Griffiths v Power Ledger Pty Ltd
[2020] FCCA 2846
•30 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GRIFFITHS v POWER LEDGER PTY LTD | [2020] FCCA 2846 |
| Catchwords: INDUSTRIAL LAW – Adverse Action – where the applicant was employed by a start-up tech company – where the applicant requested equity in the company as part of the terms of his employment – where a handshake agreement was made – where the respondent did not comply with those terms – where the applicant complained – where the role of the applicant was made redundant – where the respondent had the onus of proving the adverse action was not as a result of a prohibited reason – where the respondent failed to discharge onus – declaration made |
| Legislation: Fair Work Act 2009 (Cth), ss.340,341, 342, and 361 |
| Cases cited: Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500 |
| Applicant: | MARC GRIFFITHS |
| Respondent: | POWER LEDGER PTY LTD |
| File Number: | PEG 40 of 2019 |
| Judgment of: | Judge Vasta |
| Hearing date: | 12 and 13 October 2020 |
| Date of Last Submission: | 13 October 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 30 October 2020 |
REPRESENTATION
| Applicant in person |
| Counsel for the Respondent: | Ms R. Lee |
| Solicitors for the Respondent: | DLA Piper Australia |
THE COURT DECLARES:
That the Respondent, Power Ledger Pty Ltd, contravened s.340(1) of the Fair Work Act 2009 (“the Act”) by making the Applicant redundant after the Applicant made a complaint in relation to his employment.
THE COURT ORDERS:
That the matter be adjourned for hearing as to penalty and compensation at 11.00am (Brisbane Time) on 11 November 2020 via MS Teams.
That the parties file and serve their written submissions in relation to penalty/compensation and the continuation of the non-publication order by no later than 12.00pm (GMT) time on 9 November 2020.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
PEG 40 of 2019
| Marc GRIFFITHS |
Applicant
And
| Power ledger Pty ltd |
Respondent
REASONS FOR JUDGMENT
Introduction
The Respondent Company, Power Ledger Pty Ltd, was formed in May 2016. It has been generally described as a “start-up” tech company that utilises technology in the power, water and gas market to provide consumers with individual and therefore, better deals with such utilities.
There were five “co-founders” of the Respondent. These included Dr Jemma Green, who was the “Chairman of the Board”, Mr David Martin, who was the managing director and CEO and Mr John Bulich, who was the technical director.
In early 2017, the company wanted to recruit someone that had technical skills and experience with Blockchain. The Applicant, Marc Griffiths, answered an advertisement and met with the technical director, Mr John Bulich.
There does not seem to be any controversy with the Applicant’s statement that he saw the potential for such a company and wanted “in”; that is, a small piece of equity in the business.
There seems to have been a desire by the Respondent to have the Applicant work for them full-time and that the “sticking point” was that the Applicant wanted sufficient incentive, by way of equity, to do so.
Eventually, the Applicant began working for the respondent on a full-time basis. The terms were a salary, the provision of “tokens” and share options once the Respondent was able to work out the legalities surrounding such a plan.
The Applicant claims that he had been promised a particular arrangement when it came to the provision of share options as part of his overall package. The offer that was subsequently given to the Applicant, some six or seven months after he signed his employment contract, was strikingly different from what the Applicant says was the agreed arrangement.
The Applicant said that he made it clear that this proposal was not what was agreed upon and he refused to sign the share offer that was given to him and complained to the financial controller about this. This was filtered back to the Board of the Respondent.
The Applicant was also having trouble with another employee. The Applicant subsequently made complaints about the conduct of this other employee.
Part of the employment contract was that the Applicant would be given “tokens” as part of his remuneration package. The Applicant claims that he was not given the tokens until 2 to 6 weeks after they were due to be given to him. He complained about this.
In late July/early August 2018, the Board made a decision as to its organisational structure. That decision, the Respondent claims, was that the role in which the Applicant was performing duties (chief technical officer) would be made redundant. However, the Respondent wished to retain the services of the Applicant.
The Applicant was offered a contract in a new position. His salary would remain the same but the provision of tokens would no longer be part of his package and the share options would be those that had already been offered to him (which he had refused to accept).
The Applicant was told that if he did not accept the new role that had been offered to him, he would have his employment terminated. The Applicant did not accept the role and his employment was subsequently terminated.
The Applicant claims that the Respondent terminated his employment because he exercised the following workplace rights:-
a)making a complaint against the other employee
b)making a complaint that he was not paid his “tokens” at the appropriate time
c)making a complaint that the share offer was not the offer upon which there had been an agreement.
The Applicant seeks a declaration that the Respondent has contravened the Fair Work Act 2009 (Cth) (“the FW Act”) and an order for compensation arising out of that contravention. The Applicant also seeks pecuniary penalties to be paid to him.
The Respondent denies that they have contravened the FW Act.
Application for Adjournment
The litigation history of this matter has been set out in the judgment of Judge Kendall in Griffiths v Power Ledger Pty Ltd (No 2) [2020] FCCA 2684. Notwithstanding the orders that were made by His Honour, the Applicant applied for an adjournment of the trial when I mentioned the matter on 28 September 2020. The grounds for this application were the fact that the trial would be conducted via Microsoft Teams and that there was a change of trial judge. I refused that adjournment. The trial was to be heard via Microsoft Teams beginning on Monday, 12 October 2020.
The Applicant filed an application in a case on 8 October 2020, wishing to re-litigate the question of an adjournment of the trial and claiming that he had “new” evidence in the form of a report from his psychologist. I dealt with this matter on the first day of the trial.
Whilst it may have been somewhat unusual, it was arranged for the psychologist to attend, via MS Teams, where I asked him a number of questions. I was very careful to ensure that any answer that the psychologist would give me was not something that would impact the therapeutic relationship he had with the Applicant.
Having listened to the information given by the psychologist, I gained the very clear impression that the circumstances, which led to the institution of these proceedings, have been such to have made the Applicant angry and somewhat fixated upon the wrongs that he believed were committed against him.
