BOWLBY v Thinking Synergy Pty Ltd
[2012] FMCA 1061
•16 November 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BOWLBY v THINKING SYNERGY PTY LTD & ANOR | [2012] FMCA 1061 |
| INDUSTRIAL LAW – Procedural orders – application for amendment to defence – whether amendment futile – whether applicant an independent contractor or employee – alleged misbehaviour of applicant – application as to proposed unrestricted amendment dismissed. |
| Fair Work Act 2009, s.369 |
| Barker v Commonwealth Bank of Australia [2012] FCA 942 Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 Carter v Dennis Family Corp[2010] VSC 406 Commonwealth v Verwayen (1990) 170 CLR 394 Hussein v Westpac Banking Corporation (1995) 59 IR 103 Malik v Bank of Credit & Commerce International SA (in liq); Mahmud v Bank of Credit & Commerce International SA (in liq); [1998] AC 20 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 |
| Applicant: | BARDIE BOWLBY |
| First Respondent: | THINKING SYNERGY PTY LTD |
| Second Respondent: | CATHY VELENTZAS |
| File Number: | MLG 481 of 2012 |
| Judgment of: | Hartnett FM |
| Hearing date: | 7 November 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 16 November 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms Felman |
| Solicitors for the Applicant: | Lander and Rogers Lawyers |
| Counsel for the First Respondent: | Mr Champion |
| Solicitors for the First Respondent: | M A Lawyers |
| Counsel for the Second Respondent: | Mr Champion |
| Solicitors for the Second Respondent: | M A Lawyers |
ORDERS MADE ON 7 NOVEMBER 2012
THE COURT ORDERS THAT:
On or before 10 November 2012, the Applicant has leave to file with the Court and serve on the First and Second Respondents an Amended Claim in the form of the proposed Amended Claim provided by the solicitors for the Applicant to the solicitors for the First and Second Respondents on 5 November 2012.
On or before 7 December 2012, the Applicant is to file with the Court and serve on the First and Second Respondents any Reply to the Amended Defence.
Any request by the parties for further and better particulars of any pleadings of any other party is to be made by 14 December 2012.
The parties are to respond to any request for further and better particulars made by any other party by 21 December 2012.
On or before 30 November 2012, the Applicant is to file with the Court and serve on each other party an affidavit of documents regarding the following categories of documents:
(a)Documents which either disclose steps taken by the Applicant to mitigate her loss or income she has earned since 11 January 2012; and
(b)Documents sufficient to enable the Respondents to understand the business activities of Whereforeart and the source or sources of Whereforeart's business income declared in the tax returns discovered by the Applicant in these proceedings.
The parties to complete discovery of any documents discovered pursuant to order (5) above, including inspection, by 7 December 2012.
On or before 21 January 2013, the Applicant is to file with the Court and serve on the First and Second Respondents witness statements setting out the evidence on which she intends to rely.
On or before 18 February 2013, the First and Second Respondents are to file with the Court and serve on the Applicant witness statements setting out the evidence on which they intend to rely.
On or before 6 March 2013, the Applicant is to file with the Court and serve on the First and Second Respondents any material in reply on which she intends to rely.
The matter is listed for final hearing on 26 March 2013 at 10.00am for 3 days.
The parties have liberty to apply.
ORDERS MADE ON 16 NOVEMBER 2012
THE COURT ORDERS THAT:
On or before 30 November 2012, the First and Second Respondents have leave to file with the Court and serve on the Applicant an amended defence in the form of the proposed amended defence annexed to the First and Second Respondent’s application to this Court dated 1 November 2012, save for the amendments to paragraphs 53(b) to 53(d) and 53A to 53F.
The First and Second Respondents pay the costs of the application to amend the defence as agreed and failing agreement as fixed by the Court on the final hearing of the matter.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 481 of 2012
| BARDIE BOWLBY |
Applicant
And
| THINKING SYNERGY |
First Respondent
| CATHY VELENTZAS |
Second Respondent
REASONS FOR JUDGMENT
These proceedings commenced on the filing of an application by the applicant on 26 April 2012. On that date, the applicant also filed a Form 2 Claim under the Fair Work Act 2009 alleging dismissal in contravention of a general protection. On that same date, a certificate under s.369 of the Fair Work Act 2009 (‘the Act’) was filed in which Fair Work Australia certified that it was satisfied that all reasonable attempts to resolve the dispute had been, or were likely to be, unsuccessful.
The respondents filed a defence on 12 June 2012, to which the applicant replied on 26 June 2012. An affidavit of documents was affirmed on 16 July 2012 (pursuant to an order for discovery made on 10 May 2012) by the sole director of the first respondent, who is the second respondent. Thereafter, on 25 October 2012, a first supplementary list of documents was sworn by the second respondent and subsequently filed. On 5 November 2012, the applicant filed a list of documents.
