Suspension of Mr Bowd
85 The board also decided to formally suspend Mr Bowd whilst the final investigation into his behaviour remained pending. That decision had been made in principle on 23 January 2017, but its announcement had been deferred because the board had wished to speak to Mr Bowd on 26 January 2017. This did not occur because he preferred to spend time with his family. The board also discussed the appointment of Mr Dean Dowie as an acting CEO. Mr Dowie had been a candidate for the CEO job the previous year. It was resolved that he should be contacted.
86 Each of Ms Richardson, Mr Richardson and Mr Cartney denied that the ASIC complaint was one of the reasons, or indeed the reason, for Mr Bowd's suspension. Ms Richardson's evidence was as follows:
My decision to stand [Mr Bowd] down was motivated solely by the poor behaviour that [Mr Bowd] had demonstrated with the board and with Baltec staff over the proceeding months, which I believed (and continue to believe) put the company at risk. The complaint to ASIC, and any other complaints made by [Mr Bowd] either directly or through his lawyers, or [Mr Bowd] being on medical leave at the time, played no role in my decision to suspend him.
87 Mr Richardson's evidence was as follows:
My decision to stand [Mr Bowd] down was motivated by my concern about [Mr Bowd's] management and its impact on staff. I was of the view that the risk of losing the value of the Baltec business was extremely high because of the impact of [Mr Bowd's] management approach on the staff. I was very concerned that, without Baltec, the whole of [EG] could be non-viable.
88 Mr Cartney's evidence was as follows:
The next day, on Saturday morning, 28 January 2017, during the board meeting held outside Baltec's offices, [Ms Richardson], [Mr Richardson] and I discussed the need to suspend [Mr Bowd] unilaterally since we had been unable to do this by agreement with him since deciding to do this on Monday, 23 January 2017. We also discussed the need to appoint an acting-CEO, since it would have been inappropriate to appoint [Mr Richardson], who was Managing Director, since he had been implicated in [Mr Bowd's] ASIC complaint. We resolved to approach Mr Dean Dowie, who had been a candidate for [Mr Bowd's] job initially before withdrawing his candidacy, to accept the position, since we knew that Dean was likely available at short notice, and would start with at least some familiarity with [EG's] business.
89 Mr Dowie gave evidence and was cross-examined. His evidence was that he was asked to become acting CEO "for a short period of time". He thought Mr Bowd's employment had already been terminated when he arrived. In fact it had not. Mr Dowie's understanding about this issue was mistaken.
90 Mr Richardson was cross-examined about the events which took place over the weekend of 28 to 29 January 2017. He denied that the reasons for suspending Mr Bowd was because he had just found out about the complaint made to ASIC. He denied that this had angered him. He pointed to the draft email he had prepared earlier in the week which proposed that Mr Bowd would take "extended leave", and which I have referred to above. This had been drafted before he knew about the ASIC complaint. His evidence was that he thought that giving Mr Bowd a break from duties would result in a "win-win position all round". He said that the purpose of the draft email was to "keep Peter Bowd within the organisation, not to get rid of him". He said that on 28 January 2017, after doing some research about ASIC, he knew that "something fairly serious was going on" and became "concerned about anything going to ASIC". He first obtained a copy of the ASIC complaint on 29 January 2017 (sent by Mr Bowd to Mr Cartney by email). He said he had two emotions when he saw it: relief and sadness. When asked in cross-examination why he was relieved, he said "one just had to look at it to see that it was nonsense". He said that when he decided to suspend Mr Bowd his concern was more about Mr Bowd's management and the impact he was having on Baltec staff.
91 Mr Cartney was also cross-examined about his reasons for "removing" Mr Bowd, which I interpreted to include both his suspension and dismissal. He denied that EG was looking for reasons to terminate Mr Bowd. He denied the contention that he saw Mr Bowd as a "troublemaker". He said he was a "very poor CEO" and that in early 2017 he had come to assess that Mr Bowd was not good at his job. He denied he was dismissed because of the complaint to ASIC and the invocation of the whistleblower policy; he denied he was dismissed because he was absent from work.
92 Ms Richardson was also cross-examined about the decision to suspend Mr Bowd. She denied that the reason for it was the complaint to ASIC. Her evidence was that the decision to suspend had really been taken on Monday 23 January 2017 before and prior to her having knowledge of any such complaint.
93 I shall return to these reasons for suspension and dismissal.
94 Text messages sent around this time between Messrs Bowd and Cartney reveal that Mr Cartney was continuing to perform his role as chairman by not taking sides. His intention, at least on 27 January 2017, was to try to get BDO engaged as the external auditors. Thus, in a series of texts sent to Mr Bowd on the evening of 27 January he said the following:
… Now [Ms Richardson] is asking who engaged BDO. I said you engaged them but they work for the company and I will be down there tomorrow. And Robert Baker knows I will be there if he picks up his emails.
