Freeman v Elmore Ltd and Anor (No.2)
[2020] FCCA 2942
•16 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FREEMAN v ELMORE LTD & ANOR (No.2) | [2020] FCCA 2942 |
| Catchwords: INDUSTRIAL LAW – Application seeking compensation for alleged contravention of ss 44 and 340 of the Fair Work Act 2009 (Cth), failure to pay entitlements and breach of contract – cross-claim – applicant found to have engaged in serious misconduct – first respondent discharged its onus under s 361 of the Act – cross-claims not permitted under the Act – no contravention made out – no breach of contract made out – application dismissed – cross-claim dismissed. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 340, 361, 566 |
| Applicant: | SEAN MICHAEL FREEMAN |
| First Respondent: | ELMORE LTD |
| Second Respondent: | DAVID JAMES MENDELAWITZ |
| File Number: | PEG 294 of 2019 |
| Judgment of: | Judge Street |
| Hearing date: | 16 October 2020 |
| Date of Last Submission: | 16 October 2020 |
| Delivered at: | Sydney |
| Delivered on: | 16 October 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Raftos via Microsoft Teams |
| Solicitors for the Applicant: | MKI Legal |
| Counsel for the Respondents: | Mr TJ Hammond via Microsoft Teams |
| Solicitors for the Respondents: | MinterEllison |
ORDERS
The belated objections by the applicant in respect of the respondents’ affidavit evidence are rejected for non-compliance with the Court’s orders.
The application is dismissed.
The alleged cross-claim in the Response is dismissed.
Date of orders: 16 October 2020
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
PEG 294 of 2019
| SEAN MICHAEL FREEMAN |
Applicant
And
| ELMORE LTD |
First Respondent
| DAVID JAMES MENDELAWITZ |
Second Respondent
REASONS FOR JUDGMENT
These are proceedings within the Court’s jurisdiction under s 566 of the Fair Work Act 2009 (Cth) (“the Act”) in which the applicant alleges contraventions of s 44 of the Act in respect of the National Employment Standards and s 340 of the Act in respect of the applicant’s termination as well as an allegation of a failure to pay particular entitlements and a case of breach of contract.
The respondent’s chronology filed on 7 October 2020 up until the applicant was terminated from the applicant’s employment as a Chief Operating Officer (“COO”) with the first respondent on 26 April 2019 is extracted below. The Court finds the events that occurred are correctly summarised in the respondent’s chronology relevantly as follows:
Date Event 1992 The First Respondent was established as 'North Shore Laboratories Pty Ltd'. 1997 The First Respondent was listed on the ASX as 'NSL Health Limited'. October 2007 The First Respondent changed the nature of its business from the distribution of medical equipment to the development of iron ore mining projects in India. 1.12.2008 Cedric Goode commenced as Managing Director and Chief Operating Officer of the First Respondent. February to March 2009 Mr Goode was tasked by the board to identify and assess iron ore mining projects in India. 24.03.2009 The First Respondent released an ASX Announcement detailing its investment strategy into the Indian iron ore mining industry. 12.05.2009 The First Respondent changed its name to 'NSL Consolidated Ltd'. 26.05.2009 The Applicant is appointed by the board of the First Respondent as Chief Operating Officer.
The Applicant was initially employed on an Executive Services Agreement (ESA) for a 3 year term. The ESA contained a performance bonus if the Applicant sold 20kt of ore from acquired mines.
May 2009 Mr Goode recommended to the board that the First Respondent purchase a mining tenement based in Kurnool, Andhra Pradesh in India (known as'AP-1'), and commenced negotiations for the acquisition. 1.07.2009 The Applicant commenced employment as Chief Operating Officer. July 2009 The First Respondent established a subsidiary in India, NSL Mining Resources India Pvt Ltd (NSL India), to facilitate any acquisitions and purchases in India.
Mr Goode was appointed as Chair of the board of NSL India and the Applicant was appointed Managing Director and CEO of NSL India.
