Baggett v Commonwealth Bank of Australia

[2001] NSWSC 108

CITATION:	Baggett v Commonwealth Bank of Australia [2001] NSWSC 108
CURRENT JURISDICTION:	Common Law Division
FILE NUMBER(S):	SC 13235/1991
HEARING DATE(S):	1/11/99 - 18/11/99; 4/2/2000
JUDGMENT DATE:	6 March 2001
PARTIES :	J Baggett (plaintiff) Commonwealth Bank of Australia (ACN 123 123 124) (defendant)
JUDGMENT OF:	Hidden J at 1

COUNSEL :	P Finch (plaintiff) B Rayment QC with A Payne (defendant)
SOLICITORS:	Messrs James Moustacas & Co (plaintiff) L E Taylor (defendant)
CATCHWORDS:	Action for Damages - - Plaintiff employee of defendant - dismissed - whether defendant negligently advised him to abandon statutory right of appeal against dismissal - whether such an appeal could have succeeded - whether his dismissal and subsequent criminal prosecution attributable to unsafe work practices of defendant
LEGISLATION CITED:	Commonwealth Banks Act 1959-73
CASES CITED:	Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66
DECISION:	Verdict for defendant

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HIDDEN J

No: 13235/91

John Gilbert Baggett v Commonwealth Bank of Australia

Reasons for judgment

1     HIS HONOUR: The plaintiff, John Gilbert Baggett, was employed by the defendant, the Commonwealth Bank of Australia, for about twenty-five years. In March 1986 the Bank dismissed him from its service. It is the circumstances leading to and surrounding that dismissal which give rise to these unusual proceedings.

Introduction

2     The plaintiff’s dismissal was the result of his relationship with a customer of the Bank, John Scott, while he worked at the Thornleigh and Mudgee branches over a period in the 1980s. He was involved in opening several accounts for Mr Scott in fictitious names and in depositing into those accounts third party cheques, that is, cheques made out to a person or entity other than the named account holder. In fact, Mr Scott was perpetrating a major fraud upon his employer which, in turn, exposed the Bank to a substantial financial liability. The plaintiff himself faced criminal charges alleging his involvement in that fraud but, ultimately, that prosecution was terminated in his favour.

3     He was dismissed under certain provisions of the Commonwealth BanksAct 1959-73. That Act established a Tenure and Disciplinary Appeal Board, to which an officer of the Bank might appeal against his or her dismissal. In the first cause of action in the proceedings before me, the plaintiff alleges that he abandoned an appeal to that Board as a result of negligent advice tendered to him by superior bank officers. In a second cause of action he alleges that his dismissal and prosecution were the result of what might be described as unsafe work practices of the Bank: in particular, its acquiescence in the operation by some of its customers of accounts in fictitious names.

Background

4     The plaintiff was born on 8 September 1943 and is now fifty-seven years old. He is one of four children and he had the benefit of a responsible, caring and supportive family. He was brought up a Catholic and remained a devout adherent to that faith in his adult life. He was not academically gifted and he left school at what was then known as the Intermediate level.

5     In January 1961, at the age of seventeen, he commenced employment with the Bank. He saw it as his life long career and, as it happened, his association with the Bank was to touch upon his personal life in more ways than one. In 1964 he was married to the daughter of a senior bank officer. They have six children, to whom he sought to impart the religious and moral values which his parents had instilled in him. His salary was the only source of the family’s income until 1976, when his wife undertook some casual work. They lived modestly but comfortably enough, and enjoyed a good family life.

6     The observation of a number of more senior officers of the Bank, who gave evidence, was that the plaintiff, although something of a “plodder”, was an honest and diligent employee. He has no criminal convictions. Indeed, he has had no contact with the police other than that associated with this case.

7     When the plaintiff commenced employment with the Bank there was relatively little formal instruction in banking procedures, and most of his training was “on the job”. Almost the whole of his first seventeen years was spent at the head office, where he was involved in what might be described as “back-room” work. During this period he gained little knowledge of retail banking. Towards the end of the 1970s he did some relieving work in branches, and in July 1980 he was promoted to the position of accountant and appointed to his first permanent position in a branch at Thornleigh. He had been accustomed to complying with the instructions of senior bank officers, and he expected to follow the directions and guidance of his branch manager.

8     The Bank’s policies and procedures were conveyed to the staff by circulars issued from time to time. These were known as the “Circular Instructions”. On occasions they were amended or updated. At the relevant time they were quite voluminous, but they were indexed and it was not difficult to find out what they contained about any particular matter. The more senior staff at the branches, including accountants, were known as “classified officers”. It was expected that classified officers would be familiar with the Circular Instructions bearing upon the functions which they had to perform.