But now, as the rubber hits the road, there is an apprehension about the whole of the proceedings. The Applicant’s true fear is not the change of Judge hearing the matter, nor is it that the matter is been heard in a virtual courtroom; rather, it is that it is time for this matter to reach “the final act”. The psychologist gave me the very clear impression that there was an issue of avoidance on the part of the Applicant.
I am of the view that, even though the Applicant thinks otherwise, an adjournment of the matter would actually be worse for the mental health of the Applicant. There are obvious difficulties for the Applicant; he is unrepresented, these are difficult legal issues and he is presently in London and would be participating between the hours of 1:30 AM and 8:00 AM London time.
All of this had to be balanced with fairness to the Respondent. The Respondent is a new company whose progress has been halted by this current litigation. The Applicant has made an ambit claim for $10 million in compensation. The mere fact that such a claim has been made is something of which the Respondent must inform potential investors. The fear, that the Respondent has, is that such information would deter potential investors.
Balancing up all of the considerations, I was of the view that the trial should continue.
I should add that the Applicant presented his arguments fully and asked pertinent questions. I monitored the situation at all times to ensure that the Applicant was not overwhelmed or put into a position where he simply did not know what he should be doing. In my view, he was able to fully participate in the trial. In my view, the way in which the trial was conducted was not unfair to him.
The Evidence of the Applicant
The Applicant provided two affidavits, one dated 21 July 2020 and the other dated 7 October 2020. It was not always easy to discern what the Applicant was trying to convey in those affidavits as the testimony was not always linear. Similarly, when he gave evidence, there were aspects of the chronology where the anger that the Applicant has over what had occurred to him, did seem to intrude upon his recollection.
However, he was, overall, an impressive witness whose testimony was, in the main, both honest and reliable. Nevertheless, I looked for corroborative evidence to ensure that I could rely upon the more contentious aspects of his evidence.
The Beginning of Employment of the Applicant
I accept that the Applicant answered an advertisement and then met with Mr Bulich and another director. I accept that the Applicant did some work for the company in March 2017 for which he was paid by another company, Ledger Assets.
During this time, the Applicant told Mr Bulich that he wanted to be a shareholder of the Respondent. Mr Bulich replied that,
This is impossible. There are five co-founders and the shares were allocated a year ago. You can’t suddenly become a co-founder, we all put in equity, time and risk when the company was formed.
Nevertheless, the Applicant was able to show to the Respondent the value of the skills he brought to the company. I accept that the Applicant, using his skill as a Blockchain architect/Ethereum engineer, assisted the company in setting up their “initial coin offering” (“ICO”). It was explained to me that an ICO is akin to a virtual IPO or initial public offering. The ICO raised $34 million in funds.
The impasse between the Applicant and the Respondent continued; the Applicant wanted equity in the Respondent and the Respondent wanted the Applicant to work for them full-time. The Applicant explained in evidence that he did have another venture upon which he was working and that if he were to give up that venture, he would want it to be “worth his while” and that entailed him having some equity in the Respondent.
The email chain, that is found at MG-9, illustrates the back and forth nature of the attempts by the Respondent to woo the Applicant into working full time for them. It also illustrates the insistence of the Applicant to have a stake in the company as well as the willingness of the Respondent to have this happen.
Initially, the Applicant began working for the Respondent on a part-time basis of three days per week from, according to the contract, 8 May 2017. The contract, which is attachment MG-15 to the Applicant’s second affidavit, described that the Applicant would work for 24 hours per week and be paid the sum of $54,000 per annum. The contract said that the Applicant may become eligible to participate in a stock option plan.
The Applicant said that he was attempting to negotiate equity with the Respondent which is the reason that the Applicant was declining to work full-time with the Respondent. Interestingly, this contract refers to the Applicant’s role as being the chief information officer (“CIO”).
In his evidence before me, Mr Bulich testified that whilst he thought that the Applicant was asking for too much, he kept working with the Applicant and allowed other directors to negotiate the terms of any employment of the Applicant.
The Email Trail Regarding Share Options
In an email dated 27 April 2017, and part of Exhibit 2, one of the co-founders of the Respondent, Govert Van Ek, wrote to the other four co-founders in these terms:-
Hi all,
Further to discussions on the ESOP [employee share option plan], below the proposal for Mark [sic]. Note the draft contract attached too.
Number options Strike Price
50,000 $1.50
50,000 $3.00
50,000 $4.50
The 50,000 amounts will be reduced to 30,000 - as Mark [sic] is doing a 3 day week at present.
Feedback please…
Regards,
Gov
By July 2017, the parties were closing in on a deal. On 12 July 2017, Dr Green, Chairman of the Board of the Respondent, sent the following email to the Respondent:-
Hi Marc,
You were right! It was $50,00 [Sic] -and then pro-rata for 3 days is $30,000.
My apologies for getting that wrong.
Are you ok if I prepare your documentation for 3 days per week at $90k per annum, with $5k of your $30k ESOP payable at the end of your probation period?
Kind regards,
Jemma
On 14 July 2017 at 17:13, the Applicant replied:
Hi Jemma,
This is my understanding of the share offering based on our conversation, is this accurate?
After 3 months: 5,000 options vested
After 12 months: 45,000 options vested
After 24 months: 50,000 options vested
After 36 months: 50,000 options vested
Each tranche of options can be executed (converted to shares) for $1 total per tranche (not per share)
For the 12/24/36 month vesting dates, is 8th April a fair commence date? (originally started working on the 8th March, but spent a month away)
Hope you have a wonderful weekend!
Marc
On 14/07/17 17:31, Dr Green wrote:
Hi Marc,
The below figures are dollars worth of shares, not number of shares. These are the dollar amounts for the program, but as you are working 3 days per week, you will receive 60% of that, so AUD $30,000 per annum. To receive $50,000 worth of shares, you will need to work full time with Power Ledger for a whole year. This is our strong preference. Please advise if you are willing to come on board full time.
Regarding the commencement date and annual vesting date, as previously advised to you two days ago via email, this will be upon the date you sign the employment contract and then 1 year from that date. It will not be backdated.
Please can you sign and return the employment contract before Monday?
