Cox v Eve O & G
[2016] FWC 1861
•14 April 2016
[2016] FWC 1861
DECISION
| Fair Work Act 2009 | |
| s 394 - Application for unfair dismissal remedy | |
| Christine Cox | |
| v | |
| Doctor Elizabeth Varughese t/as Eve O & G | |
| (U2015/9370) | |
| DEPUTY PRESIDENT SAMS | SYDNEY, 14 APRIL 2016 |
Application for relief from unfair dismissal – medical practice manager – summary dismissal
–allegations of fraud – close personal and professional relationship between employer and
employee – identification of irregularities in business accounts – Small Business Fair
Dismissal Code – whether employer had a belief the employee was guilty of serious
misconduct – whether employer’s belief based on reasonable grounds - ‘show cause’ letter –
consistent denial of allegations – independent forensic investigation – explanation not
plausible – face to face meeting preferable but not essential – referral to police – unnecessary
to make findings of misconduct – employer’s belief based on reasonable grounds –employer
had complied with the Code – application dismissed.
BACKGROUND
[1] In 2011, Dr Elizabeth Varughese, Obstetrician/Gynaecologist established a small
medical practice in private rooms at the Tamworth Private Hospital, New South Wales. To
manage the practice Dr Varughese accepted a phone inquiry from Mrs Christine Cox that she
be considered for the position. Mrs Cox had told Dr Varughese that she had set up and run a
similar practice for another obstetrician, Dr Andrew Ansari. By letter of engagement, dated 1
July 2011, Mrs Cox commenced full time employment as the Practice Manager, classified at
Support Services Employee – Level 7 under the Health Professionals and Support Services
Award 2010 [MA000027] (the ‘Award’). Despite being contracted to work 38 hours a week,
Mrs Cox continued her Friday afternoon employment in the dental clinic of Dr Douglas
Thornton.
[2] From around mid-2012, until the end of Mrs Cox’s employment, Dr Varughese’s
practice engaged, at various times, five casual employees managed by Mrs Cox. At this point,
I note that there is no dispute that Dr Varughese’s practice, the employer of Mrs Cox, is a
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small business, as defined by s 23 of the Fair Work Act 2009 (the ‘Act’). I shall later return to
the implications of this for the purposes of determining the matter.
[3] Dr Varughese and Mrs Cox soon became very close, both personally and
professionally. They socialised with each other, their families holidayed together and they
were frequent visitors to each other’s homes. Dr Varughese bought Mrs Cox expensive
presents and allowed her considerable flexibility at work to attend to personal matters during
work time. Dr Varughese even arranged to travel to Brisbane with Mrs Cox on 10 April 2015
for surgery arising from her diagnosis of cancer. Dr Varughese actually assisted in the surgery
and supported Mrs Cox while she was recovering from further serious surgery following
complications. During this time, Dr Varughese arranged for, and paid for Mrs Cox’s husband
and sister to travel to Brisbane. Mrs Cox spent seven weeks in hospital. Eventually, at Mrs
Cox’s insistence, it was agreed by her doctors that she could travel back to Tamworth. She did
so on 1 May 2015, but was readmitted to the local hospital due to complications on 20 May
2015. She was discharged again on 25 May 2015.
[4] It is one of the great tragedies of this case, that this close, almost familial relationship,
has been irretrievably destroyed by the circumstances which give rise to this application.
These circumstances, arose from an incidental chain of events which occurred while Mrs Cox
was recovering from her surgery and soon after she returned to work from her extended sick
leave on 25 May 2015.
[5] What follows is a short summary of these events. In order to ensure the smooth
operation of the practice during Mrs Cox’s recovery and her limited return to work, Dr
Varughese engaged a friend and a senior practice manager, Ms Sue Weis to provide training,
on the day to day financial management of the practice, to the only other employee in the
practice, Ms Martina Hutchinson. During the training, Ms Weis discovered a number of
financial irregularities in the practice’s accounts and informed Dr Varughese accordingly. A
detailed investigation of the accounts was undertaken on 30, 31 May 2015. Dr Varughese
was satisfied that there were numerous financial transactions which could not be explained
and for which only Mrs Cox could be responsible. As a result, Mrs Cox was suspended on full
pay, while Dr Varughese arranged for a forensic accounting firm, Lomax Financial Group
(‘Lomax’) to undertake an audit of the accounts. As the audit confirmed a number of
discrepancies and irregularities, Mrs Cox received a ‘show cause’ letter from Dr Varughese’s
[2016] FWC 1861
solicitors on 18 June 2015, which is annexed to this decision as Annexure A. Mrs Cox
responded on 25 June 2015 and denied any wrongdoing (Annexure B). Her response was
considered unsatisfactory and she was dismissed for serious misconduct, by letter dated 25
June 2015. This letter is also annexed to this decision as Annexure C.
[6] On 14 July 2015, Mrs Cox filed an application, pursuant to s 394 of the Act, in which
she sought a finding from the Fair Work Commission (the Commission) that her dismissal
was ‘harsh, unreasonable and unjust’ and consequential orders for the maximum
compensatory remedy for her alleged unfair dismissal. Mrs Cox alleges her dismissal was
substantively and procedurally unfair. The application was listed for conciliation on 11 May
2015 in accordance with the Commission’s usual protocols. Both parties were legally
represented at the conciliation. However, as no settlement of the application was achieved,
the matter was remitted to me for arbitration in Tamworth. Mr R Bucksath, solicitor, appeared
for Mrs Cox and Mr L Thorburn appeared for Eve O & G and Dr Varughese (the respondent
or Dr Varughese). Both solicitors were granted permission to appear, pursuant to s 596 of the
Act.
THE EVIDENCE
[7] The following persons gave written and/or oral evidence in the proceeding:
The applicant, Mrs Cox;
The respondent, Dr Varughese;
Ms Sue Weis, employed as a Practice Manager by Professor Andrew Obermair, a
Brisbane based gynaecological oncologist;
Ms Katherine Appleby, an Accountant employed by Lomax;
Ms Martina Hutchinson, employed by Dr Varughese as a secretary from 9 February
2015; and
Ms Helene May, Dr Varughese’s nanny.
[8] Each of the respondent’s witnesses provided a written statement which Mrs Cox
responded to. The witnesses then replied to Mrs Cox’s response. I shall deal with the written
evidence in that format and then refer to any additional oral evidence given during the
proceeding.
[2016] FWC 1861
Dr Elizabeth Varughese
[9] As a foreign trained doctor, Dr Varughese said she was unfamiliar with the systems
and processes of running an Australian medical practice and was accordingly very reliant on,
and trusted Mrs Cox in the day to day financial accounting and administration of her practice.
When Mrs Cox first approached her to offer her services, Dr Varughese did not advertise,
interview anyone else or conduct a reference check. She felt that Mrs Cox was the ideal
candidate and had no reason to question her performance or honesty, particularly as they soon
became close friends.
[10] Dr Varughese deposed that after Mrs Cox’s surgery her only concern was for her
recovery and wellbeing. She had suggested hiring casual employees and temporarily reducing
Mrs Cox’s hours, without cutting her pay, until she was well enough to resume full time
work.
[11] Dr Varughese said, at no time prior to 25 June 2015 was Mrs Cox dismissed, nor was
it ever her intention to do so. Rather, Mrs Cox had ‘stormed’ out of her rooms on 25 May
2015, stating that she was quitting. She wanted Mrs Cox to come back, because of her
reliance on her and their close relationship. That same day, Dr Varughese began to receive
unpleasant and threatening text messages from Mrs Cox. Dr Varughese said she was
completely shaken by these messages which included the following:
‘How great is this going [to] look for you..chris has cancer and Elizabeth wants to get
rid of her…’
‘I just want to die…’
‘You have no heart’
‘I have contacted fair work Australia. ..they say I have a very strong case and will
provide a lawyer if they need to.
1. Since I havent formally resigned it is unfair dismissal especially under my
circumstances.
2. Discrimination…due [to] the illness that I had and I return to work under my job
description on light duties but no heavy lifting. 38hrs
3. Changing my job to my disadvantage. I will not instigate any of this [if] you speak
to me before lunch. Hefty penalties apply…I will be seeing my gp because of the
severe emotional stress that you have put me under. That is another issue I have told
them about. They have received a copy of my contract and job description. Go to
They are the body that protect employees in Australia if you wish
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to read more. Read general protections…Employees have rights you know. You
can’t change things to suit yourself sometimes. Please dont make me do this’.
[12] Initially, Dr Varughese thought Mrs Cox may have been drinking when she sent the
text messages. Given the medications she was taking, this was very unwise. Dr Varughese
continued to receive numerous texts throughout the night and the next day. She could not
understand why Mrs Cox was acting in this way, given all that she had done for her, including
during her recent surgery and recovery.
[13] When Dr Varughese was driving home the following day, she realised Mrs Cox was
following her. She ‘shook her off’, but then received a call from her children’s nanny, Ms
Helene May informing her that Mrs Cox was waiting outside her house. When Dr Varughese
arrived, there was a verbal exchange between them. Dr Varughese felt threatened as Mrs
Cox’s voice was ‘filled with rage’. Her 10 year old son later asked ‘why was Chris shouting at
you?’
[14] Dr Varughese said that around 27 May 2015 she knew she had no alternative but to
request outside assistance with the day to day financial accounting of the practice. She phoned
Ms Sue Weis, a good friend and senior practice manager in Brisbane. Ms Weis flew down
from Brisbane and commenced training her and Ms Hutchinson in the Genie System – a
computer program commonly used in specialist medical practices. After reviewing the billing
process, Ms Weis informed her that the EFTPOS payments were not being reconciled. After
further review, Ms Weis found that many of the EFTPOS dockets were missing. Dr
Varughese was then made aware that Ms Cox was making manual transactions and attaching
the EFTPOS dockets to the folder which contained the weekly Excel spread sheets of the
banking. At first, Dr Varughese believed that some dockets may have been lost and that the
actual cash would turn up and balance the accounts. However, records for a number of weeks
were checked and the cash banked did not match the transactions entered by Mrs Cox.
[15] It was Dr Varughese’s evidence that she was very distressed, upset and could not
believe what had been discovered. At the time, she did not draw any adverse conclusions, as it
was one thing to have a misunderstanding of the events of 25-26 May 2015 and another to
suspect a close friend of fraud or theft. As a result of Ms Weis’s advice, Dr Varughese then
engaged Ms Katherine Appleby from Lomax to conduct a forensic audit to ascertain what had
happened. Dr Varughese said that over the next weekend she and Ms Weis went through the
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banking reports ‘again and again’ to try and establish some explanation for the missing
monies. Around 29 May 2015, when Mrs Cox came into the practice rooms, she observed that
Ms Weis was training Ms Hutchinson. The next day, Dr Varughese received text messages
from Mrs Cox threatening self-harm. She believed that this reaction may be because she had
something to hide.
[16] After describing the practice’s accounting system, Dr Varughese believed that the
consistent error was, for example, that where there were 10 EFTPOS dockets on hand, the
Genie System recorded 15 EFTPOS transactions for the same period. This indicated that the
missing transactions were for patients who completed their payments and had been given a
tax receipt. The income account did not show any of these unexplained missing amounts. As
cash transactions were common in the practice, the only reasonable explanation was that the
missing amounts were cash transactions. It would appear that Mrs Cox was capturing all
transactions as EFTPOS and then manually recording in a table the cash and cheque payments
which went to the bank. While these showed that the cash was banked, the total did not match
the sum of the actual transactions or missing dockets. At the end of the banking cycle, the
EFTPOS machine should have reconciled with the Genie System.
[17] Dr Varughese said that Ms Appleby spent two days (4 and 5 June 2015) undertaking
the audit. Ms Appleby randomly sampled the banking against the takings in the account. Her
audit identified a pattern of irregularities in that the total amount received through EFTPOS
did not match the amount banked. Dr Varughese received the audit results on 18 June 2015. It
confirmed her suspicion that Mrs Cox appeared to be stealing money from the practice.