9     Of central importance in this case is an instruction dealing with the acceptance of cheques for the credit of accounts, relevant parts of which are as follows:

CHEQUES ACCEPTED FOR CREDIT OF ACCOUNTS
Except as provided hereunder, cheques whether payable to “order” or “bearer”, uncrossed or crossed, or restrictively crossed “not negotiable” or “account payee only”, should not be accepted for credit of persons other than the payee … without the approval of the Manager or Accountant.
Similarly, …cheques which in their details or from attendant circumstances cast doubt upon the customer’s title should not be accepted without approval.
….
The teller may at his discretion, however, accept cheques not exceeding $500 at any one time when payable to a person other than the depositer, provided there is nothing
(i) on the face of the cheque to indicate that it is drawn for some specific purpose inconsistent with payment into depositor’s accounts, eg cheques crossed “account payee” …
(ii) in the nature of the transaction to raise doubts as to the bona fides of the depositor’s possession of the cheque.
If it is apparent that cheques could not be accepted in terms of the above, customers should be referred to the Manager or Accountant rather than be questioned by tellers.
In the application of the foregoing Managers may, in their discretion, authorise tellers to accept from customers of undoubted integrity any cheques for reasonable amounts, consistent with the nature of the customer’s occupation and his account, without enquiry or reference, provided there is nothing in the detail of such cheques or attendant circumstances to arouse doubt or suspicion as to the customer’s title.
In all other cases reference must be made to the Manager or Accountant who will be guided entirely by the circumstances of each case in determining the course of action to be taken, bearing in mind that unless the Bank has the protection of Section 88D of the Bills of Exchange Act it is liable to the true owner if it collects for a customer a cheque to which the customer has no title.
As a very general rule, mere enquiry from the presenting customer would not absolve the Bank from liability. Therefore, particularly with large amounts, Managers should record by diary note the specific avenues explored to establish true ownership by our customer. In some cases it may be necessary to make direct reference to the drawer to establish the correctness of accepting a particular cheque for the credit of the customer concerned.
…
If there is in the details of the cheque or in the nature of the person dealing with (sic) anything unusual or suspicious suggesting the necessity for enquiry in the interests of the true owner, then due care should be exercised. Thus the omission to see that the endorsement on an order cheque credited to the account of a third party is in order (at least ostensibly), and/or failure to obey crossings, could constitute negligence. Restrictive crossings such as “Account Payee Only” lay a heavy burden on bankers, and failure to obey such crossings is usually conclusive evidence of negligence. ...
Apart from the details of the cheque there may be circumstances attending the deposit of a cheque which may have to be taken into account, eg where an account is opened and the customer, shortly after establishing the account, lodges for collection a cheque for a large sum of money. This should call for investigation. Again knowledge that the person lodging the cheque or his wife is an employee or agent of the drawer, payee or endorsee of a cheque and is not paying it to the credit of such an account as might be expected in the ordinary course as by paying it to his own or his wife’s account or an account under his control may be a very material factor and would call for enquiry.

10     The plaintiff could not recall ever having read that instruction. However, it was his understanding that it was the branch manager’s responsibility to authorise the deposit of third party cheques into a customer’s account. When he joined the Thornleigh branch the manager was Mr Kevin Kenna. Mr Kenna gave him to understand that normally a cheque could not be deposited to an account unless it were in the name of the account holder or the drawer had agreed to its deposit. During that period all third party cheques were referred to Mr Kenna who, to the plaintiff’s observation, would not authorise the deposit of such a cheque in excess of $500 unless he had the assent of the drawer, or the account holder was a long standing customer who was considered to be “undoubted”. Equally, the plaintiff understood that the crossing “account payee only” meant that the drawer of the cheque intended that it be deposited only into the account of the person or body in whose favour it was drawn and that, by collecting the proceeds of the cheque from the drawer’s bank, the payee’s bank would be representing that it was doing so on behalf of that payee.

Thornleigh

11     In due course Mr Kenna was promoted and moved on, and in August 1982 he was replaced as manager at Thornleigh by Mr Thomas Leggett. Mr Kenna’s managerial style might fairly have been described as conservative. Mr Leggett’s was not. He sought to increase the business of the branch by courting the custom of businessmen and professional people in the area. It was in this atmosphere that he and the plaintiff came to have dealings with John Scott.