Thanks and regards,
Jemma
On 14 July 2017, at 6:14pm, the Applicant replied:
Hi Jemma,
Yes understand it’s pro rata, I hadn’t understood the $ not shares however, which raises some questions such as whether it’s based on the value at the start or end of the period?
I can see the benefits of working full time also, I wish there were more days in the week :)
Best to you,
Marc
On 14/07/17 22:03, Dr Green replied:
Hi Marc,
The value of the shares is based on the value of the company at the date of issuance to you.
Regards,
Jemma
On 15 July 2017, at 1:35pm, the Applicant replied:
Thanks Jemma. Sorry for all the questions (especially now it’s the weekend). Would ‘date of issuance’ would [sic] be the current date, or the vesting date?
Can we meet on Tuesday to talk about these details?
Jenni advised originally that the contract and option document are combined and should be signed together, so sounds like I shouldn’t be signing one without the other.
Hope you’re having a pleasant weekend.
Marc
On 15/07/17 14:09, Dr Green wrote:
Hi Marc,
Issuance is when the shares are issued or vested to you personally i.e. when you own them.
I am travelling in Sydney Mon-Wed. I am also very busy Thursday and Friday.
You don’t need to sign them together. Garry signed the employment contract, knowing the scheme will be coming out shortly.
You can wait to sign the employment contract for when I circulate the ESOP docs but we won’t be backdating the employment contract. Let me know what you will be doing.
Kind regards,
Jemma.
It is clear from this correspondence that the Respondent was telling the Applicant that they were prepared to offer him share options at a nominal amount. This state of affairs is commensurate with the value that the Applicant brought to the Respondent and the acceptance by the Respondent of that fact.
The Employment Contract
It would seem that the Applicant was offered a full-time employment contract around 14 July 2017. This contract was to give him the title chief technology officer (“CTO”). The Applicant testified that this contract had a draft ESOP with it. That ESOP is part of Exhibit 2 as well as being Annexure E to the first Affidavit of the Applicant.
That draft ESOP comprised 150,000 options provided into three equal Tranche options. The exercise price for each tranche was the same as recorded in the email of 27 April 2017; that is, $1.50 for tranche one, $3.00 for tranche two and $4.50 for tranche three. Those options could be exercised any time after 28 April 2018, 2019 and 2020 respectively.
The document is clearly a draft, however, is totally consistent with the email chain reproduced earlier, except that it clarified that the offer was 50,000 share options rather than $50,000 worth of shares.
The other aspect of equity that the Applicant wished to receive were POWR tokens, which were described as virtual shares in the Respondent. The Applicant explained that the company had issued 1 billion tokens, however, had only allowed 500 million tokens into circulation. The tokens were similar to crypto currency and did have a redeemable value in hard currency.
The tokens were a volatile commodity but may have become very valuable. The Applicant contends that he was asking for a not-insignificant amount of tokens as part of his remuneration package. There was some resistance to this at the beginning of the negotiations.
Mr Bulich testified that, at one stage in the negotiations, he was able to tell the Applicant that “we found some more POWR tokens to offer you”. Mr Bulich also said that, during the negotiations, he said to his fellow directors that the Applicant “wants to feel like he is an owner (or founder) of the company”.
Both Dr Green and Mr Martin testified that there was a problem with the ESOP. They both said that they had legal advice about the tax implications for both the company and the employees regarding the share plan. They said that the company did want to finalise some form of share plan (so as they could conclude the employment negotiations with the Applicant) but had been unable to have had full legal advice as to the form of the plan.
The Applicant said that Mr Bulich eventually offered the Applicant 225,000 share options plus 5 million tokens. The Applicant said that this was what the parties agreed upon.
I am not satisfied that the Respondent ever offered the Applicant three trenches of share options of 75,000 options each. I have little doubt that this was what the Applicant wished from the Respondent, but it seems to me that there is nothing that would indicate that the Respondent Company ever offered a share plan other than the draft share plan which is part of Exhibit 2.
I am also of the view that the Applicant accepted the share plan that had been offered to him and that the “clincher” for him to finally agree to become a full-time employee was the provision of 5 million tokens.
I accept that the Applicant was going to travel to London in late November 2017. I accept that around 21 November 2017, the Applicant had a meeting with Mr Martin and Mr Bulich where the offer was formalised. I accept that Mr Martin told the Applicant that “you got a good deal but we needed to make sure you signed before you left for London”.
Even though the share plan agreed upon was not part of the employment contract per se, (whereas the salary and the provision of tokens were part of that contract), I am of the view that that was because of the inability of the company to have finalised a plan that met all the appropriate legal requirements.
Notwithstanding that, I accept the evidence of the Applicant that he and Mr Martin shook hands on the deal that meant his contract would be for $160,000 per annum plus the first-year instalment of 1.75 million tokens, a second-year instalment of 1.75 million tokens and third-year instalment of 1.5 million tokens.
I also accept that the handshake agreement meant that the Applicant would have a first-year option of 50,000 share options for the price of $1.50, a second-year option of 50,000 share options for the price of $3.00 and a third-year option of 50,000 share options for the price of $4.50.
The Employment of the Applicant
The Applicant signed his contract of employment on 22 November 2017, even though the contract was dated, and the contract stipulated that the Applicant would commence work from, 14 July 2017. There was a generic clause in the contract that states:-
You may, during the term of this agreement, become eligible to participate in Power Ledger’s ESOP, as approved by the Power Ledger Board of Directors from time to time. Any benefit to you as a result of participation in such a plan will be governed entirely by the rules of the plan as they may exist from time to time.
As previously discussed, this clause was part of the contract but there had been an agreement as to what the Applicant’s share plan would actually entail, notwithstanding that this generic clause did not specifically refer to those details. The Applicant’s salary and entitlement to POWR tokens were specifically mentioned in the contract. The role assigned to the Applicant was Chief Technology Officer (CTO). There was no job description for that role.
The Applicant had travelled to London. I accept that he did have an expectation that the finalised share option plan would have been sent to him while he was in London. The Applicant did enquire about this when he returned to Perth but, I accept, he didn’t feel comfortable pushing the matter any further because there were more important priorities upon which to focus. I accept the Applicant when he said that he did nothing further about this issue because he trusted the Board.