[18] Dr Varughese issued Mrs Cox with a ‘show cause’ letter on 18 June 2015. Mrs Cox’s
reply explanation, dated 22 June 2015, was that the discrepancies arose from ‘Medicare
batching’ she had not conducted. Dr Varughese did not accept that this explanation answered
the irregularities or explain a fraction of the missing money. The process of ‘Medicare
batching’ still requires a patient to sign a printout from Genie. It is recorded in the banking
report in a separate column as Medicare billing. The full amounts are paid directly into the
account by Medicare. She believed there is no room for manipulation in that process. It was
the responsibility of staff to send the ‘Medicare batching’ to Medicare at the close of business
each day. The audit discovered that this dispatch to Medicare was lagging behind by months.
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[19] Dr Varughese formed the opinion that Mrs Cox could not provide any reasonable or
plausible explanation for the irregularities and that she was stealing from the practice. As a
result, she dismissed Mrs Cox immediately for serious misconduct, although she still could
not believe this conduct by from a trusted friend. It was Dr Varughese’s evidence that since
Mrs Cox’s dismissal, the accounts have all reconciled and she had noticed a significant
increase in the cash takings.
[20] Dr Varughese said she later discovered that Mrs Cox had been paying herself, without
any authority of discussion with her, a higher wage than was agreed between them. No
payslips had been generated. Mrs Cox’s wages were sometimes accessed from her account,
after hours or offsite. Dr Varughese also claimed that she had since discovered that Mrs Cox
was also negligent in her daily work, with work often incomplete or not followed up.
[21] Dr Varughese summarised her feelings this way:
‘What passed between Christine and I in those years cannot be understood by any legal
framework or fair-work legislation. We worked together and became friends. We
watched out for each other, or at least I thought she did and we socialised together.
…
Over and above the financial loss that I suffered or my reputation being tarnished by
being drawn into frivolous Court proceedings by an employee, I will never be able to
reconcile with the truth that Christine was dishonest in her dealings with me. She was
never the person I thought she was.
…
I agonised for several weeks as to whether to make a complaint to the police as
Christine was my friend and I was hoping that maybe Christine would provide me with
a plausible explanation, even if that was an admission of guilt. At the time, I was
prepared to forgive her’.
[22] Dr Varughese confirmed she had had unofficial discussions with a Police Officer who
gave her a fraud report to complete. While Dr Varughese had no doubt as to Mrs Cox’s guilt,
she knew the devastating impact a Police investigation would have on her. Obviously, this
was an extremely difficult decision. However, even now, she would be prepared to forgive
Mrs Cox, if she admitted her guilt.
[23] Having performed surgery on another employee with the same condition as Mrs Cox,
Dr Varughese believed that Mrs Cox’s reactions and behaviour after her surgery was a
panicked response to the prospect of her conduct being discovered. She believed she was keen
to get back to work in order to stifle any investigation into her conduct.
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[24] In a reply statement Mrs Cox said she had been involved in the medical industry,
firstly as a nurse and then as a private practice manager for 15 years. Her husband is a small
business owner and she has been undertaking accounting work for 35 years. Mrs Cox said that
for two months prior to Dr Varughese opening her clinic, she had worked unpaid in preparing
the clinic for patients. She believed that Dr Varughese may have received verbal references
about her from persons for whom she had worked. Mrs Cox said that during her employment,
Dr Varughese had employed five casuals, all of whom had left of their own accord. As
practice manager, she had never dismissed any casual employee.
[25] Mrs Cox said that Dr Varughese had always known and accepted that she worked
Friday afternoons for Dr Thurston. Mrs Cox was confident that she had worked more than 38
hours a week for Dr Varughese and that Dr Varughese got ‘very good value for her wages’.
Mrs Cox explained how she would work back late, or on weekends to catch up, that she had
no morning or afternoon breaks and, on many occasions, would take no lunch break. She had
never taken advantage of her position of trust and friendship with Dr Varughese. She added
that she was available for afterhours emergencies and would sometimes mind Dr Varughese’s
children. She had once spent an entire weekend helping Dr Varughese’s move house.
[26] Mrs Cox described the circumstances surrounding her surgery in Brisbane. She was
concerned at the delay in her surgery, but had been reassured by Dr Varughese and her
colleague that ‘everything was fine’. Mrs Cox denied that Dr Varughese was her sole support
during this time; her sister was with her every day and her husband had flown up to be with
her. Mrs Cox pointed out that Dr Varughese had attended a conference during the week after
her surgery. It was never her intention to be indebted to Dr Varughese. All she wanted was to
resume normal activities, including returning to work.
[27] Mrs Cox said that after seven weeks in hospital in Brisbane, she was cleared by her
surgeon to return to Tamworth. However, the day after she returned, her condition
deteriorated and she was readmitted to Tamworth Hospital. There she was treated by Dr
Varughese’s husband, Professor Matthew George. She said his care was excellent, whereas
she was not happy with her treatment in Brisbane. During her readmission to hospital, Mrs
Cox requested work from the office and used her laptop to provide assistance to Dr
Varughese. She also provided advice to Ms Hutchinson several times a day.
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[28] Mrs Cox said she was finally discharged from Tamworth Hospital and cleared for light
duties on 25 May 2015. When she returned to work, Dr Varughese told her that she intended
to reduce her hours to 20 hours a week. Mrs Cox felt this was unfair. If she did not have
fulltime work she would have to look for other employment. She claimed that Dr Varughese
never mentioned that this was a temporary arrangement. She was rude and demanding and
said her decision was an ‘order’. She had hoped to discuss the matter later, as Dr Varughese
left soon after for a two hour teaching engagement. Mrs Cox believed that Dr Varughese
could not predict how she was going to respond to her own treatment, as every patient
responds and reacts differently to major surgery. Mrs Cox denied discussing her health and
recovery with Dr Varughese in any detail.
[29] Mrs Cox said that when she returned to work the next day, Dr Varughese was curt,
rude and unwelcoming. This made her feel distressed. She told Ms Hutchinson privately that
she had argued with Dr Varughese and had said ‘I quit’. That evening, she sent SMS
messages to Dr Varughese, with ‘Fair Work’ links, so she could see how she had been treated
unfairly. She did not believe these messages were threatening.
[30] Mrs Cox denied following Dr Varughese to her home on 26 May 2015. She was not
stalking her. In fact, they had passed each other in the opposite direction and she later texted
Dr Varughese to say she was waiting outside her house. Mrs Cox conceded, that at the time,
she was emotional and frustrated, but not aggressive. During their conversation, all Dr
Varughese would say is that she had ‘crossed the line’. Dr Varughese questioned her as to
sending the text messages to Dr Hollebone and Dr Andrew Ansari. Mrs Cox noted that Dr
Varughese’s babysitter was present and could have called the police. As she left she had
asked, ‘Why did it take 12 weeks for me to have surgery?’
[31] It was Mrs Cox’s evidence that, at no time had she threatened self-harm. Of course,
she was devastated, distressed and upset. Dr Varughese had even told her in hospital that she
had become a burden to her and her husband. She had actually left town and stayed with
friends.
[32] Mrs Cox agreed that she attended the practice on 29 May 2015. As Ms Weis was
there, she could have easily asked her about the irregularities. If she had been given an
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opportunity to explain, no further investigation or action would have been necessary. Mrs Cox
claimed that Ms Weis worked at the same level as her (Practice Manager). Ms Weis’s practice
was similar, but not identical to Dr Varughese’s. She may have contacted Ms Weis on rare
occasions, but Ms Weis had not supported her, as she would mostly speak directly to Dr
Varughese about any issue.
[33] As to the allegations, Mrs Cox said that she would usually conduct a bank
reconciliation every day, but sometimes every second day. Cash was deposited weekly. She
acknowledged that she manually entered transactions; but this was because the deposit sheet
was wrong. She had been doing it this way for years. It was confusing for the bank to provide
Genie deposit records due to the mistakes made by other employees. She also claimed that the
EFTPOS would often ‘drop out’ due to poor internet connections.
[34] Mrs Cox questioned why the same irregularities had arisen during the time she had
been away for seven to eight weeks on sick leave and at the time Ms Hutchinson was
conducting the accounts. She also questioned why Dr Varughese had not talked to her about
the irregularities. They could have been easily explained and her explanation would have
saved Dr Varughese considerable time and expense. As all patients were given a tax receipt
for transactions, this was the trail which could have been followed and provided an
explanation. Mrs Cox accepted that she did not reconcile the EFTPOS. This was because she
had been satisfied the daily EFTPOS on the bank statement was the same as the figures she
had recorded manually.
[35] Mrs Cox stressed that Genie is not an accounting system. One of its inadequacies
occurs in respect to the Medicare receipts and the banking. She explained:
‘You can total the daily billing and the amounts match but you also need to be aware of
other receipting. If you click on the name of the patient that has had an appointment
and the account is a Medicare account, it will state that there are no outstanding
accounts for this patient when in fact it is in the Medicare account and even though the
patient has been for an appointment shows no activity in their account that has been
raised. I did try to point this out to Dr Varughese in my show cause letter but it is very
hard to explain and be quite confusing without the program at your disposal’.
[36] Mrs Cox added that the irregularities were due to the completed ‘Medicare batching’,
not uncompleted ‘Medicare batching’. Mrs Cox said this was very hard to explain in a letter
or without access to Genie, particularly as she had received the ‘show cause’ letter at the start
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of her chemotherapy. She believed that Dr Varughese’s opinion of her guilt was formed,
without all the facts, and without giving her an opportunity to explain. She never cheated and
had always worked honestly and to the best of her ability. Mrs Cox admitted she had been
aware there were irregularities, but at no time had she ever tried to cover them up. Nor was
she ever consulted or criticised about her manual method of addressing the irregularities.
[37] As to increasing her pay without authorisation, Ms Cox said the rates were adjusted on
1 July 2014 to reflect the Award increases. She had not claimed for various allowances to
which she was entitled, and had performed nursing duties for well under the relevant rate. She
believed she had been paid well under the Award prior to 1 July 2014. She denied preparing
payslips for the casual employees, and, in any event, they should have been classified as part
time. Ms Cox denied that she had failed to follow up on the practice’s bad debts.
[38] Mrs Cox denied threatening court proceedings against Dr Varughese. However, she
said that sometimes this is the only way an employee can recover monies owed by the
employer. Her reputation had suffered and she had been reported to the Police. No Police
action has been taken, as there was no evidence of any wrongdoing. She has been unable to
find employment in a small country town and with a criminal charge pending. She said that if
no charge is laid (and she insisted it would not), she would bring a defamation action against
Dr Varughese. Mrs Cox asked, if Dr Varughese was prepared to forgive her, why did she not
give her an opportunity to respond to the allegations? Mrs Cox said that the only reason she
wanted to get back to work was to help Dr Varughese as her employer and dear friend. She
had nothing to hide. In any event, all the records were readily available. Mrs Cox believed
that Dr Varughese, Ms Weis and Ms Appleby had conducted themselves very poorly.
[39] Mrs Cox said she could not have her chemotherapy in Tamworth because Dr George
(as the only oncologist in town) had told her it was a conflict of interest (as he was the former
husband of Dr Varughese). She had to travel to Newcastle over a period of three days for this
treatment.
[40] Mrs Cox claimed that Dr Varughese had withheld her annual leave entitlements, not
paid superannuation and denied her access to her payslips. Mrs Cox believed Dr Varughese’s
participation in her surgery in Brisbane was wrong. It should never have happened. There was
currently an investigation into a possible legal claim against Dr Varughese and Professor
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Obermair. She believed it had suited Dr Varughese to find a way to terminate her
employment. Mrs Cox stressed that over four years, the accountants had never questioned the
management of the accounts. There was never any reason for Dr Varughese not to trust her.
