Amponsem v Laundy (Exhibition) Pty Ltd
[2014] FCCA 2206
•25 September 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| AMPONSEM v LAUNDY (EXHIBITION) PTY LTD | [2014] FCCA 2206 |
| Catchwords: EMPLOYMENT LAW – Contract of employment – whether employee’s duties as head chef included a duty to acquire chicken schnitzels (Product) for use in employer’s restaurant of which the employee was head chef – whether contract of employment was subject to an express or implied term that the employee must serve the employer with fidelity – whether in undertaking the duty to acquire the Product the employee was under a contractual or fiduciary duty to undertake that task for the benefit of the employer and not to place himself in a position where the employee’s interests or the employee’s duty to others would conflict with the employee’s duty to the employer – whether the employee disclosed to his employer that the Product the employee had ordered for the employer and which had been supplied by two intermediary businesses was acquired by the employee for a price less than the price the intermediary businesses supplied the Product to the employer and that one of the intermediary businesses was a business that was owned by the employee’s wife – whether the employee delivered to the employer less Product than was paid for by the employer – whether the employee did so in breach of his contractual duty of fidelity or fiduciary duties – whether employer suffered loss or damage as a consequence of the employee’s breach of duty. EMPLOYMENT LAW – Contract of employment – whether the contract contained a term to the effect that the employee would be paid a bonus – whether the preconditions for paying a bonus came into being. INDUSTRIAL LAW – Whether claim for compensation for breach of contract or breach of equitable obligation by employee can be set-off against an employee’s claim for unpaid accrued annual leave – whether an order against an employee for payment of compensation to the employer for breach of contract or fiduciary duty can be set-off against an order that the employer pay the employee accrued annual leave. |
| Legislation: Civil Procedure Act 2005 (NSW), s.21 |
| Australian Beverage Distributors v Evans and Tate Premium Wines Pty Ltd [2006] NSWSC 560 Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 Bishop v Bishop [2003] FamCA 240 Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 Concut Pty Ltd v Worrell & Anor (2000) 75 ALJR 312 Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41 Houghton v Arms (2006) 225 CLR 553 Re Wakim; Ex parte McNally (1999) 198 CLR 511 |
| Applicant: | KOBINA AMPONSEM |
| Respondent: | LAUNDY (EXHIBITION) PTY LTD |
| File Number: | SYG 261 of 2012 |
| Judgment of: | Judge Manousaridis |
| Hearing dates: | 4, 5, 11 and 12 February 2014; 11 March 2014 |
| Date of Last Submission: | 22 August 2014 |
| Delivered at: | Sydney |
| Delivered on: | 25 September 2014 |
REPRESENTATION
| Applicant in person. |
| Counsel for the Respondent: | Mr Cross |
| Solicitors for the Respondent: | Mr P. Ryan Australian Hotels Association (NSW) |
ORDERS
The applicant pay to the respondent equitable compensation in the sum of $72,838.60.
If either the applicant or respondent wishes to apply for a costs order, the applicant or the respondent must do so by filing and serving by 9 October 2014 an application in a case together with any supporting affidavits.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 261 of 2012
| KOBINA AMPONSEM |
Applicant
And
| LAUNDY (EXHIBITION) PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, Mr Amponsem, was employed by the respondent (Laundy) as the head chef of the restaurant Laundy operated at the North Wollongong Hotel (Hotel). Mr Amponsem was employed as head chef until 4 March 2011 when Laundy summarily dismissed him.
At the time he was dismissed, Mr Amponsem had accrued annual leave of $11,305. Laundy did not, however, pay Mr Amponsem this amount. It did not because Laundy believed Mr Amponsem dishonestly caused Laundy to suffer financial loss. Laundy withheld the money it acknowledges it owes Mr Amponsem to, in effect, recoup some of the losses it believed Mr Amponsem inflicted on Laundy.
On 6 February 2012 Mr Amponsem commenced proceedings in this Court under the Fair Work Act 2009 (Cth) (FW Act) to recover his unpaid accrued annual leave of $11,305. By an amended application, Mr Amponsem also seeks to recover the amount of $7,500. This represents a bonus Mr Amponsem claims is owing to him under a term of his contract of employment.
In its response, as it currently stands, Laundy denies it owes Mr Amponsem any bonus, but admits it owes Mr Amponsem unpaid annual leave of $11,305. It opposes, however, the Court making an order requiring it to pay $11,305 to Mr Amponsem. Instead, Laundy seeks “an order by way of a cross claim” that Mr Amponsem pay Laundy $128,272. This is the difference between the amount Laundy claims in a cross-claim it has filed in these proceedings, namely, $139,577, and the $11,305 accrued annual leave Laundy acknowledges it owes Mr Amponsem.
The $139,577 Laundy claims in its cross-claim represents the loss Laundy says it suffered as a result of Mr Amponsem breaching the contractual duty of fidelity, and fiduciary duties he owed Laundy. Laundy alleges Mr Amponsem breached these duties in three ways. First, Mr Amponsem arranged for Laundy to purchase chicken schnitzels initially from a business known as “The Educated Palate” and then from a business known as “K & S Goods” for between $2.80 and $2.90 per schnitzel without disclosing to Laundy that Mr Amponsem arranged to purchase the schnitzels The Educated Palate and K & S Goods supplied to Laundy from another supplier for between $1.80 and $1.90 per schnitzel, and also without disclosing that Mr Amponsem and his wife owned the K & S Goods business (non-disclosure claim). Second, Mr Amponsem provided to Laundy for payment, and Laundy paid, invoices issued by The Educated Palate and K & S Goods for $20,622 worth of schnitzels The Educated Palate and K & S Goods did not in fact deliver to Laundy (schnitzel non-delivery claim). And third, Mr Amponsem arranged for Laundy to pay at least $5,910 for quiches Mr Amponsem knew were not acquired by Laundy (quiche non-delivery claim).
Although Laundy does not use the expression “set-off” in its response or cross-claim, Laundy in substance asserts a right of set-off. That is, Laundy asserts it is entitled to set-off against the debt it accepts it owes Mr Amponsem so much of the amount Laundy claims in its cross-claim Mr Amponsem owes it as is necessary to discharge the debt Laundy owes Mr Amponsem.
In his reply to Laundy’s cross-claim, as it was initially framed, Mr Amponsem states there is no provision in the FW Act that permits an employer to withhold an employee’s entitlement under s.90(2) of the FW Act[1] and that, therefore, Laundy is not entitled to withhold his annual leave entitlements. Mr Amponsem also denies Laundy is entitled to an order requiring Mr Amponsem to pay the amount claimed in the cross-claim.
[1] Which provides: “If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.”
My reasons are arranged as follows. First, I consider whether the Court has jurisdiction to determine Laundy’s claims for breach of duty. Second, I set out the undisputed facts relevant to Laundy’s claims and, where there is a dispute, the conflicting evidence in relation to those disputed facts and my findings. As will be seen, most of the basic facts are not in dispute. Third, I identify the issues that arise on Laundy’s cross-claim and then deal with each of them. Fourth, I consider Mr Amponsem’s claim for a bonus. Finally, I consider whether, because of its cross-claim, Laundy was entitled not to pay Mr Amponsem the accrued annual leave and, if it was not entitled, whether the Court has power to make an order setting-off of any claim the Court may find Laundy has on its cross-claim.
Jurisdiction
This Court does not have jurisdiction to deal with a claim for damages for breach of an employment contract, or a claim for equitable compensation for breach of fiduciary duty; not unless such claims form part of a single “matter” – that is, a single justiciable controversy – which includes claims over which the Court does have jurisdiction. That is so because jurisdiction “conferred on a Federal Court in respect of a matter authorises the Court to determine all the claims, federal and non-federal, which are involved in the controversy”.[2] A federal court’s purpose of exercising jurisdiction over non-federal claims in such circumstances “is to enable the Court to deal with a single justiciable controversy”.[3] This, however: [4]
. . . does not mean a single justiciable issue. . . . [T]here may be many issues but one broad controversy. . . . . The reason why the jurisdiction is exercised is to enable the real issues to be determined between the parties, the underlying purpose being to do justice between them.
[2] Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572 at [85] (French J, as his Honour then was). I acknowledge here my indebtedness to Mr Leeming (as his Honour then was) for the identification and discussion in Chapter 4 of his book Authority to Decide (Federation Press, 2012) of the authorities I consider in this section of my reasons for judgment.
[3] Bishop v Bishop [2003] FamCA 240 at [37]
[4] Bishop v Bishop [2003] FamCA 240 at [37]
In Re Wakim; Ex parte McNally, Gummow and Hayne JJ identified when two claims, one federal, and the other non-federal, will be held to constitute part of a single matter:[5]
There is but a single matter if different claims arise out of “common transactions and facts” or “a common substratum of facts”, notwithstanding that the facts upon which the claims depend “do not wholly coincide”. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are “completely disparate”, “completely separate and distinct” or “distinct and unrelated” are not part of the same matter.
[5] (1999) 198 CLR 511 at [140] (Gleeson CJ and Gaudron J agreeing ([25] and [26]))
That a federal claim is determined adversely to an applicant does not deprive a federal court of jurisdiction to deal with the non-federal claims:[6]
They are all part of the federal jurisdiction conferred upon the Court. Nor does it matter to the scope of that jurisdiction whether the federal claim is defeated on a question of law or fact.
[6] Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572 at [85] (French J, as his Honour then was).
The jurisdiction of a federal court to determine as part of the one justiciable controversy a non-federal claim has often been referred to as the court’s “accrued jurisdiction”. Allsop J (as his Honour then was), writing extra judicially, said the expression “accrued jurisdiction” is “probably a term best avoided”.[7] The High Court,[8] however, has stated there is no harm in the continued use of the term:[9]
provided it be borne in mind that, whilst there might be several claims made in litigation, there was but one “matter”, and that jurisdiction conferred with respect to that matter is not “discretionary” and ordinarily is to be exercised by the court concerned.
[7] J Allsop, “Federal Jurisdiction and the Jurisdiction of the Federal Court of Australia in 2002” (2002) 23 Aus Bar Rev 29 at 27
[8] Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at [52]. The passage was referred to with approval by the High Court in Houghton v Arms (2006) 225 CLR 553 at [27].
[9] Houghton v Arms (2006) 225 CLR 553 at [27]
This Court has jurisdiction to entertain Mr Amponsem’s claim for payment of accrued annual leave. Mr Amponsem’s entitlement to accrued annual leave is conferred by s.87 of the FW Act. Section 90(2) of the FW Act requires an employer to pay an employee when the employment ends the amount of accrued annual leave. The right to annual leave and the obligation to pay accrued leave when the employment ends are among the “National Employment Standards” (NES) provided for by the FW Act. Section 44 of the FW Act provides that an employer must not contravene a provision of the NES. Under s.539(1) of the FW Act, s.44 is a “civil remedy provision”. That means that an employer who contravenes s.44 is liable to an order under s.545 of the FW Act, including an order awarding compensation for loss that a person has suffered because of the contravention. This Court has jurisdiction to make such an order under s.545 of the FW Act. And it is under that section that Mr Amponsem has brought his claim for the recovery of his unpaid annual leave.
The only ground on which Laundy disputes Mr Amponsem’s claim for unpaid accrued annual leave is that it has a cross-claim for an amount that exceeds Mr Amponsem’s claim, and that, in effect, it is entitled to set-off part of that claim against the amount of accrued annual leave it owes Mr Amponsem. In my opinion, however, in order to determine Mr Amponsem’s claim for relief in relation to the non-payment to him of accrued annual leave, it is necessary at the very least to consider and determine whether Laundy was entitled or is now entitled not to pay Mr Amponsem his accrued annual leave of $11,305 because it has a cross-claim against Mr Amponsem for an amount that exceeds the amount of Mr Amponsem’s accrued annual leave. Once the necessity for determining that question is established, all issues that arise in relation to the cross-claim form part of the single justiciable controversy of whether Laundy is liable to pay to Mr Amponsem the unpaid accrued annual leave. In my opinion, therefore, the Court has jurisdiction to determine Laundy’s cross-claim, and whether or not Laundy was entitled not to pay Mr Amponsem his accrued annual leave.
Before I leave the topic of jurisdiction, I should refer to Laundy’s counsel’s submission. Counsel submitted the Court has jurisdiction to determine Laundy’s claims under s.18 of the Federal Circuit Court of Australia Act1999 (Cth) (FCCA Act). That section provides:
To the extent that the Constitution permits, jurisdiction is conferred on the Federal Circuit Court of Australia in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Federal Circuit Court of Australia is invoked.
The “associated jurisdiction” to which s.18 is directed is different from the jurisdiction over non-federal claims that a federal court has when such claims form part of one justiciable controversy that includes a federal claim over which the court does have jurisdiction. This point was made by Allsop J (as his Honour was) in relation to s.32 of the Federal Court of Australia Act 1976 (Cth), a provision almost identical to s.18 of the FCCA Act:[10]
The only High Court authority is to the effect (conformably with the words of s 32) that s 32 of the FCA Act deals with separate and distinct matters. It is not what is sometimes called “accrued” jurisdiction. This latter expression may be better expressed as the limit of the matter or controversy. Associated jurisdiction under s 32 is the conferral of jurisdiction in another, different, federal matter, in respect of which jurisdiction could be, but has not been, conferred. The word “associated” is not a synonym for “accrued”.