12.08.2009 Peter Richards is appointed as a non-executive director of the First Respondent. September 2009 The Applicant and Mr Goode presented a 'Pre-Feasibility Study' to the board and recommend the transaction to purchase 'AP-1' be approved. 29.09.2009 The First Respondent announces that it had executed a binding agreement to purchase AP-1 and will undertake a drilling program to test the resource estimate prior to completion of the acquisition. October 2009 The Applicant and Mr Goode presented a 'Board Level Study' into the purchase 'AP2'.
The board approved the purchase of 'AP2' based on the business case presented by the Applicant and Mr Goode.
26.11.2009 The Applicant received a report from SGS Minerals analysing 86 samples from AP-1 and AP-2 which found only a small percentage of iron ore in the samples (less than 10% Fe). 28.01.2010 The First Respondent held a board meeting. 8.03.2010 The Applicant received an Independent Geologists Report prepared by Salva Resources regarding the geology of AP-1 and AP-2. 22.04.2010 The First Respondent held a board meeting. May – August 2010 Salva Resources prepared lithology reports from the results of their diamond drilling program. The lithology reports strongly indicated there is very little iron ore in the tenements. 26.05.2009 The Applicant is appointed by the board of the First Respondent as Chief Operating Officer.
The Applicant was initially employed on an Executive Services Agreement (ESA) for a 3 year term. The ESA contained a performance bonus if the Applicant sold 20kt of ore from acquired mines.
May 2009 Mr Goode recommended to the board that the First Respondent purchase a mining tenement based in Kurnool, Andhra Pradesh in India (known as'AP-1'), and commenced negotiations for the acquisition. 1.07.2009 The Applicant commenced employment as Chief Operating Officer. July 2009 The First Respondent established a subsidiary in India, NSL Mining Resources India Pvt Ltd (NSL India), to facilitate any acquisitions and purchases in India.
Mr Goode was appointed as Chair of the board of NSL India and the Applicant was appointed Managing Director and CEO of NSL India.
12.08.2009 Peter Richards is appointed as a non-executive director of the First Respondent. September 2009 The Applicant and Mr Goode presented a 'Pre-Feasibility Study' to the board and recommend the transaction to purchase 'AP-1' be approved. 29.09.2009 The First Respondent announces that it had executed a binding agreement to purchase AP-1 and will undertake a drilling program to test the resource estimate prior to completion of the acquisition. October 2009 The Applicant and Mr Goode presented a 'Board Level Study' into the purchase 'AP2'.
The board approved the purchase of 'AP2' based on the business case presented by the Applicant and Mr Goode.
26.11.2009 The Applicant received a report from SGS Minerals analysing 86 samples from AP-1 and AP-2 which found only a small percentage of iron ore in the samples (less than 10% Fe). 28.01.2010 The First Respondent held a board meeting. 8.03.2010 The Applicant received an Independent Geologists Report prepared by Salva Resources regarding the geology of AP-1 and AP-2. 22.04.2010 The First Respondent held a board meeting. May – August 2010 Salva Resources prepared lithology reports from the results of their diamond drilling program. The lithology reports strongly indicated there is very little iron ore in the tenements. 18.05.2010 The First Respondent held a board meeting.
The Applicant presented on the progress of the Indian iron ore project that despite a high percentage of silica in the resource, iron ore grades of between 30% to 47% were achievable through manual sorting.
The Applicant recommended the First Respondent conduct testing to determine whether beneficiation would be a more efficient way of removing high percentage contaminants from the iron ore resource.
The board requested the Applicant and Mr Goode be ready to present a report on their progress at the next board meeting.
22.06.2010 The Applicant received a geological appraisal from Salva Resources of batch testing undertaken by Salva Resources. The appraisal only assessed ROM ore, taken from the surface of the mine. 25.06.2010 The First Respondent held a board meeting.
The Applicant informed the board that iron ore grades of between 37% to 48%-52% had been achieved at AP-2.
The board requested Applicant and Mr Goode be in a position to state whether the project could be beneficiated cost effectively by the next board meeting.
4.08.2010 The Applicant modified two draft geological reports created and authored by Salva Resources.
The documents were titled 'AP1- Target Mineralisation NSL Comments' and 'AP2 – Target mineralisation NSL Comments'.