Indeed, Dr Varughese had always been satisfied with her work and work ethic. Dr Varughese
had ‘broken her heart’, as they had been close friends.
[41] In a reply statement Dr Varughese further explained how the Medicare transactions
are processed. It was Mrs Cox’s responsibility to ensure they are ‘batched’ each day. They
would then appear in the account overnight, recorded as a Medicare benefit. Patients are then
receipted. Dr Varughese agreed that this was a time consuming exercise. If there were
discrepancies, they would record a higher balance in the account - not a lesser amount - as in
this case. Dr Varughese rejected Mrs Cox’s view that the discrepancies are explained by the
‘Medicare batching’. Her view was inherently flawed, because Mrs Cox had failed to provide
any details or plausible explanation as to why:
(a) all the practice’s transactions were being recorded as EFTPOS;
(b) cash and cheque transactions were being entered as EFTPOS, as the Genie system
does not automatically revert to EFTPOS, unless someone manually sets it up that
way;
(c) the EFTPOS transactions could not be reconciled (considering Ms Cox had stated
that she reconciled the banking daily or at least every second day); and
(d) numerous EFTPOS transactions had missing dockets which could not be
reconciled to the cash banked.
[42] In any event, Dr Varughese emphasised that the Medicare billings were irrelevant to
the audit process and the daily banking reports. Because of inherent delays, they would not be
reflected in the daily or weekly banking, Dr Varughese noted that other payments into the
account, such as VMO claims, rural specialist incentives etc. were also irrelevant to the
irregularities initially identified by Ms Weis. Dr Varughese believed Mrs Cox deliberately
refrained from reconciling the EFTPOS, because by doing so the EFTPOS deposits would be
much lower in the Genie system. The Genie system is simple to operate and accurate, yet Mrs
Cox created a manual banking excel spread sheet, in which she entered cash and cheque
transactions separately. Dr Varughese added that unless she personally closely monitored the
accounts, she would not have noticed that the cash banked, did not add up to the missing
EFTPOS receipts.
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[43] Since receiving Mrs Cox’s material, Dr Varughese had undertaken a further review of
the practice’s accounts for the period 26 February – 12 March 2015. Dr Varughese noticed
that during this period, Mrs Cox would regularly enter cash, cheque and EFTPOS under
EFTPOS transactions. Curiously, however, some transactions were recorded correctly. This
demonstrated that she knew how to enter such transactions. A review of this period disclosed
missing cash of $1,827.10. Dr Varughese had contacted the relevant patients, who confirmed
they had made cash payments at the time.
[44] Dr Varughese replied to Mrs Cox’s claim that internet reception would routinely ‘drop
out’, by stating that in the last eight months, only two EFTPOS transactions could not be
processed. Dr Varughese said that since Mrs Cox’s dismissal, all six of her supposedly
inexperienced staff had reconciled the Genie system, with EFTPOS and the banking. She
demonstrated the higher cash payments after Mrs Cox’s dismissal, by providing details to
demonstrate that in the second half of 2014, cash transactions were $8,853.15. For the same
period in 2015, cash transactions were $19,280.80.
[45] As one of the operating surgeons on Mrs Cox in Brisbane, Dr Varughese said that a
post-operative complication had developed about which there was very little medical
literature. Dr Varughese said that when Mrs Cox returned to Tamworth, she was still a
surgical patient. From her experience, she understood what Mrs Cox could and could not do,
according to standard medical advice. Dr Varughese said that when Mrs Cox was discharged
from Tamworth Hospital, she went straight to her rooms. She did not even go home first. Dr
Varughese found this very worrying as she believed she needed time to look after her health.
The practice would manage with the training of Ms Hutchinson and the ongoing employment
of casuals.
[46] Dr Varughese acknowledged she was not an accountant or an auditor and she did not
know how to deal with day to day book keeping. This was why she completely relied on Mrs
Cox. Dr Varughese acknowledged that Lomax had been her accountant for the past 18 months
and Mrs Cox had provided quarterly financial details to them. If there were any questions or
queries they spoke directly to Mrs Cox, not her. She agreed that Lomax had never advised her
of any missing monies.
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[47] Dr Varughese had decided that Mrs Cox should be suspended during the investigation.
She agreed that the suspension letter of 2 June 2015 had mentioned ‘irregularities and
discrepancies’, not ‘missing money’ and that there would be an opportunity for a meeting
once the investigation was completed.
[48] Dr Varughese firmly believed that the ‘show cause’ letter of 15 June 2015 summarised
the audit outcome. While agreeing that Mrs Cox was not provided with all the raw data at the
time, she believed that Mrs Cox understated the nature of the discrepancies, because she had
offered an explanation which made no sense (the ‘Medicare batching’). As Mrs Cox was the
only person involved in running the accounts, a reasonable explanation, had it been offered,
would have been accepted. In fact, this is what Dr Varughese had earnestly hoped for.
[49] Dr Varughese conceded that Mrs Cox was due to start chemotherapy in Newcastle
around this time. She acknowledged that the ‘show cause’ letter foreshadowed further
discussion with her, which never occurred. Indeed, Mrs Cox texted her to say she was
waiting for phone contact. Dr Varughese agreed she did not respond to the text.
[50] As to Mrs Cox’s hours of work, Dr Varughese said she had worked 32 hours a week,
and had never stayed at work beyond 5pm. This was because Mrs Cox always left with her, as
she needed to get home to her two young children. When Dr Varughese was shown a letter
indicating that Mrs Cox worked 38 hours a week, at $30 an hour, she said that she was paid at
Award Level 7 with a bonus, based on a percentage of her own income. Dr Varughese did not
dispute that during the relevant period, the practice had engaged five casual employees.
[51] In re-examination, Dr Varughese deposed that despite an agreement to work 38 hours
a week, Mrs Cox continued to work for a dental surgeon on Friday afternoons. Despite asking
her to give up that work in 2012, she continued doing it. In July 2014, Mrs Cox requested, and
was granted Wednesday afternoons off. Every second Thursday morning she would get her
‘nails done’.
[52] Dr Varughese clarified her answer that she had not believed Mrs Cox had stolen
money from her, by stressing that she had never ‘wanted’ to believe it. When she received the
audit report she was ‘absolutely shocked’. She emphasised that Mrs Cox’s implausible
explanation had not altered from the response to the ‘show cause’ letter until this hearing.
[2016] FWC 1861
Ms Sue Weis
[53] Ms Weis has worked in medical practices for over 40 years. She considered herself to
be a friend of both Mrs Cox and Dr Varughese. She called Mrs Cox on 25 May 2015, after
receiving an SMS message from her saying she had ‘just quit’. Ms Weis told her that Dr
Varughese had only been concerned with her health, after undergoing major surgery. Ms Weis
was aware Mrs Cox was keen to return to work. Ms Weis has had no further contact with Mrs
Cox, except when they briefly met in Dr Varughese’s rooms on 26 May 2015. At the time,
Mrs Cox had appeared surprised that she was helping Dr Varughese.
[54] Ms Weis explained that Dr Varughese had asked her to train Ms Hutchinson in the
Genie System - a program designed for specialist medical practices, with which she was very
familiar. It allows for the making of appointments and records and processes all the day to day
accounting procedures such as billing, receipting, banking and analysis of the billing and
income for the practice. The process separately lists all the cheques, cash and EFTPOS
transactions.
[55] When Ms Hutchinson first attempted to demonstrate how she did the daily banking, as
shown to her by Mrs Cox, Mrs Weis pointed out a quicker and simpler method, involving four
‘mouse’ clicks. Ms Hutchinson claimed that Mrs Cox had told her there was no need to settle
the EFTPOS, and she should record cash transactions as EFTPOS. Ms Hutchinson further
explained that she had adopted a practice of writing the patient’s names on the EFTPOS
vouchers, so she could distinguish them from the cash payments. After Ms Weis reviewed
the banking reports she advised Dr Varughese that there appeared to be a discrepancy in the
amount of cash banked. The total of EFTPOS, cheque and direct deposit transactions should
have left an amount for cash transactions. These amounts did not correspond to the banking
records.
[56] Ms Weis recalled Dr Varughese’s reaction, at the time, as being one of shock. Ms
Weis told her not to worry, as she believed there was a reasonable explanation or that she
might have made a mistake. After checking previous banking records, similar discrepancies
were discovered. By this time, Dr Varughese was distressed, and in tears. Ms Weis suggested
that she seek advice from her accountant, who recommended a forensic audit be undertaken.
[2016] FWC 1861
[57] At the time, Ms Weis was staying at Dr Varughese’s home. Over the following
weekend they both reviewed again the banking folders and EFTPOS vouchers against
receipts. They discussed what should be done. Dr Varughese had told her of a number of
concerning text messages, sent recently to her by Mrs Cox. As Ms Weis was aware of the
close friendship between Dr Varughese and Mrs Cox, she recalled Dr Varughese was very
distressed by the text messages. She had understood Dr Varughese would allow Mrs Cox to
take her mother to appointments and have her ‘nails done’ during work time. She would take
her to lunch, buy her expensive presents and spend weekends with her in Sydney, paid for by
Dr Varughese. She believed Dr Varughese had paid for ‘on board’ expenses when their
families went on a cruise together. She also gave her a ‘ride on’ lawn mower.
[58] In a reply statement, Mrs Cox agreed she had phoned Ms Weis on 25 May 2015
because she had been very upset at the manner in which Dr Varughese had earlier spoken to
her. She had just spent seven weeks in hospital, had clearance from her doctors and was keen
to resume work on light duties.
[59] Mrs Cox said that Dr Varughese had a lack of knowledge and experience with the
Genie System. By contrast she had four years’ experience and had found out its faults. Given
her own long experience in medical practices and business, she did not believe it was
necessary to call on Ms Weis for advice. Mrs Cox denied that she had ever instructed Ms
Hutchinson as to how to do the banking, as this was her own responsibility. Mrs Cox found it
easier to manually record cash and EFTPOS transactions, as other casuals had made mistakes.
From a long history of accounting in the family business, she had devised a manual way to do
the same function as Genie. She insisted that she had never told Ms Hutchinson to enter cash
as EFTPOS. She said that it is possible to determine who paid EFTPOS or cash, by the times
the patient is billed and receipted.
[60] It was Mrs Cox’s evidence that she was always available to give an explanation for the
discrepancies to Dr Varughese and Ms Weis, because on the day, she was working in the
office next door to where they were reviewing the accounts.
[61] Mrs Cox agreed that she and Dr Varughese had exchanged gifts over the years. She
denied taking any leave to care for her mother and justified having ‘her nails done’ by noting
that she never had a paid morning tea break. She believed Dr Varughese donated a lawn
mower to her as a reward for helping with a charity event.
[2016] FWC 1861
[62] In a supplementary statement Ms Weis denied the Genie system was complicated.
Rather, she described it is very user friendly. It is easy to train staff on its use. Settling the
EFTPOS is a routine, very simple, but important procedure to ensure a balancing of the
banking. One option on the Genie System allows the operator to simply click and enter cash,
Medicare, cheque, fund cheque, personal cheque, credit card, EFTPOS or direct deposit. Ms
Weis said that bulk billing ‘Medicare batching’ is performed electronically and would not
make any difference to the identified irregularities. She was of the opinion that the banking
process would not be accurate, without settling the EFTPOS and cross checking the EFTPOS
vouchers with the banking. If the transaction was entered as EFTPOS, but paid in cash, the
banking would obviously not balance. Each receipted payment should be accurately recorded
in the Genie system. Ms Weis criticised Mrs Cox’s manual recording of the EFTPOS slip
with the patient’s appointment time, as this would not work if a patient paid for a service on
another day, or the patient was seen out of order of appointment time.
[63] Ms Weis said that when Dr Varughese commenced her practice, Mrs Cox came to see
her in Brisbane to learn how the Genie System worked. Ms Weis had invited her to call at any
time with any queries.