[10] Macteldir Pty Ltd v Dimovski (2005) 226 ALR 773 at [67]
A claim for damages for breach of contract and a claim for equitable compensation for breach of fiduciary duty are not federal matters in respect of which jurisdiction could be, but has not been, conferred. Therefore, they cannot be “associated” matters within the meaning of s.18 of the FCCA Act, and that section cannot confer jurisdiction on this Court to determine such claims.
Having concluded this Court has jurisdiction to determine Laundy’s claims for compensation based on breach of contract and fiduciary duty, it is time to turn to the facts.
Facts
Laundy is a member of the Laundy Hotels Group of companies. It operates and employs staff at the Hotel.[11] It also operates one other venue in the group, the Jamison.[12]
[11] 22.06.12 Poulos affidavit, [1], [3]
[12] 01.08.13 Poulos affidavit, [5]
Mr Amponsem commences employment with Laundy
On or about 7 March 2008 Mr Amponsem commenced employment with Laundy as head chef of the Hotel. He did so on a casual basis.[13] At around the time he commenced his employment, Mr Amponsem and Laundy signed a letter dated 7 March 2008 from Laundy to Mr Amponsem (first employment letter).[14] The letter was signed on behalf of Laundy by Mr Poulos, who was then the regional executive chef for the Laundy Hotels Group.
[13] 22.06.12 Poulos affidavit, [8]
[14] 22.06.12 Poulos affidavit, [8], annexure “A”
The first employment letter named Laundy as the employer, and contained the following clause:
You will comply with such directions of the Employer as set out in any of its written policies and procedures, including the Laundy Hotel Employee Behaviour Standards Manual, as notified and varied by the Employer from time to time. You will take the time to read such policies and re-acquaint yourself with those policies (and their variations) from time to time.
According to Mr Poulos, at the time he provided to Mr Amponsem the first employment letter, he also provided to him a copy of the Laundy Employee Behaviour Standards Manual.[15] The manual contained the following clause:[16]
[15] 22.06.12 Poulos affidavit, [9]; annexure “B”
[16] 22.06.12 Poulos affidavit, annexure “B”
Duty of Fidelity
As an employee, you owe a duty of good faith and fidelity to the company. This duty imposes an obligation on you to always act in the best interests of the company. You must not engage in conduct which:
1.Involves conflict between your personal interest and your duty as an employee of the company.
2.Impedes the faithful performance of your obligation as an employee of the company.
3.Is destructive of the confidence between you and the company.
The last page of the Laundy Employee Behaviour Standards Manual provided for an employee to acknowledge by signing the page that the employee had received and read the Laundy Employee Behaviour Standards Manual, that the employee understood the standards of behaviour required by Laundy Hotels “as set out in the Laundy Hotels Behaviour Standards booklet”, and that those standards formed part of the person’s conditions of employment.[17]
[17] 22.06.12 Poulos affidavit, annexure “B”
Mr Amponsem did not sign the acknowledgment contained in the Laundy Employee Behaviour Standards Manual. Mr Amponsem says he did not sign because he did not receive a copy of the Laundy Employee Behaviour Standards Manual.
According to Mr Poulos, three weeks after Mr Amponsem commenced work, and after Mr Poulos was satisfied with Mr Amponsem’s performance, Mr Poulos offered Mr Amponsem full time employment.[18] Mr Poulos provided to Mr Amponsem a letter dated 5 March 2008 (sic) (second employment letter) in which Mr Poulos offered Mr Amponsem the “permanent position of lead cook” at the Hotel.[19] Mr Amponsem did not dispute this part of Mr Poulos’s evidence in any affidavit he has filed, and accepted in cross-examination that he was provided with the letter and that he read it and understood its terms.[20]
[18] 22.06.12 Poulos affidavit, [10]
[19] 22.06.12 Poulos affidavit, [10]; annexure “C”
[20] 11.02.14, T253.20-T253.35
The second employment letter contained the following term:[21]
[21] 22.06.12 Poulos affidavit, [10], annexure “C”
DUTIES AND RESPONSIBILITIES
You shall faithfully and diligently serve the company and carry out the duties and responsibilities of your position, as defined in your job description, and any such other duties as directed by management. You shall also be subject to compliance with all guidelines as set forth in the Laundy Hotels Staff Behaviour Standards Manual.
The second employment letter that is in evidence is not signed by anyone. It was drafted to be signed by Mr Poulos as “Regional Executive Chef Laundy Hotels Pty Ltd”. As there is no dispute between the parties that Mr Amponsem was employed by Laundy, I will assume that the second employment letter was written by Mr Poulos on behalf of Laundy, that Laundy and Mr Amponsem assented to Mr Amponsem being employed as head chef on the terms contained in the second employment letter, and that Laundy and Mr Amponsem manifested their assent by Mr Amponsem continuing the work of a head chef that he commenced three weeks before, and by Laundy continuing to engage Mr Amponsem to undertake that work.
On or about 7 December 2009, “Laundy Hotels” provided a letter dated 7 December 2009 to Mr Amponsem which sets out terms and conditions of employment (third employment letter).[22] It contained the same term as that set out in paragraph 26 of these reasons. In addition, it contained the following term:
You will also be on a 6 monthly Bonus of $2500 as long as you met [sic] your projected net profit which will be set by George Poulos and Arthur Laundy every 6 months.
[22] 06.07.12 Amponsem affidavit, annexure “C”; 01.03.13 Poulos affidavit, [12]
Mr Amponsem’s responsibilities as head chef
According to Mr Poulos, Mr Amponsem’s role as head chef was to oversee the day to day operations of the bistro and kitchen, to ensure that suitable stock was ordered, and to ensure that the bistro could operate and handle orders placed by patrons for food.[23] This description is consistent with the information Mr Amponsem included in the application which he filed with the Court on 6 February 2012. Mr Amponsem there stated that, as head chef, he cooked food for customers and performed all management duties, including ordering. In evidence given under cross-examination, Mr Amponsem accepted he was “the boss of the kitchen”,[24] that one of his duties was ordering,[25] that he was responsible for ensuring there was an appropriate level of stock,[26] and that, as head chef, he was ultimately responsible for checking that the appropriate goods were delivered.[27] Mr Amponsem also accepted it was one of his responsibilities that he would do his best to make sure that he ran the kitchen at a profit.[28]
[23] 22.06.12 Poulos affidavit, [11]
[24] 11.02.14, T232.10
[25] 11.02.14, T232.20-T232.25
[26] 11.02.14, T232.35
[27] 11.02.14, T233.25
[28] 11.02.14, T237.5-T237.10
Schnitzel is supplied by The Educated Palate
According to Mr Poulos, in early March 2009, while Mr Poulos was in a meeting with Mr Craig Laundy and Mr Molloy, Mr Amponsem approached the meeting and said he had another sample of chicken schnitzel and asked “would you like to try it”. Mr Poulos said he would. Mr Amponsem then cooked a sample and gave it to Mr Poulos and the others. Mr Poulos considered it to be a good product and considered he might introduce it across the Laundy Hotels Group.[29]
[29] 22.06.12 Poulos affidavit, [12], [13]
Mr Amponsem does not dispute he had a conversation with Mr Poulos to the effect deposed by Mr Poulos, or that he cooked a sample schnitzel for Mr Poulos. Mr Amponsem says, however, that this occurred after Mr Amponsem informed Mr Poulos there were problems with the usual supplier to the Hotel and that, in response, Mr Poulos directed Mr Amponsem to “find someone else to supply us”. Mr Amponsem contacted South Coast Chicken Fillets and Smallgoods (SCCF) and obtained a sample of chicken schnitzel from that supplier. Mr Poulos contacted Mr Amponsem the day before Mr Amponsem cooked the sample and said to Mr Amponsem that “I will be coming down tomorrow, can you get me a sample of that chicken”.[30]
[30] 06.07.12 Amponsem affidavit, [2]
There is no inconsistency between the evidence of Mr Poulos and Mr Amponsem. I find therefore that the events described by both Mr Poulos and Mr Amponsem occurred.
That Mr Amponsem contacted SCCF is confirmed by evidence given by the proprietor of SCCF, Mr Sonnleitner. According to Mr Sonnleitner, in or about February 2009 he had a conversation with Mr Amponsem at the shop outlet section of the building from which SCCF conducted business. Mr Amponsem said he worked at the Hotel and was looking for a better product than what he was then using.[31] Mr Sonnleitner said that for the first thirty days of trading, SCCF would require cash on delivery, but after the thirty days, Mr Amponsem would be at liberty to submit a credit application.[32]
[31] 01.08.13 Sonnleitner affidavit, [3]
[32] 05.02.14, T136.20
According to Mr Poulos, approximately two weeks later, he had a conversation with Mr Amponsem to the following effect: [33]
Kobina said: “George, that schnitzel supplier will only supply the Hotel through my in-laws café, the Educated Palate.”
I said:“Why is that?”
Kobina said: “Because he does not want to take on any new business. He is going through a divorce and does not want any new business until the divorce is sorted out.”
I said:“Ok, as long as the price is the same as we are currently paying $2.80 per schnitzel, but I don’t want this arrangement to go for too long.”
[33] 22.06.12 Poulos affidavit, [14]
Mr Amponsem responded to this part of the evidence of Mr Poulos in paragraph 2 of an affidavit Mr Amponsem made on 6 July 2012.[34] In that paragraph, Mr Amponsem says:
[34] Although Mr Amponsem was not legally represented, this affidavit was prepared with the assistance of a legal practitioner.
In relation to paragraph 14, I deny that I said “Because he does not want to take on any new business. He is going through a divorce . . .”. What I said to Mr Poulos was,
“Because [he or it] wants cash on delivery”.
He said. “We won’t do that”.
I said, “Well if you are not going to do cash on delivery I can probably get my in-laws to order it through their business.”
The only part of Mr Poulos’s account of the conversation Mr Amponsem denies is the part I have underlined in paragraph 34 of these reasons. Mr Amponsem’s account assumes he told Mr Poulos words to the effect: “George, that schnitzel supplier will only supply the Hotel through my in-laws café, the Educated Palate.” That is so because that which Mr Amponsem deposes he told Mr Poulos begins with the word “because”, which implies is an answer to the question “Why is that?” which Mr Poulos says he asked.
Mr Amponsem’s account is nonsensical. It assumes the conversation began with his stating to Mr Poulos that the schnitzel supplier will only supply the Hotel through The Educated Palate. Yet, on his account, Mr Amponsem says he suggested to Mr Poulos that the schnitzels be ordered through The Educated Palate only after Mr Poulos said that Laundy would not pay cash on delivery.
Mr Amponsem has given another account of his conversation with Mr Poulos. That account is contained in a draft affidavit Mr Amponsem affirmed on the fourth day of the hearing, and in the middle of his cross-examination. That account is as follows:[35]
Mr Amponsem: George the schnitzel supplier is only going to do it on cash on delivery.
Mr Poulos:We don’t do cash on delivery, is there any other way that you can get it?
Mr Amponsem: I can get it through my in-laws for you.
Mr Poulos:That is ok as long as we are paying the same price as we are paying now.
[35] Exhibit 2, [4], [5], [6]. The affidavit was prepared and affirmed by Mr Amponsem pursuant to leave I gave at the end of the third day of the hearing. I gave that leave because Mr Amponsem, not in response to any question from the cross-examiner, gave what appeared to be an account of a conversation he had with Mr Poulos which did not appear to have been included in any affidavit Mr Amponsem filed. Mr Amponsem said the conversation was relevant to explain why he did not inform Mr Poulos about the price at which he acquired the schnitzels from SCCF.
I prefer and accept Mr Poulos’s account of the conversation over the accounts Mr Amponsem has given. First, Mr Amponsem has given two versions of the conversation. That by itself casts significant doubt on both versions he has given. Second, the first version was nonsensical, for the reasons I have given, and Mr Amponsem gave the second account in the course of his cross-examination when his evidence is likely to have been influenced by the course of his cross-examination. Third, in the meeting of 1 March 2011 to which I refer below, Mr Amponsem said that “K & S are in partnership with my in laws and when the partners divorced they wouldn’t supply us as they got it through my in-laws”.[36] Although it is not entirely clear what Mr Amponsem intended to say by these words, he did there refer to a divorce, just as he did on Mr Poulos’s account of the conversation to which I refer in paragraph 34 above. Fourth, Mr Poulos’s account, if accepted, explains the events that occurred after the conversation. As will be seen, after the conversation, schnitzels were supplied to Laundy through The Educated Palate up to around 31 August 2009; but after August 2009, schnitzels were supplied to Laundy through K & S Goods. Mr Poulos’s account of the conversation explains this change because, according to his account, the arrangement under which The Educated Palate would supply the schnitzels was intended to be for a limited time, namely, until the supplier completed his divorce proceedings. On the other hand, Mr Amponsem’s account does not explain the subsequent change of the business through which the schnitzels were supplied. On Mr Amponsem’s account, Mr Poulos simply agreed that schnitzels would be supplied through The Educated Palate.