23.08.2010 The Applicant received a report from Salva Resources indicating the lease area for AP-1 and AP-2 could host a mineralisation target tonnage of between 8Mt to 13Mt with anticipated grades in the range of 20% to 50% iron ore.
The report contains a disclaimer the tonnage and grade potential was 'conceptual in nature' and there was not sufficient exploration data to define a mineral resource at that time.
24.08.2010 The Applicant modified two draft geological reports created on 20 August 2010 by Salva Resources.
The first document was titled 'AP1 – Target mineralisation NSL (1)' and was edited over a 234 minute period.
The second document was titled 'AP2 – Target mineralisation NSL' and was edited over a 91 minute period.
The Applicant's edits to both documents include a statement that iron grades are likely to be in the range of 20% Fe to 50% Fe. This statement did not match the lithology reports previously prepared by Salva Resources.
25.08.2010 The First Respondent held a board meeting.
The Applicant informed the board the resource definition programme was progressing, as was testing to see if the iron ore was amenable to beneficiation.
24.09.2010 The First Respondent held a board meeting. 25.09.2010 Salva Resources sent an email to Mr Goode enclosing a draft document tiled 'Report NSL AP1 Resource Modelling'. 28.09.2010 Mr Goode forwarded the draft document from Salva Resources to the Applicant.
The draft document and results recorded by Salva Resources were not consistent with the mineralisation statements created by Salva and modified by the Applicant on 4 August 2010 and 24 August 2010.
29.09.2010 The Applicant prepared a document setting out his comments to the report provided by Salva Resources.
The Applicant's comments included challenging the conclusions of Salva Resource on the inferred resource on the basis the conclusion did not reflect the 'real world' mining results.
18.10.2010 The Applicant sent an email to Al Manyard, Consulting Geologist, and Salva Resources attaching a report on Salva Resources letterhead in respect of the target mineralisation for AP-6, AP-7, and AP-8. The Applicant stated in the email he compiled the report himself. 29.11.2010 The First Respondent held a board meeting.
Mr Goode presented a presentation prepared by the Applicant and stated that management is unable to provide the board with advice on the resource definition citing issues with the reliability of testing undertaken by Salva Resources.
The Applicant's presentation notes that Salva Resources engagement had been terminated and a new consultant has been engaged to 'rebuild the model from scratch'.
December 2010 The board approved a 'Company Share Trading Policy' which applies to all directors and employees. January – June 2011 The Applicant received a report from Capstone Geo Consultants on 'Geophysical Exploration for Delineation of Iron Ore Potential Zones in Two Mining Leases'.
The report does not contain any resource estimate, but measures the magnetic intensity of rock formations of AP-1 and AP-2 which may indicate prospective mineralisation of iron ore.
1.01.2011 The Company Share Trading Policy came into effect. 23.02.2011 The First Respondent held a board meeting.
The Applicant reported on the progress of the beneficiation testing. The board asked the Applicant to prepare a final paper that identified the risks and methods to mitigate those risks, associated with operating a beneficiation plant.
30.03.2011 The Applicant received a report from SRK Consulting containing statements that the quantity of iron ore in AP-1 and AP-2 is 0.59 and 1.9 million tonnes respectively, and the average grade of iron ore in AP-1 and AP-2 is 14.3% and 12.9% respectively.
The report noted the estimation of tonnage and grade does not have any demonstrated economic viability.
March to May 2011 The First Respondent held a number of board meetings. 14.06.2011 The First Respondent held a board meeting.
The Applicant presented the Kurnool Beneficiation Plant Capital Request to the board, which reported that:
□ the material from AP-1 and AP-2 was amenable to beneficiation;
□ based on the resource studies undertaken by independent consultants and mining data, the potential plant feed from AP-1 and AP-2 was 2.4 million tonnes that contained between 20% and 50% iron ore;
□ from the lowest average grades of 25% to 27% the expected performance of a dry beneficiation plant would upgrade the mineral resource to 58% to 59% iron ore, with a recovery rate between 74% to 76% and a subsequent yield of 36 to 37 tonnes of saleable iron concentrate for each 100 tonnes of plant feed;
□ the plant performance has been modelled on the lowest grade of proposed feed stock; and
□ it would be cost prohibitive to undertake further studies to gain a higher level of confidence in the definition of the mineral resource, due to the patchy nature of the deposit and the potential size of the mineralisation.