[64] In oral evidence, Ms Weis explained the operation of the Genie System and the
generation of the daily banking report through a practical demonstration on a computer in the
court room. Ms Weis emphasised that taking Medicare bulk billing accounts would make no
difference to what she had discovered in the accounts.
[65] In cross examination, Ms Weis acknowledged she is neither an accountant or auditor.
She is employed by Professor Andrew Obermair. He had trained Dr Varughese and was the
surgeon referred to conduct Mrs Cox’s surgery in Brisbane. Ms Weis has been friends with
Dr Varughese for six years.
[66] Ms Weis agreed that the default payment set up in Genie is EFTPOS. It should change
if the payment is receipted and if not, it is a mistake. The banking report will show all
EFTPOS, but will not balance with the EFTPOS vouchers. Nevertheless, Ms Weis agreed that
this could be manually reconciled. But she could not see how, or when it had been reconciled.
[2016] FWC 1861
[67] Ms Weis acknowledged that she had not asked Mrs Cox about her method of
reconciliation. This was because she had no opportunity to do so. Ms Weis said that it was not
a case of how it is normally done, it is that the Genie system is set up to have it done through
the system. It was Ms Weis’s evidence that she was not looking for a reason for the
irregularities, just that they required investigation. However, she could not find an explanation
for how it was done. It was inappropriate for her to contact or speak to Mrs Cox.
[68] In re-examination, Ms Weis said that there was no way she could have found an
explanation as to why the accounts would not reconcile. She and Dr Varughese spent a
considerable amount of time trying to find an answer, before Dr Varughese agreed to engage
an expert forensic accountant. She added that in her experience, she had not seen accounts so
poorly kept as Dr Varughese’s accounts at the time.
Ms Katherine Appleby
[69] Ms Appleby has 18 years’ experience as an accountant. She has the following
professional qualifications:
(a) Masters of Commerce (Professional Accounting);
(b) Associate Member of the Institute of Professional Accounting (AIPA);
(c) Associate Member of the Tax Institute (ATI); and
(d) Registered Tax Agent.
[70] Ms Appleby described the circumstances surrounding her appointment, by Dr
Varughese, to conduct a forensic audit of her accounts. She believed Dr Varughese had held
real concerns that Mrs Cox may have misappropriated monies. Ms Appleby noted that when
Lomax had prepared Dr Varughese’s earlier tax returns, questions had been raised as to the
wages paid to Mrs Cox. These discrepancies were raised with Mrs Cox, at the time and she
had explained that the account summary did not include her bonuses. The issue was
ultimately resolved. Ms Appleby said that during the audit, Ms Hutchinson had told her that
Mrs Cox had removed her own employment records from the office when Dr Varughese was
out.
[71] Ms Appleby conducted the audit on 4 and 5 June 2015. She analysed and reviewed the
banking sheets from Genie, along with bank statements, EFTPOS receipts and the deposit
book. As an initial random disclosed the records did not balance, a day by day check was
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undertaken for the period 1 July 2014 to 31 December 2014. Ms Appleby identified the
following irregularities:
‘(a) Transactions that had been processed into the system and recorded in the banking
sheets as EFTPOS, but they were not in the EFTPOS receipts or had been declined in
the actual EFTPOS recordings.
(b) Even making an assumption that the missing EFTPOS transactions had in fact
been in cash, I still could not reconcile the transactions in the initial sample period
and as per Annexure A, when adding the unaccounted for income in Annexure A this
amounts to of $1,372
(c) To establish if this was normal we expanded the above in 13(a) and found that this
pattern continued in the 5 months following. Please see Annexure B showing
continued unaccounted transactions.
(d) I was of the opinion that had the review covered additional periods more of the
same pattern would be found and the unaccounted income would increase
significantly.
(e) Additionally, while undertaking the review in the offices of Elizabeth, I noted a
number of people came in to pay their account using cash. This reinforced my opinion
that the cash payments were missing EFTPOS transactions.
(f) Based on the payroll spreadsheet and the information from Elizabeth, we found
that according to the standards for a Level 7 the pay rate is $21.14 per hour. The pay
spreadsheet I reviewed provided for Mrs Cox being paid at a rate of $23.16 in the
months prior to the audit.
(g) Elizabeth was advised that Mrs Cox did not work 38 hours per week but worked
32 hours per week. The spreadsheet had recorded weekly hours at 38. Please see
Annexure C the spreadsheet showing the wages and the calculations of the over
payments’.
[72] Ms Appleby said that throughout her audit review, she had discussed the process and
issues of concern with Dr Varughese. When Dr Varughese asked if these discrepancies were
normal, Ms Appleby told her that she had not seen this level of discrepancies before, even
when the accounts were very poorly kept. In her experience, this number of discrepancies
meant that something must be hidden. Ms Appleby understood that Mrs Cox was solely
responsible for the day to day financial procedures of the practice. She had control over the
accounting system and records. Dr Varughese had completely trusted Mrs Cox with these
tasks.
[73] It was Ms Appleby’s view that, given the discrepancies were identified over a sample
period, a more detailed forensic investigation was necessary to establish the extent of the
discrepancies and, further, it would be prudent for Dr Varughese to involve her lawyers and
the Police.
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[74] In a reply statement, Mrs Cox said that Ms Appleby had no qualifications in the
Genie system and was unaware of how she ran the practice. Mrs Cox said she reconciled the
banking records on average every two days, and there was never any issue with the
accountants. Mrs Cox agreed that she had an earlier conversation with Mr Hurst at Lomax
about discrepancies in her pay. However, she noted that her explanation was accepted and
adjustments were made to the accounts.
[75] Mrs Cox accepted that certain Medicare payment records had fallen behind. In fact,
some were from the previous year. She was attempting to bring these up to date with the
assistance of the casual employees. These amounts would have made an ‘imbalance of
financial statements’. Mrs Cox claimed that cash payments were minimal, as most patients
paid by EFTPOS. She had nothing to hide, and in any event, Dr Varughese had full access to
all the transactions on her laptop’s Genie program. All relevant documents were held at the
practice and were readily accessible.
[76] Mrs Cox denied having removed any payroll records from Dr Varughese’s rooms,
except for her superannuation file which, she insisted was private and personal. She noted that
if she was paid as an Assistant Practice Manager, she didn’t ‘assist’ anyone. Mrs Cox restated
the history of her wages and conditions. As an accountant, Ms Appleby should have been
aware of the Award’s pay rates and entitlements.
[77] In a reply statement, Ms Appleby observed that she is regularly engaged by various
medical practices to assist in running and auditing their practices. She agreed that the software
may vary. However, the underlying recording process remains the same. As part of her audit
it was necessary to review reconciliations, but despite Mrs Cox’s claims, no evidence of
reconciliations could be found. Ms Appleby believed that the 2014 discrepancies highlighted
a history of unbalanced accounts. Ms Appleby also believed that Mrs Cox had paid herself
above the Award rate.
[78] Ms Appleby provided the following further information:
‘(a) The Medicare payments were not reviewed as part of this audit process and
therefore have no impact on the results of our review.
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(b) This was due to the delayed timing of the deposits and the way the records had
been kept by Ms Cox. It is my professional opinion that a review of the Medicare
entries would require a separate review entirely.
(c) I also considered that due to these records being influenced by third parties, for
example private health fund receipts, that the risk factor of misappropriation of these
types of transactions would be minimal.
(d) From my discussions with Dr Varughese, I determined that the area of high risk
should be reviewed where the transactions that were not influenced by an outside
force, such as the Cash, EFTPOS and Cheque receipts. These were also the
transactions that Sue Weis and Dr Varughese had initially identified the
discrepancies.
(e) My audit focused only on each daily banking record. I reviewed the EFTPOS
transactions on the banking sheets against the EFTPOS printouts from the EFTPOS
machine and Cheques against the Cheque records. These transactions are completely
separate and distinct from the Medicare transactions.
(f) The Medicare transactions were excluded from the audit and I state that even if I
had included the Medicare transactions in the audit process, the result of my findings
would have identified the same discrepancies as they were distinct from any of the
Medicare and other third party transactions’.
[79] Ms Appleby insisted that during the audit, she reviewed all of the records maintained
by Mrs Cox which were in the Doctor’s rooms. Ms Appleby said that while she was present in
the rooms, she had personally witnessed numerous cash transactions made by patients.
[80] In oral evidence, Ms Appleby denied she was unfamiliar with the Genie system. She
confirmed that the Medicare payments were considered, but excluded from the audit process
as they made no difference to the process or its outcome. It was Ms Appleby’s opinion that
generally when you see messy accounts and an experienced person in control, that person may
be attempting to hide something. She believed Mrs Cox had engaged in serious misconduct
and had told Dr Varughese of her belief.
[81] In cross examination, Ms Appleby confirmed that Lomax had been involved with Dr
Varughese’s practice over a period of 18 months, including the preparing the practice’s
quarterly BAS statements. All of the relevant information had been provided by Mrs Cox.
She said that when questions had been raised about the balancing of accounts, explanatory
information had been supplied by Mrs Cox.
[82] Ms Appleby said that to her knowledge, the audit did not disclose any missing
receipts. What she regarded as irregularities were certain transactions not presenting in the
bank statements. She acknowledged that the Genie system defaults to EFTPOS and in order to
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do it differently, it would have to be done manually. Accordingly, if a payment is by cash and
not recorded as such, the system defaults to an EFTPOS transaction. Ms Appleby agreed that
the daily banking sheets and the bank deposit sheets were available. However, she did not see
any manual reconciliations - only bank deposits on a spreadsheet.
[83] Ms Appleby acknowledged that Genie is not an accounting program. However, the
bank statements to Genie did not match, when they should have. She accepted, and had
considered, that cash bank deposits would be recorded differently on Genie. When Ms
Appleby was asked why she had not identified any irregularities in the previous 18 months,
she said that she did not have the relevant source documents at these times and everything
balanced on the information which had been provided at the time.
[84] It was Ms Appleby’s evidence that she did not ask Mrs Cox about the audit, because
she was unaware of her whereabouts at the time. In any event, an audit is undertaken on the
financial information provided. It does not seek out persons to explain why the accounts do
not balance. Ms Appleby did not accept that her audit was insufficiently detailed. She had
said at the time that further investigation was required over the whole period of Mrs Cox’s
employment in order to establish the extent of the irregularities. The six month review
disclosed a discrepancy of almost $8,000 (Lomax billed Dr Varughese $6,854.10 for the
audit).
[85] In re-examination, Ms Appleby explained that, during the audit, the vast majority of
the banking transactions were EFTPOS, of which some did not have an EFPOS receipt.
Where there was a receipt, she confirmed with the banking records that it was an EFTPOS
transaction. At the time, Ms Appleby had a question in her mind that monies must have been
misappropriated. No other conclusion could explain the discrepancies.
Martina Hutchinson
[86] Ms Hutchinson commenced working for Dr Varughese, on or about 9 February 2015,
having been interviewed by Mrs Cox. Ms Hutchinson initially found Mrs Cox pleasant, but
strong willed and left with no doubt that Mrs Cox was in charge. Everything had to go
through her, and most of the payments from patients were conducted by her.
[2016] FWC 1861
[87] Ms Hutchinson described being trained by Ms Weis on the Genie system, while Mrs
Cox was on sick leave. As she had little experience on the system, Ms Weis showed her the
billing processes, ‘end of day’ procedures, how to bill patients after surgery or delivery by
generating an account with the corresponding item numbers and forwarding the account to the
patient. During her training Ms Weis told her that Mrs Cox’s manual processing was
incorrect, as Genie was quicker and very simple. Ms Weis had noticed that most payments
entered in the earlier banking were listed in the EFTPOS column. Ms Weis explained to her
that all payments must be recorded in the correct columns, so that the payments and banking
are reconciled. Ms Weis noticed irregularities in the cash being banked and that the number
of EFTPOS receipts did not reconcile with the banking. Ms Hutchinson believed the practice
averaged around $1,000 a week in cash. This was mostly due to elderly patients, who
preferred to pay in cash, and others who made regular payments for large accounts. Ms
Hutchinson now enters all payments correctly and finds it an easy process.
