Jay v Australian Settlements Limited (No 2)

[2025] FedCFamC2G 163

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Jay v Australian Settlements Limited (No 2) [2025] FedCFamC2G 163

File number(s):

SYG 1847 of 2020

Judgment of:

JUDGE GOODCHILD

Date of judgment:

13 February 2025

Catchwords:

INDUSTRIAL LAW – general protections – adverse action – workplace rights – whether CEO had or exercised workplace rights – whether a “complaint or inquiry” for the purposes of s.341(1)(c)(ii) of the Fair Work Act 2009 (Cth) (“FW Act”) – no alleged complaints and inquiries found to be exercisable workplace rights within the meaning of s341(1)(c) of the FW Act – consideration of reasons for decision to terminate employment.
CONTRACT LAW – breach of contract – whether Executive Employment Agreement (EEA) breached – breach of contract claim dismissed.

Legislation:

Banking Act 1959 (Cth)

Corporations Act 2001 (Cth)

Fair Work Act 2009 (Cth), s.340(1), 341(1), 342, 360, 361

Evidence Act 1995 (Cth), s.140

Cases cited:

Alam v National Australia Bank Limited (2021) 288 FCR 301; [2021] FCAFC 178

Australian Broadcasting Commission v Australian Performing Rights Association [1973] HCA 36; (1973) 129 CLR 99; (1973) 47 ALJR 526

Australian Securities and Investments Commission v Hellicar [2012] HCA 17; 247 CLR 345

BearingPoint Australia Pty Ltd v Hillard [2008] VSC 115

Cigarette & Gift Warehouse Pty Ltd v Whelan (2019) 268 FCR 46

Connelly v Wells (1994) 55 IR 73; (1994) 10 NSWCCR 396

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; (2022) 96 ALJR 89; (2022) 312 IR 1

Construction, Forestry, Mining and Energy Union v Pilbara Iron Company (Services) Pty Ltd (No 3)[2012] FCA 697

Environment Group Ltd v Bowd [2019] FCA 951

Hide & Skin Trading Pty Ltd v Oceanic Meat Traders (1990) 20 NSWLR 310

Jones v Dunkel [1959] 101 CLR 298

Jess v Cooloola Milk Pty Ltd [2022] FCAFC 75

Maric v. Ericsson Australia Pty Ltd [2020] FCA 452; (2020) 293 I.R. 442

Messenger v Commonwealth of Australia (Represented by the Department of Finance) [2022] FCA 677

Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd and Others 202 FCR 286

PIA Mortgage Services Pty Ltd v R (2020) 274 FCR 225

Qantas Airways Ltd v Transport Workers’ Union of Australia(2023) 412 ALR 134; [2023] HCA 27

State Bank of New South Wales v Brown (2001) 38 ACSR 715

Vasram v AMP Life Ltd [2000] FCA 1916; (2000) ANZ Ins Cases 90–107

Voigtsberger v Council of the Shire of Pine Rivers (No 2) (1981) 58 FLR 239

Whelan v Cigarette & Gift Warehouse Pty Ltd (2017) 275 IR 285; [2017] FCA 1534

Wilkie v Gordian Runoff (2005) 221 CLR

Division:

Division 2 General Federal Law

Number of paragraphs:

646

Date of last submission/s:

15 March 2024

Date of hearing:

13, 14, 15, 16, 27, 28, 29 November and 6 December 2023

Place:

Sydney

Counsel for the Applicant:

Mr Phillips SC

Solicitor for the Applicant:

Dentons Australia

Counsel for the Respondents:

Mr Jedrzejczyk

Solicitor for the Respondents:

Mills Oakley Lawyers

ORDERS

SYG 1847 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

DAVID CRAIG JAY
Applicant

AND:

AUSTRALIAN SETTLEMENTS LIMITED (ACN 087 822 491)
First Respondent

GRAEME DOUGLAS WILLIS
Second Respondent

ORDER MADE BY:	JUDGE GOODCHILD
DATE OF ORDER:	13 FEBRUARY 2025

THE COURT ORDERS:

1.That the Application filed on 3 August 2020 be dismissed.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

INTRODUCTION	[1]
Evidence	[9]
Submissions	[10]
FACTUAL BACKGROUND	[11]
The Parties	[12]
Mr Jay	[12]
Australian Settlements Limited	[14]
Graeme Douglas Willis	[18]
ASL Board Members	[20]
Responsibility for Capital Management at ASL -Prudential Standards APS 110	[22]
The New Payments Platform Funding Decision	[37]
San Francisco Members Innovations Tour	[50]
December 2015 Board meeting	[52]
Europe Innovations Tour	[54]
Audit Panel meeting in May 2017	[56]
Meeting between Mr Jay and Mr Lawler on 7 June 2017	[59]
ASL Board meeting on 8 June 2017	[60]
ASL Board meeting on 5 December 2017	[62]
2017 ICAAP report	[68]
Minutes of the Board meeting on 5 December 2017	[74]
ASL Board meeting on 21 February 2018	[82]
Mr Lawler’s resignation	[83]
Board Communication Inquiry	[90]
Audit Committee meeting on 14 March 2018	[94]
First NPP Funding Complaint	[102]
APRA correspondence 18 April 2018	[115]
APRA correspondence dated 20 April 2018	[122]
Letter from APRA dated 1 May 2018	[127]
ASL Board meeting on 2 May 2018	[129]
Second NPP Funding Complaint	[135]
Third NPP Funding Complaint	[139]
Mr Jay	[143]
Board Direction Inquiry CEO performance review	[154]
APRA letter dated 31 August 2018 and the Risk Committee meeting on 5 September 2018	[155]
APRA letter dated 13 September 2018	[168]
Review of Mr Jay’s remuneration in October 2018	[177]
ASL Board meeting on 24 October 2018	[178]
ASL Board Strategy Session 14 March 2019	[183]
ASL Board meeting on 14 March 2019	[188]
ASL Board meeting on 1 April 2019	[191]
Applicant’s Letter dated 30 April 2019	[193]
ASL Meeting with APRA on 21 May 2019 and APRA Letter dated 22 May 2019	[194]
Events following Mr Jay’s termination	[197]
WITNESSES FOR THE APPLICANT	[198]
David Craig Jay	[198]
WITNESSES FOR THE RESPONDENTS	[202]
Peter Gerard Lock	[203]
Robert James Ryan	[213]
Bruce Kenneth White	[218]
Garry Donald Dinnie	[229]
Graeme Douglas Willis	[236]
Shaun Hassall	[255]
Claudia Jacqueline Bels	[272]
Failure to call Ms Sweeney and Mr Lawler	[285]
ALLEGED BREACHES OF CONTRACT	[296]
Construing contractual terms	[296]
The Termination Provision of cl 15.1 of the Employment Agreement	[301]
Claim for unpaid bonuses	[321]
Remuneration Review	[326]
Claim for personal/carer’s leave	[337]
Claim for reimbursement of professional membership fees	[340]
ADVERSE ACTION CLAIM	[342]
The Legislation	[342]
Legal Principles	[346]
Complaints and Inquiries	[349]
What does it mean to be “able to” complain or inquire?	[352]
Whether the complaint is “in relation” to the employment	[360]
ADVERSE ACTION CLAIM	[363]
THE ALLEGED COMPLAINTS OR INQUIRIES	[364]
Inappropriate physical contact complaints –SOC [18]	[364]
Second Dinnie Complaint – SOC [21]	[378]
Third Dinnie Complaint – SOC [25]	[389]
Fourth Dinnie Complaint –SOC [26]	[397]
Fifth Dinnie Complaint – SOC [28]	[405]
Board Inquiries SOC [33] and APRA Risk Complaint SOC [35]	[418]
Ongoing Dinnie Complaints – SOC [38]	[432]
Further Dinnie Complaints – SOC [39]	[439]
Board Communication Inquiry	[444]
Board Direction Inquiry – SOC [43]	[459]
Willis Complaint SOC [47]	[468]
NPP Funding Complaints – SOC [52], [56], [57] and [58]	[474]
First NPP Funding Complaint	[481]
Second NPP Funding Complaint	[492]
Third NPP Funding Complaint	[500]
Complaints Regarding Recent ASL Board Issues - SOC [61(a)]	[507]
In Camera Board Complaint - SOC [61(c)]	[523]
Willis Inaction Inquiries – SOC [65]	[530]
Board Issues Follow up Inquiry – SOC [67]	[542]
Consultant Risk Complaint – SOC [70]	[551]
First Board Strategy Session Meeting Complaint - SOC [80]	[561]
Board Strategy and Self-Assessment Complaint - SOC [86]	[572]
Complaints made during the Notice Period	[584]
4 April 2019 Complaint – SOC [90]	[584]
7 June 2019 Complaints – SOC [95]	[592]
28 November 2019 Complaints – SOC [98]	[600]
24 December 2019 Complaints and Inquiries – SOC [100]	[605]
THE REASONS FOR THE TERMINATION OF MR JAY’S EMPLOYMENT	[610]
THE CASE AGAINST THE SECOND RESPONDENT	[644]
CONCLUSION	[646]

JUDGE GOODCHILD:

INTRODUCTION

1. The applicant (“Mr Jay”) was Chief Executive Officer (“CEO”) of the first respondent, Australian Settlements Limited (“ASL”), a financial services corporation which has been incorporated pursuant to the Corporations Act 2001 (Cth) and is a national system employer for the purposes of the Fair Work Act 2009 (Cth) (“the FW Act”).