4.10.2011 The First Respondent released an announcement to the ASX regarding the commencement of construction on Phase 1 of a beneficiation plant in India. 11.11.2011 The Applicant posted on the HotCopper forum for the First Respondent under the pseudonym 'pogo' giving views about the First Respondent's share value. 15 – 21.03.2012 The Applicant exchanged emails with Chief Financial Officer, Julian Tambyrajah, regarding concerns that the average iron ore grades for AP-1 and AP-2 reported by the consultant geologists did not align with what was reported to the board by the Applicant. 30.03.2012 Mr Tambyrajah resigned from his employment as Chief Financial Officer of the First Respondent. 12.07.2012 The First Respondent released an announcement to the ASX regarding commissioning of the Plant and ramping up of production.
The ASX announcement marked the commencement of Phase 2 of the Plant.
12.10.2014 The Applicant posted on the HotCopper forum for the First Respondent under the pseudonym 'pogo' giving views about the First Respondent's share value. 27.11.2014 The Applicant posted on the HotCopper forum for the First Respondent under the pseudonym 'pogo' referring to himself in the third person. 1.04.2015 The Applicant posted on the HotCopper forum for the First Respondent under the pseudonym 'pogo' referring to himself in the third person. 16.09.2015 The Applicant posted on the HotCopper forum for the First Respondent under the pseudonym 'pogo' commenting on the First Respondent's repayment of a loan. 6.10.2015 The Applicant posted on the HotCopper forum for the First Respondent under the pseudonym 'pogo' referring to himself in the third person. 17.11.2015 The First Respondent released an announcement to the ASX regarding the funding for the wet beneficiation plant. 28.09.2016 The First Respondent released an announcement to the ASX regarding commencement of commissioning of the wet beneficiation plant. 16.10.2016 The Applicant posted on the HotCopper forum for the First Respondent under the pseudonym 'pogo' giving views about the cash position of the First Respondent. December 2016 The Applicant entered into a loan arrangement with the Field Respondent in order to exercise options he held in respect of the First Respondent's shares. January 2017 The Applicant sold shares in the First Respondent to repay his loan to the First Respondent. 15.06.2017 The First Respondent held a board meeting.
The Applicant reported that 12,969 tonnes of iron ore had been purchased from local Indian producers.
12.07.2017 The Applicant posted HotCopper forum for the First Respondent under the pseudonym 'pogo' referring to conversations he had with management. 13.07.2017 The First Respondent held a board meeting.
The Applicant reported that 15,134 tonnes of iron ore feed had been purchased from local Indian producers.
1.11.2017 The First Respondent released an announcement to the ASX regarding the achievement of the name plate thorough put for the plant. 30.11.2017 The First Respondent held a board meeting.
The Applicant reported that the beneficiation plant was being operated with ore feed purchased from third parties and that 51,339 tonnes of iron ore had been purchased from local Indian producers.
15.02.2018 The First Respondent held a board meeting.
The Applicant reported that 59,435.78 tonnes of iron ore feed had been purchased from local Indian producers.
22.02.2018 The First Respondent held a board meeting.
The board considered whether to make a market disclosure regarding poor performance of the beneficiation plant as the previously forecasted production had not been achieved.
The board decided to wait to receive a report from Brian Povey of Mineralconsult who had been engaged by the Applicant to review the beneficiation process and make recommendations for plant design modifications.
6.03.2018 The Applicant received a revised report from Brian Povey of Mineralconsult regarding a review of the beneficiation process.
Mr Povey notes the core issue for the future is ore characterization, and that the First Respondent needed to fully understand the likely future mass and iron ore yields of the beneficiation plant before committing to the Phase 3 Expansion Project.