[36] 22.06.12 Poulos affidavit, [31]
Although I prefer Mr Poulos’s account of the conversation, nothing turns on whose account is correct. There is nothing in the two accounts Mr Amponsem has given that suggests he told Mr Poulos that The Educated Palate would be charging Laundy a mark-up on the prices at which The Educated Palate would acquire the schnitzels from the supplier. On the contrary, in the draft affidavit he affirmed during the hearing, Mr Amponsem stated that The Educated Palate acquired the schnitzels for cash and on-supplied them to Laundy as a favour to Laundy, and that Mr Amponsem’s in-laws ceased to acquire the schnitzels after their accountant advised them that “this would greatly affect their business records and amount of tax they would have to pay”.[37]
[37] Exhibit 2, [8]
From 14 May 2009 to 21 August 2009 The Educated Palate supplied chicken schnitzels to the Hotel. There is in evidence a copy of all the invoices issued by The Educated Palate to Laundy, which total thirty in number.[38] The amounts claimed in all but four invoices (being invoices numbered 27, 28, 29 and 30) were paid into a bank account in the name of “The Educated Palate” with Australia and New Zealand Banking Group Limited (The Educated Palate bank account). Each of the payments to The Educated Palate was recorded in The Educated Palate bank account as “TRANSFER FROM NTH WOLLONGONG”.[39] The amounts claimed in invoices numbered 27, 28, 29, and 30 were paid into a Commonwealth Bank of Australia account in the name of “K and S Goods TA Samantha Amponsem” (K & S Goods account).[40] The payments were recorded in the K & S Goods account as “NTH WOLLONGONG NTHGONG”.[41] After 21 August 2009, K & S Goods supplied the chicken schnitzels to the Hotel.
[38] Exhibit PJR-2, Volume 1, tab 1
[39] Exhibit PJR-2, Volume 2, tab 9, page 3
[40] Exhibit PJR-1, tab 2
[41] Exhibit PJR-1, tab 2, page 1
Commencement of supply of schnitzels by K & S Goods
There is in evidence two accounts given by Mr Poulos of the circumstances in which the chicken schnitzels came to be supplied to the Hotel by K & S Goods. One is that given by Mr Poulos in his affidavit of 22 June 2012. According to that version, between May 2009 and August 2009 Mr Poulos had a number of conversations with Mr Amponsem in which he asked by when the Hotel would be acquiring the chicken schnitzels directly from the supplier. Mr Amponsem answered that this would occur “soon”, and that he “will ring them”.[42] In or about late August 2009 Mr Amponsem informed Mr Poulos that “the schnitzels are being ordered directly from the supplier, K & S Goods”.[43]
[42] 22.06.12 Poulos affidavit, [17]
[43] 22.06.12 Poulos affidavit, [18]
The second version is that given by Mr Poulos in a police statement dated 20 February 2012.[44] In that statement, Mr Poulos said:
Between May of 2009 and August of 2009, on several occasions I approached Kobina AMPONSEM and asked when the schnitzels would be invoiced by the actual supplier. He kept on telling me it was getting close and he was waiting for it to happen.
All of sudden near the end of August Kobina told me that the schnitzels would be invoiced through the company of the actual supplier. He told me the name was K & S Goods and he contacted our accounts people and provided banking details to them for the supply.
[44] 07.02.14 Amponsem affidavit, [2]; annexure “1”, [18], [19]
This account is incorrect, at least to the extent Mr Poulos states that Mr Amponsem contacted Laundy’s accounts people and provided banking details to them for the new supplier. On 31 August 2009 Mr Poulos sent to Trinh Anh Nguyen, a person within the accounts department of Laundy Hotels Group, the following email:[45]
[45] 07.02.14 Amponsem affidavit, annexure “2”
Below are the new bank details for Educated Pallet for chicken Schnitzels’ for North Gong just let me [know] when you pay it.
a/c number – [. . .] bsb – [. . .] ABN [. . .] thanks Boss
Thanks
Regards
Ms Nguyen responded one hour later with an email to Mr Poulos, which she copied to Mr Amponsem, as follows:[46]
Attached is a remittance for The Educated Palate, now K and S Goods. $6160.00 covers the following invoices 27, 28, 29 and 30 (The Educated Palate) and 1 and 2 (K and S Goods). Payment will be in Tuesday 1 Sept 2009.
[46] 07.02.14 Amponsem affidavit, annexure “2”. The transaction of $6,160 is shown as being paid into the K & S Goods Account on 1 September 2009 and is described as NTHGONG27-30 & 1-2: Exhibit PJR-1, tab 2, page 1.
Mr Poulos gave evidence about this email exchange. He was asked in chief what he meant by “the new bank details for Educated Palate”. Mr Poulos answered that, to the best of his knowledge, “I believe they were the new supplier”.[47] As I understand his evidence, Mr Poulos said that “a/c number – [. . .] bsb – [. . .] ABN [. . .] thanks boss” in the email Mr Poulos sent to Ms Nguyen was text that Mr Amponsem had sent to Mr Poulos, and which Mr Poulos on-forwarded to Ms Nguyen.[48] Mr Poulos also said that he did not understand The Educated Palate to be one and the same as K & S Goods.[49]
[47] 11.02.14, T211.5
[48] 11.02.14, T211.15: Q. - “Well, if I look here, below that – that I just read to you, it says, “Account number and BSB” and an ABN number, and then it says, “Thanks boss.” What do the words “Thanks boss” mean?” A - “I’d say they were from Kobi, just forwarding information to me, and then thanking me at the end. I would have just forwarded the email that I had received from him.”
[49] 11.02.14, T211.25
Mr Amponsem denies he had a conversation or conversations with Mr Poulos in which he asked when the Hotel would be acquiring the schnitzel directly from the supplier. Mr Amponsem does not deny, however, that in or about late August 2009 he informed Mr Poulos that “the schnitzels are being ordered directly from the supplier, K&S Goods”.
There are two questions that arise from this somewhat confusing evidence. The first is whether I should accept Mr Poulos’s evidence that he did not understand The Educated Palate to be one and the same as K & S Goods. The second is whether Mr Poulos made inquiries of Mr Amponsem, as he says, on a number of occasions in and before August 2009 by when the Hotel would be acquiring the chicken schnitzels directly from the supplier.
I am satisfied Mr Poulos did not believe that K & S Goods and The Educated Palate were one and the same. First, the evidence is that The Educated Palate and K & S Goods were names attached to different businesses, operated by different persons. In the conversations to which I refer in paragraphs 34 and 35 of these reasons, Mr Amponsem referred to The Educated Palate as “my in-laws café”, and in the conversation to which I refer in paragraph 38 of these reasons, Mr Amponsem referred simply to getting the schnitzels “through my in-laws”. And in these proceedings, Mr Amponsem has resolutely asserted that K & S Goods is a business operated by his wife, and only by his wife.[50] Second, as I note earlier, Mr Amponsem did not deny Mr Poulos’s evidence that Mr Amponsem informed Mr Poulos in or about August 2009 that “the schnitzels are being ordered directly from the supplier, K & S Goods”.[51]
[50] 06.07.12 Amponsem affidavit, [6] where Mr Amponsem deposed that K & S Goods “is a business operated solely by my wife”.
[51] 22.06.12 Poulos affidavit, [18]
I am also satisfied that Mr Poulos did make enquiries of Mr Amponsem as to when the schnitzels would be supplied by the supplier. If, as I have found, Mr Poulos informed Mr Amponsem that he did not want the arrangement with The Educated Palate to go for very long, it is likely that Mr Poulos did make enquiries about when schnitzels would be supplied directly by the supplier.
In any event, whether or not Mr Poulos believed The Educated Palate and K & S Goods were the same, and whether or not he made enquiries of Mr Amponsem about when the supplier, rather than The Educated Palate would supply the schnitzels, has no bearing on the outcome of this case. Even on Mr Amponsem’s evidence, he did not suggest to Mr Poulos that The Educated Palate or K & S Goods would be adding any mark-up on the prices they would be paying for the chicken schnitzels they were to acquire from the supplier and on-supply to Laundy.
The supply of schnitzels by K & S Goods
The Hotel commenced to acquire schnitzels from K & S Goods on 25 August 2009, and continued to do so until 11 February 2011. Payments were made against invoices issued by K & S Goods.[52] The payments were made into the K & S Goods account and recorded as “NTH WOLLONGONG NTHGONG”.
[52] The invoices are exhibit GJP-2
Mr Amponsem, in his amended response filed on 19 August 2013, admitted he was “involved in the purchasing of the chicken schnitzels”, but he “was not involved in the resale of them”. And there is no doubt that the evidence establishes that Mr Amponsem purchased the schnitzels that were supplied by The Educated Palate and, then, by K&S Goods, to the Hotel. Mr Amponsem did so from SCCF.
First, there is evidence given by Mr Sonnleitner, the proprietor of SCCF, some of which I have already set out above. According to Mr Sonnleitner:
a)Mr Amponsem made his first purchase from SCCF on 13 May 2009.[53] Sometime later Mr Amponsem informed Mr Sonnleitner that SCCF could continue to supply the schnitzels in “Baiada cartons”, but that he required some of the orders to be packaged in SCCF labelled cartons.[54]
b)Mr Amponsem ordered schnitzels either by telephone or at the time he collected a previously ordered batch of schnitzels.[55] Mr Amponsem usually paid by credit card or debit card at the time he collected the schnitzels, but for a small proportion of product Mr Amponsem paid by cash.[56]
c)SCCF issued tax invoices in relation to each batch of product that was collected by Mr Amponsem.[57] Each tax invoice identified the sale to which it related as a “cash sale”.[58]
d)Mr Sonnleitner was able to identify the invoices that were issued to Mr Amponsem because Mr Amponsem was the only person who purchased from SCCF quantities of schnitzel in the amounts that he did on the basis of cash on delivery; and Mr Amponsem was the only person who was offered the price of $1.80 or $1.85 per piece of schnitzel purchased and paid as cash on delivery.[59]
[53] 01.08.13 Sonnleitner affidavit. [6]
[54] 01.08.13 Sonnleitner affidavit, [8]
[55] 01.08.13 Sonnleitner affidavit, [9]
[56] 01.08.13 Sonnleitner affidavit, [11]
[57] 01.08.13 Sonnleitner affidavit, [12], [17], [18], [19]
[58] Exhibit PJR-1, tab 1
[59] Sonnleitner affidavit, [18], [20]
The second class of evidence that Mr Amponsem purchased the chicken schnitzels that The Educated Palate and then K & S Goods supplied to the Hotel are details contained in the merchant receipts that SCCF issued in relation to the sales made to Mr Amponsem by way of credit card.[60] Each merchant receipt contains a transaction number that is also recorded in one of two bank accounts and a credit card account. One of the bank accounts is the K & S Goods account. For example, there is in evidence invoice no.24656 dated 9 September 2009 for the sale of 300 pieces of schnitzel.[61] The merchant receipt for that invoice contains the details “09/09/09 14:45 001898”. The K&S Goods account records “09 Sep STH COSTS CHICKEN\WOLLONGONG NSW\AU 001898”.[62] The second bank account is a Commonwealth Bank of Australia Streamline Account in the name of Mr Amponsem (CBA account).[63] For example, there is in evidence invoice no.23411 dated 13 May 2009 issued by SCCF for the sale of 300 schnitzels for the price of $540.[64] The merchant receipt for the invoice contains the details “13/05/09 11:38 001320”. The CBA account records for 15 May 2009 “STH COAST CHICKEN\WOLLONGONG NSW\AU 001320 540.00”. And the credit card account is a Commonwealth Bank of Australia MasterCard.
[60] Mr Amponsem was entitled to use each of the credit cards: see 11.03.14, T36
[61] Exhibit PJR-1, tab 1, page 17
[62] Exhibit PJR-1, tab 2, page 1
[63] Exhibit PJR-1, tab 4
[64] Exhibit PJR-1, tab 1, page 189
And the third class of evidence that shows that Mr Amponsem purchased the schnitzels from SCCF is the evidence Mr Amponsem gave under cross-examination. Mr Amponsem agreed that he went to SCCF to get schnitzels on behalf of K & S Goods;[65] and that he would purchase those schnitzels from SCCF using the three bank accounts available to Mr Amponsem and his wife.[66]
[65] 11.02.14, T272.15-20
[66] 11.02.14, T272.20
Mr Amponsem also gave evidence that he delivered to the Hotel the schnitzels he had collected from SCCF, and he also delivered to the Hotel the invoices K & S Goods raised in relation to the schnitzels Mr Amponsem delivered to the Hotel:[67]
[67] 11.02.14, T273.25-35
Well, you purchased schnitzels on the K and S Goods account, didn’t you? --- Yes.