2. The second respondent, Graeme Douglas Willis (“Mr Willis”) has been, since 30 October 2019, the Chair of ASL’s Board of directors (“the Board”).

3. On 14 April 2020, Mr Jay’s employment with the first respondent was terminated. Mr Jay seeks a declaration that the respondents contravened s 340(1) of the FW Act, an award of compensation by reason of that contravention, compensation for breach-of-contract and pecuniary penalties with interest.

4. Mr Jay contends that the decision by ASL to terminate his employment was due to his exercise of certain alleged workplace rights. Mr Jay also contends a number of breaches of his contract of employment.

5. ASL and Mr Willis contend that the decision to terminate Mr Jay was taken for a number of reasons, including the failure by Mr Jay to acknowledge responsibility for a culture of inadequate risk management that had developed during his tenure as CEO.

6. After the completion of the oral evidence and prior to closing addresses, Mr Jay, by correspondence dated 1 December 2023, notified the respondents that he did not press three (3) complaints and inquiries as pleaded.

7. For the reasons which follow, I have concluded that Mr Jay’s claims must fail.

8. Contrary to the case advanced by Mr Jay, I have found that he did not exercise any workplace rights in making the complaints and inquiries advanced by him. In the event that I am mistaken in my findings, I have addressed the reasons given for terminating Mr Jay’s employment and I accept that the decision to terminate Mr Jay’s employment was taken for the reasons given by ASL and Mr Willis and not because of his exercise of the alleged workplace rights.

   Evidence

9. The evidence before the Court comprises:

   (a)the following affidavits filed by Mr Jay:

   (i)affidavit of David Craig Jay sworn on 15 February 2021 (“first Jay affidavit”) and its exhibits marked DCJ-1 and DCJ-2; and

   (ii)affidavit of David Craig Jay sworn on 23 August 2021 (“second Jay affidavit”) and its exhibits marked DCJ-3 and DCJ-4,

   (b)the following affidavits filed by or on behalf of the respondents:

   (i)affidavit of Graeme Douglas Willis sworn 27 May 2022 with annexures GDW-1 to GDW-11 (“Willis affidavit”);

   (ii)affidavit of Claudia Jacqueline Bels sworn 14 May 2021 (“Bels affidavit”) along with Exhibit marked CJB-1;

   (iii)affidavit of Peter Gerard Lock affirmed 20 May 2021 (“Lock affidavit”) and annexures PGL-1 to PGL-3;

   (iv)affidavit of Garry Donald Dinnie affirmed 21 May 2021 (“Dinnie affidavit”) and annexures GDD-1 to GDD-9;

   (v)affidavit of Robert James Ryan affirmed 21 May 2021 (“Ryan affidavit”) and annexure RJR-1;

   (vi)affidavit of Shaun Hassall affirmed 21 May 2021 (“Hassall affidavit”) and annexure SH-1; and

   (vii)affidavit of Bruce Kenneth White (“White affidavit”) affirmed 20 May 2021 and annexures BKW-1 and BKW-2,

   (c)the oral evidence of each of the above witnesses, given at the hearing which took place over a period of 8 days from 13 November 2023 to 6 December 2023;

   (d)a number of documents tendered at the hearing including the applicant’s exhibits marked App-1 to App-4 and the respondent’s exhibits marked Resp-1 to Resp-8;

   (e)a Courtbook comprising of 2966 pages (“CB”) filed on 4 August 2020; and

   (f)pursuant to orders made on 19 October 2023, the parties jointly provided:

   (i)a consolidated statement of agreed and disputed facts and issues (“statement of agreed facts”); and

   (ii)a consolidated short form chronology.

   (g)Applicant’s Amended Schedule of Amounts Claimed and Basis (“AASAC”) provided to chambers on 29 October 2024.

   Submissions

10. I have had regard to the following submissions:

    (a)on behalf of the applicant:

    (i)amended written outline of opening submissions filed on 26 October 2023 (“AOS”);

    (ii)written outline of closing submissions filed on 5 December 2023 (“ACS”);

    (iii)oral submissions advanced by the applicant’s [senior] Counsel, Mr J. Phillips SC, at the hearing on 6 December 2023; and

    (iv)written outline of supplementary submissions filed on 23 February 2024 (“AOSS”)

    (b)on behalf of the respondents:

    (i)written outline of opening submissions filed on 27 October 2023 (“ROS”);

    (ii)written outline of closing submissions filed on 5 December 2023 (“RCS”);

    (iii)oral submissions by the respondent’s counsel, Mr R. Jedrzejczyk at the hearing on 6 December 2023; and

    (iv)written outline of supplementary submissions filed on 15 March 2024 (“ROSS”).

    FACTUAL BACKGROUND

11. The following summary of events giving rise to the termination of Mr Jay’s employment is sourced from material as provided by the applicant and the respondents in their respective submissions, documentary material contained in the court book and evidence given by witnesses that was not challenged, or barely challenged. Much is agreed between the parties. I have not included in this summary, evidence given by witnesses that was subject to any substantive challenge.

    The Parties

    Mr Jay

12. Mr Jay gave evidence that he holds a Bachelor of Economics in addition to further qualifications in business administration, management and finance. Mr Jay commenced employment in the position of CEO on 29 March 2010 in ASL’s Sydney and Canberra premises. Mr Jay and ASL entered into an Executive Employment Agreement (“EEA”) dated 29 March 2010.

13. Subsequently, Mr Jay and ASL entered into a written agreement titled “Executive Employment Agreement” and dated 1 July 2014 (2014 Employment Agreement). Relevant clauses of this agreement are set out below in relation to the consideration of the contract claim. 

    Australian Settlements Limited

14. ASL is a mutual organisation whose members comprise credit unions, mutual banks, building societies and ‘neobanks’. It provides to its members wholesale payment services including settlement services and access to payment clearing streams through its exchange settlement account with the Reserve Bank of Australia.

15. Mr Jay gave evidence that ASL was formed by a group of building societies were originally, under the Banking Act 1959 (Cth), only Australian trading banks could have access to an exchange settlement account with the Reserve Bank which left building societies and credit unions of the day unable to settle directly. Its members have customers of many thousands facilitating settlement of funds between financial institutions.

16. ASL is an Authorised Deposit-taking Institution and, as such, is required to comply with the Prudential and Reporting Standards for Authorised Deposit-taking Institutions (“Prudential Standards”), which are enforced by the Australian Prudential Regulation Authority (“APRA”).

17. APRA is an independent statutory authority that regulates financial institutions across banking, insurance and superannuation.

    Graeme Douglas Willis

18. On 14 August 2014 David Lawler (“Mr Lawler”) replaced Peter Andrews (“Mr Andrews”) as Chair of the ASL Board of directors.

19. Mr Lawler’s resignation as Chair of the Board took effect on 30 October 2018. On that day, Graeme Douglas Willis (“Mr Willis”) was appointed as Chair of the Board.

    ASL Board Members

20. The ASL Board Members at the relevant time of the decision to terminate Mr Jay’s employment were:

    ·Graeme Douglas Willis (“Mr Willis”)

    ·Claudia Jacqueline Bels (“Ms Bels”),

    ·Bruce Kenneth White (“Mr White”),

    ·Peter Gerard Lock (“Mr Lock”),

    ·Garry Donald Dinnie (“Mr Dinnie”),

    ·Robert James Ryan (“Mr Ryan”),

    ·Shaun Hassall (“Mr Hassall”), and

    ·Margot Sweeney (“Ms Sweeney”).

