reference to the documents he would not be able to say who was entitled to a car allowance. Rather, that view was on the basis that he was not aware of any staff being entitled to two cars and the (perhaps not surprising) notion that he was not sure why anyone would need two vehicles.
Similarly, Mr Slattery's evidence as to payments of business expenses seemed to me to be based on a common sense approach. Mr Slattery readily accepted that the reason he did not authorise Mr Grüterich's expenses was because he had no role in authorising those expenses. Rather, his evidence in essence was that, had he been asked, he would not have approved certain expenditure to which he referred in his affidavit. His common sense attitude was evident in his response to a question as to whether he remembered asking Mr Philpotts to review Mr Grüterich's credit card statements - he said "[w]hy would I ask Mr Philpotts to review a statement from his obvious superior?" (T 214.2).
It was not suggested that Mr Slattery was other than a credible witness; and I certainly found him to be such.
[9]
Jones v Dunkel inferences
As already adverted to, Mr Grüterich emphasises that Rema Tip Top did not call evidence from the ex-Group CEO, Mr Wach, or from Mr Reiff, the ultimate decision-maker within the Corporate Group; that it also "decided not to make available" Mr Ubelacker (the Group head of legal who prepared all of the relevant contractual documentation); and says that other key witnesses (such as Mr Flohr and Mr Heumüller) did not provide affidavits. It is also noted that Mr Malsem did not give evidence in Rema Tip Top's case and it is said that he ultimately gave supportive evidence in Mr Grüterich's case, and Rema Tip Top elected not to cross-examine him. For Mr Grüterich, it is submitted that if Rema Tip Top thought that the allegations made against Mr Grüterich were strong, these forensic decisions would be "truly bizarre".
Complaint is made that Rema Tip Top has not provided any proper explanation as to why any of these witnesses have not been called. In relation to the overseas witnesses, as a member of the Rema Group, and in circumstances where the instructions being given in these proceedings are coming directly from the headquarters in Germany, it is submitted that Rema Tip Top was in the unique position of being able to procure their attendance (or, at the very least, is able to take steps in an attempt to do so); and that there is no evidence that it has done this.
Mr Grüterich argues that the fact that Rema Tip Top has elected not to produce these people as witnesses ought result in an adverse inference being drawn against it (relying on Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel); Bradley Mark Lum v MV Developments (Lane Cove) Pty Ltd (in liquidation) [2018] NSWSC 247 at [48]-[53] (Emmett AJA); Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24 at [136]-[140] (Bathurst CJ, Beazley P, as Her Excellency then was, and Macfarlan JA)).
It is submitted that there is nothing in the evidence that would establish that former officers and employees of Rema Tip Top and its related companies fall within Mr Grüterich's "camp"; and that it is much more likely that the converse is true; and that Mr Grüterich, unlike Rema Tip Top, could not take informal steps successfully to procure their attendance, and was unable to request the court to issue a subpoena compelling any of them to attend (referring to Yabsley v MLC Limited [2017] NSWSC 832 at [36]-[37] (Parker J); Caswell v Sony/ATV Music Publishing (Australia) Pty Ltd [2012] NSWSC 986 (Caswell v Sony/ATV Music) at [81], [85] (Hallen AsJ, as his Honour then was); Gloucester (Sub-Holdings 1) Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1419 at [14]-[16], [29]-[30], [37], [54] (White J, as his Honour then was); Schneider v Caesarstone Australia Pty Ltd [2012] VSC 126 at [9] (Davies J)).
Complaint is also made that Rema Tip Top's discovery was deficient (referring to an affidavit of Ms McConochie dated 6 May 2019). The background to this complaint is that a discovery application was advanced in the expedition list but was "in suspension" between September 2018 and February 2019. It is said that it was made plain in Mr Grüterich's submissions filed and served in support of the discovery application that production was also sought from Rema Tip Top's related bodies corporate, and that Sabre orders would be sought in that regard (see Sabre Corporation Pty Ltd v Russ Kalvin's Hair Care Company (1993) 46 FCR 428 at 431-432 (Lockhart J); Caswell v Sony/ATV Music; Arhill Pty Ltd v General Terminal Co Pty Ltd (1990) 23 NSWLR 545; Ceramic Fuel Cells Ltd (in liq) v McGraw-Hill Financial Inc (2016) 245 FCR 340; [2016] FCA 401).
A notice of motion was filed on 6 May 2019 for a strike out, either in whole or in part, of the further amended statement of claim filed 29 April 2019 on the basis that Rema Tip Top had failed to comply with orders made for discovery by Kunc J on 5 April 2019. That motion was deferred at the commencement of the trial so that Rema Tip Top could prepare for that argument; ultimately it was not pressed but the complaints made as to discovery were raised in the context of the complaint that Rema Tip Top had chosen not to make available material in relation to the contractual arrangements. (Rema Tip Top's position on the motion for discovery was that there was no basis for the criticisms made of its discovery and that Mr Grüterich's position was a direct result of his own delay in the conduct of this matter and, it would appear, deliberate decisions by him (for reasons not apparent) not to make applications to court in relation to documents that might exist but which are not held by Rema Tip Top in Australia, but may be in the possession of related entities overseas.)
Mr Grüterich says that there was no forensic decision not to pursue Sabre orders (as Rema Tip Top suggested in its strike-out submissions dated 6 May 2019 at [44]); and that, in circumstances where Rema Tip Top and its related companies held "almost all of the cards in relation to documents", it was incumbent upon it to take all reasonable steps to procure the production of all documents answering the categories and that it has failed to do so.
It is submitted that an adverse inference ought be drawn that the content of such documentation, had it been produced, would not have assisted Rema Tip Top's case (reference being made to Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181 at 196-198 (Barwick CJ); Moody Kiddell & Partners Pty Ltd v Arkell [2013] FCA 1066 at [26]; Mirus Australia Pty Ltd v Gage [2017] NSWSC 1046 at [236]-[237], [257]-[265]) and hence that less weight should be placed on the "unsubstantiated assertions" of Rema Tip Top's witnesses in relation to matters where there ought to have been such disclosure (and it should be concluded that Rema Tip Top has failed to discharge the onus of proving its case).
With one exception (that being in relation to Mr Reiff), I do not consider that any Jones v Dunkel inferences should be drawn.
As to Mr Wach, the evidence clearly establishes that he cannot be said to be in Rema Tip Top's "camp". There is, or was at the time of the hearing, a dispute between Mr Wach and Rema Tip Top or its parent company, which was the subject of some kind of legal proceeding. It was clear from the evidence of Mr Ubelacker and Mr Slattery that there is no ongoing contact with Mr Wach within the company. The suggestion that he would have been amenable to give evidence in this proceeding or that Rema Tip Top should have compelled him to give evidence in this proceeding is not plausible. (Nor however, would I draw any adverse inference against Mr Grüterich for him not calling Mr Wach - as I understand it, Mr Wach resides in Germany. The difficulty for Mr Grüterich compelling a foreign resident to give evidence here is obvious.)
As to Mr Flohr, the relevance of any evidence he might have been able to give to any issue in the proceeding is by no means clear. Mr Grüterich deposes in his first affidavit to various conversations with Mr Flohr as to the arrangements he had in South Africa. That is not relevant ultimately to his entitlements in Australia under the separate agreement entered into in February 2017. Even assuming that there was an expectation that discretionary arrangements would continue (which is problematic) or that there was some general practice within the Rema Group which governed the position (which is also problematic given the level of generality of Mr Grüterich's evidence in this regard), it is difficult to see how the evidence of Mr Flohr would have shed light on the arrangements post February 2017.
Similarly, as to Mr Heumüller, it was not explained how his evidence would have been relevant to explain some issue in the proceeding such that the failure to call him would give rise to an adverse inference.
As to Mr Ubelacker, his evidence might have been expected to shed some light on the drafting of the contract itself if that were in issue but the real issue goes not to the drafting of the Employment Contract in 2017 but to the discussions in relation to the later variation thereof and to matters such as the bonus arrangements. It was Mr Grüterich's own case that Mr Ubelacker played no role in the negotiation of the Employment Contract (albeit that the documentary evidence makes clear that he was copied into the communications). I do not consider that an adverse inference should be drawn from the fact that he was not called, particularly in circumstances where others involved in the discussions (Mr Kopp and Mr Zimmer) did give evidence in relation to the drafting of the Employment Contract or subsequent proposals to vary it. It was not necessary for Rema Tip Top to produce every individual who had some role in the contract preparation. Rema Tip Top argues (with I consider has some force) that there was not the necessary identification of the specific issue to which each of the witness about whom a Jones v Dunkel inference is sought to be drawn would have been expected to give.
As to Mr Reiff, the position is somewhat different. True it is that Mr Reiff is not an executive of Rema Tip Top. However, he was present and participated in the various discussions on which Mr Grüterich relies for his claims in relation to the alleged oral variation of the Employment Contract and, in particular, as to the alleged fixed term arrangement (with the so-called "two year handshake"). He is also someone whom others in the Rema Group understood was in a position to give directions in relation to matters within the subsidiary companies and whose directions it is said would generally (if not always) be followed. (It is not, however, alleged that he is in the position of a shadow director of Rema Tip Top.) I am told that there was an affidavit prepared by Mr Reiff and served in the proceedings. It was not ultimately read by Rema Tip Top. There had been an application (opposed by Mr Grüterich) for his evidence (and that of Mr Ubelacker) to be taken by audio visual link. That application was opposed and was not then pressed.
It was, perhaps somewhat faintly, acknowledged by Counsel for Rema Tip Top that one might understand why Mr Reiff would have something to say about evidence such as the alleged "two year handshake" conversation. I agree. In circumstances where it might be expected that Mr Reiff would be in Rema Tip Top's camp, and where there would be unlikely to be a difficulty in calling him to give evidence (or at least any such difficulty was not explained), I consider that an inference should be drawn in favour of Mr Grüterich that any evidence Mr Reiff might have given on that particular issue would not have assisted Rema Tip Top's case.
That said, it is important to bear in mind the nature of a Jones v Dunkel inference. In In the matter of MSU Management Pty Ltd - Urusoglu v MSU Management Pty Ltd [2011] NSWSC 54 (at [248]-[250], I summarised the general rule in Jones v Dunkel and it is convenient here to reproduce that summary:
A Jones v Dunkel inference is open to be drawn in relation to an unexplained failure to call evidence as to a matter that calls for explanation. The rule in such a case permits evidence in relation to that matter to be given greater weight, and an inference or inferences to be more readily drawn, when the party who might have called evidence to the contrary has chosen not to do so. In Commonwealth of Australia v McLean (NSWCA, 31 December 1996, unreported), Handley JA and Beazley JA said: "... The rule typically applies to strengthen or weaken an inference otherwise available on the evidence for the benefit of the party not in default."
If such an inference does arise, it would do no more than permit the court to infer that the uncalled evidence or missing material would not have assisted the case of the party against whom the inference is drawn; it would not permit the court to infer that that the uncalled evidence was in fact damaging to that case.
What the principle allows is the more ready acceptance of evidence which might have been contradicted (but which was not). Thus, where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the party disputing it might have proved the contrary, had it chosen to give evidence, is properly to be taken into account as a circumstance in favour of drawing the inference (per Davies AJA in Ho v Powell (2001) 51 NSWLR 572, at [76]; HML v R (2008) 235 CLR 334; 245 ALR 204 at [302] [303; [2008] HCA 16; Brandi v Mingot (1976) 12 ALR 551 at 559-60; Cf Jones v Dunkel (1959) 101 CLR 298 at 320-321; [1959] HCA 8; Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181 at 197; 52 ALJR 189 at 197; and Menzies J in Jones v Dunkel (at 312)).
The drawing of a Jones v Dunkel inference does not permit one to infer that the evidence Mr Reiff would have given, if called, would have been positively damaging to Rema Tip Top's case. It would simply permit an inference more comfortably to be drawn that Mr Grüterich's account of the conversation was correct. That must be assessed in the light of the evidence of the other persons present (albeit not directly participating in the conversation, namely Mr Labbé and Mr Zimmer) and in light of the events that followed that conversation, including, relevantly, Mr Grüterich's conduct in calculating his entitlements on termination initially on the basis of an entitlement to a six month period of leave which is inconsistent with the "two year handshake" arrangement to which he has deposed.
Ultimately, I have concluded that even if a statement to the effect of the "two year handshake" was made by Mr Reiff at the relevant meeting it was not something that Mr Grüterich understood would have binding force in the absence of a written document (which is why he pressed for a contract variation at the time) and it was not relied upon by him so as to give rise to any entitlement to relief on his part.
[10]
Issues for Determination
With the above (admittedly lengthy) introduction and survey of the principal witnesses, I turn to the issues for determination.
[11]
Mr Grüterich's employment arrangements
I propose first to deal with the issue as to Mr Grüterich's employment arrangements as at the time of termination of his employment relationship with Rema Tip Top, since this is relevant both to Rema Tip Top's claim for declaratory relief as to the validity of its termination notice on 16 March 2018 and to Mr Grüterich's claim for damages on the basis that Rema Tip Top wrongly repudiated his employment contract.
[12]
Express terms of the 14 February 2017 Employment Contract
There is no dispute that the express terms of Mr Grüterich's employment, as set out in the signed 14 February 2017 Employment Contract (and before considering for the moment whether the evidence establishes that there was any variation in or about December 2017 of the kind alleged by Mr Grüterich), included that: Mr Grüterich would use his best endeavours to promote the financial position, profits, prospects, welfare and reputation of Rema Tip Top and not intentionally or recklessly do anything which is, or may be, harmful to those interests (cl 3.1(e)); Mr Grüterich's remuneration was inclusive of all payments required for all hours Mr Grüterich may work (cl 4.2(b)); Rema Tip Top would pay Mr Grüterich the Remuneration, being $280,000 per annum inclusive of superannuation (cl 6.1 and Schedule 1); Rema Tip Top must reimburse Mr Grüterich for all reasonable out of pocket expenses properly incurred by him in the performance of his duties (cl 9.1); Rema Tip Top could terminate Mr Grüterich's employment at any time by giving six months' written notice, or by paying Mr Grüterich six months' base salary in lieu of notice (cll 15.1 and 15.3(a)); Rema Tip Top could terminate the employment of Mr Grüterich without notice if Mr Grüterich engaged in serious misconduct (cl 15.2(a)); on or before the Termination Date, Mr Grüterich must vacate any accommodation provided to Mr Grüterich by Rema Tip Top (cl 16.3(e)); the Employment Contract could only be amended by written agreement between all parties (cl 21.1); and the Employment Contract superseded all previous agreements about its subject matter and embodied the entire agreement between the parties (cl 21.2(a)).
[13]
Implied term
Rema Tip Top contends that the Employment Contract also contained an implied term that Mr Grüterich owed a duty of honesty, good faith and fidelity to his employer (referring to Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 81; [1933] HCA 8 (Blyth Chemicals), Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 (CBA v Barker) at [30] (per French CJ, Bell and Keane JJ), [63]-[66] and [100] (per Kiefel J, as her Honour then was) and [116] (per Gageler J)). Mr Grüterich does not concede an implied duty of good faith and submits that the High Court left open whether an obligation of good faith was implied into employment contracts in CBA v Barker. (Rema Tip Top says that what was left open was whether the employer owes a duty of good faith.)
In any event, Mr Grüterich accepts that, by reason of his position, Mr Grüterich owed fiduciary and statutory duties to Rema Tip Top; and that if, as a matter of substance, there was a misappropriation of funds that would be wrongful (see Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-97; [1984] HCA 64 (per Mason J) (Hospital Products)). Rema Tip Top says that Mr Grüterich's fiduciary duties precluded him making an unauthorised benefit from his position (citing Breen v Williams (1996) 186 CLR 71 at 113, 137-138; [1996] HCA 57, Pilmer v Duke Group Ltd (In Liq) (2001) 207 CLR 165; [2001] HCA 31 at [74]). It also relies on the statutory obligation owed by Mr Grüterich as an employee (and as a director) of Rema Tip Top pursuant to, s 182(1) of the Corporations Act noting that, for the purposes of s 182(1) impropriety does not depend on an alleged offender's consciousness of impropriety and that impropriety consists of a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case.
[14]
Oral variation
By his cross-claim, Mr Grüterich contends that the Employment Contract was varied orally on 12 December 2017 to include a provision fixing his term of employment until 31 December 2019 (Fixed Term). Mr Grüterich contends that Rema Tip Top breached this provision when it terminated his employment on 16 March 2018 and that he is entitled to damages referable to lost income up to the expiry of the Fixed Term.
Insofar as Mr Grüterich contends that his employment was governed by additional oral terms along the lines of the representation said to have been made in 2017 February, Rema Tip Top says that, whatever the position may have been as regards Mr Grüterich's employment prior to 14 February 2017 (including by other companies within the Rema Group), there were no oral terms of his employment once the Employment Contract was made; that it was an entire agreement and that the Employment Contract was not varied orally at any time after that. Rema Tip Top relies on the entire agreement clause of the Employment Contract (cl 21.2(a)) and the no oral modification clause of the Employment Contract (cl 21.1).
Further, Rema Tip Top disputes the key factual allegations made by Mr Grüterich as the foundation for his contention that the Employment Contract contained oral terms. Rema Tip Top notes that much of Mr Grüterich's case in this regard depends upon his uncorroborated testimony as to conversations he claims to have had with other executives in the Rema Group; and Rema Tip Top submits that this evidence should not be accepted.
Mr Grüterich argues that it is illogical that he would sign the Employment Contract and DBS Release Agreement, making him significantly worse off, at the same time as taking a promotion to Chief Executive Officer and Managing Director of Rema Tip Top with increased responsibility. It is said that Mr Grüterich was also taking on significantly greater risk, being appointed as a director to the 16 Rema Tip Top Australia subsidiaries. Mr Grüterich in effect argues for the inference to be drawn from this that either there was a side deal with Mr Wach that was later to be reduced to writing or Mr Wach lied to him to get him to sign the contracts (and says that in either case, Rema Tip Top ought not be permitted to escape liability). (I do not consider that either such inference should here be drawn. There may well have been other reasons for Mr Grüterich to have been prepared to sign the 14 February 2017 Employment Contract at the time (not least being an expectation that salary or benefits issues would later be resolved) just as he was prepared to come to Australia without a final signed employment contract in the first place; and the emphasis seemingly placed by on his greater responsibilities as Managing Director might well be thought to be balanced by the greater status thereby conferred on him. What is clear is that Mr Grüterich was regarding the formalisation of his contractual terms of employment, and any variation thereof, as a process of negotiation - as is apparent from his emails to Mr Zimmer to which reference has been made above).
[15]
Was there a fixed term?
As noted already, Rema Tip Top's position is that Mr Grüterich's employment contract was constituted by the 14 February 2017 Employment Contract, which provided for termination on six months' notice (cl 15.1), and that it validly terminated the contract on 16 March 2018; whereas Mr Grüterich maintains that the 14 February 2017 Employment Contract was varied at the meeting on 12 December 2017 (see [45]-[46] of the cross-claim) to provide for a fixed minimum term of employment for two years ending in December 2019 (and hence Rema Tip Top was unable to terminate Mr Grüterich's employment without cause until after 31 December 2019).
Mr Grüterich accepts that the Employment Contract contains an entire agreement clause and a clause requiring amendments to be in writing but says that does not prevent an oral variation (referring to GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 (GEC Marconi) at [214]-[217] (Finn J)). In addition, he submits that an entire agreement clause does not prevent the application of the law pertaining to misleading or deceptive conduct (referring to Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [130]).
Mr Grüterich maintains that he was initially promised a fixed term of two to three years and says that Mr Reiff subsequently confirmed it to be two years (i.e., ending in December 2019). He argues that the purported termination of the Employment Contract by Rema Tip Top was in breach of this agreement; alternatively, that the promises made to him were actionable misrepresentations under the Australian Consumer Law. In circumstances where he was dismissed from his employment on a no fault basis (and where he denies that there was any relevant misconduct) it is submitted that Rema Tip Top is in breach of the agreement for a fixed term of employment and ought to pay damages accordingly. In the course of closing submissions it was made clear that Mr Grüterich only claims damages for retrospective loss (other than insofar as he presses his claim for salary to the end of the alleged fixed term of his contract). He did not press his claim to long service leave entitlements beyond the date of termination of his employment - see T 490).
[16]
Rema Tip Top's submissions
Rema Tip Top submits that the oral (Fixed Term) variation contended for by Mr Grüterich should be rejected for the following reasons.
First, that there was no consideration given by Mr Grüterich (as promisee) to support this alleged variation. (In his cross-claim, Mr Grüterich alleges that the "December 2019 Representation" as to the fixed term was supported by consideration by his "agreeing to continue his employment" with Rema Tip Top on the terms agreed (namely, the Employment Contract varied to include, inter alia, the said representation - see at [46])). In this respect, Rema Tip Top points to the lack of any evidence from Mr Grüterich that he would have left employment with Rema Tip Top if the alleged December 2019 Representation as to a fixed term had not been made to him and it is submitted that there is no evidence from which such an intention on his part could reasonably be inferred. Rema Tip Top points to the fact that, on Mr Grüterich's version of events, Mr Grüterich had just been granted a pay increase of $147,000 per annum (backdated to 1 January 2017) and it argues that he therefore had a significant financial incentive to remain employed by Rema Tip Top.
Second, that Mr Grüterich's evidence as to what was said in conversations relating to his alleged employment entitlements should not be accepted unless it is corroborated (having regard to the submissions made as to his credit).
Third, that Mr Grüterich's subsequent conduct is not consistent with his version of the 12 December 2017 conversation with Mr Reiff. In this regard, Rema Tip Top points to: Mr Grüterich's email of 13 December 2017 to Mr Zimmer which purports to summarise agreed changes to his remuneration and says nothing about an agreement to grant Mr Grüterich a fixed term of employment; to the fact that, on Mr Grüterich's own account of what he said and did between first learning that his employment was to be terminated and that termination being carried out, Mr Grüterich did not say to anyone that he had a fixed term of employment which could only be brought to an end for cause (noting that on Mr Grüterich's account of the conversation with Mr Slattery to the effect that he might need to count on him for the "two year handshake", which is denied by Mr Slattery, this occurred only after Mr Grüterich's employment had come to an end on 16 March 2018); and to the fact that the excel spreadsheets of Mr Grüterich's "entitlements" prepared by him on 15 and 16 March 2018 included, as a line item, the sum of $225,000 as the "Notice Period 6 months". Rema Tip Top submits that Mr Grüterich clearly believed that he had an entitlement to six months' notice as at 16 March 2018 and that this is wholly inconsistent with the conversation he claims to have had with Mr Reiff on 12 December 2017 (and, in particular, the exchange of that notice period for a fixed term of employment).
Fourth, Rema Tip Top argues that, even assuming Mr Grüterich's account of that conversation to be correct, it could not give rise to a variation to Mr Grüterich's contract having regard to cl 21.1 of the Employment Contract which provided that it could only be amended by written agreement between all parties.
Rema Tip Top points to the decision of the Supreme Court of the United Kingdom in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24; [2018] 2 WLR 1603 (Rock Advertising), in which Lord Sumption (Lady Hale, Lord Wilson, Lord Lloyd-Jones agreeing) concluded that the law should and does give effect to a no oral modification clause (at [10]) and said (at [15]):
If, as I conclude, there is no conceptual inconsistency between a general rule allowing contracts to be made informally and a specific rule that effect will be given to a contract requiring writing for a variation, then what of the theory that parties who agree an oral variation in spite of a No Oral Modification clause must have intended to dispense with the clause? This does not seem to me to follow. What the parties to such a clause have agreed is not that oral variations are forbidden, but that they will be invalid. The mere fact of agreeing to an oral variation is not therefore a contravention of the clause. It is simply the situation to which the clause applies. It is not difficult to record a variation in writing, except perhaps in cases where the variation is so complex that no sensible businessman would do anything else. The natural inference from the parties' failure to observe the formal requirements of a No Oral Modification clause is not that they intended to dispense with it but that they overlooked it. If, on the other hand, they had it in mind, then they were courting invalidity with their eyes open.
While Rema Tip Top accepts that Rock Advertising does not reflect the current state of the law of Australia (referring to Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91; KD Kanopy Australasia Pty Ltd v Insta Image Pty Ltd [2007] FCA 481, GEC Marconi, Cenric Group v TWT Property Group [2018] NSWSC 1570), it says that such clauses can nevertheless have considerable evidentiary importance; noting that in GEC Marconi, Finn J said (at [221]):
Though lacking legal effect in the face of a subsequent oral or implied agreement, it seems to be accepted that a no oral modification clause can have significant evidentiary effect. As Holmes J commented in Bartlett v Stanchfield, above 'The [clause] is a fact to be taken into account in interpreting the subsequent conduct of the plaintiff and defendant' …
Rema Tip Top submits that the existence of cl 21.1 in the Employment Contract supports an inference that, even if Mr Grüterich's version of the 12 December 2017 conversation were to be accepted, neither he nor Mr Reiff intended to create a binding variation to the Employment Contract. Further support for such an inference is said to be drawn from the circumstances in which the conversation took place (during the evening, at an informal and social gathering at a hotel bar). Further, it is noted that Mr Reiff was not an employee or a director of Rema Tip Top and it is contended that the evidence does not establish that he had authority (actual or ostensible) to bind Rema Tip Top to a variation to the Employment Contract.
Thus, Rema Tip Top submits that the Employment Contract was not varied orally on 12 December 2017 as Mr Grüterich contends.
[17]
Mr Grüterich's submissions
Mr Grüterich maintains that his contractual terms of employment were varied as a result of the conversation he had with Mr Reiff at the Raffles Hotel Bar in Singapore during the 18 September 2017 holding meeting, in which he says Mr Reiff agreed that Mr Grüterich's benefits the subject of the alleged February 2017 representations continued and would subsequently be confirmed in writing; that Mr Reiff told him that Mr Zimmer would take care of the variations to the Employment Contract; that those terms were confirmed by Mr Zimmer at the 12 December 2017 further regional holding meeting at the Raffles Hotel in Singapore; and that Mr Reiff confirmed on 12 December 2017 that the minimum (fixed) term of Mr Grüterich's employment would be two years, ending on 31 December 2019.
Mr Grüterich points to the lack of any response from Mr Zimmer to the communications by Mr Grüterich as to the history of his contractual entitlements and in particular to the lack of response from Mr Zimmer when he (Mr Grüterich) sent Mr Zimmer a copy of his payslips for December 2017 and January 2018 and informed Mr Zimmer that he had forwarded the Spreadsheet to payroll to action the payments. Mr Grüterich also relies upon his "two year handshake" conversation with Mr Slattery (as I understand it, as contemporaneous corroboration that it was Mr Grüterich's understanding at the time that he had a fixed term employment contract).
[18]
Determination
A number of observations can be made at the outset.
First, that the practice within the Rema Group appears to have been that there could be separate employment contracts with different entities in the group subsisting at the same time - at least when an employee was posted or deployed overseas.
Second, that there was at least some evidence of a practice whereby written side-letters were incorporated into the contractual arrangements (and that seems to explain Mr Kopp's evidence in the witness box as to how the standard from contracts were ordinarily prepared). Hence, the expectation by Mr Grüterich in 2017 that certain aspects of his remuneration would be the subject of a side letter or an "expat" letter is not inconsistent with the practice in the Rema Group at that time.
Third, that, at least in relation to Mr Grüterich's arrangements, there seems to have been a large element of trust or good faith reposed by him in the later documentation of the contractual arrangements that he was discussing (since on at least two occasions his email communications suggested it was not critical that matters be put into his contract at that stage).