Even though there were no set parameters for the position, this is not surprising considering that the Respondent was a “start-up” company and it had very few employees at the time. The company certainly grew during 2018.
Looking at all the evidence before me, including emails that the Applicant himself sent towards the end of his employment, it would seem that the duties of the Applicant as CTO were:
a)To build a high performing, agile development operations team
b)To ensure that any existing platform would be, at any given time, a quality platform that would be both robust and resilient
c)To build a future proof tech offering with maximum scalability and flexibility.
There was obviously a management component to this position, however, the management aspect would seem to be that of leading others, rather than being responsible for the professional development of others or necessarily being a hands-on supervisor. There is no evidence that the Applicant had any management experience whatsoever when he took this job.
Relevantly, the Applicant asked Mr Bulich, in cross-examination before me, what management experience Mr Bulich believed the Applicant had. Mr Bulich replied that “I don’t recall your management experience, but you must’ve had some or we would not have hired you to do a management role”.
Having witnessed the Applicant both give evidence and present his case, there is very little that would give any employer the impression that the Applicant would be “management material”. To my mind, the remark made by Mr Bulich was disingenuous. The company hired the Applicant because of his technical skill and his ability to provide a means by which the Respondent could do what it intended.
Mr Bulich did concede that the Applicant did ask for management training around the middle of 2018. Mr Bulich said that whilst the Applicant did ask for management training, “we thought that it was too late in the game for that”. I will come back to this point later in these reasons.
The evidence does illustrate that there were tensions between the Applicant and certain directors of the Respondent. On my view of the evidence, most of the reasons for that stem from the idiosyncratic personality traits of the Applicant (seen by me during the course of the trial and evident from the manner in which the Applicant expressed himself in emails) and the age difference between the Applicant on one hand and Mr Martin and Mr Bulich on the other (which I have presumed by their appearances to be upward of 20 years).
Issues with Marc Van Hoof
Marc Van Hoof was hired by the Respondent and given the title of chief operating officer (“COO”). This was a management role and the Applicant reported to Mr Van Hoof.
In the material before me, there are many instances the Applicant complaining about the management style of Mr Van Hoof.
Mr Martin, Mr Bulich and Dr Green all concede that the Applicant did make complaints about Mr Van Hoof. Those three witnesses, to various degrees, accepted the legitimacy of such complaints.
The ESOP of May 2018
By May 2018, the Applicant had been working for the Respondent for well over 12 months. That meant it had been over 12 months since he had first raised his desire to have equity in the Respondent. It was also six months since the Applicant had signed his contract and began working full-time for the Respondent. It was also six months since the Applicant had agreed with Mr Martin on the share option plan.
On 28 May 2018, the Respondent gave the Applicant the official ESOP. It was totally different from any model that had been discussed previously and there had been no prior warning by the Respondent, to the Applicant, that the ESOP would be in this form.
The ESOP is reproduced at Annexure DAM-20 to the affidavit of Mr Martin (amongst other places in the evidence). The pertinent parts of the plan are that there are no tranches of share options but simply 14,285 share options. The exercise price per option is $1.50. This means that the Applicant would have to pay $21,427.50 to exercise those options. The November 2017 arrangement (that I have found was agreed to by the Applicant and Respondent) meant that, over the course of three years, the Applicant would pay a total of nine dollars and would have 150,000 share options.
Not surprisingly, the Applicant immediately informed Mr Tim Sly, the financial controller of the Respondent, that there was a mistake with this offer and it was not consistent with the agreement he had with the Respondent.
The Applicant said that he thought this was a simple mistake and that he was sure that this would be fixed up. He said that he didn’t have any concerns because he trusted the Board.
Mr Sly described the Applicant as being agitated when he, Mr Sly, asked the Applicant for his feedback on whether he would accept the offer. Mr Sly said that he took the letter back to Mr Martin and told him of what the Applicant had said.
Mr Sly said that Mr Martin commented that he was unaware of any other offers and, in any case, the Board had ratified the list of employees and their options which meant that the time and opportunity to make any changes to the options scheme had now passed. (If Mr Martin did indeed say this to Mr Sly, such a statement would have been incorrect in light of the findings I have made.)
Mr Sly said that he again spoke to the Applicant and said that there was no written evidence of any different amount of options to be granted to the Applicant. (As has previously been detailed in these Reasons, this statement by Mr Sly was clearly wrong in that there was written evidence of different amounts of options to be granted to the Applicant. Whether Mr Sly knew of this is a totally different question.)
Mr Sly did not give evidence before me and was not required for cross-examination by Counsel for the Respondent. In cross-examination, Mr Martin said that he was told by Mr Sly that the Applicant was refusing to sign the ESOP. Mr Martin said that he could not recall what, if any, reason he was given for that refusal.
The conversation, which Mr Sly attests to, was put to Mr Martin. Mr Martin conceded that he could have had such a conversation with Mr Sly but he cannot now recall it.
The POWR tokens
According to the employment contract of the Applicant, his first lot of 1.75 million tokens were to be held in escrow and released on 14 July 2018. When these options weren’t released by 21 July 2018, the Applicant contacted Mr Sly.
In an email, reproduced as annexure TS-1 to the first Affidavit of the Applicant, the Applicant points out that the value of the token has diminished in the past seven days so that his tranche of tokens has lost around $218,000 in value. He pointed out that he was on vacation and he didn’t want to have any “stress” about the situation. He asked that the tokens be released within seven days; that is, 31 July 2018.
Mr Martin acknowledged that there was a delay in the Applicant receiving those tokens but he does not know the precise reason why there was such a delay. He speculated that one of the reasons may have been issues with the Respondent accessing the “virtual wallet” of the Applicant so as to deposit the tokens within it.
Mr Martin explained that there is a three-part password needed to access/transfer these tokens and that various staff each hold one part of the password. He said that the relevant staff need to be together to input their part of the password into the system to unlock the access to the tokens.