12     During the period that the plaintiff remained at the Thornleigh branch, Mr Scott operated three accounts in fictitious names. In a statement prepared for the purpose of these proceedings, and in the earlier part of his evidence, the plaintiff’s account was that in late 1982 or early 1983 Mr Leggett spoke of Mr Scott, saying that he was one of the best customers of the branch, that he had opened an account for him in a fictitious name, and that he wished the plaintiff to look after him. The plaintiff said that on a subsequent occasion he was introduced to Mr Scott by Mr Leggett, in the presence of another respected customer of the branch. Later in his evidence, however, the plaintiff acknowledged that it was he who had introduced Mr Scott to Mr Leggett and that he did so before any of the fictitious name accounts was opened. Mr Leggett gave evidence and, broadly speaking, this was also his account. He added that the plaintiff had vouched for Mr Scott, saying that he was “OK”. The plaintiff did not believe he had done so, saying that he had no adequate knowledge of Mr Scott’s business affairs.

13     At the time Mr Scott was employed as a promotions manager by Rothmans of Pall Mall (Australia) Limited, the well known cigarette company. He opened accounts at the Thornleigh branch in three fictitious names: John Briggs, John Carlson and Ernest Moon. Under the name John Carlson he opened both savings and trading accounts, a distinction which the bank then maintained. Into all those accounts he deposited cheques drawn by Rothmans. The majority of those cheques were drawn in favour of sporting bodies, particularly horse racing organisations. All the cheques were crossed “not negotiable, account payee only” and none of them was made out to the named account holder or to John Scott.

14     The Briggs account was the first to be opened. Between November 1982 and March 1983 Mr Scott deposited into that account Rothmans cheques in amounts ranging from $1,000 to $9,000, totalling over $80,000. The Briggs account was closed and was followed by the Carlson accounts. Between April and July 1983 Mr Scott deposited into the Carlson savings account Rothmans cheques in amounts ranging from $3,000 to $10,000, totalling $112,000. Between August 1983 and September 1984 he deposited into the Carlson trading account Rothmans cheques in amounts ranging from $1,250 to $70,000, totalling almost $750,000. The Moon account was the last to be opened, and between October 1984 and January 1985 he deposited into it Rothmans cheques in amounts ranging from $5,000 to $15,000, totalling a little over $150,000.

15     It was the plaintiff who opened the Briggs and Moon accounts and the Carlson savings account. His evidence was that he did so at the direction, or with the approval, of Mr Leggett. The Carlson trading account was opened by Mr Leggett and other staff of the bank while he was on long service leave for six months. It was he who effected the deposit of many of the Rothmans cheques, but not all of them. In particular, a significant number of cheques were deposited into the Carlson trading account while he was on leave. Equally, it was he who completed many of Mr Scott’s withdrawals from the savings accounts by the issue of bank cheques which he signed.

16     The plaintiff understood that Mr Scott used the accounts for his private purposes, as well as the promotion of Rothmans through sports sponsorship. He never knew why Mr Scott opened the accounts in fictitious names and he never made any enquiry about that matter. He had had no previous experience of opening accounts of that kind. He knew that Mr Scott was a punter and that many of the cheques drawn on the various accounts were made out to bookmakers. Mr Scott also deposited cash into the accounts, which he assumed to be the proceeds of successful wagers. Thornleigh was a small branch with only a handful of staff and, according to him, this was known to all of them.

17     The plaintiff said that he was directed by Mr Leggett to allow Mr Scott to deposit any cheques he wished into those accounts. He added that Mr Leggett directed the other staff to do likewise at times when he (Leggett) was absent from the branch. However, if Mr Scott wished to deposit a “really large” third party cheque, by which he meant a cheque in the order of “$20,000 or $30,000”, it was his practice to take it to Mr Leggett for approval. He never reported to Mr Leggett that significant amounts of money in Mr Scott’s accounts were being used for gambling, although he understood that Mr Leggett knew that Mr Scott was a punter and, like other staff at the branch, was aware that money for gambling purposes was being paid into and out of the accounts. Despite the large amounts involved, he considered Mr Scott’s operation of the accounts to be “his business”. On occasions he acceded to requests by Mr Scott, without explanation, to delay banking cheques.

18     Mr Scott would take the plaintiff and Mr Leggett out to lunch every couple of months, and sometimes he gave them betting tips and invited them to sporting events sponsored by Rothmans. On occasions he would bring cartons of cigarettes to the branch to be shared amongst the staff. In 1983 the plaintiff decided to move to Mudgee. He discussed this matter with Mr Scott, also mentioning the financial strain he suffered as the breadwinner for a large family. Mr Scott offered to lend him some money, which he initially declined. However, he did accept loans of $1,000 on two occasions, both of which he paid back with interest.

19     As I have said, Mr Leggett gave evidence. He said that, as he understood it, Mr Scott was using the accounts for Rothmans’ promotion, albeit in a clandestine manner. He was drawing cash and cheques from the accounts for payment to television personnel at sporting events to have cameras trained on cigarette advertisements at sporting venues, in an attempt to circumvent the ban on cigarette advertising on television. I say no more than that, whatever may have been Mr Leggett’s belief about that matter, it is not borne out by the records of cheques drawn on the accounts which are in evidence.