Fourth, and in my opinion significantly, what written agreements there were in existence all contained the equivalent of entire agreement clauses and no oral variation clauses. It must have been intended that they have effect and the very fact of side letters documenting particular arrangements outside the written terms of the contract is consistent with that (i.e., that they were not to be left to be the subject of oral arrangements but that they were to be recorded in writing in some fashion). True it is that such clauses may not be fatal to there being a conclusion of contract variation in some cases but in the present case I am not persuaded that this was objectively the parties' intent. While oral conversations or "agreements" might have given rise to a claim based on estoppel or the like in circumstances (where the oral agreement could be established on the balance of probabilities and there was detrimental reliance thereon) I do not consider this to be a case where that arises (as to which see further below).
As at January 2016 (on the documents referred to above), it appears that Mr Grüterich's initial employment in Australia was governed by: his October 2012 employment contract with DBS (the First DBS Contract) (to the extent that this was not superseded by the DBS Posting Agreement) and the 8 December 2015 DBS Posting Agreement (together with any side-letter(s) in respect of the First DBS Contract that remained applicable). It is not clear whether the 24 November 2015 employment contract forwarded by Mr Wach was ever formally concluded between Mr Grüterich and Rema Tip Top Australia (although the parties' conduct suggests that it may have been understood to govern the local employment arrangements); since (apart from the 7-8 January 2015 email correspondence) nothing further seems to have been done at the initial stage to document the arrangements between Rema Tip Top Australia and Mr Grüterich.
There is no doubt that the 14 February 2017 Employment Contract was signed and (with the DBS Contract) governed the employment relationship from that time.
The signed Employment Contract is clearly not a fixed term contract. The DBS Secondment Contract does not assist Mr Grüterich in that regard - it does not apply to his separate Australian employment contract. Nor does the 24 November 2015 email assist him. It is clear that Mr Grüterich did not understand the "draft" contract attached to the 24 November 2016 email to be a concluded agreement - and he queried a number of points about the proposed arrangements, including relevantly "duration of contract 5 years?" (and interestingly seems not to have considered this crucial enough to be included in his contract in any event). Mr Wach's response makes clear that he was not agreeing to a "net" salary; that he was not agreeing to the business class travel Mr Grüterich had proposed (indicating that this seemed very high); that the proposed duration of the contract was uncertain (a minimum of three to five years but could also be open ended) and that this was to be an Australian contract done locally. That said, it seems clear that the parties understood the terms of the draft contract to be at least generally applicable until the conclusion of the local contract (which did not occur until the February 2017 negotiations).
Significantly, when Mr Grüterich procured the draft employment contract from Mr Taylor, he did not include in that contract many of the "entitlements" that he says were agreed with Mr Wach and that he says it was agreed, in his discussions in February 2017, would continue (such as the two company cars and the private business travel) nor did that contract specify a fixed term.
As to the discussions in relation to the Employment Contract, I cannot accept Mr Grüterich's account of the conversation with Mr Wach on 5 February 2017. That is because it logically cannot have occurred at that time, at least in the terms that Mr Grüterich deposes it did, because at that stage Mr Kopp had not yet sent him the draft contract documents. Nor does it make sense that Mr Grüterich was simply mistaken as to the date of a discussion to that effect (leaving aside the detail with which he has recorded that conversation) because by the time that the draft contract documents were sent to Mr Grüterich (by email on 13 February 2017), Mr Grüterich was en route to Singapore for the 14 February 2017 holding meeting.
I place weight on the contemporaneous documents in this regard when determining the likely timeline of events. It is consistent with the chronology of Mr Grüterich being handed a document to sign at the Raffles Hotel (which is what he says happened) that this was the first time he had seen the document. The only other possibility is that when he arrived in Singapore he accessed the email and had reviewed the draft contract attached before the meeting in the Hotel but he does not give evidence to that effect.
Mr Grüterich says that he signed the draft contract without reviewing it and trusting that his entitlements would continue, but nothing points to any discussion to that effect and the November 2015 email from Mr Wach is inconsistent with there being such an agreement.
What might perhaps explain the somewhat inconsistent evidence of the events of 14 February 2017 is that Mr Grüterich signed the document without realising that it was not the draft contract that Mr Taylor had prepared for him (although the two are very different documents and that would seem implausible) but, if so, it is curious that the only modification that was made was as to the remuneration and, in any event, Mr Taylor's draft did not include the entitlements that Mr Grüterich now contends he had. (Moreover, this is not what Mr Grüterich contends.)
Clearly, there was a modification by Mr Kopp of some version of the document that Mr Kopp had earlier forwarded to Mr Grüterich - a revised version was sent around 9.47pm that night. The only amendment that Rema Tip Top accepts was made to the document was to the remuneration (from $260,000 to $280,000). There is no copy of a document with the $260,000 figure on it - possibly no such copy was kept. In any event, there as certainly no modification to include other terms. The sending of a modified document is consistent with Mr Grüterich's evidence that he signed a document with a lesser remuneration and this then being revised to the higher remuneration; but that does not support the assertion by Mr Grüterich as to the February representations nor of his version of events on 14 February 2017.
Mr Grüterich may well have complained to Mr Wach on that occasion about the additional benefits he sought, and may well have asked Mr Wach to get contractual variations for him, but what seems abundantly clear is that this did not occur and Mr Grüterich did not put in writing any assertion of any agreement to do so. Significantly, by the time Mr Grüterich was explaining to Mr Zimmer the "history" of his (Mr Grüterich's) contract, Mr Grüterich conveyed to Mr Zimmer that these were "discussion points" with Mr Wach. That, to my mind, is telling evidence against the proposition that there was a concluded agreement (or representation on which he could reasonably have relied) as to those benefits during the February 2017 discussions.
As to the bonus, about which Mr Grüterich was still pressing by the time of his correspondence with Mr Zimmer, the email communications between Mr Wach and Mr Kopp indicate that at least from the Rema Tip Top side what was contemplated in 2017 in relation to the bonus was a €30,000 payment for 2016 and an award arrangement based on KPI's linked to the company EBIT of $100,000.
As to Mr Grüterich's undertstanding of the September/December 2017 conversations, the 22 September 2017 email to Mr Zimmer makes clear that Mr Grüterich understood that his contractual arrangements were the subject of "discussion"; that the bonus arrangement represented by the "draft" letter was an arrangement with DBS and there was no concluded arrangement with Rema Tip Top AG; and that the question of a "fix period contract" was another topic of discussion.
In the present case, I am not persuaded that it was objectively intended that any oral variation to the signed written contract would be enforceable as between Mr Grüterich and Rema Tip Top. Even Mr Reiff's "two year handshake" conversation (if it occurred as Mr Grüterich deposes) does not persuade me that there was the necessary common intention on the part of Rema Tip Top and Mr Grüterich immediately to be bound to a variation to that effect. Indeed, Mr Grüterich's understandable wish to have a written agreement (or even an email confirmation) to govern his new position as Managing Director and then any contract variation or side letter addendum to its terms (and his consistent communications with Mr Wach and Mr Zimmer pressing for a contract and for written confirmation suggest to the contrary). It seems to me abundantly clear that Mr Grüterich's frustration was as to the lack of written confirmation as to Rema Tip Top's position. It is clear that, as at 22 September 2017, Mr Grüterich understood that matters such as his wish for a fixed term of employment were the subject only of discussion. Any suggestion that a binding arrangement had been made on 12 December 2017 flies in the face of his request for confirmation on 23 December 2017 (albeit as to the salary adjustment and bonus issues). Mr Zimmer's response which made it clear that approval was required and Mr Grüterich clearly was seeking such confirmation.
Mr Grüterich and Mr Zimmer then had their conversation on 12 December 2017 as to which they give different accounts. The only contemporaneous document is Mr Grüterich's email of 13 December 2017 seeking confirmation of "our conversation and agreement" and asking for email approval in return. That email (even if it might be said to have been a self-serving or misconceived account of the said conversation/agreement) is a contemporaneous record of Mr Grüterich's then position and, significantly, there was no response from Mr Zimmer disputing that account. Equally, however, neither does Mr Zimmer respond to confirm Mr Grüterich's account.
While Mr Zimmer's explanation in the witness box (in effect that he simply did not respond because Mr Grüterich's account was incorrect) seems surprising in that it might have been expected that Mr Zimmer would wish to correct Mr Grüterich as soon as possible if his account were wrong, it is at least on one view consistent with a need for Mr Zimmer to obtain approval as to any such arrangement (which is what ultimately was his response when Mr Grüterich pressed for confirmation that his "private topic" was confirmed (see the email of 23 December 2017) and Mr Zimmer then made clear that he had to seek approval from Mr Reiff).
Furthermore, there is nothing in Mr Grüterich's 13 December 2017 email to Mr Zimmer about other entitlements (such as two company cars or as to the private travel business class budget). Rather, Mr Grüterich's email focusses on the base salary adjustment and to the proposed arrangement for his annual bonus share (with a minimum of €50,000). It seems clear from other communications around this time that what is being pressed by Mr Grüterich is the confirmation as to those salary/bonus components (and that Mr Grüterich was content with an email approval at that stage though contemplating that the arrangements be "done in proper format" at a time convenient to Mr Zimmer).
Pausing here, as to the alleged conversation with Mr Reiff, although I have concluded that a Jones v Dunkel inference should be drawn from his absence from the witness box, as adverted to above such an inference does not extend to an inference that the evidence that Mr Reiff would have given would have been positively damaging to Rema Tip Top's case; just that it would not have assisted it.
As it is, there are doubts as to the reliability of Mr Grüterich's recollection of events in general. Mr Labbé's evidence supports the conclusion that Mr Grüterich told Mr Reiff that he wanted a two to three year contract. Mr Labbé, however, gives a different account as to Mr Reiff's response (though conceding that he did not hear the whole of the conversation).
Mr Reiff is not a director of Rema Tip Top (see T 463; 476) as Rema Tip Top points out, albeit that the evidence was that his directions were usually (if not invariably - as for example his direction for Mr Grüterich to relocate to Newcastle, which seems to have been honoured in the breach) followed by others in the subsidiary companies; hence at best this would be a representation that he would cause such a variation to the contract.
Even if (and I am left in considerable doubt as to this) Mr Grüterich's evidence were to be accepted that Mr Reiff made the "two year handshake" statement, it still does not gainsay that it was clearly expected that any agreed variation to the contractual arrangements would be in writing (though I accept that it squarely raises the misleading or deceptive conduct issue, which I address in due course). I consider that it is clear that the parties understood that contractual terms were to be in writing (see the terms of the Employment Contract itself). The very fact that Mr Grüterich was pressing throughout the period from his appointment as managing director up to the end of 2017 for the new employment agreement to be documented and then for there to be other terms or variations of that agreement also documented, suggests that he was well aware of this.
It is significant in this regard that the December 2017 email exchange makes clear that Mr Grüterich well understood the need to have something confirmed by Mr Zimmer and Mr Zimmer's response made it clear that changes needed approval from Rema Tip Top AG (or Mr Reiff).
In light of the above, I find that the issue by Rema Tip Top of the notice of termination, coupled with payment of six months' salary in lieu, did not amount to a wrongful repudiation of the Employment Contract; and operated validly to bring that contract to an end.
I consider in due course Mr Grüterich's cross-claim for misleading or deceptive conduct and to the claims for restitution and misleading or deceptive conduct made by Rema Tip Top in relation to the termination payment (and to Mr Grüterich's claims as to his long service leave entitlements), after considering the various payments received by Mr Grüterich during the course of his employment with Rema Tip Top that Rema Tip Top alleges were unauthorised.
[19]
Alleged unauthorised payments/appropriations
Rema Tip Top contends that Mr Grüterich's conduct causing the payment to himself of various monetary amounts (which it alleges were without authorisation and to which he was not contractually entitled) was in breach of his Employment Contract, in breach of his fiduciary duty as Managing Director; and in breach of his statutory obligations under s 182(1) of the Corporations Act. Rema Tip Top further contends that Mr Grüterich's conduct in relation to the receipt of these funds amounted to serious misconduct entitling it summarily to terminate his employment without notice (and providing an answer to Mr Grüterich's claim for long service leave).
I consider the various categories of expenses/payments below.
[20]
Car allowance
It is not disputed that, following a direction given by Mr Grüterich to Mr Taylor on 17 February 2017, Mr Grüterich received a payment of $1,750 (gross) each month (totalling in all $22,750 (gross) per annum) as a "car allowance".
Rema Tip Top maintains that the Employment Contract did not confer on Mr Grüterich any entitlement to a car allowance; that while Mr Grüterich had access to a company car (at the cost of Rema Tip Top) at all times during his employment this was as a discretionary benefit (not as a contractual entitlement); and that it did not authorise the payment to Mr Grüterich of a car allowance. Even if Mr Grüterich had (which Rema Tip Top disputes) a contractual entitlement to the use of a second car or was otherwise permitted to use a second company car, Rema Tip Top says that Mr Grüterich was not justified in paying himself a car allowance without Rema Tip Top's approval (regardless of whether he thought the return of the second car to Rema Tip Top was a basis for the payment of such an allowance).
Mr Grüterich's contention is that: from about August 2016, he was entitled to the use of two company cars (one for him and one for his then partner, Ms Denise Dropova, who had migrated with him to Australia); he returned the second car (the one his partner was using) to Rema Tip Top in early 2017; and, following a conversation with Mr Malsem (then the Chief Financial Officer of Rema Tip Top) in February 2017, he (Mr Grüterich) understood that he was entitled to a car allowance because he no longer had access to a second car. This is alleged by Mr Grüterich to have given rise to an oral variation to the Employment Contract or, in the alternative, is relied upon by him as one of the representations made in February 2017 on which he makes a claim of misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law.
Mr Grüterich's affidavit evidence of the circumstances in which he gave the direction to Mr Taylor was that: prior to receiving a car allowance, he was entitled to the use of two company cars (one for him and one for his then partner); that he no longer had access to a second company car in or around mid-February 2017; and (at [195] of his first affidavit) that:
… I decided that it was an appropriate time to request that a car allowance be put in place instead, in place of one of the two vehicles guaranteed to me under the DBS Secondment Agreement … and the email of 25 November 2015 from Mr Wach …
In the conversation that Mr Grüterich claims to have had with Mr Malsem (see [197] of Mr Grüterich's first affidavit) in early to mid-February 2017 (said to be "as a result of handing back the VW Passat"), Mr Grüterich says that he asked Mr Malsem "what is the usual car allowance" and that Mr Malsem replied "[t]here are two, but for executives its $21,000 annually" (after which Mr Grüterich gave the 17 February 2017 direction to Mr Taylor), Mr Grüterich deposes (at [199] of his first affidavit) that, based on this conversation with Mr Malsem, and his direction to Mr Taylor, he received a monthly car allowance "in place of having access to a second vehicle".
In his affidavit affirmed 15 May 2019, that was produced in the course of the hearing after a subpoena had been issued at Mr Grüterich's request and on which Mr Malsem was not cross-examined, Mr Malsem recalls that, when he worked for Rema Tip Top, Mr Grüterich had two company cars (that evidence was read as evidence of the deponent's understanding). Mr Malsem also deposes to a conversation that occurred in June 2016 with Mr Grüterich and Mr Wieczorkowski at Rema Tip Top's Chullora office, in which Mr Malsem says he questioned why Mr Grüterich's partner had a company vehicle and Mr Grüterich replied "[i]t is part of my arrangement that was transferred from South Africa as approved by Thorsten Wach".
Mr Malsem says that, when he left Rema Tip Top in February 2017, Mr Grüterich had two company cars (an Audi Q7 and a Volkswagen Passat). Mr Malsem says that Rema Tip Top also provided Mr Grüterich with other cars at various times, including a BMW X6, Audi A5, and Skoda Octavia RS.
In relation to the issue of the car allowance, Mr Malsem deposes that (and this was read as evidence of his understanding) that "there was a general company policy that a person could substitute a company car that they were entitled to for a car allowance instead". He continues:
… The car allowance was set at $21,000. This allowance was calculated based on an estimate of the annual running costs of a company vehicle as calculated by the Convatech Group Finance Team.
The provision of a car allowance was covered in the general company policy of the Convatech Group, and to the best of my knowledge it was available to anyone who had an entitlement to the provision of a company car. [this was read as evidence of the witness' understanding]
Mr Malsem says that, in late 2016, he spoke with Mr Grüterich about the car allowances (in light of the fact that there was a general review being undertaken regarding ConvaTech Group's company car policy) and Mr Grüterich said that they should implement the ConvaTech car allowance across the group. Mr Malsem says (and this evidence was read as his understanding only) that ConvaTech's car policy was then "rolled out" at Rema Tip Top.
Further, Mr Malsem deposes (and this evidence was also read as his understanding only) that "[i]t was not uncommon for [Rema Tip Top] to make verbal arrangements with employees which were not documented". He says that, in around June 2016, he said to Mr Grüterich that "[y]ou should really document everything you are entitled to with a contract or written confirmation" and Mr Grüterich responded "[i]t's fine. I have [a] hand-shake arrangement with Thorsten Wach & Heinz Reiner Reiff. Their word is good enough for me as that is how Rema Tip Top operates".
Last, Mr Malsem also deposes that it was his understanding, during his time at Rema Tip Top, that "directors had unlimited delegation on expenditure and that directors could authorise any expenditure".
[21]
Rema Tip Top's submissions regarding the car allowance
Rema Tip Top argues that Mr Grüterich's defence of the car allowance claim should be rejected for a number of reasons.
First, as to the alleged conversation with Mr Malsem, Rema Tip Top notes that Mr Malsem (in his position as Chief Financial Officer) reported to Mr Grüterich and could not authorise the payment of a car allowance for a superior (and, it says, Mr Grüterich could not reasonably have expected Mr Malsem to do so). Further, it says that there is nothing in Mr Grüterich's account of the alleged conversation with Mr Malsem that indicates that Mr Malsem was purporting to authorise the car allowance. Moreover, it is noted that Mr Malsem gave notice of termination of his employment (via Mr Grüterich) on 17 January 2017; and that on 20 February 2017, Mr Malsem agreed with Mr Grüterich that Mr Malsem's last day would be 24 February 2017. Rema Tip Top argues that it does not make any sense for Mr Grüterich to have asked Mr Malsem in early to mid-February 2017 (i.e., at about the time that Mr Malsem was to leave the company) whether he (Mr Malsem) was "still happy with your Skoda" and for Mr Malsem to have replied "[y]eah its perfect for me".
Second, it is noted that the Employment Contract (signed just three days earlier than the direction) not only conferred no entitlement to a car allowance (or use of a car) but contained both an entire agreement clause (cl 21.2(a)) and a no oral modification clause (cl 21.1); and that neither the DBS Secondment Agreement not Mr Wach's 25 November 2015 email (referred to by Mr Grüterich at [195] of his first affidavit) conferred an entitlement to a car allowance on Mr Grüterich (the latter referring only to "a company car to be provided in accordance with local standards"). Further, Rema Tip Top says that Mr Grüterich was aware that when Mr Wieczorkowski had received a car allowance in lieu of access to a company car, this was pursuant to a formal written variation to his contract.
Third, Rema Tip Top argues that Mr Grüterich's evidence that he believed he had an entitlement to the use of two cars should not be accepted. It is noted that the draft contract prepared by Mr Taylor and emailed by Mr Grüterich to Mr Kopp on 16 December 2016 proposed that Mr Grüterich be granted as an additional benefit "access to company car" (in the singular), not two company cars; and it is submitted that this is a more reliable reflection of Mr Grüterich's understanding of what his entitlements were in late 2016 and early 2017, than the evidence he gives in his affidavit. Insofar as Mr Grüterich's evidence that he believed he had an entitlement to the use of two cars on the basis of an alleged conversation with Mr Wieczorkowski in March 2016 (in which he says Mr Wieczorkowski told him that he should consider the Skoda part of his package), it is noted that on 27 August 2017 Mr Grüterich (in the context of preparation of a proposal for Mr Wieczorkowski's exit) had emailed Mr Taylor (copying Mr Malsem) and asked for a summary of:
… where Peter [Wieczorkowski] is not performing
Or even allegedly acting against Director duties
in response to which Mr Taylor the following day listed (apparently as an instance of Mr Wieczorkowski not performing or even allegedly acting against director duties), Mr Wieczorkowski giving employees "additional entitlements above the requirements stipulated in their contracts of employment ... employees being given fully maintained motor vehicles (Dorothy Persic)", which Mr Taylor then clarified as follows:
My apologies Christian I meant she was given a fully maintained car and fuel card whilst she worked for us even though she was not entitled to one in her contract.
It is submitted by Rema Tip Top that, in the light of Mr Taylor's emails, Mr Grüterich could not reasonably have relied on Mr Wieczorkowski's email of 18 August 2016 or the alleged conversation with Mr Wieczorkowski in March 2016 as supporting an entitlement to the use of two company cars.
Rema Tip Top also points to evidence that contradicts the suggestion by Mr Grüterich that after mid-February 2017 Mr Grüterich only had the use of one company car: noting that there is considerable evidence that Mr Grüterich continued to use the Skoda after Mr Malsem left the company (including communications that disclose that Mr Grüterich had the keys or one set of keys to the Skoda and that he had incurred a traffic infringement in relation to the vehicle); that the company vehicle register which showed Mr Grüterich as a "Regular Driver" of one vehicle (Audi Q7) and his partner as a "Regular Driver" of the Skoda as at 16 June 2016; and the evidence in cross-examination that Mr Grüterich had access to and/or the use of up to four company cars over the period of his employment.
Rema Tip Top submits that Mr Grüterich's assertion (at [199] of Mr Grüterich's first affidavit) that he paid himself a car allowance "in place of having access to a second vehicle" should be rejected. As to the conversation with Mr Malsem, Rema Tip Top contends that the allegation at [41(b)] of the defence to the further amended statement of claim that this conversation resulted in a variation to Mr Grüterich's Employment Contract should be rejected. Rema Tip Top points out that Mr Malsem had not had anything to do with the negotiation of the terms of the Employment Contract between 16 December 2016 and 14 February 2017 (and maintains that the conversation is implausible as Mr Malsem was about to leave the company).
Finally, as noted above, Rema Tip Top emphasises that even if Mr Grüterich believed that he had an entitlement to the use of two company cars he was not justified in "exchanging" one of those cars for a substantial ongoing cash allowance without the approval of Rema Tip Top; and points to the evidence of Mr Slattery that the company's board of directors did not approve the payment of a car allowance to Mr Grüterich at any time.
It is submitted that by giving the direction as to a car allowance to Mr Taylor, and retaining those payments, Mr Grüterich engaged in serious and wilful misconduct. It is submitted that Mr Grüterich must have known that he was not entitled to this car allowance; and that it was dishonest of him to retain it. (In this regard, I note that on 12 January 2018, Ms Fairclough emailed Mr Grüterich to confirm that the car allowance was still to be paid, in circumstances where Mr Grüterich had issued the double salary direction - see below - and he confirmed that it was to remain.)
[22]
Mr Grüterich's submissions regarding the car allowance
In his submissions, Mr Grüterich says that, throughout his employment with Rema Tip Top and its related entities, he was given the use of various company vehicles, including a vehicle for use by his partner; and that when the use of those vehicles was no longer required by his partner, Mr Grüterich enquired with Mr Malsem as to what the appropriate vehicle allowance was in lieu of using a company vehicle and was informed that it was $21,000 per annum. Mr Grüterich says that, relying upon this conversation, he was paid the car allowance in lieu of use of a company vehicle and there is no reason to conclude that this involved any misconduct.
It is submitted that the payment of the car allowance to Mr Grüterich was consistent with the payment of a car allowance to other staff, including Mr Wieczorkowski (Mr Grüterich pointing to an email that was sent by Mr Wieczorkowski to Mr Grüterich on 18 August 2016 (Exhibit 1) in which Mr Wieczorkowski (responding to a request from Mr Grüterich to send a "quick overview" on who in Chullora "has got what company car and values and whether it is asset or lease") included the following: "Christian [Mr Grüterich] - BMW X6 / Mini cabriolet, salary-packaged"; and that Mr Wieczorkowski also stated in that email that he (Mr Wieczorkowski) was entitled to a car allowance of $1,750 per month (i.e., $21,000 per annum)).
Mr Grüterich points to this documentary evidence as corroborating Mr Grüterich's and Mr Malsem's evidence. It is submitted that there is no reason to conclude that the payment of a $21,000 per annum car allowance to Mr Grüterich involved any misconduct. In this regard, Mr Grüterich also attaches significance to the fact that Mr Malsem was not called as a witness by Rema Tip Top and that, when Mr Grüterich himself adduced evidence from Mr Malsem, Rema Tip Top chose not to cross-examine him.
Further, it is submitted that the position of Rema Tip Top that this was a discretionary entitlement is inconsistent with a finding that there was any dishonesty attached to Mr Grüterich's receipt of the car allowance (even if it was unauthorised).
[23]
Evidence as to authority matrices
At this point it is relevant to note the affidavit evidence in reply of Mr Davison (an affidavit affirmed 15 May 2019) to which objection was taken by Mr Grüterich and which I provisionally admitted indicating that I would rule on its admissibility in final reasons (to which I now turn) as to certain authority matrices. In his affidavit, Mr Davison refers to the document tendered by Mr Grüterich as Exhibit 8 in the proceedings - namely, the two excel spreadsheet documents headed 'Expenditure Authority Matrix - Convatech', which he describes as "a draft of the "Delegations of Authority Matrix" that he and Mr Malsem created in or about September 2016, following the merger of [Rema Tip Top] and ConvaTech. Mr Davison says that these were "never approved for use by the directors of [Rema Tip Top]".
Mr Davison deposes that Mr Malsem (who was then the Chief Financial Officer of Rema Tip Top) sent an email to Mr Grüterich that was copied to him, in which Mr Malsem stated "here is the draft DOAG" (a copy of that email and its attachment is marked as Annexure A to the affidavit).
Mr Davison then summarises briefly the separate divisions of Rema Tip Top (being the material processing division; the automotive division; and a shared services division). He deposes that between July and November 2016 he and Mr Malsem "developed delegations of authority matrices for the three divisions" of Rema Tip Top. According to Mr Davison (and this was read subject to weight), "[s]everal iterations of the matrices were developed; those iterations were refined"; and, on about 1 November 2016, Mr Grüterich "signed" the delegations of authority matrices in respect of the shared services and automotive divisions of Rema Tip Top. Mr Davison's understanding was that the approved form incorporated a dual sign-off requirement.
Mr Davison deposes that, on or about 2 November 2016, Mr Malsem sent an email to the senior managers of Rema Tip Top (which was copied to, among others, Mr Grüterich) stating:
Please find attached the approved delegations of authority for the Automotive & Shared Services Divisions.
Can you please cascade to the relevant people in your teams.
Additionally, can you please review and amend any associated expenditure forms, systems or templates accordingly.
…
Mr Davison says that attached to that email was an excel format document entitled "Delegations of Authority - SS & Auto", which incorporated the ratified versions of the Shared Services and Automotive matrices as was "scanned versions of those spreadsheets bearing Mr Grüterich's signature (indicating that the matrices had been approved by Mr Grüterich) and dated 1 November 2016". (A copy of the email and its attachments are Annexure B to this affidavit.) Mr Davison deposes (and again this was read subject to weight as going to his knowledge and understanding):
From at least 2 November 2016 until 31 March 2018, the Approved Delegations of Authority Matrices for the Share Services and Automotive divisions of [Rema Tip Top] were substantially in this form. It is the document that was used by [Rema Tip Top] in that period, and not Exhibit 8. To my knowledge, the dual signoff requirement and expenditure limits relating to the line items in the Approved Delegations of Authority remained the same during this time.