22.03.2018 The Applicant gave two presentations to the board on the Phase 3 Expansion Project that addressed Mr Povey's report.
The presentations did not flag Mr Povey's core concern regarding ore characterisation.
5.04.2018 The First Respondent held a board meeting.
The Applicant reported that as of 2 April 2018, about 2,116 tonnes of ROM had been mined from AP-1 and 8,150 had been mined from AP-26. The Applicant also disclosed that a total of 34,092 tonnes of iron ore feed had been received, of which 22,284 tonnes were purchased from local Indian producers.
19.04.2018 The First Respondent held a board meeting.
The Applicant reported that as of 15 April 2018, about 8,160 tonnes of ROM had been mined from AP-1 and 12,000 tonnes had been mined from AP-26. The Applicant also disclosed that a total of 56,452 tonnes of iron ore feed had been received, of which 41,985 tonnes was purchased from local Indian producers.
14.05.2018 The First Respondent released an announcement to the ASX regarding the securing of funding for the expansion on the Plant through the Phase 3 Expansion Project. 17.05.2018 The First Respondent held a board meeting.
The Applicant reported that as of 14 May 2018, about 22,016 tonnes of ROM had been mined from AP-1 and 20,000 tonnes had been mined from AP-26. The Applicant also disclosed that a total of 73,920 tonnes of iron ore feed had been received, of which 54,674 tonnes were purchased from local Indian producers.
15.02.2018 The First Respondent held a board meeting.
The Applicant reported that 59,435.78 tonnes of iron ore feed had been purchased from local Indian producers.
22.02.2018 The First Respondent held a board meeting.
The board considered whether to make a market disclosure regarding poor performance of the beneficiation plant as the previously forecasted production had not been achieved.
The board decided to wait to receive a report from Brian Povey of Mineralconsult who had been engaged by the Applicant to review the beneficiation process and make recommendations for plant design modifications.
6.03.2018 The Applicant received a revised report from Brian Povey of Mineralconsult regarding a review of the beneficiation process.
Mr Povey notes the core issue for the future is ore characterization, and that the First Respondent needed to fully understand the likely future mass and iron ore yields of the beneficiation plant before committing to the Phase 3 Expansion Project.
22.03.2018 The Applicant gave two presentations to the board on the Phase 3 Expansion Project that addressed Mr Povey's report.
The presentations did not flag Mr Povey's core concern regarding ore characterisation.
5.04.2018 The First Respondent held a board meeting.
The Applicant reported that as of 2 April 2018, about 2,116 tonnes of ROM had been mined from AP-1 and 8,150 had been mined from AP-26. The Applicant also disclosed that a total of 34,092 tonnes of iron ore feed had been received, of which 22,284 tonnes were purchased from local Indian producers.
19.04.2018 The First Respondent held a board meeting.
The Applicant reported that as of 15 April 2018, about 8,160 tonnes of ROM had been mined from AP-1 and 12,000 tonnes had been mined from AP-26. The Applicant also disclosed that a total of 56,452 tonnes of iron ore feed had been received, of which 41,985 tonnes was purchased from local Indian producers.
14.05.2018 The First Respondent released an announcement to the ASX regarding the securing of funding for the expansion on the Plant through the Phase 3 Expansion Project. 17.05.2018 The First Respondent held a board meeting.
The Applicant reported that as of 14 May 2018, about 22,016 tonnes of ROM had been mined from AP-1 and 20,000 tonnes had been mined from AP-26. The Applicant also disclosed that a total of 73,920 tonnes of iron ore feed had been received, of which 54,674 tonnes were purchased from local Indian producers.
17.10.2018 After returning from India, the Second Respondent asked the Applicant to provide him with the technical data obtained from the resource definition work undertaken on AP-1 and AP-2.
The Applicant sent the Second Respondent a link to a OneDrive account containing some technical reports. The Second Respondent formed a view the technical reports were of poor quality and insufficient to have confidence the tenements contained economical grades of iron ore.
18.10.2018 The Second Respondent arranged a meeting with the Applicant to ask him to explain how the iron ore for the Phase 3 Expansion Project would be sourced.