20     Mr Leggett’s evidence was supportive of the plaintiff’s account in some respects but not in others. For example, he claimed to have no recollection of being aware when he was at Thornleigh that Mr Scott was a punter and that the accounts were being used, in part at least, for gambling purposes. I have earlier referred (par 12 of these reasons) to his evidence that the plaintiff not only introduced him to Mr Scott but also vouched for him. Mr Leggett was also dismissed as a result of this affair but he pursued an appeal to the Tenure and Disciplinary Appeal Board. It is apparent that his evidence before that Board was considerably more exculpatory of himself, and inculpatory of the plaintiff, than his testimony in this Court. He did not impress me as a witness. I view his evidence with circumspection and I do not find that it assists me in arriving at my conclusion in this case. If it were necessary to resolve such conflict as there is between his evidence and that of the plaintiff, I would prefer the plaintiff’s. However, for reasons which will become apparent, that process need not be undertaken.

21     In February 1985 Mr Leggett was removed as manager at Thornleigh and sent to work at the head office of the Bank. In that same month the Moon account, which Mr Scott was then operating, was closed. In the following month the plaintiff took up a position at the Mudgee branch. In the meantime, he did not introduce Mr Scott to the new manager at Thornleigh or to the accountant who was coming to replace him, nor did he tell either of them anything about Mr Scott’s business at the branch. He denied that this was because he felt any concern about Mr Scott’s dealings.

Mudgee

22     In March 1985 the plaintiff commenced work at the Mudgee branch as the savings bank supervisor, a position junior to that of accountant. The manager was Mr Robert Stelfox, and the accountant was Mr Geoffrey Lemon. The trading bank supervisor was Mr Samuel Cutting. In October 1985 Mr Stelfox left the branch. Mr Lemon relieved as manager until that position was filled in December of that year by Mr John True. All these gentlemen gave evidence.

23     Soon after his arrival at Mudgee the plaintiff was contacted by Mr Scott, who had him open a trading account at the branch in the name of the “Australian Snooker and Billiards Council”. Mr Scott still lived at Epping, close to the Thornleigh branch, and appeared to have no association with the Mudgee area. Between the time the account was opened and January 1986 he deposited into it Rothmans cheques in amounts ranging from $2,000 to $37,000, totalling over $650,000. A few of the cheques, including the first to be deposited, were made out to the “Australian Professional Snooker and Billiards Council”, an organisation which undoubtedly did exist. Again, the Rothmans cheques were crossed “not negotiable, account payee only” and, to the plaintiff’s knowledge, many of Mr Scott’s dealings with the account related to his gambling. Nevertheless, the plaintiff said that he understood that this account also was used for promotional purposes.

24     The circumstances surrounding the opening and operation of this account were significantly different from those pertaining at Thornleigh. Mr Scott used the name “Ian Anderson”, that name being shown on the documentation opening the account as the chairman of the Australian Snooker and Billiards Council and as the account’s only signatory. The Council was described as an “organiser of snooker and billiards tournaments Australia wide” and the plaintiff represented that Mr Anderson was known to him personally. The address shown for the Council was a post office box at Mudgee which the plaintiff had opened, supplying his home address at Mudgee as the address of the holder of the box. All this was arranged by communication with Mr Scott by telephone or by mail, Mr Scott forwarding the documentation he had to complete to the plaintiff at the Mudgee branch.

25     According to the plaintiff, Mr Scott undertook to provide the rules of the organisation but, in fact, he never did so. Despite a request from the plaintiff in response to an enquiry by Mr Lemon, they still did not materialise. The plaintiff never heard of any other office bearer of the Council and he did not know where it was located. He had no knowledge of any meetings it might have conducted and he never saw any document bearing its name (including minutes of meetings).

26     The plaintiff kept a deposit book for the account. Mr Scott would mail cheques to him, which the plaintiff would personally deposit into the account, signing the name “Ian Anderson” on the deposit slips. He would also fill out cheque book requisitions in that name, purporting to verify the signature of the named account holder by placing his initials on the document in his capacity as supervisor. In the result, it was he alone who opened the account and attended to all transactions upon it. Despite the amounts of the Rothmans cheques which he deposited into the account, on no occasion did he seek the manger’s approval to do so.