Mr Martin said that these tokens did become available to the Applicant for collection from his wallet on 31 July 2018. Mr Martin testified that the Applicant did not actually access his tokens until 30 August 2018. Mr Martin explained that in order to access his tokens, the Applicant needed to sign for and accept them in his wallet that was set up for him.
General Work Issues about the Applicant
Mr Martin testified that he felt that the Applicant was having difficulties in the CTO role. He noted that the relationship between the Applicant and the COO, Mr Van Hoof, was strained if not completely broken.
On 29 June 2018, the Applicant sent an email to Mr Martin. In that email, the Applicant relevantly asks whether the organisational chart could be adjusted so that he did not report to the COO, but reported directly to the CEO. The Applicant wrote:-
I see my role as blockchain strategy and implementation. This includes R & D work; spinning up new tech and building prototypes. Communication of my understanding of how this space is unfolding, and how that impacts our tech strategy. As well as public interaction, in relation to my role. I also care deeply that Power Ledger has a positive and productive culture, and would like a voice in decisions related to that. I’d like to sharpen my focus, by only focusing on the things that only I can do. This would be much simpler if I can also get some support on certain things, such as handling comms with partners, recruitment, managing work to be done, cultivating the team culture, polishing draft documents et cetera. We’re moving in the right direction here, but still I get more pushback than support, with everything I initiate.
Mr Martin also outlined that the Applicant took three weeks of personal leave in late July/early August 2018. Whilst this leave was approved, it was subject to business requirements. Before his leave was about to commence, Mr Bulich told the Applicant that the business could only spare him for one week.
Mr Martin said that there were discussions that ended up with a negotiated two-week leave period. Mr Martin said that despite this, the Applicant still took three weeks annual leave. He said that the Applicant did not return to work when he was due to return.
Mr Martin also detailed that the Applicant had engaged a consulting firm in violation of a request by Mr Martin to discuss such an engagement with him before hiring the consultants. Mr Martin said that he believed that the managing director from the consultancy firm was a personal friend of the Applicant’s and this was a concern for Mr Martin.
The Role of CTO
Both Mr Martin and Mr Bulich testified that the problems with the Applicant, of which I have just recounted, gave them the feeling that the Applicant was not coping with the role of CTO.
In his statement, Mr Sly said that it was his recollection that during the time that the Applicant was on leave, the subject of his performances are CTO was raised, especially because of his taking leave during a crucial time for the Respondent. Mr Sly believed that the whole three weeks had not been actually approved. He said also that there were other technical decisions that were not appropriate to the business requirements and that the development was forecast to exceed the timeline for completing certain tasks. He believed that a decision was then made to remove the Applicant from the role of CTO and offer him an alternative role.
Mr Bulich said that he had a conversation with the Applicant in mid-2018. He said that the Applicant told him that it was difficult to manage the team and that he (the Applicant) wasn’t good at managing people. Whilst the Applicant asked for management training, Mr Bulich thought that the Respondent would be paying a CTO to be a management trainee and, therefore, the request should not be accommodated.
Mr Bulich said that he asked the Applicant whether it would help if he didn’t have the CTO team management role but could instead do what he liked best. He said that he suggested to the Applicant that the COO could absorb the management function of the CTO role.
On 3 August 2018, whilst on leave, the Applicant wrote an email to Mr Martin and Mr Bulich, amongst others, in the following relevant terms:-
Hi team,
I love Power Ledger. Also though, while I’m 100% willing to take a direction that is not my #1 preference, there are also directions I won’t participate in. Everyone has limits.
My relationship with [the COO] is irreparable. Based on this, it’s best for the company that our roles don’t overlap at all, and that we don’t work from the same office.
That brings its own challenges, but they are less compared to the dynamic that has unfolded: a toxic cocktail that is not good for anyone. I’m done with that.
I’m not willing to lessen the value I offer to the company by being malleable to a c&c, fear-based power dynamic. I serve our mission not $.
I can’t stand with integrity and participate in this.
I’ve made a public commitment to our mission by my (key) participation in the ICO. As such, I will taper off gradually over the next 18 months.
Always open to solutions and collaborative resolution, but my gut says it’s not going to happen.
This mandates me handing over my role, but it is imperative that this is to someone aligned with our values rather than whoever has the best connection to our investors.
Solid regards,
Marc
Mr Bulich replied with a very short email:-
Hi Marc,
Thanks for your feedback.
Is this a resignation?
R
John
The Applicant replied:-
No that would be totally irresponsible and I wouldn’t do that.
I’m highlighting the problem. Mentioning that based on current dynamics and [the COO] ability to influence, I don’t see it being resolved.
So a heads up that assuming that’s the case, then I’ll look to knowledge transfer and handover to a suitable CTO over the next 18 months.
I request to spend time next week writing up a comprehensive evaluation and 360 degree review that will provide clarity.
The business, shareholders, tokenholders and the leadership of the board are all of critical importance and I’ll make sure none of those are impacted.
Best regards
Marc
On 23 August 2018, an email chain of conversations between the Applicant and Mr Martin, amongst others, was created. A lot of the discussion involved different philosophies for the setting up of businesses and communities. Pertinently, the Applicant wrote the following:-
…I think under the circumstances, as a first-time CTO, I did well, and would have succeeded even with those constraints if I’d been allowed to fire someone when there was resistance to Clojure, and [the COO] hadn’t been given language selection authority, resulting in the loss of our only world-class engineer, Jong-won [who also had six years of successful start-up experience…]
Every time I found myself against the new barrier, I responded with agility and without complaining. I pressed forward undeterred. I accepted the leadership of the board and those above me in the hierarchy throughout, even when I disagreed.
The public signal of failure of being demoted, is the most difficult of all to accept, but still I respond with ‘ok, I accept the leadership of the board’. It’s important however, that the narrative we present is transparent and accurate, including on company records and to our community. Can we setup sometime next week to go through what has been said on company records so far, in relation to myself, the platform, and the tech team?
I’m aware we have immediate business needs that require my attention on writing smart contracts, so that is where my focus will be. The most important thing is the long term success of the business, value to shareholders, value to tokenholders, and delivering on our mission. We achieve that by working collaboratively.