The Second Respondent was not satisfied with the Applicant's explanation and directed the Applicant to set up another explanatory drilling program to test the resource contained on the tenements. The Applicant declined this request and cited it would not be possible to source a drill rig.
25.10.2018 The First Respondent held a board meeting.
At the meeting, the Second Respondent provided the board with an update on his progress on the review of the project.
The minutes note: 'DW (the Second Respondent) to take on the finalisation of these contracts and the KPI's' referring to the finalisation of the Applicant's renewed ESA.
20.11.2018 The First Respondent held a board meeting.
The Second Respondent provided the board with an update on his progress on the review of the Indian operations.
Last week of October 2018 The Second Respondent proceeded to source a drill rig to undertake further drilling on AP-1, AP-2 and AP-26, and engaged SRK Consulting to undertake the explanatory drilling program. November 2018 SRK Consulting undertook an exploratory drilling program on AP-1, AP-2 and AP-26.
The Second Respondent engaged Glenn Simpson to support Tim Lee, Chief Financial Controller who had informed the Second Respondent he needed assistance preparing financial information requested by the Second Respondent regarding forecasted cash flow positions for the corporate group.
November 2018 The Second Respondent met with Dasari Rao, Director of NSL India. Mr Rao showed the Second Respondent a notebook which recorded the iron ore sales made by NSL MRI, including the source of the iron ore raw material.
The Second Respondent noted the source of the iron ore raw material was from third party producers rather than from the First Respondent's acquired tenements.
22.11.2018 The Second Respondent engaged geological consultancy service firm, Geomysore Services, to undertake an independent investigation of the results from the exploratory drilling program undertaken by SKR Consulting. 28.11.2018 SRK Consulting provided the Second Respondent and the Applicant with their initial drilling results for AP-1 and AP-2.
The drilling results showed the average iron ore grade over the drilled holes for AP-1 was 5% and for AP-2 was 10.5%.
The Second Respondent forwards the drilling results to the board.
Early December 2018 Mr Simpson met with Mr Lee and the Applicant to go through the financial modelling for the Phase 3 expansion project. Mr Simpson learned the drivers in the financial modelling are based on assumption of potential performance and were aspirational in nature.
Mr Simpson then informed the Second Respondent he held concerns regarding the reliability of the assumptions built into the financial model from the Indian operations.
6.12.2018 The Second Respondent received an email from Mr Rao informing him that the Phase 3 expansion project required environment clearances from Indian Authorities, but no application had been made.
Mr Rao advised the Second Respondent that a clearance could take up to 12 months to obtain.
8.12.2018 The Second Respondent prepared financial modelling for AP- 1, AP-2, AP-3 and AP-26 using the 'best case scenario' assumptions the Applicant had provided for the purpose of the First Respondent presenting a financial model to investors to secure funding for the P3 Expansion Project.
The Second Respondent was unable to design modelling that showed the Indian operations could operate at a profit.
9.12.2018 The First Respondent held a board meeting.
The Second Respondent briefed the board on a significant issue with the mineral resource for Indian project that had been identified through the resource drilling program undertaken by the Second Respondent.
10.12.2018 The First Respondent requested the ASX place the Company's securities in trading halt. 10.12.2018 The First Respondent held a board meeting to discuss the future of its Indian operations. 10.12.2018 The Second Respondent had a conversation with Mr Lee where Mr Lee disclosed that he had been instructed by the Applicant and Mr Goode to run over 200 variations of the financial model, and that the assumptions underpinning the model were theoretical and selected because they made the model work.
The Second Respondent emailed the board regarding the conversation with Mr Lee about misgivings held by management about the mineral resource that had not been disclosed to the board.
11.12.2018 Peter Richards emailed the Second Respondent asking him to address the board regarding the issues with the mineral resource and the options open to the First Respondent. 11.12.2018 The First Respondent's securities were suspended from quotation on the ASX. 12 – 16.12.2018 The Second Respondent travelled to India to investigate the feasibility of a number of options for the future of the India operations.
The Second Respondent considered the best option for the First Respondent was to close down the Indian operations and dismantle the beneficiation plant for sale.