21. All directors, other than Ms Sweeney gave affidavit evidence in the proceedings and were cross examined.

    Responsibility for Capital Management at ASL -Prudential Standards APS 110

22. There was no dispute between the parties that one of the Prudential Standards with which ASL must comply is Prudential Standard APS 110.

23. The objectives and key requirements of this Prudential Standard are described on the title page as follows:

    This Prudential Standard requires an authorised deposit-taking institution (ADI) to maintain adequate capital, on both a Level 1 and Level 2 basis, to act as a buffer against the risk associated with its activities.

    The ultimate responsibility for the prudent management of capital of an ADI rests with its Board of directors. The Board must ensure the ADI maintains an appropriate level and quality of capital commensurate with the type, amount and concentration of risks to which the ADI is exposed.

    The key requirements of this Prudential Standard are that an ADI and any Level 2 group must:

    •have an Internal Capital Adequacy Assessment Process (ICAAP);

    •maintain required levels of regulatory capital;

    •operate a capital conservation buffer and, if required, a countercyclical capital buffer;

    •inform APRA of any adverse change in actual or anticipated capital adequacy; and

    •seek APRA’s approval for any planned capital reductions.

24. Paragraphs [8] to [10] of APS 110 provide the following:

    [8]Capital is the cornerstone of an ADI’s financial strength. It supports an ADI’s operations by providing a buffer to absorb unanticipated losses from its activities and, in the event of problems, enables to ADI to continue to operate in a sound and viable manner while the problems are addressed or resolved.

    [9]Capital management must be an integral part of an ADI’s risk management, by aligning its risk appetite and risk profile with its capacity to absorb losses.

    [10]The Board of directors … of an ADI has a duty to ensure that the ADI maintains a level and quality of capital commensurate with the type, amount and concentration of risks to which the ADI is exposed from its activities. In doing so, the Board must have regard to any prospective changes in the ADI’s risk profile and capital holdings.

25. Under paragraph 12 of APS 110, an ADI must have an ICAAP that is documented and approved by the Board of directors.

26. Paragraph 18 of APS 110 states that an ADI must, on an annual basis, provide to APRA a report on the implementation of its ICAAP, which is known as an “ICAAP report”. The ICAAP report submitted to APRA must include a declaration approved by the Board and signed by the CEO stating whether “capital management has been undertaken by the AI in accordance with the ICAAP” over the 12-month period and whether the information included in the ICAAP report is “accurate in all material respects”.

27. Paragraphs 22 to 24 of APS 110 set out the “Minimum capital adequacy requirements” that an ADI is required to observe. An ADI must also hold a “capital conservation buffer”, as explained in paragraphs 25 to 29 of APS 110.

28. In her affidavit, Ms Bels confirmed as an accurate summary the minimum capital adequacy requirements and capital conservation buffer prescribed by the APS 110, summarised as follows:

    …APRA requires ASL to maintain a minimum prudential capital ratio of 10.5% of its total risk-weighted assets, 7.0% of that 10.5% must be held in the form of Tier 1 Common Equity and 8.5% must be held in the form of Tier 1 capital (APS110). In addition, a capital conservation buffer of 2.5% must be held above actual CET1 at each level of capital. Further, ASL has been requested by AFRA to maintain a minimum capital base of $5M.

1. Paragraphs 39 and 40 of APS 110 contain “Notification requirements”. Paragraph 39 states that an ADI “must notify APRA … of any breach or prospective breach of the capital requirements” contained in APS 110. Notably, paragraph 40 requires that an ADI must inform APRA, “as soon as practicable”, of any:

   (b)concerns it has about its capital adequacy (including projected losses) … and the measures its proposes to take to address those concerns;…

   (d)      other significant adverse changes in its capital…

2. ASL produced an ICAAP Summary Statement in respect of the 2017 financial year (“ICAAP Summary”). Under the heading “Roles and Responsibilities”, the ICAAP Summary states that the ASL Board’s roles and responsibilities in relation to the ICAAP process within the ASL included:

   (a)taking “primary responsibility for the capital management of ASL and specifically to ensure that the institution holds sufficient capital to ensure compliance with regulatory capital requirements, and commensurate with it’s risk profile”; and

   (b)providing “oversight” regarding the “implementation” of the ICAAP and ensuring that it was “integrated into the decision-making process and adequately considered in strategic and business planning”.

3. The ICAAP Summary also identified the role and responsibilities of “Senior Management”, which included “ensuring that the capital management and the ICAAP are complied with especially in relation to ensuring capital is maintained above the required level and appropriate action is taken when trigger or limit breaches occur”.

4. In cross examination, Mr Jay agreed that the statement above was an accurate summary of senior management’s responsibilities in relation to capital management.

5. On 5 December 2017, the ASL Board held a meeting at which it approved a revised version of the company’s “Risk Appetite Statement”. Part 3.5 of that document stated:

   Risk appetite

   The Board has determined that its appetite for regulatory risks is in the range of “Averse” and “Minimise Risk”, meaning that ASL has an extremely low appetite or tolerance in relation to any regulatory breaches and/or tax changes, therefore ASL will take all measures possible to reduce any negative outcomes arising in this area.

6. In cross-examination, Mr Jay agreed that the reference to “regulatory breaches” in the excerpt from the Risk Appetite Statement quoted above included “any breaches of APRA’s requirements in relation to either PCR and/or regulatory capital”.

7. Mr Jay accepted in cross examination that his responsibilities as CEO included:

   (a)ensuring that, at all times, ASL stayed above the minimum regulatory capital level required by APRA;

   (b)ensuring that reportable breaches of any APRA Prudential Standards with respect to regulatory capital and PCR did not occur; and

   (c)ensuring that the Board was informed of all “material developments in, or relevant to, ASL’s affairs”, including potential beaches of APRA’s minimum regulatory capital requirements.

8. The applicant submits that at no time during his tenure did ASL breach the mandated minimum capital adequacy requirements in APS110 including the minimum APRA regulatory capital level of $5 million nor the PCR ratio of 10.5%.

   The New Payments Platform Funding Decision

9. The New Payments Platform (“the NPP”) figured prominently in the proceedings.

10. In February 2013, the Payments System Board of the Reserve Bank decided to establish an industry-based project to deliver a “fast payments” solution for consumers and businesses. In response, the NPP was developed by the Australian payments industry. On 15 July 2014, ASL signed a “non-binding expression of Intent” indicating that ASL would connect to, and use, the NPP.

11. In October 2014, Mr Jay prepared a document titled “New Payments Platform Business Proposal” (“the NPP Proposal”), as part of the materials that were circulated ahead of a Board meeting which took place on 30 October 2014. The respondents assert that when first presented to the Board of the ASL the NPP Proposal outlined the total cost of the NPP, getting it operational, was $2.5 million. The applicant submits that this was incorrect.

12. Mr Jay gave evidence in his first affidavit that during this Board Meeting he said words to the following effect: “the first decision for the Board is whether ASL should commit to the NPP given that this would be the single largest investment for ASL since its establishment and likely to be in excess of $10,000,000.”

13. Ms Bel’s gave evidence not agreeing that in October 2014 Mr Jay said the words: “and likely to be in excess of $10,000,000”. She recalled that at the time, the estimate of the cost of the NPP, as presented to the Board was in the order of $7 million and did not increase to $10 million until around March 2017. In cross examination, the exchange with Mr White was as follows “…And the figures around nine, 10 million with a kind of banded around, were they not? ---They were.” In cross examination Mr Dinnie said, “From memory, I thought the initial estimates were around seven, but…”.

14. The respondents contend that Mr Jay’s assertion that he told the Board on 30 October 2014 that the costs associated with the NPP were “likely to be excess of $10,000,000” find no support in the contemporaneous documents. The resolution of this factual dispute is not necessary for the determination of these proceedings.

15. In any event, on 10 May 2017, the Audit Committee (comprising Mr Dinnie as Chair, Ms Bels and Mr Williams) resolved to recommend the NPP Budget Request be approved by the Board. The NPP Budget Request of $10,542 million was subsequently approved by the ASL Board.

16. With respect to the decision taken by the Board in October 2014 to fund the implementation of the NPP, the Board decided to charge monthly fees to ASL’s members rather than issuing additional shares in the company.

17. The NPP Proposal recommended that ASL fund the NPP through the “Share Issue” model by issuing up to $3 million of ordinary, non-voting shares to members who wished to join the NPP.