Mr Davison's understanding of the Approved Delegations of Authority Matrices was that: his authorisation to incur any expense on behalf of the company during the period between 1 November 2016 and 31 March 2018 was subject to the terms of the Approved Delegations of Authority Matrices; if he were to purchase equipment, such as office furniture, on behalf of the company (referring to row fifteen, column "E") his authorisation to incur capital expenditure in respect of furniture would be $9,999.99; if he were to purchase a motor vehicle on behalf of the company (referring to row seventeen, column "E") the limit of his authorisation in respect of motor vehicles would be $49,999.99; and if he were to organise entertainment on behalf of the company (referring to row 25, column "E") the limit of his authorisation in respect of entertainment expenses would be $1,999.99.
Finally, Mr Davison deposes to his understanding that if he "needed to purchase item/s above the limits specified in the above examples, the Approved Delegations of Authority required [him] to seek the approval of two directors".
Mr Grüterich's submissions as to matrices
Mr Grüterich emphasises that Rema Tip Top did not adduce evidence of any written policies specifically for: the use of company credit cards; travel expenditure; rental accommodation; purchasing furniture for rental accommodation; education allowances and expenses; or bonus payments.
As to the series of spreadsheets entitled "Delegations of Authority Matrix", Mr Grüterich contends that the proper interpretation of the document is far from clear. It is said that if the expenditure was business-related and Rema Tip Top wishes to prove it was unauthorised, the onus is on Rema Tip Top to prove first that it exceeded the threshold in the fourth column and then that the particular expenditure in question was in fact not approved by two directors; and that it has failed to do this.
Mr Grüterich submits that if the Delegations of Authority Matrix applies: first, the motor vehicle allowance paid to Mr Grüterich was expenditure by the business in lieu of the use of a motor vehicle (which falls within the category 'Motor vehicle' in the first column) and that a $21,000 per annum motor vehicle allowance does not exceed the $50,000 threshold in the fourth column and therefore did not require the approval of two directors; second, in relation to Rema Tip Top's allegations regarding travel budgets, there is no limit specified in the fourth column (and therefore Mr Grüterich's authority was unlimited in relation to his expenditure on travel, which is said to be consistent with Mr Grüterich's evidence) and in any event, his expenditure on travel was co-approved as a budget by Mr Wach, one of the named directors in the Matrix; third, that the education allowance (referred to in the Statement of Claim as the 'Double Salary') may fall within one of the two 'Training' categories in the first column (and if so, Rema Tip Top has failed to prove that the education allowance was not approved by two directors) but in any event, the amount was authorised in the March 2017 letter. As to the furniture claim, an item for furniture appears in the first column and the threshold specified in the fourth column is $10,000 but it is said that Rema Tip Top failed to adduce evidence from any of Mr Reiff, Mr Wach or Mr Malsem (or even ask any questions of Mr Malsem in cross-examination) that they did not approve the attempted purchase of the Poliform furniture. It is submitted that it is not enough that one director (Mr Slattery) says that he would not have authorised it if he had been asked to. Accordingly, it is said that Rema Tip Top has failed to prove that the attempted purchase of the Poliform furniture was unauthorised.
Mr Grüterich points to Mr Slattery's evidence that in his role as advisory director he did not have authority to approve any expenditure by Rema Tip Top and says that that is inconsistent with the Delegations of Authority Matrix and Mr Davison's evidence about its operation.
Further, it is noted that Rema Tip Top seeks to rely on the Delegations of Authority Matrix, yet does not make any claim in relation to Mr Grüterich's purchase of multiple vehicles, including the BMW X6, the Audi Q7 and the Tesla Model S, which, if Rema Tip Top is correct, would have required the approval of two directors under the Delegations of Authority Matrix.
Determination as to admissibility of the evidence of the delegations of authority
I accept that the circumstances in which evidence as to the authority matrices emerged was less than satisfactory, in the sense that if these were policies that applied during Mr Grüterich's employment and were relevant to the allegation that certain expenditure or payments to him was or were unauthorised, then it would be expected that this evidence would have been disclosed at a far earlier time. However, it must be borne in mind that Rema Tip Top disputes that these authority matrices applied at all; and Mr Grüterich did not rely on them in his affidavit evidence. The first delegation of authority document (Exhibit 8) was produced as a result of a call for production of such a document and was tendered in the course of cross-examination of Mr Grüterich. The documents ultimately relied upon by Mr Grüterich (and referred to by Mr Malsem in his evidence) were not available at the time that Mr Grüterich was being cross-examined.
To the extent that Mr Grüterich had adduced evidence from Mr Malsem as to the matrices documents, I considered that procedural fairness required that Rema Tip Top have an opportunity to adduce evidence to explain its understanding of those documents. I made it clear to Mr Grüterich that I would permit him to give further evidence in chief to response to the evidence from Mr Davison as to the matrices and he chose not to take up that opportunity.
The upshot of all of that was that the whole issue of the matrices of authority documents proved to be a furphy - it is tolerably clear that in terms they did not apply to Mr Grüterich (and, even if they did, it would not assist him insofar as the level of expenditure would have required two director approval). It is clear that Mr Grüterich sought no approval for the bulk if not all of the expenditure disputed.
Accordingly, given the relevance of the evidence of Mr Davison to the questions arising from Mr Malsem's late adduced evidence, and given that I had permitted Mr Grüterich an opportunity to meet that evidence if he so wished by further evidence of his own, I consider that the evidence should be admitted without qualification (other than as to its weight).
[24]
Determination as to car allowances having regard to the above
In terms of the chronology of events, it is not insignificant that the direction that Mr Grüterich issued to Mr Taylor to change his pay and add the annual car allowance occurred after the terms of the Employment Contract had been negotiated (in communications involving Mr Wach, Mr Kopp and Mr Ubelacker) between December 2016 and 14 February; just three days after Mr Grüterich had executed the 14 February 2017 Employment Contract.
The Employment Contract made no provision for a car allowance (cf the Rema Tip Top SA contracts and the DBS Side letter), let alone provision for the use of two company cars. Mr Grüterich said in his email to Mr Taylor that he would "get provided another side letter" but there is no evidence of any side letter concerning a car allowance being provided to Mr Taylor at any time.
To the extent that Mr Grüterich there placed reliance on the DBS contractual arrangements, this does not assist him in establishing that he had a contractual entitlement vis a vis Rema Tip Top. Not only are they different corporate entities, it is clear from the various contracts that Mr Grüterich signed in relation to his South African (and then Australia) deployments that there was a clear demarcation between his DBS entitlements and those under his Australian contract. The suggestion that he could continue to rely on his "ex pat" benefits, at least after he became Managing Director, is inconsistent with his recognition that a side letter of some kind might be required (in that he indicated to Mr Taylor that one would be provided).
The conversation with Mr Malsem cannot possibly have amounted to authorisation to claim a car allowance - in its terms it did no more than establish a basis for how such an allowance would be calculated; and Mr Malsem was not in the position on his own to give such authorisation even leaving aside the fact that he was about to leave the company at that time which makes it implausible that he would have felt it appropriate to grant any such authorisation.
As to whether there was a company policy in relation to a car allowance, Ms Fairclough has deposed "[d]uring my 2 years at [Rema Tip Top] and my 14 years at Convatech prior to that, I cannot recall ever paying a car allowance to any employee who was also provided with a company car at the cost of [Rema Tip Top]". Mr Slattery's evidence was that he was not aware of any company policy in the Rema Group as to car allowances (though, as the evidence makes clear, there was such an allowance in the case of Mr Wieczorkowski - though there that was documented as part of a contract variation).
Mr Malsem's evidence is obviously to the contrary. However, Mr Malsem's evidence largely depends on the ConvaTech delegations of authority being "rolled out" generally and there is no contemporaneous documentary evidence to support this. (And Mr Malsem's understanding that directors had unlimited delegation on expenditure beggars belief.)
I consider that Mr Grüterich must have known that he was not entitled (under his written contractual arrangements) to the payment of an annual car allowance and that, even if he genuinely believed that he was entitled to the use of two cars and that he could substitute one of those cars for a car allowance, it is clear that Mr Grüterich continued to have access to and at least occasional use of more than one car during the time that he was receiving the annual car allowance. In those circumstances, it is incomprehensible that Mr Grüterich could have understood that he was entitled to a separate car allowance on top of the use of at least one and from time to time more than one company car.
I do not accept that the evidence establishes that the use of more than one company car was authorised but, even if this was a discretionary benefit, I do not see any basis for concluding that receipt of the car allowance was authorised (and particularly where the factual premise for this - that Mr Grüterich no longer had use of a second company car - was clearly false). In those circumstances, I am satisfied that this was an unauthorised expenditure of company funds. Moreover, while I accept that Mr Grüterich might mistakenly have believed that he was entitled to a discretionary benefit in the use of more than one company car (and even where I am prepared to accept that he might have considered that there was a precedent for the taking of a car allowance in lieu), the suggestion that he could do so without a contract variation is inconsistent with communications in relation to potential misconduct by Mr Wieczorkowski in authorising just such an allowance outside an employee's contractual arrangements. More pertinently, it does not explain how any such entitlement could honestly be claimed when Mr Grüterich still clearly had the use (albeit from time to time) of more than one company car.
I consider that Rema Tip Top's claims in relation to the car allowance are made good and that Mr Grüterich's conduct in relation to this allowance was not honest.
[25]
Double salary payments
There is no dispute that Mr Grüterich received the three "double salary" payments of $23,333 following his 12 December 2017 direction to Ms Fairclough. Rema Tip Top maintains that he was not entitled to these moneys under the Employment Contract, noting (as is self-evident from the English translation) that the 2017 Education Support Letter (which Mr Grüterich told Ms Fairclough to put on the file to cover herself in that regard) provides no justification for these payments.
In relation to the double salary, Ms Fairclough deposes: that on 12 December 2017 she received an email from Mr Grüterich directing her to pay him double his normal salary for the next three pay runs; that, prior to this, Mr Grüterich had not given her a direction to cause Rema Tip Top to pay money to him; that she assumed this request was "private, and possibly of a sensitive nature" and that was the reason Mr Grüterich had approached her directly; that she requested further information from Mr Grüterich to cover herself; and that Mr Grüterich provided via email a letter written in German for her files "to cover" herself. Ms Fairclough says that she cannot read German but "understood by his email that the letter attached to the email authorised the payment of Mr Grüterich's double salary".
Ms Fairclough says she then spoke to Mr Davison who said there was "nothing more" to do and she subsequently sent an email on 12 January 2018 to Mr Grüterich confirming that the extra salary payment had been made. Ms Fairclough deposes that:
On my reading of it, I understand that the document [i.e., the 2017 Education Support Letter] does not authorise Mr Grüterich to receive a double salary from January 2018 to March 2018 but rather concerns an educational allowance. For that reason, had I been shown this letter by Mr Grüterich in 12 January 2018, I would have requested more information about the authorisation for that salary payment.
(I note that the first sentence was read as evidence of the deponent's understanding only and the second sentence was read as going to her state of mind.)
[26]
Rema Tip Top's submissions regarding the double salary payments
It is submitted that even if Mr Grüterich genuinely believed that the 2017 Education Support Letter gave him an entitlement to the double salary payments, that belief could not have been reasonable having regard (amongst other things) to the terms of the letter and the very nature of the benefit to which it referred. Rema Tip Top also notes that Mr Grüterich did not seek the approval of Rema Tip Top before determining that he could convert an education allowance into straight cash payments.
Rema Tip Top notes that the 2017 Education Support Letter is dated 8 March 2017; it is not from Rema Tip Top (rather, it is from Rema Tip Top AG, and signed by Mr Wach, the then Chief Executive Officer of Rema Tip Top AG). Rema Tip Top further notes that by 12 December 2017 (when the 2017 Education Support Letter was provided to Ms Fairclough to be filed in relation to the double salary direction) Mr Wach had been suspended by Rema Tip Top AG (this occurred in late August 2017) and had not been performing his role from that date; and that Mr Grüterich was aware of this.
Rema Tip Top emphasises that Ms Fairclough cannot read German and that Mr Grüterich had no reason to expect that she could read German when he sent the letter to her.
Mr Grüterich's evidence is that the education grant had an expiration date of December 2017 and that he understood it to be a "fixed grant" and that payment "could be made either before or after I undertook any study, and without the need to provide invoices or receipts prior to obtaining reimbursement". Mr Grüterich says that during his employment with Rema Tip Top, he attempted to enrol in a number of subjects in respect of his doctoral studies, but, due to his work load and work commitments, he was unable to finalise any of his enrolments and placed his higher education "on hold". Mr Grüterich's evidence is that he instructed Ms Fairclough to make the payment "of the remaining educational allowance in three equal and consecutive payments of $23,333.00 totalling the amount of $69,999.33" which he calculated by taking €30,000 00 multiplying it by an exchange rate of 1.5873 and grossing that up by 47%, which gave a total figure of $69,999.93.
Rema Tip Top submits that this evidence should be rejected. It contends to findings: that Mr Grüterich had no entitlement to be paid the three amounts of $23,333 over and above his usual monthly salary amounts; that Mr Grüterich knew this when he gave his direction to Ms Fairclough to make those payments to him; and that his actions were dishonest. In that regard, Rema Tip Top relies on the following matters.
First, that there is nothing in either letter that supports Mr Grüterich's "understanding" that he was able to take this allowance before or after he undertook any study; to the contrary, it is said that the financial support was to be used on a designated course of study, Doctor of Business Administration, to be undertaken between 2014 and 2017. Rema Tip Top says that it is also clear that the financial support was not to be paid to Mr Grüterich, but to a third party (or third parties) in connection with his studies, noting that the 8 March 2017 letter states that part of the allowance had already been paid to Acad International Research AG (and that Mr Grüterich had no connection with that organisation).
Second, that the financial support was promised to Mr Grüterich from DBS (initially in 2014) and then Rema Tip Top AG (in March 2017), not Rema Tip Top. It is submitted that there was no justification for Mr Grüterich taking Rema Tip Top's money purportedly as part of a benefit granted to him by two different entities. It is also noted that the financial support was promised in a foreign currency, which it is said indicates it was to come from an entity other than Rema Tip Top (an Australian company).
Third, Rema Tip Top submits that Mr Grüterich's calculations are not consistent with him having a genuine belief that the 2017 Education Support Letter justified his direction to Ms Fairclough. It is noted that that letter indicates that the balance remaining was "€ 22,034 00 gross". Rema Tip Top says that, applying the exchange rate Mr Grüterich says he used in his calculations (1.5873) gives an amount of $34,974.57. It is said that Mr Grüterich's evidence that he "grossed" up the Australian dollar figure does not make any sense, noting that the 8 March 2017 letter indicates clearly (in three places) that the payments are to be gross (and not net) amounts.
Fourth, Rema Tip Top points to Mr Grüterich's acceptance in cross-examination that the balance of the education support stated in the 2017 Education Support Letter should have been reduced by €2,950 on 14 March 2017 and by a further €6,450 on 19 May 2017. It is noted that had those two amounts been deducted, the balance outstanding would have been reduced to €12,634 and that, applying the 1.5873 exchange rate, this amounts to an amount of $20,053 95. It is noted that Mr Grüterich did not explain why he failed to take those two payments into account when he gave his 12 December 2017 direction to Ms Fairclough. Rema Tip Top submits that the fact that the amounts Mr Grüterich directed Ms Fairclough to pay to him bore no relationship to the balance of the education support allowance remaining at that time (€12,634), clearly indicates that his payment direction had nothing to do with the 2017 Education Support Letter.
Fifth, that when Mr Grüterich was told that his employment was to be terminated (three months later), on 15 March 2018 he calculated his "list of entitlements" and sent an email to Mr Slattery "regarding my entitlements as calculated by me", stating in that email that he had prepared a list of his entitlements that he believed were "legitimate" based on supporting documents "received from superiors, directors and Ex-directors".
Attached to the email was an excel spreadsheet titled calculation and there was a line item in the spreadsheet (Item J - 'Doctorate agreement' - 22k Euro net - Remainder - $51,464.60), which line item was also contained in the further version of this spreadsheet sent by Mr Grüterich to Mr Slattery and Mr Labbé at 9.16am on 16 March 2018.
Rema Tip Top notes that earlier, at 3.35 pm on 15 March 2018, Mr Grüterich had sent the 2014 Education Support Letter to Mr Labbé in an email in which he said:
Attached is the Dr confirmation from DBS.
Are you still making progress or do you need anything else from me. I am still finding the takeover confirmation of [Rema Tip Top AG/ Rema Tip Top].
Mr Labbé's evidence is that he spoke with Mr Grüterich after receiving this email and questioned how Mr Grüterich could still have such an entitlement; and that Mr Grüterich said to Mr Labbé that he still had the entitlement and he would show Mr Labbé another letter proving this. Then, at 4.12 pm on 15 March 2018, Mr Grüterich sent Mr Labbé an email to which he attached the 2017 Education Support Letter from Rema Tip Top AG, which said "Attached as discussed".
Rema Tip Top says that, on Mr Grüterich's evidence, his understanding was that the entitlement to which these letters relate expired in December 2017, noting that he says that he read the 2017 Education Support Letter when he received it. The effect of his evidence, Rema Tip Top contends, is that he had exhausted the entitlement by requesting and being paid the three amounts of $23,333.33. It says that Mr Grüterich's attempt to explain this evidence away as a mistake in cross-examination should be rejected.
Rema Tip Top contends that it is plain that Mr Grüterich used the German letters regarding educational support twice to obtain money from Rema Tip Top: first, in December 2017 and then in March 2018 to support his claim for termination entitlements. It is submitted that this is a clear indication that Mr Grüterich knew that he was not justified in doing so in December 2017; and that Mr Grüterich's actions were dishonest, both in December 2017 and in March 2018.
It is submitted by Rema Tip Top that, on any reasonable view, if Mr Grüterich genuinely believed (in December 2017) that he was entitled to claim a cash payment from Rema Tip Top in satisfaction of the benefit promised to him in the German letters by different corporate group companies, he would have sought approval from a superior before directing a subordinate to make that payment to him (noting that at the time he gave the payment direction to Ms Fairclough, Mr Grüterich was in Singapore and meeting with Mr Zimmer (his direct superior and Mr Wach's successor) to discuss his employment entitlements and that Mr Grüterich could easily have raised this with Mr Zimmer (or with any of Mr Reiff, Mr Slattery or Mr Labbé, each of whom was present at the holding meeting in Singapore)).
Rema Tip Top also points to the fact that Mr Grüterich gave his direction to Ms Fairclough without any explanation in the first instance and without any supporting information or documents; that it was only after she questioned him that Mr Grüterich provided the 2017 Education Support Letter (in a language he had no reason to believe she could understand and without any explanation of how that letter supported his entitlement to the double salary payments as opposed to a single lump sum payout of an allowance); and that, in cross-examination, Mr Grüterich said there was no reason why he chose not to explain the payments to Ms Fairclough.
Rema Tip Top submits that the German letters clearly did not justify the "Double Salary" direction (as, I interpose to note, is apparent from the documents themselves) and contends for a finding that this was apparent to Mr Grüterich when he gave his direction to Ms Fairclough.
[27]
Mr Grüterich's submissions regarding the double salary payments
Mr Grüterich says that Rema Tip Top's claim that he was not entitled to be paid an education allowance is inconsistent with the objective evidence, pointing to the 2017 Education Support Letter which Mr Grüterich says confirmed that entitlement continued after his employment with Rema Tip Top commenced. It is said that the letter did not include any restriction on how, or on the method by which, that allowance was to be paid; and hence that it cannot be asserted that anything untoward occurred when Rema Tip Top paid the allowance to Mr Grüterich.
[28]
Determination as to the double salary payments
The difficulty I have with Mr Grüterich's position in relation to the education allowance is that it is wholly implausible that he considered that the 2017 Education Support Letter authorised the payment of "double salary" in any particular amount; and his sending of the letter to Ms Fairclough (without any translation of it) as some form of authorisation for those payments (leaving aside the jocular tone in which the communication was sent) is redolent of a concealment of the fact that it related to a wholly different topic or at least a consciousness of the fact that this was the case.
Mr Grüterich's conduct in this and other aspects of the case (in particular his evidence as to the car allowance and the private travel budget) suggests that he may have adopted some form of quid pro quo philosophy in his treatment of company funds (i.e., that if he was entitled to some form of benefit - here the education support allowance; elsewhere the use of one or more company cars - it was open to him to take it upon himself to obtain a monetary payment in lieu). However, that said, there is no explanation for the manner in which the equivalent amount of this allowance was structured by way of three double salary payments and, even if it was permissible to make payment directly to himself (when the allowance was for educational purposes), the evidence shows that the amount claimed exceeded his then entitlements.
Moreover, as noted above, the circumstances in which he proffered a letter in German in relation to the education allowance as support for the payment of additional salary is suggestive of a consciousness that he was not entitled to these amounts. Mr Grüterich's later reliance on the 2017 Education Support Letter (now conceded to be incorrect albeit said to be in error) when his termination entitlements were being calculated also is suggestive of a contrived claim for additional moneys but it is not necessary to explore that further.
I find that Mr Grüterich was not entitled to the double salary payments the subject of the direction he gave to Ms Fairclough in December 2017/January 2018 and that the manner in which he sought to justify those payments is not consistent with an honest belief that he was entitled thereto at the time. Accordingly, I find that his conduct was not honest in that regard.
[29]
Bonus payment ($103,210.88)
This claim relates to a payment that Mr Grüterich directed Ms Fairclough to make to him of $103,210.88 on 9 January 2018.
Ms Fairclough deposes that, on 9 January 2018, she received a "strictly confidential" email (according to Mr Grüterich) from Mr Grüterich (copied to Mr Davison) stating that he should be paid an extraordinary amount of $250,521.47 and that his annual salary should be adjusted from $280,000 to $427,310.59 from 1 January 2018 and that the email forwarded an email from Mr Zimmer with an attachment which were both in German. Ms Fairclough describes this as "only the second time that [she] had received a direct request from Mr Grüterich regarding his pay".
Ms Fairclough deposes that, upon reading the email on 10 January 2018; she spoke with Mr Davison who told her "[y]ou should investigate it, go and ask Christian". According to Ms Fairclough, she and Mr Davison then spoke to Mr Grüterich who was working at the Newcastle office at the time and he explained that this payment was to be on top of the double salary and car allowance and that it had been authorised by Mr Zimmer. Ms Fairclough deposes that she made the bonus payment on 12 January 2018.
The competing contentions on this aspect of the claim revolve around the construction to be placed on the communications between Mr Grüterich and Mr Zimmer in January 2018 as to certain remuneration adjustments that Rema Tip Top accepts were agreed with (or at least granted to) Mr Grüterich in January 2018.
It is not disputed that, on 15 January 2018, Rema Tip Top agreed to increase Mr Grüterich's salary to $427,310.59, and to make that increase effective from 1 January 2017. Rema Tip Top accepts that this meant that Mr Grüterich was entitled to back-pay in the amount of $147,310.59. However, Rema Tip Top says that Mr Grüterich was not entitled to the additional amount referred to in his email to Ms Fairclough (of 9 January 2018) of $103,210.88.
Mr Grüterich's contention is that this amount was payment of the sum of €50,000 referred to in the €50,000 Bonus Letter.
[30]
Rema Tip Top's submissions regarding the bonus payment
Rema Tip Top disputes the contention that this amount was payment of the sum referred to in the €50,000 Bonus Letter on the following bases: first, that the letter was an unsigned draft from DBS (not Rema Tip Top); and, second, that the best evidence of the terms of the remuneration adjustments agreed between Mr Zimmer and Mr Grüterich is the Salary Progress Document which Rema Tip Top contends clearly does not indicate that Mr Grüterich would receive a bonus of €50,000 in early 2018.
It is noted by Rema Tip Top that previous bonuses granted to Mr Grüterich by DBS whilst he was working in Australia were paid into a German bank account of Mr Grüterich directly by DBS. The 28 February 2017 Termination Agreement between DBS and Mr Grüterich was made after the €50,000 Bonus Letter was issued. It is noted that the provisions of that document make clear that any claim to a bonus would cease to exist following its execution (in particular, reference here being made to cll 2 and 4).
Rema Tip Top contends that Mr Grüterich had no authority to cause it to make the payment of $103,210.88 to himself. It is further submitted that, even if Mr Grüterich genuinely (but mistakenly) believed he was entitled to be paid this amount, the evidence of Mr Zimmer is that he did not at any time intend Mr Grüterich to be paid a bonus of €50,000 and for that reason, Rema Tip Top contends, in the alternative, that it is entitled to restitution of the $103,210.87 payment on the grounds that it was paid under a mistake.
Insofar as Mr Grüterich's answer to this claim is, in substance, that the $103,210.88 amount was the Australian dollar equivalent of a €50,000 net bonus that he was paid "for the successful integration of Convatech with Rema Tip Top AP". Rema Tip Top places weight on the process that was followed in relation to the payment of this bonus, to which I have referred above.
Rema Tip Top notes that both Mr Zimmer and Mr Grüterich gave evidence that they discussed a salary increase and back pay (from 1 January 2017) for Mr Grüterich; both say that a performance bonus related to EBIT was discussed; and both say that a bonus of €50,000 was discussed.
It is submitted that the following is clear from the face of the Salary Progress Document: first, that in the top half of the page, Mr Zimmer was comparing what he understood Mr Grüterich's remuneration to be before and after he signed the Employment Contract; second that Mr Zimmer calculates Mr Grüterich's total remuneration before that appointment to be €162,451.50, comprising €120,000 as salary under his "Deployment Contract" paid in Germany and "Local income" of $100,000 (€42,451.50) and calculates Mr Grüterich's total remuneration after the appointment to be €168,864.20, comprising $280,000 (€118,864) and €50,000 "Bonus to compensate income before new appointment"; third, that in the line commencing "summary" Mr Zimmer observes that without the €50,000 which is not contractually agreed, Mr Grüterich's income is less after taking his appointment by an amount of €44,000; fourth, that Mr Grüterich is to receive a salary adjustment "to the previous level before the new appointment GR RTT AP and a performance based remuneration arrangement based on the location in Australia retrospective to the 1st January 2017 is to be implemented (inclusive of a 10% adjustment)".
Rema Tip Top says that the end result is that Mr Grüterich's gross salary from 1 January 2017 was to be $427,310.59 per annum; and that there is no indication at all that Mr Grüterich was to receive a further amount of €50,000. It is submitted that in the part of the document that deals with the €50,000 amount, Mr Zimmer is "plainly not speaking prospectively".
Rema Tip Top says that the Salary Progress Document assumes that Mr Grüterich has been paid the €50,000 that was the subject of the 22 January 2017 letter from DBS, noting that Mr Zimmer's evidence is that he recalls Mr Grüterich telling him that he had received this amount, and that is why it is recorded in the document.
Mr Zimmer's evidence is that he did not know that Mr Grüterich received a bonus of €30,000 from DBS in May 2017, and that is why this amount is not referred to in the Salary Progress Document. Mr Zimmer says that he would have used this amount and not €50,000 in his spreadsheet had he been told that Mr Grüterich was paid €30,000 and not €50,000 by DBS in 2017.
Rema Tip Top says that the effect of Mr Grüterich's evidence is that Mr Zimmer's Salary Progress Document justified his (9 January 2018) direction that Ms Fairclough process a payment of $103,210.87 to Mr Grüterich.