[88] Ms Hutchinson had understood that Dr Varughese did not understand how the Genie
system worked and relied on Mrs Cox for the day to day management of the practice. When
the irregularities were explained to Dr Varughese, Ms Hutchinson witnessed that she appeared
shocked, confused, teary and visibly upset. She always understood Dr Varughese trusted Mrs
Cox as an employee and close friend.
[89] Ms Hutchinson witnessed Mrs Cox’s reactions on the day she left the practice - 26
May 2015. She had been very angry, threw stuff in a box, and had said she ‘quit’ and was ‘out
of here’. Dr Varughese was very upset and concerned that Mrs Cox needed more time off to
recover from her major surgery.
[90] Ms Hutchinson described a specific incident when a patient’s husband called the
practice and told her that he was upset that Mrs Cox had discouraged him from paying by
direct debit and to come in and pay in cash. He had wanted to pay the account three times
over the phone, but was discouraged each time by Mrs Cox. Ms Hutchinson had observed that
when working with Mrs Cox, she was reluctant to give patients the account details for direct
payment. Mrs Cox had told her it was easier for the accounts to be paid in cash and she had
discouraged her from giving the account details to patients.
[2016] FWC 1861
In a response statement, Mrs Cox said she had only worked with Ms Hutchinson as her
supervisor for 14 days. Ms Hutchinson was required to bill and receipt daily clinic patients,
while the private obstetric and surgery billing remained her responsibility. Mrs Cox said Ms
Hutchinson had very little experience with Genie and was being trained in the ‘Medicare
batching’. Mrs Cox denied her daily billing responsibilities were incorrect – her method was
just a different way to do it. She blamed the casual employees, including Ms Hutchinson, for
not correctly entering transactions. Mrs Cox believed this could be confirmed through the
Genie system itself. Mrs Cox did not consider Ms Hutchinson had sufficient experience to
know the amount of cash transactions in the practice. Mrs Cox queried, if the Genie was so
simple, why Ms Hutchinson had not originally entered the transactions correctly. Mrs Cox
denied discouraging patients from making direct deposits.
[91] As to Ms Hutchinson’s version of events on 26 May 2015, Ms Cox said she:
did not throw stuff in a box;
did not say she ‘quit’;
was professional at all times;
was considerate of patients in the waiting room; and
really had nothing to do with Ms Hutchinson at the time.
[92] In cross examination, Ms Hutchinson agreed that she was aware that the Genie was
set up to default to EFTPOS. She also acknowledged that the practice was very busy and
payments could be processed as EFTPOS, when they were not EFTPOS transactions. In re-
examination, Ms Hutchinson said it was not difficult or time consuming to switch the Genie
default from EFTPOS to cash, direct deposit or cheque.
Ms Helene May
[93] Ms May is Dr Varughese’s nanny. She works four days a week caring for Dr
Varughese’s two children. Ms May’s evidence dealt with the events of 26 May 2015. At
6.15pm, she observed Mrs Cox sitting in her car outside Dr Varughese’s home. After about
five or ten minutes, Mrs Cox went to the back door and asked her if Dr Varughese was home.
When Ms May replied ‘no’ and asked if she would she like to wait inside, Ms Cox replied ‘I
might not be welcome. I walked out of work today’. Ms May thought this was strange, as she
knew Dr Varughese and Mrs Cox were very good friends. Ms May then rang Dr Varughese to
tell her that Mrs Cox was there and was acting strangely. Dr Varughese told her what had
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happened the day before. About an hour after Dr Varughese returned home, Mrs Cox came to
the back door. Ms May said she appeared to be furious and was gesturing in a very aggressive
manner. She started yelling at Dr Varughese about her job and was angry that Dr Varughese
had asked her to work out of the back room. She recalled Dr Varughese saying ‘how can I
run a practice without any staff when you are sick’. Dr Varughese tried to explain her
position, but Mrs Cox was aggressive and confronting. Ms May said she had been concerned
because Dr Varughese’s son was present and he looked fearful and confused. She could see
Dr Varughese was also upset. As Mrs Cox left the house Ms May heard her say, ‘You haven’t
heard the last of this’. Ms May said she was shocked at the incident. She recalled that Dr
Varughese was concerned for Mrs Cox’s health and the problems she might face if she
returned to work too soon after major surgery.
[94] In a reply statement, Mrs Cox agreed she went to Dr Varughese’s home. However,
she did so because Dr Varughese would not reply to her text messages. She thought that, as
friends, they could sort out any problem. She admitted to being upset and frustrated at what
had happened the day before. Mrs Cox insisted that she had not resigned. She had not been
told the reduction in her hours was temporary.
[95] When she went to Dr Varughese’s home, it was because she was confused by Dr
Varughese’s earlier behaviour, which had appeared angry and unwelcoming. Mrs Cox
claimed that she was not aggressive and did not yell. She just wanted to know the reason for
Dr Varughese’s changed attitude towards her. She was not concerned about the reduced
hours, because she was still a full time employee. Mrs Cox was aware that Dr Varughese’s
son was in the house. Mrs Cox agreed she had mentioned ‘Fair Work Australia’ and that she
would be submitting a complaint. She agreed she had asked ‘Why did it take 12 weeks for me
to have my surgery?’, but denied having said, ‘You haven’t heard the last of this’. She
criticised Dr Varughese’s assessment of her capacity to return to work because she believed
she had a complete understanding of her own health and, in any event, a specialist had cleared
her for light duties.
[96] In further oral evidence, Mrs Cox said that prior to May 2015, she and Dr Varughese
were very close friends, having spent a lot of time together and having worked together for
four years. Mrs Cox described the nature and extent of her surgery and recovery in early 2015
which resulted in her spending eight weeks in hospital. Dr Varughese went with her to
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Brisbane and given their strong friendship, she had found her being there comforting. After
eight weeks in hospital, all Mrs Cox wanted to do was to get back to work and a normal life.
She felt obliged to help Dr Varughese manage the practice while she was in hospital. She was
excited and happy to be cleared for work on light duties.
[97] Mrs Cox said that on the day she returned to work and two weeks before her
chemotherapy commenced, Dr Varughese approached her to tell her that her hours were to be
reduced to 20 hours a week. Mrs Cox replied that she needed fulltime work. That night, she
was upset and confused. She intended to discuss the matter with Dr Varughese the next day.
The next day, Dr Varughese walked past her without speaking and was rude and curt to her.
She was made to feel unwelcome. Later that day, she and Dr Varughese had a discussion
about Ms Hutchinson’s start time. Mrs Cox told Dr Varughese not to treat her like a child, as
she was quite capable of making decisions about her health. These conversations left her
feeling ‘destroyed’ and ‘devastated’.
[98] On the way home that day, Mrs Cox texted Ms Weis and said ‘I think I’ve just walked
out and quit’. A few days later she received the suspension letter. She could not understand
why Dr Varughese would not talk to her, as she had ‘tried and tried’ to engage with her.
When Mrs Cox received the ‘show cause’ letter, accusing her of theft and fraud, she claimed
not to have understanding of any of it. She denied stealing any money.
[99] Mrs Cox explained that the Genie System requires every patient to have an invoice
and receipt. The records were readily available to be checked and there is no way of hiding
anything, without deleting receipts and invoices. The appointment book would corroborate
the patients’ attendances at the practice. Mrs Cox pleaded that, as she had no access to the
Genie System or the practice’s records, she had no means of defending herself.
[100] Mrs Cox tried to speak with Dr Varughese and went to her home. All Dr Varughese
said was that ‘[I] had crossed the line’. She tried to think of every area of the practice and
what she had done, in order to work out what she was being accused of. She was devastated to
learn that Dr Varughese had even rang her sister that night to tell her she had lost trust and
faith in her.
[2016] FWC 1861
[101] In the ‘show cause’ letter, Dr Varughese had led her to believe she would speak to her
on the following Thursday. Mrs Cox and her husband waited all morning for Dr Varughese’s
call. It never came. Mrs Cox insisted that she did not understand the ‘show cause’ letter. She
had just come out of eight weeks in hospital and was due to commence chemotherapy shortly.
She had lost her job and her friend. As a result, her head was in ‘a bit of a spin’.
[102] Mrs Cox again described the practice’s system of transactions. Casual staff were
employed to invoice and receipt patients, in order for her to be freed up for administrative
work. She had little spare time and would take accounting work home on weekends. Mrs Cox
said the practice was very busy and ‘high pressure’ and mistakes were made. She had used a
manual method which she described as follows:
‘It was a manual method. All I did was print off the banking sheet and there’s an
example there. I would change the columns. The next morning, I did not – I did not
reconcile the EFTPOS machine, because the amount was reconciled by the bank at
midnight and it was on the bank statement the next morning and for everybody to see
or for me to see to get the figure off the EFTPOS and going on the appointments, I had
printed off an appointment sheet for the patients as a daily appointment book and I
used to just put who paid cash, because I was sitting next door – sitting next to the
person that was receipting and invoicing and I knew who paid cash, so I could work it
out manually quite easily. So I used to change the columns and it reconciled’.
[103] Mrs Cox said she had used this method in her husband’s business for 43 years. It
worked well. Mrs Cox said she was never told by Dr Varughese or her accountants that she
was doing the wrong thing. She had control of the office and accounts, but Dr Varughese had
full access to all transactions. Mrs Cox insisted she had nothing to hide and could not hide
anything anyway.
[104] In cross examination, Mrs Cox agreed she had never reconciled the daily accounts in
Genie because of mistakes made by other staff. Mrs Cox denied that Ms Weis had assisted
her in setting up the Genie system. She had merely visited Brisbane to have a look at the
system. However, if she had an issue she would call Genie direct. Over the four years, she
sought advice on four, or possibly five occassions, from Ms Weis about Genie. Mrs Cox
conceded that instead of a simpler system, she had decided to use a manual process. She also
accepted that she knew how to enter transactions correctly, but accused the other staff of
making the majority of the entries. Mrs Cox conceded that her explanation – the Medicare
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bulk billing payments – had been consistent and remains her explanation for any irregularities
in the accounts.
[105] When queried as to her expertise, compared to a qualified accountant of 15 years’
experience, Mrs Cox replied that she had no idea of the reasons for the irregularities without
looking at the program. It was very unfair to be accused of theft, when she had done nothing
wrong. Mrs Cox accepted that prior to May 2015, Dr Varughese was a dear friend, who had
treated her very well.
[106] Mrs Cox also relied on favourable character references from Ms Wendy Marle and Ms
Mary Sylvester. These letters were not ultimately tendered in the proceeding.
SUBMISSIONS
[107] Both parties filed written submissions, which were supplemented orally during the
proceeding.
For Dr Varughese
[108] Mr Thorburn identified the relevant sections of the Act and Regulations applicable to
this matter, which I will set out later in this Decision.
[109] Mr Thorburn summarised the evidence added in the case. He emphasised that it was
only out of pure concern for Mrs Cox, both professionally and personally, that Dr Varughese
proposed reducing her hours to allow her to fully recover from her surgery. At no time, were
her wages reduced or was it Dr Varughese’s intention to do so. However, Mrs Cox had
reacted by ‘storming’ out of the practice and declaring she was quitting. Dr Varughese had
anticipated that Mrs Cox would calm down and understand that she only had her best interests
at heart.
[110] Mr Thorburn noted that Mrs Cox then proceeded to send hostile and threatening SMS
messages to Dr Varughese and behaved aggressively when she attended Dr Varughese’s
home. In light of the circumstances, Dr Varughese arranged for Ms Weis to train Ms
Hutchinson in the Genie system. When Ms Weis identified a number of irregularities, Dr
Varughese had no alternative but to engage a forensic expert to further investigate the
irregularities. Ms Appleby had confirmed regular and systematic discrepancies in the financial
[2016] FWC 1861
records in the six month review period amounting to $7,658 and found that Mrs Cox had
overpaid herself approximately $5,500 in the same period. Ms Appleby recommended wider
investigation, with the assistance of Lomax, Dr Varughese’s lawyers and the Police.