18. The recommendations set out in the NPP Proposal were discussed at the Board meeting on 30 October 2014. The minutes of the meeting record the following:

    Directors acknowledged that for ASL members to remain relevant, ASL must commit to the NPP as a Direct Connector. Accordingly discussion centred not so much on the decision to join, but rather on how it should be funded. ASL management submitted a capital proposal which broadly mirrored the issuing of shares in the NPP by the issue of shares to members.

    After much discussion, Member nominated directors held sway that an operational expense model as opposed to a capital expenditure platform would sit more palatably with the ASL members. Accordingly the CEO was requested to fund ASL’s commitment to the NPP by operational revenues.

19. The ASL Board’s decision in October 2014 to fund the NPP via a monthly charge, the Operation Model, was contrary to the recommendation of Mr Jay and his executive team. Mr Jay contended that the later regulatory capital issues, and the attention by APRA, that faced ASL were solely attributed to this decision of the Board.

20. Mr Jay pleads in his SOC that the NPP Funding Complaints, being the repeated complaints, he alleges he made to Mr Lawler and Mr Willis that adopting the Operational Model Proposal, was an erroneous decision made by the directors.

21. The First, Second, and Third NPP Complaints concern firstly, Mr Jay making a complaint to Mr Lawler about the NPP to the effect that Board members did not understand the basics of ASL’s capital requirements, secondly, the Board not taking accountability and seeking to excuse the NPP Funding Decision by blaming the management team, and thirdly, Mr Jay complaining to Mr Lawler about Ms Bels seeking to blame the capital issue raised by APRA on the applicant’s management team.

    San Francisco Members Innovations Tour

22. In around July 2015, certain members of the ASL Board and executive team travelled to the United States for an “Innovations Tour”, organised by Mr Jay.

23. Mr Jay contends that, during the tour, Mr Dinnie engaged in certain misconduct, including Mr Dinnies allegedly hitting Mr Potter, an employee of ASL, over the head, which became the subject of verbal complaints that he made to Mr Lawler (“Inappropriate Physical Contact Complaints”).

    December 2015 Board meeting

24. On 17 December 2015, the ASL Board held a meeting. The minutes of that meeting record that the Board discussed the draft ICAAP report for the 2015 financial year. The minutes record as follows:

    The CFO explained that APRA’s main objection had been that the investment in the NPP was not included and this has now been included for the three years going forward. He explained that capital is fairly tight for 2016 because of the treatment of NPP as an intangible asset but from 2017 on, it is back to a more favourable position assuming business as usual.

    …

    Director M Williams questioned the trigger time (three consecutive days) on PCR before notification to the CEO … and, after discussion, it was agreed by the Board that this be tightened to one day’s notice to the CEO.

25. Mr Jay highlights the minutes stating that the Board agreed to tighten the trigger time to notification “to the CEO” and not to the ASL Board.

    Europe Innovations Tour

26. In February and March 2017, certain members of the ASL Board and executive team went on an “Innovations Tour” to Europe and the United Kingdom, which was organised by Mr Jay.

27. Mr Jay contends that, during the tour, Mr Dinnie made certain remarks to Mr Potter and Mr Olrich (“First and Second Dinnie Remarks”) which became the subject of a verbal complaint that Mr Jay says he made to Mr Lawler. This is the subject of the Second Dinnie complaint.

    Audit Panel meeting in May 2017

28. On 9 May 2017, ASL’s Internal Audit and External Audit Evaluation Panel (Audit Panel) held a meeting.

29. Mr Jay contends that, during the meeting, Mr Dinnie said: “I can save you money and you won’t like it” (“Third Dinnie Remark”). Mr Jay gave evidence that Mr Dinnie spoke the words in a threatening and intimidating matter with an aggressive tone. Mr Jay understood that the remark was made in reference to two contentious operational expenses being the continued operation of the Canberra office and the retention of the Sydney Cricket Ground private box.

30. At a later meeting of the same day, Mr Jay contends that Mr Dinnie said to him in an aggressive tone, words the effect of “Ah that’s right, you don’t get a fucking vote” (“Fourth Dinnie Remark”). Mr Jay gives evidence that shortly after the Audit Meeting, he telephoned Mr Lawler and made a complaint about the Fourth Dinnie Remark. This is the subject of the “Third Dinnie Complaint”.

    Meeting between Mr Jay and Mr Lawler on 7 June 2017

31. On 7 June 2017, Mr Jay contends that he met with Mr Lawler and made a complaint regarding the Inappropriate Physical Contact Complaints, and the First, Second, Third and Fourth Dinnie Remarks. This the subject of the “Fourth Dinnie Complaint”.

    ASL Board meeting on 8 June 2017

32. On 8 June 2017, the ASL Board held a meeting. The minutes of the meeting recorded that Mr Iain Giles (“Mr Giles”) attended the meeting and delivered a presentation regarding the “Small ADI Strategic Business Case”. After Mr Giles had finished his presentation, a number of directors asked questions regarding the reasoning and assumptions underlying the paper that Mr Giles had presented.

33. Mr Jay contends that Mr Dinnie accused Mr Giles of having produced “rubbery figures”, and that he spoke those words in an “aggressive and threatening” tone. Mr Jay further contends that he considered that Mr Dinnie’s remarks were “dismissive and disrespectful”. This the subject of the “Fifth Dinnie Complaint”.

    ASL Board meeting on 5 December 2017

34. On 5 December 2017, ASL’s Board held a meeting. The papers provided to the Board ahead of the meeting included a “CEO’s Report” that was prepared by Mr Jay.

35. Under the heading “Emerging Challenges”, the CEO’s Report stated that the NPP “go live date” had been delayed to February 2018, which would result in “additional spend” in the project. The CEO’s Report further stated that “cashflow and capital will need to be closely monitored” and indicated that “the overall project impact is forecast to be an increase of $850k, which is a combination of resourcing and additional licencing to meet performance standards”. The CEO’s Report also noted that each additional month of delay will “cost circa $120k plus”.

36. The respondent submitted that there was no other reference to capital management in the body of the CEO’s Report.

37. The respondents referred to Attachment A to the CEO’s report, a “Financial Management Report” for the period ended 31 October 2017. The Executive Summary to that report stated:

    NPP project costs are being managed within the approved budget and are capitalised in accordance with the accounting standards. Table 2 details project to date (capital and recurrent) expenditure compared to the approved budget. The revised go live date will increase project costs.

38. The Financial management report included a “Capital Adequacy Report” as at 31 October 2017. The Capital Adequacy Report indicated that ASL’s total capital as at 31 October 2017 was $6,101,853. That figure was below ASL’s internal trigger point of $7.5 million.

39. The respondents submit that Mr Jay’s CEO Report did not refer to the fact that ASL’s regulatory capital had fallen below the trigger of $7.5 million.

    2017 ICAAP report

40. The Board papers for the December 2017 meeting included ASL’s ICAAP report for the 2017 financial year. The purpose of this report was to “set out the results of the ICAAP process as at 31 October 2017 and to report the results to the Board”. It also covered a five-year planning horizon.

41. Mr Jay clarified in cross-examination that the ICAAP process was an internal capital adequacy process that was undertaken annually as part of the APRA regulations to ensure that ASL capital was adequate to meet the requirements of the business.

42. Under the heading “Projected ICAAP capital and financials for the five-year period to 30 June 2022”, the report stated:

    Based on the current strategic plan of ASL, five year projections have been developed, using the 2017-2018 budget and outer year projections submitted to the Board in June 2017, with updates based on the 2017-2018 actual results to 31 October 2017. These financial projections are included in Attachment 2.

    For ASL, the equity investment in NPP Australia and the cost of building the infrastructure to participate in the NPP is impacting on ASL’s capital position, which is reflected in the five year projections.

43. The ICAAP report went on to state, under the heading “Expected changes to available capital levels”:

    There are no current plans to increase the level of issued capital. There will be growth in Tier 1 capital through the accumulation of each year’s retained profits, offset by the regulatory adjustment for the NPP intangible which will begin to amortise in the 2017-2018 financial year.

    As, outlined in the prior year ICAAP report, the NPP project budget is funded over 6.2 years … with the significant portion of the investment occurring in years 1-3. An outcome of the timing of the monthly Member payment access fee funding the NPP and the timing of NPP project spend is a reduction in the ASL Total Capital in the 2017-2018. From 2018-2019 the continuation of the Member payment access fee will strengthen the ASL balance sheet by increasing retained profits. Further as the NPP intangible held on the balance sheet is amortised down, the regulatory adjustment will reduce accordingly, strengthening the capital position. In the 2018-2019 financial year the capital is projected to grow and increase further in the outer years.