The matter was listed for a directions hearing on 7 November 2012 but an application in a case, filed on 1 November 2012, by the first and second respondent, required hearing on that date. The orders sought were as follows:
“1. That the First and Second Respondents have leave to file and serve an Amended Defence substantially in the form of the Proposed Amended Defence annexed to the Affidavit of Mr. Manuel Puyol sworn on 31 October 2012 and marked with the letters “MP-1”;
2. That the Applicant pay the costs of the First and Second Respondents of this Application; and/or
3. Such further or other order as to the Court seems appropriate.”
That application was supported by an affidavit sworn by Mr Manuel Puyol on 31 October 2012.
The Court was required to consider the seeking of an order by the respondents in the terms below:
“1. That on or before 30 November 2012, the first and second respondents have leave to file with the court, and serve on the applicant, an amended defence, in the form of the proposed amended defence, annexed to the first and second respondents’ application to this court, dated 1 November 2012.”
The applicant opposed the making of such order.
The issue in dispute between the parties was not the filing of an amended defence in itself, but whether it be filed without restriction as sought by the respondents or with qualification as sought by the applicant. The applicant sought the addition of the below words in the above proposed order:
“save for the amendments to paragraphs 53(b) to 53(d) and 53A to 53F.”
that is, the applicant sought the express deletion of paragraphs 53(b) – 53(d) and 53A to 53F of the proposed defence.
Otherwise, the parties were content to make orders, by consent, in the terms made on 7 November 2012.
The disputed proposed amendments add to the respondents’ defence to the applicant’s claim for reasonable notice. In summary, they are mutual trust and confidence amendments and are opposed. The defence sought to be added is that:
a)the applicant did not properly declare her income in her taxation returns for the period for the financial years ending 30 June 2005 until 30 June 2011; and
b)this conduct breached the duties of good faith and mutual trust and confidence implied in the contract of employment between the parties; and
c)this breach was of such a serious nature that it would have entitled the first respondent to summarily dismiss the applicant.
Background
In her application, the applicant makes a claim under the Act alleging dismissal and contravention of a general protection as a result of the termination of the relationship between the applicant and the first respondent on 11 January 2012. In summary, the applicant alleges that the relationship was terminated by the first respondent because she had made a complaint or inquiry as to unpaid or unrecognised employment entitlements. The respondents deny the allegations.
The applicant’s entitlement to unpaid annual leave, unpaid long service leave, unpaid superannuation contributions and other entitlements depends upon the Court’s decision as to whether the applicant was an employee of the first respondent or provided services as an independent contractor.
Relevant to the proposed amended defence, the applicant also makes a contractual claim that she is entitled to payment in lieu of reasonable notice of termination. That claim is set out in paragraphs 53 to 56 of the Claim filed 26 April 2012. The substantive amendment to the proposed amended defence is to plead a new defence in answer to a claim for payment in lieu of reasonable notice of termination.
By her list of documents, the applicant discovered her taxation returns for the financial years ended 30 June 2005 to 30 June 2011. Mr Puyol deposes in his affidavit sworn 31 October 2012 and in paragraph 11 thereof the following:
“11. On the face of her tax returns, the Applicant declared income in each of those financial years as follows:
a) for the year ended 30 June 2005 total income of $24,221..00;
b) for the year ended 30 June 2006 total income of $23,267.00;
c) for the year ending 30 June 2007 total income of $19,539.00;
d) for the year ending 30 June 2008 total income of $22,412.00;
e) for the year ending 30 June 2009 total income of $23,800.00;
f) for the year ending 30 June 2010, total income of $18,835.00;
g) for the year ending 30 June 2011 total income of $25,622.00;”
The respondents first saw the applicant’s taxation returns on an inspection of the applicant’s documents in August 2012 in preparation for a mediation the parties participated in.
In her application in this proceeding, the applicant alleges that at the time of the termination, her base rate of pay was $74,282 per annum. The respondents plead that the first respondent paid the applicant an amount of $71,200 per annum.
The respondents seek the proposed amended defence to be filed because they claim that on their face, the applicant’s taxation returns represent systematic dishonest and/or reckless disregard by the applicant of her taxation obligations. It is the respondents’ position that the first respondent is entitled to rely upon serious misconduct discovered after the termination of the engagement in answer to a claim for wrongful termination of employment. The respondents claim that the applicant was engaged to perform duties in a position of trust and that the applicant’s honesty was essential to that ongoing position. The respondents maintain that if the allegation that the applicant was dishonest is proved at trial, it was repudiatory of the applicant’s obligations under the contract of engagement and the first respondent was entitled to terminate the engagement forthwith without notice.
The applicant has made no response to the allegations of dishonesty and/or reckless disregard of her obligations to the Australian Taxation Office and Commissioner of Taxation as it is made by the respondents.