[111] Mr Thorburn put that Dr Varughese unequivocally formed the only reasonable
conclusion in the circumstances – that Mrs Cox was stealing money from the practice and was
overpaying herself. Given this belief, Dr Varughese issued a ‘show cause’ notice to Mrs Cox.
Mrs Cox’s response was considered implausible and she was dismissed. Despite Dr
Varughese agonising over reporting the matter to the Police, she did so several weeks later.
[112] Mr Thorburn referred to a number of the Commission’s authorities relevant to a
dismissal under the Code; See: Suttie v Lloyd & Co Pty Ltd [2015] FWC 4242, Pinawin T/A
RoseVi.Hair.Face.Body v Domingo [2012] FWAFB 1359 (‘Pinawin’), Khammaneechan v
Nanakhon Pty Ltd ATF Nanakhon Trading Trust T/A Banana Tree Cafe [2010] FWA 7891
and Harley v Rosecrest Asset Pty Ltd T/A Can Do International [2011] FWA 3922.
[113] Mr Thorburn put:
‘In the circumstances, the applicant was employed to manage the day to day financial
accounting needs of the respondent’s practice. From the respondent’s and Ms
Appleby’s comprehensive investigation of the financial records of the respondent’s
practice, the respondent formed and held the unequivocal and reasonable belief at the
time of the applicant’s dismissal that the applicant had engaged in serious misconduct
involving theft (both in respect of the cash takings and or overpayment of wages) and
that the applicant’s conduct warranted immediate dismissal.’
[114] Mr Thorburn submitted that despite Mrs Cox’s contention that all of the documents
she had prepared would explain any discrepancies, this was proven to be untrue. There would
have been no different outcome if Dr Varughese had investigated the matter further,
particularly since Mrs Cox’s consistent explanation was not plausible. Mr Thorburn said that
Dr Varughese’s delay in notifying the Police was perfectly understandable, as she agonised
over doing so. In any event, notifying the Police is not a prerequisite under the Code.
[115] Mr Thorburn put that since Mrs Cox’s dismissal, Dr Varughese had been made aware
of incidents in which Mrs Cox had discouraged a patient making payments via direct deposit
and to pay by cash instead, on three occasions. The practice has also recorded a noticeable
increase in cash payments since her dismissal.
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[116] Mr Thorburn concluded by submitting that Mrs Cox’s dismissal was in compliance
with the Code and, in any event, was not unfair, even if the Code did not apply.
[117] In oral submissions, Mr Thorburn addressed Mrs Cox’s claim that other staff,
including Ms Hutchinson, were responsible for the incorrect transactions. He said this claim
conflicted with Mrs Cox’s own evidence that she - and no one else - had direct control over
the accounts. Moreover, Ms Hutchinson was not even employed during the audit investigation
period. Now that the correct processes are being followed, all of the accounts have balanced.
[118] Mr Thorburn stressed that Mrs Cox’s consistent claim that the ‘Medicare batching’
explained the discrepancies, was not plausible, particularly given the fifteen year forensic
experience of Ms Appleby. Mrs Cox had simply failed to provide any plausible explanation of
the allegations put to her in the ‘show cause’ letter or since that letter.
[119] Mr Thorburn noted the extremely close friendship between Dr Varughese and Mrs
Cox. Dr Varughese had trusted her completely. Dr Varughese’s belief as to Mrs Cox’s theft of
money from the practice was only made after a thorough and costly investigation by an
independent experienced auditor. It was also Ms Appleby’s view that Mrs Cox had engaged
in serious misconduct. Nothing further was required to be done to alter Dr Varughese’s belief.
[120] In respect to Mrs Cox overpaying herself, Mr Thorburn said that Dr Varughese had
not sought to initiate civil proceedings for recovery of the overpayments.
For Mrs Cox
[121] In a personal response to Mr Thorburn’s submissions, Mrs Cox repeated much of the
evidence she had given earlier in the proceeding. She insisted that it was Dr Varughese’s rude
and angry behaviour which caused her to be confused and upset. The workplace was
intolerable. She had said, in the ‘heat of the moment’, that she was ‘quitting’. Mrs Cox
insisted that she was never asked to explain the discrepancies, which were due to the
‘Medicare batching’. She had nothing to hide and could not hide anything, in any event. She
had not overpaid herself.
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[122] Mrs Cox said the ‘show cause’ letter was vague and, at that stage, she was unaware the
EFTPOS transactions were recorded incorrectly. She could have easily explained the
discrepancies and the accounts would eventually balance. Mrs Cox insisted the allegations
against her were false. Dr Varughese had not followed the Code as she had not given her an
opportunity to respond to the allegations. She asked why would she apologise or seek
forgiveness from Dr Varughese when she had done nothing wrong?
[123] Mrs Cox again denied discouraging patients from making direct payments. Indeed, it
was in her interests to increase Dr Varughese’s bank account, as she received 2% of her
income as a bonus.
[124] Mrs Cox expressed amazement that the accounts now balanced with casual employees
doing the transactions. She believed that an examination of Genie would prove who else had
made the errors. Mrs Cox stressed that her dismissal was unfair, unreasonable and unjust. She
would not have jeopardised a job she loved and a dear friendship by defrauding Dr
Varughese.
[125] In oral submissions, Mr Bucksath put that Dr Varughese failed the first test under the
Code, as to her belief as to Mrs Cox’s dishonesty, by her very first answers in cross
examination. She did not believe Mrs Cox stole money from her, even at the point of her
dismissal. In answer to a question from me, Mr Bucksath said that Dr Varughese may have
had her suspicions, but this did not amount to a belief. The possible reason for Mrs Cox’s
dismissal was Dr Varughese’s concern as to a possible medical negligence claim, arising Mrs
Cox’s surgery in Brisbane in April 2015.
[126] Mr Bucksath dealt with the second leg of the Code’s test – whether Dr Varughese’s
belief was based on reasonable grounds; See: Pinawin. Mr Bucksath set out the uncontested
background to the allegations made against Mrs Cox. Mrs Cox was trusted to run the office
and, in four years, with the last eighteen months using Lomax as Dr Varughese’s accountant,
no issue had ever been raised about the accounts not balancing, or there being missing
monies. Lomax had even queried Mrs Cox earlier about other issues with the accounts; all of
which had all been resolved. However, Mrs Cox was denied a similar opportunity in late
May/June 2015.
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[127] Mr Bucksath referred to the suspension letter (2 June 2015), in which Dr Varughese
had actually told Mrs Cox there would be an opportunity for them to discuss the issue. This
never happened. Two weeks later, Mrs Cox received a hostile letter, which was very
aggressive, confrontational and inappropriate. There was an expectation of a discussion two
days later. This did not occur either. Given the seriousness of the allegations, it was necessary
for Dr Varughese to engage with Mrs Cox to be able to assess her explanation. It could have
all been resolved if this had occurred, because Mrs Cox was innocent of any wrongdoing.
[128] Mr Bucksath pointed to other staff being involved in processing payments and that
errors had been made. As a result, Mrs Cox had introduced her own means of fixing the errors
by manual recording certain transactions.
[129] Mr Bucksath submitted that even if Dr Varughese held a belief that Mrs Cox had
stolen money, it could not be based on reasonable grounds, as there was no opportunity
provided to Mrs Cox to explain the allegations, despite Dr Varughese’s promises that she
would do so.
CONSIDERATION
Relevant statutory provisions and principles
[130] Section 385 of the Act sets out four jurisdictional prerequisites which must be satisfied
for the Commission to find that a person was unfairly dismissed. By the use of the
conjunction ‘and’ joining sub-sections (a), (b), (c) and (d) it is clear that each of the four
requirements must be satisfied for a person to be unfairly dismissed. The section is set out as
follows:
385 What is an unfair dismissal
A person has been unfairly dismissed if the FWC is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal
Code; and
(d) the dismissal was not a case of genuine redundancy.
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[131] For present purposes, I am satisfied that Mrs Cox was dismissed (sub-section (a)) and
her dismissal was not a case of genuine redundancy (sub-section (d)). The question of whether
Mrs Cox’s dismissal was ‘harsh, unjust or unreasonable’ would need to be considered
subsequent to a positive conclusion as to the preliminary matter, that her dismissal was not
consistent with the Small Business Fair Dismissal Code (the Code). This question is the
essential basis of this case. It is expressly relied on by Dr Varughese in seeking to have Mrs
Cox’s unfair dismissal application dismissed because it is claimed her dismissal was
consistent with the Code.
[132] It is convenient to set out the terms of the Code below:
Commencement
The Small Business Fair Dismissal Code comes into operation on 1 July 2009.
Summary dismissal
It is fair for an employer to dismiss an employee without notice or warning when the
employer believes on reasonable grounds that the employee's conduct is sufficiently
serious to justify immediate dismissal. Serious misconduct includes theft, fraud,
violence and serious breaches of occupational health and safety procedures. For a
dismissal to be deemed fair it is sufficient, though not essential, that an allegation of
theft, fraud or violence be reported to the police. Of course, the employer must have
reasonable grounds for making the report.
Other dismissal
In other cases, the small business employer must give the employee a reason why he
or she is at risk of being dismissed. The reason must be a valid reason based on the
employee's conduct or capacity to do the job.
The employee must be warned verbally or preferably in writing, that he or she risks
being dismissed if there is no improvement.
The small business employer must provide the employee with an opportunity to
respond to the warning and give the employee a reasonable chance to rectify the
problem, having regard to the employee's response. Rectifying the problem might
involve the employer providing additional training and ensuring the employee knows
the employer's job expectations.
Procedural matters
In discussions with an employee in circumstances where dismissal is possible, the
employee can have another person present to assist. However, the other person cannot
be a lawyer acting in a professional capacity.
[2016] FWC 1861
A small business employer will be required to provide evidence of compliance with
the Code if the employee makes a claim for unfair dismissal to Fair Work Australia,
including evidence that a warning has been given (except in cases of summary
dismissal). Evidence may include a completed checklist, copies of written warning(s),
a statement of termination or signed witness statements.
[133] It is manifestly apparent that the Code applies to a dismissal by an employer with less
than 15 employees (at the time of the dismissal) in two circumstances – summary dismissal
(presumably for serious misconduct) and dismissal for poor performance (capacity to do the
job) or conduct (which is not serious misconduct). A significant difference between the two
circumstances is that the former does not require notice or warning to an employee and the
latter requires warnings to the employee and opportunities for the person to respond and
improve on any shortcomings in behaviour or conduct.
[134] There is no doubt that the applicant’s dismissal was without notice and for reasons of
serious misconduct, although she was given an opportunity to explain the allegations against
her, upon receipt of the ‘show cause’ letter (See Annexure A) and she did so. Thus, the
applicant’s dismissal falls under the summary dismissal limb of the Code. Should the
dismissal be found to be inconsistent with the Code, but the serious allegations are ultimately
found to have been proven, it would seem highly likely that a positive finding of a valid
reason for her dismissal would follow. However, that is not the test for the purposes of
establishing whether there has been compliance with the Code. I shall come back to this
crucial consideration shortly.
[135] Before leaving the statutory provisions, s 12 of the Act defines ‘serious misconduct’ as
having the ‘the meaning prescribed by the Regulations’. The relevant Regulation is r 1.07 of
the Fair Work Regulations 2009 and is expressed as follows:
1.07 Meaning of serious misconduct
(1) For the definition of serious misconduct in section 12 of the Act, serious
misconduct has its ordinary meaning.
(2) For subregulation (1), conduct that is serious misconduct includes both of the
following:
(a) wilful or deliberate behaviour by an employee that is inconsistent with the
continuation of the contract of employment;
[2016] FWC 1861
(b) conduct that causes serious and imminent risk to:
(i) the health or safety of a person; or
(ii) the reputation, viability or profitability of the employer’s business.