27     The plaintiff told Mr Cutting, Mr Lemon and a more junior employee of the bank, Mr Roy Beer that he knew Ian Anderson and that he was involved in organising snooker and billiards tournaments. According to Mr Cutting, he also said that Anderson would be moving to the area and was going to start a competition. The plaintiff denies having said this. Later, in answer to an enquiry by Mr True about the account, he said that it was funded by Rothmans for snooker and billiards tournaments around the country. He told no-one that the account was in fact opened by Mr Scott, that he was an employee of Rothmans, that he was depositing into the account third party cheques drawn by Rothmans or that he used the money in the account, at least in part, for his own purposes.

28     While they had no face to face contact during this period, Mr Scott sent the plaintiff cartons of cigarettes through the mail every few weeks and on one occasion he forwarded a gift of cash.

Arrest and Dismissal

29     On 29 January 1986 the plaintiff was arrested and charged with involvement in Mr Scott’s fraud upon Rothmans. Mr Scott himself was also arrested, as was Mr Leggett. All of them were committed for trial in the District Court, where the plaintiff and Mr Leggett were acquitted at the direction of the trial judge. Except to the limited extent to which I shall turn in due course, the nature of the charges and the course of the criminal proceedings are not material for present purposes.

30 By s107 of the Commonwealth Banks Act, an officer of the Bank could be dismissed for misconduct. The various bases upon which misconduct might be established were set out in subs (10), the relevant parts of which are as follows:

(10) For the purposes of this section, an officer shall be taken to have been guilty of misconduct if, and only if -

(b) he has been negligent or careless in the discharge of his duties;

…

(e) he has been guilty of any disgraceful or improper conduct, whether as an officer or otherwise; (or)

(f) he has committed a breach of the terms and conditions upon which he holds office;
……

31 In a letter to the plaintiff of 6 March 1986 the Bank set out the behaviour alleged to constitute misconduct on his part. It is unnecessary to recite these allegations, some of which could not be sustained on the evidence before me. It is sufficient to say that they arose from his dealings with the accounts in false names opened by Mr Scott at Thornleigh and Mudgee, with particular reference to his deposit into those accounts of third party cheques drawn by Rothmans, together with his borrowing of money and accepting gifts of cigarettes from Mr Scott. These matters were said to constitute misconduct within the meaning of the three paragraphs of s107(10) set out above. As a consequence, it was said, the Bank had reason to doubt the plaintiff’s integrity in carrying out his duties “as a classified officer in a position of trust”.

32     The decision to dismiss the plaintiff was made on 27 March 1986 and he was informed of it by letter of 2 April 1986. That letter drew his attention to his right of appeal under the Act and added that he would be written to separately about the release of his final salary payment and the refund of his superannuation contribution. The plaintiff lodged an appeal to the Board by a letter of 28 April 1986.

33     An internal bank memorandum of 3 April 1986 recorded a direction that the plaintiff’s superannuation contribution be released to him. Nevertheless, it seems that the foreshadowed letter about his final salary payment and superannuation contribution was never forwarded to him and by early July 1986 he had received no payment. He had been suspended without pay for some months and was in financial difficulty. On 10 July 1986 he attended the Mudgee branch and spoke to Mr Lemon. Mr Lemon told him that his money was in a suspense account and could not be paid until the conclusion of his appeal. According to him, Mr Lemon went on to say that his only recourse would be to withdraw his appeal, whereupon the money would be available to him. In evidence, Mr Lemon did not believe that he had said that but, yet again, I find it unnecessary to resolve that dispute. What is significant is that the plaintiff was led to believe that he could not receive the money while his appeal was on foot.

34     On 14 July 1986 he wrote a letter to the secretary of the Board withdrawing his appeal, as he put, “due to the fact I require the release of my superannuation to pay debts and to live on”. On the same day he handed the letter to Mr True at the branch for transmission to the Board. According to him, the letter was in a sealed envelope. If that be so, it must have been opened and read by senior bank staff. This is a disturbing feature of the evidence but, ultimately, nothing turns on it.

35     On the following day, the plaintiff was telephoned by Mr Lemon and asked to go into the branch to discuss “the wording” of the letter withdrawing the appeal. He attended the branch on 16 July 1986 in the company of his wife, and he saw Mr Lemon and Mr True. His evidence was that Mr True told him that the Board would not accept his letter of withdrawal in so far as it was expressed to be due to his need for the release of his superannuation contribution. Mr True added that he had had a letter of withdrawal typed which omitted reference to that matter and, if the plaintiff signed it, the money could be paid immediately. The plaintiff considered that he was left with no choice about the matter and, on that day or not long thereafter, he signed a typewritten letter to the Board stating simply, “I refer to my letter of 28 April 1986 appealing against my dismissal by the Corporation and now advise that I wish to withdraw my appeal as of this date”.