Rema Tip Top says that it is common ground that the back pay to which Mr Grüterich was entitled was $147,310.59, being the difference between his salary ($280,000 per annum) and his new salary approved by the supervisory board ($427,310.59 per annum). Mr Zimmer's evidence is that he did not appreciate at the time that the amount of $250,251.47 in the payslip was more than the agreed back pay.
Mr Zimmer's evidence is that he did not sign the Contract Variation because it did not reflect the approved adjustments to Mr Grüterich's remuneration; specifically, the Contract Variation made provision for.
… a payment of 50,000 € (euros), after applicable taxes, as a discretionary bonus for the 2017 calendar year
Rema Tip Top's claims in respect of the $103,210.88 are dealt with at [55]-[67B] and [122A] of the further amended statement of claim. Mr Grüterich's response to those claims is at [55]-[67B] and [122A] of the defence to the further amended statement of claim; and at [33(c)], [34], [35], [36], [42], [43], [48], [49], [50] and [51] of the cross-claim.
Rema Tip Top points out that the key allegation Mr Grüterich makes in this regard is in [51] of the cross-claim, where he alleges that he instructed Ms Fairclough to pay the $103,210.88 amount to him in reliance on: a conversation with Mr Zimmer on 9 January 2018 (pleaded at [48] of the cross-claim), the Salary Progress Document, the "9 January and 15 January 2018 email correspondence", and the Bonus Representation.
Rema Tip Top submits that Mr Grüterich's claim should be rejected for the following reasons.
First, that the evidence does not support the allegation pleaded at [48] of the cross-claim (where Mr Grüterich alleges that during the 9 January 2018 conversation he had with Mr Zimmer, Mr Zimmer "confirmed [Rema Tip Top] would pay the Net EUR 50,000 Bonus" - see [362] of Mr Grüterich's affidavit). Rema Tip Top points out (and I accept the force of this) that nowhere in his own account of this conversation does Mr Grüterich say that Mr Zimmer told him Rema Tip Top would pay Mr Grüterich a net €50,000 bonus. (Mr Zimmer was adamant that no such thing was said during this conversation or at any time by him.)
Second, that the Salary Progress Document does not contain any statement or indication that Mr Grüterich would be paid a net €50,000 bonus by Rema Tip Top; rather, the document refers to a €50,000 amount as having been paid to Mr Grüterich in 2017 in the context of analysing and comparing Mr Grüterich's remuneration before and after he was appointed to the role of Managing Director of Rema Tip Top. Rema Tip Top says that Mr Zimmer's subjective belief that Mr Grüterich was entitled to be paid a €50,000 bonus is not relevant to the proper construction of the Salary Progress Document (which is the instrument in which the terms of the agreement to vary Mr Grüterich's salary was recorded), noting that Mr Zimmer's belief was based on a draft letter to Mr Grüterich from DBS and not Rema Tip Top. (I consider below the difficulties that arise in relation to the construction of this document.)
Third, that the 9 January 2018 "email correspondence" does not contain any representation by Mr Zimmer that a net €50,000 bonus would be paid to Mr Grüterich.
Fourth, that the 15 January 2018 "email correspondence" came after Mr Grüterich directed Ms Fairclough to make the $103,210.88 payment. It is submitted that it is therefore irrelevant to his allegation of reliance but that, in any event, there is nothing in that correspondence that constitutes a representation that a net €50,000 bonus would be paid to Mr Grüterich.
Fifth, that Mr Grüterich had Mr van der Burgt prepare the Contract Variation on or before 11 January 2018. It is submitted that that fact, and the terms of the Contract Variation, indicate that when Mr Grüterich directed Ms Fairclough to make the payment to him on 9 January 2018, he did not understand there to be a binding agreement between him and Rema Tip Top for his salary increase and back pay, payment of a €50,000 bonus for 2017 or a further performance incentive payment linked to EBIT.
Sixth, that Mr Grüterich was not informed by Mr Zimmer that his salary increase and back pay were approved until 15 January 2018. It is said that the taking of any action to direct payments to himself before that date was not justified; and that when Mr Zimmer provided confirmation of this approval on 15 January 2018, it is clear he was referring to the approval of the salary adjustment only. It is noted that there is no mention in his 15 January 2018 email of approval for a further payment of €50,000.
Seventh, that the payment of $103,210.88 could not have been justified even if Mr Grüterich did have approval to pay the €50,000 bonus under the terms of the draft DBS letter to himself, noting that the 22 January 2017 letter clearly indicates that the bonus was to be "gross" and not net. Assuming an exchange rate of 1.52905 (which was the rate that appeared in the Salary Progress Document), the amount of the €50,000 in Australian dollars would have been $76,452.50.
Eighth, that the 22 January 2017 letter was from DBS and not from Rema Tip Top. On Mr Grüterich's evidence Mr Zimmer referred to Mr Grüterich having the €50,000 in writing "from DBS" (see Mr Grüterich's first affidavit at [336]). It is said that when Mr Grüterich was paid a €30,000 bonus by DBS in May 2017, he was not simply paid that money by Rema Tip Top. It was paid directly into a German bank account by DBS and then that company invoiced Rema Tip Top for the same amount. It is noted that Mr Grüterich was aware of this; and that he sent several follow up emails to Mr Kopp (at DBS) seeking payment of the €30,000 bonus. It is noted that Mr Grüterich did not just direct a subordinate employee of Rema Tip Top to pay him this amount. It is said that this is a clear indication that he knew he was not justified in taking Rema Tip Top's money to satisfy a payment offered to him by DBS.
Finally, that it is clear from the spreadsheets Mr Grüterich prepared as to his "entitlements" on 15 and 16 March 2018 that, in his mind, he had not received the €50,000 2017 bonus. It is said that the $103,210.88 payment that he directed Ms Fairclough to make on 9 January 2018 could not possibly have been a payment of a €50,000 2017 bonus.
Rema Tip Top seeks a finding that Mr Grüterich had no justification for giving that direction, and that he knew this at the time; and that his actions were dishonest. It is submitted that Rema Tip Top's primary claims in relation to this payment should succeed, and the cross-claim should fail.
It is said that, if that submission is accepted, it is not necessary to decide whether the alternate claim (that the $103,210.88 was paid by mistake) is made out but that, if there were to be a finding that, although Mr Grüterich was not entitled to the $103,210.88, Mr Grüterich was not aware of this when he gave the payment direction to Ms Fairclough, it is clear that the payment was made under a mistake and that it should be repaid by Mr Grüterich in accordance with restitutionary principles (as considered below).
[31]
Mr Grüterich's submissions regarding the bonus payment
In the cross-claim, Mr Grüterich alleges that on 12 December 2017, Mr Zimmer represented to him that he would "receive the bonus previously promised by DBS of EUR50,000, net of tax, for [Mr Grüterich's] satisfactory performance in 2017 (the "Net EUR50,000 Bonus")" (see at [42(b)]). This representation is said to be one of three representations which are collectively described as the "Bonus Representations" (at [42]).
Mr Grüterich alleges that: this representation "constituted a variation to the terms of the Employment Contract" ( at [43(c)]), was relied on by him to his detriment by his (Mr Grüterich's) agreement "to continue his employment with [Rema Tip Top] on the terms agreed (namely the Employment Contract, varied to include, inter alia, the Bonus Representation)"; and were "liable to be misleading as to the nature, terms and conditions of [Mr Grüterich's] employment" ([44]).
Mr Grüterich says that the overpayment of $103,000 was a bonus of €50,000 to which he was entitled to in the previous year but had not yet received. He argues that the fact that (after making that payment as well as an additional payment for back pay to increase his salary over the previous year), he forwarded a copy of his payslip directly to Mr Zimmer, speaks to his subjective understanding of what he was entitled to do and is "also highly likely to reflect the objective rights and liabilities of the parties".
It is noted that Mr Zimmer said nothing about this payslip until many months later (after Rema Tip Top purported to terminate Mr Grüterich's employment and after these proceedings were commenced). It is said that Mr Zimmer's evidence implies that Mr Grüterich was entitled to this bonus for 2017; and that Rema Tip Top has not disputed that Mr Grüterich had not, in fact, received the bonus up to that point. It is submitted that it must follow that the payment was authorised and Mr Grüterich urges a finding that the bonus payment was not only made by Mr Grüterich in good faith, but was objectively authorised.
Mr Grüterich notes that there is a dispute as to the meaning of the Salary Progress. Mr Grüterich submits that in circumstances where it is apparently common ground that the €50,000 2017 bonus had not yet been paid at this time but was owing, it ought be concluded that the document was signifying, at the very least, an intention that it be paid. It is noted that the 2017 bonus is the largest component of Rema Tip Top's alleged misconduct claim. (Rema Tip Top disputes that this is common ground. It says that there was no entitlement to the €50,000 bonus - there being only a draft letter from Rema Tip Top AG; and that on the proper construction of the relevant document and the correspondence there was no such agreement.)
Mr Grüterich further says that Rema Tip Top has not adduced any documents showing payment at a prior point in time. It is noted that there was no response from Mr Zimmer to the 15 January email enclosing payslips for December 2017 and January 2018 and no explanation in cross-examination for why he did not respond. It is submitted that basic arithmetic "or even a superficial review of the payslip", which is what Mr Zimmer undertook, would have revealed the bonus payment.
As to the bonus, it is said that in cross-examination, Mr Zimmer conceded this was owing to Mr Grüterich; he also conceded: that he did not know of any document showing that the €50,000 2017 bonus was actually paid; that he did not know whether it had been paid; and that he had not investigated or bothered to find out whether it was actually paid. It is submitted that the serious allegations made against Mr Grüterich about the bonus should not be accepted in these circumstances and it must follow that the payment was authorised.
It is said that there is no proof from Rema Tip Top that Mr Grüterich's "discretionary benefits", which it concedes were previously granted, were ever withdrawn.
[32]
Determination
The March 2018 spreadsheets
Much significance is placed by Rema Tip Top on the March 2018 spreadsheets, in which Mr Grüterich set out his claimed entitlements in the context of the termination of his employment.
The meaning to be attributed to the successive versions of the March 2018 entitlements spreadsheet is by no means clear. However, the significance of those successive versions lies in the assumptions that must logically underlie the entries in those spreadsheets and the apparent inconsistency between those factual assumptions and the evidence now given by Mr Grüterich.
The first version of the March 2018 entitlements spreadsheet is that which was prepared and sent to Mr Labbé and Mr Slattery in the afternoon of 15 March 2018 (Exhibit 7). The second version (Exhibit T) was sent at 9.17am on 16 March 2018.
Mr Slattery accepts that he requested that Mr Grüterich prepare a list of his entitlements (which led to the production of the first version). He denies that he suggested that Mr Grüterich provide a second revised version (as Mr Grüterich has contended).
Oddly, there is a third version of the spreadsheet (that being the version that was annexed to Mr Grüterich's 10 May 2019 affidavit and which he says was the incorrect version). That appears to be an amalgamation of the first and second versions (and perhaps was a draft prepared at some stage but not sent by Mr Grüterich). There was no explanation as to how this document came into existence but it is accepted that it was not sent or provided to Rema Tip Top.
One of the issues to which submissions were addressed in relation to the entitlements spreadsheets was as to whether they demonstrated that Mr Grüterich considered at the time (in March 2018) that the €50,000 2017 bonus had already been paid to him in January 2018 (by the $103,000 bonus payment). If that was Mr Grüterich's belief or understanding at the time, then obviously it would have been incorrect (and Rema Tip Top says, fraudulent) for him to represent in the entitlements spreadsheets that this amount was still owing to him (even assuming for the purposes of this analysis that there was an entitlement to the €50,000 2017 bonus at all - something that Rema Tip Top denies).
Rema Tip Top says that what Mr Grüterich was trying to do in his first affidavit was to justify the payment of around $103,000 made to him in January 2018 by reference to an agreed minimum €50,000 bonus for 2017 - i.e., that he was entitled to the bonus; and that it was inconsistent with such a claim for Mr Grüterich to have included that amount in the 15 and 16 March 2018 spreadsheets as part of his entitlements on termination of his employment as if the €50,000 bonus had not been paid. (Mr Grüterich's defence similarly pleads that the $103,000 "Bonus Payment" was an amount to which he was entitled by way of the Australian dollar equivalent of the €50,000 bonus.)
It is said (see T 456) that Item K in the schedules relates to the €50,000 2017 bonus (the subject of the draft letter from Rema Tip Top AG and the conversations with Messrs Wach, Kopp and Zimmer on which Mr Grüterich relies) (including the communication from Mr Grüterich to Mr Zimmer that if it was too much trouble he would get it (the bonus payment) done himself).
Rema Tip Top argues that it is not credible for Mr Grüterich to say (as he did) in cross-examination that in March 2018 he simply forgot about the $103,000 payment that he had received a couple of months earlier.
Rema Tip Top accepts that, on one view of things, Mr Grüterich may have had in his mind when he gave the Bonus Direction that this represented the €50,000 bonus to which he claimed to be entitled but, if so, Rema Tip Top says it is not credible that Mr Grüterich then forgot about that when he included it in the March 2018 spreadsheets.
Thus, Rema Tip Top argues (see T 457) that there are two alternatives - that the spreadsheet itself was an act of fraud; or alternatively (and it says this is the natural inference) that when Mr Grüterich arranged for the payment to himself of the $103,000 he knew that this had nothing to do with the €50,000 bonus "draft" letter. (A similar submission is made in relation to the doctorate allowance.)
The second spreadsheet contains an alternate calculation number 2. There is no entry on the right hand side of the spreadsheet for the €50,000 bonus but that entry remains on the left hand side.
Insofar as Mr Grüterich's explanation for the second spreadsheet is that he realised by then (from reference to other documents) that that amount had been paid, Rema Tip Top says that this evidence is not credible and does not explain why the amount remained included on the left hand side of the document (and says that it would have been open to Mr Grüterich to have said at that stage that he had made a mistake and that amount had been paid - which he did not). It is submitted that the most likely explanation for the alternate calculation 2 in the second spreadsheet is that this was something that Mr Grüterich had in mind to use as a negotiating tool (perhaps in the way that he seems to have approached the Poliform furniture negotiation or as he adverted to in the witness box).
Mr Grüterich's position in relation to the spreadsheets (see T 470.20) is that they set out in a transparent way the entitlements to which he considered he had the benefit (see T 485-486).
Conclusion on this issue
The interpretation of the relevant spreadsheets is problematic. I find that Mr Grüterich was not entitled to the €50,000 bonus. The letter on which he relies was a draft letter and it was not from Rema Tip Top. The correspondence from Mr Zimmer in terms related to the salary adjustment (and did not mention the bonus) and I did not understand Mr Zimmer in cross-examination to be conceding that the bonus was owing as such; rather that he was proceeding on the basis that the bonus had been paid (as he said Mr Grüterich had said to him) and accepting that, if the bonus was payable and had not been paid, then Mr Grüterich would have been entitled to it as at the time of the March entitlement spreadsheets.
That said, I consider that there was room for Mr Grüterich honestly to have understood Mr Zimmer's communication as to the adjustment to his salary to have encompassed agreement to the claimed €50,000 bonus (which was an issue that had been the subject of discussion) and that Mr Grüterich's email communication in which he appears to offer heartfelt thanks to Mr Zimmer for pushing this through (even while pointing out that his preference would have been for it to be paid in Germany) supports the conclusion that this was indeed how Mr Grüterich had understood the email from Mr Zimmer.
I accept that the fact that the direction was given before the email from Mr Zimmer is of some concern - since at the very least it appears that Mr Grüterich was "jumping the gun" in relation to the booking of the back pay adjustment and bonus. However, on balance, I do not find that there was dishonesty involved in Mr Grüterich so acting.
I accept that it was a mistaken payment on Mr Zimmer's part and I consider that the alternative claim for restitution of that amount is made out (applying the principles that I consider shortly in relation to the claim for restitution in relation to the Notice Payment).
[33]
Furniture purchase
This claim relates to an order placed by Mr Grüterich on 28 February 2018 with Poliform furniture for furniture at a total cost of $96,164. The furniture was for the apartment occupied by Mr Grüterich in Bathurst Street, Sydney. At all times, Rema Tip Top paid Mr Grüterich's rent for that apartment. At Mr Grüterich's direction, Rema Tip Top paid a 50% deposit for the Poliform furniture. After Mr Grüterich's employment was terminated, the deposit was refunded save for an amount of $9,616.40.
[34]
Rema Tip Top's submissions regarding the furniture purchase
Rema Tip Top says that Mr Grüterich had no entitlement under his Employment Contract to any kind of furniture allowance. It is not disputed that Mr Grüterich directed a subordinate staff member of Rema Tip Top to pay to Poliform furniture a 50% deposit for his order; nor that the deposit was in fact paid by Rema Tip Top. It is noted that Mr Grüterich had previously acquired furniture at the expense of Rema Tip Top but on those occasions it was specifically authorised and the sums involved were much smaller.
Mr Grüterich's answer to this claim is: first, that the purchase was approved by Mr Slattery and Mr Craig Philpotts during a conversation that took place in February 2018; second, that the expense was an "incident" of Rema Tip Top's obligation to pay for his "accommodation expenses"; third, that the furniture was purchased for "business purposes" because he used one of the bedrooms in the apartment as a "home office" and another bedroom was "kept for international company staff to stay from time to time"; and, fourth, that he did not need specific approval for this purchase because he had been granted a budget of $1.55 million to "acquire furnishing for business premises".
Rema Tip Top says that those explanations do not justify his actions, and his defence of this claim should be rejected.
First, Rema Tip Top points out that (although Rema Tip Top kept any furniture in the Bathurst Street apartment upon cessation of Mr Grüterich's employment, as well as the residence occupied by Mr Grüterich in Newcastle (see [385] of Mr Grüterich's first affidavit)), Mr Grüterich did not order the Poliform furniture on Rema Tip Top's behalf; rather, he ordered it in his own name. The quote is addressed to Mr Grüterich; he is identified as the "client" on the quote; the space next to the word "company" is blank; and his personal email address appears on the quote (though he provided his work mobile phone number). It is noted that when he signed the quote he did not indicate that he was signing on behalf of Rema Tip Top. Similarly, the invoice issued for the Poliform furniture contains Mr Grüterich's name, address and personal mobile phone numbers. Rema Tip Top says that there is no indication that the order is for anyone other than him; and no indication that the furniture will belong to Rema Tip Top.
Rema Tip Top says that it is also clear from the email chain between Mr Grüterich and Mr Chase of Poliform furniture that Mr Grüterich was shopping with his own tastes in mind and not for the benefit of Rema Tip Top. It is submitted that all of Mr Grüterich's email communications with Mr Chase are consistent with him purchasing that furniture for himself.
It is noted that once the order was cancelled by Rema Tip Top, Poliform furniture resisted repayment of the deposit. In an email from Ms Ivanka Andrews (Financial Controller - Australia) to Mr Davison dated 26 March 2018, Ms Andrews said:
The reason he [representative of Poliform Furniture] was calling was to valid [sic] the refund request as the order was placed with an individual and an organisation was requesting the money back
It is submitted that there is no doubt that the order was made by Mr Grüterich personally; and that it is to be inferred that he intended to keep the furniture, and was not purchasing it on the basis that it would be the property of Rema Tip Top.
Second, Rema Tip Top disputes that there was any authorisation of this purchase by Mr Slattery and Mr Philpotts. In particular, it is said that the conversation at [389] of Mr Grüterich's first affidavit (which is the sole basis for this part of Mr Grüterich's defence of the claim) does not amount to approval to use company money (much less $100,000 of company money) to buy furniture for Mr Grüterich. Further, it is said that, even on Mr Grüterich's account of this alleged conversation, Mr Grüterich did not tell Mr Slattery that he proposed to use Rema Tip Top's money to pay for the furniture, that the furniture would cost just under $100,000 or that he intended to acquire the furniture in his own name (or, as Rema Tip Top says should be inferred, that he intended to keep the furniture for himself).
Third, it is submitted that Rema Tip Top had no obligation to pay for Mr Grüterich's accommodation expenses. Rema Tip Top denies that this was an incident of the company's payment of Mr Grüterich's rent, noting that the cost of the Poliform furniture ($96,164.00) exceeded the annual rent on the apartment that was to house it ($88,642.80). Rema Tip Top says that it was not contractually obliged to provide accommodation for Mr Grüterich at its cost but chose to do so in its discretion.
Fourth, it is submitted that the assertion that the furniture was for "business" purposes is contrary to the evidence of what was actually purchased (a dining table ($9,876), dining chairs ($6,340), arm chair ($6,741), sofa ($19,571), coffee tables ($3,519 and $4,311), chest of drawers ($12,722), bedside tables ($9,330), a bed ($11,520), TV cabinets ($3,742 and $3,938), a bookshelf ($6,115) and a mirror ($1,904)). It is submitted that none of the items related to any "home office" that Mr Grüterich might have been operating out of the apartment and that the assertion that such a lavish expense was justified by the prospect that "international" visitors from related companies might stay with him when they visited from overseas is absurd.
Finally, it is submitted that the attempt to justify this purchase ex post facto by reference to an alleged budget of $1.55 million for furnishing for business premises is equally unmeritorious. Rema Tip Top points to Mr Grüterich's evidence that he understood this budget to exist because he saw a letter dated 22 December 2016 from Rema Tip Top AG and a further letter dated 22 December 2017 from Rema Tip Top AG. Rema Tip Top submits that neither letter says anything that could reasonably be interpreted as authoring an expense of (almost) $100,000 on furniture for the residence of Rema Tip Top's Managing Director. Rema Tip Top argues that if Mr Grüterich's understanding were to be correct it would mean that he believed he had authority to spend $1.55 million on furniture for his private accommodation as an "investment" expense (and that this is not a proposition that any honest person could seriously have believed to be correct).
It is submitted that there is no justification for what Mr Grüterich did and that it was highly improper, pointing to Mr Grüterich's own evidence that he was in Sydney only one to two days a week by February 2018 (when the furniture was ordered); and to the evidence that Mr Reiff had directed him to move to Newcastle permanently in September 2017, where he had a fully paid apartment available to him in Newcastle (provided by Rema Tip Top); and all office functions of Rema Tip Top had been moved from Chullora to Newcastle by October 2016 (although noting that Mr Grüterich suggested otherwise in the witness box).
Rema Tip Top cancelled the furniture order. It claims the amount not refunded out of the deposit ($9,616.40) as damages.
[35]
Mr Grüterich's submissions regarding the furniture purchase
As to Rema Tip Top's claim that he was not entitled to purchase furniture for the rental accommodation provided and paid for by Rema Tip Top, Mr Grüterich says that Rema Tip Top provides no evidence that specific authorisation was required. He says that authorisation was not required under the 2018 budget if the value of items was less than 10% of the budget; and that any furniture and household items purchased for the rental accommodation used by Mr Grüterich were retained by Rema Tip Top at the end of his employment and vacation of the accommodation. It is submitted that this conduct by Rema Tip Top is inconsistent with any suggestion that the furniture was an unauthorised personal expense incurred by Mr Grüterich.
As to the furniture and household goods, it is said that Rema Tip Top provides no evidence that items of furniture purchased for rental accommodation paid for by Rema Tip Top would be accounted for as anything other than a capital investment; and that authorisation was therefore not required under the 2018 budget if the value of items was less than 10% of the budget. In cross-examination, Mr Zimmer accepted that the 10% limit applied in 2018. It is said to be common ground that the value of the Poliform furniture was comfortably under this limit.
It is noted that on 23 April 2018, Mr Grüterich's former solicitors sent a letter to Rema Tip Top's solicitors setting out an offer to purchase the remaining furniture from Rema Tip Top for $500; and that the offer was not accepted by Rema Tip Top. It is submitted that this conduct by Rema Tip Top is inconsistent with any suggestion that the furniture belonged to Mr Grüterich and that replacements were an unauthorised personal expense incurred by Mr Grüterich; and that, in any event, most of this expense has been refunded.
[36]
Determination
The evidence on this issue was implausible. The suggestion that the investment authorisation budget would support an expenditure of this kind on personal furniture is not credible and it defies belief that Mr Grüterich could seriously have considered that he was entitled to authorise this as part of the company investment budget or that it was appropriate expenditure for his personal use. However, I am not persuaded that there should be a finding that Mr Grüterich purchased this furniture with every intention of keeping it for himself; nor am I persuaded that Mr Grüterich purchased the furniture knowing that he had no authority to make this purchase, and thus I make no finding of dishonesty in this regard. While I consider that Mr Grüterich's explanations as to the furniture were contrived (and self-serving) I do not find that there was a conscious misuse of company funds in this respect.
[37]
Travel expenses
This claim relates to payments from February 2017 to February 2018, that Mr Grüterich caused Rema Tip Top to make being the costs of and associated with his and his partners' private travel totalling $138,063.54. Of that amount, $38,930.40 (which related to trips scheduled to take place after 16 March 2018), was refunded to Rema Tip Top by a booking agent, after Mr Grüterich's employment ended.
[38]
Mr Grüterich's submissions regarding the travel expenses
Mr Grüterich claims that he incurred these costs as part of what he has says was a "Business Class Private Travel Budget" of $50,000 per annum. Rema Tip Top says that the Employment Contract did not grant Mr Grüterich any form of private travel allowance.
Mr Grüterich claims that he had a company funded private travel budget of $50,000 per annum; allegedly arising from conversations with Mr Wach. Mr Grüterich claims that he was granted an "economy class" private travel budget (as a result of this email chain) of $10,000 per annum, and that at his request in August 2016 Mr Wach "upgraded" that budget to "business class" and told Mr Grüterich that he did not need approval to use this benefit because he (Mr Wach) did not have time for the "peanuts anymore". Mr Grüterich deposes in his first affidavit that he understood that the "upgrade" meant that "the budget increased from $10,000 to $50,000 which was derived from an average cost of 4 business class flights to Germany" (at [165]).
Mr Grüterich's evidence is that he incurred $92,178.89 in private travel expenses that he caused Rema Tip Top to pay for in the period 14 February 2017 to 16 March 2018. These expenses are itemised in the table that appears at [526] of Mr Grüterich's first affidavit. Those expenses comprise flights, accommodation, meals and other costs. In addition to the above, in February 2018 Mr Grüterich caused a further travel booking to be made for the benefit of himself and his partner. These bookings concerned a trip he planned to take in August 2018 to Germany and the Maldives. The cost of the flights booked for Mr Grüterich and his partner was $21,464.56. The cost of the accommodation booked was USD $14,067.20 that was, at that time, equivalent to $17,464.84. Mr Grüterich claimed in cross-examination that part of this trip related to business.
Mr Grüterich's evidence is that he had a conversation with Mr Wach in Singapore (at the regional meeting) on 23 August 2016 to the effect:
Grüterich: Can we also upgrade my economy class travel budget to business class?
Wach: Yes, I agree, we can.
Grüterich: Thorsten, thanks for that. Do I need to ask for approval for specific trips? Or can I still use it to other destinations other than home, as per usual?
Wach: Christian, I've told you, you don't need me to approve those anymore. You are now the Managing Director and had this entitlement for a long time, and I don't have time for the peanuts anymore.
At [165] of Mr Grüterich's first affidavit (as adverted to above), Mr Grüterich deposes that:
From August 2016, the Economy Class Private Travel Budget therefore changed to a business class budget ("Business Class Travel Budget"). I understood this to mean the budget increased from $10,000 to $50,000, which was derived from an average cost of 4 business class flights to Germany, each to the value of $12,500 (using the same methodology as that total budget of the Economy Class Private Travel Budget). Once again, Mr Wach never discussed with me as to how the Business Class Private Travel Budget was to be used or applied to my travel, and I understood this would be up to me.