(3) For subregulation (1), conduct that is serious misconduct includes each of the
following:
(a) the employee, in the course of the employee’s employment, engaging in:
(i) theft; or
(ii) fraud; or
(iii) assault;
(b) the employee being intoxicated at work;
(c) the employee refusing to carry out a lawful and reasonable instruction that
is consistent with the employee’s contract of employment.
(4) Subregulation (3) does not apply if the employee is able to show that, in the
circumstances, the conduct engaged in by the employee was not conduct that made
employment in the period of notice unreasonable.
(5) For paragraph (3)(b), an employee is taken to be intoxicated if the employee’s
faculties are, by reason of the employee being under the influence of intoxicating
liquor or a drug (except a drug administered by, or taken in accordance with the
directions of, a person lawfully authorised to administer the drug), so impaired that the
employee is unfit to be entrusted with the employee’s duties or with any duty that the
employee may be called upon to perform.
[136] Presumably, Dr Varughese relies on her belief that Mrs Cox had engaged in ‘theft’ or
‘fraud’ which amounted to ‘wilful or deliberate behaviour … inconsistent with the
continuation of the contract of employment.’ The seminal case, indeed the first Full Bench
Decision which considered the Code, was Pinawin. After setting out a number of passages
from two earlier single member decisions about the application of the Code, the Full Bench of
Fair Work Australia (FWA, as the Commission then was), said at paras [29-[31]:
‘[29] We believe that the approach and observations in these two decisions are correct.
There are two steps in the process of determining whether this aspect of the Small
Business Fair Dismissal Code is satisfied. First, there needs to be a consideration
whether, at the time of dismissal, the employer held a belief that the employee’s
conduct was sufficiently serious to justify immediate dismissal. Secondly it is
necessary to consider whether that belief was based on reasonable grounds. The second
[2016] FWC 1861
element incorporates the concept that the employer has carried out a reasonable
investigation into the matter. It is not necessary to determine whether the
employer was correct in the belief that it held.
[30] Acting reasonably does not require a single course of action. Different employers
may approach the matter differently and form different conclusions, perhaps giving
more benefit of any doubt, but still be acting reasonably. The legislation requires a
consideration of whether the particular employer, in determining its course of action in
relation to the employee at the time of dismissal, carried out a reasonable
investigation, and reached a reasonable conclusion in all the circumstances.
Those circumstances include the experience and resources of the small business
employer concerned.
[31] The question we need to consider in this case is whether Mr and Mrs Pinawin
believed on reasonable grounds that Mr Domingo’s conduct was sufficiently serious to
justify immediate dismissal [my emphasis].’
[137] In referring to Pinawin, Mr Bucksath relied on para [38], which I set out below and
which I will discuss later in this Decision:
‘[38] Normally in order to hold a belief on reasonable grounds it will be necessary
to have a discussion with the employee about the perceived serious misconduct
and pay regard to the explanations and views given by the employee. We are
concerned in this case that no discussions took place about the implications of Mr
Domingo’s conduct for his future employment. However this is a very unusual case.
The employer was very small. The owners knew Mr Domingo well. They directly
observed his behaviour. They believed that he had made lifestyle choices that involved
drug-taking and this directly related to his capacity to perform his work. His work
involved close personal dealings with clients. At the time they made their decision, Mr
Domingo was hospitalised. They were conscientious in considering the grounds for
summary dismissal in regulatory material available on the internet. In these unusual
circumstances we are of the view that the employer, when considering Mr Domingo’s
recent erratic and unusual behaviour, formed the belief that Mr Domingo had engaged
in conduct that justified immediate dismissal on reasonable grounds. Our conclusion
should not be seen as one that would necessarily be reached in all cases of out of hours
misconduct or drug-taking [my emphasis].’
Pinawin continues to be cited with approval in decisions of the Commission. Pinawin
is authority for the proposition that, unlike a summary dismissal where the Code is irrelevant,
the Commission is not required to find that serious misconduct occurred and that the
allegations of serious misconduct against the dismissed employee had been proven. Under the
Code, the tests are only that:
the employer held a reasonable belief that the employee’s conduct was sufficiently
serious to justify immediate dismissal; and
[2016] FWC 1861
that belief was based on reasonable grounds.
Self-evidently, both of these tests do not require findings of unfairness, in a statutory sense,
within the meaning of s 387 of the Act.
[139] That said, the Full Bench of the Commission has had occasion to recently consider the
Code and the conclusions in Pinawin. In Ryman v Thrash Pty Ltd [2015] FWCFB 5264
(‘Ryman’), the Full Bench, after expressing the view that the summary dismissal section of
the Code is ‘very poorly drafted’ (with which I respectfully agree), because it uses discordant
expressions such as ‘without notice or warning’, ‘immediate dismissal’ and ‘summary
dismissal’ synonymously, nevertheless went on to say at paras [37]-[41]:
‘[37] Notwithstanding that the Code, and its accompanying checklist, were apparently
designed to be read as “stand alone” documents by small business employers, we
prefer the view that the reference to “serious misconduct” is to be read as bearing the
meaning in reg.1.07. The types of conduct expressly referred to in the Code as
constituting serious misconduct are all encompassed by the reg.1.07 definition, so no
direct inconsistency is apparent. The fact that the checklist invites inclusion of “some
other form of serious misconduct” suggests that the identified types of conduct were
not meant to be exhaustive, and it is otherwise difficult to conclude that they were
meant to be exhaustive given that they do not include other types of behaviour which
may well constitute misconduct justifying summary dismissal, such as sexual
harassment, bullying or significant non-compliance with a lawful and reasonable
direction. And, as earlier discussed, the lack of any recognised meaning at law of the
expression “serious misconduct” means that the definition in reg.1.07 is necessary to
give the expression a clear content.
[38] We therefore consider that the “Summary dismissal” section of the Code
applies to dismissals without notice on the ground of serious misconduct as
defined in reg.1.07.
[39] To be clear, nothing stated above is to be taken as suggesting that in relation to
such a dismissal it is necessary for the Commission to be satisfied that the serious
misconduct which is the basis for the dismissal actually occurred in order for the
dismissal not to be unfair. As was explained in Pinawin T/A RoseVi.Hair.Face.Body v
Domingo:
“[29] … There are two steps in the process of determining whether this aspect of
the Small Business Fair Dismissal Code is satisfied. First, there needs to be a
consideration whether, at the time of dismissal, the employer held a belief that
the employee’s conduct was sufficiently serious to justify immediate dismissal.
Secondly it is necessary to consider whether that belief was based on
reasonable grounds. The second element incorporates the concept that the
employer has carried out a reasonable investigation into the matter. It is not
necessary to determine whether the employer was correct in the belief that it
held.”
[2016] FWC 1861
[40] Whether the employer had “reasonable grounds” for the relevant belief is of
course to be determined objectively.
[41] In summary, drawing on the conclusions stated above and the ratio in Pinawin,
we consider that the “Summary dismissal” section of the Code operates in the
following way:
(1) If a small business employer has dismissed an employee without notice
- that is, with immediate effect - on the ground that the employee has
committed serious misconduct that falls within the definition in reg.1.07,
then it is necessary for the Commission to consider whether the dismissal
was consistent with the “Summary dismissal” section of the Code. All
other types of dismissals by small business employers are to be considered
under the “Other dismissal” section of the Code.
(2) In assessing whether the “Summary dismissal” section of the Code was
complied with, it is necessary to determine first whether the employer
genuinely held a belief that the employee’s conduct was sufficiently serious
to justify immediate dismissal, and second whether the employer’s belief
was, objectively speaking, based on reasonable grounds. Whether the
employer has carried out a reasonable investigation into the matter will be
relevant to the second element [my emphasis, endnote omitted].’
[140] I intend to apply, the principles set out in Pinawin, as recently reaffirmed in Ryman to
the facts and circumstances of this case.
Did Dr Varughese have a belief that Mrs Cox was guilty of serious misconduct?
[141] At the risk of repetition, I would wish to make it unambiguously clear that a
determination of Mrs Cox’s claim of alleged unfair dismissal, in the context of the Small
Business Fair Dismissal Code, does not involve a finding by the Commission that she did or
did not misappropriate monies from Dr Varughese’s practice; that is, whether or not she was
guilty of serious misconduct. Importantly, it does not require findings as to whether there was
a valid reason for her dismissal, let alone whether the dismissal was ‘harsh, unjust or
unreasonable’. It must also be made plain that, even if the Code had not applied, the fact that
Mrs Cox might be found not guilty of theft in a Court, based on the criminal standard of proof
(beyond reasonable doubt), the Commission could still find that Mrs Cox had been dismissed
for serious misconduct, based on the civil standard of proof (the balance of probabilities); See:
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34.
[142] However, these are not pertinent matters to be considered in the present circumstances.
Of course, if Mrs Cox is able to establish that her dismissal was inconsistent with the Code,
[2016] FWC 1861
then other considerations arise which will necessarily require further proceedings. It is
obvious from the foregoing discussion that Mrs Cox vehemently denies any wrongdoing. In
summary, she claims that any discrepancies in the accounts are easily explained by the
practice’s method of ‘Medicare batching’ and that any errors may have been made by other,
less experienced casual employees.
[143] Much of the evidentiary material provided by Mrs Cox was directed towards these
claims and her denials of her allegedly aggressive and angry behaviour around the end of May
2015. It is unnecessary for me to make findings about these matters, but in respect to Mrs
Cox’s strident criticism that she had not been provided with an opportunity to respond to the
allegations, it will be necessary to make some observations about this complaint, as it relates
directly to whether Dr Varughese’s belief was based on reasonable grounds. I shall come back
to this issue shortly. I deal firstly with Dr Varughese’s belief as to Mrs Cox’s alleged
misconduct.
[144] Mr Bucksath relied on Dr Varughese’s answers to his first two questions in cross
examination:
‘Now, look, at no stage up until the date of Christine's dismissal, did you ever believe
she stole money from you, did you?---No, I did not.
You didn't believe it, did you?---No, I didn't believe it.’
[145] In my view, Mr Bucksath’s reliance on Dr Varughese’s answers as damning her case
to failure, is entirely misplaced. Her answers must be viewed in the context of the subsequent
questions and answers and the undisputed evidence as to the nature of the relationship
between Dr Varughese and Mrs Cox. It was a very close personal and professional
relationship, based on the absolute trust between the very best of friends. Given that, firstly,
Dr Varughese had innocently engaged Ms Weis to train Ms Hutchinson and, during this
training, Ms Weis had discovered unexplained irregularities and, secondly, that Dr Varughese
knew Mrs Cox (even on her own evidence) had complete control and authority over the day to
day management of the practice, Dr Varughese did not want to believe her best friend could
be responsible for fraud against her. I note it was Dr Varughese’s evidence, which I accept,
that soon after Mrs Cox observed Ms Weis training Ms Hutchinson, she received text
[2016] FWC 1861
messages from Ms Cox threatening self-harm. She assumed that this behaviour may be
consistent with someone who had something to hide.
[146] On the other hand, I do not doubt Dr Varughese’s further evidence that she was hoping
that an independent forensic audit would prove that the irregularities could be explained and
her best friend would be found completely innocent. In my view, there is nothing adverse to
be read into Dr Varughese’s continued hope and belief – even to the day of the hearing – that
there was some plausible explanation for the irregularities. The reality is that Dr Varughese,
in her ‘heart of hearts’, did not want to believe that her best friend was guilty of defrauding
her. I ask, who would? In any event, if Dr Varughese had firmly and unequivocally believed,
during the investigation that Mrs Cox was not responsible, then it does not make any sense for
her to go to the cost, time and emotional trauma of seeking an independent forensic analysis
to confirm Ms Weis’ opinion. Having received that advice from Ms Appleby, Dr Varughese
was left with no real alternative. Is it seriously suggested that the conclusions of a highly
qualified experienced forensic auditor should be just ignored and Mrs Cox be restored to work
with ‘no hard feelings’?