36     In evidence, neither Mr True nor Mr Lemon had any adequate recollection of this conversation and neither was able to deny the plaintiff’s evidence about it. I accept the plaintiff’s account, which was corroborated by the unchallenged evidence of his wife. Mr True said that he understood that payment to the plaintiff might be delayed if he pursued his appeal and that the only way to ensure immediate payment was to withdraw it. In fact, this was inconsistent with a telephone conversation he had had on the previous day with a senior officer of the personnel department and a memorandum forwarded to him by that officer, which had been received at the Mudgee branch on the day of his meeting with the plaintiff and his wife. The effect of that conversation and that memorandum was that the plaintiff should be asked to recast his letter of withdrawal, omitting reference to his financial hardship, but that the money was to be released to him whether or not he withdrew the appeal.

37     It is common ground that the appeal, having been abandoned, was not able to be re-instated. The Board was subsequently disbanded. As it happens, the last appeal it heard was that of Mr Leggett.

38     What I have written so far is a relatively brief summary of a great deal of evidence. I have referred to several conflicts in that evidence which I have found it unnecessary to resolve. There were a number of others in the same category which I have not mentioned. What I have set out, however, is sufficient to identify the issues which I must determine.

The first cause of action

39 Put shortly, by the first cause of action the plaintiff alleges that he was advised, wrongly and negligently, by Mr True and Mr Lemon that he would have to abandon his appeal to have access to his final salary payment and superannuation contribution, that he abandoned the appeal in reliance upon that advice, and that he thereby lost a chance that the Board might vary or set aside the Bank’s decision to dismiss him: s108(3) of the Commonwealth Banks Act. (In written submissions counsel for the plaintiff mounted arguments that the advice tendered to the plaintiff was the result of something more sinister than negligence, but it is clear that the cause of action pleaded is in negligence only.)

40     For the Bank, questions were raised whether it was under any relevant duty of care and whether, in any event, the advice given the plaintiff was correct by the application of the doctrine of election: that is, he could not receive payments due to him upon termination of his employment whilst seeking to set aside that termination. In addition, it was not conceded that it was as a consequence of that advice that the plaintiff withdrew his appeal. However, the final submissions for the Bank were directed primarily to the question whether the plaintiff had established any damage, that is, the loss of a chance of success in his appeal. Written submissions by counsel for the Bank contained a useful reference to a body of authority on this matter. At the end of the day, however, it was common ground that the plaintiff bore the burden of establishing on the balance of probabilities that his appeal would have succeeded if he had pursued it.

41     Although the Act enabled the Board to vary a decision of the Bank, as well as to set it aside, argument centred upon the question whether the Board would have re-instated the plaintiff. It was also common ground that this was a matter for me to assess in the light of the whole of the evidence adduced in this Court. In doing so, I should proceed upon the basis that the Board’s discretion would have been unfettered and that, even if misconduct had been established, it could have ordered the plaintiff’s re-instatement in the light of extenuating circumstances. Accordingly, submissions were directed not only to whether the plaintiff was guilty of misconduct but also, if he were, to the seriousness of that misconduct.

42 I have referred (par 31 of these reasons) to the Bank’s letter to the plaintiff of 6 March 1986 in which it set out a series of specific allegations said to constitute his misconduct. That letter was adopted by reference in a formal document for the purpose of the appeal, entitled “Particulars and Reasons”, in which the Bank again relied upon pars (b), (e) and (f) of s107 (10) of the Commonwealth Banks Act. In large part, the final submissions of counsel for the plaintiff on the question of damage consisted of an analysis of each of the allegations in that letter and the response to them. However, if the appeal had proceeded, this is not the manner in which the Board need have approached the matter. No more should I. The question is whether, in the light of all the evidence, the plaintiff has been shown to be guilty of misconduct such that, even taking extenuating circumstances into account, his dismissal was warranted. The notion of misconduct expounded in s107(10) of the Act is broad enough to embrace the following observation of Dixon and McTiernan JJ in Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66 at 81:

Conduct which in respect of important matters is incompatible with the fulfilment of an employee’s duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal…

43 In my view, the course of events at the Thornleigh and Mudgee branches demonstrates that the plaintiff was guilty of misconduct, at least in the sense of having been “negligent or careless in the discharge of his duties”: s107(10)(b). At Thornleigh, his deposit of Rothmans cheques into the various accounts operated by Mr Scott consistently failed to meet the requirements of the Circular Instruction set out at par 9 of these reasons. This is so even though that instruction vested a measure of discretion in the branch accountant, which was the position he then occupied. Great care should have been exercised, particularly as the Rothmans cheques were marked “account payee only” and it was known that Mr Scott used the accounts for his own purposes. Mr Scott may well have been regarded as a valued customer of integrity, but his use of the accounts for gambling should have put the plaintiff on his guard. I accept that the operation of the accounts was no secret at the branch and that the plaintiff understood that he had Mr Leggett’s blanket authority to bank the Rothmans cheques. In so far as he sought Mr Leggett’s approval in relation to cheques in large amounts, I accept that it was forthcoming.

