Anthony Sangwin v Imogen Pty Ltd (trading as Carleton Custom Upholstery)

[1996] IRCA 73

DECISION NO:   73/96

CATCHWORDS

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - complaint of unlawful termination - review - serious misconduct - allegation of attempted stealing - whether termination unlawful on proof that misconduct did not occur - whether employer's honest belief of misconduct held on reasonable grounds after sufficient enquiry a valid reason for termination - whether misconduct occurred in fact - whether sufficient enquiry - onus of proof

Industrial Relations Act 1988

Bi-Lo Pty Ltd v Hooper (1994) 53 IR 224
Reader v Wyndham Lodge Nursing Home Inc., Industrial Relations Court of Australia, Marshall J, 8 September 1995
Senathirajah Selvachandran v Peteron Plastics Pty Ltd, Industrial Relations Court of Australia, Northrop J, 7 July 1995
Burazin v The Blacktown City Guardian Pty Ltd, Industrial Relations Court of Australia, Madgwich J, 3 November 1995
Ball v Tip Top Bakeries, Industrial Relations Court of Australia, Marshall J, 12 January 1996
Byrne v Australian Airlines Ltd (1995) 131 ALR 422
Byrne v Australian Airlines Ltd (1994) 47 FCR 300
Briginshaw v Briginshaw & Another (1938) 60 CLR 336

Matter No. SA 95/1161R

ANTHONY SANGWIN v IMOGEN PTY LTD (trading as Carleton Custom Upholstery)

VON DOUSSA J
ADELAIDE
8 MARCH 1996

IN THE INDUSTRIAL RELATIONS COURT )
  )
OF AUSTRALIA  )    No. SA 95/1161R
  )
SOUTH AUSTRALIAN DISTRICT REGISTRY    )  

BETWEEN:  ANTHONY SANGWIN

Applicant

AND:     IMOGEN PTY LTD (trading as
  Carleton Custom Upholstery)

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER     :    VON DOUSSA J

PLACE                  :    ADELAIDE

DATE                   :    8 MARCH 1996

THE COURT ORDERS THAT:

1. The decision of the judicial registrar delivered on 24 August 1995 be set aside.

2. Declare that the termination of the applicant's employment on 18 May 1995 was in contravention of s.170DE(1) of the Industrial Relations Act 1988.

3. The respondent to pay to the applicant the sum of $16,900 (less any sum required by law to be deducted by the respondent from that sum and paid to the Commissioner of Taxation).

NOTE:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS COURT )
  )
OF AUSTRALIA  )    No. SA 95/1161R
  )
SOUTH AUSTRALIAN DISTRICT REGISTRY    )  

BETWEEN:  ANTHONY SANGWIN

Applicant

AND:     IMOGEN PTY LTD (trading as
  Carleton Custom Upholstery)

Respondent

REASONS FOR JUDGMENT

Coram: von Doussa J
Place: Adelaide (heard in Perth)
Date : 8 March 1996

The respondent was the employer of the applicant whose employment was summarily terminated on 18 May 1995 on the ground of serious misconduct.  The applicant brought proceedings in this Court seeking relief under Part VIA of the Industrial Relations Act 1988 ("the Act") alleging that there was no valid reason for his termination, or alternatively that his termination was harsh, unjust or unreasonable: see s.170DE. The matter was heard by a judicial registrar who on 24 August 1995 found for the respondent. The applicant now seeks to have that decision reviewed pursuant to s.377.

A review of a decision of a judicial registrar under s.377 is a review by way of rehearing afresh unless it is agreed that the review be conducted on some more narrow basis that enables evidence given before the judicial registrar to be used on the review - perhaps supplemented by further evidence.  In the present case no such agreement has been possible as the decision of the judicial registrar turned upon her assessment of the credibility of the central characters in events which happened in the 24 hours preceding the applicant's dismissal, and, as one ground for the review was that evidence had not been placed before the judicial registrar that was important to the assessment of the credit of the principal witness for the respondent.

On the review all the witnesses gave evidence again, and were cross-examined.  The transcript of the earlier trial was not referred to (save for 2 pages to which reference was made during cross-examinations).  It is necessary that I form my own assessment of the witnesses, and of the evidence, and reach conclusions uninfluenced by the result before the judicial registrar.  As I was forewarned the review was to be by way of full rehearing I did not read the transcript of the trial before the judicial registrar, or refresh my memory of the judicial registrar's reasons for decision, before the review commenced.

The background facts can be shortly stated.  The respondent company is owned by its two directors, Mr Lindsay Ashcroft and Ms Robyn Stanton.  The respondent carries on business in Perth as an upholsterer under the name Carleton Custom Upholstery.  From 8 February 1995 the applicant was employed as the respondent's foreman upholsterer.  He had responsibilities for the supervision of the workshop floor, and for the performance and quality of work.  At the time of his dismissal the business employed about nine people. 