Mr Grüterich claims that he had a conversation with Mr Wach on 5 February 2017 (this being the conversation in which Mr Grüterich also deposes to a discussion about a draft contract that he had not yet then been sent - see above) during which the following exchange took place:
Grüterich: What about my flights and private travel budget? Can I get this into writing as well?
Wach: Don't even go there. I told you before that you are in charge. Use them as per normal. No need to get back to me with these peanuts.
On 14 February 2017, Mr Grüterich and Mr Wach (in Singapore) spoke to Mr Kopp (in Germany) over the telephone. Mr Grüterich claims that the following exchange occurred:
Kopp: Christian what else do you need for your contract?
Grüterich: Thorsten [Kopp], everything! The medical insurance is gone, my German social security payments are gone, the business class travel budget is not stated in the contract, the bonus payments aren't stated in the contract. The contract is empty of all my promised and previously received benefits and entitlements.
Kopp: Oh yeah, ok do not worry, we will sort that out. Trust me with
this, as per normal, we will provide you with variations and side letters from [Rema Tip Top], the same way you got them from DBS. You will not be worse off. I'll handle all the medical insurance and social security issues with you. I will also get the 2016 €30,000 and the 2017 €50,000 letters as Thorsten [Wach] as I agreed to. I'll get the medical agreement onto a Rema letterhead for you. No problem.
…
Wach: Don't worry, about all the little bits and pieces. You are the director now, and I authorise you to continue using the benefits that were given to you previously … .
The conversations alleged at [193] and [202] of Mr Grüterich's affidavit are said to have occurred in the context of the negotiation and preparation of his Employment Contract. Mr Kopp also gives evidence about those matters (and the 14 February 2017 conversation) in his affidavit.
Mr Grüterich places emphasis on the fact that Rema Tip Top's witnesses all conceded that Mr Wach had the authority to confer benefits on Mr Grüterich, and that Mr Zimmer conceded that he was aware that Mr Wach had granted benefits to Mr Grüterich and the other witnesses had no idea whether Mr Wach had done so. It is noted that Rema Tip Top only complains about travel taken in the period covering 2017-2018, without any explanation as to why no complaint is made about the prior period. It is said that Mr Grüterich took private travel previously and no-one ever told him that this benefit was withdrawn when he became Managing Director; it is said that in fact he was told the opposite. In the circumstances, it is submitted that it ought be accepted that the private travel taken by Mr Grüterich was authorised under the Business Class Private Travel Budget.
[39]
Rema Tip Top's submissions regarding the travel expenses
Rema Tip Top notes that the total amount that Mr Grüterich concedes he spent on private travel in 2017 and 2018 is $131,109.29 that he claims he incurred as part of his private travel budget. (As noted above, the Germany/Maldives travel bookings were cancelled by Rema Tip Top after Mr Grüterich's employment was terminated.)
Rema Tip Top submits that Mr Grüterich's evidence (at [162], [165], [189], [193], [202], [211], [215] and [216] of Mr Grüterich's first affidavit) in relation to the alleged "business class private travel budget" should not be accepted.
First, it is said that important aspects of Mr Grüterich's evidence are "demonstrably wrong": that the conversation he claims to have had with Mr Wach on 5 February 2017 (as Mr Grüterich drove Mr Wach to Newcastle airport) (which is the subject of [193] of his affidavit) could not have occurred, having regard to the chronology to which I have referred already; and that Mr Grüterich claims he was told by both Mr Wach and Mr Kopp that they planned to get his contract finalised without Mr Ubelacker's involvement as he was "hindering the process and holding [Mr Grüterich's] contract back", yet when Mr Kopp sent the Revised Draft Contract to Mr Grüterich he copied Mr Ubelacker to his email (and both Mr Kopp and Mr Ubelacker gave evidence that Mr Ubelacker supervised the preparation of Mr Grüterich's employment contract); and that, to the extent that Mr Grüterich's evidence (at [201] of his affidavit) appears to be that he had not seen the release agreement before it was presented to him by Mr Wach and he was asked to sign it, this is implausible when both documents had been emailed to him by Mr Kopp on 13 February 2017 at 6.07am, and there was evidence that Mr Grüterich was using his email account that day; for example, he communicated with the agent for his Bathurst Street apartment on that same date about a second parking spot.
Second, Rema Tip Top says that there is no evidence of any document ever being created that records or refers to any business class private travel budget for Mr Grüterich.
Third, Rema Tip Top notes that none of the executives who gave evidence in the case had heard of a business class private travel budget being granted to Mr Grüterich; and that they gave evidence that it is the usual practice within their companies to document executive entitlements, especially one as significant as a $50,000 annual allowance that was not recorded in an employment contract. (See, for example, Mr Kopp's evidence that he did not discuss a "business class travel budget" with Mr Grüterich or Mr Wach, and that he had never heard of such a thing; cf Mr Wach's email of 25 November 2015 which refers to a private travel budget albeit in a lesser amount.)
Fourth, it is said that, despite his evidence that he expected the business class private travel budget would be put into writing, and his anxiety as to the absence of any terms in the Employment Contract about this, there is no evidence of Mr Grüterich ever following up Mr Kopp or Mr Wach for a "side letter" or any other written confirmation of this alleged benefit (in contrast to his persistence in relation to other alleged entitlements such as: the 2017 bonus agreement, payment of the 2016 bonus, medical insurance and a fixed term of employment).
Fifth, Rema Tip Top notes that, when learning that Mr Wach had lost his position, Mr Grüterich did not raise the private travel budget with his new supervisor, Mr Zimmer. It is said that even if his evidence that Mr Wach told Mr Grüterich he did not need to seek approval (from Mr Wach) before purchasing expensive flights and accommodation unrelated to his employment with the company's money was true (which Rema Tip Top does not accept), Mr Grüterich did not know whether Mr Zimmer's policy on such matters was different to that of Mr Wach. It is noted that there is no evidence that Mr Grüterich ever tried to find this out and it is submitted that it is relevant that, despite having discussions with Mr Zimmer specifically about his employment entitlements in September and December 2017, Mr Grüterich did not once mention the alleged business class private travel budget (even on his own evidence).
It is submitted that, as a matter of common sense and prudence, if Mr Grüterich really did have the oral arrangement regarding private travel he claims to have had with Mr Wach, he would have told Mr Zimmer this upon Mr Zimmer taking over Mr Wach's role and before he spent more of the company's money on his, and his partners', holidays. It is said that the fact that Mr Grüterich did not at any time discuss his alleged private travel budget with Mr Zimmer is "powerful evidence that it simply did not exist".
Sixth, Rema Tip Top argues that Mr Grüterich's evidence that Mr Wach authorised him to spend as much as $50,000 per annum of Rema Tip Top's money on private travel is implausible. It is noted that in his 25 November 2015 email to Mr Grüterich, Mr Wach rejects Mr Grüterich's request to be granted "4 flights home for Denise and I per annum", and says the "private travel expenses are very high" and was prepared to allow an amount of $10,000 per annum only. It is submitted that it is unlikely that he would then, a mere nine months after sending this email, tell Mr Grüterich that he could "upgrade" this travel budget to "business class" (without either of them actually specifying what that meant, much less agreeing on it) and that Mr Grüterich need not seek approval when using this alleged benefit because Mr Wach did not have time to be bothered with these "peanuts". It is said that private travel expenses of $10,000 were clearly not "peanuts" to Mr Wach in late November 2015; and that it is highly unlikely that a travel allowance of $50,000 would have been "peanuts" to Mr Wach in August 2016.
Seventh, Rema Tip Top says that the effect of Mr Grüterich's evidence is that he was left to work out the actual dollar amount of his own travel budget on the basis that it was "upgraded" from economy to business class. It is submitted that this is highly implausible, especially when viewed in the context of Mr Wach's 25 November 2015 email, and the evidence other executives gave about Mr Wach's practices with respect to the proper documentation of executive benefits. Further, it is noted that on his own evidence, Mr Grüterich could not point to any conversation or document that he put forward as granting him a private travel budget for a specific dollar amount, or a basis for him to purchase anything other than flights under the "private travel budget".
Eighth, Rema Tip Top says that Mr Grüterich's subsequent conduct was not consistent with him believing that he had a fixed annual travel budget in the amount of $50,000. It is noted that there is no evidence that Mr Grüterich kept any log or record of how much of the company's funds he was spending on private travel and accommodation, and what the current balance of that budget was at any point in time. In Mr Grüterich's oral evidence, he claimed that the only place he kept a record of his expenditure in relation to the "Business Class Private Travel Budget" was in his mind (and it is noted that on his own evidence Mr Grüterich spent more much more than $50,000 on private travel in 2017 - i.e., that by 31 December 2017, Mr Grüterich had spent $75,192.09 and he then spent a further $55,917.20 by 15 February 2018).
It is further said that, even on his own evidence, there is nothing to indicate that Mr Grüterich believed he was entitled to "borrow" against his entitlement in future years but that this is in effect what he seems to be saying that he did (see [526]). It is said that Mr Grüterich did not at any time seek approval from anyone to exceed his alleged annual travel budget; and that the above conduct is inconsistent with Mr Grüterich having, or believing that he had, an entitlement to spend a fixed amount of $50,000 on private travel annually. Rather, it is submitted that Mr Grüterich's conduct is consistent with him "simply spending whatever amounts he wished when he wished to do so without any regard, or even awareness, of how much he had already spent in a particular year".
It is noted that in his spreadsheet of 'entitlements' prepared on 15 March 2018, there is no mention of any private business class travel budget of $50,000 (nor, I note, is there any reference in the updated spreadsheet prepared on 16 March 2018). Instead, in that document Mr Grüterich asserts an entitlement to "2 home flights per person as agreed" and attributes an amount of $41,720.00 to this item (but it is said he seems to assume a cost of $7,000 per flight). It is submitted that if Mr Grüterich believed he had a business class private travel budget, as distinct from "homeflights" it is inconceivable that he would have omitted to record it in this document.
Rema Tip Top contends for findings that Mr Grüterich had no entitlement to use its money to pay for his private travel and accommodation expenses, and nor did he understand himself to have any such entitlement; that there was no justification for Mr Grüterich's actions; and that those actions were dishonest.
[40]
Determination
The difficulty I have in accepting the suggestion that Mr Grüterich genuinely believed that he had an entitlement to a private travel budget of the amount that he claimed he had is that it is inconsistent with the only documents in which the issue of a private travel budget was addressed (the email from Mr Wach making it clear that he considered the proposed private travel budget was very high and proposing a much reduced figure). I consider that the evidence is more consistent with Mr Grüterich simply assuming an entitlement to unrestricted travel for business purposes and adopting an ad hoc process of claiming private travel against an assumed entitlement to a private travel budget. I see no basis for the assumption that amounts unused in one year could be carried forward to another - and certainly there was no evidence that Mr Grüterich was told this.
I cannot accept Mr Grüterich's account of the conversations with Mr Wach in the absence of corroboration (given the unreliability of other aspects of his account of such conversations) and I do not draw an inference adverse to Rema Tip Top by reference to its failure to call Mr Wach in circumstances where the evidence is that there is ongoing litigation between them.
In these circumstances, I find that the expenditure was unauthorised and that the failure to obtain approval for the travel was not consistent with Mr Grüterich's obligations as a Managing Director. In my opinion, the expenditure was also dishonest in the sense that there was a knowing misuse of company funds. In particular, I find force in Rema Tip Top's submission that, in relation to other alleged entitlements, Mr Grüterich had been persistent in seeking written confirmation, whereas, with the travel allowances, Mr Grüterich had not sought for the entitlement to be put in writing. The fact that Mr Grüterich chose not to attempt to have this entitlement noted in writing is consistent with Mr Grüterich having made a deliberate choice not to press for such an entitlement. Further, the fact that Mr Grüterich kept no log or record of how much of the company's funds he was spending on private travel and accommodation is not consistent with a belief that he was entitled to much such expenditure on the company expense (since otherwise it might be expected that he would appreciate he might need to reconcile or account for such expenditure). I find it implausible that someone with Mr Grüterich's professional experience would honestly believe that it was satisfactory for him to make use of the company funds without a record or some form of oversight in this regard.
[41]
Credit card expenses
Rema Tip Top says it is common ground that Mr Grüterich was only permitted to use company credit cards for business purposes (though noting that Mr Grüterich seems to claim that he could use his company credit card to make purchases referable to his "private travel budget").
Mr Grüterich was issued with a HSBC Credit Card (in his name) by Rema Tip Top on 5 February 2016. He was able to direct employees of Rema Tip Top to book travel and accommodation through the agency Corporate Traveller, and to pay for those bookings using Rema Tip Top's American Express credit card (in the name of 'Peter Slattery'). The real issue in dispute is the scope of the authority granted to Mr Grüterich by Rema Tip Top to cause charges to be made to each credit card.
Mr Grüterich's evidence is that he understood the HSBC Credit Card:
... would be used for company related purchases. In particular, I believed I was entitled to use the HSBC Credit Card for all purchases related to reasonable out of pocket expenses incurred in the performance of my duties.
and that:
... I continued to treat the HSBC Credit Card as a business card, and always intended to pay for personal items on my own credit cards ... .
Rema Tip Top says that this evidence is not contentious but takes issue with Mr Grüterich's statement that:
My understanding was that this included the promotion of the financial position, prospects, welfare and reputation of [Rema Tip Top] through the attendance at and participation in client conferences, meetings and events, which might assist in promoting [the Plaintiff] and its goods and services.
Mr Grüterich claims that, on 23 August 2016, Mr Wach told him that he did not need Mr Grüterich to send his credit card statements to Mr Wach, but that he did not understand Mr Wach as authorising him to spend Rema Tip Top's money on anything he wanted. From that point on, Mr Grüterich claims to have approved his own expense claims.
On 20 April 2017, Mr Grüterich asked Rema Tip Top's Financial Accountant (Ms Sherry Lin) to "explain the process now around credit card checks". He says that, in response, Ms Lin said (amongst other things) that: "there is no approval or checking from superior"; "there is no control as its not [Accounts Payable] officer's position to decide which transaction is eligible"; "if it's not work related expenses, there's little we can do"; "[w]e could deduct personal expenses from card holder's next payroll however it never happened in the past"; and that he (Mr Grüterich) replied "[l]et's get this enforced then".
It is noted that later on 20 April 2017, Mr Grüterich sent an email (to Mr Slattery, Ms Fairclough, Mr Davison and others) in which he said "one of our measurements to gain control back over our cost is going to be the monthly credit card statement check and approval process"; and he asked to "receive the monthly statements with attached receipts and sign them off". Mr Grüterich asked the recipients of his email to sign off any of their team members' credit card statements as well and said "[f]ailing to provide evidence is going to result in pay reduction".
It is noted that Mr Grüterich says that he continued to review his own expense claims and that his review was cursory because he "did not have time as Managing Director to go through and reconcile them in detail" and he "expected that accounts staff would do this". It is noted that his credit card statements had tens of dozens of entries and that he says that at no time did he receive a "response or feedback" from Ms Lin.
However, Rema Tip Top notes that Ms Lin had told him on 20 April 2017 that it was not the role of Accounts Payable to determine whether or not his credit card charges were eligible for reimbursement by the company.
Rema Tip Top says that in between demanding stricter controls in relation to reimbursement of company credit card charges on 20 April 2017 and September 2017, Mr Grüterich nevertheless continued with his own company credit card usage with no oversight whatsoever; and that, despite Mr Wach's departure in late August 2017, Mr Grüterich did not enquire of Mr Wach's successor (Mr Zimmer), nor of any other executive as to whether his alleged arrangement with Mr Wach (whereby Mr Grüterich did not need to submit his credit card statements for approval by a supervisor) was to continue.
In early September 2017, Mr Grüterich claims that he asked his executive assistance (Ms Thompson) to "review my credit card statements". He says that from time to time she questioned him about specific charges but that he trusted her to reconcile his statements and "code specific items if they were found to be personal in nature". As a result of this, Mr Grüterich says, "I did not consider that I needed to review my own statements from this point onward".
Ms Thompson's evidence is that Mr Grüterich took her to a cafe when she commenced working with him and told her that he was "close to management" and had been "set up with everything"; and that he told her the company paid all of his living expenses.
Ms Thompson reconciled Mr Grüterich's HSBC Credit Card statement for the first time on 15 September 2017. She queried medical expenses, Myer and bookshop charges to the credit card. Mr Grüterich instructed her that: the company paid his medical expenses; the Myer charges were referable to "travelling, repatriation according to employment agreements"; and that the books were "company property as part of training". He suggested that she categorise expenses as "Accessories, customer gifts Entertaining" and told her to "[f]eel free to be creative".
Ms Thompson reviewed Mr Grüterich's HSBC Credit Card statements from then on and provided her reconciliations to him for approval. Rema Tip Top points out that at no stage did Mr Grüterich tell Ms Thompson that she had categorised anything incorrectly, or that an expense she had treated as work-related was in fact private.
Rema Tip Top notes that Mr Grüterich acknowledged that his behaviour with the HSBC Credit Card exposed the company to a financial risk (T 353). Rema Tip Top says that despite his professional qualifications and significant vocational experience in corporate finance roles (including very senior positions such as Chief Financial Officer), and despite insisting others follow proper procedure and threatening disciplinary action if this was not done, on his evidence Mr Grüterich nevertheless thought it was satisfactory from Rema Tip Top's perspective that he used his HSBC Credit Card in the way he did with no oversight.
Rema Tip Top says that the expenses itemised in the Annexures to the further amended statement of claim were not work-related. The expenses fall (broadly) into a number of categories.
[42]
Emirates flights costs (Annexure B)
These are flights to Prague purchased for Mr Grüterich's partner (Ms Dropova). Insofar as Mr Grüterich claims that he was entitled to charge the company for these flights because repatriation costs were among the benefits provided to him by his employer, it is noted that the Employment Contract contained no such benefits. The total cost of these flights was $7,392.15.
[43]
Boston and New York travel (Annexure C)
These are costs incurred by Mr Grüterich whilst he was in Boston and New York in October and November 2017. He arrived in Boston on 28 October 2017 and flew back to Sydney from New York on 16 November 2017. Mr Grüterich's then partner (Ms Zhang) was with him for the duration of this trip, and Rema Tip Top was charged for her flights also. The expenses include flights, accommodation, meals and many miscellaneous charges.
Mr Grüterich's justification for these expenses between 28 October 2017 and 3 November 2017 was his attendance at a seminar in Boston over the period 29 October to 3 November 2017. Mr Grüterich flew to New York on 3 November 2017. Mr Grüterich attended the holding meeting in New York from 12 to 16 November 2017. Mr Grüterich's justification for using his company credit card to pay for accommodation, meals and other items in the period 3 to 11 November 2017 was that he had worked during business hours.
The total of these expenses was $17,089.74. Rema Tip Top maintains that these were not work-related expenses and they fell outside the scope of Mr Grüterich's authority to charge items to his company credit card.
[44]
New Zealand travel (Annexure D)
These expenses relate to a trip Mr Grüterich had planned with his partner to New Zealand for the period 22 to 31 August 2017. He claims that prior to taking this trip he was directed to attend an American Express exhibition in Sydney from 29 to 31 August 2017. He went to New Zealand, but flew back to Sydney on 28 August 2017 to attend the exhibition. Mr Grüterich says that he worked during his trip to New Zealand, and for that reason he was justified in charging flights, accommodation and other expenses to Rema Tip Top.
The total of these expenses was $8,139.63. Mr Grüterich has claimed $5,740.52 as business expenses; the remainder he has apportioned to his "private travel budget".
Rema Tip Top's position is that Mr Grüterich was not justified in paying for the New Zealand trip with his company credit card merely because he worked during that trip. It accepts that it may have been reasonable of Mr Grüterich to seek to re-credit his annual leave balance for the period of this trip but says it was not reasonable for him to use his company credit card to pay for it (and certainly not without approval).
[45]
Miscellaneous expenses (Annexure G)
These expenses include the following:
1. an expense of $1,569.38 relating to accommodation at the Emirates One&Only resort at Wolgan Valley, NSW purchased on 27 April 2017 (which Mr Grüterich claims was work related);
2. purchases totalling $5,540 from the Apple Store in Sydney (which Mr Grüterich claims were purchases relating to his work from home);
3. purchases totalling $2,090.68 from JB Hi-Fi stores in the Sydney CBD (which Mr Grüterich claims were purchases relating to his work from home);
4. a purchase of cycling shoes from the Giant store in the Sydney CBD in the amount of $619.75 (which Mr Grüterich does not now dispute);
5. a purchase of cycling shoes from Cycleworld in the amount of $131.73 (which Mr Grüterich does not now dispute);
6. three traffic infringement notices issued to Mr Grüterich totalling $999.98 (it is noted that Mr Grüterich claims his previous employer in South Africa paid traffic fines for its executives (including him); Rema Tip Top says that there is no evidence to support this (other than Mr Grüterich's oral testimony). Insofar as Mr Grüterich says he believed that Rema Tip Top had a similar policy, Rema Tip Top says that there is no basis for this claimed belief, and it was improper of Mr Grüterich to pay these fines with his company credit card);
7. a charge of $619.00 for accommodation in Melbourne at the Hilton Doubletree Hotel (Mr Grüterich claims he visited Melbourne to watch the Formula One Grand Prix at the invitation of an IT supplier to "discuss a potential partnership in the Asia Pacific Region" and that he decided that his presence in Melbourne was in the best interests of the company and so he charged Rema Tip Top for his accommodation);
8. a charge of $514.95 from the Shaver Shop (which Mr Grüterich does not now dispute);
9. monthly charges for a Foxtel subscription totalling $429 (Mr Grüterich claims that he previously had a pay TV subscription that paid for by his previous employer in South Africa. Rema Tip Top says that there was no basis for Mr Grüterich to charge Rema Tip Top for his personal Foxtel subscription without approval);
10. a charge of $222.00 from Ugg Australia (which Mr Grüterich does not now dispute);
11. a charge of $60.86 for a cookbook (which Mr Grüterich does not now dispute).
[46]
Rema Tip Top's submissions regarding the credit card expenses
Rema Tip Top submits that Mr Grüterich adopted a cavalier attitude to expense claims; and says that his actions were "dishonest/culpably careless". Rema Tip Top complains that Mr Grüterich allowed a situation to exist from August 2016 to 16 March 2018 whereby there was no oversight of his spending on the HSBC Credit Card; noting that his credit card statements were never submitted to a supervisor for approval during this period.
Rema Tip Top notes, in particular, that in cross-examination, Mr Grüterich accepted that no one had said to him after his arrival in Australia that it was permissible to use the company credit card to pay traffic infringement notices; points to his evidence as to the May 2017 stay at the Wolgan Valley resort, his evidence as to the trip to Melbourne to watch the Formula 1 Grand Prix with Mr Nehru Eljiz, the Shaver Shop expense, the JB Hi Fi multiple purchases of various headphones and earphones; and the Apple Store purchases (which it is said were not authorised goods legitimately needed for work purposes or ought to have been obtained from Rema Tip Top).
[47]
Mr Grüterich's submissions regarding the credit card expenses
In essence, Mr Grüterich maintains that there was justification of certain of the expenses and concedes (albeit on the basis that these were minor amounts and for the efficient conduct of the litigation) various of the other expenses. Mr Grüterich also maintains that Rema Tip Top has failed to establish that the disputed expenses were unauthorised. Mr Grüterich deposes to a conversation with Mr Reiff as to expenditure on various client expenses (see T 477).
[48]
Determination
As to the disputed expenses, I am not persuaded that it has been established that the Prague flights were unauthorised (or, if they were, that Mr Grüterich acted dishonestly in claiming these expenses), having regard to the discretion that appears to have been allowed in relation to partner travel during the course of Mr Grüterich's employment in South Africa and the communications that suggested a continuation of those benefits on his deployment to Australia. Rema Tip Top's claim to this amount has not been made good.
As to the Boston and New York travel expenses, Mr Slattery was cross-examined as to his sponsorship of Mr Grüterich to attend a Harvard leadership program (which was at or about the same time as a New York holding meeting and in circumstances where Mr Grüterich had claimed his expenses of the trip to Boston as a business expense). Mr Slattery's evidence made clear that had signed the sponsorship form at Mr Grüterich's request and that he had not reviewed it (on the assumption apparently that it was a "relatively benign document"). This was in the context of comments in his affidavit as to the expenditure of money by Mr Grüterich on travel to Boston. The nub of Mr Slattery's evidence was that he considered that Mr Grüterich had simply "tacked on" the Boston trip and carried out his own private activities at the time that he went to a New York holding meeting; and Mr Slattery said that he did not consider that the travel to Harvard was related to business.
I consider that there is sufficient doubt as to this item that I cannot make a finding that the expenses were either unauthorised or, if they were unauthorised, that this was knowingly the case. Rema Tip Top's claim to this amount has not been made good.
In relation to the New Zealand travel, again I am not satisfied that Rema Tip Top's claim to this amount has been made good. There is room for doubt as to this item in my opinion. This is because it is not disputed that Mr Grüterich had to attend an American Express exhibition which required him to fly home from New Zealand earlier than anticipated and which, it can be safely assumed, would have required him to do some work as preparation in the lead up to it.
In relation to the miscellaneous expenses, I consider that Rema Tip Top's claim has been made good in relation to the amounts that are there claimed (most of which are now not disputed by Mr Grüterich) with the exception of the traffic infringement notices (on the basis that there is sufficient doubt as to the practice within the company in this regard). I should add that the evidence in relation to items such as the Wolgan Valley accommodation and the Shaver Shop purchase was in my opinion contrived - the former is inconsistent with the facts that emerged in cross-examination and the latter is inherently implausible. I also consider that Mr Grüterich's explanation of his visit to Melbourne with Mr Eljiz of Virtuelle Technologies (which Rema Tip Top says was a supplier of IT services to Rema Tip Top, and not a "potential client" as Mr Grüterich had claimed in his affidavit) was contrived.
In this regard, while one or two examples of improper use of the company credit card might be explicable as an honest mistake, this is a situation of expenditure consistently claimed by the Managing Director without any attempt to review the claims (delegating that task to an assistant and encouraging her to be creative) and in the context of a situation where he was clearly conscious of the need for staff to be held to account for company expenses. I consider that the cavalier attitude he adopted is analogous with the situation considered in BGC (Australia) Pty Ltd v Phippard [2002] WASCA 191 (Phippard) to which I refer below and that it is inconsistent with an honest or diligent approach to his duties. Taken as a whole, I find that Mr Grüterich's use of the HSBC Credit Card to make the personal purchases was in breach of his Employment Contract, his fiduciary duty and s 182(1) of the Corporations Act 2001 (Cth).
[49]
Was Rema Tip Top entitled to terminate as at 16 March 2018 for serious misconduct?
Rema Tip Top seeks a finding that Mr Grüterich engaged in serious misconduct in his employment such as to justify its summary dismissal of him. Such a finding would have defeated Mr Grüterich's claim to damages for repudiation of the Employment Contract (had it been found that the contract was a fixed term contract of employment). It remains relevant (notwithstanding my finding on that issue) as it is an element in Rema Tip Top's claim for restitution of the Notice Payment; and, to Rema Tip Top's contention that a finding of serious misconduct defeats Mr Grüterich's claim for long service leave accruals (though for the reasons I explain later I am not persuaded that it does so).
[50]
Rema Tip Top's submissions
Rema Tip Top refers in this regard to BIyth Chemicals where Dixon and McTiernan JJ said (at 81):
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.
