Buitendag v Ravensthorpe Nickel Operations Pty Ltd
[2014] WASCA 29
•6 FEBRUARY 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: BUITENDAG -v- RAVENSTHORPE NICKEL OPERATIONS PTY LTD [2014] WASCA 29
CORAM: McLURE P
PULLIN JA
MURPHY JA
HEARD: 23 OCTOBER 2013
DELIVERED : 6 FEBRUARY 2014
FILE NO/S: CACV 144 of 2012
BETWEEN: ISAK BUITENDAG
Appellant
AND
RAVENSTHORPE NICKEL OPERATIONS PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :LE MIERE J
Citation :BUITENDAG -v- RAVENSTHORPE NICKEL OPERATIONS PTY LTD [2012] WASC 425
File No :CIV 1444 of 2009
Catchwords:
Contract of employment - Summary termination of employment contract - Conflict of interest - Whether involvement in establishing sports club gave rise to a conflict of interest - Whether duty to avoid conflict of interest modified or excluded by contract or otherwise - Whether conflict rule confined to propriety or financial interest - Breach of fiduciary duty - Whether breaches justified summary dismissal - Turns on own facts
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant: Mr G R Ritter QC & Ms S P J Tan
Respondent: Mr K J Mony De Kerloy & Ms O J Klimczak
Solicitors:
Appellant: HopgoodGanim
Respondent: Herbert Smith Freehills
Case(s) referred to in judgment(s):
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Settlement Agents Supervisory Board v Property Settlement Services Pty Ltd [2009] WASCA 143
McLURE P: The appellant appeals against an order made by Le Miere J on 15 November 2012 dismissing his claim against his former employer, Ravensthorpe Nickel Operations Pty Ltd (the respondent) for wrongful termination of his employment contract.
The respondent is a wholly owned subsidiary of BHP Billiton Plc and a member of the BHP Billiton group. The appellant was the general manager of the respondent's nickel mine and processing operations near the town of Ravensthorpe in south west Western Australia.
From 1 October 2007 Mr Buitendag was employed by the respondent under a written contract of employment dated 10 September 2007 (the employment contract). The employment contract is titled 'Nickel West Employment Agreement'. Nickel West is a division of the BHP Billiton Stainless Steel Materials Group (SSM). The respondent's Ravensthorpe operations were part of Nickel West which ran BHP Billiton group nickel mines and processing sites in Western Australia. At the material time, the appellant reported directly to Mr James Wilson, President of SSM.
On 23 January 2009 the respondent summarily dismissed the appellant. The trial judge dismissed the appellant's claim that the respondent had wrongfully terminated his employment contract, finding that the appellant had breached his employment contract in six areas. In particular, the appellant: (1) failed to make full and fair disclosure and made misleading statements to Mr Wilson in relation to the donation of a transportable house to the Hopetoun Clay Target Club (the Club) of which the appellant was a founding member; (2) requested an employee of the respondent to prepare drawings for the Club's clay target range; (3) requested an employee of the respondent to action the donation of materials owned by the respondent to the Club; (4) requested Ertech, an independent contractor who provided services to the respondent, to voluntarily undertake earthmoving works for the Club; (5) failed to comply with the respondent's disposal procedure in relation to the donation of the transportable house to the Club; and (6) failed to report to Group Audit Services a suspected misappropriation of the respondent's property located at the Club. The first four matters were held to involve a contravention of the conflict of interest principle.
The appellant's grounds of appeal with accompanying schedules cover some 40 pages and fail to identify succinctly or with precision the individual errors of law and fact on which he relies. The schedules are an amalgam of argument, submission and evidence. The appellant challenges a vast array of findings made by the trial judge and seeks findings in lieu without complying with the requirement in Practice Direction 7.4 that a party to an appeal identify all relevant evidence for and against a finding of fact which is challenged or sought. The appellant eschewed any attempt at pleading or establishing that the factual findings made by the trial judge were not reasonably open on the evidence as a whole. The detail of the factual claims must await a detailed summary of the trial judge's findings.
In broad terms, the appellant challenges the correctness of the trial judge's statement and application of the conflict of interest principle. In relation to each ground of appeal the appellant claims that there was no conflict of interest, no breach of fiduciary duty and no breach of the employment contract and if there were breaches, they were not sufficient, individually, or collectively, to justify summary termination.
Before addressing the individual grounds of appeal, it is necessary to detail the contractual framework.
The contractual framework
It was a term of the employment contract that the appellant comply with and conduct himself ethically and professionally as detailed in the BHP Billiton Guide to Business Conduct (the Guide) [8]. The appellant was aware of the Guide, that it applied to his employment and that he was bound by is terms [23].
A further term of the employment contract was that the appellant was required to familiarise himself with, and comply with, all workplace policies and procedures and with the respondent's rules, policies, practices and procedures as introduced or amended from time to time [8]. Those included, relevantly, the BHP Billiton Conflict of Interest Standard (Conflict Standard) and the BHP Billiton Nickel West Disposal Procedure (Disposal Procedure).
Other express terms of the employment contract (cl 12) included obligations to diligently and faithfully serve the respondent and protect and further its interest at all times. The trial judge found that this term reflected the duty of good faith and fidelity that is implied into contracts of employment as a matter of law. The trial judge continued:
The scope and content of the duty of good faith and fidelity will vary according to the circumstances of the particular employment. The trust and confidence required in the employment relationship can be undermined by an employee in many different ways. The numerous cases in which a breach of the duty of good faith and fidelity has been found do not limit the conduct of the employee which may breach the duty of good faith and fidelity. The conduct must … impinge on the employment relationship in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employer is reasonably entitled to have in its employee [66].
The trial judge also found that the high levels of discretion and trust reposed in the appellant placed him under a fiduciary obligation in the exercise of his powers on behalf of the respondent. The trial judge continued:
[The appellant] was subject to the 'no conflict' fiduciary rule, that is, [the appellant] was under an obligation not to bring his interests or duty to a third party into conflict with the interests of, or his duty to, his employer without the informed consent of his employer [68].
Under 'Policies, Standards and Guidelines', the Guide relevantly stated:
- All BHP Billiton employees are accountable for acting in line with the policies and standards outlined in this section.
- Managers will be held accountable for BHP Billiton's policies and standards being followed, even if compliance costs the Company business in the short term. Proper business conduct is in our long‑term interests because it creates loyalty and trust in employees, customers, the communities in which we operate, and other stakeholders.
Under 'Compliance with the Law', the Guide relevantly stated:
- BHP Billiton employees must comply with the letter, where it is clear, the spirit of all laws and regulations relating to their business conduct.
Under 'Travel, Entertainment and Gifts', the Guide relevantly stated:
- Employees must exercise the utmost care about giving or receiving business‑related gifts. This applies to direct payments and payments in kind, including the provision of goods or services, personal favours, and entertainment …
- Under no circumstances should an employee request a gift of any kind from a supplier, customer, or other party with whom BHP Billiton conducts business.
Under 'Conflicts of Interest', the Guide relevantly stated:
- Employees should not engage in activities or hold or trade assets that involve, or could appear to involve, a conflict between their personal interests and the interests of BHP Billiton (ie conflict of interests). Such circumstances could compromise or appear to compromise the employee's ability to make impartial business decisions.
- Employees must advise their manager or supervisor of situations that could involve an actual or perceived conflict of interest and remove themselves from any discussion or activity involving the conflict.
Under 'Violations of Company Policies and Standards', the Guide relevantly stated:
- All employees are expected to adhere to the policies and standards described in this Guide … Employees or directors who violate these policies or standards may be subject to disciplinary action up to and including dismissal.
Under 'Using Company Resources and Fraud Prevention', the Guide relevantly stated:
- Employees must not use Company funds, property, equipment or other resources for personal benefit.
- Unauthorised removal of Company equipment, supplies or other resources is regarded as theft. Similarly, Company resources must not be sold, loaned or donated without management approval.
The Guide also required managers such as the appellant not only to comply with the Guide but to take all reasonable steps to ensure that BHP Billiton's employees and where appropriate, consultants, contractors and partners are aware of and comply with the policies and standards in the Guide and to demonstrate exemplary behaviour that other employees can follow.
The Conflict Standard relevantly provided:
- Employees … must avoid business dealings … and also personal relationships that cause or may cause conflicts of interest (actual, perceived or potential) … with an individual's obligations to BHP Billiton (cl 3.1).
- Employees … must not misuse BHP Billiton resources or their position or influence within BHP Billiton to promote or assist in any way any outside activity with which they are engaged (cl 3.7).
Background facts and findings
Prior to the commencement of the respondent's operations, Ravensthorpe and the nearby town of Hopetoun were small farming communities with few education, sporting or recreational facilities. Nickel West developed infrastructure in the area to make it more desirable for the workforce and to foster a good relationship between the respondent and the local community. The respondent had a hybrid residential/fly-in‑fly‑out workforce strategy at the relevant time. The aim of community investment was to develop a long‑term sustainable partnership with the community [10]. The respondent funded a child‑minding facility, a commercial shopping centre and was planning the construction of an indoor sports complex [11].
Nickel West also provided sponsorship to community projects and groups that supported people and activities in the communities close to the respondent's operations. An organisation that sought sponsorship was required to submit an application form which was considered by the Community Liaison Committee (CLC). The CLC consisted of representatives of the respondent and of organisations within the area surrounded and affected by its operations. The role of the CLC was to assess applications for sponsorship. The authority to make a grant rested with a nominated representative of the respondent [12]. Sponsorship funds came from the respondent [108].
In a memorandum of 9 August 2007 to the appellant, Ford Murray, Nickel West's Manager of Government Relations and Communication, recommended the purchase (and lease back if preferred) of six farms neighbouring the respondent's Ravensthorpe operations. The object was to mitigate complaints regarding operational noise and general lifestyle disturbance from what was a large open pit mining operation and a 24/7 processing plant. Mr Murray recommended, inter alia, the purchase of a farm owned by Gary Edwards (the homestead property). Mr Edwards also owned an adjoining property to the east of his homestead property (the eastern property). Mr Murray's memorandum had recommended that Mr Edwards' eastern property not be purchased [16].
The appellant forwarded Mr Murray's memorandum to Nickel West's then president, Mr Bastos, informing him that 'ownership of these farms is critical'. Mr Bastos approved the recommendations. The respondent engaged a real estate agent, Robert Pens, to provide market appraisals of the six farms, including Mr Edwards' homestead property.
On 10 January 2008 Sias Jordaan, the respondent's commercial manager, prepared a Project Submission form for the acquisition of Mr Edwards' homestead property (homestead PS). That stated that it was one of six farms purchased for the purpose of forming a buffer region around the existing mine site. The homestead PS was signed by the appellant on 10 January 2008. It was subsequently approved by Nickel West.
Mr Pens met with the farmers to negotiate the sale of their farms. However Mr Edwards would only sell his homestead property if the company also purchased his eastern property. There was a transportable house on both the homestead property and the eastern property.
On 13 August 2008 Mr Jordaan prepared a PS form for additional funds to purchase Mr Edwards' eastern property (eastern property PS) which stated that Mr Edwards' homestead property was crucial, as it was the closest property to Ravensthorpe nickel operations; that Mr Edwards had suddenly decided to sell due to ill health but he had made the sale of his homestead property conditional upon the purchase of his eastern property; that the eastern property was of no value to the company and it would on‑sell it as a matter of priority. The eastern property PS was signed by the appellant on 14 August 2008 and approved by Mr Wilson.
The purchase of Mr Edwards' homestead property and eastern property was agreed and settlement took place in September 2008.
The appellant, and a group of people including Bernie Biddulph and Rick Besso, often made a round trip of 360 km to participate in clay target shooting at a club in Esperance. In about August 2008 the appellant and others decided they would establish a clay target club in Hopetoun. The appellant, Mr Biddulph and Mr Besso were the three primary proponents in the establishment of the Club.
Mr Besso was allocated the task of identifying appropriate community land for the establishment of the Club and approaching the Shire of Ravensthorpe about the possibility of an allocation of land at a peppercorn rental. Mr Besso, Mr Biddulph and the appellant eventually agreed that a parcel of land adjacent to the airport would be ideal. On 22 September 2008 Mr Besso wrote to the Ravensthorpe Shire on behalf of prospective members of the Club proposing that the Shire lease to the Club a portion of the airport property. The letter enclosed a letter of support signed by 10 people including the appellant. The proposal was approved by the Ravensthorpe Shire in November 2008 and the Club was allocated the airport site.
The appellant undertook the task of forming an incorporated association and drafted a constitution for the Club. He lodged an application for incorporation with the Department of Consumer and Employment Protection on 17 November 2008.
The appellant was aware that two of the respondent's employees, Guy Withers and Matthew Whittred, and others were establishing a motocross club. In February 2008 Mr Withers had asked the appellant if there was a building or donga that the respondent would be able to donate to the motocross club that they could use as a club house.
In August 2008 the appellant became aware that there were two transportable houses on Mr Edwards' properties. The donation of those transportable houses to the Club and the motocross club fell within the appellant's delegated authority. He was able to authorise donations of assets that were valued at up to $1.5 million. However, recognising that he would be donating an asset to an organisation in which he was involved, the appellant decided to disclose his involvement in the Club to Mr Wilson and request approval for the donation of the transportables to the Club and the motocross club.
On 26 September 2008 the appellant telephoned Mr Wilson. The appellant proposed to Mr Wilson that the respondent offer the transportable houses on Mr Edwards' properties to the Club and the motocross club. The appellant told Mr Wilson that he was a member of the Club. There was a conflict between the evidence of the appellant and Mr Wilson concerning precisely what was said about those matters. However, it was common ground that Mr Wilson told the appellant that he agreed with the donation of the two houses on certain conditions and asked the appellant to write an email to him confirming the terms on which he had agreed to the donation of the houses. Later that day the appellant sent an email to Mr Wilson which relevantly provided:
As part of creating a buffer zone around our existing and future operations, RNO have acquired a number of farms just recently. There are two very modest transportables on these farms that we will remove to ensure that they are not inhabited during the lifetime of our mining operation.
BHPB have spent very considerably to establish a residential workforce in Hopetoun. This effort is matched on a smaller scale by community initiatives such as the creation of sporting and recreation clubs by members of the community. Two current examples are the Motor‑cross Club and the Clay Target Club. Both are supported by local government and have been allocated community land for their establishment. However, there is a requirement at the two sporting clubs for something that can be converted into club rooms over time.
It is my proposal that RNO offer the transportables that will be removed from our farms to the two clubs on the basis that they remove and relocate the buildings at their own cost and within a defined timeframe. I am seeking this approval from you in terms of good business conduct because I have an interest in Clay Target shooting and will participate in the club when it is established. The Club will be a community facility under the auspices of an incorporated association registered as not for profit. Besides being able to participate in the sport of my choice locally, there will be zero personal benefit.
Please approve on this basis so that these offers may be extended.
The following day, 27 September 2008, Mr Wilson sent an email to the appellant stating 'noted and supported'. The donation of a transportable house to the motocross club did not proceed because it had difficulty in obtaining land for the club.
In October 2008 the appellant made an application to the CLC on behalf of the Club. The application stated that the Club was already in possession of a transportable building that was to be removed to the Club site. The funding application was for $40,000 for the purposes of securing the services and goods required to safely transport the building to the site and to install the civil structures necessary to support both the building and the initial trap shooting layout [25].
The appellant also contacted James Giumelli, CEO of Ertech, a civil and earthmoving company, and asked whether Ertech would be willing to provide earthmoving services to the club free of charge.
On 1 December 2008 the appellant forwarded to Mr Jordaan the emails between himself and Mr Wilson of 26 and 27 September 2008. The appellant said it was likely that the first house would be removed from the Edwards' farms during December and that the Club had appointed an electrician to do the electrical disconnection. The appellant asked Mr Jordaan to ensure the farmhouse was disconnected from power in an orderly fashion to ensure it was safe to move off the respondent's property.
Also on 1 December 2008 Mr Besso sent the appellant an email identifying materials in various lay down areas (open areas for the temporary storage of equipment and supplies that were not in service) on the respondent's mine site that could be useful for the Club. The appellant inspected the materials with Mr Besso and then took Mr Jordaan and showed him the materials that the Club was interested in and asked him to process the donation of the materials to the Club. Mr Jordaan said his department was too busy to process the donation and that there was no procedure for donating the material. Mr Jordaan undertook to create the necessary procedure when his team had time earlier in the New Year [29].
On 9 December 2008, Matthew Keogh, the respondent's community manager, stated his intention to progress the grant to the Club through a memorandum of understanding (MOU). The MOU between Nickel West and the Club was signed on 11 December 2008.
On 9 December 2008 the appellant and Mr Jordaan were separately informed of the decision of BHP Billiton to close the Ravensthorpe nickel operations. Both men were required to sign a confidentiality undertaking not to disclose that information.
On 12 December 2008 Mr Jordaan raised with the appellant his concerns about, among other things, moving the transportable house to the Club site. As the appellant was unable to resolve those concerns to Mr Jordaan's satisfaction, the appellant said he would elevate the matter to Mr Wilson.
On 12 December 2008 the appellant sent an email to Mr Wilson informing him of two issues of concern raised by Mr Jordaan. The first concerned the Club's successful application for funding through the CLC and the second concerned the removal of the transportable house from Mr Edwards' eastern property. In his email to Mr Wilson the appellant provided an explanation on the second issue that, on any objective view, is very difficult to follow (see exhibit 194, 844 ‑ 845) but which ends with the statement that the 'wrong house' was donated to the Club and a recommendation that the 'wrong' removal proceed the following Monday. Mr Wilson replied, asking the appellant to send him a simple short note he could understand. The appellant replied by email on 12 December 2008 saying, relevantly:
We had to buy two farms to get the buffer zone we created alongside the intended conveyer route … Both have houses, but only the house alongside the conveyor is inhabited. Both houses will be affected by the noise/dust associated with the operation of the conveyor …
I made the decision that both houses should be removed to avoid close proximity neighbours …
At the same time, Sias argued in the capital application that the house on the second farm would ensure that it is easy to re‑sell in order to get approval to buy it. Because I was so certain about the merit of buying the two farms, I did not study the motivation that CS wrote when I signed the application. I am astounded that Sias did not see the same opportunity at the time, and I made the assumption that he was aligned with this thinking given the work that we were doing. The root cause of the problem was my failure to read the motivation detail to ensure we were aligned.
Following the approval, I offered the house on the farm destined for re‑sale to the community group. That house is scheduled to be relocated by the Club on Monday using funds secured through the CLC in accordance with [the] usual process, where community members decide on application of available funding. Sias has today identified the discrepancy in the capital application he produced and has brought this to my attention.
…
My recommendation is that Sias corrects the application for capital to reflect that the correct strategy was to remove the house prior to on‑selling and that we allow the removal of the house as scheduled on Monday.
Mr Wilson replied 'Given the knowledge that we now have, my suggestion is that we don't take any of the farm [houses] off the land'. The appellant responded to Mr Wilson:
Your position is understandable. However how do I take back the transportable that I have donated in good faith.
Following telephone discussions with the appellant, Mr Wilson agreed that the best option now was to allow the house on the eastern property to be moved as scheduled. The transportable was then removed from Mr Edwards' eastern property and re‑established on the Club site.
On 14 December 2008 Mr Jordaan visited the Club site. He took photographs of earthworks completed at the Club and of pipes which bore an Ertech job number and were marked 'BHP' or 'Ertech Ravensthorpe Nickel'. During a visit to the respondent's site on 15 December 2008 Mr Wilson told the appellant that there were allegations of company pipes being at the Club. The appellant said it was impossible.
On 30 December 2008 the acting President of SSM approved a protocol for an investigation into alleged misconduct and breaches of the Guide by the appellant. The investigation was conducted during the first two weeks of January 2009. On 23 January 2009 the appellant was summarily dismissed.
Ground 1 - conflict of interest
The trial judge held that in an employment context, a conflict of interest will arise where an employee could be influenced, or could be reasonably perceived to be influenced, by a private interest when exercising a power or performing a function which involves the exercise of discretion in the course of his employment [72].
The trial judge rejected the appellant's claim that there was no conflict of interest because he had no proprietary interest in the Club and did not stand to gain any financial benefit from a donation to the Club. The trial judge rejected any requirement for a proprietary or financial interest, stating:
Conflicts of interest can arise in circumstances that do not involve a personal financial gain or benefit. The test is to assess the capacity of a private interest, that is an interest separate from that of the company, to influence the actions or decisions of an employee in the course of his employment. The interest of an employee through membership of a sporting association may become material and give rise to a conflict when the interest of the association becomes involved with the performance of a function by the employee in the course of his employment. It is relevant to consider the commonness of the employee's interest. An interest as a ratepayer is not likely to affect an employee's dealings with the Shire in which he pays rates. However, membership of a sporting club reflects a specific interest and would generally be considered a material interest if the employee had any dealings with their employer on behalf of their club. The size of the club and the role of the employee within the club may be relevant considerations. In this case, the Club was a small group. In September 2008 it had not been formally established. [The appellant] was one of three people involved in establishing the Club and was actively involved in all of the major activities involved in establishing the Club. [The appellant] had a conflict of interest in making any decision, or taking any action involving the exercise of discretion, on behalf of [the respondent], in relation to [the respondent] donating a transportable building to the Club. [The appellant] initiated the request to [the respondent] to donate the transportable building to the Club. [The appellant] was, in effect, acting on both sides of the transaction. [The appellant] could not make an 'impartial business decision' whether or not it was in the interests of [the respondent] to donate the transportable to the Club in circumstances where he was one of the three men attending to the founding of the Club and it was he who initiated, on behalf of the Club, the request to [the respondent] to donate the transportable building.
[The appellant] had a conflict of interest in deciding to donate materials or services of [the respondent] to the Club. The conflict is not removed by [the appellant] requesting the donation of materials and services rather than commanding that they be made. By requesting Mr Whittred to provide services to the Club and Mr Jordaan to arrange for the donation of materials to the Club [the appellant] was, in effect, authorising the provision of the services and materials by the defendant to the Club [74] ‑ [75].
In this ground of appeal, the appellant contends in effect that the trial judge erred in concluding that the appellant had a conflict of interest because he paid insufficient regard or no regard to certain evidence which the appellant claims should have caused the trial judge to conclude that there was no conflict of interest arising from the appellant's involvement in the Club. The relevant part of ground 1 is in the following terms:
[B]ased on the evidence set out in Schedule 'A':
(i)in respect of the business imperative and implied contractual term that the appellant should be actively engaged in, and engaging others in, community development, particularly in a remote community such as Hopetoun;
(j)in respect of the specific investments made by BHP Billiton and the respondent in the Shire of Ravensthorpe;
(k)as to the appellant's motivation for establishing the Club; and
(l)in relation to other donations made by the respondent to community organisations in which the appellant was also involved where no conflict of interest arose,
and the finding … that BHP Billiton's Nickel West operation developed infrastructure in the area and invested in the local community with the aim to develop long term sustainable partnerships with the community, the trial judge should have found that:
(m)the size of the Club and the appellant's involvement in it were not relevant considerations; and
(n)no conflict of interest arose between the appellant's involvement with the Club and his interest thereof, and his role as General Manager of the respondent and the interests of the respondent.
As explained by senior counsel for the appellant at the hearing of the appeal, the appellant's case applicable to all relevant matters is that there was no conflict of interest because (1) he had no proprietary or financial interest in the Club; and (2) he was obliged to be actively engaged in and engaging others in community development, including the improvement of community infrastructure, which was said to be a business imperative of the respondent.
In relation to the transportable, the appellant also contends that there was no conflict because it was a redundant company asset as it had no value to the respondent and that there was no breach because he had acted with the fully informed consent of Mr Wilson.
In relation to the donation of materials in the lay down area, the appellant also contends there was no conflict because the materials he requested were scrap materials that had no use to the respondent.
As to his request for drawing services, the appellant also contends there was no conflict because the request had been approved by Scott Magee, the respondent's projects/engineering manager before the services were provided.
I will confine my consideration of this ground to the general claims applicable to all the findings of conflict of interest. I will deal with the appellant's claims that any breaches were not, individually or collectively, sufficiently serious to justify summary termination of the employment contract under ground 6.
There is no merit in the appellant's claim that the conflict rule is confined to proprietary or financial interests of an employee. The conflict rule in the context of the obligations of fiduciaries was explained in Settlement Agents Supervisory Board v Property Settlement Services Pty Ltd [2009] WASCA 143 [70] ‑ [74]. A fiduciary owes a duty of undivided loyalty to his principal (in this case his employer) which requires the fiduciary to avoid a conflict of duty and interest (and a conflict of duty and duty). The court continued:
A conflict of interest and duty can arise where the personal interest of the fiduciary is pecuniary or non-pecuniary, direct or indirect. A non‑pecuniary interest includes an interest by way of association, whether by way of kinship or business connection [or otherwise]. Whether the interest is within the conflict rule will depend on (inter alia) the nature, intensity and duration of the association.
Not all interests are within the conflict rule. The interest must give rise to a conflict or a real or substantial possibility of a conflict: Hospital Products (103) (Mason J). There are other formulations of the required connection such as 'a sensible, real or substantial possibility' (Clay v Clay (2001) 202 CLR 410) and 'a significant possibility' (Chan v Zacharia (1983) 154 CLR 178, 198). The extension to cover a real or substantial possibility of a conflict serves at least two functions. First, it is intended to signify that not all personal interests come within the conflict rule. An interest will not fall within the conflict rule if it is too remote or insubstantial: Hospital Products (103) (Mason J).
…
The existence of a conflict of interest and duty (actual or otherwise) is not conditioned on proving that the fiduciary acted with the intention (purpose or motive) of advancing its personal interests: Hospital Products (103).
…
The object of the first limb of the conflict rule is to prevent a person who has undertaken to act for someone else from allowing any personal interest to sway or influence that person away from the proper performance of his or her duty to the principal: Chan v Zacharia (198 - 199). A conflict of interest and duty will exist if the interest in question is in opposition to, or in tension with, the duty of loyalty. That will be the case if there is a real and sensible possibility that the interest might sway or influence an agent away from the proper exercise of its duties (which includes powers) to the principal.
The test as to the existence of a conflict or a real and substantial possibility of a conflict is objective. It is to be determined from the standpoint of the objective observer with knowledge of all relevant facts and circumstances: Boardman v Phipps [1967] 2 AC 46, 124 [71] ‑ [75].
For the reasons given by the trial judge, the evidence established that the appellant had a strong personal interest and close involvement in establishing a clay target club in Hopetoun so that he could pursue his sporting interests without having to make a round trip of 360 km to Esperance.
The appellant says his involvement in relation to the Club is indistinguishable from his involvement in the establishment of an indoor sports complex including a swimming pool for the community that he would use, the donation of computers and blinds to the local school (attended by two of his children) and the donation of a greenhouse. There is no finding of the facts and circumstances surrounding these matters. In any event, they are on their face distinguishable having regard to their obvious benefit to the community at large and in relation to which any benefit to the appellant and/or members of his family would be on all fours with the community as a whole.
The establishment of the Club was initiated and driven by the appellant and a small number of other persons to cater for their interest in a niche activity.
On any view of the facts, there was a real and sensible possibility that the appellant's personal interest in the Club might influence him away from the proper exercise of his duties to the respondent.
The second general challenge to the finding of a conflict of interest is based on the 'business imperative' sourced obligation. As the respondent correctly points out, it was no part of the appellant's case at trial that there was an implied contractual term to the effect pleaded in ground 1.
At the hearing of the appeal, the appellant retreated from any claim that there was a contractual obligation (express or implied) that the appellant was required to engage in community development but was unable to identify the legal source of any such obligation. An unexplored possibility may be an implied direction made by or on behalf of the respondent pursuant to and within the scope of the employment contract.
In any event, the appellant relies on the following extracts from the Guide:
- This Guide is based on our Charter values and it defines our basic principles of business conduct and how we should work … The Guide is not a prescriptive set of rules for business behaviour, it is a practical set of principles - our behavioural compass, giving direction and reflecting our approach to business conduct.
- This Guide has been written to help you apply our charter values in a practical way …
- To prosper and achieve real growth, we must … earn the trust of employees, customers, suppliers, communities and shareholders by being forthright in our communications and consistently delivering on commitments.
- We are successful in creating value when … the communities in which we operate value our citizenship.
- At BHP Billiton our objective is to be the company of choice‑ creating sustainable value for our … host communities.
- Wherever we operate we will develop, implement and maintain management systems for sustainable development that drive continual improvement and ensure we … develop partnerships that foster the sustainable development of our host communities …
- In implementing this Policy we will engage with and support our … host communities in sharing responsibility for meeting our requirements. We will be successful when we … are valued by our host communities, and provide lasting social, environmental and economic benefits to society.
I am unable to glean any support in these generalised statements for an obligation, contractual or otherwise, which is capable of negativing or modifying the scope or application of the specific provisions of the Guide, the Conflict Standard and the general law requiring the avoidance of conflicts of interest. Moreover, the appellant's formulation of the business imperative obligation is in such generalised terms as to be incapable of justifying the conduct engaged in by the appellant.
There is also a suggestion that there was no conflict because the conduct benefited the respondent. The trial judge found that the respondent and other members in the BHP Billiton group invested very extensively in the local community, including in social infrastructure. It may be inferred that the respondent regarded those decisions as being in its best commercial and financial interests. However, the provisions of the Guide, the Conflict Standard and the existence of the CLC procedure makes it clear that an employee with a conflict of interest is not to be involved in decisions about when, where or how the respondent (or its contractors) donates its assets and resources to the community as a whole or community groups.
It may also be accepted that the respondent encouraged its senior employees to invest their resources (time, skills and perhaps even money) in community activities and infrastructure. However, that falls a long way short of expressly or impliedly negativing or modifying the express, specific duties to avoid conflicts of interest.
I would dismiss ground 1.
Ground 2 - the donation of the transportable
The trial judge's findings
The trial judge identified the scope and source of the appellant's relevant duty as follows:
The express terms of the [employment contract] to faithfully serve the [respondent] and protect its interests at all times, the implied term of good faith and fidelity, and his fiduciary obligation required [the appellant] to make a full and fair disclosure of all matters within his knowledge which would enable Mr Wilson to make a properly informed judgment about the donation … of the transportable house to the Club [79].
In addition to this positive duty to provide full and fair disclosure to Mr Wilson, the appellant was also under a duty not to positively mislead Mr Wilson. The trial judge makes his findings in terms of omissions (failure to inform) and acts (positive misstatements).
The trial judge's factual findings are as follows. First, the appellant did not fully or accurately inform Mr Wilson of the extent of his involvement with the Club or in the donation of the transportable.
In addition to the matters identified earlier, the trial judge found that prior to his communications with Mr Wilson the appellant, with Mr Biddulph and Mr Besso, had (1) inspected a number of areas identified as suitable for a club; (2) discussed with them the presentation that should be made to the Shire prior to Mr Besso sending a letter on 22 September 2008 to the Shire counsellors; (3) researched and obtained a quote for the supply of clay target traps; (4) and drafted the constitution and an advertisement for the Club.
Nor did the appellant tell Mr Wilson that he had, on behalf of the Club, initiated the request to the respondent for the donation of the transportable nor (as he stated in the application to the CLC) that he was responsible for integration of the effort to establish the Club.
Moreover, the appellant's email of 26 September 2008 to Mr Wilson was positively misleading as to the nature and extent of his involvement with the Club. It would lead a reader to believe that the appellant had no greater involvement in the Club than that he would become a member and participate in clay target shooting when it was established. Further, based on what he was told by the appellant, Mr Wilson believed that the Club had approached BHP to donate the transportable not that the appellant had initiated the request.
Second, the appellant did not fully or accurately inform Mr Wilson of (1) the circumstances in which the respondent had acquired Mr Edwards' eastern property; (2) what it intended to do with the property; and (3) the use or value of the transportable on the property.
The detail of the findings are as follows. The appellant's email of 26 September 2008 erroneously conveyed to Mr Wilson that Mr Edwards' eastern property was acquired to create a buffer zone around the respondent's operations.
The appellant's statements to Mr Wilson that the transportables were 'very modest' and that 'we will remove [them] to ensure that they are not inhabited during the lifetime of our mining operation' were misleading. There was no intention to remove the transportable on the eastern property which property was to be sold. Further, the transportable on the eastern property had a substantial value. Based on the appellant's statement in the CLC application, he believed it was worth at least $50,000. The appellant did not tell Mr Wilson that. Mr Wilson was also misled by the appellant into believing that not only did the transportable on the eastern property have no value to the respondent but that donating it would advantage the respondent by saving it the expense of getting rid of the transportable.
Third, the appellant did not tell Mr Wilson that he was going to apply to the CLC to obtain the funds necessary to pay for the removal and relocation of the transportable house. That was a relevant matter for Mr Wilson to know when considering the advantages and disadvantages to the respondent in donating the transportable house to the Club [108].
Finally, the appellant did not give to Mr Wilson a full and fair account of the circumstances concerning the donation of a transportable to the motocross club. In particular, the appellant did not have a sufficient factual basis for saying that the club had secured its site for a clubhouse nor did he know whether or not the motocross club had funds to enable it to move the transportable.
In his summary on this subject the trial judge made findings as to the appellant's knowledge of relevant matters at the time he spoke to Mr Wilson and his intention in making the misstatements:
[The appellant] misled and failed to fully or fairly inform Mr Wilson of matters within [the appellant's] knowledge, which would enable Mr Wilson to make a properly informed judgment on the donation of an asset of some value where [the appellant] had an interest in the donation separate from that of [the respondent]. [The appellant's] disclosure that he had an interest in clay target shooting and would participate in the Club when it was established was not a full and frank disclosure. His statement that the transportables were on farms acquired as part of creating a buffer zone around the company's existing and future operations was misleading. [The appellant] knew that Mr Edwards' eastern property had been acquired only because Mr Edwards had made it a condition of selling his western property and [the appellant] knew that, unlike in the case of the farms acquired to create a buffer zone, [the respondent] intended to sell Mr Edwards' eastern property as soon as possible. [The appellant's] statement to Mr Wilson that [the respondent] would remove the transportable to ensure that it was not inhabited during the lifetime of the mining operation was wrong. [The appellant] made a series of wrong or misleading statements to Mr Wilson to induce him to approve the donation of the transportable. Mr Wilson was misled. I find that if he had been told the full circumstances concerning [the appellant's] involvement in the Club, that Mr Edwards' eastern property was acquired only to enable acquisition of the western property and was intended to be sold as soon as possible, that the capital acquisition approval for the eastern property did not authorise or anticipate the removal of the transportable, the value of the transportable and the inability of the Club to remove the transportable at its own cost, Mr Wilson would not have approved the donation. That is a matter which is likely to destroy Mr Wilson's trust and confidence, and that of [the respondent], in [the appellant] carrying out his responsibilities as general manager of [the respondent] in accordance with his contractual obligations. It justified [the respondent] terminating [the appellant's] employment [164]. (emphasis added)
The grounds of appeal
The substance of the appellant's challenges are best understood by reference to the factual findings which he claims the trial judge should have made. Ground 2 relevantly provides that the trial judge should have found that:
(q)as Wilson was aware the Club was being established:
(1) …
(2)Wilson should have been aware that the Club had limited, little or no funds;
(r)where there was a divergence of evidence between Wilson and the appellant, the appellant's evidence was to be preferred;
(s)the appellant did not mislead, or fail to fully inform Wilson of matters within his knowledge as:
(1)the appellant had a proper basis for his statement that there were two very modest transportables on Gary Edwards (Edwards)' properties;
(2)the appellant reasonably believed the transportables formed part of the buffer zone strategy;
(3)Wilson knew that it was the appellant's proposal that the respondent offer the transportables to the Clubs;
(4)the appellant considered the transportables to be redundant company assets of the respondent that would otherwise have been disposed of;
(5)pursuant to the Disposal Procedure, the Club was not responsible to pay for the removal of the transportable; and
(6)by the time Wilson's final decision that the transportable should be donated to the Club was made (in mid‑December 2008), he was aware that Jordaan was of the view that the PS Form for the purpose of Edwards' eastern property did not provide for the removal of the transportable;
(t)under the Guide, Wilson was responsible for ensuring that the matter (the appellant's disclosure) was properly reviewed.
To add to this court's burden, these grounds are enlarged upon and added to in the relevant schedule and in the appellant's submissions.
Analysis
The appellant's first contention is that the appellant's disclosure concerning the nature and extent of his interest in the Club was sufficient and that in any event it was Mr Wilson's responsibility to ask for further information and to carry out a proper review.
There is no merit in either contention. The appellant's obligation was to make full and accurate disclosure of all relevant matters giving rise to his conflict of interest. The Guide required an employee in a situation that could involve an actual or perceived conflict of interest to remove himself from any discussion or activity involving the conflict. The appellant, with Mr Wilson's tacit approval, did not comply with that requirement. However, to remain involved as he did, it was imperative that Mr Wilson understood the full extent of the appellant's personal interest in the decision he was advocating.
The appellant did not contend at trial that the Guide required Mr Wilson to ensure that the matter was properly reviewed. Even if that is a correct construction of the Guide, it is a nonsense to suggest that the content of the appellant's obligation to make full and accurate disclosure of the nature and extent of the appellant's personal interest and other relevant matters within his knowledge is reduced or nullified by an obligation on Mr Wilson to ensure an independent review.
The appellant also challenges the correctness of the trial judge's findings that the transportable on the Edwards' eastern property was acquired only to enable the acquisition of his western property and that the eastern property PS did not authorise or anticipate the removal of that transportable. However, the eastern property PS cannot be construed in isolation.
Mr Murray's memorandum of 9 August 2007 to the appellant referred to the Edwards' homestead property as being a 'home block' and that Mr Edwards was complaining about 'noise' and 'light spill' at night. It was clear that the Edwards' resided on their homestead property. Moreover, Mr Murray's proposal expressly excluded Mr Edwards' eastern property from the buffer zone purchase strategy. The appellant's email of 10 August 2007 to Mr Bastos supports Mr Murray's recommendations.
The overwhelming weight of the objective evidence is that the only reason the respondent purchased Mr Edwards' eastern property was because he made the sale of the homestead property conditional upon the purchase of the eastern property. That is reflected in the Murray memorandum, the homestead PS and the eastern property PS. The latter was endorsed and signed by the appellant on 14 August 2008. The 'brief description of project' in that form was as follows:
Funds have been approved to buy Gary Edwards' farm (marked A on the attached map). This farm is crucial as it is the closest property to RNO (noise problems at the homestead) but more so in that the future conveyor belt from the Shoemaker Levy deposit will run along the boundary fence. Edwards has suddenly decided to sell due to ill health, but has made the purchase of his adjacent property (marked B) conditional upon selling the main property. The price for the first property is $1.7 million.
This application is for additional funds to procure the second property for a value of AUD$1.5 million (including costs). The benefit is that he wants to vacate his property by January 2009 which would allow us to remove the homestead from the property and prevent anyone from residing there. The price is not a premium to the market value, as is the case with the initial property.
The property is of no value to RNO and we will on‑sell this as a matter of priority. A neighbouring property … has just been put on the market for sale in January or February of 2009 … and the agents advised us that they will attempt to sell the second property as part of this transaction. However the property is not expected to be sold until early next year, which is a typical time for properties to change hands.
The reason why Edwards does not want to sell the property separately is that he would have to wait until early in 2009 to be able to effect the transaction and he wants to vacate the property as soon as the current crop has been harvested (late Dec). (emphasis added)
The second sentence of the second paragraph can only be a reference to the 'homestead' referred to in the first paragraph, being the homestead property. The eastern property PS makes no reference anywhere to any building other than the 'homestead'.
The appellant contends that the 'risk summary' section of the eastern property PS, which makes no reference to any house but refers to future leasing of the 'eastern property', impliedly contemplates the removal of the house on the eastern property. That submission is farfetched. The evidence overwhelmingly demonstrates that the respondent purchased the eastern property solely for the purpose of obtaining the homestead property and the intention was to resell the eastern property within 12 months. The removal of the homestead from the homestead property was because the respondent intended to retain that land as a buffer zone and wanted to ensure that no‑one would reside there. That rationale has no application to the eastern property.
That is confirmed by the narrative under the heading 'Investment Description' in the eastern property PS. Under the subheading 'Scope and Configuration' it is made clear that the submission was to acquire Gary Edwards' eastern property which was required to enable the purchase of the homestead property. Under the sub‑heading 'Value Drivers' the submission states:
By acquiring these farms there will be a buffer zone between the mine site and the neighbouring farms to minimise the risk of any encroachment or interference with the neighbouring community. In this particular case Edwards will vacate the property in December 2008, allowing us to demolish the house on the property and ensuring that no‑one resides there in the future.
The first sentence of that statement reports what is said under the same sub‑heading in the homestead property PS. When read in context it is clear that is a reference to the homestead property. The sole reason for the purchase of the Edwards' eastern property was to secure the Edwards' western property because the latter was essential for the buffer zone.
The appellant's evidence at trial (and in the investigation) was that he believed that:
- any noise affecting Mr Edwards' homestead property also affected his eastern property;
- once Mr Edwards made the purchase of the eastern property conditional on the sale of the western property, the eastern property became part of the buffer zone strategy;
- the transportable on the eastern property was a redundant company asset as it had no value to or use for the respondent;
- the transportable would have been removed and demolished if the appellant had not sought to donate it.
The trial judge expressly rejected this evidence. He found that the appellant knew that: (1) Mr Edwards' eastern property had been acquired only because Mr Edwards had made it a condition of selling his western property; (2) unlike in the case of the farms required to create a buffer zone, the respondent intended to sell Mr Edwards' eastern property as soon as possible; and (3) the respondent did not intend to remove the transportable to ensure that it was not inhabited during the lifetime of the mining operation. The trial judge also found that the appellant made the wrong or misleading statements to induce Mr Wilson to approve the donation of the transportable [164]. These are credibility findings within the rule in Fox v Percy (2003) 214 CLR 118. They can only be set aside on appeal where the incontrovertible facts or uncontested testimony demonstrate that the findings are errors or where it is concluded that the decision is glaringly improbable or contrary to compelling inferences. No attempt was made to scale these hurdles.
The appellant also challenges the findings as to the value of the transportable. The appellant contends that the trial judge should have found that he reasonably believed the transportable to have no value to the respondent and that it did not have potential to increase the value of Edwards' eastern property.
The trial judge found that the transportable donated to the Club had some value and had a potential to increase the value of the eastern property [101]. He continued:
Whether or not a buyer would have paid more for the eastern property with the transportable farmhouse on it would depend upon the identity of the buyer and the use that the buyer would make of the property.
The trial judge also found that the appellant's statement to Mr Wilson that the transportables were 'very modest' was misleading. He continued:
The transportable on the eastern property had a substantial value. [The appellant] believed it was worth at least $50,000. [The appellant] did not tell Mr Wilson that [104].
The finding of the appellant's belief as to the worth of the transportable was based on his statement in the application to the CLC that the Club had 'secured the Club building (that is, the transportable) valued at more than $50,000'. The appellant said that assessment of value was based on replacement costs.
To the extent that the appellant relies on his evidence at trial as to his belief that the transportable had no value to the respondent, that evidence was clearly rejected by the trial judge. Mr Pens' evidence to the effect that the infrastructure on the eastern property was of no consequence in his valuation of the farm land does not invalidate the trial judge's finding that the transportable had a 'potential to increase the value of the eastern property' depending on the identity and needs of a particular buyer. So much is common sense and is consistent with Mr Pens' evidence that the transportable was in reasonable condition (exhibit 408 [35]) and had the potential to add value (ts 460).
Moreover, it is wrong to say, as the appellant does, that he did not make any statement to Mr Wilson concerning the value of the transportable. The appellant's description of it in the email as 'very modest', his statement that it would have to be removed from the farm (at the respondent's expense) and that his proposal would relieve the respondent of the removal and relocation costs are related statements going to a value/cost/benefit analysis.
The appellant also challenges the trial judge's finding that he should have told Mr Wilson that the Club was unable to move the transportable at its own cost. The appellant contends first, that Mr Wilson was aware that the Club had little or no funds having been told that it was being established and second, that under the Disposal Procedure, the Club was not responsible for payment of the removal of the transportable because it was not the owner.
The challenge is without merit. The appellant misstates the finding which was that the appellant intended to apply to the CLC to pay the removal and relocation costs. In any event, Mr Wilson's knowledge that the Club was being established falls well short of establishing knowledge that it had little or no funds. Further, reliance on the Disposal Procedure is misconceived. It depends upon displacing the finding that Mr Edwards' eastern property was to be treated in the same way as his homestead property and was part of the buffer zone strategy.
Finally, the appellant contends there was no conflict of interest or breach of fiduciary duty because, when Mr Wilson approved the donation of the transportable to the Club in December 2008, he was in receipt of all relevant information. That is incorrect. There is no evidence to support a finding that the appellant had corrected his misstatements or informed Mr Wilson of (1) the extent of his involvement in the Club, (2) the circumstances in which, to the appellant's knowledge (as found by the trial judge), the respondent had acquired Mr Edwards' eastern property or (3) his belief as to the value of the transportable. Indeed, based on the trial judge's findings, there are misstatements in the appellant's second email to Mr Wilson on 12 December 2008 (set out earlier).
Moreover, any subsequent revelations cannot alter the fact that the appellant made positively misleading statements to induce Mr Wilson to approve the donation of the transportable. Finally, the appellant's statement to Mr Wilson 'how do I take back the transportable that I have donated in good faith' is itself a misleading statement, having regard to the trial judge's finding as to the appellant's knowledge and motivation.
I can deal with the remaining issues shortly. The appellant relies on his evidence as to his motivation (his belief that the Club would be beneficial for the community and was aligned with the respondent's community initiatives). Motivation is irrelevant to the existence of a conflict. In any event, the appellant's motivation evidence cannot sit with the trial judge's finding of him making knowingly wrong statements to Mr Wilson to induce him to approve the donation. The appellant's claim that the appellant's evidence should be preferred where it was in conflict with that of Mr Wilson is an unsubstantiated assertion that would not in any event change the outcome.
I would dismiss ground 2.
Ground 3 - request for drawings
The trial judge's findings are as follows. In late November 2008, the appellant asked Mr Whittred, the respondent's drafting coordinator, to complete drawings for the Club's clay target range. He requested the services as 'a personal kindness to me' and as a 'personal favour'. Before speaking to Mr Whittred, the appellant spoke with Mr Magee, head of the respondent's engineering department and Mr Whittred's supervisor, who said he had no problems with that. Mr Magee reported to the appellant.
Mr Whittred subsequently completed the drawings and provided them to the Club. The appellant did not ask Mr Wilson for permission or approval for the respondent's resources to be used in this way or remove himself from any discussion or activity involving the conflict.
The trial judge found that in requesting Mr Whittred to complete the drawings and in obtaining those drawings for the Club, the appellant breached his contract of employment and his fiduciary duty to the respondent. All of the breaches stemmed from the trial judge's finding that the appellant's personal interest conflicted with his duty to the respondent. By requesting Mr Whittred to make the drawings using company assets, the appellant authorised the use of those assets for the benefit of the Club and thus was involved in the decision-making process [122]. The appellant acted on behalf of the Club in requesting the provision of services by the respondent and acted on behalf of the respondent by allowing or authorising an employee to provide the services using its resources [123]. Not having obtained informed consent of the respondent, the appellant breached his fiduciary duty to the respondent.
In his ground of appeal the appellant contends that the trial judge should have found that:
(j)the appellant was not required to ask Wilson for his permission or approval to donate the drawings;
(k)as Whittred's direct manager, Magee had authority on behalf of the respondent to approve the use of the respondent's resources (being the drawings for the Club) and had approved the use of the respondent's resources;
(l)the appellant had excused himself from the decision making process in accordance with the Code, by asking Magee for approval.
As to (j), there being a conflict of interest, the Guide required the appellant to advise his manager or supervisor. As to (k), Mr Magee did not have the authority to authorise his superior to place himself in a position of conflict.
As to (l), it was no part of the appellant's case at trial that the Code had superseded the Guide. Further, Mr Wilson's unchallenged evidence was that the Code did not come into operation until early 2009 (exhibit 416 [29]). It should not be raised for the first time on appeal.
Under the Code, employees were required to excuse themselves from any decision‑making process where they had an interest that influences, or may be perceived as influencing, their ability to make an objective decision and to fulfill their responsibilities. Under the Guide they were required to excuse themselves from any discussion or activity involving the conflict. The trial judge found in effect that the appellant was involved in the decision‑making process.
In any event, the Code expressly provides that an employee must 'never misuse BHP Billiton resources of your position or influence to promote or assist an external activity'. The appellant breached his employment contract even if the Code had replaced the Guide.
I would dismiss ground 3.
Ground 4 - request for donation of company materials
The trial judge's findings are as follows. Mr Besso's company was responsible for forming up and looking after redundant and stored materials in the lay down areas. On 1 December 2008 Mr Besso sent an email to the appellant in which he identified material in various lay down areas that could be useful for the Club. The materials listed include tower frames, septic tanks, access ladders, power cables and light poles.
The appellant inspected those materials with Mr Besso. The appellant then took Mr Jordaan to inspect the materials. He showed Mr Jordaan the materials the Club was interested in and asked him to process the donation of the materials to the Club. Mr Jordaan said to the appellant words to the effect that the materials would have to be inventoried, that there was currently no procedure for donating the materials, that his department was currently too busy to attend to that and that he would do so in the New Year [126].
On 3 December 2008 the appellant sent an email to Mr Besso in which he said:
Sias is also playing hardball with the various bits and pieces of junk in the lay down yard. He is claiming that his people are too busy now, and he doesn't have a procedure etc etc. I just get the impression that he lacks the balls to get stuff done. Unfortunately, I must pander to his ego. It is likely that we will wait until early January to get our hands on this material. It seems an awful shame and perhaps I will revisit.
The donation never happened. The trial judge found that in directing or requesting Mr Jordaan to arrange for the donation of the materials in the lay down areas to the Club, the appellant breached his employment contract and his fiduciary obligation to the respondent. As with the donation of drawing services, the trial judge concluded that by directing or requesting Mr Jordaan to effect the donation, the appellant was acting on behalf of the Club in making the request and on behalf of the respondent in making the donation; that is, he was acting on both sides of the transaction. Accordingly, his personal interest in the matter was in conflict with his duty to the respondent.
The appellant did not advise his manager or supervisor of the situation as required by the Guide and did not remove himself from any discussion or activity involving the conflict as required by the Guide. Further, the trial judge inferred from Mr Jordaan's description of the material that it had some substantial value.
In his ground of appeal, the appellant claims that the trial judge should have found that:
(f)the appellant was not required to ask Mr Wilson for his permission or approval in donating the scrap materials;
(g)there was no evidence that the appellant had acted contrary to the respondent's procedures in relation to the scrap materials …
(h)the appellant had excused himself from the decision making process in accordance with the Code, by asking Jordaan to process the donation and by accepting his refusal.
The thrust of the appellant's claims in (f) and (g) are that the materials were scrap. The appellant relies on Mr Besso's evidence that he believed the materials referred to in his list were 'essentially scrap material for the respondent' which was not referred to by the trial judge. The appellant does not rely on any evidence given by him in that regard. Moreover, there is nothing in the description of the material that would justify its characterisation as scrap material. Mr Jordaan's evidence suggests strongly to the contrary. Mr Besso is hardly in the best position to give reliable evidence on that subject. I am not persuaded that the trial judge's finding of value is not reasonably open.
In any event, the respondent's Disposal Procedure applied to disposal of the respondent's assets. The objectives of the Disposal Procedure include that 'All disposals are accounted for correctly and in a timely manner. Disposals are validly and properly authorised'.
Mr Jordaan, like Mr Magee, was the appellant's subordinate. Even if the appellant requested rather than directed Mr Jordaan to process the donation of the materials, he in effect authorised that action.
As noted earlier, the claim that the Code had superseded the Guide was not raised at trial. However, for the same reason as in the previous ground, the outcome is the same under the Guide and the Code. I would dismiss ground 4.
Ground 5 - Ertech
The trial judge's findings are as follows. Ertech performed earthworks for the respondent pursuant to a contract for works worth roughly $10 million. The appellant was ultimately responsible for the administration of the contract and his approval was required for things such as variations and extensions of time. The appellant also had the power to suspend Ertech's operations. In an email to Mr Magee on 9 September 2008 the appellant referred to standards at the Ertech site offices, asked Mr Magee to schedule a follow up audit in the second half of the following week and to ensure that Ertech understood that the appellant would suspend their operations at that time if there was insufficient progress.
In an email on 30 September 2008 Mr Magee informed the appellant that the respondent had over $100 million of earthworks proposed over the next 18 months and that he was going to propose they look seriously at a sole source arrangement for that work with someone like Ertech.
In an email on 8 October 2008 Mr Magee informed the appellant that a case had been presented that specified earthworks (evaporation ponds and TSF development), and that the proposal to sole source those works with Ertech (that is, not go out to tender) was endorsed.
Mr Drake, the respondent's ramp up manager, gave evidence that Ertech was likely to be awarded a contract for the performance of future earthworks provided that appropriate and satisfactory terms could be agreed. There were ongoing negotiations between the parties regarding those terms. Mr Drake said that any resulting contract would require, at the very least, the approval of the appellant. On 15 October 2008 the appellant sent an email to the Executive Chairman of Ertech, Mr Giumelli, in which he said:
Ertech is becoming a key partner to our business and there is a stack of work that will be executed in the next few years.
In late November or early December 2008 the appellant approached Mr Giumelli and requested that Ertech voluntarily undertake earthmoving work for the Club (that is, without charge). Mr Giumelli agreed to the appellant's request. The appellant arranged with Richard Musgrove, a site based Ertech employee, to attend a meeting at the Club site to discuss the scope and detail of the works which the Club required. That meeting took place and was attended by the appellant, Mr Besso and representatives of Ertech.
On 30 December 2008 the appellant met with Mr Bond and Ms Scott (employees of the respondent) to discuss the appellant's conduct which had been raised by Mr Jordaan. The appellant said words to the effect that his wife had warned him about talking to Ertech, given his position as general manager and Ertech's likely inability to say no. The appellant maintained that he had done nothing wrong and said words to the effect:
Why not use the influence I have for the benefit of the community. I did not personally benefit.
Ertech subsequently undertook earthmoving work at the site including creating a pad for the shooting range, a pad for the house, creating a 30‑vehicle car park, creating an access way from the main road to the Club site and grading existing roads on the Club site. In his interview with Mr Bond and Ms Scott on 30 December 2008, the appellant estimated the value of the work by Ertech at $25,000.
The trial judge found that in requesting and obtaining from Ertech the earthmoving services for the Club, the appellant breached the employment contract and his fiduciary duty. In particular, the trial judge found that the appellant had breached the Guide provision relating to business‑related gifts and cl 3.7 of the Conflict Standard.
In his ground of appeal the appellant contends that the trial judge should have found that:
(r)the earthworks carried out at the Club by Ertech were minimal and the value was not substantial;
(s)the appellant did not request a gift from Ertech under the Code or the Guide.
First, the appellant contends that the trial judge should have accepted Mr Besso's evidence as to the extent and value of the earthworks. His evidence was to the effect that Ertech was not required to create: a pad for the shooting range but to level the existing shooting pad; a pad or install a slab for the transportable; a 30‑vehicle car park but only to remove the top soil so that a car park in the area could be formed; a network of roads on the Club site but only to use the grader to smooth out bumps and fill in pot holes on existing roads. He estimated the value of the works as being in the range of $6,000 to $8,000.
The trial judge's findings, which are limited to the earthmoving aspects of the description, is consistent with the appellant's evidence (ts 349 ‑ 350) and the photographs taken of the work (exhibit 195). The trial judge's finding as to the value of the work was open on the evidence. He accepted Mr Bond's evidence as to the appellant's admission concerning the value of the works (exhibit 491 [59]). There can be no doubt as to the reliability of the appellant's assessment. In any event, the value of the work was significant, even on Mr Besso's assessment.
Second, the appellant contends that there was no breach of the Guide because, on the evidence of Mr Yarrow, the respondent's then HSEC (health, safety environment, community) manager, a breach would only arise if there was a 'leverage' with the contract negotiation, that is, if the employee said to the supplier words to the effect 'You must support the community or you will not get this contract' (ts 572). That reflects a misunderstanding of the effect of the relevant provisions of the Guide, the Conflict Standard and the general law. The trial judge's statement and application of the law on the subject is correct.
Third, the appellant contends that his request was made in his capacity as a community member, not as the general manager of the respondent's operations and that Ertech understood that. That proposition is fanciful. It is inconsistent with the appellant's acknowledgement to Mr Bond and Ms Scott that he had used his influence as general manager of the respondent to achieve Ertech's donation of services to the Club. That is the only reasonable inference on the evidence as a whole.
Fourth, the appellant contends that there was no evidence as to when and how negotiations proceeded in relation to the award of the sole source contract for the evaporation ponds. It is my understanding that a sole source contract was not confined to the agreement relating to the earthworks for the evaporation ponds. The evidence established that the respondent would require over $100 million of earthworks over the 18 months from 30 September 2008 and approximately $300 million of earthworks over the life of the operation. In any event, the appellant's influence stemmed from his capacity as the general manager of the respondent's operations, his role in the administration of the existing contract (including variations and extensions of time), his role in signing off on future contracts and the potential for Ertech to be a sole source provider of earthworks over the next 18 months and the life of the mine.
Fifth, there is no basis for the appellant's claim that the appellant's request of Ertech to undertake earthmoving work for the Club free of charge was not a gift within the meaning of the Guide (or the Code). On its proper construction, the Guide is not confined to gifts directly to an employee; it covers gifts solicited by an employee to a club or association with which the employee has a personal interest that is capable of giving rise to a conflict. In any event, there was a clear breach of cl 3.7 of the Conflict Standard.
Finally, it is of no significance on the facts in this case that there were provisions in the Guide (and Code) that encouraged the engagement of other stakeholders in community work or that Ertech had a history of voluntary participation in community projects, including projects with the respondent (such as training young Aboriginal school leavers on earthmoving equipment at the respondent's site). Those matters are incapable of overriding the appellant's specific contractual obligations to avoid a situation where his personal interests conflict with his duties to the respondent. Ground 5 should be dismissed.
Ground 6 - no breach
This is a catch‑all ground that overlaps with the individual grounds. It is to the effect that there were no breaches of the employment contract; alternatively, none of the breaches, individually or collectively, constituted sufficient reason for the respondent to summarily terminate the employment contract, there being no evidence that the appellant displayed any intention to repudiate the employment contract or to not be bound by one or more of its essential conditions.
The trial judge found that the breaches of the employment contract associated with the donation of the transportable and the appellant's conduct in requesting and obtaining from Ertech a gift of services to the Club, were each matters which, individually, were likely to and did destroy the respondent's trust and confidence in the appellant carrying out his responsibilities as general manager in accordance with his contract obligations and that each justified summary dismissal of the appellant. The trial judge found that no other breach itself justified summary dismissal. However, the trial judge continued:
The breaches by [the appellant] may be considered together. They all related to the donation of assets and services to the Club or obtaining such donations. The breaches all arose from [the appellant] placing himself in a position of conflict of interest. [The appellant] did not accept that there was any conflict of interest at the time. When he gave his evidence [the appellant] did not accept that there was any conflict of interest. The breaches did not arise from a single act or omission. They arose from a course of conduct in which [the appellant] was in a position of conflict of interest and failed to act in accordance with his contractual and fiduciary obligations. [The appellant] held a senior position which required him to exercise significant responsibilities and discretion on behalf of his employer. His conduct was conduct which is likely to, and did, destroy his employer's trust and confidence in him carrying out his responsibilities as general manager of [the respondent] in accordance with his contractual obligations. It justified [the respondent] terminating his employment summarily [168].
The appellant does not challenge the trial judge's statement of the legal principles applicable to the determination of whether the respondent was entitled to summarily dismiss him. In essence, the trial judge approached the matter on the basis that summary dismissal required the appellant's conduct to constitute a repudiation of the employment contract (that is, evince an intention no longer to be bound by it or to fulfill it only in a manner substantially inconsistent with his obligations) or be a breach of an essential term of the employment contract [46]. There was no issue in this case of any breach of an intermediate term causing substantial loss or benefit.
The trial judge is correct, for the reasons he gives, that the respondent was entitled to summarily dismiss the appellant. His misconduct in relation to the transportable and Ertech each justified that result. They were very serious transgressions that could and did destroy the trust and confidence which is essential to the employer/employee relationship. Its centrality is underscored in this case by the appellant's very senior position, his wide duties and powers, and the capacity of his misconduct to undermine the very culture which the respondent assiduously promoted. It is clear from the appellant's defence at his trial and his claims in the appeal that he had, and continues to have, no understanding of the scope and application of the respondent's rules governing the conduct of its employees. I would dismiss ground 6.
Conclusion
For these reasons, I would dismiss the appeal.
PULLIN JA: I agree with McLure P.
MURPHY JA: I agree with McLure P.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: BUITENDAG -v- RAVENSTHORPE NICKEL OPERATIONS PTY LTD [2014] WASCA 29 (S)
CORAM: McLURE P
PULLIN JA
MURPHY JA
HEARD: ON THE PAPERS
DELIVERED : 13 MARCH 2014
FILE NO/S: CACV 144 of 2012
BETWEEN: ISAK BUITENDAG
Appellant
AND
RAVENSTHORPE NICKEL OPERATIONS PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :LE MIERE J
Citation :BUITENDAG -v- RAVENSTHORPE NICKEL OPERATIONS PTY LTD [2012] WASC 425
File No :CIV 1444 of 2009
Catchwords:
Practice and procedure - Costs - Whether the costs of counsel should be assessed at senior counsel rate
Legislation:
Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA)
Legal Profession Act 2008 (WA), s 280(2)(c)
Result:
Application refused
Category: B
Representation:
Counsel:
Appellant: No appearance (on the papers)
Respondent: No appearance (on the papers)
Solicitors:
Appellant: HopgoodGanim
Respondent: Herbert Smith Freehills
Case(s) referred to in judgment(s):
Cazaly Iron Pty Ltd v Minister for Resources [No 5] [2008] WASCA 181
JUDGMENT OF THE COURT: On the delivery of the judgment in this appeal on 6 February 2014 the respondent sought the following orders:
1.The appeal be dismissed.
2.The appellant pay the respondent's costs of the appeal, including any reserved costs, to be taxed if not agreed.
3.The taxing officer make reasonable allowance for the respondent's lead counsel under scale item 23(h) - Counsel fee for Senior Counsel (including preparation).
4.The limits on costs allowable under the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 be removed in respect of the following items of work:
(a)scale item 23(b) - Respondent's Answer;
(b)scale item 23(g) - Counsel fee on hearing (including preparation); and
(c)scale item 23(h) - Counsel fee for Senior Counsel (including preparation).
Proposed orders 1, 2, 4(a) and (b), were made by the court with the agreement of the parties. There being opposition to proposed orders 3 and 4(c), the court ordered the filing of written submissions in relation to those proposed orders.
The Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (the Determination) applies to the costs of the appeal. The court has the power to remove the limits on costs fixed in the Determination if it is of the opinion that the amount of costs allowable thereunder is inadequate because of the unusual difficulty, complexity or importance of the matter: Legal Profession Act 2008 (WA), s 280(2)(c).
In the parties agreeing to, and the court making, the orders in terms of pars 4(a) and 4(b) it has been accepted that the appeal involved unusual difficulty, complexity or importance.
The only outstanding issue is whether the costs of lead counsel for the respondent should be assessed at the rate applicable to Senior Counsel. Lead counsel for the respondent in the appeal is a partner of the firm of solicitors representing the respondent and an experienced counsel, but has not been appointed Senior Counsel.
The term 'Senior Counsel' is defined in the Determination to include reference to Queens Counsel or Senior Counsel appointed in Western Australia, or appointed in any State or Territory in Australia and whose appointment is afforded recognition by the Chief Justice of Western Australia.
It is only in very exceptional cases that a person who has not been appointed Senior Counsel, with its attendant rights and responsibilities, would have their costs assessed at the rate designated for Senior Counsel in the Determination. There is nothing in the subject matter or conduct of the appeal in this case that would justify such a course. The power of the court to remove the limits on costs in this case derives primarily from the factual complexity of the appeal which was unduly increased by the unorthodox approach taken in the Appellant's Case. We would decline to make the orders sought in pars 3 and 4(c).
Notwithstanding the appellant's agreement to orders 4(a) and 4(b) on 6 February 2014, he now seeks to retreat from the full effect of those orders by excluding hourly rates from any increase in the costs limits.
Removing the limits on costs allowable under the Determination affects the dollar value of the specified item in the scale. Each of the matters that go to make up that dollar value, including the hourly rate, will be capable of variation by the taxing officer: Cazaly Iron Pty Ltd v Minister for Resources [No 5] [2008] WASCA 181 [1]. That is appropriate in this case. Moreover, the orders having been made by agreement, we see no justification for altering or qualifying their effect.
6
5
1