The applicant was a well qualified upholsterer who had come to Australia from England about eight years previously.  He migrated with his family to South Australia.  In February 1995 the applicant, his wife, and two sons Anthony and Karl, moved to Perth.  The respondent also engaged Anthony and Karl as apprentice upholsterers.  The initial engagement of Anthony and Karl was on three months probation.  On 17 May 1995 their apprenticeships and employment were terminated with one week's pay in lieu of notice.  Mr Ashcroft said that there had been a downturn in the business and he was unable to continue their employment beyond the probation period and maintain the required ratio of tradespeople to apprentices.  That decision was accepted without demur by the applicant and his two sons.

The applicant had been informed by Mr Ashcroft at lunchtime on 17 May 1995 that his sons would be put off that afternoon.  Mr Ashcroft told Anthony and Karl of their fate at about 2.00 p.m. in his office.  They returned to their work positions on the floor thereafter and continued their work in the ordinary way at the applicant's direction until close at the end of the day's work.  The shop customarily closed down at 4.00 in the afternoon.

It was common ground that shortly before 4.00 p.m. Anthony and Karl took various tools owned by them or the applicant out of the respondent's workshop and placed them in Karl's Torana car which was in the adjoining car park.  One of the tools was an item called a Klinch-it tool owned by the applicant which the applicant had taken to the workshop in February to speed up an aspect of the upholstery work.  This tool was used to expand small metal fasteners or "Klinch-its" so as to affix upholstery coil springs to the jute webbing once commonly used to hold the springing mechanism of chairs in place.

It was also common ground that in early March 1995 the respondent through Ms Stanton had arranged to buy for $167.00 a box of the fasteners applied by the Klinch-it tool.  When the applicant first took his Klinch-it tool to the workshop he also took a supply of his own fasteners, but these had run out, hence the purchase of the box of fasteners.  In the course of taking tools to the car, the respondent's box of fasteners was also carried out from the workshop and placed in the car by Anthony.  Mr Ashcroft came to hear of this from Mr John Heath, one of the respondent's upholsterers, and spoke first to Anthony at the car, and then to Karl in the workshop.  The fasteners were then returned to the workshop where they remained in the respondent's possession.

On the morning of 18 May 1995 Mr Ashcroft requested the applicant to come into his office.  He informed the applicant that a witness had seen the applicant instruct his son to take the fasteners out to the car.  The applicant was accused of stealing (or attempting to steal) the fasteners, an act which it was said constituted serious misconduct.  The applicant denied he had been guilty of misconduct.  He said that it was a "misunderstanding" or a "mistake".  (There is a dispute whether a more extensive response was made).  Mr Ashcroft considered the applicant had breached the trust reposed in him as foreman, and dismissed him.  The applicant was asked to leave immediately, which he did.  Later that afternoon he returned to collect equipment which belonged to him, and his pay for the week.  He was paid to 18 May 1995 including pro rata holiday pay but not beyond that date.  It is not suggested by Mr Ashcroft that the dismissal was for any reason other than for attempted stealing.

A critical question on which this case turns is what happened on the afternoon of 17 May 1995 regarding the applicant's instruction to his sons relating to the box of fasteners.  The presentation of the applicant's case identified this as the question on which the case turned.  If the applicant did instruct his son to take the respondent's fasteners to the car, knowing as he did that they were his employer's property, counsel for the applicant did not argue against the proposition that his conduct was a serious breach of duty, and such as to render his summary dismissal not harsh, unjust or unreasonable: see Byrne v Australian Airlines Ltd (1995) 131 ALR 422 at 434, 462-463. On the other hand, if the applicant were not guilty of the conduct alleged, counsel for the applicant argued that it followed that there was no valid reason for his dismissal as required by s 170 DE(1) and the applicant was entitled to succeed.

The primary case for the respondent turns on the same question, as the respondent contended that the applicant had indeed given the instruction to his son. However counsel for the respondent also advanced an alternative defence on the basis that the dismissal did not contravene s 170DE(1) because, after investigation, the employer genuinely believed that the applicant had been guilty of attempted stealing, even if in fact that were not so. To this end evidence was led to support the contention that the respondent had appropriately investigated a report from Mr Heath that he had witnessed the box of fasteners being stolen; that the applicant had then been given the opportunity to defend himself; that the applicant had failed to provide a satisfactory explanation; and that the directors of the respondent therefore believed on reasonable grounds in the truth of the allegation - facts which in combination provided a "valid reason" within the meaning of s 170DE for dismissal.