44. The report also stated, under the heading “Changes in ICAAP since the last review”:

    To date, ASL has largely managed the regulatory capital impact of the NPP by managing its investment profile in Risk Weighted Assets. As a result, the investment profile has shifted, with a decrease in grade 1 financial institutions holdings and an increase in the RBA ESA holding, which is zero rated. The lower risk investment profile has resulted in decreased interest income in the 2017-2018 year to date. ASL intends to invest in Australian government securities in 2018 to improve interest income.

45. The capital projections which formed part of the ICAAP report indicated that ASL’s total capital for 2017 was $6,839,201 and was projected to fall to $5,951,184 in 2018, before increasing to $6,789,857 in 2019 and further increase to $7,625,365 in 2020.

    Minutes of the Board meeting on 5 December 2017

46. The minutes of the Board meeting that was held on 5 December 2017 indicate that Mr Jay spoke to his CEO’s Report.

47. The minutes record that the directors, particularly Mr Hassall, considered the 2017 ICAAP Report:

    Director Hassall queried the assumptions underpinning the capital projections and how realistic they were. Mr Roberts provided an overview of the five-year capital forecasting and budget projections that support the analysis, noting that there was inherently less precision in years four and five.

    Director Hassall queried if the forecast includes the increase in NPP budget of $854k. Mr Roberts confirmed that it did.

    Director Ryan observed that it is assumed that members do not contribute more capital during the period.

    Director Lock queried how close previous year projections were to actual results. Mr Roberts advised that the results were similar to expectations.

    Director Hassall queried if more detail surrounding the assumptions and risks to capital projections, and comparison of actual to previous year forecasts, should be included in the ICAAP report.

    Mr Roberts advised that the ICAAP model had been independently reviewed in 2016 and APRA have had no material issues with the report structure to date.

    Following further discussion, the Board requested more detail be included in the report as discussed, particularly in respect of the scenario analysis completed.

    Chair Lawler queried when the ICAAP Report must be lodged with APRA. Mr McGregor advised it needed to be submitted within three month of Board approval. Director Hassall advised that he believed the ICAAP report was now overdue, and should be submitted within three months of financial year end.

    The Board requested that a revised report be reviewed by the Audit Committee at its meeting on 13 December 2017, and that the Audit Committee be delegated authority of the Board to approve the CEO declaration contained in the ICAAP Report.

48. The Board accordingly resolved, inter alia, that:

    … the Audit committee review a revised ICAAP Report and, if thought fit, approve the certification from the CEO to APRA contained in the annual ICAAP report, under the delegation of the Board.

49. On 13 December 2017, the Audit Committee approve the ICAAP Report. The ICAAP Report identified the current Capital Position at $6,839,201 (below the $7.5 million internal trigger point) and projected capital to fall to $5,951,184 in June 2018.

50. The respondent submitted that at this point Mr Jay did not refer to any risk that the costs of the NPP might cause ASL’s regulatory capital to fall close to the APRA required minimum. Nor did he make any recommendation that ASL take remedial action to increase its capital.

51. Mr Jay submitted that despite the ICAAP Report disclosing clearly that ASL’s capital levels were both under the internal trigger point and predicted to decline further, no director including Mr Dinnie, Ms Bels nor Mr Hassall raised any questions as to what, if any remedial action was being taken or recommended to remedy ASL’s capital position, nor was there any explanation as to why this did not alert their attention to the fact ASL’s capital had fallen below the internal trigger point. Mr Jay submitted that the ASL Board were clearly accepting of this level of regulatory capital given the NPP impacts as presented in the ICAAP.

52. The respondents contend that the applicant’s submissions take no account of and are contradicted by the express statements in the ICAAP Report – “There are no current plans to increase the level of issued capital” and “In the 2018-2019 financial year the capital is projected to begin to grow and increase further…”.

1. The respondents characterise as ‘simplistic’ the applicant’s assertion that the inclusion of capital forecasts in the financial reports provided to the Board exonerates the applicant from his obligation to bring matters concerning the decline in ASL’s regulatory capital, and the need to take remedial action to boost the company’s capital reserves, specifically to the Board’s attention.

   ASL Board meeting on 21 February 2018

2. On 21 February 2018, ASL’s Board held a meeting.

   Mr Lawler’s resignation

3. On 21 February 2018, ASL’s Board of directors held a meeting. It is common ground that, at some point during an in-camera session, Mr Lawler resigned as Chair.

4. Mr Jay gave evidence that, at around 11:45 AM, he rejoined the Board meeting and made certain statements that are defined in his SOC and affidavit as the “Board Inquiries” and “APRA Risk Complaint”.

5. The minutes of the Board meeting state that Mr Jay rejoined the meeting after the in-camera session. Those minutes do not record any discussion in which Mr Jay made the Board Inquiries or APRA Risk Complaint. Mr Jay’s handwritten note of the Board meeting does not make any reference to the APRA Risk Complaint.

6. Mr Dinnie gave evidence that he recalled Mr Jay saying something akin to the Board Inquiries, but he denied that Mr Jay said the words defined as the APRA Risk Complaint.

7. It is not in contention that Mr Jay made the Board Inquiry. However, the respondents maintain that Mr Jay did not make the APRA Risk Complaint, despite this not being contested by the relevant witnesses in attendance at the 21 February Meeting. In fact, Mr Lock agrees that Mr Jay said the words attributed as the APRA Risk Complaint.

8. On balance, I find that Mr Jay made a comment consistent with the APRA Risk Complaint.

9. The papers provided to the Board ahead of the 21 February 2018 meeting included a CEO Report from Mr Jay. In cross examination it was put to Mr Jay that he did not address the Board in relation to the regulatory capital forecasts contained in the financial report that was attached to his CEO Report. Mr Jay did not agree. He agreed that there was nothing in the minutes pointing to him addressing the Board on regulatory capital. He pointed to the minutes not recording everything. Mr Jay pointed to two matters in the Board minutes identified as “current highlights and challenges” in support of his assertion that he addressed the Board on regulatory capital. He did not give evidence in his affidavit that he addressed the Board on regulatory capital. On balance, and in the circumstances where capital is a matter of some considerable significance to ASL, I am satisfied that Mr Jay did not make any recommendation to the Board at the 21 February Board meeting that ASL should take remedial action to increase its regulatory capital.

   Board Communication Inquiry

10. On 22 February 2018, Mr Jay had a telephone discussion with Mr Ryan. Mr Jay contends Mr Ryan said, “I will be your conduit to the board until all of this is sorted”, or words to that effect. Mr Ryan denied he said those words. He was not challenged on this denial. I am not satisfied that the uncorroborated evidence of Mr Jay should be accepted in the circumstances, and I am not satisfied that this communication, in the terms alleged, did occur.

11. On 26 February 2018, at approximately 10 AM Mr Jay, Mr Dinnie and Ms Bels participated in a telephone conference. Ms Bels prepared a file note of the conversation. The file note stated, “From here on GD will take over DLs role dealing with the CEO i.e. would deal with any in camera discussions and briefings etc”

12. On 26 February 2018 Mr Jay sent an email to Mr Ryan, stating “Last Thursday, you advised that, as Chair of the Governance Committee, you would be my conduit to the Board whilst matters with Dave was sorted. Today I have a teleconference with Garry and Claudia advising of Board decisions. This I would have expected to come from you as Governance chair. To ensure that there are no further opportunities for miscommunication.” This constitutes the “Board Communication Inquiry”.

13. Mr Ryan replied to that email, stating: “... Just for clarity I didn’t say I would be your conduit from the board but I did say that… I would ring to keep you up-to-date with progress”.

    Audit Committee meeting on 14 March 2018

14. On 14 March 2018, the Audit Committee of ASL’s Board held a meeting. The papers that were circulated to the Audit committee ahead of the meeting included a Financial Management Report for the period ended 31 January 2018. The Executive Summary to that report stated:

    NPP project costs are being managed within the approved budget and are capitalised in accordance with the accounting standards. … The spend on the NPP is impacting regulatory capital, with an increasing risk to the $5m regulatory capital minimum. Options to increase [regulatory] capital need to be developed.

15. The respondents submitted that the statement made in the Executive Summary that “[t]he spend on the NPP is impacting regulatory capital, with increasing risk to the $5 million regulatory capital minimum” is the first occasion on which Mr Jay and his management team expressly acknowledged (whether orally or in writing) the risk that the cost of the NPP might cause ASL to breach its minimum regulatory capital requirement. Further, the respondent contends that the statement “[o]ptions to increase [regulatory] capital development” was the first time that Mr Jay expressly advised the Board that immediate stepd need to be taken to bolster ASL’s capital in order to reach of its regulatory capital requirements.