. . . .
You delivered schnitzels to the North Wollongong Hotel - - - ? --- Yes.
--- together with invoices from K and S Goods? --- Yes.
So you would turn up in your black four-wheel drive, in the early days, with those schnitzels, with an invoice from K and S Goods, and deliver them to the hotel; correct? --- Yes.
Mr Amponsem later qualified this evidence. Mr Amponsem said he did not deliver the invoices issued by K & S Goods at the same time as he delivered the schnitzels; he delivered the invoices at a later time.[68]
[68] 11.02.14, T274.30
K & S Goods supplies other venues within Laundy Hotels Group
It is not only to the Hotel that Mr Amponsem delivered schnitzels he acquired from SCCF; Mr Amponsem delivered schnitzels to other hotels operated by companies within the Laundy Hotels Group. From approximately the middle of 2010, on the recommendation of Mr Poulos, six other venues within the group acquired schnitzels from K & S Goods. These were the Jamison, the Heritage Hotel, Honeysuckle, Horse and Jockey Hotel, Manly Pacific, Ocean Beach Hotel and Twin Willows Hotel.[69] The invoices K & S Goods issued identified the venue to which the schnitzels were delivered.[70]
[69] 01.08.13 Poulos affidavit, [7]-[12]
[70] 01.08.13 Poulos affidavit, annexures “A”-“F”; and exhibit PJR-2
Supply of quiches through The Educated Palate
According to Mr Poulos, in or about late March 2010, Mr Amponsem telephoned Mr Poulos and said that there had been complaints about the quiches. He said the complaint related to the quality of the quiches, and that the Educated Palate could supply a much better quality quiche for around the same price. Mr Poulos agreed with Mr Amponsem’s proposal, but said that Mr Amponsem should make sure “accounts are settled upon delivery”.[71] Mr Amponsem has not disputed this part of the evidence of Mr Poulos. I therefore find that a conversation to this effect did take place.
[71] 22.06.12 Poulos affidavit, [22]
The Educated Palate commenced to supply quiches to the Hotel on 10 April 2010, and continued to do so until 19 February 2011.[72] In evidence given under cross-examination, Mr Amponsem accepted that he “bought” the quiches, and he “dropped them off” and “authorised payment of their invoices”.[73]
[72] A copy of the invoices is exhibit “B” to the affidavit of Mr Fargher.
[73] 12.02.14, T345.5
Payment for schnitzels
Although The Educated Palate bank account and the K & S Goods account show The Educated Palate and K & S Goods received payments, Laundy itself did not make the payments. The evidence suggests, and I find, that another company in the Laundy Hotels Group paid the invoices. First, there is the email exchange between Mr Poulos and Ms Nguyen of 31 August 2009 to which I refer in paragraphs 44 and 45 of these reasons. I find that Ms Nguyen was a person employed by a company within the Laundy Hotels Group who was responsible for processing payments to suppliers of product to companies within the Laundy Hotels Group. Second, most of the invoices that came to be issued by K & S Goods contained hand writing “ATT TRINH” and, later “ATT MARG”. Mr Amponsem agreed in cross-examination that the handwriting “ATT TRINH” in the K & S Goods invoice dated 8 September 2009 is his.[74] He agreed that similar handwriting on the other K & S Goods invoices is his.[75]
[74] 11.02.14, T274.35-40
[75] 11.02.14, T284.45-T285.10
Who is K & S Goods?
K & S Goods is a business name that was registered on 24 July 2009. The business name holder is Samantha Amponsem.[76] She is the wife of Mr Amponsem.[77] Mr Amponsem has given two accounts of the persons behind K & S Goods.
[76] Exhibit G
[77] 12.02.14, T351.5
Mr Amponsem gave one account at a meeting he attended on 1 March 2011 (to which I refer below) with, among others, Mr Craig Laundy and Mr Poulos. At that meeting, words to the following effect were spoken:[78]
[78] 22.06.12 Poulos affidavit, [31]
Craig said:“ . . . . Run me through K & S Goods.”
Kobina said: “K&S is my in-laws and the quiches are my in-laws also. George is aware of it.”
Craig said:“Aren’t they in separate invoices though?”
Kobina said: “Yes. K&S are in partnership with my in laws and when the partners divorced they wouldn’t supply us as they got it through my in-laws. The quiches come through my café and we get bread through them as well.”
Craig said:“The company K&S, if you do a search, the search is your wife. Are you aware of that? . . . .”
Kobina said: “The reason why my wife’s name is on there is her dad is on a pension and I don’t have anything to do with it. That’s what it is. She is not working and her name is on it for business purposes.”
Mr Amponsem gave another account in his affidavit of 6 July 2012. He said K & S Goods is “a business operated solely by my wife”.[79] He gave similar evidence under cross-examination. Mr Amponsem said that K & S Goods was “my wife’s business”;[80] K & S Goods bought and sold schnitzels;[81] and that when he bought schnitzels from SCCF, and delivered the schnitzels and the invoices to the Hotel, he did that on behalf of K & S Goods.[82]
[79] 06.07.12 Amponsem affidavit, [6]
[80] 11.02.14, T251.40-T251.45
[81] 11.02.14, T271.10-20
[82] 11.02.14, T275.35; T276.5-T276.15
Meeting of 1 March 2011
On or about 19 February 2011, Mr Poulos was informed by the duty manager at the Hotel that Mr Amponsem handed to him an invoice for ten quiches but only five arrived. A few days later, after it was confirmed to Mr Poulos that the balance of the quiches referred to in the invoice had not been delivered, Mr Poulos was informed by another duty manager that the Hotel’s sales records for quiches did not match what had been invoiced, and that there was a large discrepancy. Mr Poulos also directed the duty manager to collate sales records of schnitzels.[83] About two days later, Mr Poulos collected till records of the Hotel for the period 1 May 2009 to 20 February 2011 and compared the schnitzel sales recorded on those records with the number of schnitzels recorded in invoices issued by The Educated Palate and K & S Goods.[84]
[83] 22.06.12 Poulos affidavit, [25]-[28]
[84] 22.06.12 Poulos affidavit, [29]
On 1 March 2011 a meeting was held between Mr Poulos, Mr Laundy, Ms Mahoney and Mr Amponsem. Ms Mahoney was the Laundy Hotels Group’s human resources manager. During the meeting, Mr Amponsem was asked questions about Mr Amponsem’s ordering and receiving of stock, about K & S Goods, and about what Mr Laundy put to Mr Amponsem were various discrepancies between the amount of schnitzels and quiches purchased and sold. Mr Laundy said:[85]
This stinks mate and George has supported you as have I over the years. You are suspended at this stage and I’m out of brass, so I want to know where my money is. I am prepared to give you a 20% buffer. I don’t want to think the worst of you.
[85] 22.06.12 Poulos affidavit, [31]. Mr Amponsem does not deny Mr Poulos’s version of the conversation.
Mr Laundy requested Mr Amponsem to “[g]o away, talk to your family and give me some answers”, and provide Mr Poulos with “your responses”.[86] It was put to Mr Amponsem that he was either incompetent or he was guilty of theft. Just before the meeting ended, Mr Laundy again informed Mr Amponsem that Mr Amponsem was suspended.[87]
[86] 22.06.12 Poulos affidavit, [31]
[87] 22.06.12 Poulos affidavit, [31]. Mr Amponsem does not deny Mr Poulos’s version of the conversation.
According to Mr Poulos, later on the same day, he had a telephone conversation with Mr Amponsem. Mr Amponsem said that he had spoken with his family, and they thought it was an issue with the packaging. Mr Poulos said he had asked Mr Amponsem to come back with “where the schnitzels are” and that “we want our money back or our schnitzels”. Mr Amponsem responded by saying that that was “between you and my family”.[88]
[88] 22.06.12 Poulos affidavit, [32]
Mr Amponsem agrees he had a telephone conversation with Mr Poulos, but denies he had a conversation to the effect deposed by Mr Poulos. According to Mr Amponsem, he said that his family “are going to reduce the price of the schnitzel although they don’t believe they have been short supplied”.[89] Mr Poulos said that he would talk with Mr Laundy and get back to him.[90] Mr Amponsem included in his affidavit further evidence. Mr Amponsem did not, however, rely on this evidence after I informed him that the evidence might be subject to a claim for privilege under s.131 of the Evidence Act 1995 (Cth). Nothing turns on the conflict of evidence between Mr Amponsem and Mr Poulos, and I do not propose to make any finding about it.
[89] 06.07.12 Amponsem affidavit, [7]
[90] 06.07.12 Amponsem affidavit, [7]
By letter dated 7 March 2011, Laundy terminated Mr Amponsem’s employment as from 4 March 2011.[91]
[91] 22.06.12 Poulos affidavit, [34], annexure “H”
Summary of major findings
It will assist in the comprehension of what follows if I pause here to record my major findings of fact.
a)In early 2009 Mr Amponsem informed Mr Poulos there were problems with the supplier of schnitzels. Mr Poulos directed Mr Amponsem to “find someone else to supply us”. Mr Amponsem then contacted SCCF and obtained a sample of schnitzels from SCCF.
b)In March or April 2009, Mr Amponsem informed Mr Poulos that the supplier would only supply the schnitzels through Mr Amponsem’s in-laws’ café, The Educated Palate. Mr Poulos agreed that Mr Amponsem acquire the schnitzels through The Educated Palate provided the price was no more than $2.80 per schnitzel, and provided the arrangement with The Educated Palate did not go for too long.
c)The supplier Mr Amponsem had in mind was SCCF. It was not true, however, that SCCF had indicated to Mr Amponsem that SCCF would supply schnitzels only through The Educated Palate or through any other entity.
d)Commencing on 14 May 2009, and ending on 21 August 2009, chicken schnitzels were supplied to the Hotel by The Educated Palate. The schnitzels were acquired from SCCF, and it was Mr Amponsem who acquired the schnitzels from SCCF and delivered them to the Hotel.
e)In or about late August 2009 Mr Amponsem informed Mr Poulos that “the schnitzels are being ordered directly from the supplier, K & S Goods”.
f)On or about 31 August 2009, Mr Amponsem provided to Mr Poulos, and Mr Poulos provided to the accounts department of the Laundy Hotels Group the bank account details of K & S Goods.
g)From around 25 August 2009 until early 2011 chicken schnitzels were supplied to the Hotel and other hotels within the Laundy Hotels Group by K & S Goods. The schnitzels were acquired from SCCF, and it was Mr Amponsem who arranged to acquire from SCCF and supply to the Hotel the schnitzels.
h)Mr Amponsem acquired the schnitzels from SCCF at a price of between $1.80 and $1.90 per schnitzel, and the schnitzels were invoiced to Laundy, first by The Educated Palate, and then K & S Goods, at the price of between $2.80 and $2.90 per schnitzel. The difference between the price for which The Educated Palate and then K & S Goods delivered the schnitzels to Laundy and the price at which Mr Amponsem acquired the schnitzels from SCCF was never less than one dollar per schnitzel.
Issues arising on Laundy’s claim
Laundy’s claim is set out in the further amended response filed on 2 August 2013 (Laundy’s Claim), and is as follows:
a)Laundy operated the Hotel.
b)At all material times, Mr Amponsem was employed by Laundy as the Hotel’s head chef.
c)It was an express or, in the alternative, an implied term of the contract of employment that Mr Amponsem owed Laundy a duty of fidelity and good faith.
d)Further, the applicant owed Laundy fiduciary duties.
e)In early March 2009 Mr Amponsem encouraged Laundy to change the supplier of chicken schnitzels, and Laundy approved the change of supplier.
f)Between March and May 2009, Mr Amponsem negotiated for the alternate schnitzels to be supplied by SCCF to Mr Amponsem for a price of $1.80.
g)Mr Amponsem did not inform Laundy that the alternate schnitzels could be supplied by SCCF for a price of $1.80 per schnitzel.
h)From 14 May 2009 to 5 March 2011, Mr Amponsem personally purchased chicken schnitzels from SCCF for the price of between $1.80 and $1.90 per schnitzel, and those schnitzels were then supplied to Laundy and “associated entities”.
i)From 14 May 2009 to 5 March 2011 Mr Amponsem sold the schnitzels he had purchased from SCCF to Laundy and associated entities for the price of between $2.80 and $2.90 per schnitzel, and he did that without Laundy’s knowledge or consent.
j)In so doing, Mr Amponsem disguised his involvement in the purchase of the schnitzels delivered by K & S Goods and obtained a profit of $1 per schnitzel for himself, or alternatively, for his wife.
k)Further, Mr Amponsem charged Laundy “and associated entities” for 9,465 more schnitzels than had been purchased from SCCF.
l)Further still, from March 2010 to 5 March 2011 Mr Amponsem sourced quiches to be supplied to Laundy and “associated entities” from The Educated Palate but, during that period, Laundy purchased 324 quiches, yet Laundy sold the equivalent of 111 quiches, and this discrepancy could not be explained by stock on hand or wastage.
m)Mr Amponsem “by fraudulent means” breached his contractual duty of fidelity and his “Fiduciary Duty of Fidelity” by “misusing his position” to:
i)gain a secret profit of $1.00 per schnitzel purchased and supplied to Laundy, or alternatively gain such profit for his wife;
ii)invoice and receive payment from Laundy and associated entities for 9,465 more schnitzels than he provided; and
iii)invoice and receive payment from Laundy for more quiches than he provided.