In Bi-Lo Pty Ltd v Hooper (1994) 53 IR 224 the South Australia Industrial Relations Commission considered a summary dismissal of an assistant manager of a supermarket based on an allegation of stealing a carton of cigarettes in the course of his employment. The dismissed employee brought proceedings against the employer for a remedy under s 31 of the Industrial Relations Act 1972 (SA).  That section vested in the Industrial Relations Commission jurisdiction to grant a range of remedies where the Commission "is of opinion that the dismissal of the applicant was harsh, unjust or unreasonable".  The dismissed employee contended that he had not stolen the cigarettes, and that it necessarily followed that his dismissal on that ground was harsh, unjust or unreasonable.  At first instance the trial judge upheld this argument.  The judge held that the evidence led by the employer to prove the theft failed to do so: the judge was not satisfied that the employer had discharged the burden of proof of that fact.  An award of compensation was made against the employer.

On appeal, a Full Bench of the Commission set aside the award.  The Commission said at 229-230:

"In a case such as the present one where the employee is dismissed for misconduct in respect of dishonest dealing with the employer's property we do not believe it is a correct test to state as did the learned trial judge that the employer must prove, on the balance of probabilities, on the evidence submitted to the Commission, that the employee actually stole the goods, before it will escape a finding that a dismissal based upon such an alleged theft is to be treated as harsh, unjust or unreasonable.

There can be no doubt that in line with decided authority the ultimate task pursuant to s 31 is for the Commission to determine whether when viewed objectively the dismissal may be properly adjudged to fall within the statutory criteria of harsh, unjust or unreasonable.

An employee is entitled to both substantive and procedural fairness in respect of a dismissal.  Substantive fairness will be satisfied if the grounds upon which dismissal occurs are fair grounds.  Broadly speaking a dismissal will be procedurally fair if the manner or process of dismissal and the investigation leading up to the decision to dismiss is just.

Where the dismissal is based upon the alleged misconduct of the employee, the employer will satisfy the evidentiary onus which is cast upon it if it demonstrates that insofar as was within its power, before dismissing the employee, it conducted as full and extensive investigation into all of the relevant matters surrounding the alleged misconduct as was reasonable in the circumstances; it gave the employee every reasonable opportunity and sufficient time to answer all allegations and respond thereto; and that having done those things the employer honestly and genuinely believed and had reasonable grounds for believing on the information available at that time that the employee was guilty of the misconduct alleged; and that, taking into account any mitigating circumstances either associated with the misconduct or the employee's work record, such misconduct justified dismissal.  A failure to satisfactorily establish any of those matters will probably render the dismissal harsh, unjust or unreasonable.

If a fact or facts come to light subsequent to the dismissal which cast a different light on the Commission of the alleged misconduct, such fact or facts will not necessarily or automatically render the dismissal harsh, unjust or unreasonable.  In our view in such circumstances what will need to be considered is whether the employer, if it had acted reasonably and with all due diligence, could have ascertained those facts before the dismissal occurred.

The Commission is required to objectively assess the subjective actions and beliefs of the employer as at the time of dismissal and not at some subsequent time: see Gregory v Philip Morris (1988) 24 IR 397 at 413; 80 ALR 455 at 471; see also Stearnes v Myer SA Stores Print No 9A/1973 at 5.

Whether the employer will satisfy that objective test will depend upon the facts of each case.  The gravity of the alleged offence will dictate the nature and extent of the inquiry which the employer must conduct.  An employer must ensure that an employee is given as detailed particulars of the allegations against him/her as is possible, an opportunity to be heard in respect of such allegations, and a chance to bring forward any witnesses he/she may wish to answer those allegations."

[The third paragraph in the above passage must now be read subject to the observations of the High Court in Byrne v Australian Airlines Ltd at 462].

The Commission examined in detail the very thorough investigation which the employer conducted, the full and fair opportunity which the dismissed employee was given to respond, and the unsatisfactory and untruthful explanation that he offered.  The Commission concluded that in all the circumstances the dismissal was not harsh, unjust or unreasonable, even though the trial judge later held that the evidence failed to prove the alleged theft.

I have set out at length the reasoning of the Commission as it recognises an approach to an unfair dismissal case that accords with that urged on the respondent's behalf before this Court, and also identifies the range of matters that the employer was required to establish before a dismissal founded on a mistaken but honest belief held on reasonable grounds that the employee had been guilty of serious misconduct would not be characterised as harsh, unjust or unreasonable.

In the context of alleged breaches of an award provision which provided that termination of employment by an employer shall not be harsh, unjust or unreasonable a similar approach was approved in Byrne v Australian Airlines Ltd (1994) 47 FCR 300 by three members of the Full Court of the Federal Court. Beaumont and Heerey JJ at 331 said:

"It is well established that, for present purposes, where a dismissal is based upon alleged misconduct, the employer will not breach the award if it is demonstrated that, in so far as it was within the employer's power before dismissal, the employer conducted as full and extensive an investigation into all of the relevant matters surrounding the alleged misconduct as was reasonable in the circumstances (see Bi-Lo Pty Ltd v Hooper ..."