17.12.2018 The First Respondent held a board meeting to discuss the Second Respondent's advice in relation to the issues with the mineral resource.
The Second Respondent presented his report titled 'Evaluation of Mineralisation to Support P3 Project'. The board determined based on the Second Respondent's report that the only viable option was to close down the Indian operations immediately and cease incurring any additional expenditure.
20.12.2018 Mr Lee resigned from his position of Chief Financial Officer. Mid-January 2019 The Second Respondent received a copy of Geomysore's draft report containing their assessment of the drilling results undertaken by SRK Consulting in November 2018.
The report concluded that the average iron content does not appear to be above 20% in any tenement except AP-3, and that AP-1 and AP-2 do not contain any significant iron ore.
24.01.2019 The First Respondent held a board meeting.
The Second Respondent provided an update of the wind up of the operations in India and an update in respect of his investigations concerning managements' conduct, which included the Applicant.
The Second Respondent informed the board his investigations demonstrated the Applicant had disregarded drilling results that were actually obtained, which led to overstating volume estimates when obtaining board approval for capital expenditure.
6.02.2019 The Applicant emailed the Second Respondent citing his concerns regarding his exposure to the First Respondent regarding his accrued annual leave and suggesting that two to four weeks of his accrued leave be paid out.
The Second Respondent replied to the Applicant that this would not be an ideal use of the limited cash available to the First Respondent.
28.02.2019 The First Respondent held a board meeting.
At the board meeting the Second Respondent presented his rationale that the First Respondent's shares in NSL India be sold for $1.00. The board agreed with the Second Respondent's rationale.
Late February 2019 The Second Respondent secured the interest of a potential buyer in India for the sale of the shares in NSL India. 20.03.2019 The First Respondent announced it had signed a memorandum of understanding for a Western Australian iron ore project. 21.03.2019 The Applicant emailed the Second Respondent and Mr Richards asserting his role had become redundant. 3.04.2019 The Applicant again emailed the Second Respondent and Mr Richards regarding the redundancy of his position and proposed a way forward for the ending of his employment. 9.04.2019 The First Respondent entered into a share sale agreement for the sale of NSL MRI. 10.04.2019 The Second Respondent asked the Applicant to attend a meeting at the offices of the First Respondent's solicitors on 15 April 2019 for the purposes of discussing the share sale agreement and the Indian operations generally. 15.04.2019 The Applicant attended a meeting at the office of the First Respondent's solicitors, with Jonathon Cook, Associate, and Mr Simpson.
After the meeting the Applicant emailed the Second Respondent to complain the meeting felt like an 'ambush'.
16.04.2019 The Applicant emailed Mr Simpson to request copies of payslips for the period January 2019 to March 2019. 24.04.2019 The Second Respondent had a telephone conversation with the Applicant during which he invited the Applicant to resign from his employment rather than having his employment terminated for serious misconduct.
The Second Respondent informed the Applicant that he would not receive a redundancy payment as it wasn't warranted.
The Applicant declined to resign from his employment.
25.04.2019 The Applicant emailed the Second Respondent and
Mr Richards again asserting his role was to be terminated on the grounds of redundancy.
26.04.2019 The Second Respondent instructed the First Respondent's solicitors to issue a letter to the Applicant advising his employment was terminated summarily for serious misconduct.
The Court heard evidence from the applicant, Mr Mendelawitz who was the CEO of the first respondent, Mr Richards who was a director of the first respondent and Mr Simpson who performed some accounting exercises in respect of outstanding entitlements which have been paid to the applicant.
The applicant was not an impressive witness. The applicant was evasive in answer to questions asked in respect of his authorship of a particular document. When asked directly by the Court in respect of a report he created on 8 June 2011, it was not until he was pressed the third time that the applicant candidly answered that he was the author.
The Court does not accept the applicant’s assertions as to having disclosed to the board the true position in respect of the grade of the relevant ore that was the subject of the two projects in India.
The Court accepts the evidence given by Mr Mendelawitz that the applicant misled the board in a serious and material way in relation to the viability of the two projects in India.