Rema Tip Top also refers to Concut Pty Ltd v Worrell [2000] HCA 64; (2005) 75 ALJR 312 (Concut) where Kirby J said (at [51(4)]):
It is, however, only in exceptional circumstances that an ordinary employer is entitled at common law to dismiss an employee summarily. Whatever the position may be in relation to isolated acts of negligence, incompetence or unsuitability, it cannot be disputed (statute or express contractual provision aside) that acts of dishonesty or similar conduct destructive of the mutual trust between the employer and employee, once discovered, ordinarily fall within the class of conduct which, without more, authorises summary dismissal. Exceptions to this general position may exist for trivial breaches of the express or implied terms of the contract of employment. Other exceptions may arise where the breaches are ancient in time and where they may have been waived in the past, although known to the employer. Some breaches may be judged irrelevant to the duties of the particular employee and an ongoing relationship with the employer. But these exceptional cases apart, the establishment of important, relevant instances of misconduct, such as dishonesty on the part of an employee like Mr Wells, will normally afford legal justification for summary dismissal. Such a case will be classified as amounting to a relevant repudiation or renunciation by the employee of the employment contract, thus warranting summary dismissal. [footnotes omitted]
In Phippard, the Industrial Court of Appeal said (at [22]):
The reasoning of Kirby J in Concut Pty Ltd v Worrell makes it clear that acts of dishonesty which are destructive of mutual trust ordinarily fall within the class of conduct which, without more, authorises summary dismissal. He allowed that an exception to this general position may exist for trivial breaches. In the present case, however, where the respondent occupied a senior managerial position, and could reasonably be expected to set an impeccable example in regard to such claims, I am of the view that the outcome of the present case must be decided by reference to the rule rather than to the exception."
Rema Tip Top submits that the factual situation in Phippard bears a close similarity to this matter: there, Mr Phippard was the General Manager of the appellant; he had the authority to incur and authorise his own business expenditure, and in the absence of specific guidelines in that regard, such expenditure was a matter of judgment and a discretionary decision; it was alleged that he had misuse of the expense system and had abused his position of trust as General Manager; it was held that there were no fixed rules in regards to the claiming of expenses and that a high degree of trust was part of the arrangement between the parties; and it was accepted that Mr Phippard did not deliberately set out to deceive his employer but he did have "a cavalier attitude to expenses claims". In considering whether the conduct of Mr Phippard constituted such a deliberate flouting of his contract of employment to warrant summary dismissal, Hasluck J said (at [14]):
… Put shortly, the respondent conducted a system of claims for expenditure in his own case which allowed mistaken, unverifiable claims and several dishonest claims. His inability to explain why he misclaimed was proof of how obviously and fundamentally flawed the system was. It constituted a breach of the respondent's fiduciary duty to allow and claim on such a system, in some cases dishonestly.
Rema Tip Top submits that it would be no answer to the case against him even if it were to be found that Mr Grüterich did not subjectively appreciate that his misconduct was dishonest; arguing that Mr Grüterich's subjective beliefs as to whether or not his actions were legitimate have limited relevance in this matter. Reference is made to Downer EDI Limited v Gillies [2012] NSWCA 333 (Downer EDI), where Allsop P, as his Honour then was, said (at [84]):
The dispute between the parties was as to the weight to be given to the subjective honesty of Mr Gillies. Some of Mr Gillies' submissions appeared to place it as a determinative factor. To the extent that the submissions went that far they should not be accepted. Subjective honesty and motive may, no doubt, be relevant. … The relevance of subjective belief and motivation will depend, however, upon the nature and character of the acts in question. If, for instance, as in BIyth Chemicals, conduct was capable of an innocent construction compatible with the relationship, as well as being capable of a construction that was incompatible with the relationship, the "motives and intentions" of the employee may become "all-important": BIyth Chemicals at 82. On the other hand, where the conduct is not capable of an innocent construction, such as an employee taking a secret commission, the Court may be of the view that evidence of the belief of the employee that he saw nothing wrong with this would not be taken as relevant: Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 Ch D 339 at 369. As in the assessment of impropriety for the purposes of ss 181 and 182, the standard of conduct is imposed by the courts as that which would be reasonably expected in the relationship in all the circumstances. The place of subjective honesty will depend upon the nature of the conduct and all the circumstances. But there is no haven for the morally obtuse: Doyle at 29 [37]. [my emphasis]
Objective factors to which Rema Tip Top points as being relevant to the assessment of Mr Grüterich's claimed belief that he was acting honestly include that: he was the Managing Director of the company; his professional and educational background was in company finance; he had a high level of qualifications that were relevant to the proper governance of a corporation; he demanded high standards of probity from others in relation to the use of company funds (such as his insistence on proper procedure and scrutiny in relation to use of company credit cards); and he had personally had an involvement in instances of disciplinary action or investigation of potential employee misbehaviour with respect to entitlements, company funds or other property (such as in the case of Mr Wieczorkowski and Mr Malsem).
Rema Tip Top submits that the conduct of Mr Grüterich in: paying himself the car allowance; paying himself the double salary; paying himself the bonus payment; using company money to pay for his private travel expenses; causing Rema Tip Top to pay the 50% deposit on the Poliform furniture; and using his HSBC Credit Card to pay for personal expenses, both individually and collectively, amounts to serious misconduct that justified his instant dismissal (under the express terms of his contract, or at common law as a matter of orthodox contractual principles).
Thus, it is submitted that, by 16 March 2018, Mr Grüterich had engaged in serious misconduct such as to justify the company's summary termination of his employment and Rema Tip Top was therefore entitled to terminate the Employment Contract by giving Mr Grüterich six months' notice or payment in lieu of notice (and hence did not repudiate the Employment Contract when it terminated his employment on 16 March 2018 even if that contract was for a fixed term). It is further submitted that, even if the Employment Contract had the alleged Fixed Term, Mr Grüterich did not enjoy a right to terminate the Employment Contract himself for alleged repudiation by Rema Tip Top; and that, by 16 March 2018, Mr Grüterich was in material breach of the Employment Contract himself by reason of his serious misconduct, which also amounted to a repudiation of the Employment Contract (referring to Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; [2007] HCA 61 at [44]; and Concut at [51]); and hence Rema Tip Top was also entitled to terminate the Employment Contract for those reasons.
It is said that it is no answer to this contention that Rema Tip Top did not know about Mr Grüterich's misconduct when it terminated his employment (see Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21).
[51]
Determination
As outlined earlier, Rema Tip Top makes allegations of serious misconduct by Mr Grüterich during the course of his employment, namely, that Mr Grüterich: wilfully and dishonestly misappropriated moneys from Rema Tip Top; purchased personal property without its authorisation; and breached his fiduciary duty to Rema Tip Top while in its employment. Rema Tip Top seeks: a declaration that it was justified in terminating Mr Grüterich's contract of employment in March 2018 for serious misconduct by Mr Grüterich.
In North v Television Corp Ltd (1976) 11 ALR 599 (North v Television Corp), Smithers and Evatt JJ interpreted the expression "misconduct" as "referring to conduct so seriously in breach of the contract that by standards of fairness and justice the employer should not be bound to continue the employment" (see at 608 and 609). Their Honours continued (at 609):
This situation would arise if there were conduct inconsistent with the fulfilment of the express or implied conditions of service.
I have already noted the passages from Blyth Chemicals on which Rema Tip Top relies. In that case, Starke and Evatt JJ noted that "[t]he degree of misconduct that will justify dismissal is usually a question of fact" (see also Clouston & Co Ltd v Corry [1906] AC 122 (Clouston v Corry); and Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 (Willis v Mitchell-Innes)).
In Clouston v Corry, their Lordships (at [129]) said (as cited in Willis v Mitchell-Innes at [89]):
… There is no fixed rule of law defining the degree of misconduct which will justify dismissal. Of course there may be misconduct in a servant which will not justify the determination of a contract of service by one of the parties to it against the will of the other. On the other hand, misconduct inconsistent with the fulfilment of the express or implied conditions of service will justify dismissal. Certainly when the alleged misconduct consists of drunkenness there must be considerable difficulty in determining the extent or conditions of intoxication which will establish a justification for dismissal. The intoxication may be habitual and gross, and directly interfere with the business of the employer or with the ability of the servant to render due service. But it may be an isolated act committed under the circumstances of festivity and in no way connected with or affecting the employer's business. In such a case the question whether the misconduct proved establishes the right to dismiss the servant must depend upon facts - and is a question of fact. …
In Willis v Mitchell-Innes after considering (at [90]) the relevant passages in Blyth Chemicals (per Dixon and McTiernan JJ), Macfarlan JA (myself and Leeming JA agreeing) also (at [92]) referred to the judgment of Gillard J in Rankin v Marine Power International Pty Ltd [2001] VSC 150; (2001) 107 IR 117 at [250]:
The authorities do establish that the employee's breach of contract of employment must be of a serious nature, involving a repudiation of the essential obligations under the contract or actual conduct which is repugnant to the relationship of employer-employee, before an employer may terminate the contract summarily. Isolated conduct usually would not suffice. Each case must be considered in the light of its particular circumstances, but nevertheless, the seriousness of the act of termination and the effect of summary dismissal are factors which place a heavy burden on the employer to justify dismissal without notice. The circumstances do not have to be exceptional, but nevertheless, must establish that the breach was of a serious nature.
In North v Television Corp, it was also said that "[i]t is of assistance to consider the expression "misconduct" by reference to subject matter to which it is related and the context in which it appears" (at 608 per Smithers and Evatt JJ).
In Blyth Chemicals, Starke and Evatt JJ (at 74) made clear that "[t]he mere apprehension that an employee will act in a manner incompatible with the due and faithful performance of his duty affords no ground for dismissing him; he must be guilty of some conduct in itself incompatible with his duty and the confidential relation between himself and his employer".
In Matter Technology Ltd v Mrakas; Mrakas v Matter Technology Ltd [2018] NSWSC 507, Stevenson J found that Mr Mrakas had engaged in serious misconduct and breached his contractual and statutory duties as director and Chief Executive Officer of Matter Technology Ltd and, thus, that the plaintiff was justified in terminating Mr Mrakas' employment, explaining at [148] that:
In order that conduct be "serious misconduct" it must "be of a serious nature", involve "a repudiation of the essential obligations under the contract" or be "repugnant to the relationship of employee and employer": see Rankin v Marine Power International Pty Ltd [2001] VSC 150 at [250] (Gillard J) and see generally Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37 at [139]-[140].
To establish serious misconduct, knowledge on the part of the person who has committed the misconduct is not required. (What may be a relevant consideration, however, may be the knowledge of the employer or a superior in the employment context.) In comparison, to establish dishonesty as a ground for dismissal, it would be necessary that the person was aware that his or her actions were dishonest.
In Australian Labour and Employment Law (M Pittard and R Naughton (1st ed, 2015, LexisNexis)), dishonesty is included as a separate ground for summary dismissal; it being said (at [7.55]) that:
Dishonesty per se may not be sufficient to warrant summary dismissal. The dishonesty must be sufficiently serious and relate to, or affect, the employment.
In Miller v Sunland Park Pty Ltd [2014] FCCA 89, allegations were made of dishonesty (including, the unauthorised use of the company credit card). Relevantly, in concluding that the grounds for summary dismissal had not been made out, Simpson J made the following concluding remarks at [204]ff:
The primary question to be decided in this case is whether or not Sunland was entitled to summarily dismiss Mr Miller for serious misconduct. For the following reasons I am not satisfied on the balance of probabilities that Sunland had any proper basis to summarily dismiss.
A close examination of the evidence in relation to Mr Hutchens' dealing with Mr and Mrs Miller and Ms Schutz convinces me that Mr Hutchens far too readily makes allegations of dishonesty without first having the evidence to support such conclusions. …
His allegations about the dishonesty of Mr Miller and, to a lesser extent, Mrs Miller, are not supported by the evidence or by the use of common sense. The evidence of Ms Schutz does not support Mr Hutchens' evidence. Mr Miller used the Mastercard for numerous private purchases. It does not accord with common sense that he was doing so dishonestly as he knew that very soon afterwards Mr Hutchens would be able to see the entries on the Mastercard statement.
There was no element of subterfuge in Mr Miller's actions. He was at all times transparent in his dealings with Mr Hutchens. Notwithstanding the evidence given during this lengthy trial, Mr Hutchens has continued to maintain that Mr Miller was acting dishonestly.
In Cunningham v Australian Bureau of Statistics (2005) 148 IR 20, a senior employee had changed the results of a work social football tipping competition. The Australian Industrial Relations Commissions, reversing the primary decision-maker's decision, held that given the senior position of the employee, the fact the position carried a high degree of trust and the nature of his role, changing the results of the work social tipping competition constituted grounds to terminate the employment contract, as it "erode[d] the trust and honesty" between the employee and his colleagues, which could affect the work environment. The Commissioners also held that:
The test determining the validity of the termination is an objective one. The respondent was employed at a senior level and had system administrator privileges, which carried a high degree of trust. Anything that erodes the trust and honesty between work colleagues is destructive and has the potential to affect the work environment significantly. Viewed objectively, there was a legitimate basis for the appellant to conclude that the requisite level of trust no longer existed.
Relevantly, the Commissioners appeared to place weight on the fact that the employee used the privileges associated with his position "for personal gain", stating at [27]:
… We are influenced by two things in particular. The first is that the other participants in the tipping competitions for the most part were, it is to be inferred, the respondent's co-workers. The second is that the respondent was an assistant director of the appellant and used his system administrator privileges for personal gain. These matters give the conduct a relationship to work which is direct and significant.
In my opinion, taken as a whole, the conduct of which Rema Tip Top complains and in respect of which I have made the findings above did amount to misconduct on Mr Grüterich's part and, in circumstances where some of that conduct cannot in my opinion be said to have been made with an honest and reasonable belief as to the existence of the relevant entitlement (in particular, the claimed car allowance at a time when Mr Grüterich still had the use of a number of cars, the claimed double salary payments sought to be supported by the 2017 Education Support Letter which was wholly unrelated to those payments and the purported entitlement to a private travel budget of $50,000), I can only conclude that the conduct had an element of dishonesty.
Rema Tip Top notes that dishonesty is sufficient to permit summary termination under the terms of the Employment Contract. Mr Grüterich points out that what is alleged in the pleaded claim is wilful and dishonest misappropriation. It is not apparent to me that there is any real difference between those concepts. Suffice it to note that I find Mr Grüterich's conduct in relation to the car allowance, double salary payments and provision to himself of a private travel budget of $50,000 to have been wilful and dishonest misappropriations of company moneys.
Moreover, I consider that the overall conduct of Mr Grüterich in relation to the failure properly to reconcile his company credit card expenses to amount to serious misconduct (albeit that I do not make an express finding of dishonesty in that regard). Thus, I have concluded that it was open to Rema Tip Top summarily to terminate Mr Grüterich's employment as at 16 March 2018 and that it did so validly in accordance with the contract.
[52]
Restitutionary claim for recovery of notice payment
Rema Tip Top seeks restitution of the Notice Payment on the grounds that it was paid as a result of an operative mistake. It says that the mistake that caused the Notice Payment to be made was its lack of knowledge of the misconduct (of which it now complains) at the time that it made the payment; alternatively, or in addition, it says that it was its belief that it was obliged to make the Notice Payment.
In this regard, Rema Tip Top points to the fact that the concept of mistake has been found to include a lack of awareness of something, not just a positive but incorrect belief, referring to David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48 (David Securities) (at 369 and 374).
It is submitted that the making of the Notice Payment ostensibly in accordance with cl 15.3(a) of the Employment Contract did not preclude Rema Tip Top from summarily terminating Mr Grüterich's employment once it became aware of his serious misconduct (referring to Downer EDI (per Allsop P (as his Honour then was), Macfarlan and Meagher JJA agreeing); Bibby Financial Services Australia Pty Ltd v Sharma [2014] NSWCA 37; cf Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221; [2015] FCAFC 20) (Sautner). It is said that, as in Downer EDI, the language of the termination provisions of the Employment Contract (i.e., cll 15.1, 15.2 and 15.3) supports such a conclusion.
At the time of Mr Grüterich's dismissal, the three directors of Rema Tip Top were Mr Grüterich, Mr Zimmer and Mr Slattery. Mr Zimmer and Mr Slattery each gave evidence that he had participated in the decision to terminate Mr Grüterich's employment; and that the Board of Rema Tip Top had resolved to terminate Mr Grüterich's employment because the "Head Office" (i.e., Rema Tip Top AG) had lost trust in Mr Grüterich's performance of his role.
Mr Zimmer and Mr Slattery each gave evidence that he did not know that Mr Grüterich had used company money to fund private expenses and had directed employees of the company to make payments out of Rema Tip Top's funds to which he was not entitled; and each say that if he had known of these things he would have recommended that Mr Grüterich be dismissed summarily.
Mr Slattery's evidence was that it was his intention to pay Mr Grüterich only what he was legally entitled to be paid; and for that reason, he asked the payroll officer (Ms Fairclough) to consult Rema Tip Top's records to ascertain what, if any, amounts were due to Mr Grüterich on termination.
Rema Tip Top says that the evidence of Mr Slattery and Mr Zimmer as to their lack of knowledge of Mr Grüterich's misconduct is supported by Mr Grüterich's account of the discussions he had with Mr Slattery and Mr Labbé on 15 and 16 March 2018 in relation to the termination of his employment (in particular, as to the list of his "entitlements" prepared by Mr Grüterich at Mr Slattery's request (which included payment in lieu of six months' notice of termination)); and by the letter of advice it received from O'Hearn Lawyers (which records their instructions as to Mr Grüterich's overall performance).
Rema Tip Top submits that it is clear from this evidence that Rema Tip Top was unaware of Mr Grüterich's misconduct when it chose to make a payment in lieu of notice to him. It is submitted that the Notice Payment was therefore made under a mistake (noting that the concept of mistake includes a lack of awareness of something, not just a positive but incorrect belief - see David Securities at 369 and 374, Mason & Carter's Restitution Law in Australia (K Mason, J W Carter, G J Tolhurst) (3rd ed, 2016, LexisNexis)) (Mason & Carter) at [430]).
Rema Tip Top argues in this regard: first, that it was unaware of facts that would have justified it in the conclusion that Mr Grüterich had engaged in serious misconduct and, second, that it was unaware of its legal right summarily to dismiss Mr Grüterich. It is said that each of those matters supports a finding that Rema Tip Top made the payment in lieu of notice to Mr Grüterich under a mistake.
Accordingly, Rema Tip Top contends that it made the payment under a mistake of fact, or, alternatively, a mistake of law. It is noted that the mistake need not be 'fundamental', but that it must be shown to have been operative, in the sense that it caused Rema Tip Top to make the Notice Payment (referring to Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673; [1988] HCA 17 (ANZ v Westpac)); and that negligence will not preclude recovery by a plaintiff whose mistake led to the payment (referring to Mason & Carter at [424]).
It is submitted that the Notice Payment could not be said to have been a voluntary payment such as to defeat any restitution claim (referring to David Securities at 69; and Salib v Gakas; Newport Pacific Pty Ltd v Salib [2010] NSWSC 505 (Salib v Gakas) at [315]).
It is noted that, in David Securities, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ, said (at 373-374):
The payment is voluntary or there is an election if the plaintiff chooses to make the payment even though he or she believes a particular law or contractual provision requiring the payment is, or may be, invalid, or is not concerned to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment. We use the term "voluntary" therefore to refer to a payment made in satisfaction of an honest claim, rather than a payment not made under any form of compulsion or undue influence.
Rema Tip Top says that it is no answer to this claim that its agents (its employees) were aware of facts that would have alerted Rema Tip Top to Mr Grüterich's misconduct, noting that those employees did not include Mr Zimmer and Mr Slattery who were, for the purposes of the decision to terminate Mr Grüterich's employment the collective mind of Rema Tip Top (referring to Mason & Carter at [425] and [440]). Nor, it is submitted, is it an answer that Rema Tip Top made a binding election between inconsistent rights at the point of paying Mr Grüterich in lieu of notice instead of dismissing him summarily. Reference is made in this context to Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [56]-[67] per Gummow, Hayne and Kiefel JJ; and to Sargent v ASL Developments Ltd (1974) 131 CLR 634; [1974] HCA 40, where Stephen J said (at 648-649):
Election as between inconsistent contractual rights does not call for any conscious choice as between two sets of rights, it being enough that there should be intentional and unequivocal conduct together with knowledge of the facts giving rise to the legal rights
Having regard to the evidence of Mr Zimmer and Mr Slattery as to a lack of knowledge of the facts that gave rise to the right of Rema Tip Top summarily to dismiss Mr Grüterich, it is said that there was no binding election by Rema Tip Top between inconsistent contractual rights when it made a payment to Mr Grüterich in ignorance of circumstances that would have permitted it to dismiss him summarily (referring to Downer EDI at [141] (per Allsop P (as his Honour then was), Macfarlan and Meagher JJA agreeing), see also Heugh v Central Petroleum Ltd [No 5] [2014] WASC 311 at [94]). (It is noted that no defence of election was pleaded by Mr Grüterich in answer to Rema Tip Top's claim, as it would have to have been in order for Mr Grüterich to rely upon it, referring to Mason & Carter at [2316]-[2317].)
Finally, it is submitted that the decision of the Full Federal Court in Sautner (to which Mr Grüterich has referred) does not preclude an order for restitution of the Notice Payment in this matter, for the following reasons.
First, it is said that, insofar as the Full Court disagreed with the reasoning of Allsop P, as his Honour then was, (Macfarlan and Meagher JJA agreeing) in Downer EDI (at [144]) as to the extended operation of the principle in Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21 (Shepherd), it is said that this was obiter dicta as it was not necessary for the court to consider the application of the Shepherd principle in Sautner (see at [91]). It is noted that the Full Court characterised Allsop P's reasoning in Downer EDI (at [144]) as permitting, following a (lawful) termination of an agreement, an entitlement to rely upon a different type of termination based upon a serious misconduct provision to sustain that very termination (Sautner at [113]).
Second, it is said that the terms of the Employment Contract in the present matter support a conclusion that the making of a payment in lieu of notice (ostensibly in compliance with cl 15.3(a)) did not foreclose the exercise by Rema Tip Top of its right summarily to terminate the contract pursuant to cl 15.2 of the Employment Contract. It is noted that, in Downer EDI, Allsop P said at [143]:
Clause 4.3 should be construed both in the context of the common law, including the principle in Shepherd v Felt and Textiles, and in accordance with honest commercial common sense. One aspect of common sense would be the obvious fact that serious misconduct of an employee is sometimes not discovered for some time. A business contract, otherwise tolerably straightforwardly drafted, to be understood as permitting an employee to obtain contractual benefits on termination on the basis of no misconduct when, unknown to the employer, serious misconduct has occurred, which if appreciated, would have denied the contractual benefits, might give pause for thought. If the words are reasonably capable of conforming to a regime consistent with the parties' rights being resolved by reference to the true position, they should be given that sensible meaning. Here, cl 4 as a whole and the text of cl 4.3 support a meaning to the word 'effected' in cl 4.3 broader than the historical fact of what happened.
Rema Tip Top emphasises that, in the present case, the employer's right to terminate by giving six months' notice (in cl 15.1) was expressed to be "subject to" cl 15.2; and that the employer's right to make a payment in lieu of notice (under cl 15.3(a)) was available "without limiting the Employer's rights". It is submitted that those words should be construed in a way that makes commercial sense and avoids unreasonable or unintended results of the kind referred to by Allsop P in Downer EDI.
Rema Tip Top thus submits that the preferable construction of cll 15.1, 15.2 and 15.3(b), in these circumstances, is that the right of termination on payment in lieu of notice in cll 15.1 and 15.3(a) did not operate severally from the right to terminate summarily in cl 15.2 (see Downer EDI at [136]); and that the right to terminate under cl 15.1 (by paying Mr Grüterich in lieu of notice under cl 15.3(a)) arose concurrently with its right to terminate his employment summarily for serious misconduct under cl 15.2. It is said that, in contrast with Bibby, the right to terminate Mr Grüterich's employment summarily under cl 15.2 did not arise later in time than its right to terminate his employment under cll 15.1 and 15.2(a)). Further, in this context, Rema Tip Top repeats its submission that there was no binding election between inconsistent rights at the point of Rema Tip Top making the Notice Payment because it did not know of the facts that gave rise to the right to dismiss Mr Grüterich's employment summarily.
As to Mr Grüterich's change of position defence (see below), Rema Tip Top says that, insofar as Mr Grüterich claims that he did the things particularised at [134AA] of the defence to the further amended statement of claim "as a result of the termination notice and the Notice Payment", this erroneously treats the termination and the Notice Payment as the same thing. Rema Tip Top argues that Mr Grüterich's acceptance of Rema Tip Top's alleged repudiation of the Employment Contract did not occur because Mr Grüterich was paid the Notice Payment (but in any event says that it did not repudiate the Employment Contract). It submits that the "sub-class 457 visa status" was unaffected by the making of the Notice Payment (on the basis that the cancellation of Mr Grüterich's visa did not occur as a result of the Notice Payment); and it is said that Mr Grüterich's return to Germany and the costs of doing so were not caused by the making of the Notice Payment.
Thus, it is submitted that the restitution claim in respect of the Notice Payment should be upheld.
[53]
Mr Grüterich's submissions
Insofar as Rema Tip Top claims restitution of the $213,655 payment made to Mr Grüterich in lieu of notice, on the basis of an alleged unilateral mistake of fact, Mr Grüterich says that the facts do not support that claim.
It is noted that cl 15.2 of the Employment Contract allowed (so far as relevant) for summary termination if Mr Grüterich "engage[d] in serious misconduct", which under the contract has its ordinary meaning at law and includes "theft, dishonesty and fraud".
It is noted that although these proceedings are civil in nature, Briginshaw v Briginshaw has the consequence that the seriousness of the allegation and the gravity of the consequences mean that the evidence required to reach a level of satisfaction "should not be produced by inexact proofs, indefinite testimony, or indirect inferences". Mr Grüterich quarrels with Rema Tip Top's reliance on "indirect and hearsay-ridden evidence" in this regard, noting that where the Briginshaw principle applies, while the burden of proof remains unchanged, the evidence needed to satisfy the burden must be more coherent and comprehensive.
Mr Grüterich says that his evidence is supported by contemporaneous documentation, including the Spreadsheet, Mr Zimmer's instruction for the payments to be paid as soon as possible, the submission of the payslip by Mr Grüterich to Mr Zimmer upon the making of the bonus payment, and an email exchange between Mr Grüterich and Mr Wach setting out various other benefits to be provided. He notes that he himself queried the lack of oversight of company credit cards and directed a credit card policy to be put in place and enforced. It is submitted that those are not the actions of a person who intended to charge expenses to company credit cards for which he knew he was not entitled.
Mr Grüterich submits that, for a case of unilateral mistake to succeed, Rema Tip Top must first establish a prima facie case of unjust enrichment on the basis that the payment was made as a result of a mistake or law or fact and then prove receipt. It is noted that receipt is not in issue but it is said that Rema Tip Top must prove the misconduct alleged was sufficient to give rise to a right of termination under cl 15.2 for serious misconduct for theft, dishonesty or fraud. It is noted that fraud and theft have not been pleaded, and it is said that the evidence establishes that at all relevant times, Mr Grüterich held an honest belief that he was entitled to the benefits he received.