16. Mr Jay does not contend otherwise in his responsive submissions.

17. The attachments to the Financial Management report included a capital Adequacy Report as at 31 January 2018, which stated that ASL’s total capital was $5,434,131. The ASL capital minimum was $7,500,000.

18. The minutes of the Audit Committee meeting on 14 March 2018, under the heading “Item 5.a – Finance Report”, records the following in relation to the Financial Management Report and the status of ASL’s regulatory capital:

    Mr Robert’s spoke to his report noting that:

    •ASL had commenced investment in Government securities.

    •Interest rates payable on members voluntary funds had been reduced, as approved by the Contracts & Pricing Committee on 16 February 2018.

    •Capital management challenges continue and would be discussed in agenda item 5.b (Budget).

    The CEO advised that options for capital funding were to be discussed at the 21 February 2018 Board Strategy Workship, however that workshop was deferred. The CEO further advised that options for increasing regulatory capital could include:

    •Issuing of more shares.

    •Increased member pricing.

    •Conversion of subordinated debt into equity.

    Director Hassall queried the process for reporting limit breaches, in respect of the ASL Minimum Capital limit of $7.5m. Ms Westman advised that, as there was no breach of the APRA mandated regulatory capital nor minimum PCR, reporting to APRA was not required.

    The CEO advised that the capital values for both equity and regulatory had been reported to the Committee, and the Board, at each meeting.

    Director Hassall queried if the 31 January 2018 report was the first breach of the $7.5 total capital limit. The CEO advised that this was not the first time the level had fallen below $7.5m, as had been previously reported to the Committee and Board.

    Director Hassall advised that he believed the ASL internal PCR trigger of 13.5% had been breached, as the PCR for 31 January 2018 is 13.46%, when rounded to 2 decimal places. Director Hassall also advised that he believed such breaches should be reported.

    Mr Roberts disagreed and advised that the PCR is rounded to one decimal place, hence reported and managed to 13.5%. the CEO advised that the PCR is managed daily through the adjustment of the risk weighted assets in the ASL ESA account, to maximize investment returns, and is therefore managed closely. Director Hassall emphasized that he still considered a breach of the internal ASL PCR limit of 13.5% had occurred.

    Acting Chair Bels queried if there was a forecast of ASL’s regulatory capital against the $5m minimum capital requirement. The CFO advised the capital level was being closely monitored but options for increasing capital required discussion at the Committee and Board. Chair Bels suggested the options for increasing capital should be recommended by the Committee to the Board and queried the timeline for this.

    The Committee agreed that a recommendation to increase regulatory capital should be considered by the Committee before the next Board Meeting with a view to taking a recommendation to the 2 May Board meeting. The CEO undertook to do so.

    Resolved: “That the Committee note the Finance Report as at 31 January 2018, as presented.”

19. The following was recorded in the minutes of the 14 March 2018 Board meeting with regard to the BAU Budget:

    Director Hassall noted that the budget paper stated that regulatory capital is projected to be just on, or above, the regulatory minimum amount of $5m, and queried if there was a projection, on a monthly basis, of the capital ratios and the impact on PCR if the regulatory minimum is approached. The CEO advised that the PCR will be adequate and can be managed on a daily basis by increases investments in zero weighted securities, and the issue is the maintenance of total capital above the $5m value.

    …

    The CEO reiterated that the PCR is less of an issue, but the Board needs to make a decision in respect of capital management, and that the most palatable option appears to be the conversion of subordinated debt to equity.

    …

    The Committee discussed capital management further and requested a paper for the review of the Committee analysing the options for increasing regulatory capital, following which, as noted in the previous agenda item, thy would make a recommendation not the Board for consideration at the 2 May 2018 Board meeting. The CEO committed to provide an analysis of options for increasing regulatory capital, for the review of the Committee, that includes:

    •Options to increase total regulatory capital including an assessment of the impacts over a 24-month timeframe.

    •Management’s recommendation for the preferred option.

    •Time frame for implementation of the preferred option.

20. The applicant contended that the comments from Mr Hassall querying if the 31 January 2018 report was the first breach of the $7.5mil total capital limit reflect poorly, suggesting that Mr Hassall did not review the ICAAP Report in detail, nor the financial audit contained in the Board packs provided before every Board and committee meeting. The submission from the applicant is that had he done so, he would have been aware of the matters the subject OF his enquiry on 14 March 2018.

21. In cross-examination in response to Counsel for Mr Jay requesting reports where Mr Jay provided inaccurate information, Mr Hassall said this:

    COUNSEL: Tell us all the reports he provided inaccurate information?---

    MR HASSALL: So the ICAP provided – so I will go back – I will – and I will add – the ICAP provided in December 2017 provided capital forecasts with a declaration from the CEO that they were accurate and reliable. Questions were asked in response to that with adequate – adequately captured the changes around the NPP budget, and it was confirmed that they had. In the same reports – in the same board back, we had the CEO reports and various other reports. In those reports, there were things like the risk rating for capital issues contained in the CEO report. They showed our position of it being, I think, green – minor as a risk. The issues called out in the CEO report around capital at that time were really about – do we have enough capital to fund strategic elements going forward – and whether we would achieve the budget. There was no specific callout on an immediate, impending capital issue that was about to face the organisation.

    COUNSEL:  Yes?---

    MR HASSALL: The second thing I would like to add is that in the period of time between January and, you know, say, March or April, when the capital - - -

    HER HONOUR: Of what year? Sorry?---Sorry. 2018.

    HER HONOUR: Thank you.

    MR HASSALL: Yes. When the capital degradation occurred, what we focused on was the impact of the NPP funding decision, not what caused those movements when we break it down across the changes in the treatment for the NPP funding. So increases in NPP funding over that time – the changes in the environment that meant that development costs had to continue to be capitalised and that amortisation would occur at a later period than originally anticipated – I believe those things had a material impact on the actual capital outcomes versus the projections that were provided in the December ICAP. We didn’t really talk about those and get to the heart of those in that period of time. In terms of what I did about it, I think I adequately challenged the December ICAP. I asked a few key questions, as did the 5 [sic] rest of the directors. We believed that based on the statements provided by the CEO – time – to be accurate. In reports subsequent, as soon as we became aware of the capital issue, I think a number of questions were raised around capital.

    First NPP Funding Complaint

22. On 16 March 2018 at 5:33 PM, Mr Jay sent an email to Mr Hassall with a subject line that read “Feedback Regarding Audit Committee Meeting | 14 March 2018”. Mr Jay started the email by saying he wanted to “touch base” following the 14 March 2018 Audit meeting to “ensure we avoid future misunderstandings going forward, as this resulted, in my view, in an unproductive discussion, rather than a focus on the more substantive issues.”

23. Mr Jay raised two issues in the email being firstly, ASL’s PCR, and secondly, Total Regulatory Capital. Mr Jay stated he believed there was a “clear misunderstanding” of the “particular way the ASL capital requirements work”.

24. In relation to the PCR, Mr Jay said the following:

    The APRA requirement is that we maintain a PCR of 10.5%, before the addition of a Capital Conservation Buffer of 2.5%. Our Internal capital Adequacy Policy states the ASL trigger point (for action) as 13.5%. Our aim is to always manage our PCR at approximately 13.6-14.0% as this allows the most effective use our capital. In this regard, it is relatively easy for us to maintain this limit as we maintain a substantially liquid book. Your comment at the Audit committee meeting was that there was a breach of the ASL trigger point because it was 13.46%. The APRA correspondence has set the ASL ratios at 1 decimal point and we have reported this way for consistency. Under accepting rounding principles, 13.46% rounds to 13.5%. as confirmed by the CFO at the meetings, there is no breach and I concur with this held view.

25. In relation to the total Regulatory Capital, Mr Jay said the following:

    APRA has required ASL to maintain regulatory capital of $5m. The Internal Capital Adequacy Policy set an internal trigger of $7.5m for regulatory capital when the Capital Conservation Buffer was introduced in January 2016, which was an increase from $5.5m. the minimum number was brought into question when approval for the NPP program was first brought to the Board back in October 2014. [Mr Hassall], whilst I appreciate you were not on the Board at the time, Newcastle Permanent was represented by Mark Williams, and you might like to discuss this with him to clarify your understanding.