The Court accepts that that was serious misconduct and a material departure from the applicant’s duties, taking into account the authorities that were referred to by the respondent in respect of the serious misconduct.
The Court regards Mr Mendelawitz as having been an impressive witness and accepts his evidence in respect of the history of the matter.
Mr Raftos of counsel on behalf of the applicant submitted that the Court should nonetheless find, taking into account the reverse onus under s 361 of Act and the object of the Act as identified in s 4, that the first respondent has failed to discharge its duty in respect of establishing that there was not adverse action taken by reason of the applicant’s exercise of workplace rights relating to outstanding bonus, redundancy, annual leave and long service leave. Mr Raftos correctly identified that the Court must take into account the whole of the circumstances in determining the real reason for the termination of the applicant.
The Court accepts the evidence of Mr Mendelawitz that the real reason was his assessment of the incompetence of Mr Freeman and the finding that he made that Mr Freeman had seriously misled the board in relation to the viability of the two projects in India. The Court accepts Mr Mendelawitz’s evidence that no activating reason was involved in that termination decision by reason of the applicant having raised a potential for redundancy, the applicant’s annual leave, long service leave or alleged bonus.
Mr Raftos submitted that the financial circumstances of the company were such that the Court should more readily infer that the applicant’s entitlements were part of the reason for the termination of the applicant. The Court rejects that submission. The Court accepts the evidence of Mr Mendelawitz that there was no such an activating reason. Notwithstanding the cross examination concerning roles or input of other persons and the submissions advanced by the applicant, the Court finds that Mr Mendelawitz was the real decision maker in the dismissal of the applicant and that it was his state of mind only that was in the circumstances of this case decisive of the alleged contraventions. The Court finds that Mr Mendelawitz was the main decision maker.
Mr Raftos submitted that the Court should be concerned as to the absence of other members of the board in respect of the reasons for the termination. In circumstances of the present case, where the Chief Executive Officer (“CEO”) has put on evidence and identified the decision making role he has played in relation to the investigation, the Court does not accept the absence of other board members to repeat the substance of the evidence delivered by Mr Mendelawitz as basis by reason of which the Court should draw some adverse inference or find that respondent has failed to discharge its onus under s 361 of the Act.
The Court finds that the first respondent has discharged its onus under s 361 of the Act in that the termination of the applicant was not by reason of any alleged workplace rights raised by the applicant but was due to serious misconduct that the Court has found has been made out by the respondents in respect of the termination of the applicant. It follows that the alleged contravention of s 340 of the Act is not made out.
Nor is the Court satisfied that there has been any breach of contract in the circumstances where the applicant was found to have engaged in serious misconduct and the Court has accepted the respondents’ evidence in relation to the applicant having engaged in such serious misconduct and having misled the board in relation to the viability of the two Indian projects, which was a core and material departure from his duties as a COO.
The Court does not accept that there has been any contravention in these circumstances of any alleged entitlement to redundancy. The applicant was not made redundant. The applicant was terminated for misconduct which the Court has found have been made out by the respondents.
The applicant also alleged entitlements under the National Employment Standards. It is apparent that the applicant has been paid outstanding entitlements on the evidence before the Court. There is no outstanding entitlement in respect of which the Court has been persuaded that applicant has under s 44 of the Act and no contravention of the provision is made out.
The case in contract fails for the reasons the Court has identified.
The case of alleged contravention of the Act also fails for the reasons the Court has identified.
The respondents sought to advance a cross-claim allegedly seeking to recover amounts outstanding. Cross-claims are not permitted under the Act. The cross-claim is without substance. Accordingly, the cross-claim is dismissed.
I certify that the preceding nineteen (19) paragraphs are a true copy of the transcript of the published oral reasons for judgment of Judge Street delivered in open Court on 16 October 2020 and the parties were sent a sealed copy of the Court’s orders.
Associate:
Date: 13 November 2020
Key Legal Topics
Areas of Law
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Employment Law
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Contract Law
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Civil Procedure
Legal Concepts
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Breach
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Remedies
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Statutory Construction
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Jurisdiction
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