Keely J at 313 agreed with the conclusion and reasoning of Beaumont and Heerey JJ.  On the other hand Gray J at 355-356 said:

"Plainly, it would be harsh, unjust and unreasonable to dismiss an employee for an offence which he or she had not committed.  In a proceeding in which a breach of the clause is claimed, the Court is required to determine whether, as a matter of fact, the cause which the employer advanced as the ground for dismissal existed.  The Court will determine that issue on the evidence before the Court, not merely on the evidence available to the employer.  In determining that issue, the Court must inevitably take into account the credit of the various witnesses called."

Black CJ at 303 left open which of these approaches was correct.  On the appeal to the High Court this difference of opinion between the members of the Full Court was not discussed.

The requirements of Division 3 of Part VIA of the Act are more detailed than a briefly expressed proscription against dismissals that are "harsh, unjust and unreasonable". The central provision intended to ensure fairness in dismissal situations is s 170DE which reads:

"170DE(1) An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service.

(2) A reason is not valid if, having regard to all of the circumstances of the case, including the employee's capacity and conduct and those operational requirements, the termination is harsh, unjust or unreasonable.  This subsection does not limit the cases where a reason may be taken not to be valid."

The requirement that a dismissal must not be "harsh, unjust or unreasonable" finds expression only in subsection (2), and does not arise for consideration in a particular case unless and until it is proved by the employer (see s.170EDA(1)(a)) that there was a "valid reason" within the meaning of subsection (1) for the dismissal.

In Reader v Wyndham Lodge Nursing Home Inc., Industrial Relations Court of Australia, Marshall J, 8 September 1995, where a nursing sister who had been dismissed on an allegation of assault on an elderly resident alleged unlawful termination contrary to Part VIA of the Act, it was held that as the respondent failed at trial to prove the happening of the assault, the respondent failed to establish a "valid reason". The possibility that a "valid reason" existed because the employer at the time of the dismissal honestly believed on reasonable grounds that the assault had taken place was not considered. However it had been conceded by counsel for the respondent that the requirements of s 170DE(1) were not satisfied "if the facts which were said to justify the dismissal were not proved to be so". The decision therefore provides no authority in the interpretation of s 170DE.

It has been held that a "valid" reason exists where the employer had a "sound, defensible or well founded" reason for termination of the applicant's employment: see Senathirajah Selvachandran v Peteron Plastics Pty Ltd, Industrial Relations Court of Australia, Northrop J, 7 July 1995; Burazin v The Blacktown City Guardian Pty Ltd, Industrial Relations Court of Australia, Madgwich J, 3 November 1995; Ball v Tip Top Bakeries, Industrial Relations Court of Australia, Marshall J, 12 January 1996. These dictionary definitions for the word "valid", whilst wide enough to include a reason based on an honest belief held on reasonable grounds, do not assist in determining whether on the true interpretation of the section such a belief, if later shown to be erroneous, could nevertheless still constitute a "valid reason" for a dismissal. The expression "valid reason" must be read in the full context of the Act. The reason must be a "valid reason connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service".

In virtually every situation of termination of employment, hardship to a greater or lesser degree is likely to come to the employee. Often the economic and personal hardship to the employee and to his family will be considerable. But in considering the application of Division 3 of Part VIA of the Act, it must be recognised that its provisions are intended to operate in the practical arena of commercial activity, and that in the endeavour to achieve industrial fairness it is necessary to balance the interests and well being of an individual employee against the interests of the employer, and also to have regard to matters of wider public interest which may be involved. The construction of the Act is not to be considered only from the viewpoint of the employee.

Examples of factual situations that might arise help to elucidate the meaning of "valid reason" in s 170ED(1).  Take a situation where a person is employed as a skilled operator of equipment where human life depends on its proper operation or performance, and the employer receives a report that the operator is suspected of suffering a medical condition that is likely to impair his ability to perform his duties.  The employer would be duty bound to ensure human safety.  If after sufficient inquiry the suspected diagnosis could not be excluded would not the employer then have a sound and well founded, i.e. "valid", reason connected with the employee's capacity, or alternatively connected with the operational requirements of the undertaking, establishment or service for terminating the operator's employment (assuming, of course, that there is not some other position reasonably available to which the employer can transfer the employee)?  It would be odd if, after dismissal, it was later held that no valid reason existed at the time of dismissal because later events, e.g. the passing of time or a new diagnostic procedure, proved that the operator had not been suffering the suspected medical condition.

An employer of a health worker or child care provider against whom was made an allegation of serious physical abuse that threatened the health and safety of those in that person's care would be duty bound to act to protect those under care.  If, after sufficient inquiry, the employer honestly believed on reasonable grounds that the allegation was correct the employer would be in dereliction of duty to those in care if the employee were allowed to return to duty.  Again, would not the employer have a sound or well founded reason connected with the operational requirements of the undertaking, establishment or service for terminating the operator's employment even if, after dismissal, a tribunal or court held that it was not satisfied that the misconduct alleged had occurred, or that it did not occur? 