In his amended response filed on 5 September 2013, Mr Amponsem:
a)agrees that Laundy operated the Hotel and that he was employed by Laundy as the Hotel’s head chef;[92]
[92] Amended Response, [8]
b)denies he had a contractual duty of fidelity because it was not stated in his contract and also because he was not given a copy of the “Employee Behaviour Standards Manual”;[93]
[93] Amended Response, [9]
c)denies that in early March 2009, he encouraged Laundy to change the supplier of chicken schnitzels; he says that he was asked by Mr Poulos to find an alternative supplier;[94]
[94] Amended Response, [10]
d)denies that between March and May 2009, he negotiated for the alternate schnitzels to be supplied by SCCF to him for a price of $1.80; he says that he went to SCCF to see if they could supply the Hotel and at what prices;[95]
[95] Amended Response, [11]
e)denies that he did not inform Laundy that the alternate schnitzels could be supplied by SCCF for a price of $1.80 per schnitzel; he says that he informed Mr Poulos “that they would only supply but on cash basis and [Mr Poulos] said no”;[96]
[96] Amended Response, [12]
f)agrees he purchased the schnitzels, as alleged in paragraph 16 of Laundy’s Claim;[97]
g)denies he disguised his involvement in the purchase of the schnitzels by providing invoices in the trading name of the Educated Palate and K & S Goods to Laundy and obtained a profit of $1 per schnitzel for himself, or in the alternative his wife; he says he did not resell the schnitzels to the Hotel and did not obtain any profit;[98]
h)denies he personally sourced 113,045 schnitzels from SCCF and invoiced Laundy and “associated entities” for 122,510 schnitzels, thereby charging Laundy and “associated entities” for 9,465 schnitzels more than he purchased; he says that he sourced the schnitzels because Mr Poulos asked Mr Amponsem to do that and Mr Poulos provided him with a list of the quantities of schnitzels the other hotels required;[99]
i)denies he encouraged Laundy to change its quiche supplier;[100]
j)agrees he sourced quiches, but only for delivery to the Hotel, not to “associated entities”;[101]
k)denies any discrepancy between the amount of quiches purchased by the Hotel and sold by the Hotel cannot be explained by stock on hand or wastage;[102]
l)denies he gained any secret profit; he says he did not invoice or receive payment from Laundy or associated entities for the extra 9,465 schnitzels; he also denies he received a secret profit in connection with the quiches;[103]
m)says his job description did not include the seeking of suppliers and he did not breach any duty of fidelity and did not gain a secret profit;[104]
n)says that although he was an additional card holder to his wife’s business credit card account, he held such card to help his wife because she was not in a position to collect the schnitzels from SCCF;[105]
o)says he acted “in good faith because I looked for these suppliers in my own time, using my own petrol and my own phone for a job that was not part of my job”, and that “I did not get paid for this extra work and I believe I acted on [sic] good faith for the hotel, trying to get the best product for the patrons”.[106]
[97] Amended Response, [13]
[98] Amended Response, [14]
[99] Amended Response, [15]
[100] Amended Response, [16]
[101] Amended Response, [17]
[102] Amended Response, [18]
[103] Amended Response, [19]
[104] Amended Response, [20]
[105] Amended Response, [21]
[106] Amended Response, [24]
Mr Amponsem did not specifically address in his response the allegation that he owed Laundy a fiduciary duty or an implied contractual duty of fidelity. Given that the existence or non-existence of a fiduciary duty is a question of law, Mr Amponsem’s failure to respond to that allegation cannot be treated as an admission.
From the claims made by Laundy, and Mr Amponsem’s response, the following issues arise:
a)In relation to the non-disclosure claim:
i)Did Mr Amponsem owe Laundy any express or implied contractual duty of fidelity in relation to the purchase of the schnitzels and the quiches? If so, what was the scope of that duty?
ii)Did Mr Amponsem owe Laundy a fiduciary duty in relation to the purchase of the schnitzels and the quiches? If so, what was the scope of that duty?
iii)Did Mr Amponsem inform Laundy that K & S Goods was a business name held by his wife, or that the schnitzels were purchased from SCCF and at a price of between $1.80 to $1.90 per schnitzel?
iv)Did Mr Amponsem breach his duty of fidelity or his fiduciary duty in connection with the supply of schnitzels by K & S Goods to Laundy?
v)If (iv) is answered in the affirmative, what remedies are available to Laundy?
b)In relation to the schnitzel non-delivery claim:
i)Did Mr Amponsem present to Laundy K & S Goods invoices claiming the supply of 9,465 schnitzels more than Mr Amponsem delivered to Laundy?
ii)If (i) is answered in the affirmative, did that occur because of a breach of the duty of fidelity or fiduciary duty?
c)In relation to the quiche non-delivery claim:
i)Did Mr Amponsem present to Laundy invoices for the supply of a greater number of quiches than was delivered to the Hotel?
ii)If so, did that occur because of a breach of the duty of fidelity or fiduciary duty?
The non-disclosure claim
I first turn to the issues that arise in relation to the non-disclosure claim.
Did Mr Amponsem owe a contractual duty of fidelity?
As I note earlier in these reasons, Mr Poulos says he provided to Mr Amponsem the Laundy Employee Behaviour Standards Manual (Manual) at the time he provided Mr Amponsem the first employment letter on or about 7 March 2008. Mr Amponsem denies this. He says he was not provided with a copy of the Manual.
I am not satisfied Mr Amponsem received the Manual. Mr Amponsem signed the first letter of employment, but there is no signature on the Manual. One available inference is that Mr Amponsem was given the letter and was asked to sign it, which he did. As the Manual also contained provision for the employee to sign it, it is reasonable to expect that, if Mr Poulos had with him the Manual he would have also provided the Manual to Mr Amponsem for him to sign, and that Mr Amponsem would have signed it. As Mr Amponsem did not sign the Manual, an available inference is that it was not provided to him.
In my opinion, however, nothing turns on whether Mr Amponsem received the Manual. First, Mr Amponsem agreed he was provided with the three employment letters. Mr Amponsem agreed in cross-examination that he had read the first and second employment letters and that he understood their terms. He agreed he read and understood that part of the first employment letter that stated he would be “subject to compliance with all guidelines set forth in the Laundy Hotels Staff Behaviour Standards Manual” and that, therefore, he was aware of the existence of the Manual. In these circumstances, the terms of the Manual have been incorporated into the contract of employment between Laundy and Mr Amponsem based on the terms of the second letter. Second, the term contained in the second employment letter which I have set out in paragraph 26 of these reasons, namely, that Mr Amponsem would “faithfully and diligently serve the company and carry out the duties and responsibilities of [his] position, as defined in [his] job description and any such other duties as directed by management”, is a duty to act with fidelity. And third, the law implies in every contract of employment a term that is generally referred to as a duty to act with fidelity and good faith.
The nature of this implied term was considered by the High Court in Concut Pty Ltd v Worrell & Anor.[107] The plurality said:[108]
In Pearce v Foster, Lord Esher MR stated it to be a "rule of law" that "where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him". In Blyth Chemicals Ltd v Bushnell, in the course of considering the position of the respondent, who was the manager of the appellant's business, Starke and Evatt JJ said:
"As manager for the appellant, the respondent was in a confidential position. And it is clear that he might be dismissed without notice or compensation if he acted in a manner incompatible with the due and faithful performance of his duty, or inconsistent with the confidential relation between himself and the appellant."
[107] (2000) 75 ALJR 312
[108] At [25] (footnotes omitted)
In the same case, Dixon and McTiernan JJ said:
"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."
The implied term obliging faithful performance has both a positive and a negative aspect. In its positive aspect, the term requires the employee to perform with fidelity the tasks he or she is required to undertake under the employment contract; that is, the employee must perform such tasks for the benefit, and only for the benefit, of the employer. In its negative aspect, the term prohibits the employee from undertaking certain conduct. This includes entering into transactions in which there is a real conflict between the employee’s interests and the interests of his or her employer,[109] and using the employee’s position to make a gain for the employee or for some third person.
[109] See, for example, Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at pages 81-82, quoted in the passage set out in paragraph 81 of these reasons.
The scope of the implied term in any given case depends on the tasks the employee has been expressly or impliedly engaged to perform under the employment contract.
In my opinion, Mr Amponsem owed a duty of fidelity to Laundy. That duty was owed either under the term contained in the second employment letter, or by incorporation of the Manual that contained such term, or under the implied term. The activities in relation to which he owed that duty included those which he undertook in response to Mr Poulos’s request that Mr Amponsem “find someone else to supply us” with schnitzels.
Given Mr Amponsem was requested to obtain schnitzels for Laundy, and that he acted on that request, Mr Amponsem came under a duty to undertake that task with fidelity to Laundy; that is, for the benefit, and only for the benefit of Laundy. The duty obliged Mr Amponsem to acquire the schnitzels from SCCF for Laundy, not for anyone else. The duty prohibited Mr Amponsem from purchasing the schnitzels from SCCF and selling them to Laundy on behalf of himself or his wife or anyone else at a profit to himself or his wife or anyone else, without first fully disclosing to Laundy that he was undertaking such activity. This duty arose and remained, even though the schnitzels were supplied initially through The Educated Palate, a business conducted by Mr Amponsem’s in-laws. The duty continued after the schnitzels were supplied through K & S Goods, whether or not Mr Poulos was aware of the existence of K & S Goods or, if he was aware, whether or not Mr Poulos believed K & S Goods was one and the same as The Educated Palate.
Whether or not Mr Amponsem, as he claims, purchased the schnitzels from SCCF on behalf of K & S Goods or his wife, rather than on his own account, and sold the schnitzels on behalf of K & S Goods or his wife, rather than on his own account, has no bearing on whether Mr Amponsem owed Laundy a duty to acquire the schnitzels for Laundy.
Did Mr Amponsem owe a fiduciary duty to Laundy?
Persons (fiduciaries) who undertake to act in the interests of another (principal) are subjected to a number of proscriptive duties - fiduciary duties - which are designed to ensure that the fiduciary performs his undertaking with fidelity.[110]
[110] “In this country, fiduciary obligations arise because a person has come under an obligation to act in another’s interests”: Breen v Williams (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ quoted with approval in the joint judgment of the Court in Pilmer v The Duke Group Ltd (2001) 207 CLR 165 at 198 ([74]).
The circumstances in which and the reasons for which the law imposes duties on fiduciaries were stated by Mason J (as his Honour then was) in Hospital Products Ltd v United States Surgical Corporation & Ors:[111]
The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations . . . viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions “for”, “on behalf of”, and “in the interests of” signify that the fiduciary acts in a “representative” character in the exercise of his responsibility . . .
[111] (1984) 156 CLR 41 at 96-97
A fiduciary is subject to two obligations. The first is that the fiduciary cannot, without the informed consent of the principal, promote his or her personal interests by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between the personal interests of the fiduciary and those of the principal.[112] This obligation extends to prohibiting a fiduciary from promoting the interests of some person other than the fiduciary in circumstances where there is a conflict or a real or substantial possibility of a conflict between the interests of that other person and those of the principal.[113]
[112] Pilmer v The Duke Group Ltd (2001) 207 CLR 165 at 199 ([78])
[113] Pilmer v The Duke Group Ltd (2001) 207 CLR 165 at 199 ([78])
The second obligation, which is closely related to the first, is that a fiduciary cannot make a profit by use of his fiduciary position or of property or knowledge possessed by virtue of the position.[114] This rule has been expressed in terms of a fiduciary being prohibited from making a profit for himself or herself, or for some other person.[115]
[114] Consul Development Pty Ltd v D.P.C. Estates Pty Ltd (1975) 132 CLR 373 at 393 per Gibbs J
[115] Finn “The Fiduciary Principle” in T.G. Youdan (ed.) Equity Fiduciaries and Trusts 1989. Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 is an example.
As the passage from the reasons of judgment of Mason J (as his Honour then was) states, the relationship of employee and employer is one of the accepted fiduciary relationships. The plurality in Concut Pty Ltd v Worrell & Anor confirmed that to be the case,[116] and there are “a vast number of cases in which non-managerial employees have been held to owe fiduciary duties”.[117]
[116] (2000) 75 ALJR 312 at [17]
[117] M. Irving, The Contract of Employment LexisNexis Butterworths Australia 2012 at page 375 ([7.34]).