[Mr Richardson] trying to have a meeting of the Board at 7.30 tomorrow. I guess he knows from [Ms Richardson] that he is implicated.
I just sent this to [Ms Richardson]: Ideally we get a quick independent BDO report. That would head ASIC off and protects [Mr Richardson]. If we get a bad report then we are stuffed. If we take no action then ASIC will do the same work and they will wonder why we did not get an independent report. Then we are stuffed. If we have an audit that [Mr Richardson] gets involved in then ASIC will still do their thing and they will wonder why the audit committee did not keep [Mr Richardson] out of it to comply with the whistle blower legislation. That will make them look even harder. Perhaps time to explain this all to [Mr Richardson]?
95 At about 1:00am on 28 January 2017, Mr Bowd replied by making allegations about "bribes". He said:
That's very true. So I have to ask you a question, the jobs that we discussed that we've paid substantial costs or monies into that "[Mr Boratav]" says "will" or "might" eventuate! The "WIP" I discussed! What if these Are bribes to get us work? I have to look very very hard at some of these jobs David! It's now all making a lot of sense! The 3 jobs that [Mr Boratav] would have won for us! That will come but we will lose if he goes! Could well be bribes to win work.... We've had huge costs and these projects have not eventuated. Hundreds of thousands of dollars.
I must look at all of this David! It's a real hornets nest.
It's much bigger than I initially thought or saw, the 3 jobs with "cash retention" are potential bribes or some other kind of leverage that [Mr Boratav] may well of used!
Thanks
Pete
(Errors in the original.)
No evidence of bribery was adduced before me in support of these allegations.
96 At 6:42am, Mr Cartney replied to this text as follows:
[Ms Richardson] now playing for time audit may yet get stopped.
Pete I told [Ms Richardson] you went to Gaden's at my request after you told me verbally that the ASIC complaint had been lodged and the police were involved. And this was under the whistleblower protection.
Pete your email confirmation from ASIC the PDF attachment doesn't open can you re email this to me including the PDF thanks.
(Errors in the original.)
Mr Bowd responded saying that "it's critical that we get in … We must get the team in". The team, I infer, is a reference to BDO. On Sunday, Mr Cartney tried to contact Mr Bowd. Amongst other things, Mr Bowd said in a text that he proposed to give the police a "data dump" as well as his "PC" the next day, being 30 January 2017. He said that he had meetings with his counsel that he was going to attend and that it would be a "long day". This was a day, I note, covered by his medical certificate.
97 On the evening of 29 January 2017, Mr Bowd sent Mr Cartney the following "without prejudice" email which attached a copy of the ASIC complaint (Mr Cartney had not previously seen it). It again invoked the whistleblower provisions of the CA. It also evidences, in the clearest terms, Mr Bowd's belief that he was going to be dismissed. It relevantly said as follows:
Dear David,
Without Prejudice
I am informing you that on Friday afternoon I took a call from an ASIC officer, please find the attached copy of my statement to ASIC, I am now formally including you as a part of the whistleblowing process, as Chairman of [EG] I am also formally notifying you of the report, and the details in the report.
I am also clarifying that I qualify for full protection of the act under section 1317AA as an employee and CEO of [EG], I have supplied a copy of the whistleblowing provisions of the act here for your information, the following parts of the corporations act that protect me from any further inappropriate action from the board and specifically [Mr Richardson] Managing Director of [EG]. Please see the following information, which I am assuming you will provide to the board:
[The text of ss 1317AA to 1317AE in Pt 9.4AAA of the CA is then set out.]
I wish to make my situation very clear, I have lodged with both ASIC and the Victorian Police, I have protection under the Corporations Act 2001 whistleblowers part 9.4AAA, as listed above.
I am informing you that I have opened dialog with legal counsel and have informed them of the changes to the locks at the Baltec offices, the engagement of staff by [Mr Richardson] in regards to my removal, including the meetings arranged by the Managing Director [Mr Richardson] with a number of the staff over the past week, a complete breach of executive confidence, I have informed my legal counsel of the meeting of the Baltec staff at lunchtime Tuesday the 24th where they made comments in regards to my removal, I have independent statements that Staff member Marco Tomasi stated "we need to out this CEO".