These are extreme examples based on human safety issues.  Other examples based on the serious risk of property damage or monetary loss which might arise if employees against whom serious allegations of a breach of safe operating practices or dishonesty had been made were allowed to continue performing their normal employment duties would pose similar rhetorical questions.  Although the examples may not be representative of the risk of harm that could arise in many workplace situations, they lead me to the view that s 170ED(1) should not be construed so as to exclude from the notion of a "valid reason" an honest belief held on reasonable grounds by the employer, after inquiry of the type envisaged in Bi-Lo Pty Ltd v Hooper, that a state of fact exists which justifies termination of the employment.  In my opinion if the employer honestly believes on reasonable grounds after sufficient inquiry that the employee has been guilty of serious misconduct a valid ground within the meaning of s.170ED(1) exists for terminating the employment of the employee.

Even where such a belief constitutes a "valid reason", there may nevertheless still be cases where a dismissal based on that belief may be harsh, unjust or unreasonable within the meaning of s 170DE(2).  Many considerations of the kind likely in other cases to lead to a finding that a dismissal was harsh, unjust or unreasonable would probably have been excluded in the course of reaching the conclusion that a "valid reason" existed, but there would be other matters as well to be considered.  These would include whether dismissal was disproportionate to the gravity of the believed misconduct on which the employer acted and to the risk of harm to the employer and others had the employee not been dismissed; the gravity of the personal and economic consequences of dismissal on the employee; and any mitigating circumstances such as the length, loyalty and quality of the employee's work record.

In the present case the central issue which must first be determined to resolve the principal claim and defence is whether the alleged attempted stealing occurred.  To determine this it is necessary to refer in detail to the evidence.

The applicant gave evidence that his sons were given their notice after lunch on 17 May 1995, and that he instructed them to continue working.  At about 3.30 p.m. - the normal time to start cleaning up - he spoke to them.  They both worked in the same bench area, and not far from their father.  He asked them, along with another employee named Tyson, to clean up the benches and factory, to clean up some woodworking equipment which belonged to the applicant and which he proposed to take home, and to collect all their personal tools.  He also instructed Karl to reverse the applicant's van up to a loading door so that the woodworking machinery could be loaded.

A few minutes later Karl came to his father and said that as Mr Ashcroft was about they would be embarrassed moving out the woodworking machinery as the other employees did not know their fate, and asked if they could come back at lunchtime tomorrow to do it.  The applicant agreed.  The van was not therefore reversed to the door.

The applicant, who was at his cutting table at that time, said to Karl "Don't forget to take my Klinch-it gun and tools".

His son went off to the bench where the tools were laid out.  He returned to his father some three minutes later and said that as their tools were mixed up with the tools of the respondent, could his father come and sort them out.  The applicant went to the tool bench and sorted the tools into two piles: those of the applicant and his sons to the right - those of the respondent to the left.  The box of fasteners was on the bench.  It was moved to the left and placed with the respondent's property as the applicant knew they were not his.  As this was being done Karl was present, but Anthony was elsewhere cleaning the woodworking machinery.  The applicant says he did not see or hear of the fasteners again at work that day, and denies that he gave any instruction to Karl (or Anthony for that matter) to take the fasteners to the car. 

Karl confirmed, generally, these events although there were minor differences in aspects of the detail.  He said his father told him the fasteners were the property of the respondent.  After his father sorted the tools Karl started taking their tools to the car, in between the cleaning jobs that were still taking place.  He did not take all their tools out.

Anthony gave evidence that he came back from his cleaning jobs to the tool bench.  He observed tools that he believed were either his, Karl's or his father's and took them out to Karl's car.  He was unaware there had been any sorting performed by his father.  He noticed the open box of fasteners, assumed they were his father's as he knew his father had taken some fasteners to the factory, and took them out to the car.

It is common ground between Anthony and Mr Ashcroft that whilst Anthony was at the car, Mr Ashcroft came into the parking area, spoke to Anthony about Karl's acquisition of the car the preceding weekend, then opened the car door and extracted a string of fasteners from the box.  Anthony gave evidence that Mr Ashcroft asked whose they were, and Anthony said he did not know; Mr Ashcroft said he thought they belonged to his company.  Mr Ashcroft did not dispute Anthony's evidence about this conversation. 

It is common ground that Mr Ashcroft went inside and spoke to Karl saying the fasteners belonged to the respondent. 

Anthony and Karl gave evidence that when Anthony returned inside to the workbench Karl asked him if he had taken the fasteners because they were not "ours".  Karl told him to return the fasteners.  Anthony then went out and retrieved them from the car.  Anthony said that at no time during the afternoon did he speak to his father about the fasteners.  The applicant said he first heard that the fasteners had been taken to the car later that evening when all the family had returned to their home.