As with the express or implied contractual term of fidelity and good faith, the scope of the fiduciary duties to which an employee will be bound in any given case will depend on the tasks the employee has been expressly or impliedly required to undertake as an employee. As I have noted above, Mr Amponsem was requested to acquire schnitzels and quiches on behalf of Laundy. Having been requested to undertake that task, Mr Amponsem came under a fiduciary duty not to pursue a gain for himself or some other person where there was a conflict or a real or substantial possibility of a conflict between, on the one hand, the duty he owed Laundy and, on the other, Mr Amponsem’s interests or duty Mr Amponsem assumed towards some other person. Mr Amponsem also came under a duty not to make a profit for himself or some other person by use of his position as an employee. And, as with the case of his contractual duty of fidelity, Mr Amponsem was under these fiduciary duties even though the schnitzels and the quiches were being supplied by or through The Educated Palate or through K & S Goods, and whether or not Mr Poulos was aware of the existence of K & S Goods or, if aware, whether or not K & S Goods was one and the same entity as The Educated Palate.
Was there disclosure?
Mr Poulos has given evidence that he was not aware in August 2009 that K & S Goods was an entity operated by Mr Amponsem and his wife.[118] I accept that evidence. I also find that Mr Poulos was not aware throughout the time the schnitzels were supplied to Laundy, initially through The Educated Palate and then through K & S Goods, that the schnitzels were being acquired by Mr Amponsem at a price of between $1.80 and $1.90 per schnitzel.
[118] 22.06.12 Poulos affidavit, [19]
In evidence given in cross-examination, Mr Amponsem agreed he never told Mr Poulos that he was picking up schnitzels for $1.80 and providing them to Laundy for $2.80.[119] Mr Amponsem said he did not tell Mr Poulos because Mr Poulos “didn’t ask me”.[120] Mr Amponsem also said, at least initially, that he did tell Mr Poulos about his wife’s involvement “because he know that my family was involved”.[121] Mr Amponsem denied Mr Amponsem kept secret his wife’s involvement in the supply of the schnitzels.[122] Later in his evidence, however, Mr Amponsem appeared to accept he did not tell Mr Poulos of his wife’s interest in K & S Goods.[123]
Q. You never told Mr Poulos until 1 March 2011 that your wife had any involvement in K&S Goods?‑‑‑To March two thousand and – 1st – I – I don’t know – I don’t know dates. He never asked me.
[119] 11.02.14 T253.5
[120] 12.02.14, T332.20
[121] 11.02.14, T253.10
[122] 12.02.14, T332.15: Q. You were involved in every step of the supply chain of the schnitzels from South Coast Chickens to North Wollongong Hotel; correct? ‑‑‑ Mostly, yes. Q. And you made the positive decision throughout the whole period of supply not to tell George Poulos you were making a dollar a schnitzel?‑‑‑He didn’t ask me.
[123] 12.02.14, T352.1
Also relevant to the question of whether Mr Amponsem disclosed to Mr Poulos or anyone else in the Laundy Hotels Group his wife’s interest in K & S Goods is what Mr Amponsem said during the meeting of 1 March 2011 which I have set out in paragraph 64 above. Mr Amponsem initially said that “K&S is my in-laws and the quiches are my in-laws. George is aware of it”. And when it was put to Mr Amponsem that a business name search of K & S Goods revealed it to be held by Mr Amponsem’s wife, Mr Amponsem said the “reason why my wife’s name is on there is her dad is on a pension and I don’t have anything to do with it. That’s what it is”. These answers are at odds with Mr Amponsem’s stance in these proceedings. He has claimed that K & S Goods is the business of his wife. Had Mr Amponsem disclosed that fact to Laundy before 1 March 2011, he would have repeated that fact at the meeting. Instead, he made statements that are inconsistent with the claim he makes in these proceedings that the K & S Goods business is one that is conducted by Mr Amponsem’s wife, and only by his wife.
For these reasons, I find that Mr Amponsem did not disclose to Mr Poulos that The Educated Palate and then K & S Goods were making no less than $1 gross profit on each schnitzel they sold to Laundy or to other companies within the Laundy Hotels Group, or that his wife was the holder of the K & S Goods business name, or that K & S Goods was a business conducted by his wife.
Did Mr Amponsem breach his duty of fidelity and fiduciary duty?
In my opinion, by purchasing, either for himself or for his wife, or for anyone else, rather than for Laundy, the schnitzels from SCCF at a price of between $1.80 and $1.90 per schnitzel, and arranging for Laundy to purchase those schnitzels, first, from The Educated Palate and then from K & S Goods, for a price of between $2.80 and $2.90 per schnitzel without disclosing that fact to Laundy, Mr Amponsem breached his contractual duty of fidelity. Having been requested to acquire the schnitzels for Laundy from another supplier, and having agreed to undertake that task, Mr Amponsem’s duty to render faithful service to Laundy required him to acquire the schnitzels from SCCF on behalf of Laundy, and at the best price he could have negotiated.
Mr Amponsem also breached the fiduciary duties he owed Laundy. By purchasing for himself or for his wife or for anyone else the schnitzels from SCCF, and arranging for those schnitzels to be sold to Laundy for between $2.80 and $2.90, Mr Amponsem placed himself in a position where his duty to his employer conflicted with his own interest, or with his duty to his in-laws as the owners of The Educated Palate or with his duty to his wife as the owner of the K & S Goods business. Further, either Mr Amponsem or his wife or someone else profited from this arrangement. That profit arose only because Mr Amponsem used his position as employee of Laundy to arrange for the purchase of the schnitzels from SCCF and on-selling them to Laundy.
Mr Amponsem says he acted “in good faith because I looked for these suppliers in my own time, using my own petrol and my own phone for a job that was not part of my job”, and that “I did not get paid for this extra work and I believe I acted on [sic] good faith for the hotel, trying to get the best product for the patrons”.[124] I regret I cannot accept that Mr Amponsem acted in good faith.
[124] Amended Response, [24]
First, even on his second account of the conversation he had with Mr Poulos to which I refer in paragraph 38 of these reasons his statement to Mr Poulos that “the schnitzel supplier is only going to do it on cash on delivery” was only partly true, and, for that reason, misleading. As I note above, Mr Sonnleitner informed Mr Amponsem that for the first thirty days of trading SCCF would require cash on delivery, but after the thirty days Mr Amponsem would be at liberty to submit a credit application.[125] Had Mr Amponsem believed he was acting in good faith, he would have informed Mr Poulos of that information.
[125] 5.02.14, T136.20
Second, there is the evidence of what Mr Amponsem said about K & S Goods at the meeting of 1 March 2011 to which I refer above. Mr Amponsem initially said that K & S Goods belonged to his in-laws. After it was pointed out to him that The Educated Palate and K & S Goods issued different invoices, Mr Amponsem said that K & S Goods were in partnership with his in-laws. And after Mr Amponsem was informed that K & S Goods was in the name of his wife, he said that his wife’s name was attached to K & S Goods for business purposes because his father-in-law was on a pension. Had Mr Amponsem believed he was acting in good faith, he would have informed those at the meeting of that which he has maintained at the hearing of these proceedings, namely, that K & S Goods was a business operated by his wife.
In any event, whether or not Mr Amponsem truly believed he was acting in good faith, that is not determinative of whether Mr Amponsem has breached his contractual duty of fidelity or his fiduciary duties. As was said by Gibbs J (as his Honour then was) in a slightly different context, it “would not be just that a person who had full knowledge of all the facts could escape liability because his own moral obtuseness prevented him from recognizing an impropriety that would have been apparent to an ordinary man”.[126]
[126] Consul Development Pty Limited v D.P.C. Estates Pty Limited (1975) 132 CLR 373 at page 398
Who profited?
The question of who received the profits from the sale by The Educated Palate and K & S Goods of the schnitzels to Laundy is relevant, or potentially relevant to the remedies that may be available to Laundy. Where a fiduciary makes a profit as a result of breaching his or her duty, one remedy available to the principal is an order that the fiduciary account – that is, pay – to the principal the profit the fiduciary made.
As I note above, the payments that were made in relation to the schnitzels were paid, first into The Educated Palate bank account and then into the K & S Goods bank account. There is no evidence to suggest that Mr Amponsem is a holder of either of those accounts. Accordingly, the legal title to the money that was paid into those accounts was held by those behind The Educated Palate (in the case of The Educated Palate) and Mr Amponsem’s wife (in the case of K & S Goods). Laundy has made no claim that the account holders of these accounts received the money that was paid in relation to the schnitzels as constructive trustees. The persons who made the profit, therefore, were those behind The Educated Palate and the wife of Mr Amponsem, not Mr Amponsem.
Remedies – principles
The remedy for breach of a contractual term of fidelity is damages; the remedy for breach of a fiduciary duty is either an account of profits or equitable compensation.[127] There are differences, however, between a claim based on breach of the contractual term of fidelity, and a claim based on breach of fiduciary duty.
[127] Digital Pulse Pty Ltd v Harris & Ors [2002] NSWSC 33 at [24] (Palmer J)
It is only the employer who can enforce a claim based on breach of a contractual term; and it is only the losses that the employer suffers that the employer can recover by an award of damages. These propositions are relevant in this case. Laundy was Mr Amponsem’s employer; but it is only one of a number of companies within the Laundy Hotels Group. Laundy did not pay for the schnitzels Mr Amponsem arranged to supply to Laundy; another company within the group made the payments. Further, not all of the schnitzels Mr Amponsem arranged to acquire from SCCF were delivered to Laundy; many were delivered to other venues within the Laundy Hotels Group, which I infer were operated by companies other than Laundy. The question I must address is what damages, if any, Laundy suffered as a result of Mr Amponsem’s breach of the contractual duty of fidelity; the question is not what damages some other company within the Laundy Hotels Group suffered, or what damages the Laundy Hotels Group as a whole suffered.
The position is more fluid when it comes to claims against employees based on a breach of fiduciary duty. This was recognised by McDougall J in Manildra Laboratories Pty Ltd v Campbell:[128]
There may be cases where a person employed by one company in a group owes fiduciary obligations to another company within that group. For example, if a person is employed by company A to render services to company B, and is for all effective purposes, even if not in law, an employee of company B, it may be legitimate to find that the person owes fiduciary duties to company B.
[128] [2009] NSWSC 987 at [69]
In the proceedings before me, the only company within the Laundy Hotels Group that is a party is Laundy; and there is no allegation that Mr Amponsem owed fiduciary duties to any other company in the Laundy Hotels Group.
The ordinary measure of damages for breach of contract is the amount of money that will place the innocent party, so far as money can do, in the position that party would have been in had the party in breach performed the contract.[129] Where there is no allegation of a failure to mitigate loss, the measurement of damages for breach of contract requires a court to undertake the following steps:
a)First, the court must determine the position the innocent party would have been in had the contract been performed, and then assess, in monetary terms, that position.
b)Second, the court must identify the position the innocent party actually finds itself in as a result of the contract not having been performed, and then assess, in monetary terms, that position.
c)If the amount the court assessed in (a) is greater than the amount it assessed in (b), the innocent party has suffered damages equal to the difference between the amount assessed in (a) and the amount assessed in (b).
[129] See Haines v Bendall (1991) 172 CLR 60 at page 63 (Mason CJ, Dawson, Toohey and Gaudron JJ): “The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed.”
The measure of equitable compensation flows from the purpose for which equitable compensation is awarded; and that purpose is “to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation”.[130]
[130] O’Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at page 272
Remedies – application of principles
To determine whether Laundy suffered any damages as a result of Mr Amponsem’s breach of the contractual duty of fidelity, I need first consider the position Laundy would have been in had Mr Amponsem performed that duty with the position Laundy found itself in as a result of Mr Amponsem not performing that duty.
Had Mr Amponsem performed his contractual duty of fidelity, he would have acquired from SCCF the schnitzels for Laundy. Instead, Mr Amponsem acquired the schnitzels, first on behalf of The Educated Palate and then on behalf of K & S Goods, and provided the schnitzels to Laundy at a price in the range of between $2.80 to $2.90 per schnitzel. Although Laundy did not pay for the schnitzels, I find that it incurred a liability to the company within the Laundy Hotels Group that did pay for the schnitzels in amounts equal to the amounts the company paid for the schnitzels. The basis of that finding is that I assume that the company that made the payment did not intend to pay for the schnitzels delivered to Laundy as a gift to Laundy, but expected that it would be reimbursed by Laundy. The basis of that assumption is the further assumption that directors of companies, including the directors of companies within the Laundy Hotels Group, are aware of the fiduciary and other duties they owe the companies of which they are directors and that they would not breach their duties by making gifts of money to fund another company’s purchase of goods.
Thus, the loss Laundy suffered is the difference between the prices The Educated Palate and K & S Goods charged for the schnitzels that were delivered to the Hotel and to the Jamison less the prices Laundy would have paid had Mr Amponsem purchased the schnitzels from SCCF on behalf of Laundy. This excludes the schnitzels Mr Amponsem arranged to deliver to other venues operated by companies in the Laundy Hotels Group other than Laundy. That is so because Laundy did not suffer any loss in relation to the schnitzels that were delivered to those venues.