It is said that from at least 14 March 2018, Rema Tip Top had involved its in-house auditor; that by the same date Mr Slattery had Mr Grüterich's credit card statements and had given them to Mr Philpotts (another witness not called by Rema Tip Top; Mr Grüterich here again invoking Jones v Dunkel), and Rema Tip Top obtained an advice from its solicitors on 16 March 2018 regarding its rights of termination under the Employment Contract. It is said that in light of those circumstances, the mistake case must fail and Rema Tip Top relied upon its own investigations and inquiries in deciding to make the termination payment.
However, if mistake and receipt are proved then Mr Grüterich argues that any unjust enrichment must be balanced against any unjustness that will be suffered by him (the recipient) if restitution were to be ordered.
Mr Grüterich submits that he has changed his position in the most fundamental way by causing his solicitors to send a letter on 23 April 2018 to the solicitors for Rema Tip Top accepting the repudiation of the Employment Contract and bringing the Employment Contract and his employment with Rema Tip Top to an end (citing David Securities (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ)). It is said that Mr Grüterich's "subclass 457 visa" was dependent on his employment at Rema Tip Top and, as a result of his Employment Contract coming to an end, his visa was cancelled and he was required to leave his life in Australia and return to Germany. It is submitted that, in the circumstances of that fundamental change of position, as a result of the alleged mistake and the payment, it would be unjust for Mr Grüterich to be required to make restitution for the alleged mistaken payment.
Further or in the alternative, it is submitted that even if the elements of mistake can be established, Rema Tip Top cannot recover the payment because a contract, once terminated on one ground, cannot be revived so as to be able to be terminated again (citing Salib v Gakas at [315]-[336]; Sautner at [112]-[116]).
Mr Grüterich notes that at [131] of the further amended statement of claim, Rema Tip Top asserts that under cl 15.2 of the Employment Contract, it was entitled summarily to terminate his employment and the Employment Contract by reason of the "Conduct", or any of it. It is said that on Rema Tip Top's interpretation of the operation of cl 15.2, if it had knowledge of any of the alleged instances of misconduct before 16 March 2018, it could have terminated the Employment Contract; conversely, it follows that, if Rema Tip Top was aware of any of the alleged misconduct before 16 March 2018, it cannot have been mistaken as to its rights of termination of the Employment Contract and is therefore not entitled to restitution.
Mr Grüterich says that Rema Tip Top was aware of the following: the €50,000 2017 bonus (pointing to the 15 January 2018 correspondence to Mr Zimmer informing him that Mr Grüterich had instructed staff to pay him the €50,000 2017 bonus and confirming that it had been paid); by 16 March 2018 at the latest (before Mr Grüterich's employment was brought to an end), Mr Slattery and Mr Philpotts (another key witness not called by Rema Tip Top: Jones v Dunkel), were aware of at least some of the transactions on the credit card statements which are now the subject of Rema Tip Top's claims of misconduct; from at least 14 March 2018, Rema Tip Top had involved an in-house auditor to investigate its accounts, and had obtained an advice from its solicitors regarding its rights of termination under the Employment Contract: and fourth, in cross-examination, Mr Labbé conceded that he did not contact the one person who could have confirmed or disproved Mr Grüterich's claimed entitlements (Mr Wach). It is noted that Mr Labbé accepted that there was nothing stopping him from calling Mr Wach or sending him an email; and that Mr Labbé's explanation for not contacting Mr Wach was that "[i]t is irrelevant" because "we have terminated Mr Grüterich to the terms of his management contract, for his Australian contract [sic]".
It is noted that Mr Labbé conceded that because he did not contact Mr Wach, he did not know what Mr Grüterich's entitlements were and, as a result, the Board of Rema Tip Top did not know either. Likewise, Mr Zimmer, Mr Slattery and Mr Kopp made no inquiry with Mr Wach.
It is submitted that there is no evidence as to how, in the absence of contacting Mr Wach, the legal department of Stahlgruber AG (which is giving instructions on behalf of Rema Tip Top) has knowledge of Mr Grüterich's entitlements. It is noted that Rema Tip Top has failed to call the head of the legal department of Stahlgruber AG, Mr Ubelacker. It is submitted that an adverse inference ought to be drawn against Rema Tip Top in this regard.
It is submitted that it follows that the legal department of Stahlgruber AG does not in fact know whether or not there is a proper basis for the allegations Rema Tip Top makes in these proceedings; and that any assertions by Rema Tip Top that it was mistaken, misled or deceived are unreliable at best.
Mr Grüterich submits that it is remarkable, given the seriousness of the allegations made against him by Rema Tip Top that Rema Tip Top's witnesses, including the current CEO of the group, do not know who is actually giving instructions to its lawyers, or whether the claims made by Rema Tip Top have any veracity.
[54]
Determination
As to Rema Tip Top's claim for restitution of the Notice Payment on the grounds that it was paid as a result of an operative mistake (being lack of knowledge of the misconduct of which it now complains at the time that it made the payment; alternatively, or in addition, that it was its belief that it was obliged to make the Notice Payment), I note that in Meagher, Gummow and Lehane's Equity Doctrines and Remedies (J D Heydon, M J Leeming and PG Turner (5th ed, 2014, LexisNexis)) (at [25-035]) it is observed that "a more liberal view is taken by equity than common law of what is required for restitution, which may be effected by equity's ancillary remedies of account and delivery up and by granting relief on terms".
The elements of a claim in restitution are generally described as mirroring the components of the unjust enrichment concept; namely, (1) the identifiable enrichment; (2) that the enrichment was obtained at the plaintiff's expense; and (3) that the enrichment (or its retention) is unjust (see G D Pont et al, Halsbury's Laws of Australia (Lexis Nexis) at [370-5]).
Money paid by mistake was outlined by Lord Mansfield in Moses v Macferlan (1760) 2 Burr 1005 at 1012; 97 ER 676 at 681 (as cited in Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162 at [54] per Edelman J (sitting in the Supreme Court of Western Australia as his Honour then was)) as a judicially recognised example of an unjust factor.
In Goff & Jones The Law of Unjust Enrichment (C Mitchell, P Mitchell and S Watterson (9th ed, 2016, Thomson Reuters) (Goff & Jones)), the authors put forward an appropriate way to establishing restitution, in the context of mistake, as being (see [9-40]):
An appropriate way forward may be the following. First, the concept of a "mistake" requires, as a threshold matter, that a claimant believed that it was more likely than not that the true facts or true state of the law were otherwise than they actually were. Secondly, this belief must cause the claimant to confer the benefit on the defendant, in the required sense. Thirdly, even if a causative mistake can be shown, a claimant may sometimes be denied relief on the basis that he responded unreasonably to his doubts, and so unreasonably ran the risk of error. Fourthly, beyond this, a claimant who had doubts may be denied relief on the distinct grounds that he has compromised or settled with the defendant, or on the basis that he is estopped from pleading his mistake. There is no need for any independent "assumption of risk" bar in this context, and the language of assumption of risk is a redundant way of expressing the conclusion that a claimant's claim must fail on one or more of the foregoing grounds.
In Mason & Carter, mistakes giving rise to legal liability to make the payment is described as "the commonest category of mistake of fact" (at [411]). Reference is made to Norwich Union Fire Insurance Society Ltd v William H Price Ltd [1934] AC 455, where liability was believed to arise under an existing contract between the parties. Similarly, another common example is the recovery of money provided pursuant to a supposed contractual obligation "that did not in truth exist or that had already been discharged".
As I noted in Salib v Gakas (at [322]):
That restitution, on the basis of unjust enrichment, will be available only where a recognised 'unjust' factor has been established, was again affirmed by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89; (2007) 236 ALR 209, where Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ stated at [150]-[151]:
First, whether enrichment is unjust is not determined by reference to a subjective evaluation of what is unfair or unconscionable: recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category; Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at 673 per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 379 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. In David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 379, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ gave as instances of a qualifying or vitiating factor mistake, duress or illegality.
The mere fact of the conferral of a benefit does not suffice to establish an entitlement to recovery (see Lumbers v W Cook Builders Pty Ltd (In Liq) (2008) 232 CLR 635; [2008] HCA 27 (per Gummow, Hayne, Crennan and Kiefel JJ at [80])).
In Wasada Pty Limited v State Rail Authority of New South Wales (No.2) [2003] NSWSC 987, Campbell JA (at [16]) approved the following passage from an earlier edition of Mason, Carter and Tolhurst, in Mason & Carter's Restitution Law in Australia at [166]:
'Unjust' is the 'generalisation of all the factors which the law recognises as calling for restitution'. Because we need to search for recognised factors, examination of which involves an analysis of case law, the reference to 'injustice' as an element of unjust enrichment, is not a reference to judicial discretion. Normal judicial processes are involved and it is only in cases where there is no recognised basis for saying that injustice has arisen that problems can arise.
Receipt of a payment which has been made under an operative mistake has been recognised as giving rise to a prima facie obligation to make restitution (see ANZ v Westpac at 673 (per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ)); and, as noted above, in David Securities, the High Court unanimously rejected the notion that such a mistake need be fundamental, emphasising (at 43) the requirement that the mistake be causative. Thus, in Salib v Gakas, I said (at [326]):
… to establish a right to restitution on the basis of a mistake the plaintiff must not only have held the relevant mistaken belief (whether that be a mistake of fact or law) but also the mistake must be causative of the payment or conferral of the benefit (David Securities, per Mason CJ, Deane, Toohey, Gaudron, at 378-379 and per McHugh JJ, at [43] making it clear that the prima facie entitlement to recover moneys paid under a mistake depends upon the appearance that the moneys were paid by the payer "in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys").
Further, as noted (at [327]) a party may be relevantly mistaken, and entitled to restitution, even where the mistaken belief is his or her own fault, provided that payment was made as a result of the mistake (see Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444 at 450; David Securities; Kelly v Solari (1841) 9 M & W 53 at 59; 152 ER 24 at 26 per Parke B).
In David Securities (at 373-374), the plurality (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) addressed the question of the voluntariness of the payment or election by the payer:
The payment is voluntary or there is an election if the plaintiff chooses to make the payment even though he or she believes a particular law or contractual provision requiring the payment is, or may be, invalid, or is not concerned to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment. We use the term "voluntary" therefore to refer to a payment made in satisfaction of an honest claim, rather than a payment not made under any form of compulsion or undue influence.
As was also recognised in David Securities by the plurality (at 379):
… it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality.
The absence of a factor rendering retention of the benefit (or the relevant enrichment) "unjust" for the purposes of a claim in restitution was determinative of the claimant's inability to establish an entitlement to interest upon moneys paid over in State Bank of New South Wales v Commissioner of Taxation (1995) 62 FCR 371; (1995) 132 ALR 653. Similarly, in Lahoud v Lahoud [2010] NSWSC 1297 (Lahoud) no causative mistake was identified so as to warrant the conclusion that what had occurred on the facts was inequitable or unconscionable. Such case law indicates that, instead of pleading in general and abstract terms, the facts material to the case must be pleaded clearly and with particularity (see Lahoud at [151]ff).
That restitution, on the basis of unjust enrichment, will be available only where a recognised 'unjust' factor has been established, was again affirmed by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 where the plurality (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ) stated (at [150]):
First, whether enrichment is unjust is not determined by reference to a subjective evaluation of what is unfair or unconscionable: recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category; Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at 673 per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 379 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. In David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 379, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ gave as instances of a qualifying or vitiating factor mistake, duress or illegality. … Further, principles respecting fiduciary duty have been said to be foreign to unjust enrichment notions because the unjust factors are commonly concerned with vitiation or qualification of the intention of a claimant: Edelman, "A Principled Approach to Unauthorised Receipt of Trust Property", (2006) 122 Law Quarterly Review 174 at 177-178.
In the present case, the relevant payments made by Rema Tip Top in respect of which restitution is claimed include not only the Notice Payment but also the payments of other claimed entitlements to which I have earlier referred. In relation to those other payments, in particular, the bonus payment, I consider that the relevant vitiating factor giving rise to a prima facie entitlement to restitution has been established; the relevant vitiating factor being the mistake that there was an obligation to pay that amount and the lack of an entitlement on the part of Mr Grüterich to those payments.
However, in the case of the Notice Payment, there is an issue to my mind as to the voluntary nature of that payment (and this leads me to conclude that the retention of the benefit is not in all the circumstances unjust).
Before turning to that issue, I note the debate in relation to the ability summarily to terminate in the present case where the contract was terminated by notice. As noted above, in Sautner there was discussion regarding the scope of Shepherd.
At first instance, Mr Sautner had sued (and succeeded) on the basis that the following conduct (as extracted from the Full Court's decision) did not justify his summary dismissal:
• the bartering misconduct, by which Mr Sautner used tickets to the Medallion Club area of the stadium as a form of cash to obtain goods and services for his personal benefit (grounds 1 to 3 of the amended notice of appeal);
• the ARU (Australian Rugby Union) misconduct, by which Mr Sautner used his superior position as Director, Commercial Business of MSL to suborn another employee to issue to him tickets to a rugby match to be played at the stadium in breach of the ARU's requirements (grounds 4 and 5 of the amended notice of appeal);
• the disparagement misconduct, by which Mr Sautner communicated to the same employee and to a person who was both his friend and a senior employee of the main sponsor of the stadium disparaging, disrespectful and derogatory comments about the Chief Executive Officer ("the CEO") of MSL and showed to his fellow employee photographs of the CEO taken without the CEO's knowledge or consent which Mr Sautner used to support his comments (grounds 6 and 7 of the amended notice of appeal); and
• the breach of the CEO's direction, by which Mr Sautner was directed by the CEO not to be involved with the Perth stadium project and thereafter arranged two tours of the stadium by the Brookfield consortium, a tenderer for the Perth stadium project, which Mr Sautner and the stadium's facilities manager conducted (grounds 8 and 9 of the amended notice of appeal).
Shepherd came up for consideration in Sautner because, as their Honours in the majority in the Full Court of the Federal Court of Australia (Tracey, Gilmore, Jagot and Beach JJ) had found that Mr Sautner's dismissal was justified, the issue arose as to whether the Shepherd principle applied in the case to permit a termination for cause (i.e. a summary dismissal), rather than the termination with notice that had been previously been asserted and required the company to pay Mr Sautner six months' remuneration in lieu of notice.
Their Honours summarised Shepherd in Sautner (at [92]) as involving a contract of agency, extrapolating that:
… Shepherd's agency was terminated by the respondent because it was dissatisfied with his services although at that time it was not aware of certain conduct of Shepherd. It was held that an agent's dismissal may be justified upon grounds upon which his principal did not act or of which the principal was unaware when the purported termination occurred.
Dixon J in Shepherd said that, "[i]t is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not".
Mr Sautner argued that neither Shepherd properly understood nor any later authorities (including Downer EDI) "extend the Shepherd principle to a circumstance whereby a party lawfully terminates a contract in accordance with its terms on proper notice (or payment in lieu of notice) and a debt thereby accrues, and after this the terminating party discovers conduct which would have justified the summary termination of the contract of employment for cause" (see at [95]).
The majority in Sautner differentiated that case from Shepherd (at [97]) on the basis that:
… here there has been an actual contractual termination, not a mere purported termination upon inadequate grounds but nonetheless later justified on grounds not known or not relied upon at the time of purported termination. Moreover, the actual termination was not based upon breach.
As adverted to above, the Shepherd principle was considered by the New South Wales Court of Appeal in Downer EDI. Allsop P (as his Honour then was) (Macfarlan and Meagher JJA agreeing) stated (at [132]) that:
[t]he principle enunciated in Shepherd v Felt and Textiles often operates when a contractual act sought to be justified cannot be so justified on the ground contemporaneously relied upon, but can be so justified on a ground then existing but not known about: see for example British and Beningtons Ltd v North Western Cachar Tea Co Ltd [1923] AC 48 at 70-71; and see the discussion of principle by Devlin J in Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 at 443-446 approved by Mason CJ in Sunbird Plaza at 262.
In Downer EDI, Allsop P ultimately found that the Shepherd principle should not be limited to "supporting as justifiable acts done under contract which are not valid without further justification from the facts not previously known" (at [136]). His Honour continued:
… In principle, it should equally extend to adding a further basis for justification of the act if that further basis has separate relevance. So to approach the matter accords with the approach to the availability of damages for loss of bargain even if the contract be terminated in the exercise of a contractual power: Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; 157 CLR 17 at 31; and Sunbird Plaza at 260-262. Of course, whether or not the two contractual bases can operate concurrently or severally will be affected by the terms of the contract.
In reaching this conclusion, Allsop P followed Mason CJ's statement in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262; [1988] HCA 11 (Sunbird Plaza) that:
Shepherd v Felt & Textiles of Australia Ltd stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance
and reasoned that the Court was bound by the wider expression of the Shepherd principle in Sunbird Plaza (at [138]).
In Sautner at [109], the majority disagreed with Allsop P's broad reading of Mason CJ's decision in Sunbird Plaza. Their Honours suggested that the better view was that "Mason CJ was merely describing the principle in terms of the facts found in Shepherd". Their Honours stated (at [112]) that they did not consider that Shepherd supported the contention that "a lawfully terminated agreement, in effect, may be resuscitated and then re-terminated upon some ground not known at the time of the termination", and noted (at [113]) that, to the extent Downer EDI suggested otherwise (particularly what was said by Allsop P at [136], [138] and [144]) they would disagree:
… Allsop P construed the termination clause in Downer in a way which enabled the Shepherd principle to be invoked in its wider expression as articulated by his Honour. We do not need for present purposes to explore that textual construction in detail. However, we would depart from his Honour's reasons at [144] which would permit, following a (lawful) termination of an agreement, an entitlement to rely upon a different type of termination based upon a serious misconduct provision to sustain that very termination.
In my opinion, the situation at hand is not one where Rema Tip Top is maintaining a right to terminate the contract afresh (having validly terminated it without cause on 16 March 2018). Rather, Rema Tip Top is asserting that it would have been entitled summarily to dismiss Mr Grüterich on that date (as I have found it was) and therefore that the Notice Payment was made under a mistake that Mr Grüterich was entitled to receive that amount if his employment were to be terminated without a six month notice period.
Although Rema Tip Top relies on the fact that it obtained legal advice in effect as to its ability to terminate Mr Grüterich for cause (the advice sought strictly being addressed to the question whether Mr Grüterich would have a cause of action if Rema Tip Top were to terminate his employment) as indicating that, but for its mistake, it would have terminated summarily; to my mind what this indicates is that Rema Tip Top was making an election not to investigate further the circumstances of Mr Grüterich's conduct (or any alleged misconduct) but to bring his employment to an end immediately on the payment of that Notice Payment. I consider that this has the necessary quality of a voluntary payment so as to lead to the conclusion that there should not be restitution of the Notice Payment. It is not therefore necessary to consider the change of position defence. (Suffice it to note that had it been necessary to determine this I would have held, for the reasons put forward by Rema Tip Top in its submissions, that there was no relevant change of position referable to the manner in which the contract was terminated (as opposed to the fact of termination).)
[55]
Misleading or deceptive conduct claim
In the alternative to the restitution claim in relation to the Notice Payment, Rema Tip Top contends that Mr Grüterich contravened s 18 of the Australian Consumer Law by failing to disclose his misconduct before the Notice Payment was made. Section 18(1) of the Australian Consumer Law of course provides that "[a] person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive".
[56]
Rema Tip Top's submissions
It is submitted that Mr Grüterich's silence was misleading or deceptive in the context of the discussions and negotiations that took place from about 14 March 2018 to 16 March 2018 in relation to his departure from Rema Tip Top and his entitlements upon termination.
Rema Tip Top submits that Mr Grüterich's claims that he did nothing wrong, that there was no reason to terminate his contract and that he was entitled to six months' notice, gave rise to a representation which was falsified by undisclosed facts (i.e., his misconduct). It is alleged that the misleading or deceptive conduct of Mr Grüterich was his silence in the context of these positive representations to Rema Tip Top and that it is no answer to this claim that Mr Grüterich cannot reasonably have been expected to confess to his own wrongdoing if he genuinely believed that he had in fact done nothing wrong.
Rema Tip Top notes that liability for misleading and deceptive conduct by silence does not depend on the subjective state of mind of the defendant (referring to Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 467); and says that what is called for is an objective assessment of all of the relevant circumstances to determine whether the conduct was misleading or deceptive (referring to ACN 074 971 109 (as trustee for the Argo Unit Trust) and Pegela Pty Ltd v National Mutual Life Association of Australasia Ltd [2006] VSC 507 at [741]; Addenbrooke Pty Limited v Duncan (No 2) [2017] FCAFC 76 at [482]; and Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76 per McLure P at [41]-[67]).
It is submitted that any reasonable person in Mr Grüterich's position ought to have known that his conduct was wrongful and therefore any requirement that Rema Tip Top have a reasonable expectation that Mr Grüterich would reveal his own misconduct to it (having regard to the context in which he remained silent) is here satisfied.
Further, Rema Tip Top says that Mr Grüterich's contention that Rema Tip Top was relying on its own investigations and inquiries in making the payment, including the assistance of an in-house auditor and external solicitors, should not be accepted on the basis that it is against all of the evidence and illogical. It is noted that there is direct evidence from Mr Slattery and Mr Zimmer that Mr Grüterich would not have received a payment in lieu of notice when he was dismissed on 16 March 2018 had they known of his misconduct.
It is submitted that the fact that Rema Tip Top quickly commenced proceedings against Mr Grüterich for recovery of that Notice Payment once it had become aware of his misconduct is conclusive proof that it would not have paid this amount to him in the first place had it been aware of this misconduct prior to making the payment.
Rema Tip Top submits that it is not necessary to plead, or prove, that Mr Grüterich consciously concealed his misconduct in the period 14 to 16 March 2018. It is noted that liability for breach of s 18 of the Australian Consumer Law does not depend on an intent to mislead or deceive; and that Mr Grüterich's state of mind is irrelevant to the question of liability.
Rema Tip Top submits that the critical question is whether the circumstances were such as to make Mr Grüterich's silence misleading. It is said that this does not depend on any reasonable expectation of the plaintiff. Reference in this regard is made to Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 (Miller v BMW Australia) where French CJ and Kiefel J, as her Honour then was, pointed out (at [19]) that the language of reasonable expectation is not statutory, but indicates an approach which can be taken to the characterisation for the purpose of s 52 of the Trade Practices Act 1974 (Cth) (and equally s 18 of the Australian Consumer Law) of conduct of or including nondisclosure of information; and went on to say (at [23]):
Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct.
In the present case, it is said that Mr Grüterich's failure to disclose the falsity of the various assertions he made as to the non-existence of any reason for his dismissal and his entitlement to the Notice Payment was misleading or deceptive. Rema Tip Top says that it would not have made the Notice Payment had it been aware of Mr Grüterich's conduct and that Mr Grüterich's silence (in the context of the matters identified above) was causative of Rema Tip Top's loss.
Thus, it is submitted that this claim should succeed, in the alternative to the restitution claim and Rema Tip Top should be awarded damages under s 236 of the Australian Consumer Law in the amount of the Notice Payment.
[57]
Mr Grüterich's submissions
As to Rema Tip Top's misleading or deceptive conduct claim, Mr Grüterich submits that it should fail for the same reasons as the restitution claim: namely, that Rema Tip Top was relying upon its own investigations and inquiries in making the payment, including the assistance of an in-house auditor and external solicitors; and it stated that it was terminating Mr Grüterich because it had "lost trust" in him. It is submitted that, having lost trust in him, it is incongruous that Rema Tip Top would have relied upon anything he did, or did not, say.
Mr Grüterich submits that the reasonable expectation analysis advanced by Rema Tip Top should be rejected as being a mischaracterisation of the law. It is submitted that cases of misleading conduct by omission do require the application of that analysis (see Miller v BMW Australia at [5], [19]-[21]; Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [189] (Barrett JA, Bathurst CJ and Beazley P agreeing); OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at [178]-[179] (Gleeson JA, Macfarlan and Leeming JJA agreeing)). It is said that where a positive 'false representation' case is advanced, it is unnecessary to consider the inverse implied omission by silence as to the falsity of the representation; and that in that context doing so would not require a 'reasonable expectation' analysis (Miller v BMW Australia at [23]) but that here a positive false representation case is not advanced by Rema Tip Top.
Further, it is submitted that for the purposes of misleading or deceptive conduct, a party to commercial negotiations is not required to volunteer information which will be of assistance to the decision-making of the other party, noting that in Miller v BMW Australia, French CJ and Kiefel J (as her Honour then was) said (at [22]):
[A]s a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. ...
It is submitted that, in the present case, any inequality of bargaining power was firmly in favour of Rema Tip Top. Mr Grüterich submits that there was no relevant misconduct; and that even if (contrary to his position) the payments were not objectively authorised, this is insufficient to establish misconduct of the kind required for termination on that basis (i.e., misconduct involving intention or knowledge). Further, it is submitted that it is not clear that conduct by an employee, in their capacity as an employee, is "in trade or commerce".
[58]
Determination
As to the misleading or deceptive conduct claim, the decision to terminate Mr Grüterich's employment was made prior to the discussions held on 15 and 16 March 2018 and was not in reliance on anything that Mr Grüterich did or did not say at the meeting at that time. Mr Labbé accepted that he was directed by Mr Reiff to travel to Australia and terminate Mr Grüterich's employment before 14 March 2018. Further, Mr Labbé gave evidence that there was nothing Mr Grüterich could have said or done between 14 and 16 March 2018 to change the decision to terminate his employment. Mr Labbé also conceded that nothing Mr Grüterich in fact did (or did not do) between 14 and 16 March 2018 affected the decision to terminate his employment.
Although Mr Grüterich submits that Rema Tip Top's misleading or deceptive conduct case ought to be dismissed on that basis alone, it seems to me that there is a distinction between the decision to terminate Mr Grüterich's employment and the basis on which that employment was terminated (i.e., whether with notice or summarily). The decision to terminate with a notice payment was one that seems to have been made at the time of termination (having regard to Mr Slattery's evidence as to his discussion with Mr Labbé about a mutual separation agreement and the way that these things would be done in Australia) and, relevantly, with the benefit of legal advice. As adverted to above, Mr Grüterich says, in that regard, that the misleading or deceptive conduct claim should fail for the same reasons as the mistake claim, namely that Rema Tip Top was relying upon its own investigations and inquiries in making the payment, including the assistance of an in-house auditor and external solicitors. It is in this context that the question as to whether it would need to be shown that Rema Tip Top had a reasonable expectation of disclosure by Mr Grüterich, at the time it terminated his contract, of the matters giving rise to the alleged misconduct, is raised.
In Semrani v Manoun; Williams v Manoun [2001] NSWCA 337 (per Beazley JA, as Her Excellency then was, Mason P and Ipp AJA agreeing), it was said (at [58]-[62]) that:
It is well established that a party can engage in misleading and deceptive conduct through silence: see for example Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR 46-054; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; Winterton Constructions Pty Ltd v Hambros Australia (1992) 39 FCR 97; Warner v Elders Rural Finance (1993) 41 FCR 399.
In Kimberley NZI Finance Ltd v Torero Pty Limited (approved by the Full Federal Court in Demagogue Pty Limited v Ramensky), French J said at 53,195:
"The cases in which silence may be … characterised [as conduct in contravention of s 52] are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that that fact does not exist."
Silence may more readily lead to a finding of breach of s 52 or s 42 [of the Trade Practices Act 1974 (Cth)] where there is a duty of disclosure: see Winterton Construction Pty Limited v Hambros Australia Ltd per Hill J at 114; Warner v Elders Rural Finance at 404-405.
Although an intention to deceive is not necessary for the purposes of s 42: see Yorke v Lucas (1985) 158 CLR 661, Puxu Pty Ltd v Parkdale Custom Built Furniture Pty Ltd (1982) 149 CLR 191, a person cannot engage in conduct in contravention of the section unless the person has actual knowledge of the matter said to be misleading or deceptive: see Gurr & Gurr v Forbes (1996) 80 ATPR 41-491.