Mr Ashcroft gave evidence that he went to the parking area and looked in Karl's car because of a report he received from Mr Heath.  Mr Heath had come into his office and said he had just witnessed the theft of a box of "cleats".  He said (words to the effect) that he saw the applicant organise his son to take the box out to the car.  Mr Heath confirmed in his evidence that he made a report of stealing to Mr Ashcroft.  Mr Ashcroft said that he checked again with Mr Heath on the evening of 17 May by telephone what Mr Heath had seen or heard.  Mr Heath was emphatic that he had heard the applicant instruct his son to take out the fasteners.

I have already referred to the events of 18 May.  The applicant gave evidence that as he entered the office at the request of Mr Ashcroft, Mr Ashcroft said "Our relation has come to an end".  The applicant enquired what Mr Ashcroft meant and was told that it was due to his conduct and attitude the preceding day in instructing his son to take the box of fasteners to the car.  The applicant says he denied that he had instructed his son to do so.  Ms Stanton, who was present in the office, then waved the strip of fasteners and the applicant again denied that he had instructed his son to take out the fasteners.  He said his son had apparently picked them up by mistake.  The applicant said that further conversation then followed about other aspects of his performance which were criticised.  Mr Ashcroft said they were not happy with the applicant's explanation.  He was then dismissed. 

Mr Ashcroft and Ms Stanton on the other hand gave evidence that the remark made by Mr Ashcroft as the applicant entered the door was "Anthony, this could be the parting of our ways".  Mr Ashcroft said to the applicant that a witness had seen him instruct his son to take the fasteners to the car.  That constituted serious misconduct.  The applicant's only response was to say "It was a misunderstanding".  Mr Ashcroft said how could it be a misunderstanding when the witness saw you instruct your son.  The applicant's only further comment was "It was a misunderstanding".  Ms Stanton added an embellishment.  She said that there were long pauses after the applicant said it was a misunderstanding while they waited for further explanation - but there was none, and that the applicant looked defiant.  Because the comment "It was a misunderstanding" was not a satisfactory response, he was dismissed.  Ms Stanton added that he was dismissed because they had lost confidence in him.

Under s 170EDA(1)(a) the onus of proving that a valid reason for dismissal existed rests on the employer.  The burden of proof is on the balance of probabilities.  That is so even where the alleged valid reason is the commission of an act that constitutes a criminal offence.  Nevertheless, the standard of proof required to tilt the scales to the point of reasonable satisfaction in favour of the employer may vary according to the gravity of the fact to be proved.  This matter was discussed by Dixon J in Briginshaw v Briginshaw & Another (1938) 60 CLR 336 at 362 where he said:

"But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved.  The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal."

Here what is alleged against the applicant is complicity in attempted stealing as a servant.  That is a serious allegation against a shop floor foreman and the persuasion of the mind must reflect the gravity of that allegation.

In the conduct of their respective cases counsel for each party attacked the credit and reliability of the witnesses for the opposing party.  In the process, several collateral facts were said to be important guides to whether witnesses should be accepted on critical facts relating to the box of fasteners.  One of the collateral facts which received particular attention was whether the applicant had his van at work in the car park on 17 May 1995 - as the applicant and each of his sons said in their evidence.  The respondent's case denied that this was so.  Ms Stanton was emphatic that the applicant's van was not in the car park.  Mr Heath, in support of the absence of the van, related how he saw all three members of the applicant's family arrive at work in Karl's car that morning, and he was reluctant to admit the possibility of mistake in his recollection.  On this topic I consider a finding can confidently be made in favour of the presence of the van from documentary evidence relating to a sofa owned by a customer, Mrs Denhaan, which I am satisfied was collected by the applicant in his van on the evening of 16 May 1995, and delivered to the respondent's premises by the applicant on 17 May 1995.  Both Ms Stanton and Mr Heath were wrong about the van.  The confidence which they expressed in the accuracy of their evidence was misplaced.  This raises doubt about the reliability of the balance of their evidence.

During the cross-examination of Mr Heath it emerged that he signed a short statement about the events of 17 May 1995 which had been typed up by Ms Stanton.  The statement was almost word for word identical with his evidence about the conversation he said he overheard between the applicant and Karl.  This statement is dated 17 May 1995, but plainly on the evidence of the respondent's witnesses it was not prepared that day.  It seems likely from the evidence of Ms Stanton that it was prepared after the application to this Court was served and in conjunction with Ms Stanton.  The statement was later used by Mr Heath to refresh his memory when he was asked to give evidence at the first trial.  There is, in my view, a very real risk that Mr Heath's evidence is a reflection of the contents of the statement and not a direct recollection of the conversation.  Mr Heath was examined about his degree of confidence in the accuracy of his account of the conversation.  He was asked whether he was sure of what he heard or whether possibly he was mistaken.  He replied that he was sure, otherwise the cleats would not have been in the car.  The logic of this piece of reconstruction is bad, and illustrates a failure, or refusal, to consider other less sinister possibilities.  But the real significance of this answer became apparent when Ms Stanton was giving evidence.  She was not in court when Mr Heath was giving his evidence.  When it was suggested to her that there could have been a mistake or misunderstanding, as the applicant said at the meeting on 18 May 1995, she replied that there could not be otherwise the fasteners would not have been put in the car.  It then emerged that this line of reasoning had been discussed by Mr Ashcroft, Ms Stanton and Mr Heath together before they gave evidence.