On this evidence, I accept that there had been a conversation about the role of CTO. I accept that the Applicant knew that he was being “demoted” and would mean he would no longer be called CTO. It is also quite evident to me, that the true concern of the Applicant was that, if those duties were transferred to the current COO, Mr Van Hoof, there would be a real detriment to the company.
The Redundancy
By August 2018, there were only three directors of the Respondent; Dr Green, Mr Bulich and Mr Martin. All three persons have given evidence to the effect that they were all, to some extent, lessening the work they had to do outside of the work of the Respondent and so were looking some form of restructuring that would give them a more hands-on role with the Respondent.
Mr Bulich testified that, while the Applicant was on leave, the directors decided to restructure the management team. They decided that there was no longer a need for the CTO or the COO positions. He said it was decided that there would be a flatter structure and that the team would self-manage. He said there was no need for the CTO or COO positions.
Mr Bulich said that from that time onwards, the Applicant was informally operating in a new role of blockchain architect.
Mr Martin testified that after the Applicant returned from leave, he had a face-to-face meeting with him and advised him that the Respondent was making changes to the leadership team and structure. He said that the role of CTO would be made redundant. He said that he told the Applicant that he would report to Mr Bulich for now.
He said that he told the Applicant that the Respondent could not leave the development team in the middle of a project so that Mr Van Hoof would look after them temporarily until the project was completed and then he would leave the business as the COO role had also been made redundant.
Mr Martin said that Mr Van Hoof left the business on 26 October 2018 because his role had been made redundant.
The New Role
On 6 September 2018, the Applicant was formally offered a new role with the Respondent. The terms of the role were contained in a letter given to the Applicant. The letter read as follows:
Dear Marc,
As discussed, we are proposing a change in your position and role at Power Ledger. The nature of our business requires flexibility and your duties, title, position and responsibilities may need to be flexible from time to time to meet Power Ledger's changing needs. We have this expectation of all our staff.
Given the business's decision to make your current role redundant, we would like you to consider and accept an alternative role. As a Blockchain Architect, you will report directly to John Bulich- Technology Director. Your key responsibilities will include:
• Supporting the development of the business's long-term strategy for blockchain technology development and adoption;
• Undertaking blockchain development and coding, including the coding of smart contracts as directed and
• Contributing to the development of business plans and strategies as required.
We understand that this role is different from that of the CTO as you will no longer be required to manage a team and be responsible for the overall development and delivery of our platform/product. We see your strength and expertise in the blockchain space and believe your contribution as a Blockchain Architect will be of significant value to the business.
Considering the proposed changes to your role, we have reassessed your remuneration and benefits package. We believe the below reflects the role of a Blockchain Architect and corresponding level of responsibility:
• Your full-time annual salary will remain unchanged at $160,000 per annum before tax.
• Your allocation of POWR Tokens will no longer apply- in its place, Power Ledger will pay a bonus of $20,000 per year on the anniversary of this contract variation letter being signed.
• You will be eligible to participate in the Employee Share Option Plan.
This offer supersedes all previous offers of remuneration, however all other terms and conditions of your employment will remain unchanged - details of which are specified in your employment contract dated 17 July 2017.
Marc, over the last few months we have engaged in several honest conversations about your role and its impact on the business. We appreciate your commitment and dedication to Power Ledger and hope you will see the value in what we are proposing as an alternative to your current position.
I encourage you to sincerely consider our proposal. Please sign and return this letter to confirm your acceptance of changes to your employment as detailed above. If you have any questions or would like to discuss this further, please do not hesitate to speak to me.
Yours sincerely,
David Martin
Managing Director
Interestingly, the letter says that this new role is different from that of the CTO as the Applicant would no longer be responsible for the overall development and delivery of the platform/product. Significantly, there would be no more allocation of tokens. This letter also makes it clear that the share options that would be enjoyed by the Applicant are the ones contained in the letter of 28 May 2018 rather than anything that had been agreed in November 2017.
There is quite a deal of correspondence that then flowed between the Applicant and Mr Martin. Mr Martin wrote to the Applicant on 14 September 2018 confirming that the CTO role was to be made redundant. He asked that the Applicant provide his views by 21 September 2018.
The Applicant sent a “counteroffer” to the Respondent on 21 September 2018. The gist of that counteroffer was that the Applicant and Respondent part ways but that the Respondent honour the agreement and pay the Applicant the equivalent of two years wages plus the remaining tokens as well as the share options that had been agreed in November 2017.
On 27 September 2018, Mr Martin sent a letter to the Applicant which confirmed that, as he had rejected the alternative position, his employment with the Respondent was now terminated. The Applicant was provided with all of his employment entitlements and was paid amounts owing to him.
Dr Green, Mr Bulich and Mr Martin all agreed that the three of them were the ones who made the decisions to make the CTO role redundant, to offer a new role to the Applicant, and, finally, to terminate the employment of the Applicant.
Adverse action
There is little doubt that the actions of the Respondent were actions that, firstly, altered the position of the Applicant to the Applicant’s prejudice, and then, secondly, were an effective dismissal of the Applicant. This means, pursuant to s.342 of the FW Act, that the Respondent has taken adverse action against the Applicant.
Section 340 of the FW Act legislates that a person must not take adverse action against another person because that person has exercised a workplace right. There is little contest that the Applicant did make complaints about Mr Van Hoof; his not receiving his tokens on 14 July 2018; and, that the ESOP given to him on 28 May 2018 was not in accordance with what had been agreed in November 2017.
There is also no doubt that the Applicant was able to make a complaint about Mr Van Hoof to the Respondent. There is no doubt that the Applicant was able to make a complaint that he had not been given his tokens in accordance with his employment contract. There is no doubt that the Applicant was able to make a complaint that the ESOP given to him was different from that agreed upon earlier. Pursuant to s.341 of the FW Act, the ability to make these complaints was a workplace right.
The Applicant has claimed that the Respondent committed the adverse action because he had exercised those workplace rights. Pursuant to s.361 of the FW Act, it is presumed that the adverse action was taken for those reasons unless the Respondent proves otherwise.
In Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500, the High Court said at paragraph [45]
This question is one of fact, which must be answered in the light of all the facts established in the proceeding. Generally, it will be extremely difficult to displace the statutory presumption in s 361 if no direct testimony is given by the decision-maker acting on behalf of the employer. Direct evidence of the reason why a decision-maker took adverse action, which may include positive evidence that the action was not taken for a prohibited reason, may be unreliable because of other contradictory evidence given by the decision-maker or because other objective facts are proven which contradict the decision-maker's evidence. However, direct testimony from the decision-maker which is accepted as reliable is capable of discharging the burden upon an employer even though an employee may be an officer or member of an industrial association and engage in industrial activity.
Has the Respondent met their Onus? - Mr Van Hoof
This aspect of the claim is relatively straight forward. The evidence of the three witnesses for the Respondent is that the Applicant made those complaints. The evidence of Dr Green was that she concurred in the opinion that the Applicant had of Mr Van Hoof.
The evidence of all three witnesses of the Respondent was that they acknowledged the complaints and acted upon them. They removed the reporting relationship between the Applicant and Mr Van Hoof upon the Applicant’s return to work in August 2018. The Respondent ended up making the position, that Mr Van Hoof was filling, redundant.
I accept the evidence of the Respondent that the complaints made against Mr Van Hoof did not play any part in the decision to make this CTO position redundant or to terminate the employment of the Applicant.
Has the Respondent met their Onus? – Late provision of tokens
This aspect of the claim is also relatively straight forward. There is little doubt that the Applicant made this complaint and the Respondent was aware of the complaint.
The evidence of the Respondent was that they acknowledged the complaint and acted upon it. The Applicant asked for his tokens to be available from 31 July 2018, and I accept the evidence from the Respondent, that the tokens were available from that date.
The Applicant has complained that there was a diminution in the value of the tokens because he did not access them until 30 August 2018. That may be a legitimate claim or complaint, but, as I said to the Applicant at the start of the proceedings, such a complaint is akin to a claim of breach of contract. The Applicant wished to claim the difference, between the highest value that the tokens had between 14 July 2018 and 31 July 2018 and the value at which he sold a large proportion of the tokens, as an amount of damages.
That claim was not part of the statement of claim, and in doing the best the Court can to assist an unrepresented Applicant, I cannot find anywhere in the statement of claim where such an action could be inferred to have been commenced by the Applicant.
The question for me is simply “do I accept the evidence of the Respondent that this complaint did not play any part in the action taken by the Respondent?”
The complaint itself from the Applicant was that he did not receive his tokens on that particular date. That particular complaint about not receiving the tokens on 14 July 2018, and therefore losing some redeemable value of the tokens, is quite a different question to a general illustration of a willingness to enforce the terms of the employment contract. The former is a matter where I am satisfied that the particular complaint had no bearing on the dismissal. The latter is an aspect that plays very much into the next complaint.
Has the Respondent met their Onus? – Share options
This aspect of the claim is not straight forward at all. The complaint was made to Mr Sly and he informed Mr Martin of the complaint. The Board knew that the Applicant had not signed the ESOP. All of them have said that they did not know why it was that the Applicant had not done so.
I find that evidence extremely hard to believe. When one looks at all of the material before me, a very clear picture emerges of the Applicant being almost obsessed with acquiring equity in the Respondent. The Applicant said that the provision of equity was far more important to him than the salary. I accept that this is so.
The negotiations as to share offers are quite evident in the email messages in evidence. The draft ESOP plan is also quite telling evidence. The Respondent had been trying for around eight months to get the Applicant to commit to a full-time role. It is quite evident that the provision of equity was the stumbling block.
I am of the view that if the Respondent had not made the offer of share options in terms of the draft ESOP, the Applicant would not have agreed to become a full-time employee of the Respondent.
It is also quite clear that the ESOP of 28 May 2018 is completely different from the draft ESOP. Given this history, I cannot accept that Dr Green, Mr Bulich or Mr Martin could ever have any doubt as to why the Applicant was refusing to sign the ESOP of 28 May 2018.
Dr Green was asked as to the differences between the emails that she had sent the applicant in 2017 and the ESOP given to the Applicant in May 2018. She testified that she could not see any inconsistency in those agreements. When she was asked how paying nearly $22,000 for just over 14,000 shares was the same as paying nine dollars for 150,000 shares, Dr Green gave an example that, if the shares were worth $100,000, then the employee had just been given $78,000.
The answer of Dr Green was totally unsatisfactory. Mr Martin attempted to put some doubt over the reliability of the draft ESOP and claimed that he didn’t know what that particular document was and that he had not seen any verification of it. However, the document is absolutely consistent with the emails that had been sent by Mr Van Ek to the board and from Dr Green to the Applicant.
I find that the complaint was made, the Board knew of the complaint and that the Board simply neither acknowledged the complaint nor set about trying to rectify the complaint.
The Applicant claims, in effect, that the redundancy is a ruse to try and justify the true motivation of the Respondent which was to strip him of any equity in the company. His complaint, he says is what has led to this situation. The Respondent claims that this was a proper and honest decision in the best interests of the company.
The Management Role
According to all the witnesses of the Respondent, the flaws in the Applicant and his ability to manage was becoming quite evident by mid-2018. Yet it is very unclear as to what true management role the Applicant had. The Respondent had a CEO and a COO for a company that had no more than 32 personnel which included the three directors.
On 15 June 2018, Mr Martin sent an email to all staff. It read:
Hi guys,
Attached is a revised organisational structure to cover the next few months while we’re in an intensive period of development both of the platform and the business itself. Most things are as they have been for a while but I want to bring to your attention a couple of changes designed to make it easier for us to focus on key areas for the next few months.
Firstly as we focus on building out the scalability and resilience of the platform, and as our key blockchain development capability, Marc Griffiths’ focus will turn to blockchain architecture designing the solution needed for the platform of the future and for the AGE product.
At the same time Marc Van Hoof will take a more discrete focus on managing the dev team, its development program and the delivery of projects. To give Marc the space for drilling down on delivery, some of his responsibilities in the Operations team will be split out for the next few months. Nothing much changes for the Dev team except for Simon who will take some more management responsibility for the Dev team (thanks Simon).