[147] In any event, Mrs Cox’s own evidence was that she could not believe what had
changed Dr Varughese’s behaviour towards her. She described Dr Varughese on 26 May
2015 as curt, unfriendly and unwelcoming. She went to her home the next day to try to
understand what had happened, as she was confused and upset. So, here we have two very
close friends expressing similar disbelief as to how they had treated each other. Given these
circumstances, their respective reactions were perfectly understandable, and must be viewed
in this light. In my opinion, Dr Varughese’s evidence does not undermine her regrettable
belief that Mrs Cox was guilty of serious misconduct.
[148] Of course, if Dr Varughese had not dismissed Mrs Cox based on her belief that she
had defrauded her, it begs the question (which I posed to Mr Bucksath) – what was the
motivation for Dr Varughese to dismiss her best friend? Mr Bucksath’s submission, and
supported by Mrs Cox’s own theory, was that Dr Varughese was upset and worried by the
potential for a medical negligence claim being made against both her and her surgeon friend
who performed the surgery in Brisbane. In my view, this is a very ‘long bow to draw’. Firstly,
there was no evidence that Dr Varughese was motivated to dismiss Mrs Cox because of a
[2016] FWC 1861
possible medical negligence claim that had not even been formalised. It is no more than a
theory, without any evidentiary foundation.
[149] Secondly, it is difficult to reconcile this theory, given that I cannot perceive of any
advantage or defence to be gained by Dr Varughese dismissing Mrs Cox. Dismissal does not
prevent a negligence claim and, on one view, it is likely to be viewed unfavourably, even an
act of vindictiveness. It is more likely to have hardened Mrs Cox’s resolve to pursue such a
claim, rather than not do so.
[150] Thirdly, in my view, the theory is implausible in light of how the irregularities were
discovered in the first place. Dr Varughese did not go ‘hunting around’ looking for some
financial discrepancy to blame on Mrs Cox. Indeed, Dr Varughese did not even know how the
practice’s accounts and transactions were conducted. Ms Weis, whose knowledge of the
relationship between Mrs Cox and Dr Varughese was that they were close friends, had been
innocently requested by Dr Varughese to train Mrs Hutchinson in the day to day accounting,
given Mrs Cox’s likely limited return to work. Ms Weis is an experienced medical practice
manager and friend of Dr Varughese. Had she not been asked to train Ms Hutchinson, it is
possible someone else who was called in, would have found the same irregularities as she did.
For Mrs Cox’s alternative reason for dismissal (or indeed any other reason) to be made good,
it seems that it would have needed both Ms Weis’s and Ms Appleby’s connivance with Dr
Varughese to concoct a false reason (fraud) in order to get rid of her. I think such a scenario is
utterly implausible.
[151] In addition, it is difficult to understand that if Dr Varughese really wanted to get rid of
Mrs Cox, she could have easily accepted her resignation when she told Ms Hutchinson, Ms
Weis and Ms May that she had ‘quit’ on 26 May 2015. I note that in Mrs Cox’s response
evidence to Ms Hutchinson’s statement, she denied telling her that she ‘quit’. However, this is
clearly untrue as she agreed in her later submission that she had ‘quit’, albeit, in the heat of
the moment. For these reasons, I am satisfied that Dr Varughese had a belief Mrs Cox was
guilty of serious misconduct, involving misappropriation of money from the practice.
Was Dr Varughese’s belief based on reasonable grounds?
[152] It is obvious that Dr Varughese did not act precipitously or irrationally in ultimately
dismissing Mrs Cox. The facts were that in late May 2015:
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Dr Varughese engaged Ms Weis to train Ms Hutchinson on the day to day running of
the practice.
On 26 May 2015, Ms Weis advised Dr Varughese of unexplained irregularities with
the accounts and, further, of her view that only Mrs Cox could be responsible.
Over the weekend of 30 and 31 May 2015, Ms Weis and Dr Varughese poured over
the accounts, but could not reconcile the irregularities. Ms Weis recommended a
forensic audit to confirm her suspicions.
From 4-6 June 2015, Ms Appleby conducted her audit over the period 1 July 2014 to
31 December 2014. She could find no explanation for the irregularities and
determined that Mrs Cox had been responsible and was guilty of serious misconduct.
Ms Appleby recommended further investigation to determine the extent of the fraud
and referral to Dr Varughese’s lawyers and the Police;
On 2 June 2015, Mrs Cox was suspended on full pay;
On 18 June 2015, Mrs Cox was given a ‘show cause’ letter, to which she responded
on 22 June 2015;
Mrs Cox was dismissed on 25 June 2015;
Dr Varughese referred the matter to the Police on 15 July 2015.
[153] In my assessment, this chronology, over a month before the dismissal, is hardly
indicative of an employer rushing to dismiss an employee, without reasonable grounds. I
accept that Dr Varughese had earnestly hoped that two investigations would not disclose any
wrongdoing by Mrs Cox. She had hoped that Mrs Cox’s response to the ‘show cause’ letter
would provide a plausible explanation for the discrepancies in the accounts. It did not. I am
satisfied that Dr Varughese’s belief, that Mrs Cox was guilty of serious misconduct, was
based on reasonable grounds. Those grounds include the advice of Ms Weis, Dr Varughese’s
own assessment of what Ms Weis had discovered and, most notably, the advice of an
independent experienced auditor.
Failure to put the allegations to Mrs Cox
[154] Much of Mrs Cox’s case was built on the criticism of Dr Varughese for not directly
discussing the allegations with her and not providing her with an opportunity to explain,
particularly after promising to do so. Mrs Cox stated emphatically that had she been given the
opportunity, everything would be found to be completely explainable and she would be
cleared of any wrongdoing.
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[155] Of course, in accordance with Pinawin, I agree it would have been preferable to have
had a meeting with Mrs Cox in order for her to respond to the allegations and explain her
position. However, the Code does not make it mandatory for such an opportunity to be given
to an employee; indeed, Pinawin determined that there may be exceptions to that proposition
(as happened in that case). In this case, Dr Varughese’s evidence was that in light of Mrs
Cox’s inappropriate, if not threatening, text messages, her aggressive behaviour at her home
on 26 May 2015 and the fact that she had told Ms Hutchinson she was quitting, it was not
appropriate to have such a meeting. In reviewing the text messages, I can understand why Dr
Varughese found them hurtful, concerning and distressing, but I do not consider that they fall
into the category of ‘threatening’ or ‘aggressive’. I am more troubled by Mrs Cox’s behaviour
when she arrived unannounced at Dr Varughese’s home on the night of 26 May 2015. Even if
I was to find that these reasons do not justify Dr Varughese refusing to meet with Mrs Cox, I
pose the question – would it have made any difference? I think not.
[156] This is because Mrs Cox’s consistent position, even from her response to the ‘show
cause’ letter, has been that the ‘Medicare batching’ process explains the irregularities or that
other casual staff may have been responsible. Dealing with the last issue first, there was no
evidence that the day to day accounting and bank reconciliations were the responsibility of
other staff. No names were mentioned. However, if the finger was pointed at Ms Hutchinson
it must be remembered that she only commenced employment on 9 February 2015; well after
Ms Appleby’s audit investigation period (1 July – 31 December 2014). Interestingly, it was
Mrs Cox’s own evidence that she had complete responsibility for, and authority over, the day
to day management of the practice, including the accounts.
[157] As to the ‘Medicare batching’ explanation, I accept the evidence of Ms Appleby that
the ‘Medicare batching’ was ultimately unconnected to the irregularities in the accounts and
was therefore not taken into account in the audit. There was no evidence to cogently
contradict Ms Appleby’s opinion or her conclusions arising therefrom. While having no
conclusive view myself as to this explanation, it seems plausible that the ‘Medicare batching’
would have actually disclosed more unexplained money in the accounts, rather than less (as
Ms Appleby found). Put another way, it would not involve missing money, but actually more
money than was accounted for.
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[158] In any event, I do not consider it entirely accurate to argue that Mrs Cox was not given
an opportunity to respond to the allegations against her. This was precisely the purpose of the
‘show cause’ letter of 18 June 2015. I do not accept Mrs Cox’s characterisation of the letter in
her evidence as so vague and lacking in detail that she could not respond appropriately.
Indeed, that is not how Mrs Cox responded to the ‘show cause’ letter at the time (see
Annexure B). There is nothing in her response to indicate, or even infer, that she did not
understand what she was being accused of. There is no request for further details or access to
information or records in order for her to provide a fulsome response. In my view, it is
obvious she must have known that it involved missing money, as she expressly set out her
view as to why money might be missing, by referring to the ‘Medicare batching’ as the
explanation. At paragraph 5 of her response she said:
‘In view of the discrepancies in your Genie program I think you need to have a look at
the Medicare batching as I feel this is where the problem has stemmed from. Since the
employment of other staff members it had given me some time to go through some old
Medicare claims and it was necessary to receipt those claims even though the deposits
were previously made into your bank account some time prior to the dates involved. It
is a time consuming job with many patients’ details to be corrected and numerous
patients to be contacted to update details of current Medicare numbers and referral
details. This was one of the jobs I was handing on to Martina due to my time restraints.
This had to be done in case you were ever audited by Medicare. This can be confirmed
with Martina and Renae and would amount to considerable [sic] amount of money.’
[159] Finally, I do not consider the fact that Dr Varughese formally reported Mrs Cox to the
Police as being relevant to a determination of this matter. It is not mandatory under the Code
to do so. Nonetheless, I accept the evidence that Dr Varughese had agonised over taking such
a drastic step. In addition, I make no findings as to whether Mrs Cox had overpaid herself
without authority. I am somewhat at a loss at the implied criticism of Dr Varughese for the
classification of Mrs Cox as Level 7 Assistant Manager, under the Award. Mrs Cox’s letter of
appointment plainly states she was engaged at Level 7. It must be presumed that Mrs Cox
accepted this level at the time. She had no complaint for four years that she was incorrectly
classified. Perhaps this is so because the letter of engagement makes no reference to the fact
that Mrs Cox received a bonus of 2% of Dr Varughese’s income. Finally, I note the confusing
reference in the position description as Mrs Cox being employed under the Clerical and
Administrative Employees (State) Award at Level 7, rather than the Health Professionals &
Support Services Award 2010. There was also a reference letter signed by Dr Varughese and
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dated 27 June 2014 which states that Mrs Cox was employed as a Nurse and Practice
Manager, working 38 hours a week and paid $30 an hour.
CONCLUSION
[160] For the foregoing reasons, I am satisfied, firstly, that Dr Varughese had a belief that
Mrs Cox had misappropriated money from her practice and, secondly, that Dr Varughese’s
belief was based on reasonable grounds. From the opening words in the Code, it follows that
it was ‘fair’ for Dr Varughese to dismiss Mrs Cox, without notice or warning; although it
must be accepted that Mrs Cox did have warning of her likely dismissal in the ‘show cause’
letter of 18 June 2015. Simply put, Dr Varughese complied with the Code in respect to Mrs
Cox’s dismissal.
[161] Accordingly, Mrs Cox cannot have been unfairly dismissed, pursuant to s 385(1) of
the Act. Such a conclusion precludes the Commission from making findings as to whether
Mrs Cox’s dismissal was ‘harsh, unreasonable or unjust’. In these circumstances the only
outcome that the Commission can order is that Mrs Cox’s unfair dismissal application must
be dismissed.
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[162] Orders to this effect shall be published contemporaneously with this decision.
DEPUTY PRESIDENT
Appearances:
Mr R Bucksath, Solicitor for the applicant.
Mr L Thorburn, Solicitor for the respondent.
Hearing details:
2016:
Tamworth,
18 February.
Printed by authority of the Commonwealth Government Printer
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