It cannot be assumed that the prices Laundy would have obtained from SCCF had Mr Amponsem purchased the schnitzels on behalf of Laundy would have been the same as the prices Mr Amponsem paid for the schnitzels. The prices Mr Amponsem paid did not include the cost of delivery. And because Mr Amponsem paid for the schnitzels in cash, the price he was charged did not include a cost attributable to extending credit.
It is reasonable to infer, and I do infer, that had Mr Amponsem purchased the schnitzels on behalf of Laundy, the prices Laundy would have paid would have been higher than the prices Mr Amponsem in fact paid. First, Mr Amponsem would not have been responsible for the delivery of the schnitzels from SCCF, because it was not part of his role as chef to deliver product to the kitchen he managed. SCCF, therefore, would have arranged delivery, and it would have added the cost of delivery to its price for the schnitzels. Second, assuming Laundy Hotels Group does not acquire products on a cash-on-delivery basis, the prices at which SCCF would have sold the schnitzels to Laundy would have reflected a finance cost for the credit Laundy would have required for the schnitzels.
Laundy, on whom the onus of proving damages lies, adduced no evidence from which I could find the likely delivery cost and finance costs that would be added to the prices Mr Amponsem arranged to pay. That will not, however, prevent me from assessing damages. But it will result in my making what I consider to be a generous allowance to take into account these deficiencies of proof. I propose to allow 30% off the difference between the prices that were paid to SCCF, and the prices that The Educated Palate and K & S Goods charged Laundy. Therefore, I propose to assess damages by multiplying the number of schnitzels Mr Amponsem acquired from SCCF and which were delivered to the Hotel and to the Jamison by one dollar. The one dollar represents the difference between what Laundy Hotels Group paid to The Educated Palate and K & S Goods for the schnitzels, and the price SCCF was paid for the schnitzels. I will then reduce the product of these two amounts by 30%.
The number of schnitzels that invoices issued by The Educated Palate and K & S Goods record were delivered to the Hotel and to the Jamison is 86,300 and 10,740 respectively. It cannot be assumed, however, that all the schnitzels referred to in these invoices were delivered to the Hotel and the Jamison. That is so because the number of schnitzels (invoiced schnitzels) identified in the invoices issued by The Educated Palate and K & S Goods to all the hotels within the Laundy Hotels Group total 121,610,[131] whereas the number of schnitzels Mr Amponsem acquired from SCCF (delivered schnitzels) total 113,045.[132] This discrepancy of 8,565 schnitzels (undelivered schnitzels) is the basis of the non-delivery claim I consider later in these reasons.
[131] Exhibit PJR-2. Laundy, in Analysis of Educated Palate and K & S Goods Invoices and Payments. claims that the invoices showed that 121,550 schnitzels were delivered to hotels within the Laundy Hotels group. There is a discrepancy of 60 schnitzels which Laundy did not factor into their total amount of 121,550 in the Analysis of Educated Palate and K & S Goods Invoices and Payments. This is incorrect. Invoice no.429 issued to the Heritage Hotel (which is at Exhibit PJR-2 Volume 1, tab 3, page 55) is for 120 schnitzels, but in the analysis the amount is incorrectly set out as 60 schnitzels.
[132] Exhibit PJR-1
In calculating the damages on its non-disclosure claim, therefore, I must exclude schnitzels referred to in invoices issued by The Educated Palate and K & S Goods that were not delivered to the Hotel or to the Jamison because they do not fall within Laundy’s non-disclosure claim. That claim is predicated on Mr Amponsem’s having acquired and delivered schnitzels to Laundy for a price that was less than the price that Laundy paid. Such claim, therefore, cannot apply to schnitzels that had not been acquired in the first place.
There is a difficulty in determining on the basis of the evidence how many schnitzels referred to in the invoices The Educated Palate and K & S Goods issued to the Hotel and the Jamison were not delivered to the Hotel and to the Jamison. The difficulty arises because the difference between the invoiced schnitzels and the delivered schnitzels is aggregated over all of the companies in the Laundy Hotels Group. I propose, however, to deal with that difficulty as follows.
First, up to about 31 May 2010, apart from 150 schnitzels that were delivered to the Heritage Hotel on 8 April 2010,[133] the Hotel was the only hotel in the Laundy Hotels Group to whom The Educated Palate and K & S Goods had issued invoices. Therefore, the number of schnitzels referred to in those invoices that were not delivered to Laundy can be calculated by deducting the number of schnitzels recorded in invoices that SCCF had issued up to 31 May 2010 (40,650) from the number of schnitzels recorded in the invoices The Educated Palate and K & S Goods issued to Laundy (46,650). Thus, up to 31 May 2010, The Educated Palate and K & S Goods invoiced for 6,000 more schnitzels than were delivered to the Hotel.
[133] Exhibit PJR-2, tab 3, page 1 (invoice from K & S Goods) and exhibit PJR-1, tab 1, page 86 (invoice from SCCF).
Second, after 31 May 2010, there were 2,565 schnitzels referred to in the invoices that K & S Goods supplied to the Laundy Hotels Group as a whole that were not in fact delivered. It is reasonable to assume that the approximate number of these schnitzels that had been invoiced to the Hotel and the Jamison but which were not delivered is the number determined by the following formula:
IH + J / ILHG x 2,565
where IH + J is the total number of schnitzels referred to in the invoices issued by K & S Goods to the Hotel and the Jamison after 31 May 2010 (50,240) and ILHG is the total number of schnitzels referred to in all of the invoices K & S Goods issued to the Laundy Hotels Group after 31 May 2010 (74,810). That formula, when applied, results in 1,722 schnitzels referred to in the invoices but which were not delivered to the Hotel or to the Jamison. Thus, the total number of schnitzels referred to in invoices issued by The Educated Palate and K & S Goods to the Hotel and the Jamison that were not delivered total 7,722.
On these assumptions, the total number of schnitzels the Hotel and the Jamison acquired is 89,318 (97,040 less 7,722). Laundy’s damages, therefore, are (89,318 x $1) x 70%, which comes to $62,522.
In my opinion, in the circumstances of this case, the equitable compensation that Mr Amponsem is liable to pay to Laundy is to be assessed on the same basis as damages for breach of the implied contractual term of fidelity. In the alternative to its claim for damages, therefore, Laundy is entitled to equitable compensation in the amount of $62,522.
The schnitzel non-delivery claim
Laundy has adduced evidence that the number of schnitzels specified in invoices Mr Amponsem provided to the Hotel and to other venues operated by companies within the Laundy Hotels Group exceeded the number of schnitzels Mr Amponsem purchased from SCCF. The number of schnitzels identified in the invoices issued by The Educated Palate and K & S Goods total 121,610;[134] and the number of schnitzels Mr Amponsem acquired from SCCF total 113,045.[135] Accordingly, Laundy and other companies within the Laundy Hotels Group were invoiced for 8,565 schnitzels more than Mr Amponsem acquired from SCCF.
[134] Exhibit PJR-2
[135] Exhibit PJR-1
Laundy alleges fraud against Mr Amponsem; but it does not identify the facts on which it relies for the fraud it alleges Mr Amponsem committed. In its further amended response, Laundy alleges that “by fraudulent means” Mr Amponsem misused his position to “[i]nvoice and receive payment from the Respondent and associated entities for 9465 more schnitzels than he provided”. In its counsel’s written submissions, Laundy refers to Mr Amponsem secretly being involved in acquiring schnitzels from SCCF, evidence from Mr Sonnleitner that he has provided a complete set of all the invoices that were raised in relation to schnitzels Mr Amponsem purchased from SCCF, and the difference between the number of schnitzels identified in the invoices The Educated Palate and K & S Goods issued to Laundy and its associated entities, and the number of schnitzels identified in the invoices issued by SCCF. And in oral address, counsel for Laundy submitted:[136]
[I]t is clear on the documents there is no way we have not been overcharged. We have paid bills that there is no documentation can show that the applicant [Mr Amponsem] ever purchased these schnitzels, and the applicant was the only person doing the purchasing.
[136] 11.03.14 T23.20-25
I am satisfied on the evidence before me that the Laundy Hotels Group was invoiced by The Educated Palate and by K & S Goods for 8,565 schnitzels more than Mr Amponsem delivered to the hotels of the group. I am not prepared to find, however, that this occurred as the result of fraud by Mr Amponsem. The most obvious type of fraud that would explain this discrepancy, to the extent fraud is relied on as an explanation, is that Mr Amponsem prepared, or was involved in the preparation of the invoices which contained information that he knew was incorrect, and that he did that for the purpose of inducing payment to him or to some other person of the amounts claimed in the invoices. But no such case is pleaded against Mr Amponsem; nor was such case put to Mr Amponsem in cross-examination.
In my opinion, however, the payments that were made in relation to those schnitzels referred to in invoices that were issued by The Educated Palate and K & S Goods to the Hotel and to the Jamison but which were not delivered (which I have assessed to be 7,722 schnitzels) occurred as a result of Mr Amponsem using his position as employee, in breach of his fiduciary duty, to benefit his wife. Accordingly, Mr Amponsem is liable to pay equitable compensation for the loss Laundy suffered as a result of the payment for 7,722 schnitzels that were not in fact delivered to the Hotel or to the Jamieson. I assess the amount of that compensation to be $21,621.60 (7,722 x $2.80).[137]
[137] This is generous to Mr Amponsem because after xx the price of which the schnitzels were supplied to the Hotel and the Jamison increased to $2.90
The quiche non-delivery claim
Laundy has adduced evidence that shows the Hotel ordered 2,304 servings of quiche but sold only 663 servings.[138] Laundy claims that Mr Amponsem invoiced Laundy and received payment from Laundy for more quiches than he provided to the Hotel; and that this constituted a breach of fiduciary duty and duty of fidelity “by fraudulent means”. Laundy has also adduced evidence which shows that this difference cannot be explained by wastage rates that are typically found in kitchens of the nature the Hotel operated. That evidence was to some extent contested by Mr Amponsem; but I find that the discrepancy between what the Hotel ordered and what it sold is not consistent with typical wastage rates.
[138] 22.06.12 Poulos affidavit, annexure “F”
That does not mean, however, that I accept that the discrepancy is due to fraud by Mr Amponsem. As is the case with the schnitzel non-delivery claim, the most obvious type of fraud that would explain the discrepancy between the amount of quiches the Hotel purchased and sold, is that Mr Amponsem prepared, or was involved in the preparation of the invoices which contained information that he knew was incorrect, and that he did that for the purpose of inducing payment to him or to some other person. But no such case is pleaded against Mr Amponsem; nor was any such case put to Mr Amponsem in cross-examination.
Nor can any claim be made against Mr Amponsem based on breach of fiduciary duty. Mr Poulos was aware the supplier of the quiches – The Educated Palate – was operated by Mr Amponsem’s in-laws.
The quiche non-delivery claim, therefore, fails.
Mr Amponsem’s claim for bonus
As I note earlier in these reasons, the third employment contract contains a term that Mr Amponsem would be on a six-monthly bonus as long as Mr Amponsem were to meet his projected net profit set by George Poulos and Arthur Laundy every six months.
In one affidavit, Mr Amponsem claims it was promised that he would be paid a six-month bonus of $2,500, that he had been paid one bonus, and he had met his projected net profits for the entire period of his employment.[139] In another affidavit, Mr Amponsem said:[140]
With regards to my bonus’s I had a meeting with George Poulos and there was no targets set but if I kept the kitchen averaging the amount of $3000 profit after all costs were meet [sic] than [sic] after a six month period I would receive my bonus. I was paid two of this bonus’s [sic] one on 5th April 2009 of $2000 and one on 14th February 2010. I have marked these on the payment summary that the Respondent submitted. Annexure 4.
[139] 06.07.12 Amponsem affidavit, [16]
[140] 19.03.13 Amponsem affidavit, [8]
What is referred to in that paragraph as annexure 4 is a document titled “North Wollongong Hotel Employee Payment Summary”. Mr Amponsem has highlighted two payments. One for $2,902 paid on 5 April 2009. That is the sum of taxable gross wage of $1,153.85, less $251 tax, plus an addition of $2,000. The second is for $3,401.95 paid on 14 February 2010. That is the sum of taxable gross wage of $1,153.85, less $246 tax, plus an addition of $2,494.10.
Mr Poulos responded to Mr Amponsem’s affidavit in an affidavit made on 1 March 2013. He does not in that affidavit deny the agreement Mr Amponsem deposes was made in relation to the payment of bonus. Instead, Mr Poulos says that he does not recall Mr Laundy or himself having set targets and that, had he and Mr Laundy set projected net profit targets, it would have been set at 20-25%. The actual net profits achieved for the years ending 30 June 2010 and 30 June 2011 were 11.33% and 9.56% respectively.