The combined effect of the Act and the authorities therefore, is that for Williams' silence to be actionable, he must have had actual knowledge of a matter which he intentionally refrained from telling Manoun in circumstances where there was either a duty to disclose or where Manoun had a reasonable expectation that such information would be disclosed to him.
In Metalcorp Recyclers Pty Limited v Metal Manufactures Limited [2003] NSWCA 213; (2004) ATPR (Digest) 46-243 (Handley JA with Hodgson JA and Gzell J agreeing) said (at [14]-[15]):
A finding of misleading or deceptive conduct is open where that conduct, by word or deed, conveyed a misrepresentation (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514). In this case the misrepresentation is said to have been conveyed by silence, but that is an inadequate and incomplete description. The relevant principles were felicitously summarised by Black CJ in Demagogue Pty Limited v Ramensky (1992) 39 FCR 31, 32:
"Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive ... to speak of 'mere silence' or a duty of disclosure can divert attention from that primary question. Although 'mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed".
The misleading and deceptive conduct relied upon was that of Mr Cook during the critical conversation. As Black CJ said, silence that is capable of being misleading or deceptive never stands alone. In the absence of some positive duty to speak, silence can only be misleading or deceptive against a background of other facts known to both parties which make what is actually said so incomplete that it conveys a misrepresentation.
Were it necessary here to determine the 'reasonable expectation' issue raised in the parties' competing submissions in this case, I would have concluded that silence is misleading and deceptive only in circumstances where there is a duty to disclose (which ultimately is a factual question). In this sense, I agree with what was said by French J, as his Honour then was, in Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53,193 that "unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that that fact does not exist".
There is also some force to the proposition that there would not be a reasonable expectation on the part of an employee being summarily dismissed for misconduct in effect to confess his or her sins over the period of the employment there being terminated (especially in circumstances where I have concluded that some of Mr Grüterich's conduct was not knowingly dishonest). Here, of course, Mr Grüterich was not just silent as to the conduct of which Rema Tip Top now complains but he actually prepared the list of entitlements (which was at the least misleading) and, though he may have done so in haste, he did review it at least once and provided an updated spreadsheet with updated calculations.
In any event, whether or not the 'reasonable expectation' analysis is required, I am not satisfied that the conduct of Mr Grüterich in putting forward the "entitlements spreadsheets" was misleading or deceptive. I accept that it reflected his view at the time of his entitlements (albeit that he now concedes he was mistaken as to aspects of the spreadsheet schedules) and notwithstanding that at least the second of the versions seems to have built into it scope for "negotiation" as to his claimed entitlements.
Furthermore, I consider that it is clear that Rema Tip Top chose not to explore further the circumstances surrounding Mr Grüterich's claimed entitlements and to that extent did not rely on any representation arising from Mr Grüterich's "silence" or failure to disclose his misconduct when terminating the contract.
I have therefore concluded that Rema Tip Top's claim for restitution of the Notice Payment and for damages for misleading or deceptive conduct in relation thereto have not been made good.
[59]
Trust claim
Rema Tip Top contends that the receipt of the car allowance payments, the double salary payments and the bonus payment were all instances of dishonest misappropriation of Rema Tip Top's moneys by Mr Grüterich.
It says that the moneys were impressed with a trust in the hands of Mr Grüterich (citing Black v S Freedman & Co (1910) 12 CLR 105 at 110; [1910] HCA 58; Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82; Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589 at [40] (Wambo Coal) (per White J), as his Honour then was)); alternatively, that the moneys were received in breach of fiduciary duty and are held by Mr Grüterich on constructive trust for Rema Tip Top (citing Hospital Products at 107-108; [1984] HCA 64 (per Mason J)).
Rema Tip Top seeks a declaration that these moneys are held on trust by Mr Grüterich for its benefit and an order that they be repaid to it.
It is noted that in Wambo Coal White J (as His Honour then was) said at [40]:
… Where property is stolen, the property is trust property in the hands of the thief and can be traced into the hands of a third party who receives the property otherwise than as a bona fide purchaser of the legal estate for value without notice. The property is trust property in the hands of the thief because the thief is bound in conscience to hold the property on behalf of its true owner. Whether the trust is characterised as a resulting trust, or as a constructive trust, the trust is of an institutional rather than a remedial character. It arises because the conscience of the thief is bound. [citations omitted]
Rema Tip Top seeks to trace those trust moneys into Mr Grüterich's bank accounts (referring to Foskett v McKeown [2001] 1 AC 102 at 127) and seeks an order that funds held in the HSBC bank account be released to it in the amount of $195,960.87 (gross).
[60]
Determination
I have concluded (aware as I am of the degree of satisfaction necessary for such a finding) that the directions for payment of the car allowance, the double salary payments and the business class private travel expenses (as opposed to the travel expenses claimed as being for business purposes and dealt with separately in these reasons) were not honestly made and accordingly the declarations of trust and tracing remedies as sought should be granted. As for the bonus payment, I have concluded that it was mistakenly made (but not that there was dishonesty in relation to its receipt) but that there should be a repayment of that amount by way of restitution as the retention of that benefit by Mr Grüterich would be unjust. As to the balance of the unauthorised expenses I am satisfied that they were obtained (and have been retained) in breach of fiduciary duty such that a declaration of constructive trust should be made.
[61]
Overpayment of annual leave on termination
Mr Grüterich concedes that he was overpaid his annual leave by an amount equivalent to 15 days. (His evidence is that, from his experience of the companies in the Rema Group in which he worked, he did not appreciate that he had to record annual leave. That is not necessary here to explore since the relief sought is simply as to its repayment.) An order should be made for repayment of the amount conceded to have been overpaid (which I understand to be $24,751.39).
[62]
Cross-claim
The principal claim by Mr Grüterich on his cross-claim (based on a variation of the Employment Contract to include the Fixed Term) or for misleading or deceptive conduct in that regard, in respect of the loss of salary to 31 December 2019 has failed for the reasons already set out. Mr Grüterich, "for commercial reasons and on a without admissions basis", did not press the smaller heads of claim in his cross-claim in respect of Rema Tip Top's claim.
That leaves Mr Grüterich's claim to have been wrongly denied long service leave accruals on termination of his employment. Rema Tip Top submits that Mr Grüterich's misconduct deprived him of a right to any payment in respect of long service leave upon termination of his employment (relying on s 4(2)(a)(iii) of the Long Service Leave Act) and argues that this claim should be dismissed
Section 4 of the Long Service Leave Act sets out the statutory calculation for long service leave and the circumstances in which the leave can be taken or paid out. Long service leave is accrued during time spent with an "employer", which is defined in s 3 as "any person employing any worker or workers and includes the Crown".
Section 4(13)(c) of the Long Service Leave Act provides:
Where before or after the commencement of the Long Service Leave (Amendment) Act 1967 a worker has transferred from the service of an employer (in this paragraph called the first employer) being a corporation to the service of another employer being a corporation related to the first employer at the time of that transfer, then for the purposes of this section:
(i) the continuity of the period of service of the worker shall be deemed not to have been broken by reason of the transfer, and
(ii) the period of service which the worker has had with the first employer before the commencement of the service of the worker with that other employer (including any service which by reason of a prior transfer or prior transfers or for any other reason the worker is deemed by this section or, for the purposes of long service leave for such service, the worker is deemed by any Act or award to have had with the first employer) shall be deemed to be service of the worker with that other employer.
Mr Grüterich says that his employment prior to the Employment Contract is counted because his former employers were corporations related to Rema Tip Top.
Mr Grüterich accepts that by s 4(2)(a)(iii) of the Long Service Leave Act "serious and wilful misconduct" may disentitle an employee to accrued long service leave but he notes that he was not dismissed for misconduct and argues that the facts do not establish this. Further, it is noted that cl 16.1 of the Employment Contract provided:
If the Executive's employment is terminated for any reason, the Employer will pay the Executive the Executive's' accrued and untaken annual leave and long service leave.
Mr Grüterich says that cl 16.1 is inconsistent with Rema Tip Top's defence to the Long Service Leave Act claim and says that this claim should not be disallowed.
[63]
Determination
Section 4(1) of the Long Service Leave Act states that:
Except as otherwise provided in this Act, every worker shall be entitled to long service leave on ordinary pay in respect of the service of the worker with an employer … .
Pursuant to s 4(2)(a)(iii), the amount of long service leave to which a worker shall be so entitled shall:
in the case of a worker who has completed with an employer at least five years service, and whose services are terminated by the employer for any reason other than the worker's serious and wilful misconduct, or by the worker on account of illness, incapacity or domestic or other pressing necessity, or by reason of the death of the worker, be a proportionate amount on the basis of 2 months for 10 years service.
The phrase "serious and wilful misconduct" is not defined in the Long Service Leave Act but the case law indicates (particularly see McDonald v Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903 (McDonald v Parnell Laboratories)) that it is understood as having the same meaning attributed to serious and wilful misconduct in the case law (including cases such as Blyth Chemicals).
The following extract from McDonald v Parnell Laboratories (per Buchanan J) (at [48]) has been cited on numerous occasions:
The terms 'misconduct', 'serious misconduct' and 'serious and wilful misconduct' are often the subject of judicial and administrative attention as applied to the facts of particular cases but there is relatively little judicial discussion about their content and meaning. Naturally enough, when the term 'serious misconduct' is under consideration an evaluation of what conduct represents 'serious' misconduct is influenced by the (usually statutory) setting in which the phrase must be given meaning and applied. Frequently, for example, the question at issue is whether an employee is disentitled by reason of his or her conduct to a statutory entitlement (eg. in New South Wales, where Ms McDonald was employed, see Long Service Leave Act 1955 (NSW) s 4(2)(a)(iii); Workers Compensation Act 1987 (NSW) s 14(2)[)].
In Portelli v Polar Fresh Cold Chain Services Pty Ltd (t/as Polar Fresh) [2016] FWC 3519, the applicant argued that his dismissal from a refrigerated goods storage and distribution business on the basis of absences from work that did not comply with the circumstances when leave might be taken according to the relevant contract, was unfair. Amongst other things, in holding that the dismissal was not unfair, Hatcher VP of the Fair Work Commission took into consideration that (see at [45(5)]):
It is well arguable that Polar Fresh would have been entitled to summarily dismiss Mr Portelli, and deny him his long service leave on the basis that he had committed serious and wilful misconduct [citing s 4(2)(a)(iii) of the Long Service Leave Act 1955 (NSW)]. However they treated him generously by dismissing him with a payment in lieu of notice and paying out his long service leave, which provided him with about eleven weeks' income on termination.
In my opinion, the proper construction of s 4(2)(a)(iii) is to focus on the actual basis or reason for termination (i.e., whether the employee's services "are terminated by the employer for any reason other than the worker's serious and wilful misconduct") not whether some other basis for termination would have been available under which an entitlement to long service leave would not have arisen. Apart from the text of the section, which focusses on the reason for the termination (not whether some other basis for termination may have been available), I have in mind the fact that contracting out of the legislation is prohibited (see s 7 of the Long Service Leave Act), which reinforces the emphasis placed by the legislature on such statutory entitlements and suggests that such entitlements are not lightly to be taken as having been lost. I was not taken to any authorities in which the present situation has arisen (of a valid termination without cause but where the employment could validly have been terminated for serious misconduct) in the context of disputed long service leave entitlements (nor have I been able to find any). I consider that a literal interpretation should be given to the legislation as most consistent with the evident purpose of the legislation.
Therefore I have concluded that the fact that Mr Grüterich's employment was terminated with a payment in lieu of notice, and not for misconduct, means that he is entitled to accrued long service leave up to the date of termination of his employment. Such a conclusion is consistent with cl 16.1 of his Employment Contract and therefore it is not necessary to consider the arguments raised as to the operation of cl 16.1 independently or otherwise of the relevant provisions of the legislation. Accordingly, an order should be made for the payment of the long service leave accrued from the time of Mr Grüterich's employment with DBS, a related corporation.
[64]
Costs
As to costs, in light of the mixed outcome on the respective claims, I will make directions for written submissions to be provided within seven days with a view to determining this on the papers and I will give liberty to apply in case there is any difficulty in the implementation of these orders.
[65]
Orders
For the reasons set out above, I make the following orders and declarations:
1. Declare that the plaintiff would have been justified in terminating the contract of employment between itself and the defendant on 16 March 2018 for serious misconduct by the defendant.
2. Declare that moneys in respect of the car allowance, the double salary payments and the expenses said to be incurred under the claimed private business class travel budget (as opposed to the claimed business travel expenses on Mr Grüterich's company credit card) totalling $187,037.67 were wilfully and dishonestly misappropriated by the defendant and that those moneys were impressed with a presumed or resulting trust and are held on trust by the defendant for the benefit of the plaintiff.
3. Declare that those moneys, together with the moneys in respect of the bonus payment of $103,210.88 and the unauthorised credit card expenses (including the Poliform furniture deposit) totalling $21,413.75, that the defendant caused to be paid to himself or for his benefit in breach of his fiduciary duty not to make an unauthorised profit from his position, are held by the defendant subject to a constructive trust in the plaintiff's favour.
4. Order that, subject to the set-off ordered below, funds held in the HSBC bank account to the amount of $311,662.30 (being the total of the amounts the subject of the trust declarations in Orders 2 and 3 above) be released to the plaintiff.
5. Order that the defendant pay the following sums to the plaintiff (totalling $336,413.69) as damages (for breach of contract, in equity or under s 1317H of the Corporations Act 2001 (Cth) for breach of fiduciary or statutory duties owed by the defendant as managing director of the plaintiff) and/or by way of restitution:
1. Car allowance: $22,750.
2. Double salary: $69,999.99.
3. Bonus payment: $103,210.88.
4. Poliform furniture: $9,616.40.
5. Travel expenses: $94,287.68.
6. Annual leave overpayment: $24,751.39.
7. Other miscellaneous credit card expenses: $11,797.35.
1. Order the payment of interest up to judgment on the above amounts.
2. Order that the plaintiff pay to the defendant accrued long service leave calculated taking into account his employment within the Rema Group of companies from 25 October 2012 to the date of termination of his employment on 16 March 2018, with interest calculated up to judgment on that amount, but otherwise dismiss the defendant's cross-claim.
3. Order that the amounts payable pursuant to the plaintiff under Orders 4 and 5 be set-off against the amount ordered to be paid to the defendant under Order 7; with the remaining balance of the amounts so ordered to be paid to the plaintiff or the defendant, as the case may be, within 28 days.
4. Reserve the question of costs to be dealt with on the papers following any further brief written submissions on that issue.
5. Liberty to apply on three days' notice for any variation necessary to correct any error in the calculation of the above amounts or otherwise in relation to the working out of the above orders.
[66]
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: 18 November 2019
EMPLOYMENT AND INDUSTRIAL LAW - Leave - Long service leave - s 4(2)(a)(ii) of the Long Service Leave Act 1955 (NSW) - whether the defendant had been wrongly denied long service leave accruals on termination of his employment - held that the defendant was entitled to long service leave on the basis that his employment was terminated in lieu of notice and not for misconduct.
Legislation Cited: Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, ss 18, 31, 236
Corporations Act 2001 (Cth), ss 182(1), 183, 1317
Long Service Leave Act 1955 (NSW), ss 4, 5, 7
Trade Practices Act 1974 (Cth), s 52
Cases Cited: ACN 074 971 109 (as trustee for the Argo Unit Trust) and Pegela Pty Ltd v National Mutual Life Association of Australasia Ltd [2006] VSC 507
Addenbrooke Pty Limited v Duncan (No 2) [2017] FCAFC 76
Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570; [2008] HCA 57
Arhill Pty Ltd v General Terminal Co Pty Ltd (1990) 23 NSWLR 545
Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; [1988] HCA 17
BGC (Australia) Pty Ltd v Phippard [2002] WASCA 191
Bibby Financial Services Australia Pty Ltd v Sharma [2014] NSWCA 37
Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58
Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66; [1933] HCA 8
Bradley Mark Lum v MV Developments (Lane Cove) Pty Ltd (in liquidation) [2018] NSWSC 247
Breen v Williams (1996) 186 CLR 71; [1996] HCA 57
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34)
Browne v Dunn (1893) 6R 67
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Caswell v Sony/ATV Music Publishing (Australia) Pty Ltd [2012] NSWSC 986
Cenric Group v TWT Property Group [2018] NSWSC 1570
Ceramic Fuel Cells Ltd (in liq) v McGraw-Hill Financial Inc (2016) 245 FCR 340; [2016] FCA 401
Clouston & Co Ltd v Corry [1906] AC 122
Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444
Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32
Concut Pty Ltd v Worrell [2000] HCA 64; (2005) 75 ALJR 312
Coote v Kelly; Northam v Kelly [2016] NSWSC 1447
Cunningham v Australian Bureau of Statistics (2005) 148 IR 20
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48
Downer EDI Limited v Gillies [2012] NSWCA 333
Evans v Braddock [2015] NSWSC 249
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
Foskett v McKeown [2001] 1 AC 102
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50
Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560
Gloucester (Sub-Holdings 1) Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1419
Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91
Heugh v Central Petroleum Ltd [No 5] [2014] WASC 311
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64
In the matter of MSU Management Pty Ltd - Urusoglu v MSU Management Pty Ltd [2011] NSWSC 54
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181
KD Kanopy Australasia Pty Ltd v Insta Image Pty Ltd [2007] FCA 481
Kelly v Solari (1841) 9 M & W 53; 152 ER 24
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; [2007] HCA 61
Lahoud v Lahoud [2010] NSWSC 1297
Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162
Lumbers v W Cook Builders Pty Ltd (In Liq) (2008) 232 CLR 635; [2008] HCA 27
Matter Technology Ltd v Mrakas; Mrakas v Matter Technology Ltd [2018] NSWSC 507
McDonald v Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903
Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221; [2015] FCAFC 20
Metalcorp Recyclers Pty Limited v Metal Manufactures Limited [2003] NSWCA 213; (2004) ATPR (Digest) 46-243
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31
Miller v Sunland Park Pty Ltd [2014] FCCA 89
Mirus Australia Pty Ltd v Gage [2017] NSWSC 1046
Moody Kiddell & Partners Pty Ltd v Arkell [2013] FCA 1066
Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676
MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24; [2018] 2 WLR 1603
North v Television Corp Ltd (1976) 11 ALR 599
Norwich Union Fire Insurance Society Ltd v William H Price Ltd [1934] AC 455
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76
OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120
Pilmer v Duke Group Ltd (In Liq) (2001) 207 CLR 165; [2001] HCA 31
Portelli v Polar Fresh Cold Chain Services Pty Ltd (t/as Polar Fresh) [2016] FWC 3519
Rankin v Marine Power International Pty Ltd [2001] VSC 150; (2001) 107 IR 117
Rema Tip Top Asia Pacific Pty Ltd v Gruterich [2018] NSWSC 591
Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82
Sabre Corporation Pty Ltd v Russ Kalvin's Hair Care Company (1993) 46 FCR 428
Salib v Gakas; Newport Pacific Pty Ltd v Salib [2010] NSWSC 505
Sargent v ASL Developments Ltd (1974) 131 CLR 634; [1974] HCA 40
Schneider v Caesarstone Australia Pty Ltd [2012] VSC 126
Semrani v Manoun; Williams v Manoun [2001] NSWCA 337
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21
State Bank of New South Wales v Commissioner of Taxation (1995) 62 FCR 371; (1995) 132 ALR 653
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; [1988] HCA 11
Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24
Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94
Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589
Wasada Pty Limited v State Rail Authority of New South Wales (No.2) [2003] NSWSC 987
Watson v Foxman (1995) 49 NSWLR 315
Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381
Yabsley v MLC Limited [2017] NSWSC 832
Texts Cited: C Mitchell, P Mitchell and S Watterson , Goff & Jones The Law of Unjust Enrichment (9th ed, 2016, Thomson Reuters)
G D Pont et al, Halsbury's Laws of Australia (Lexis Nexis)
J D Heydon, M J Leeming and PG Turner, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th ed, 2014, LexisNexis)
K Mason, J W Carter, G J Tolhurst, Mason and Carter's Restitution Law in Australia (3rd ed, 2016, LexisNexis)
M Pittard and R Naughton, Australian Labour and Employment Law (1st ed, 2015, LexisNexis)
Category: Principal judgment
Parties: Rema Tip Top Asia Pacific Pty Ltd (Plaintiff)
Christian Grüterich (Defendant)
Representation: Counsel:
N Furlan and JC Lee (Plaintiff)
J Knackstredt and M Connor (Defendant)
Judgment
HER HONOUR: This matter involves a dispute between Rema Tip Top Asia Pacific Pty Ltd (Rema Tip Top) and its former managing director, Mr Christian Grüterich, relating to Mr Grüterich's employment with Rema Tip Top and the circumstances in which that employment came to an end.
There is an issue as to whether Mr Grüterich's contract of employment was validly terminated by Rema Tip Top by notice on 16 March 2018 or whether it was terminated on 23 April 2018 when Mr Grüterich's then solicitors advised Rema Tip Top's solicitors that Mr Grüterich accepted what was contended to be Rema Tip Top's repudiation of his contract of employment. However, on either case, it is accepted that the employment relationship between Mr Grüterich and Rema Tip Top came to an end on 16 March 2018. Shortly thereafter, Rema Tip Top paid Mr Grüterich a termination payment, which was based on Mr Grüterich's calculation of his entitlements, and included a component of $213,655 (the Notice Payment) for six month's salary in lieu of notice. Mr Grüterich contends that his employment contract was for a fixed term and not terminable (other than for cause) before 31 December 2019 - hence his claim that Rema Tip Top repudiated his contract of employment by giving him notice on 16 March 2018.
Rema Tip Top denies that the contract of employment was for a fixed term but says that, in any event, it was entitled summarily to terminate Mr Grüterich's contract for serious misconduct by Mr Grüterich during the course of his employment. Rema Tip Top alleges that Mr Grüterich: wilfully and dishonestly misappropriated moneys from Rema Tip Top; purchased personal property without its authorisation; and breached his fiduciary duty to Rema Tip Top while in its employment. Apart from some relatively minor purchases of personal items on his company credit card, Mr Grüterich broadly denies the allegations of misconduct that have been made against him and asserts that particular payments to him (for items such as an annual car allowance, private travel and home furniture) were within the scope of his authority as managing director or otherwise authorised.
Rema Tip Top seeks: a declaration that it was justified in terminating Mr Grüterich's contract of employment in March 2018 for serious misconduct by Mr Grüterich (prayer 1); declarations that moneys wilfully and dishonestly misappropriated by Mr Grüterich from Rema Tip Top (totalling $195,960.87 prior to tax) and personal property purchased by Mr Grüterich using Rema Tip Top's moneys without its authorisation, were impressed with a presumed or resulting trust, and are held on trust by Mr Grüterich for the benefit of Rema Tip Top (prayers 2A-2B); and, in the alternative, a declaration that Mr Grüterich caused to be paid to himself the sum of $195,960.87 (prior to tax) and property purchased by Mr Grüterich using Rema Tip Top's moneys, in breach of his fiduciary duty not to make an unauthorised profit from his position, and that such moneys and property are held by Mr Grüterich subject to a constructive trust in Rema Tip Top's favour (prayer 2C).
Finally, Mr Grüterich points to the fact that Rema Tip Top failed to cross-examine Mr Grüterich on the Delegations of Authority Matrix at all, let alone as to whether he complied with it in relation to particular expenditure and payments made to him. Accordingly, it is submitted that the Delegations of Authority Matrix (the first version of which was adduced before Mr Grüterich's cross-examination: Exhibit 8) cannot fairly now be deployed against him in closing argument (referring to the rule in Browne v Dunn (1893) 6R 67).
Rema Tip Top also seeks damages (prayer 2); equitable compensation generally and/or under s 1317 of the Corporations Act 2001 (Cth) (Corporations Act) (prayers 3-4); restitution (prayer 5); in the alternative, damages under s 236 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law (Australian Consumer Law) (prayer 5A); interest up to judgment (prayer 6); and costs and interest on costs (prayers 7-8).
Although Mr Grüterich disputes that this is a case of fraud, arguing that instead it is about technical questions surrounding the nature and scope of [his] employment contract, including the effect of an entire agreement clause, given that serious allegations involving dishonesty are here made against Mr Grüterich, it is accepted by Rema Tip Top that it bears the onus of proof to the Briginshaw standard (Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 - Briginshaw v Briginshaw) of those allegations.
Mr Grüterich filed an amended cross-claim on 15 April 2019 (the cross-claim) (pursuant to leave to amend granted by Kunc J on 12 April 2019) seeking: damages for breach of contract (prayer 1); judgment for a contractual debt of $1,432,722.85 (plus the payment of PAYG and fringe benefits taxes as required) (prayer 2); declarations that Rema Tip Top engaged in misleading conduct in relation to Mr Grüterich's employment, contrary to ss 18 and 31 of the Australian Consumer Law (prayers 3-4); damages pursuant to s 236 of the Australian Consumer Law (prayer 5); payment of accrued long service leave pursuant to s 4 (though I note that the cross-claim says s 5 which I assume is an incorrect reference) of the Long Service Leave Act 1955 (NSW) (Long Service Leave Act) (prayer 6); and costs and interest on costs (prayers 8-9).
For the reasons that follow, I have concluded that Mr Grüterich's contract of employment was not (as he contends) for a fixed term; rather, that it was terminable on six months' notice without cause; and that it was validly terminated by Rema Tip Top on 16 March 2018. In that regard, I am not persuaded that Mr Grüterich's misleading or deceptive conduct claim as to representations alleged to have been made to him in the course of his employment (in relation to a fixed term or otherwise) has been made good.
I further find that Rema Tip Top would have been justified in summarily terminating Mr Grüterich's contract of employment on 16 March 2018 for serious misconduct; that misconduct being comprised of: Mr Grüterich's unauthorised directions for payment to himself of an annual car allowance, double salary payments and amounts said to be referable to a private business class travel budget (which I cannot find were honestly made) together with the overall history of unauthorised use of his company credit card for personal expenditure (some of which non-work-related expenses is now not disputed by him); those amounts in Mr Grüterich's hands being impressed with a resulting or presumed trust. I find that the direction for a payment of a sum being the equivalent of a €50,000 bonus for the 2017 year (the bonus payment) was also not authorised but I am not satisfied that Mr Grüterich's conduct in relation to that payment was dishonest; this sum being recoverable by way of restitution, having been paid by Rema Tip Top under the mistaken belief that it was obliged to make that payment and in circumstances where the retention of that benefit by Mr Grüterich would be unjust. (Pausing here, I note that Mr Grüterich's change of position defence related to the Notice Payment claim not the bonus payment claim.)
The consequences of those findings, in terms of the relief here sought by Rema Top, are dealt with in due course.
I accept that, at the time of its termination of Mr Grüterich's employment, Rema Tip Top was under the mistaken belief that it was entitled so to do only on the provision of notice (with payment of six months' salary in lieu of a notice period if it so chose), rather than (as I have found it was) summarily for cause. However, I am not persuaded that Rema Tip Top's claim for restitution or misleading or deceptive conduct in relation to the Notice Payment is made good.
Finally, as to Mr Grüterich's cross-claim to payment of long service leave, I find that this claim is made good because, although Rema Tip Top was entitled summarily to terminate his employment for serious misconduct in March 2018, in fact it did not do so.
For the sake of clarity, I note here at the outset that any reference to an amount in dollars in this judgment (as opposed to euros) is a reference to Australian dollars (unless otherwise stated).