I do not doubt that Mr Heath now believes the conversation he overheard in the work place is as he related it in Court, but I have no confidence that the conversation was in fact in those terms.  There is too great a risk that his present belief has been infected by reconstruction and discussion with Mr Ashcroft and Ms Stanton.

I accept that Mr Heath genuinely believed at the time from what he saw and overheard that the box of fasteners was taken outside on the instruction of the applicant, and that he reported this interpretation of the events to Mr Ashcroft.  But for the reasons given I am not satisfied by Mr Heath's evidence that he was not mistaken.  If he misheard, or misinterpreted a direction by the applicant to Karl about the "Klinch-it gun" then the balance of his evidence is entirely consistent with the evidence and innocent explanation of the applicant and his sons.

There are other collateral facts over which the parties disagreed where I have no hesitation in preferring the evidence of the applicant.  Those facts concern the conversation which occurred in the office on 18 May 1995.  I think it improbable that the conversation was as limited as Mr Ashcroft and Ms Stanton now say.  The applicant presented in Court as a confident, articulate person, and it is unlikely that he would not have given a more complete explanation than Mr Ashcroft and Ms Stanton assert.  In particular I think it is highly unlikely that he did not deny instructing his son to take the fasteners to the car.  I am also satisfied on the evidence that Mr Ashcroft and Ms Stanton had decided before the discussion on 18 May 1995 that the applicant would be dismissed.  Mr Ashcroft demonstrated vividly in the witness box by his demeanour, and by his description of the meeting, that he had prejudiced the applicant's guilt before the meeting.  I think it was because the decision to terminate the applicant's employment had already been made that Mr Ashcroft and Ms Stanton went through all the work in progress on the shop floor with the applicant before he was invited into the office on 18 May 1995.

Whilst my conclusions about the events of 18 May tend to support the applicant's evidence, a number of criticisms about the reliability of the applicant on other collateral facts were made on the respondent's behalf.  I have considered these.  I think in some respects the applicant's evidence is not wholly reliable.  If his evidence stood alone I would have difficulty relying on it to the extent that I could make a positive finding that the events on 17 May were as he asserts.  Rather I would conclude simply that I could not accept one version of those events in preference to the other, and decide the issue against the party carrying the onus of proof.

However the applicant's evidence does not stand alone.  There is also the evidence of Anthony and Karl.  Karl in particular impressed as an honest and reliable witness.  In my opinion their evidence should be accepted.  The support which their evidence gives to the applicant satisfies me that the applicant's evidence that he did not instruct one of his sons to take the fasteners to the car should be accepted.  I therefore find that the applicant was not a party to the alleged attempt to steal, and that Mr Heath was mistaken in his interpretation of the events which happened.

This finding makes it necessary to consider the alternative contention advanced on the respondent's behalf that a valid reason for dismissal existed in an honest belief held on reasonable grounds that the applicant was guilty of the misconduct alleged against him.  In my opinion this contention fails on several grounds.  For such a belief to constitute a valid reason the employer must establish that the allegation was investigated as fully as the circumstances permitted, that the employee was informed precisely of the allegation, and that the employee was given a fair and full opportunity to respond, that is to defend himself or herself against the allegation.  Unless these steps have been taken a belief held by the employer will not have the quality which could constitute the belief a "valid reason".  The proper fulfilment of these steps will also cover, at the least, those which are now required of the employer under s 170DC which reads:

"170DCAn employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless:

(a)the employee has been given the opportunity to defend himself or herself against the allegations made; or

(b)the employer could not reasonably be expected to give the employee that opportunity."

On any version of the meeting on 18 May 1995 the allegation made against the applicant was not sufficiently put to him.  In the circumstances of this case it was necessary that the evidence on which the allegation was based be made known to the applicant before he could properly defend himself.  The allegation put to him was that he instructed his son, or organised his son, to take the box of fasteners to the car.  If he had been told that Mr Heath said he overheard the applicant say "[whatever he thought he overheard]" the reason for the misunderstanding would, in all likelihood, have been immediately exposed.  Moreover, if the enquiry ahead of the interview had been properly conducted the exact words overheard by Mr Heath - or at least his best contemporaneous recollection of them - would have been recorded and the present doubt about what he actually heard may not have arisen.

Once the allegation was put, the applicant was not given a proper opportunity to answer it.  It is plain from the evidence of Mr Ashcroft that the interview was confrontational, and moved rapidly from the accusation to the announcement that the applicant was dismissed.  The applicant was given no time to reflect on the allegation, to seek advice, or to organise for his sons to offer their version.  On this last point, I think the investigation conducted by the employer should have included seeking the accounts of Anthony and Karl.