Mr Poulos does not say anything in his affidavit about the two entries in annexure 4 that Mr Amponsem claims represent the payment of a bonus to him. Mr Amponsem, however, cross-examined Mr Poulos about the two entries. Mr Poulos said that the $2,000 entry was “an addition to your salary”.[141] Mr Poulos also gave the following evidence:[142]
[141] 04.02.14, T63.30
[142] 04.02.14, T63.45-T64.10
Those were bonuses that you paid me?‑‑‑Right.
HIS HONOUR: That’s a question. Do you agree with the question?‑‑‑If they were a bonus, it would be allocated on his payment file. I would have to see. If they were, yes they were.
MR AMPONSEM: But you claim in your affidavit that I didn’t achieve my targets and that I wasn’t going to get a bonus?‑‑‑Well, they could have been paid as a loyalty bonus. I would have to recheck our payment files, to see what that was paid for.
Mr Poulos was re-examined about this evidence:[143]
[143] 04.02.14, T93.10-T93.20
Now, you were also asked some questions – you were taken to some payments that were made to Mr Amponsem in early 2009. There was a payment of $2000 and a payment of $2429 and you were asked as to what that could be and I think you didn’t know until you saw particular pay records, correct?‑‑‑Correct.
The hotel group is effectively run by Mr Arthur Laundy?‑‑‑Yes.
What forms of payment other than salary does Mr Laundy make to his various employees?‑‑‑He gives loyalty bonuses. He gives all sorts of stuff but it’s entirely up to his discretion.
Mr Amponsem was also cross-examined about the entries. It was put to him that the entries could not have been the payment of a bonus under the terms of the third employment letter because the first payment was made in April 2009, yet the third employment letter was dated 7 December 2009.[144] It was also put to Mr Amponsem that the amounts recorded in annexure 4 to Mr Amponsem’s affidavit of 19 March 2013 do not reflect the amounts of the bonus specified in the third employment letter.[145]
[144] 12.02.14, T254.15-T254.35
[145] 12.02.14, T384.1-T384.30
I find that Mr Amponsem made an agreement with Mr Poulos to the effect deposed by Mr Amponsem. That is so because Mr Poulos did not deny the agreement. I also find, however, that the bonus that was the subject of that agreement was not the $2,500 referred to in the third letter. That is so because I find that the two amounts Mr Amponsem identified in annexure 4 to his affidavit of 19 March 2013 were each a bonus; but the amounts do not reflect the $2,500 bonus specified in the third employment letter. The evidence, however, does not permit me to make a finding about how the bonuses were calculated, and hence determine whether Mr Amponsem became entitled to a further bonus. Their differing amounts suggest that they were calculated by reference to some other and variable figure.
If, contrary to what I have found, the only agreement for the payment of a bonus is that contained in the third employment letter, the conditions for the payment of the bonus – namely, the meeting of Mr Amponsem’s projected net profit which was to be set by Mr Poulos and Mr Laundy – have not been satisfied. According to the evidence of Mr Poulos (which on this point I accept), neither Mr Poulos nor Mr Laundy set any projected profit for Mr Amponsem.
Laundy further submitted that, in any event, Mr Amponsem could not recover in these proceedings what he claimed to be a bonus owing to him under the third employment letter. Neither s.540, nor any other provision of FW Act, permits the recovery of amounts said to be owed as contractual entitlements. Laundy accepts that such a claim could be made if it fell within the Court’s accrued jurisdiction, but Mr Amponsem makes no such claim. In my opinion, assuming Mr Amponsem could not make a claim for the bonus under the FW Act, the Court has jurisdiction under its accrued jurisdiction to determine the claim. That is so even though Mr Amponsem did not in terms invoke the Court’s accrued jurisdiction.
Setting-off of claims
As I say at the beginning of these reasons, Laundy accepts that Mr Amponsem is entitled to unpaid accrued annual leave of $11,305, but it says that it is entitled to set-off against that amount the amount of damages or compensation it claims Mr Amponsem is liable to pay to Laundy for breach of contract and fiduciary duty. I have found that Mr Amponsem is liable to pay damages or compensation to Laundy. Was Laundy entitled to withhold payment of Mr Amponsem’s unpaid accrued annual leave because it had what I have now found to be a valid claim for compensation? Or, if Laundy was not so entitled, is Laundy nevertheless now entitled to set-off the amount of its claim against the unpaid accrued annual leave it acknowledges it owes Mr Amponsem? This requires a brief discussion of some of the basic principles of the law of set-off.
The law of set-off
The law of “set-off” falls to be considered where each of two persons has a liquidated or unliquidated claim for money against the other. Let two such claims be described as C1 and C2. When used as a verb, “set-off” refers to the act of subtracting all or part of the amount of C2 from the amount of C1; to subtract all or part of C2 from C1 is to “set-off” C2 against C1. The setting-off of C2 against C1 results in the replacement of two claims by one claim, C3, being a claim for an amount equal to the difference between C1 and C2. Judgment is then given for the amount of C3. The law of set-off is a set of rules that defines the circumstances in which C1 and C2 may be set-off against each other.
At common law, set-off was available in the circumstances provided for by the Statutes of Set-off enacted in 1729 and 1735 (legal set-off).[146] The two money claims each had to be debts. And the set-off provided by the statutes could only be effected by a judgment of a court.[147] In that sense, legal set-off is referred to as a procedural defence.[148] In New South Wales, legal set-off is provided for in s.21 of the Civil Procedure Act 2005 (NSW). That section is available to be applied in these proceedings, by the operation of s.79 of the Judiciary Act 1903 (Cth), if the circumstances for its application otherwise exist.
[146] (1729) 2 Geo II, c22, s.13; (1735) 8 Geo II, c24, s.4. For these references and the other cases to which I refer in this section of my reasons I gratefully acknowledge the scholarship of Dr Derham in Derham on the Law of Set-off Fourth Edition, 2010. The text of the Statutes of Set-off are quoted in Derham from page 11
[147] Stein v Blake [1996] 1 AC 243 at page 251 (Lord Hoffman):
[148] Derham on the Law of Set-off, Fourth Edition, 2010, page 22 ([2.34]) ff.
Equity allows a set-off in circumstances not provided for by legal set-off. In equity, it is not necessary that C1 or C2 be liquidated claims. In equity, however, C2 can be set-off against C1 only if it can be said that C2 impeaches the legal title of C1. This is the formulation given in 1841 by Lord Cottenham in Rawson v Samuel.[149] As Dr Derham has observed, most courts in Australia have continued to emphasise impeachment of title as the basis of equitable set-off.[150]
[149] Rawson v Samuel (1841) Cr & Ph 161; 41 ER 451. At page 179 (ER 458), Lord Cottenham said: “Several cases were cited in support of the injunction; but in every one of them, except Williams v Davies, it will be found that the equity of the bill impeached the title the legal demand.”
[150] Derham on the Law of Set-off Fourth Edition, 2010, page 93
There is another species of set-off that may be relevant to these proceedings; and that is the setting-off of judgments. A foundation authority is the judgment of the Court of King’s Bench in Mitchell v Oldfield.[151] In that case the plaintiff recovered a judgment against the defendant. The defendant, however, in another action, had recovered a judgment against the plaintiff and another person. The defendant obtained a rule to show cause why the debt and costs in the other proceedings should not be set-off against the judgment the plaintiff obtained against the defendant. The Court made the rule absolute holding that the judgment in the other proceeding should be set-off against the judgment the plaintiff had recovered against the defendant. Lord Kenyon said:[152]
[T]his did not depend on the Statutes of Set-off; but on the general jurisdiction of the Court over the suitors in it: that it was an equitable part of their jurisdiction, and had been frequently exercised . . . .
[151] (1791) 4 TR 123; 100 ER 929
[152] At 100 ER page 929
The jurisdiction to set-off judgments has been recognised in cases after Rawson v Samuel. For example, in Edwards v Hope Brett MR said:[153]
The Courts . . . always had an equitable jurisdiction, for the purpose of preventing absurdity or injustice in cases where there had been judgments for damages between the same parties in distinct actions, to set-off one judgment against the other and to allow execution to issue in respect of the balance only.
[153] (1885) 14 QBD 922 at page 926
And in Australian Beverage Distributors v Evans and Tate Premium Wines Pty Ltd White J, in speaking of the power to set-off judgments for costs, said:[154]
[S]et-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings.
[154] [2006] NSWSC 560 at [68].
Finally, r.28.09 of Federal Circuit Court Rules 2001 (Cth) (FCCR) provides for what is in substance the setting-off of judgments. That rule provides that if a respondent establishes a cross-claim against the applicant and there is a balance in favour of one of the parties, the Court may give judgment for the balance.
Is Laundy entitled to set-off its claims against the claim for accrued annual leave?
Ignoring for the moment the provisions of the FW Act, Laundy’s claim for compensation cannot, under the principles of legal set-off, be set-off against Mr Amponsem’s claim for unpaid accrued annual leave; that is so because its claims are not liquidated debts. Nor is it apparent that the principles of equitable set-off are available to have entitled Laundy to have set-off its claim for equitable compensation against Mr Amponsem’s claim for unpaid accrued annual leave.
Even if Laundy could set-off its claims for compensation under the principles of legal or equitable set-off, the question would arise whether the FW Act ousts the principles of set-off in relation to the right to accrued annual leave the FW Act creates. Given I have found Laundy does not have a right of set-off, I do not need to decide that question. I do, however, need to consider whether the FW Act prevents the Court from exercising the power conferred by r.28.09 of the FCCR to give a judgment in favour of Laundy for the amount of compensation I have found it is entitled less the $11,305 owing to Mr Amponsem. That turns on the statutory construction of the relevant provisions of the FW Act, the substance of which I have set out in paragraph 13 of these reasons, and whether r.28.09 of the FCCR is inconsistent with the FW Act.
In my opinion, there is no inconsistency between s.90(2) of the FW Act, which obliges an employer to pay accrued annual leave on termination of employment, and r.28.09 of the FCCR. As I set out in paragraph 13 of these reasons, the FW Act confers a right to commence proceedings in this Court to recover accrued annual leave an employer has failed to pay in contravention of the Act. By conferring on an employee the right to enforce by action in this Court an employee’s right to unpaid accrued annual leave without more, it is to be inferred that the legislature intended such pursuit of such claim to be regulated by this Court’s rules and procedures. That would include the availability to the Court to exercise the power conferred by r.28.09 of the FCCR.
Given that I have found Laundy does have claims for compensation against Mr Amponsem in the amounts $62,522 and $21,621.60, making a total of $84,143.60, and Laundy accepts Mr Amponsem does have a claim against it for unpaid annual leave in the amount of $11,305, it is not in the interests of justice that I make two separate orders – one against Laundy for the payment of $11,305 to Mr Amponsem, and one against Mr Amponsem for the payment of $84,143.60 to Laundy. Instead, I propose to exercise the power conferred by r.28.09 of the FCCR and make one order that Mr Amponsem pay to Laundy the amount I have held Laundry is entitled to recover from Mr Amponsem on its cross-claim ($84,143.60), less the $11,305 claimed by Mr Amponsem. That amount is $72,838.60.
Conclusions and disposition
My conclusions may be summarised as follows:
a)Mr Amponsem breached his contractual duty of fidelity, and his fiduciary duty not to profit from his position as head chef of the restaurant at the Hotel and the Jamison by acquiring 97,040 schnitzels from SCCF at a price ranging between $1.80 and $1.90 per schnitzel and arranging for Laundy to accept delivery of that amount of schnitzels at a price ranging between $2.80 and $2.90 per schnitzel without disclosing to Laundy that:
i)Mr Amponsem had acquired the schnitzels from SCCF for a price ranging between $1.80 and $1.90; and
ii)K & S Goods was a business name held by his wife.
b)Laundy suffered loss as a result of Mr Amponsem’s breaches of duty in the amount of $62,522.
c)Mr Amponsem breached his fiduciary duty not to profit himself or another person by use of his position as head chef of the restaurant at the Hotel by providing to Laundy invoices that recorded the delivery of schnitzels to the Hotel that had not in fact been delivered to the Hotel.
d)Laundy suffered loss as a result of Mr Amponsem’s breaches of duty referred to in (c) in the amount of $21,621.60.
e)Laundy has not succeeded on its claim based on the non-delivery or overcharging for quiches.
f)Mr Amponsem has not succeeded on his claim for the payment of bonus.
g)Laundy is entitled to an order for equitable compensation against Mr Amponsem in the amount of $84,143.60.
h)It is in the interests of justice that the Court should enter one order for payment that reflects the difference between $84,143.60, being the amount of equitable compensation to which Laundy is entitled against Mr Amponsem, and the amount of $11,305, being the amount of accrued annual leave to which Mr Amponsem is entitled. That amount is $72,838.60.
Accordingly, I propose to order that Mr Amponsem pay to Laundy the sum of $72,838.60.
I do not propose to make any order for costs. I will order, however, that if either Mr Amponsem or Laundy wishes to apply for a costs order, Mr Amponsem or Laundy must do so by filing and serving within fourteen days an application in a case together with any supporting affidavits.
I certify that the preceding one hundred and fifty-six (156) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 25 September 2014
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