Consideration
The applicant argues that the respondents’ proposed amendment to the defence is hopeless, and bound to fail for two reasons:
a)because there is no connection as required between the applicant’s alleged misconduct and her employment with the first respondent; and
b)even if there was a connection between the applicant’s alleged misconduct and her employment with the first respondent, the connection is so tenuous that it could not possibly justify the summary termination of the applicant’s employment (as distinct from termination on notice).
In the applicant’s outline of submissions on the respondents’ application, counsel for the applicant submits that it is well-established that a Court ought not allow an amendment to a pleading if that amendment would be futile. The test has been put in various ways, but it is commonly stated that the Court will assess whether the proposed amendment is arguable [Commonwealth v Verwayen (1990) 170 CLR 394 at 456 (Dawson J)]. The applicant argues that the alleged misconduct in this proceeding, even if established, is a personal matter between the applicant and the Australian Taxation Office. It had no bearing on the duties performed by the applicant in her employment with the first respondent or on her employment with the first respondent generally. The applicant points to there being no allegation in this proceeding that any breach of the applicant’s taxation obligations could have an impact directly or indirectly on the first respondent’s business, and thus that the respondent’s reliance on the decision in Malik v Bank of Credit & Commerce International SA (in liq); Mahmud v Bank of Credit & Commerce International SA (in liq); [1998] AC 20 is misplaced.
Counsel for the respondents referred the Court to the Federal Court of Australia decision in Barker v Commonwealth Bank of Australia [2011] FCA 942 to the effect that there is an implied term of trust and confidence in a contract of employment. In Barker v Commonwealth Bank of Australia [2012] FCA 942, Besanko J referred to the leading English authority of Malik v Bank of Credit & Commerce International SA (in liq); Mahmud v Bank of Credit & Commerce International SA (in liq); [1998] AC 20, wherein Lord Steyn held that the duty of trust and confidence is a mutual duty:
“It imposes reciprocal duties on the employer and employee.” (at [15]).
Counsel for the respondents asserted that on the face of the taxation returns of the applicant, there has been systemic and/or dishonest non-declaration or under-declaration of income by her. The respondents sought an explanation from the applicant which would answer the allegation of dishonesty but no response has been forthcoming.
The applicant sues for nine months reasonable notice. If she repudiated her obligations under her contract of employment, the first respondent was entitled to terminate the contract forthwith without notice. As a matter of law, the respondents were entitled to rely on conduct unknown as at the date of termination, and discovered only after termination (Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359) as is the case here in respect of the alleged conduct.
The respondents argue that the applicant had an obligation not to conduct herself in a dishonest or corrupt way, and that if she has done so, the first respondent was entitled to treat that conduct as a repudiation by the applicant of her contractual obligations. The respondents reply in response to the applicant’s contention that there was no relevant connection between the applicant’s taxation affairs and the engagement, is that whether there is a requisite connection is a matter for trial. Further, the conduct alleged is serious, particularly when it is considered that the applicant alleges, amongst other matters, her duties involved the maintenance of financial records of the first respondent’s business.
I accept the submissions of counsel for the applicant that it is well-established that misconduct justifying summary dismissal must be in respect of important matters which are incompatible with the fulfilment of an employee’s duty, or involve an opposition, or conflict between an employee’s interest and his duty to his or her employer, or impedes the faithful performance of his or her obligations, or is destructive of the necessary confidence between employer and employee. An actual repugnance between an employee’s act and the relationship with employer must be found. It is not enough that ground for uneasiness as to its future conduct arises (Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66) (Dixon and McTiernan JJ). An employer who alleges gross negligence or serious misconduct to justify summary dismissal carries a “heavy burden” (Carter v Dennis Family Corp[2010] VSC 406 at 39 to 42) (Habersberger J).
Staindl JR in Hussein v Westpac Banking Corporation (1995) 59 IR 103 said when considering dismissal in the face of dishonesty (at page 107) the following:
“This case is unusual. It involves a dismissal for conduct which is not directly related to the applicant’s employer, the charge of dishonesty related to the ANZ Bank, not to Westpac.
There is surprisingly little case law on when a dismissal is justified in such circumstances. In my view a conviction on a drink-driving charge which occurred outside work hours would not be relevant to the employment of many people. However, I would be of critical relevance to a truck or taxi driver. It seems to me that an appropriate test is whether or not the conduct has a relevant connection to the employment.”
In this case there is not the relevant connection. There is a tenuous connection, if there is any connection, between the alleged misconduct of the applicant and her employment with the first respondent. It cannot be said that the alleged misconduct would have destroyed the necessary confidence between the respondents and the applicant, nor could the alleged misconduct involve a repugnance between the relationship of employer and employee. The alleged misbehaviour has no relevant connection with the performance of the applicant’s duties as an employee of the first respondent. Nor so in circumstances where the respondents assert the applicant to be an independent contractor. It is a matter for cross-examination certainly and can go to credit findings. But the relevant connection to the employment is absent. In those circumstances the Court must exercise its discretion and not permit the amendment.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Harnett FM.
Date: 16 November 2012
0
8
1