    At the time, the recommendation from the executives of ASL was that we back-to-back equity it, so that there would be no diminution below the $5.5m (the internal trigger at that time). The Board was advised, at that time, that because of the way of the way the IT software is deducted from the total regulatory capital position, this would reduce our position, and this was called out at that time. The Board decided that it preferred ASL to fund the NPP as business as usual and understood the impact it would have on the $7.5m, advising the executives at the time, that we would need to consider the $7.5m as the benchmark without adjustment for the IT software. This was the point I made at the Audit Committee that we needed to add this back for the correct comparison to be made.

    We have called this position out in all Board reporting and on numerous occasions over the last few years and have listed it for the Board Strategy Day for discussion.

26. On 16 March 2018 at 5:36 PM, Mr Jay forwarded the email above at to Mr Lawler stating:

    As you are aware and as I advised on Wednesday, what occurred with Board Members not understanding the basics of our capital requirements concerns me greatly and is unacceptable. I have sent the below email to [Mr Hassall] today.

27. The respondents submitted that Mr Jay’s suggestion to Mr Lawler that Mr Hassall did not understand the “basics” of ASL’s capital requirements was an “egregious mischaracterisation of Mr Hassall’s experience and the nature and contents of the matters that Mr Hassall had addressed in his email of 21 March 2018”

28. The above email to Mr Lawler constitutes the “First NPP Funding Complaint”.

29. On 21 March 2018, Mr Hassall made a robust response to Mr Jay’s email provided, he stated, in the spirit of “constructive challenge”.

30. Mr Hassall stated that there was “absolute no misunderstanding” on his part regarding ASL’s “capital framework, the PCR or minimum absolute capital amount required to be held”. Mr Hassall did not accept “that internal limit[s] are not limited simply because they are not APRA limits”. Mr Hassall did not “accept that there has not been a breach of ASL’s internal limit and it’s risk appetite…” Mr Hassall did not accept Mr Jay’s view on rounding up. He stated, “A breach is a breach and should be treated as such.”

31. Mr Hassall said this regarding ASL’s regulatory capital:

    The second [query] was in respect of forward projections in respect of the absolute capital amount relative to the $5.0m APRA minimum. This was in the context of your budget paper calling and expected breach (or near breach) of this amount by the end of the budget. In requesting the Audit Committee to recommend that the Board approves us issuing $1.25m in capital and given there was no mention, in any respect, of this issue in the ICAAP Report (including its forward projections provided within). I can only issue Mrs either because the assumptions looking forward have changed materially, or it was an omission in the ICAAP report.

32. On 25 March 2018, Mr Jay replied to Mr Hassall. He stated:

    Total regulatory capital remains a challenge for ASL, and was anticipated to be so from the commencement of [the] NPP. The decision to fund the project on a revenue collection model over an extended period, rather than raise additional capital, was a Board decision of the time. With the miss match of spend (the majority of spend over a 2-3 year period) and the revenue collection (over a seven year period), it is self-evident that capital will diminish, without any corrective actions. The timing of the project spend, as well as the approved project variations has brought forward the capital impact earlier than anticipated, which impacts the forecasting, with the forecast, as is always the case with projections and forecasting, based on the best information at the time. We continue to review the forecasts on a non-going basis.

    As you have highlighted and requested at the Audit Committee, out here profit and loss, balance sheet and capital projections will be provided to the Order Committee. The Audit Committee budget paper identified the additional need for an improvement in regulatory capital is the current level leaves the room for volatility, unexpected events or timing changes. The modelling projections show this, which is why it was brought forward to the Order Committee the next year’s budget. Since the last ICAAP Report was prepared there is now increase clarity and certainty surrounding NPP expenditure and timing of expenses.

1. The respondents consider Mr Hassall’s position regarding the need for ASL to report to APRA upon the reduction in PCR to 13.46 per cent was vindicated by the correspondence that APRA sent ASL in April 2018 considered below.

2. Mr Hassall gave the following evidence:

   COUNSEL: I understand. And also, in the answer you gave you referred to an instance in which you found Mr Jay’s response to be challenging. I think you used that word?

   MR HASSALL: Yes.

   COUNSEL: And - - -?---

   MR HASSALL: I – I think it was clear in his responses to some of my questions, really important to understand that those questions went to, if we are breaching internal triggers and limits we need to respond effectively to that. Whilst the $5 million capital issue was already on foot at that time and we needed to address it, my concern was that, further capital issues and breaches might occur, and we already had a significant challenge in working through our position with APRA on that front. So if we weren’t responding to that effectively, if we weren’t identifying it effectively, then that actually went to the heart of some of the things that can cause these issues and ultimately set us up for deeper and more problematic issues long-term. And, his approach to that was adversarial. It was clear in his responses to me, in his demeanour and his tone, that he sought to underplay my questions, and he also sought to mischaracterise my questions about unfairly not understanding capital and being focused on the PCR issue in absence of understanding the issue for total regulatory capital. Both items were discussed, various directors discussed those through the course of the meeting, but I felt that I was dismissed as not understanding capital management when I was raising valid issues. I would also point out that there were multiple examples where internal limits were not met and no adequate reporting was brought in respect of those, and our policies and processes for reporting in response to those was – was not followed. One such instance was referred to that in email, where we had a disagreement on rounding. There were further instances. In the reports that were provided in February and March, it showed that we had actually breached our internal limits for our tier 1 capital ratio – if you go and look at the reports, they’re within the board reporting limits. No reporting was provided on those. Yes, they were captured in appendices in the reports and buried in the detail, but they weren’t adequately brought to life, and our processes for reporting breaches, as they were characterised under the risk management framework as time of internal limits, were not fully brought to the attention of the board.

   APRA correspondence 18 April 2018

3. There was no dispute between the parties that around early or mid-April 2018, the decline in ASL’s capital position caught the attention of APRA.

4. On 18 April 2018, Mr Roberts (Chief Financial Officer of ASL) sent an email to Mr Gary Dowling (“Mr Dowling”), and Ms Chathu Epa (“Ms Epa”) of APRA copying in Ms Rubi Westman (Chief Risk Officer of ASL) (“Ms Westman”) and Mr Jay following discussions had earlier in the week with APRA.

5. On 19 April 2018 in reply to the email, Ms Epa sought that APRA meet with the Chair of the Board and Risk Committee of ASL together with the members of the executive management team “urgently”.

6. On 20 April 2018, ASL’s Chief Risk Officer, Ms Westman, telephoned Ms Bels and informed her that management had been contacted by APRA regarding its concern about the level of ASL’s regulatory capital.

7. Ms Bels then telephoned Mr Jay and advised him that nobody had told her that APRA had raised concerns about ASL’s capital position. She asked Mr Jay to forward her the emails that APRA had exchanged with ASL. Mr Jay did so on 20 April 2018 between 3:33 PM and 3:35 PM

8. The applicant contends that the delay of two days of informing Ms Bels of the APRA correspondence cannot be seen as delay.

9. This was the exchange with Ms Bels, in cross-examination:

   COUNSEL: So it was two days before you got it. The letter?

   MS BELS: Right.

   COUNSEL: And that’s your beef, is it?

   MS BELS: Yes, I – well, I should have initially been told when they started raising concerns verbally, and then I should have, yes, received the letter promptly.

   APRA correspondence dated 20 April 2018

10. On 20 April 2018 at 4:22 PM, Ms Epa sent an email to Mr Jay attaching a letter from APRA (“20 April letter”). The attached letter was from Ms Jennifer Balding, a Senior Manager within APRA’s Specialised Institutions Division.

11. Mr Jay was asked by Ms Epa to “please forward a copy of the letter to the Chair of the Board and Chair of the Risk Committee”. This letter was forwarded to Ms Bels and Mr Lawler at 5:50 PM on the same day.

12. The 20 April 2018 APRA letter stated:

    I refer to APRA’s telephone conversation with Mr Anthony Roberts and Ms Rubi Westman on 16 April 2018 and 17 April 2018 advising of APRA’s concerns regarding the significant reduction in ASL’s surplus capital over the minimum APRA requirement of $5m and that ASL was operating within its Capital Conservation Buffer (CCB) during the December 2017 quarter. ... Mr Roberts advised APRA that as of 31 January 2018 ASL was no longer operating within the CCB.

    Whilst ADI’s are able to operate within the CCB, this has implications under Prudential Standard APS 110 Capital Adequacy (APS 110), such as the application of constraints on distributions, including discretionary staff bonuses. In addition, APRA expects that ADIs should not operate within the CCB on an ongoing basis. The expectation is that, where an ADI expects to, or actually does operate within the CCB, it should notify APRA and provide a plan to move back above the CCB.