But more serious than any of these deficiencies, the proper process for investigation, inquiry, and compliance with s 170DC failed in this case because Mr Ashcroft and Ms Stanton prejudged the issue.  I am satisfied that they had decided to dismiss the applicant upon the report of Mr Heath before the allegation was put to the applicant. 

Moreover, I consider that dismissal in all the circumstances was disproportional to the gravity of the conduct alleged.  The afternoon must have been a very difficult one for the applicant.  The dismissal of his two sons placed him in a position where he had divided loyalties.  The applicant had earlier in his employment made available free of charge to the respondent his supply of fasteners, along with the Klinch-it tool, and other equipment that was used in the respondent's business.  The respondent did not have a Klinch-it tool and the fasteners would have been of no immediate use to the respondent once the applicant removed his Klinch-it tool.  The applicant, quite reasonably, could have asserted an entitlement to the fasteners to replace those which he had earlier supplied.

It is true that the applicant, as foreman, was in a position where trust and honesty was expected of him - as to an extent it is from all employees.  In most situations the theft of property by an employee - even the theft of small items - would provide sufficient reason for summary dismissal, but in the circumstances that prevailed that afternoon, and because of the nature of the particular item said to have been taken, I think dismissal was an overreaction.  In all the circumstances the removal of the box of fasteners, assuming for the moment that the applicant had told his son to put them in the car, was not the kind of misappropriation that necessarily indicated that the employee lacked the qualities of honesty and trustworthiness that should be possessed by a person holding the position occupied by the applicant.  It was not the kind of misappropriation which indicated a significant risk that the applicant might act to the detriment of the employer in the future.  I am left with the feeling that the real reasons for the dismissal lay elsewhere, and that the allegation of attempted theft provided a convenient vehicle through which to achieve the end of dismissal, but whatever those reasons were they did not emerge from the evidence.

In my opinion the respondent has failed to establish that a valid reason existed within the meaning of s 170ED(1) for the applicant's dismissal. The applicant is entitled to a remedy in accordance with s 170EE.

It is plain that reinstatement is impracticable, and both parties were agreed in that.  The appropriate remedy is compensation.  For the purpose of assessing compensation it was agreed that the applicant would have received remuneration of $650 per week over the six months immediately following 18 May 1995 had he not been dismissed.  The jurisdictional limit which s 170EE(3) imposes on the award of compensation is therefore $16,900.

It is now just over 9 months since the dismissal occurred.  The only employment which the applicant has been able to obtain in that time was as a casual upholsterer with a company in South Australia from 8 August to 27 November 1995 when his earnings averaged $486 per week.

There are suggestions in the evidence that there was a downturn in the upholstery business in late 1994 and the first half of 1995 in Perth, and the applicant in late 1994 went out of business as a self-employed upholsterer in South Australia, presumably as it was not a profitable business although the reasons why he did so were not explored.  However there was no suggestion made by the respondent's case that, had the dismissal based on the erroneous allegation of dishonesty not occurred, the employment of the applicant would not have continued.  Nor was it part of the respondent's case that the applicant had failed to make adequate enquiry for work, or had failed to pursue any avenue for earnings that was open to him.  It was not suggested that he failed to mitigate his loss.  The applicant said that his searches for work had been unsuccessful, apart from the casual work already mentioned, and that he had no immediate prospects.  In these circumstances his loss  already exceeds the maximum.  I therefore fix the compensation at $16,900.

The decision of the Judicial Registrar will be set aside. It will be declared that the applicant's employment was terminated in contravention of s 170DE(1). There will be an order that the respondent pay to the applicant compensation of $16,900.

I certify that this and the     preceding pages are a true copy of the Reasons for Judgment of  Justice von Doussa

Associate

Dated:

Counsel for the applicant  : Mr F R Condon

Solicitor for the applicant     : Condon & Co.

Agent for the respondent       : Ms J Dowling

Dates of hearing               : 19 & 20 February 1996

IN THE INDUSTRIAL RELATIONS COURT     )
  )
OF AUSTRALIA  )         No. SA 95/1161R
  )
SOUTH AUSTRALIAN DISTRICT REGISTRY  )  

BETWEEN:     ANTHONY SANGWIN

Applicant

AND:            IMOGEN PTY LTD (trading as
  Carleton Custom Upholstery)

Respondent

CORRIGENDUM

Please note the following changes:

On p.12 in the third paragraph, line 2 the reference to "s.170ED(1)" should be substituted with "s.170DE(1)".

On p.14 in the second paragraph lines 9 and 17 the references to "s.170ED(1)" should be substituted with "s.170DE(1)".

On p.28 in the second paragraph, line 2 the reference to "s.170ED(1)" should be substituted with "s.170DE(1)".

Associate:

Dated: