Buontempo v Buontempo Enterprises Pty Ltd
[2023] FedCFamC2G 430
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Buontempo v Buontempo Enterprises Pty Ltd [2023] FedCFamC2G 430
File number: MLG 906 of 2021 Judgment of: JUDGE BLAKE Date of judgment: 26 May 2023 Catchwords: INDUSTRIAL LAW – Adverse action – where claim brought by applicant who was both a business owner and employee – whether complaints and inquiries relate to employment – where applicant consistently referred to his status as a business owner when raising complaints – where outcomes sought by applicant were commercial outcomes and not employment outcomes – HELD that complaints and inquiries properly characterised did not relate to employment.
INDUSTRIAL LAW – Adverse action – where applicant sought to rely on alleged adverse action of bullying and exclusion – where it was not clear on the face of the Form 2 Claim that these were alleged to be separate adverse actions – where applicant was asked at the outset of the trial what constituted the adverse action – HELD that applicant’s claim of adverse action confined to those adverse actions identified at the outset of the trial.
INDUSTRIAL LAW – Adverse action – reason for dismissal and suspension from employment of the applicant – where the evidence supports the reasons given by the decision maker – HELD reverse onus discharged and termination of employment and suspension from employment not unlawful.
Legislation: Fair Work Act 2009 (Cth) ss 340, 341, 341(1)(c), 340(1)(a)(i), 340(1)(a)(ii), 342, 360, 361. Cases cited: Alam v National Australia Bank Limited (2021) 288 FCR 301
Cigarette & Gift Warehouse Pty Ltd v Whelan (2019) 268 FCR 46
Cummins South Pacific Pty Ltd v Keenan (2020) 281 FCR 421
Green v Preston Motors Pty Ltd [2022] FedCFamC2G 205
Flaguel v WeDrive Pty Ltd [2020] FCA 1666
Kantor v WISR Finance Pty Ltd [2022] FedCFamC2G 672
Messenger v Commonwealth of Australia (Represented by the Department of Finance) [2022] FCA 677
Serpanos v Commonwealth of Australia [2022] FCA 1226
The Environmental Group v Bowd [2019] FCA 951
Trevena v Thiess Pty Ltd [2016] FCA 468
Walsh v Greater Metropolitan Cemeteries Trust (No.2) [2014] FCA 456
Wong v National Australia Bank [2021] FCA 671
Division: Division 2 General Federal Law Number of paragraphs: 97 Date of hearing: 7, 8, 9 February & 2 March 2023 Place: Melbourne Counsel for the Applicant: Mr McKenney Solicitor for the Applicant: Wisewould Mahony Counsel for the Respondent: Mr Millar Solicitor for the Respondent: HWL Ebsworth Lawyers ORDERS
MLG 906 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FRANK BUONTEMPO
Applicant
AND: BUONTEMPO ENTERPRISES PTY LTD T/A ROMA FOOD PRODUCTS (ABN 82 006 617 876)
Respondent
order made by:
JUDGE BLAKE
DATE OF ORDER:
26 May 2023
THE COURT ORDERS THAT:
1.The Application filed by the Applicant dated 5 May 2021 be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BLAKE:
This is an unfortunate case. Massimo Buontempo (‘Max’) and Frank Buontempo (‘Frank’) are brothers. They started the business involved in this proceeding (‘Business’) in the 1980’s when both were younger men. They worked hard together and built it from the ground up. The Business has apparently thrived and is successful. Each man through his investments in the Business or elsewhere apparently has done well. They should by now be enjoying the fruits of their labour with family and friends. They ought be reflecting and taking pride in their achievement. Instead, they are engaged in litigation (effectively against each other) in this Court. While there are legal issues to be resolved in this Court, nothing this Court does will resolve the differences that have arisen between them as business partners (or shareholders), and brothers. This litigation is arguably futile when the bigger picture is considered. Despite that, each has invested time and no doubt significant funds in this case. Each is prepared to wear the corporate and reputational risks that arise from litigation of this type. So be it. It is a sorry state of affairs.
For the reasons that follow, Frank’s claim in this Court is dismissed.
BACKGROUND
In around 1984, Frank and Max started the Business together manufacturing and selling fresh pasta. The Respondent was established in around 1986, and the Business conducted through it. The Directors of the Respondent at that time were Frank and Max. The shares in the Respondent are held by Finebrook Pty Ltd. The Directors of Finebrook Pty Ltd are Frank and Max. Each owns a 50% shareholding of Finebrook Pty Ltd.
Since the Respondent commenced, it has employed Frank and Max. The employment contracts are oral. Frank’s employment ultimately ended on 25 February 2021.
Frank and Max both worked in the Business since its inception. Over the years, the Business grew. Currently, the Respondent employs approximately 100 employees in the Business.
In around 2013, there was some rearrangement of superannuation funds. Consequent upon that, Frank ceased to be a Director of the Respondent.
In around 2016, the relationship between Frank and Max began to deteriorate. Frank says from this time, he began to make various complaints to Max in respect of his employment. I will return to the complaints later.
In January 2020, a new Chief Executive Officer (‘CEO’), Sam Schachna (‘Mr Schachna’) was appointed to run the Business. In around September 2020, Vikki De Laney (‘Ms De Laney’) was appointed as the Head of People and Culture.
On 20 November 2020, the Respondent through its lawyers wrote to Frank. The Respondent alleged, among other things, that Frank had engaged in bullying and harassment of employees of the Respondent. The Respondent demanded, among other things, that Frank immediately cease engaging in such conduct.
On 4 February 2021, Max wrote to Frank. Max informed Frank that the Respondent had become aware of serious allegations against Frank. Max advised Frank that the Respondent would commence a workplace investigation. Max also advised Frank that given the nature of the allegations, the Respondent had decided to suspend him from employment on full pay until the investigation had been completed. Frank was directed, among other things, not to attend work, not to perform any work related activities, not to come onto the Business premises, not to have contact with the Respondent’s employees, customers, suppliers or stakeholders and not to use or access any of the Respondent’s customer records or documents.
On 5 February 2021, Max sent a further letter to Frank. Max referenced the letter of 4 February 2021, and stated that since that letter had been received, Frank had sent emails to Max, Mr Schachna and Ms De Laney in breach of the lawful and reasonable directions that were given to him. Max informed Frank that if he continued to breach the lawful and reasonable directions of the Respondent, ‘your employment with the Company will be summarily terminated for failing to obey the lawful and reasonable directions given to you by the Company’.
On 22 February 2021, Frank received correspondence relating to the Respondent at his home. He attended the office to deliver that correspondence, and to farewell a long-term employee who had resigned.
On 25 February 2021, the Respondent through its solicitors wrote to Frank. Frank was advised, among other things, that his employment had been terminated for failing to follow lawful and reasonable directions given to him by the Respondent. The termination of employment was effective immediately.
Subsequent to these events, the Respondent conducted a workplace investigation into the allegations that Frank had bullied or harassed employees. Allegations were put to Frank. He did not respond to the allegations. Ultimately, findings were made in relation to the conduct alleged against Frank.
THE CLAIMS
Frank filed his Application in this Court on 5 May 2021. He claims he has been subject to adverse action by the Respondent. While there is a management structure, Max as Managing Director of the Respondent sits at the apex of that structure. Frank claims that the Respondent (through Max) subjected him to adverse action. The adverse actions are said to include, Frank’s suspension from employment and his dismissal from employment. Frank’s case is that he was subject to the adverse actions because he made a series of complaints and inquiries that related to his employment. In making this claim, Frank relies on sections 340(1)(a)(i) and (ii) of the Fair Work Act 2009 (Cth) (‘Act’), together with section 341(1)(c) of the Act. If Frank makes good these claims, the adverse actions he complains about are unlawful having regard to the terms of section 340 of the Act.
Max denies that the adverse actions were taken for the alleged unlawful reasons. He says Frank was suspended because of the allegations of bullying made against him, and the decision to commence a workplace investigation. Max also says that Frank’s employment was terminated because he disobeyed a lawful and reasonable direction to, among other things, remain away from the work premises. In mounting that defence, the Respondent by virtue of the operation of section 361 of the Act must satisfy the Court that it did not dismiss Frank because of the complaints or inquiries that he made.
Frank filed two affidavits in the proceeding on 30 November 2021 and 28 April 2022. He relies on those affidavits, together with affidavits of Blake Hicks (‘Mr Hicks’), Megan Jacobson (‘Ms Jacobson’), Melissa Handrinos (‘Ms Handrinos’), Steve Gogos (‘Mr Gogos’) and Paul Clifford. Frank also called Kathy Astrinakis, Psychologist (‘Ms Astrinakis’), to give evidence in relation to his mental health. Ms Astrinakis adopted the content of a report she wrote in respect of Frank on 28 March 2022. Only Frank and Ms Astrinakis were required for cross-examination. Frank also relies on various exhibits that were tendered throughout the proceeding.
The Respondent relies on the affidavit of Max filed 28 April 2022. Max was cross-examined in relation to the content of his affidavit. The Respondent also relies on various exhibits that were tendered throughout the proceeding.
In addition to the evidence to which I have referred, both parties filed an outline of submissions prior to the hearing, with the Applicant also filing a supplementary outline of submissions prior to trial. Additionally, each party filed written closing submissions at the conclusion of the trial, and also had the opportunity to address the Court orally.
I have had regard to all of the material referred to above.
RELEVANT PRINCIPLES
There is not any dispute between the parties as to the law or legal principles to be applied in this case. In Green v Preston Motors Pty Ltd [2022] FedCFamC2G 205 (‘Green’), I summarised the law and legal principles to be applied in a case such as this at paragraphs [15]-[36]. I directed the parties to that decision and neither took issue with the summary of principles contained therein. I therefore adopt and intend to apply in this case, the principles as set out in Green at paragraphs [15]-[36], subject to the matters below.
In this matter, unlike Green, no issue was taken that the various complaints or inquiries made by Frank were received by Max or known to Max. There was a significant contest between the parties, however, as to following matters:
(a)whether each of the various complaints or inquiries could be characterised as complaints within the meaning of the Act;
(b)whether there was a source of entitlement underpinning the complaints; and
(c)whether the complaints were ‘in relation to’ Frank’s employment.
In submissions, Frank emphasised the statement of Bromberg J at [41] and [43] in Walsh v Greater Metropolitan Cemeteries Trust (No 2) [2014] FCA 456 that the words ‘in relation to’ are a broad description. He also pointed to similar comments by Tracey J in Trevena v Thiess Pty Ltd [2016] FCA 468 at [81]. Snaden J in Serpanos v Commonwealth of Australia [2022] FCA 1226 at [89] stated that a complaint will be made ‘in relation to’ employment if the subject matter about which a complaint is made concerns an aspect of that employment. The Respondent, in turn, emphasised the comments of Steward J in The Environmental Group v Bowd [2019] FCA 951 (‘Bowd’) at [126] that ‘a test of “potential implications” may be too broad a statement of principle’ at least insofar as it concerns a CEO. Steward J went on to state that ‘In my view, in the case of a CEO, the complaint must be one directed at or concerned with that person’s employment in a substantive way… It must, as a matter of substance, be about the CEO’s employment’.
Furthermore, as Snaden J noted in Wong v National Australia Bank [2021] FCA 671 at [153] ‘not every interaction by which one person communicates to another the existence of some suboptimal state of affairs will qualify as a “complaint”, as that term is properly understood. Were it otherwise, any form of reporting that involves the conveying of objectively unwelcome news would suffice to qualify’. I made a similar point in different circumstances in Green at [45]-[46], and other Judges of this Court have made similar observations: see Kantor v WISR Finance Pty Ltd [2022] FedCFamC2G 672 at [129] – [132].
As to the source of an employee’s ability to make a complaint, or to use the language of section 341(1)(c) of the Act, whether an employee ‘is able to’ make a complaint, both parties accepted that the right to complain must be found in some entitlement or right contained, for example, in a contract or other instrument, or the general law: see Cigarette & Gift Warehouse Pty Ltd v Whelan (2019) 268 FCR 46 (‘Whelan’) at [28], Bowd at [128]-129], and Messenger v Commonwealth of Australia (Represented by the Department of Finance) [2022] FCA 677 at [150].
ARE THERE COMPLAINTS AND INQUIRIES WITHIN THE MEANING OF SECTION 341(1)(C) OF THE ACT?
Save for one matter, the content of each of the alleged complaints is not in dispute. The documents said to constitute each of the complaints were annexed to Frank’s affidavit. It was not contended by the Respondent that Max did not have knowledge of the alleged complaints.
The alleged complaints
Each of the alleged complaints is summarised below.
The 2016 complaints
Frank claims that between April 2016 and July 2016, he made numerous complaints about Max’s alleged bullying behaviour towards him. He produced to the Court an ‘email chain’ between Max and himself. The emails traverse a number of issues. On 22 April 2016, Frank wrote among other things that ‘I cannot handle the situation, your attitude and the criticism on every smallest aspect’; ‘As i have previously advised, I do not want to sell the business as I am still ambitious..’; ‘THE ONLY SOLUTION TO THIS IS FOR THE BUSINESS TO BE SOLD OR YOU BUY MY SHARE! I can only suggest you think of a reasonable buy out figure and I will initiate discussions with appropriate investors’. An hour later on 22 April 2016, Frank wrote to Max ‘I will no longer entertain your criticism, negativity or behaviour whether written, documented or verbal. It is over, done, don’t want it, don’t need it, Never requested it!’. Max wrote back ‘I guess that is the constructive response from you. Obviously you didn’t get anything from my efforts in the document which once again are ignored…’. In a further email on 23 April 2016, Frank wrote to Max stating ‘You exert your energy on documents of criticism and cutting people down’. Frank then stated ‘I have told you i dont want to sell!’ [sic] and ‘You name the price i will start the process’. Max wrote back, acknowledging the different opinions between them and stated ‘Name the reasonable price that you would take to leave the business or pay to buy my share’.
Later in around 20 May 2016, there was a further disagreement about input into the direct budget. There is nothing that indicates what budget is referred to. There are further exchanges about the sale of the Business, with Frank telling Max he needs to ‘ease up’ and then going on to state ‘Do you want to run the business by yourself? Do you want to engage a different GM? Do you want a different partner?’. Frank stated that he has ‘highlighted certain behaviour and requested that you withhold from sending personal criticism’. In the same email Frank raised again the prospect of Max selling his share in the Business. Finally on 24 July 2016, Frank wrote ‘With reference to your email, please note that i am neither a buyer or seller’ and that he will do his utmost to find a suitable buyer.
The complaint on 20 January 2020
On 20 January 2020, Frank wrote a letter to Max. The letter was headed in bold and underlined as ‘NOTIFCATION AND REITERATION OF PROVISIONS UNDER COMPANY LAW’. In this document, Frank asserted that Max’s interest in Livwell was a conflict-of-interest (Livwell was another food business apparently owned and operated by Max). In the document, Frank wrote that it is necessary to set corporate boundaries to ‘protect my interests in Roma Foods’. He stated that this ‘will also ensure clear separation with product, NPD, selling partners and network colleagues in both domestic and international markets’. In the letter, Frank asserted that he has been involved in the development of ‘sorghum ‘mini pops’’ and that Livwell has launched ‘sorghum ‘mini pops’’ without seeking approval from Roma Foods. Attached to the letter are ‘guidelines’ in relation to the management of the conflict. Frank wrote ‘This is also an example of the ‘conflict of interest’ and is unequivocally a breach which contravenes the duties of a Director under the provisions of Company law’.
The complaints in ‘early 2020’
This complaint is not documented and is the subject of direct evidence from Frank. Frank deposes that he made a number of complaints and enquiries as to the general management of the company, staff turnover and other matters. He claims that Max never responded to any of these complaints.
The complaint on 15 May 2020
On 15 May 2020, Frank wrote a letter to Mr Schachna. In that letter, Frank stated that he was a 50% stakeholder of the Business, that he has had continual involvement and contribution in new product development at Roma Foods, that he requests involvement in new product development meetings and artwork direction, and that Livwell remains a conflict-of-interest. Frank wrote that ‘In reality, my share of investments into production capabilities made at Roma Foods are being devalued by Max’. Frank also wrote ‘As a stakeholder and director of Roma Foods I request that the guidelines process is immediately brought into effect’. In the letter, Frank also stated that the content of the letter is a ‘final warning’ to abide by the guidelines.
The complaint on 19 May 2020
Frank wrote to Mr Schachna on 19 May 2020. In the email, Frank acknowledged prior correspondence and ‘requests as a 50% owner of the business to be involved and informed equally about various business aspects irrespective of any self-proclaimed importance or self-purposed structures imposed by any one person’. Frank goes on to inform Mr Schachna that he expects compliance with conflict-of-interest guidelines, and that he will administer the matter. Other information is also provided to Mr Schachna.
The complaint on 1 June 2020
Frank wrote to Mr Schachna on 1 June 2020. In the email, Frank raised a number of matters. He once again requested involvement. He raised a range of matters relating to products, stock, poor management, pallets and costings, private label brands and other matters. He requested the organisation of a roundtable meeting to discuss these and other matters.
The complaint of 16 July 2020
Frank sent an email to Max dated 16 July 2020. Some of what is in this email amounts to nothing more than the trade of demeaning insults, for example, when Frank writes ‘I personally don’t think it was such a bad idea when I suggested on several occasions that we both have a psychological assessment to see if there is an underlying issue’. Some of what is contained in this email is about ownership matters, for example, Frank’s proposal to settle the dispute between them by Max ‘selling your share of Roma Foods (appropriately valued) to an investor approved by me’. There is also the expression of a demand that Max consider various options for managing the conflict between Livwell and the Respondent.
The complaint of 23 September 2020
It is somewhat unclear whether Frank relies on this email. As a precaution, I have treated it as an alleged complaint or inquiry. Frank sent an email to Mr Schachna on 23 September 2020. In that email, Frank stated that he appreciates Mr Schachna’s efforts to bring information equally to business owners and asks to be ‘in the know’ if there is something of value that he can input. He also states that ‘I consider matters such as strategy, performance and other operational functions of the business to be a natural flow of information requirement to any business shareholder that has a financial interest or more importantly that has requested this information’. He concludes the email by stating ‘I trust that this has provided some clarity’.
The complaint of 30 September 2020
Frank sent an email to Mr Schachna on 30 September 2020. Frank commenced that email by stating that ‘The business has always been accustomed to monthly management meetings and information was equally shared to shareholders. This is purely a standard process and expectation of shareholders of any business led by a General Manager or CEO’. Frank stated that Max has caused a lot of destabilisation, and has acted with total ignorance, and total disrespect. Frank stated that ‘To date, every communication sent to Max has been ignored and there has not been a response and in the meanwhile he continues to do as he wants! He tells you to refer me to him so he can continue the cycle of ignoring, side shift me and continue doing what he wants’. Frank goes on to remind Mr Schachna that ‘[Max] is not your sole employer’, that ‘I am a 50% shareholder and equal right in the business. I have reminded you that I pay 50% of your salary!’. Frank also wrote that ‘if you are emailing Max and it has anything to do with what is tabled in my email then applying cc is simply an easy function of any General Manager, Accountant or CEO when requested by a Company director with 50% shareholding’. Frank concludes by saying ‘this is how I want the business managed’.
The complaint of 19 November 2020
Frank sent an email to Melissa Handrinos on 19 November 2020. The substance of this email is all about the remuneration of Marco Buontempo (‘Marco’), Frank’s son. Frank expressed his view that Marco’s remuneration does not realistically reflect the work that he has done, and he requests an adjustment. He stated that this is not an issue of favouritism and that ‘I, as a business shareholder and parent have to now intervene and communicate my instruction directly to you that Marco’s salary will of today be adjusted to $85,000 plus super and backpay to March 2020’.
The complaints of 20 November 2020
Frank sent two emails to Mr Schachna on 20 November 2020. The first email sent at 2.28pm appears to be a response to something Mr Schachna sent. The substance of the email, however, relates to Frank’s son, Marco. In the email, Frank questioned Marco’s rate of remuneration. Frank also told Mr Schachna that he has ignored requests relating to protecting the Respondent from Livwell, establishing a review board or restricting sales to existing distributors, in circumstances where those requests have come from a ‘50% shareholder’. Frank asked Mr Schachna to ‘acknowledge that I have rights as a business owner to have the business run in accordance with my objectives, style and expectations’.
The complaint of 2 December 2020
Frank sent an email to Max on 2 December 2020. In the email, Frank referred to the Livwell conflict-of-interest and the guidelines. He also referred to the launch (apparently by Livwell) of a product known as ‘Buck Weaves’, and stated that it was not brought before ‘Roma Foods constituents or shareholders as required, and therefore approval was never sought or granted’. Frank asserted that the release of this product is in direct conflict-of-interest because the Respondent has invested in production of laminated snack products. Max is requested to immediately withdraw the product.
Complaint of 16 December 2020
Frank sent an email to Mr Schachna and Ms DeLaney on 16 December 2020. Frank listed ten matters requiring attendance and resolution including access to Mr Schachna’s contract, that Max reinstate him to Buontempo Enterprises, that the Livwell guidelines are communicated and in place, that Livwell withdraw certain products from sale, ensure that Roma Foods is not exposed to defaults arising from Livwell, that he be provided with salary and bonus information prior to any approval, that Marco attend management meetings and be provided with growth opportunities, that two non-executive directors be involved in meetings, and that a copy of the services and legal letter from HWL Ebsworth Lawyers be given to him. Frank also stated that he wants to ‘…know where money is spent. If managers are being paid bonuses why was I not permitted to have an input to this?’. Frank also re-asserts that ‘As a founder who has been in the business 36 years I feel mostly ignored due to the way Max likes to structure himself and allow himself to do whatever he wants’.
Do the complaints and inquiries fall within section 341(1)(c) of the Act?
The principal issue raised by the definition of ‘workplace right’ contained in section 341 of the Act, having regard to the communications set out above, is whether Frank as an employee ‘is able to make a complaint or enquiry… in relation to his or her employment’.
The employment arrangement pertaining to Frank (and Max) is unusual. The contracts were not in writing, but were oral. The precise time of their formation is not clear. The terms of the contracts are not clear, nor are the obligations under the contracts. Max set the salaries to be paid to each of him and Frank annually. The level of salary was set, it seems from the evidence, on the basis of how the Business was travelling, not on individual performance, or whether a party was satisfying the obligations under the contract. Max determined the level of salary for both him and Frank, without having any knowledge about what work Frank was actually performing. Furthermore, the salary paid to each of them (set at $118,000) was paid in advance annually to both of them, and not on a weekly, fortnightly or monthly basis as might typically be the case.
The parties addressed the issues in this part of the proceeding by submitting that whether the terms of section 341 of the Act were satisfied required the Court to consider three questions. First, whether the complaint raised a ‘grievance’ or ‘finding of fault’ in the sense contemplated by the authorities. Second, whether the complaint related to Frank’s employment. Third, whether there was a source of entitlement for Frank to be able to make the complaint or inquiry.
In an evidentiary context, Frank approached the issues above by giving evidence about the nature of the work he performed for the Respondent. In his trial affidavit, his evidence was that he was involved in ‘product development, production and general business development’. In his supplementary trial affidavit, Frank’s evidence was that while he stepped down as a Director ‘on the papers’ in 2013, he had ‘always acted as a director of the Company and was referred to and known as a director’. Some support for that evidence can be seen from documents that emerged during the course of the trial. Those documents, which are documents outlining the company structure, show that there were ‘Managing Directors’ (whom I take to be Frank and Max) in November 2009 and September 2012. There is also a company structure document dated March 2017 (after the date Frank had ceased being a Director) which identifies the Managing Directors as ‘Max B’ and ‘Frank B’. There are minutes of meeting from September 2019 that record both Frank and Max as being ‘Director’. Furthermore, in his supplementary affidavit, Frank says that he was heavily involved in the day-to-day activities of the Respondent, that he attended all meetings ‘in the capacity as a director and provided direction and guidance in numerous aspects of the business including product development, technical advice, business and customer relationships, employee relationships, international business development, branding, processing, efficiency matters and other business discussions’. Frank also refers to several products that he developed.
Frank was cross-examined about these matters. He emphasised that he had a role in product development, and this was emphasised by his Counsel in closing submissions. Frank gave evidence about how weekly product development meetings had ceased from around 2020, and how he was not actively involved in product development any longer, and how in his view he was being pushed aside. He also stated that prior to 2020, there were monthly meetings to assess financials, and he had made requests in relation to contracts and bonuses paid to employees, but now there were a lot of things occurring without his knowledge. His evidence was that he attended work on full-time basis.
Max was cross-examined about the work he and Frank performed. Max gave evidence of the Business, and how it developed. His evidence was to the effect that in the early years, he and Frank did whatever work was necessary or needed to be done. There was no demarcation of roles. As the Business grew in size, and professional management were brought on, things changed. Max acknowledged an email he sent to Frank in 2015 in which he allocated various responsibilities to Frank, including sales and marketing, packaging design, expenditure governance and new product development. He told the Court those arrangements, which occurred after Frank ceased to be a Director, were in place for a short period. Max also accepted the proposition that he and Frank were business owners and that if they had an interest or identified a problem in an area of the Business, then they could direct their energies to that irrespective of whether a CEO or General Manager was in place. Max acknowledged that Frank attended meetings involving other management personnel for some years after he ceased to formally be a Director of the Respondent. Max’s evidence was that in more recent times, Frank only attended work for a few hours each week.
Insofar as new product development is concerned, Max acknowledged that Frank had an interest in that area. He also gave evidence, however, that at various stages they were both involved in new product development. Max also stated in more recent years, the Respondent had employed other persons to be responsible for new product development. Max stated that he had no knowledge that Frank was performing any kind of product development role for the Respondent at the time Frank raised concerns about a conflict-of-interest.
What all of this evidence shows is the imprecise, and fluid nature of the way Frank and Max worked over time. It is unsurprising that their work changed over time. After all, apart from the passage of time itself, they were the owners of a small business that grew and developed over the years. They did what needed to be done in the early years, while in the later years as professional management was engaged, they enjoyed a somewhat freer rein in respect of the work they chose to perform. The conclusion that the nature and boundaries of the work that they performed was imprecise, informal and fluid in nature can be seen from, among other things, the following:
(a)Max’s evidence given in cross-examination that this was the reality of how the parties worked;
(b)The email from Max to Frank in 2015 in which Max allocated various responsibilities to Frank including for sales and marketing, packaging design, and other matters;
(c)Frank’s evidence that he was heavily involved in the day-to-day activities of the Respondent and provided guidance on a range of matters including product development, technical advice, business and customer relationships and so on, despite the fact that he ceased to be a Director of the Respondent in 2013, and despite the fact that his employment contract did not set out or contain any obligations or responsibilities in relation to these matters;
(d)The corporate structure document from March 2017 that identifies both Frank and Max as ‘Managing Directors’, even though Frank was not a Director of the Respondent;
(e)The evidence from both Frank and Max that Frank attended meetings with other management personnel for some years after he ceased to be a Director. That evidence includes the minutes of the meeting of 18 September 2019;
(f)The fact that the employment contracts (such as they were) were oral and contained no express terms as to duties or responsibilities;
(g)That the salary for Frank and Max was set without any reference to their duties, responsibilities, performance or hours of work.
The issue that then arises, given the fluid nature of the work performed by Frank, and the arrangements under which that work was performed, is whether the work was performed in Frank’s employment (or to use the words of section 341, whether it was ‘related to’ Frank’s employment). Mr McKenney submitted that Frank wore various ‘hats’, and that the Court should infer that Frank was performing his duties, whether in relation to product development or anything else, as an employee in the Business.
I have considered this submission closely. It has some force behind it. After all, Frank and Max have, for reasons not touched upon during the hearing, structured the Business so that each is an owner, as well as an employee (there is little if any evidence as to why they thought it necessary to become employees when they enjoyed the rights to run the Business as owners). It could, therefore, be said that it is artificial to attempt to delineate between what may have been done as an employee, and what may have been done as an owner. Put another way, it may be said that given Frank and Max have structured their affairs in this way, they ought not now be able to draw artificial or fine distinctions between whether some act relates to employment or not.
While the submission from Mr McKenney has some attraction to it, I have ultimately decided to reject it. In my view, all of the complaints relied on by Frank are not related to his employment when all the facts and circumstances of the case are considered, for the reasons that follow.
The substance of the complaints and inquiries need to be assessed. The substance of the complaints overwhelmingly reveals a dispute between business owners, and not complaints or inquires relating to employment. By way of example:
(a)The 2016 complaints reveal various exchanges about whether one of either Frank or Max should sell his share in the Business. Frank is complaining about alleged criticism from Max, but that all occurs in the context of a dispute between owners, and about whether one or the other of them should sell his share. It does not relate to employment;
(b)The complaint on 20 January 2020 is about Max’s establishment of another business. The ownership or commercial character of that complaint (as opposed to it being related to employment) can be seen clearly from Frank’s assertions that there is a ‘conflict of interest’ which is ‘unequivocally a breach which contravenes the duties of a Director under the provisions of Company law’. It does not relate to employment;
(c)The complaint of 15 May 2020 is a complaint where Frank asserts his continued involvement in new product development and requests further involvement. However, that constitutes simply one part, and a minor part, of the correspondence. Frank is clearly raising a range of concerns in this email as an owner. For example, he asserts his ownership rights as a ‘50% stakeholder’. He refers to his share of investments in the Respondent being devalued by Max. He complains again about Livwell, and requests that a guidelines process is put in place. The correspondence is overwhelmingly about how the Business is being run from an ownership perspective, and the matters raised are not related to employment;
(d)The complaint on 19 May 2020 is similar to the complaint above. Frank once again reiterates his demands or requests not as an employee with responsibilities, but as a ‘50% owner of the business’. Because of that ownership, he asserts a right to be ‘informed equally’ about various Business aspects. He once again reiterates his demand that there be compliance with the conflict of interest guidelines in respect of Livwell. Moreover, this is a communication making demands of the CEO, Mr Schachna. That communication can only come from a higher authority than the CEO, being the owner of the Business or the Board;
(e)The communication of 1 June 2020 raises a broad range of business matters and issues and asks for a meeting. The range of issues raised is much broader than any interest or role in new product development, which was a focus of Mr McKenney’s submissions. The breadth of the issues raised points not towards this being related to any employment matter, but to matters of ownership. Once again, the fact that these are requests being made to the CEO, underline the fact that the content of the email is not about matters relating to employment. One could not imagine any employee having the authority to raise these issues with a CEO. It does not relate to employment;
(f)The communication of 16 June 2020 again relates not to employment matters, but ownership matters. It is difficult to envisage any employee suggesting that an owner undertake a psychological assessment, without sanction. There are again the references to Max potentially selling his share to ‘an investor approved by me’ as well as the re-agitation of the demands concerning the Livwell business. The content of this communication is not related to employment;
(g)The communication of 23 September 2020 is not related to employment. Frank raises matters of strategy, performance and operational functions, a much broader range of matters than simply new product development. Frank asserts his rights to information about these matters not because he is an employee, but because he considers it to be ‘a natural flow of information requirement to any business shareholder that has a financial interest or more importantly that has requested this information’;
(h)The communication of 30 September 2020 is also not related to Frank’s employment. He refers to monthly management meetings, information equally shared to shareholders, his 50% shareholding and equal right in the Business, and his reminder that he pays 50% of the CEO’s salary. Frank’s conclusion that ‘this is how I want the business managed’ simply emphasises that the contents of this document in substance are not related to his employment;
(i)The communication of 19 November 2020 is not related to Frank’s employment. If anything, this is a complaint related to Marco’s employment, which Frank is raising;
(j)The communication of 20 November 2020 is also not related to Frank’s employment. It is communication that is concerned with the following. First, Marco and his employment. Second, Frank re-agitating his concerns about Livwell, establishing a review, and other matters. That the communication does not relate to Frank’s employment is emphasised again by him asserting his position as a ‘50% shareholder’;
(k)The communication of 2 December 2020 does not relate to employment. So much can be seen from Frank re-agitating his concerns about Livwell, and his comment that shareholder approval was not sought prior to the release by Livwell of the relevant new product; and
(l)The communication of 16 December 2020 is not related to Frank’s employment. The email constitutes effectively a series of demands concerning various business and management matters. That the communication is not related to employment is emphasised when Frank states ‘As a founder who has been in the business 36 years I feel mostly ignored due to the way Max likes to structure himself and allow himself to do whatever he wants.
That the communications above are not related to Frank’s employment is also demonstrated when consideration is given to the outcome Frank is seeking when he raises these matters. Frank is not seeking resolutions to employment matters, but rather commercial, non-employment, outcomes. For example:
(a)In the 2016 communication, Frank states the only solution to this is for the Business to be sold or for Max to buy his share. A commercial, non-employment-related, resolution is proposed by Frank to the issues he is raising;
(b)In the communications on 20 January 2020, 15 May 2020 and 19 May 2020 Frank seeks the adoption of guidelines to manage what is a conflict-of-interest under ‘Company law’;
(c)In the communication of 1 June 2020, it is true that Frank requests involvement in meetings, which may relate to employment. It can be seen, however, that the range of matters that Frank is requesting involvement in, extend well beyond new product development. It includes involvement in products, stock, poor management, pallets and costings, private label brands and other matters. In that context, what he is seeking extends well beyond anything to do with his employment;
(d)In the communication of 16 July 2020, Frank proposes that he and Max both undertake a psychological assessment. There is also the proposal that Max sell his shares to an investor approved by Frank. The outcome sought by Frank does not relate to employment issues, but ownership matters;
(e)In the communication of 23 September 2020 Frank is plainly seeking a broad range of information that, in his own words, should flow naturally to ‘any business shareholder’. The resolution he seeks is the provision of shareholder information, not employment information;
(f)In the communication of 30 September 2020, Frank is effectively stating his wish to be involved in monthly management meetings, and wants access to information that is ‘equally shared to shareholders’. He instructs the CEO to copy him in the correspondence sent to Max. Again, Frank is seeking remedies as a shareholder;
(g)In the communications of 19 November 2020 and 20 November 2020, Frank is seeking an outcome (among other things) for his son Marco. The adjustment to Marco’s salary, sought in the 19 November 2020, email firstly relates to Marco’s employment and secondly, constitutes the intervention of an owner, not an employee. The communication of 20 November 2020 seeks an acknowledgement of Frank’s right as a Business owner to run the Business in accordance with his style or objectives. Once again, the outcomes pursued by Frank do not relate to his employment;
(h)In the communication of 2 December 2020, Frank seeks that Livwell withdraw a product from the market because it has not been approved by the shareholders of the Respondent. The outcome sought by Frank does not have anything to do with his employment; and
(i)The communication of 16 December 2020 is a list of demands made by Frank. It relates to a broad range of matters. The outcomes sought include that Livwell withdraw certain products, that the Respondent is not exposed to commercial defaults, that he be provided with salary information for all employees, that Marco attend management meetings, and that he be given access to the legal services provided by ‘Ebsworth’s’. These are matters to do with management of the Business, the commercial standing of the Business, or other corporate and commercial matters. They do not bear on Frank’s employment.
In none of the communications does Frank rely on his status as an employee in pursuing the matters he is pursuing. The documents disclose Frank was predisposed in his communications to remind recipients of his status and authority. Not once does he reference any authority or standing he has pursuant to an employment contract or his employment generally. He does not reference any part of his employment responsibilities. He does not point to any term of his employment contract when pursuing rectification of the wrongs allegedly done to him. The evidence, such as it is, points almost uniformly in another direction. That is, Frank frequently and repeatedly asserting his rights as a Business owner and 50% shareholder.
There is then the question about the source of any right or entitlement to make a complaint. Frank contended in written submissions that his right or entitlement to make the complaints arises from express and implied terms of the oral contract of employment, the general law, as well as the Company Policies.
The ‘Company Policies’ to which Frank refers is a document entitled ‘Roma Food Products HR Manual’. Extracts of this document which I shall refer to as the ‘Manual’ were annexed to Frank’s supplementary outline of submissions filed prior to trial.
I have considered the Manual. In my view it does not provide a basis to underpin any entitlement or right to make a complaint for the following reasons.
First, the Manual is not in evidence. It was annexed to the outline of submissions as noted, but it was not formally tendered. Frank sought to overcome this issue by submitting, among other things, that Max was questioned about the Manual, and that it therefore should be regarded properly as being in evidence. Max was questioned about the Manual, but there are problems for Frank in relying on that. Max was not shown the document in the witness box. When asked about it, Max seemed unaware of it and asked for details. When asked whether there was an earlier version of the Manual, Max replied ‘I can’t tell you. No’. Nothing about Max’s evidence leads me to conclude with any confidence that the Manual is the property of the Respondent, such that I would rely on it for the purposes of this matter.
Second, and more significantly, the Manual on its face was not in operation at the time Frank was employed, and made his complaints or inquiries. Frank’s employment ended on 25 February 2021. The footer to the Manual records that it was approved on ‘1/09/2021’. Moreover, the footer to the Manual records the version number of the Manual as ‘Version: 1’. There is no evidence before the Court that there was an earlier version of the Manual in effect at the time Frank was dismissed.
Frank also submitted that the source for his entitlement to make complaints was the ‘express and implied terms of the oral contract of employment’. There are no express written terms of the contract. The submission that there was any implied term amounts to little more than assertion. Mr McKenney emphasised the broad nature of Frank’s role and responsibilities, which he contended related to employment. Be that as it may, whether or how any term of employment might have arisen having regard to the work performed by Frank remains entirely undeveloped. I was not, for example, addressed on any of the relevant tests as to why any term ought to be implied into Frank’s contract of employment, nor was I taken to any evidence to support the implication of any employment terms by reference to the applicable tests. I am not satisfied that the express or implied terms of the contract provide a source for Frank being able to make a complaint.
Frank submitted that a further source for his ability to make complaints were the provisions of the general law. I do not accept this submission for two reasons. First, during closing submissions, I asked Frank’s Counsel what provisions of the ‘general law’ were relied on. He was not able to identify any, and accepted that the only sources of entitlement were the oral contract of employment and the ‘Company Policies’.
Second, at paragraph [35] of the Frank’s outline of submissions filed prior to trial, Mr McKenney refers to, inter alia, the statements of Bromberg J in Cummins South Pacific Pty Ltd v Keenan (2020) 281 FCR 421 at [34], and also the comments of the Full Court in Alam v National Australia Bank Limited (2021) 288 FCR 301 (‘Alam’) at paragraph at [95]. In reliance on those passages, Mr McKenney submitted that it was open to Frank to rely on ‘section 341 of the Act and its intention, which establishes the Applicant’s right to make a complaint’. There are two difficulties with that submission. First, while the Full Court in Alam expressed the views that it did in paragraph [95] of its reasons, it ultimately concluded at [97] that ‘irrespective of our own views concerning the proper construction of s 341(1)(c), this Court should proceed on the understanding of s 341(1)(c) indicated by the unanimous decision of the Full Court in Whelan’. In Whelan, the Court confirmed that a complaint needs to be based upon some form of entitlement. Second, it is not accurate to say that section 341 of the Act ‘establishes the Applicant’s right to make a complaint’. Rather, section 341, together with the surrounding sections, establish a scheme where an employee may seek a remedy if adverse action is taken against the employee if, among other things, all the requirements of section 341 are satisfied. There is no broad right to make a complaint.
For all of the above reasons, all of Frank’s complaints or inquiries do not fall within section 341 of the Act.
ADVERSE ACTION
Frank was dismissed from employment. He was also suspended from employment on 4 February 2021. Each of these actions constitute adverse action for the purposes of section 342 of the Act.
In closing submissions, Frank argued that he was bullied by Max, and that the appointment of Mr Schachna as CEO resulted in him being excluded from information in meetings which concerned his role in the Business and product development. He submitted that each of these also constituted adverse action for the purposes of section 342 of the Act. There is a problem with these submissions.
Frank commenced this proceeding by, among other things, setting out his claim in a Form 2. Within the Form 2, Frank outlined his claims. The claim was outlined essentially in a chronological form. It was not apparent from reading that form exactly which actions were said to constitute adverse action within the meaning of section 342 of the Act, though a fair reading of the document would disclose that the principal and perhaps only adverse action relied on was Frank’s termination from employment.
The Applicant filed an outline of submissions prior to trial. This document also fails to articulate clearly which actions were said to constitute adverse action within the meaning of section 342 of the Act, though once again, a fair reading of the document discloses that the principal, and perhaps only adverse action relied on was Frank’s termination from employment.
Given the lack of clarity in the documents, I asked Mr McKenney on the first day of the trial what adverse actions were being relied on. The following exchange took place:
HIS HONOUR: I see. All right. And the adverse action - - -
MR McKENNEY: Yes.
HIS HONOUR: - - - there is only one. That’s the dismissal; is that right?
MR McKENNEY: The suspension of the applicant, your Honour, would also amount to adverse action, because that, obviously, alters the applicant’s position to his prejudice and/or injures that person. Obviously, the effect of that suspension is to exclude the applicant from performing his duties, your Honour.
HIS HONOUR: So there’s two identified - - -
MR McKENNEY: Yes.
HIS HONOUR: - - - adverse actions that you are - - -
MR McKENNEY: Yes.
HIS HONOUR: - - - litigating, the suspension and the dismissal?
MR McKENNEY: As you know with these cases, they’re initiated through the Fair Work Commission, your Honour. That’s on the basis that there was a termination and a dismissal for the purpose of section 342, but the evidence reveals that the suspension – there was a suspension, which is also adverse action, because there’s a continuum of events here, your Honour, which is what we say is that the respondent embarked on a course to destroy the applicant’s employment. I’ve already made a submission about why that was so. The respondent will say no, that’s not right, and they did it for this reason, but we challenge that, but there’s no doubt in my mind, your Honour, that that continuing of suspension through to termination both are examples of adverse action.
HIS HONOUR: All right. Thank you, Mr McKenney.
The exchange above reveals that at the outset, the claimed adverse action was the suspension from employment and Frank’s termination from employment. The case was subsequently run on that basis.
In light of the above, I do not propose to entertain any claim that Frank was subject to adverse action because he was bullied by Max, or because he was excluded from certain things because of the appointment of Mr Schachna. Those claims were only articulated in closing submissions for the first time. The Respondent had no notice of them, and no opportunity to respond to them.
WAS THE ADVERSE ACTION TAKEN FOR A PROHIBITED REASON?
The Respondent contends that Max alone made the decision to suspend Frank’s employment from 4 February 2021 because of an incident that occurred 1 February 2021. The Respondent contends that Max alone made the decision to terminate Frank’s employment, effective 25 February 2021, for the sole reason that Frank attended the Business premises in direct breach of the directions given to him on 4 February 2021. Max deposed that he did not suspend Frank from employment or terminate Frank’s employment because Frank had made any complaints or enquiries, or because Frank had exercised any workplace rights.
Frank submitted that Max’s evidence as to the reason for his suspension from employment, and termination of employment should not be accepted. Frank submitted, inter alia, that:
(a)His employment was terminated by Max, Mr Schachna and Ms De Laney, and that as neither Mr Schachna or Ms De Laney was called to give evidence, the Respondent could not overcome the onus in section 360 of the Act;
(b)Max’s evidence cannot be relied on because he has a direct interest in the matter: see Flaguel v WeDrive Pty Ltd [2020] FCA 1666 (‘Flaguel’) at [27] and [31];
(c)He made continuous complaints well prior to his termination of his employment and proximate to his termination of employment (including claims of bullying and harassment), and these complaints are the real reason for his dismissal, all of which continued to be live issues, and none of which had been dealt with or responded to. It was also submitted that the correspondence demonstrates animosity between Frank and Max;
(d)The complaints made against him were not particularised, and he was never given an opportunity to respond to them. Furthermore, he had never been subject to any prior complaints as to bullying or harassment;
(e)Aspects of Max’s evidence were not correct, and therefore he should not be believed in relation to the reasons he gives for dismissing Frank; and
(f)Max gave conflicting and contradictory evidence, was evasive in the witness box, and therefore should not be believed.
I did not find Max’s evidence to be conflicting or contradictory, nor would I regard him as being evasive in the witness box. He gave every impression of trying to be of assistance when cross-examined, though like many witnesses, he occasionally had to be asked to focus on answering the question or had to have the question clarified for him. In relation to the specific matters raised by Frank, as to why I should draw a conclusion that Max’s evidence should not be believed, the following was highlighted:
(a)Max was criticised for omitting details in his affidavit as to what occurred on 1 February 2021 leading to the suspension of Frank from employment. In respect of this matter, I note that Max deposed in his affidavit that Mr Schachna left the Respondents premises saying he was unable to continue in employment due to Frank’s bullying and harassment. The matter was therefore dealt with, though I accept that Max only provided more detail about this orally when asked to do so;
(b)Frank also criticised Max in respect of his evidence about what occurred on 1 February 2021, claiming there was no corroborating evidence in respect of Max’s account of what occurred. That is not correct. The corroborating evidence is contained in Frank’s emails to each of Max, Mr Schachna and Ms De Laney on 4 February 2021. Some examples follow. Max’s evidence was that he asked Frank to leave the premises. Frank acknowledges in his email to Max on 4 February 2021 that he (Frank) had been asked by Max to leave the premises. Max’s evidence was that Frank was yelling, and Mr Schachna was scared and said to Max he could not continue in employment. Frank effectively corroborates this evidence as well. In his email to Mr Schachna, Frank stated that he is ‘recapping on my discussion’, and then acknowledged his frustration and anger on 1 February 2021 saying-‘Who would not be frustrated and angry?’ before going on to accuse Mr Schachna (and Max) of being ‘the root of all problems’. The email also contains a somewhat veiled threat to Mr Schachna being ‘You cannot continue to run and hide under the protection of Max’. Max’s evidence was that Ms De Laney told him she was ‘uncomfortable’. Frank corroborates this in his email to Ms De Laney on 4 February 2021 when he writes ‘you made a comment in front of Sam and Max that I make you uncomfortable’;
(c)Max was criticised for not being able to identify or describe what Frank’s role was, despite paying him a salary, and for not knowing what work Frank was doing. That criticism does not take into account all of the evidence I have referred to above about how the Business developed, how the roles of each of Frank and Max changed, and the unusual and unexplained employment arrangement;
(d)Max was criticised for giving evidence that Frank was hardly present at the office, while other witnesses, notably Mr Hicks, Ms Jacobson, ‘Ms Handrinos, and Mr Gogos each gave evidence to the effect that he was there every day. The weight of the evidence suggests Frank was present in the office on most days up to 2020. However, I note the following. First, the evidence of Mr Hicks, Ms Jacobson, Ms Handrinos and Mr Gogos in so far as it extends from the start of 2020, is inconsistent with Frank’s evidence which was that in 2020, he reduced his attendance at the office to one day per week, consistent with the regulations that were in place by the Government to manage the Covid-19 pandemic. Second, given the very poor relationship between these brothers, it does not surprise me that Max did not know what Frank was doing. In a situation such as this, it is likely that each preferred to avoid the other;
(e)Max was criticised for giving evidence that the termination caused him and his family distress. This is said to be contradictory evidence, because Max instructed the letter of 20 November 2020 to be sent, and subsequently suspended Frank’s employment. There is nothing contradictory about this evidence. An individual can take steps to terminate another’s employment, but still find it difficult and be affected by it;
(f)Max was criticised for stating that Frank only attended meetings of shareholders. It was submitted that minutes of meeting held on 18 September 2019 showed Frank’s participation in a meeting with persons other than shareholders. This was said to be contradictory. The evidence as to what meetings were held and when is somewhat unsatisfactory. It is clear that various meetings were held at various times. I would not regard it as unusual that in a business this size, there is not a clear delineation between meetings dealing with management, meetings dealing with board issues, and meetings dealing with other issues. Max did say under cross-examination that Frank attended meetings of shareholders, but he also gave evidence of Frank attending other meetings at various times. When all the evidence is weighed, I would not regard Max’s evidence as giving rise to such a contradiction as to render his evidence lacking in credibility; and
(g)Max was criticised for acknowledging he received various emails from Frank. It was admitted that there was no evidence of any response to these emails. Two things may be said about this submission. First, it does not disclose any contradiction or inconsistency. Second, there is evidence of Max replying to some of Frank’s emails which I have noted in my summary of the relevant emails earlier in this decision.
There is then the submission by Frank that Max was not the sole decision-maker. Max’s evidence is that he was the sole decision maker in relation to Frank’s suspension from employment, and that he was the sole decision maker in relation to Frank’s termination of employment. He was not challenged on this evidence during cross-examination. There is not any other evidence that suggests in any way that others were involved in either of these decisions. Accordingly, I accept Max was the sole decision maker in relation to Frank’s suspension from employment, and his termination from employment.
The submission that Max’s evidence should not be relied on simply because he has an interest in the matter should be rejected. Flaguel does not support that proposition, and is a decision that turns on its own facts. Further, Frank also has an interest in the matter. The question of why was the adverse action taken is one that is to be answered in light of all the established facts in the proceeding, including an assessment of the direct evidence from the decision maker and an assessment of whether that direct evidence is unreliable because of other contradictory evidence.
There is no doubt that there has been a seemingly irretrievable breakdown in the relationship between Frank and Max. The correspondence passing between the two leaves a clear impression of two men who do not like each other and are prepared to demean each other in writing, and probably to each others faces. It is clear that the relationship deteriorated some time ago. Max says it deteriorated in May 2014, some nine years ago. Frank says the relationship started breaking down around the ‘early 2000’s’. I find the ‘early 2000’s’ somewhat difficult to believe. It is unlikely Frank would have voluntarily stepped down as a Director from the Respondent in 2013 had there been any serious deterioration in the relationship between them at that point in time. Whatever the position, however, relations between the two men have not been good for many years. The relationship was clearly poisonous from 2016 judging from the emails passing between them between April 2016 and July 2016, which Frank tendered to the Court.
There is little evidence before the Court as to what occurred between Frank and Max in the period between the complaints Frank relies on in 2016 and January 2020. I am satisfied, however, that the relationship did not improve, and continued to deteriorate. Evidence that the relationship did not improve in this period can be seen from minutes of a meeting between Max, Frank, Owen Nelson (the previous CEO of the Respondent), Firoz Divecha (Financial Controller) and Walter Moscatelli dated 8 September 2019. Those minutes record the various ‘rules’ by which it was agreed the Respondent should be managed. Many of the ‘rules’ appear to be related, and intended to deal with issues that had arisen between Frank and Max, and of which the Court has been taken to.
There are then the various complaints that Frank made during the course of 2020. The content of those complaints has been outlined earlier in these reasons. Those complaints were received predominantly by Max and Mr Schachna. They were written in direct terms and were forceful. They laid bare various grievances. They were at times condescending and insulting. Despite the content, forcefulness and regularity of these complaints, however, nothing was done by Max or anyone else to threaten or make less secure Frank’s employment. There was a preparedness, it seems, to let matters continue as they had been for some years, which may be summarised as open hostility between Frank and Max as co-owners.
Things seemingly changed, however, on 20 November 2020. That was the day that HWL Ebsworth wrote to Frank and demanded that he cease engaging in various conduct, including bullying and harassment of employees, making verbal threats to employees and communicating issues regarding individual employee remuneration. It is relevant to ask what prompted the change in approach. In my view, what prompted the change in approach was the allegations that Frank had bullied, harassed or threatened employees of the Respondent. This was no longer a dispute between warring brothers and co-owners. Rather, the issue at least from the perspective of Max and the Respondent, was that the health and welfare of other employees was threatened. The terms of the letter make that clear, as does Max’s evidence to this Court.
Frank says, in effect, that there is no substance to the allegations made against him. His case is, among other things, that this was all part of a plot to hide the true reason for the dismissal. He points to the unchallenged evidence of Mr Hicks, among others, to say that he was not a bully in the workplace. He also points to the unchallenged evidence of Ms Handrinos to say that he was in fact the one that was bullied by Max. This evidence does not advance Frank’s case. There is nothing to suggest that either Mr Hicks or Ms Handrinos were present or observed what occurred between Frank, Ms De Laney and Mr Schachna (whether on 1 February 2021 or otherwise). Generic statements that Frank was not a bully carry little weight. Generic statements that Max bullied Frank also carry little weight. The real issue is what Max knew and why he acted. On that issue, Max is clear that Mr Schachna and Ms De Laney had raised concerns with him about Frank’s behaviour, and that as a result of those concerns, he felt it necessary to take steps to address their concerns. In my view, Max could hardly have done anything else. He and the Respondent would have been subject to criticism had he not acted to address those concerns, and stop the conduct.
There are two other matters that arise in relation to Frank’s submission that there was no substance to the bullying allegations. First, it is plain from the emails that Frank relies on that he involved Mr Schachna (in particular) in the dispute between him and Max. In his various emails, Frank demanded many things from Mr Schachna. The emails also demonstrate that Frank has an awareness that Mr Schachna was being directed by Max. It is not difficult to understand that Frank’s emails to Mr Schachna would have placed Mr Schachna in a difficult position, between two conflicting business owners. Frank’s emails may or may not have been found to have been bullying behaviour, but it is easy enough to understand why Mr Schachna would have felt threatened in his employment, and why he may have felt bullied. He found himself in the middle of a longstanding and hostile dispute between two business owners. Second, the submission that the bullying complaints had no substance misses the point. At no point was it suggested that the bullying allegations against Frank were proved. The allegations were to be investigated, and Frank was told that he would have an opportunity to participate in the investigation and respond to the allegations.
Returning to the email of 20 November 2020, there had been years of hostility between Frank and Max up to that point. Despite that history, no attempt had been made prior to that time to do anything about that hostility, or to take any step to bring Frank’s employment to an end. Max, Frank and the Business simply carried on, while the brothers fought. In the context of this matter in particular, it is relevant that Max accepted the barbs and complaints that came his way from Frank, and at no stage threatened his brother with suspension or termination from employment. Things changed only when the conflict between the brothers spilled over, affected other employees, and those other employees raised the issue with Max.
The letter of 20 November 2020 is noteworthy for another reason. The Respondent (through HWL Ebsworth) did not threaten Frank’s employment in any way. It did not threaten to suspend him from employment. It did not threaten to dismiss him from employment. It neither instituted any investigation, nor foreshadowed any investigation. It simply demanded that Frank cease engaging in the conduct. The approach taken was measured.
The evidence discloses that at least the following then occurred after 20 November 2020.
Frank wrote an email to Mr Schachna on 16 December 2020, the contents of which are summarised earlier. In that email, Frank characterised at least two statements made by Mr Schachna as a ‘fallacy’. He also conveyed to Mr Schachna a list of demands, some of which were only capable of being actioned by Max. By sending this email, Frank once again placed Mr Schachna in the middle of the dispute between him and Max. It is not apparent that Frank gave any consideration to the content of the letter of 20 November 2020 when he wrote this email to Mr Schachna. Notwithstanding that, the Respondent’s approach was measured. It did not take any action against Frank in relation to the email of 16 December 2020.
The next relevant incident occurred on 1 February 2021. I have examined the evidence as to what occurred on this date earlier. I find that there was an incident between Mr Schachna, Ms De Laney, Frank and eventually Max. I find that Frank was angry, upset and yelled at Mr Schachna. I find that Ms De Laney said she was uncomfortable with Frank. I find that Max told Frank to leave the premises because of Frank’s behaviour.
Following the incident on 1 February 2021, Max on behalf of the First Respondent wrote to Frank on 4 February 2021, and suspended him from employment. Max informed Frank that the Respondent had become aware of serious allegations against Frank. Max advised Frank that the Respondent would commence a workplace investigation. Max also advised Frank that given the nature of the allegations, the Respondent had decided to suspend him from employment on full pay until the investigation had been completed. Frank was directed, among other things, not to attend work, not to perform any work related activities, not to come onto company premises, not to have contact with the Respondent’s employees, customers, suppliers or stakeholders and not to use or access any of the Respondent’s customer records or documents. Frank was expressly informed that he was ‘required to comply with the lawful and reasonable directions set out in this letter’, and that should he fail to do so ‘disciplinary action may be taken against you, including summary termination of your employment’. Finally, Frank was informed that any queries about the letter were to be directed to Max.
In the witness box, Max was asked why he decided to suspend Frank’s employment. He stated that there had been an incident on 1 February 2021, there were concerns about key staff, and this was something he needed to address.
The letter of 4 February 2021 was criticised by Frank as not providing any particulars of the allegations against him. That is a valid criticism. The letter does not contain particulars, and it is understandable that Frank complains that he does not know why he was suspended. Equally, however, Max makes it clear in the letter that he will be advised of the allegations separately in writing, and be given an opportunity to respond. Max also makes clear in the letter that he is suspended on ‘full pay’, and then sets out various directions (referred to earlier) with which Frank is required to comply. Max’s unchallenged evidence is that immediately on the same date he suspended Max from employment, he engaged Inclusion@Work to undertake a workplace investigation in relation to the complaints made about Frank.
I am satisfied on the basis of the evidence before me that Max suspended Frank’s employment on 4 February 2021 because of the incident that occurred on 1 February 2021. Max’s evidence as to his reason for acting was not undermined in the witness box. The surrounding facts corroborate Max’s evidence. Those facts include the following. First, there was an incident that occurred on 1 February 2021 in which Frank yelled at Mr Schachna in the presence of Ms De Laney. The incident caused Ms De Laney to feel uncomfortable and led to Max telling Frank to leave the premises. Second, the letter of 4 February 2021 confirms that Frank is being suspended because of his ‘conduct in relation to a number of other employees’. No other reason is advanced in the letter for the suspension. Third, the letter was sent in close proximity to the incident of 1 February 2021. Fourth, workplace investigators were properly engaged. I am therefore satisfied that Frank was not suspended from employment because of any complaints or inquiries he may have made.
During the trial, a question arose as to when Frank received the letter from Max of 4 February 2021. Frank says he did not receive it prior to sending the emails to each of Max, Mr Schachna and Ms De Laney at around 7.30pm 4 February 2021. I am inclined to accept that evidence. The subject matter of the emails refers to the events of 1 February 2021, and the emails themselves make no reference to the letter of suspension. While I accept Frank did not receive this letter by the time he sent his emails of 4 February 2021, he accepted he received it and understood its contents prior to the time of his dismissal.
While I am satisfied that Frank was not aware of the letter of 4 February 2021 at the time he sent his emails at around 7.30pm on 4 February 2021, that fact was not known to the Respondent at the relevant time. It seems likely the Respondent only became aware of this fact at trial. Accordingly, on 5 February 2021, the Respondent through Max sent a further letter to Frank. In the letter, Max referenced the directions contained in the letter of 4 February 2021 and asserted that the emails sent to him, Mr Schachna and Ms De Laney were sent in breach of the directions contained in the letter of 4 February 2021. Plainly, that assertion is inaccurate given the findings I have made, however, the letter of 5 February 2021 is important for at least the following reasons. First, although Max believed Frank had contravened the directions given to him, Max took no step to terminate Frank’s employment. He did not rush to carry through with the warning contained in the letter of 4 February 2021. Second, this letter served as a further notification, and warning to Frank that a contravention of the directions set out in the letter of 4 February 2021 would result in his employment being summarily terminated.
What happened next is not in dispute. Frank attended the Respondent’s premises on 22 February 2021 to deliver some correspondence, and farewell an employee. As a result of his attendance, his employment was terminated summarily. The termination of employment was effected by letter dated 25 February 2021.
When all of the evidence is considered, I find that the Respondent terminated Frank’s employment because he attended the Respondent’s premises on 22 February 2021 and in so attending, failed to comply with directions that had been given to him on 4 February 2021 and 5 February 2021. Frank was not dismissed because of the various complaints or inquiries he had made. There was no long standing plot to dismiss him in reaching this conclusion, I accept Max’s evidence that he made the decision to terminate Frank’s employment for the sole reason that Frank failed to follow directions given to him. Importantly, however, Max’s evidence is also corroborated by the following matters:
(a)There had been open hostility between Max and Frank for years. Despite that hostility, Max took no step to either threaten Frank’s employment, make it less secure, or bring it to an end. He was prepared (in all probability, reluctantly) to accept the far from optimal outcome that owning and operating the Business meant continued conflict with Frank;
(b)The trigger for Max’s change in approach was Frank’s conduct toward other employees. Once concerns were raised by others in November 2020, Max was compelled to act. The Respondent would have been criticised, and been potentially exposed to other risks, had it not acted;
(c)Once Max felt the need to act, it is notable that he did so in a measured and restrained way. He did not move immediately to threaten Frank’s employment or make that employment less secure. The first action was the letter of 20 November 2020 which simply asked Frank to desist from his behaviours. That plea fell on deaf ears. Notwithstanding that, the Respondent maintained a measured approach. It did nothing about the email sent to Mr Schachna on 16 December 2020, notwithstanding the tone and content of that email. Faced with a significant incident, on 4 February 2021, the Respondent once again eschewed moving to termination of employment, and instead opted for an investigation in which Frank was to be given every opportunity to participate. Moreover, faced with an apparent breach of the directions of 4 February 2021 by Frank, the Respondent once again exercised restraint, reiterating its directions to Frank. This is not a case in which an employer moved with speed to effect termination of employment, or had a plan to effect dismissal as soon as possible;
(d)There was an incident on 1 February 2021, and it was serious. The incident was not made up in order to affect the suspension of Frank’s employment. Key aspects of that incident are corroborated by Frank himself;
(e)The letter suspending Frank from employment, in its terms, corroborates the reasons given by Max in evidence for suspending Frank from employment;
(f)Frank was aware of the directions that had been given to him on 4 February 2021 and 5 February 2021. He had received them and he understood them. He nevertheless chose to disregard them by attending the Business premises on 22 February 2021;
(g)The content of the letter of termination corroborates Max’s account of the reason for termination;
(h)It is plain that Max regarded the complaints he had received from employees as serious and intended to act on them. He engaged Inclusion@Work to commence a workplace investigation. That further corroborates the seriousness with which the Respondent approached the allegations, the reasons given for the suspension from employment, and the reasons for the directions that were given to Frank, among other things, not to attend the premises or to engage with employees in the period of his suspension;
(i)In cross-examination, Max was cross-examined as to the reasons for his decision. At one point, the following exchange occurred:
Okay. And, in fact, what you did was that because those complaints or grievances were made to you, you decided you wouldn’t put up with that, and you devised a plan with assistance from your lawyers to get rid of - - -?---That’s - - -
- - - Frank?--- - - - ridiculous. I’m sorry. Absolutely not. Firstly, he is my brother.
The impact to the family, the impact to – to every element of my life. I’m sorry.
Well, what do you think has been - - -?---That’s just - - -
MR MILLER: Well, let him finish.
THE WITNESS: I – it’s – it’s a step too far because it has affected me as well very greatly. It’s – it’s something I would rather have avoided, but now, you know, to put that in front of me – I’m sorry
(j)It is clear from the content of that exchange, and the manner in which it was given that dismissal was a last resort and caused real distress to Max (as it no doubt did to Frank).
DISPOSITION
In summary, I find that the Respondent made the decision to suspend Frank from employment because of his involvement in the incident of 1 February 2021, and the impact it had on other employees. I find that the Respondent made the decision to terminate Frank’s employment because he failed to comply with the lawful and reasonable directions given to him in writing on 4 February 2021 and 5 February 2021. The decision to suspend Frank from employment, and the decision to terminate Frank’s employment was not made because Frank had workplace rights, or exercised workplace rights, or to prevent Frank from exercising workplace rights. The reverse onus has been discharged.
It follows that Frank has not made out the claims in his Application. Accordingly, the proceedings will be dismissed.
I certify that the preceding ninety-seven (97) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Blake. Associate:
Dated: 26 May 2023
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