I have sent my legal counsel and ASIC copies of the minutes from both of the meeting's with the board and executive on the 18th and 19th of January, copies of the November and December board reports, copies of the minutes of the meeting with staff at Wollongong. I have informed my legal counsel and ASIC in regards to the intent to stand me down. More importantly I have informed legal counsel that members of my team have been told by [Mr Richardson] that they are not to talk to me, this is victimisation and contravenes section 1317AC, please refer to the above clauses in the act. At this stage I am in fear of losing my job based on the immediate feedback from other employees within the TAPC part of the company, please see section 1317AD part 5. I have statements from a number of the management team, and a number of employees in the group that I will lodge with my legal counsel on Monday.
I am formally reporting the above to you as Chairman of [EG], I appreciate this is a lot to take on David, I will be meeting with Victorian Police early Monday so I will be late into the office for any meetings, given the current behaviour of our Managing Director [Mr Richardson] and my report to ASIC, any meetings that we have on Monday will require an independent 3rd party to be present.
(Errors in the original.)
98 On 30 January 2017, Mr Bowd sent a further email to Mr Cartney informing him that he was going to take a day of personal leave, and acknowledging that Mr Richardson wished to discuss matters with him but that he needed to have clarification about his position under the "whistleblower" provisions of the CA. Once again, this was a day covered by Mr Bowd's medical certificate.
99 On the same day the board met and formally suspended Mr Bowd. The following letter was sent by Mr Cartney to Mr Bowd suspending him:
Peter,
A number of matters have recently come to the attention of the Board concerning your performance as CEO.
Due to the nature of the matters, the Board has resolved to temporarily relieve you from the performance of your duties as CEO effective immediately.
Mr Dean Dowie has accepted an appointment as acting CEO for the foreseeable future.
Please note that it is only the performance of your duties as CEO which has been temporarily suspended. Your contract of employment remains on foot, and you will continue to be paid during the suspension period.
The Board intends to carry out an independent investigation of the matters concerning your employment. You will be required to cooperate with any investigation during normal business hours, and it is intended that you will be afforded procedural fairness throughout the process.
During the period of your suspension:
1. You must direct all enquiries made to you in your capacity as CEO to Mr Dowie;
2. You must not take or continue any action on behalf of [EG] in your capacity as CEO;
3. You must carry out any lawful instruction given to you by or on behalf of the Board;
4 If you have not already done so, you must return your company laptop computer and that of [Mr Ly] to [EG];
5. Access to your company email address will be suspended, and diverted to Mr Dowie;
6. You must not contact or have any communication with any employees, contractors, customers or suppliers of the company (other than the directors);
7. You must not hold yourself out as still carrying out duties as CEO to any employees, contractors, customers or suppliers of the company, or to the general public (including ASX and/or the news media);
8. You must not attend any business premises of [EG]; and
9. You remain bound by your employment obligations to [EG], including the terms of your contract of employment, as well as your fiduciary duties under statute and at common law.
You will be contacted about participating in the investigation process in due course. In the meantime, please contact me directly if you have any questions.
100 Eventually, Mr Cartney contacted Mr Bowd by phone and requested that he return EG's property, including his computer and phone. He also asked Mr Bowd to meet on 1 February 2017 with the independent investigator appointed by the board.
101 On the same day Ms Richardson attended the offices of Baltec and met with the company's regular auditors. Their "preliminary view" was that the ASIC complaint contained misinformation.
102 On 31 January 2017, Mr Bowd wrote an email to the police, his lawyer, EG's auditors and Mr Cartney making allegations that bribes had been paid. Later that day, Mr Bowd sent a text to Mr Cartney stating that he would not attend any meeting with EG's auditors and would leave the matter to the "AFP, ASIC and the courts". In cross-examination, Mr Bowd gave a different reason for his failure to attend the meeting with the auditors; he said he was sick.
103 On 1 February 2017, Mr Bowd contacted, as already mentioned, the AFP by phone. He was told to wait for the serious fraud team to contact him and to retain all evidence. I have no reason to doubt that this is what was said to him. On the same day, Mr Bowd also got a medical certificate for the period 1 to 6 February 2017 from the same doctor. It simply said that Mr Bowd "will be unfit to work for" that period.
104 On 2 February 2017, Mr Bowd emailed data files to ASIC. On 3 February 2017, Mr Cartney contacted Mr Bowd by email and asked him what his intentions were in relation to return of his two laptops and phone. Mr Bowd replied on the same day saying that he was retaining company items in his possession as evidence for the AFP.