44     However, Mr Leggett’s role in this affair does not absolve the plaintiff of all responsibility for what occurred at Thornleigh. Rather, he shared that responsibility with Mr Leggett. Nevertheless, the fact that he acted at Mr Leggett’s direction or with his approval, in circumstances where there was no concealment from other staff at the branch of the origin of the accounts and the transactions upon them, significantly mitigates the gravity of his conduct. Given the length of his otherwise diligent service with the Bank, the dire step of dismissal may well not have been justified if the matter had rested there.

45     The plaintiff’s acceptance of loans from Mr Scott was imprudent and in breach of another of the Circular Instructions. However, standing alone, I would not view that matter as critical. The significance of the loans and the other gifts from Mr Scott is that they demonstrate the development of an inappropriate relationship between the two men, such that the plaintiff might well have been motivated to “cut corners” for his favoured customer.

46     I believe that the plaintiff had some sense that his actions at Thornleigh were contrary to the Bank’s policy and procedures. This, I think, is why he did not discuss Mr Scott’s business with the incoming manager and accountant, or introduce him to them, at the time he left the branch. That said, it is his conduct at the Mudgee branch which is determinative of the question whether his dismissal was called for.

47     Unlike at Thornleigh, the plaintiff’s dealings with Mr Scott at Mudgee were shrouded in secrecy. When asked by other staff at the bank about the Australian Snooker and Billiards Council account, he concealed the true identity of Mr Scott and the fact that, to his knowledge, Mr Scott used the account for his private purposes. The opening of a post office box at Mudgee as the address of the Council gave the false impression that the organisation was active in the area. The fact that all transactions on the account were conducted by the plaintiff personally meant that the tellers at the branch were bypassed and ensured that Rothmans cheques could be deposited without reference to the manager or accountant. The plaintiff said nothing to his colleagues about the deposit of those cheques, and it came to the attention of more senior staff at the branch only as a result of the police investigation in January 1986.

48     No-one now suggests that there was such a body as the Australian Snooker and Billiards Council (although, as I have observed at par 23, there was an organisation with a somewhat similar name). However, the plaintiff claimed in evidence that he believed at the time that the account was bona fide. This I simply cannot accept. If it were, why would Mr Scott have not used his own name as chairman and signatory for the account? I shall turn in a moment to the question of accounts in fictitious names generally. I accept that, to the Bank’s knowledge, some of its customers operated such accounts and that the completion of documentation to open accounts of that kind necessarily involved a measure of falsification of which the Bank was aware. However, if the plaintiff believed that the Australian Snooker and Billiards Council account was genuine, why was it necessary to cling to the pretence that the man who opened it was someone called Ian Anderson, not only in the documentation opening the account but also in conversations with other staff at the bank? The whole of his conduct in relation to the account is inconsistent with a belief in its bona fides.

49     The manner in which the plaintiff opened the account failed to comply with yet another Circular Instruction dealing with the identification of account holders. More importantly, his deposit into the account of Rothmans cheques was again in conflict with the circular instruction set out above (par 9) and, it must be added, could not be reconciled with his own understanding of his responsibility when dealing with cheques of that kind: see par 10. At Mudgee, of course, he was not the accountant and the position is not significantly altered by the fact that he may for brief periods have acted in that capacity.

50     I accept that he saw Mr Scott as a valued and respected customer of the bank. It is also true that from late 1982, when he commenced to deal with Mr Scott, until January 1986, when the police became involved in the matter, Rothmans had not complained to the Bank of any irregularity in relation to its cheques. The plaintiff’s evidence was that he saw his dealings with Mr Scott at Mudgee as simply a continuation of those at Thornleigh, believing that his blanket authority from Mr Leggett to bank Rothmans cheques for Mr Scott endured at the Mudgee branch. This, also, I cannot accept. From the somewhat clandestine nature of his behaviour at Mudgee I can only conclude that he knew that what he was doing was wrong and that it would not survive the scrutiny of his superiors.

51     Of course, I do not suggest that he was acting fraudulently. However, what he did was highly negligent and, to his knowledge, was in breach of proper bank procedure. This was serious misconduct. Despite his long service with the Bank and his general good character (outlined at pars 4-7 of these reasons), his dismissal was justified. I think it most unlikely that his appeal to the Board would have succeeded, if he had pursued it. Certainly, I am not satisfied on the balance of probabilities that it would have. The first cause of action is not made out.