Anya will report to John while she defines the AGE project with a title change to Platform Economist.
Lara will move to the Sales and Business Development team to give sharp focus to the development of marketing materials focused on product sales and market seeding.
The Analyst team and Aimie and Cameron in the Community Marketing team will report via Meagan who as Principal Analyst will help create an internal SWAT Team to bring analytical support to the area it’s needed most:
• Trevor will still support the dev team
• Dunc will still focus on development opportunities
• James will still focus on BD
• Sarah will still focus on regulatory matters
• Marrah will continue to support the triaging of requests for presenters
Marie, Tim, Mindy and Lindsay will continue to do what they do so well.
One of the reasons for sharing the Org Chart is to give everyone a clearer view of what everyone else is doing while at the same time being clear about lines of reporting -not so we can set up silos but so when you need support you know where to go to get it BUT to be fair to everyone when you need support from one of the Dev Team or one of the analysts make sure you go through their formal leader so we can make sure resources are available and their activity is prioritised.
Finally I want to thank you for your continued focus and effort over the past few months. Unbelievably, we have gone from a business of 5 founders to a team of nearly 30 in what feels like the blink of an eye. We’ve had the few growth pains you’d expect from bringing together a diverse group of individuals with different work styles different experiences and different backgrounds but we’re developing the sort of team culture we need to be successful. That will be a continual focus for us as we work to change the world.
Cheers
Dave [See Annexure A herein for the organisational chart.]
As can be seen from this email and organisational chart, the Applicant, as CTO, has no management responsibility on this chart. While the email talks of what the focus for the Applicant will now be, it does not say that any of the persons who were to report to the Applicant, if they actually existed, would now be reporting to someone else.
As this chart was created on 15 June 2018, it predated any of the discussions that the Respondent alleges were occurring about the ongoing role of the Applicant. The Applicant was still called Chief Technical Officer notwithstanding that the email talked of “a change of focus” for the Applicant.
So as of 15 June 2018, the Applicant was focusing on the exact duties that are described in the new role of Blockchain Architect in the employment offer of 6 September 2018. As of 15 June 2018, there is no need to change the title of the position of the Applicant from CTO notwithstanding that there is a new focus for the Applicant.
The need to change the role of the Applicant and to make the role of CTO redundant is not readily discernible. The Respondent has not demonstrated what changed in the role of the Applicant from 15 June 2018 to August 2018, when it is said by Mr Bulich that the Applicant was informally performing the duties of Blockchain Architect.
However, what is known is this. The ESOP of 28 May 2018 gave an expected grant date of the options of 8 June 2018. The acceptance form had to be signed and completed by 5 PM on 8 June 2018. However, Mr Sly, in his statement, said that the closing date for accepting the option grant was about four weeks following the issuing of the letter, which would be at the end of June 2018.
Mr Sly does not give a timeframe as to when he spoke to the CEO about what the Applicant had said, other than to say that it was within the week of speaking to the Applicant. On all of this evidence before me, I have a very large doubt that Mr Martin (and therefore the rest of the Board) knew of the fact that the Applicant was not going to sign the ESOP as at 15 June 2018.
Certainly, sometime after 15 June 2018, the Board are made aware of the Applicant not wanting to sign the ESOP and the Applicant wanting redemption of his tokens. They are certainly aware of the complaint after 15 June 2018. The great preponderance of the evidence that the Respondent relies upon to justify the redundancy of the CTO position, is evidence that postdates 15 June 2018.
In looking at the new role description of 6 September 2018, there does not seem to be any change to the role that the Applicant has been fulfilling since 15 June 2018. In particular, there is no evidence that after 15 June 2018 the Applicant had any responsibility for managing a team or for the overall development and delivery of the platform/product.
It is perplexing at the very least, to understand why the Respondent offered the Applicant no diminution in salary but an eradication of the ability to receive tokens, when the driving force in trying to get the Applicant to work full-time for the Respondent was the provision of equity in the Respondent.
In his evidence, Mr Bulich said that the applicant “wanted too much (equity in the company)”. It is instructive to note that the Respondent had manoeuvred itself into a position by which they could deprive the Applicant of exactly those things that he wanted and which were the purpose of his “coming on board” with the Respondent in the first place.
Conclusion
I have taken into account these factors:
a)the role of the Applicant as of15 June 2018;
b)the lack of management responsibilities in that organisational chart;
c)the role that is offered on 6 September 2018 is exactly the same as the role the Applicant had been fulfilling since 15 June 2018;
d)the refusal to sign the 28 May ESOP was probably not known by the Board as at 15 June 2018;
e)the query as to tokens was not made until 24 July 2018;
f)that the Board knew that they had, in November 2017, agreed to a totally different plan by which the Applicant could attain share options;
g)the new role has the same salary aspect to remuneration but deletes the ability to attain tokens;
h)the new role expressly will only allow the attaining of share options through the ESOP;
i)the position that the Respondent is in as at 6 September 2018 is that the Applicant must accept that he will no longer be able to have anywhere near the equity in the company that he expected to have if he wishes to stay employed by the Respondent;
j)the only demonstrable change in circumstance between 15 June 2018 and 6 September 2018 is that the Applicant complained about the share options that he had been promised and asserted his right to his tokens.
Looking at all of the factors, I am not satisfied that Respondent has met the onus; that is, the Respondent has not satisfied me that it did not commit adverse action for the reason that the Applicant made complaints as to the Respondent not abiding by the agreement of 22 November 2017.
For those reasons, I will make the declaration that has been sought.
I will make directions to the parties for submissions regarding the determination of the quantum of compensation and the imposition of pecuniary penalties. I will also decide whether the non-publication order made by His Honour Judge Kendall should remain in force.
I certify that the preceding one hundred and fifty-one (151) paragraphs are a true copy of the reasons for judgment of Judge Vasta
Date: 30 October 2020
Annexure A
Key Legal Topics
Areas of Law
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Employment Law
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Statutory Interpretation
Legal Concepts
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Breach
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Remedies
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Procedural Fairness
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Statutory Construction
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