105 On 6 February 2017, the solicitors for Mr Bowd sent Mr Cartney a lengthy letter. It recited a number of matters on the instructions of Mr Bowd, and made an allegation that Mr Richardson and others were attempting to "Phoenix" the business, namely taking steps to reduce the market price of EG's share, so they could be bought back cheaply. I have seen no evidence to support that allegation. The letter went on to state that there "was absolutely no basis" for the suspension. The letter referred to Pt 3-1 of the FW Act and stated that EG had been in breach of s 340 of the FW Act. The letter stated that Mr Bowd reserved his rights under the FW Act in the event that he was not reinstated. It also stated that Mr Bowd reserved his rights under the whistleblower provisions of the CA as well as under the Defamation Act 2005 (Vic).
106 On 9 February 2017, EG's regular auditors, McIntosh Bishop, sent to EG their report concerning Mr Bowd's complaint to ASIC. The report found, in general terms, that the complaint was misconceived. The "board summary" was in the following terms:
We have examined the complaint made by Peter John Bowd. Our examination confirmed $400,000 went to PT Baltec. It was cost of goods sold, tender expenses and loans to PT Baltec. There is supporting documentation for cost of goods sold and tender expenses. The loan balance will be confirmed when the audit of PT Baltec for the year ended 31 December 2016 is completed in Indonesia.
In Peter John Bowd's ASIC eComplaint it includes: "substantial funds have been transferred from the ASX listed business unit ([EG]) (Baltec) to the Indonesian company PT Baltec without any supporting documents or evidence of costs or 3rd party invoices".
In our examination there were 11 loans totalling US$169,000, AUD$227,089 and these would have been approved by either [Mr Richardson] or [Mr Boratav] or both. At the meeting held 11 January 2017, page 2 of 3 of the ASIC eComplaint that group believed [Mr Richardson] and Ahmad Basalamah or [Mr Richardson], [Mr Boratav] and Ahmad Basalamah owned PT Baltec.
Peter John Bowd's claim is incorrect as he did not understand PT Baltec is a subsidiary company with Baltec IES owning 80% and Ahmad Basalamah owning 20%.
On page 3 of 3 of the ASIC eComplaint Peter John Bowd states that the PT Baltec business has not been audited for over 2 years. The audited financial statements for the year ended 31 December 2015 can be obtained from Allan Fink. The audited financial statements for the year ended 31 December 2016 are expected to be received on 10 February 2017.
Peter John Bowd's claim that the PT Baltec accounts have not been audited is incorrect.
(Emphasis in the original.)
107 Counsel for Mr Bowd submitted that this document should not be admitted into evidence pursuant to s 135 of the Evidence Act 1995 (Cth), which is in the following terms:
The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:
(a) be unfairly prejudicial to a party; or
(b) be misleading or confusing; or
(c) cause or result in undue waste of time.
108 The submission was that, as the reasoning in the report was somewhat thin, its probative value was substantially outweighed by the prejudice arising from the fact that its authors had not been called to give evidence, thus denying Mr Bowd the opportunity to test the accuracy of its contents. In circumstances where counsel for Mr Bowd put on the record that he did not seek to attack EG's auditors, I reject that submission. In my view, the document is admissible as a business record and its contents potentially received as evidence of their truth. It was always open to Mr Bowd to call the auditors himself. Nonetheless, I agree that the reasoning is not detailed. Moreover, I do not consider that I need be troubled by the possible accuracy or reliability of the report. Whether there were in fact expense irregularities at Baltec is not an issue which I can decide. The evidence before me fell short of what I would need to adjudicate that issue. Rather, I have received the report as evidence of what was reported to the board in February 2017. In that respect, I infer that the board accepted that the contents of the report were true.
109 On 9 February 2017, Mr Bowd also obtained a third medical certificate for the period 7 to 26 February 2017. Once again the certificate contained no explanation for why Mr Bowd was unfit to work. The necessity of the certificate was also unclear to me as Mr Bowd was suspended from work during this period. Over this period, Mr Bowd nonetheless analysed data on the hard drive taken from EG, and kept looking for evidence that might support the claims he had made to ASIC and the police.
110 On 14 February 2017, solicitors for EG responded to the letter sent to Mr Cartney by Mr Bowd's solicitors. The letter stated that the accuracy of the facts recited in Mr Bowd's letter was disputed. It recorded denials that there had been any breach of s 340 of the FW Act or the whistleblower provisions of the CA. Enclosed with the letter was an annexure entitled "Summary of allegations" against Mr Bowd. There were six pages of these. A good many were not raised before me. Counsel for Mr Bowd contended that they represented an attempt by EG to trawl through Mr Bowd's time at that company to find reasons for his dismissal. Each of Mr Richardson, Ms Richardson and Mr Cartney denied that contention in cross-examination. In any event, on 23 February 2017, the solicitors for Mr Bowd sent EG a response addressing the allegations.