52     A significant part of the submissions of counsel for the plaintiff in relation to this cause of action centred upon the Bank’s policy about accounts in fictitious names. This misconceives the gravamen of the misconduct which led to the plaintiff’s dismissal. The fact that Mr Scott’s accounts were, to his knowledge, in fictitious names was of little moment. It was the deposit into them of the third party cheques which brought him undone and led to the substantial loss sustained by the Bank. This misconception also infects the second cause of action, to which I now turn.

The second cause of action

53     This cause of action also sounds in negligence. It is alleged that the Bank conducted an unsafe system of work, whereby it acquiesced in the opening and operation of accounts in fictitious names without warning its staff of the dangers inherent in that practice, as a result of which the plaintiff was dismissed and suffered the indignity of criminal prosecution. It is further alleged that, in the course of the police investigation and the criminal proceedings, the Bank failed to inform the police, the magistrate’s court and the court of trial of its true policy concerning fictitious name accounts, thereby perpetuating criminal proceedings which otherwise might not have been launched or might have been terminated at a much earlier stage.

54     There is abundant material before me establishing that in the early 1980’s the Bank was aware that accounts in assumed or fictitious names were widespread throughout its branches and that they might be used for unlawful or improper purposes. An internal memo at the upper level of the Bank’s administration of July 1984 refers to legal advice that the activity was “both dangerous and disreputable”. The memo went on, however, to note that accounts in fictitious names were in vogue throughout the banking industry and that the Bank might suffer a “loss of major business” if it were to put a stop to the practice. By September 1984 a decision had been made to do nothing about the matter generally, although it was acknowledged that the involvement of staff in some accounts might call for action “on a case by case basis”. This material was objected to but I allowed it, subject to determining its relevance in the light of counsel’s final submissions. I think that it is relevant but it is by no means determinative of the matter at hand.

55     For the purpose of the investigation, Mr Ivan Connors, a senior officer of the Bank concerned with the investigation of frauds and the like, supplied a statement to the police. That statement did not deal with the matter of fictitious name accounts. However, in the course of cross-examination at the committal proceedings in 1987, he was asked about them. The effect of his evidence was that he knew of no such accounts, that he himself would not permit them and, certainly, that he was unaware that they constituted a widespread practice which the Bank tolerated. Despite his having given this evidence, and having made an oral report to his superiors afterwards in which he may have referred to it, the Bank did not inform the prosecuting authorities that the position was otherwise. (I should add that counsel for the plaintiff accepted that Mr Connors’ evidence was truthful and was given in ignorance of the practice of fictitious name accounts and the Bank’s policy about them.)

56     Shortly stated, this is the material upon which the plaintiff relies for the second cause of action. In final submissions, counsel for the Bank raised very real questions about duty of care, breach and causation. As far as the criminal proceedings are concerned, these submissions were based in large part upon the fact that the initiation and prosecution of those proceedings were in the hands of authorities acting independently of the Bank. However, it is sufficient to refer to one aspect of the argument about causation which, in my view, concludes the matter.

57 I have already said that the fact that Mr Scott’s accounts were in fictitious names was not a material matter in the decision to dismiss the plaintiff. Nor was it in the decision to prosecute him. It is true that at a very early stage, in respect of the Mudgee account, he was charged with an offence under s178BB of the Crimes Act 1900, in which the statement said to be false in a material particular was the fact that the account was opened in the name of the Australian Snooker and Billiards Council and one Ian Anderson was shown as its signatory. That charge may well have been inappropriate to reflect the criminality alleged. In evidence before me, the police officer in charge of the investigation explained that, while he saw evidence that the name of the account was fictitious as relevant, it was the deposit into it of the Rothmans cheques which he saw as the offending behaviour. In due course, the conduct of the prosecution was assumed by the Director of Public Prosecutions and in 1990 the plaintiff was presented for trial in the District Court upon a series of charges of being an accessory after the fact to the fraudulent misappropriation of Mr Scott.

58     Clearly, it was the plaintiff’s involvement in the deposit of the Rothmans cheques, not the fact that the accounts into which they were deposited were in fictitious names, which led to his arrest and prosecution. This cause of action, also, is not made out.

Conclusion

59     I have found this a sad and difficult case, and I have given it anxious consideration. I am indebted to counsel on both sides for the thorough presentation of their cases and their comprehensive submissions. I have no doubt that the plaintiff has suffered gravely, emotionally and economically, as a result of his dismissal and prosecution, and I have considerable sympathy for him. Nor, it must be said, does the Bank emerge from this affair covered in glory. The fact remains that the plaintiff has failed to make out his case.

60     There must be a verdict for the defendant. If necessary, I shall hear the parties on costs.

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Last Modified: 03/21/2001