    APRA is extremely disappointed that it was not notified by ASL that it was operating within the CCB, rather APRA identified the issue and brought it to the attention of ASL management.

    Furthermore, APRA is concerned that ASL lacks an effective limit and trigger framework to maintain and monitor a buffer sufficiently above its prudential capital requirements, including to ensure that it does not operate within the CCB.

    APRA proposes to engage with ASL’s Board and management relating to the weaknesses in ASL’s capital planning and management, together with a broader range of concerns relating to the financial position. These issues and concerns will be discussed at the scheduled meeting on Tuesday, 24 April 2018.

13. Mr Jay agreed in cross examination that it had been a “direct failure” by himself and his management team not to have brought to APRA’s attention the fact that ASL had briefly operated within the Capital Conservation Buffer.

14. The respondents submitted that the concerns expressed by APRA in the 20 April 2018 letter were entirely consistent with the matters Mr Hassall had raised in the Audit Committee meeting on 14 March 2018 and in his email to Mr Jay dated 21 March 2018 – that the breach of ASL’s internal PCR limits in the December 2017 quarter suggested that there were deficiencies in ASL’s capital monitoring and reporting procedures.

    Letter from APRA dated 1 May 2018

15. On 1 May 2018, Ms Balding of APRA sent a 6-page letter to Mr Jay, copying Mr Lawler and Ms Bels (“1 May Letter”). The letter from APRA relevantly stated:

    I refer to APRA’s meeting with you and other representatives of ASL management and Board on 24 April 2018. I also refer to APRA’s letter to you dated 20 April 2018 and your email of 23 April 2018.

    As discussed during the meeting, APRA has a number of concerns regarding the adequacy of ASL’s capital position; inadequacies in the capital management framework – particularly in relation to triggers and response actions; profitability – reasonableness and accuracy of financial forecasts and associated assumptions; and deficiencies in ASL’s Recovery Plan.

    …

    Minimum Capital Requirement

    ASL’s minimum prudential capital requirement has two critical components – a Prudential Capital Ratio (PCR) of 10.5% and a minimum capital requirement of $5m. While ASL has managed its Total Capital Ratio adequately above the PCR, APRA communication its concern at the significantly reduced and thin surplus over the $5m requirement. Having previously been relatively stable, ASL’s total capital reduced from $8.4m as at 31 March 2017 to $6.8m at 31 December 2017. ASL subsequently advised that capital had reduced further to $5.277m at 31 March 2018, with results indicating that capital would be circa $5.6m by 30 April 2018.

    Capital Conservation Buffer

    APRA advised in its letter of 20 April 2018, and during our meeting of its disappointment that ASL had notified APRA that it was operating within the CCB during the December 2017 quarter, rather APRA identified and brought this to the attention of ASL management. ASL indicated in an email dated 23 April 2018 that ASL operated in the CCB due [to] an isolated incident in December 2017. While APRA was advised during the meeting that this had occurred due to an error, the specific cause of the error was not able to be explained to APRA. Furthermore, APRA was advised that the Board had not been informed of this issue until the February 2018 Board meeting.

    …

    APRA also noted that while ASL had a clear awareness of the need to maintain an adequate buffer above the PCR, the need to maintain an adequate buffer above the minimum capital requirement of $5m did not appear to receive the same level of emphasis by management and the Board.

    …

    Communication with APRA

    As discussed during the meeting, APRA encourages its institutions to have early and open communication in order to facilitate APRA’s supervision process. APRA requests the commitment of ASL’s Board and management to promptly communicate any material issues, which should be confirmed in writing in addition to any discussion in meetings and telephone calls. This will help ASL to demonstrate awareness of APRA’s expectations and requirements and to ensure any significant matters are highlighted and addressed in a timely manner.

16. In cross-examination, Mr Jay agreed that:

    (a)in the 1 May letter, APRA was expressing concerns that it had about the reliability and accuracy of the financial projections that had been prepared by Mr Jay’s management team; and

    (b)at the time he received and read the 1 May Letter, there was “no doubt” in his mind that APRA expected ASL’s management to “take proactive approach to informing APRA about potential breaches of capital requirements”.

    ASL Board meeting on 2 May 2018

17. An ASL Board meeting was held on 2 May 2018. The papers that were circulated to the directors ahead of the meeting included a CEO’s Report prepared by Mr Jay. Under the heading “Challenges”, the report stated:

    Capital – Following the Board’s decision to operationise [sic] expenditure for the NPP, strain on regulatory capital continues. Balance at 31/03 is $5,277M (APRA minimum $5.0M). following the launch of the NPP, this is expected to be the “low” point with regulatory capital expected to be circa $5.6M at 30/04. Further capital enhancement options are recommended for consideration of the Board at agenda item 8b. Note equity capital remains strong at $13.5M.

18. Attachment A to the CEO’s Report comprised a Capital Adequacy Report for the period ended at 31 March 2018, which recorded ASL’s total capital at $5,277,727.

19. The materials in the Board pack also included a paper titled “APRA Correspondence”. Under the heading “ASL Capital”, the document stated:

    A teleconference was held between APRA (Mr Gary Dowling – Manager Supervision Team and Ms Chathu Epa – Senior Analyst Institutions Division) and ASL (Mr Anthony Roberts – CFO and Ms Rubi Westman – CRO) on Monday 16 April 2018. In this teleconference, APRA stressed to ASL that they “were concerned about the regulatory capital of ASL going forward”.

    The discussion covered the following:

    •APRA’s concern around the current balance of regulatory capital in march 2018 of $5.277M (APRA’s minimum balance requirement being $5M);

    •Querying whether the regulatory capital will drop any further and what the current CCB ratio was;

    •Requesting information from ASL as to what rectification plans are in place to address the capital issue. They were advised of the following measures:

    •Increased revenue from voluntary deposits (rate change) and investment in zero rated government debt;

    •Run-off NPP project costs; and

    •Tier 1 capital issue replacing subordinated debt.

    A letter was received from APRA on 20 April 2018 relating to the capital conservation buffer and capital issues, a copy of this letter is attached[.]

    A response to this letter was provided by the CEO on 23 April 2018, a copy of this email is attached[.]

    A meeting was held on 24 April 2018 between APRA and ASL’s Chair of the Board, Chair of the Risk committee, CEO and CRO to resolve APRA’s concerns.

    A summary of the outcomes of the meeting:

    •APRA confirmed that there had been no breach by ASL in relation to its capital requirements.

    •APRA have requested a revised Recovery plan (formerly Living Will), including a more defined trigger framework and detailed recovery options; and

    •A revised ICAAP incorporating changes in ASL’s capital position.

    ASL committed to providing this information to APRA within the agreed timeframes.

20. The minutes of the 2 May 2018 Board meeting indicate the following discussion took place regarding Mr Jay’s CEO’s Report:

    Chair Lawler observed that the reporting of capital compliance limit adherence had been improved in the current report. The CEO advised that APRA were pleased with the change to format, which had been discussed with them at the previous meeting. The Board discussed the changes that had been made and agreed that whilst the improvements were good, further improvements can be achieved to enhance reporting and monitoring. The CEO and the CFO undertook to make further changes including incorporating “triggers on a page”.

    Director Lock advised that he believed the incursion into the Capital Conservation Buffer in December 2018, whilst included in the Board pack reporting, should have been more clearly highlighted. Director White advised that an out of session notification to the Board may have been appropriate at the time, and future reports should include enhanced highlighting of potential regulatory capital issues.

    The Board further discussed the need to review triggers, frequency and timeliness of reporting.

    Director Hassall suggested that the ICAAP process should be reviewed to ensure capital challenges are highlighted, and that the ICAAP independent review be brought forward as a result.

21. Mr Jay in Supplementary Submissions considers the above extract reflecting another example of the Board “blaming Mr Jay and the ASL management team for their own incomprehensible failure to read and understand the Board packs including financial reports contained therein as they are required to do by directors”. The respondent contends that the minutes reflect the Board holding genuine concerns regarding the applicant’s failure to bring important matters concerning ASL’s capital management and reporting specifically to the Board’s attention.

22. The minutes of the 2 May 2018 Board meeting indicated the Board also discussed the correspondence that had been received from APRA since the previous Board meeting. The minutes record the following:

    The Board discussed the process of responding to APRA and the need for the Board to be comfortable with the adequacy of the response and agreed that the response will be distributed to the Board Members for comment prior to despatch [sic].

    Director Hassall queried if the capital ratios as at 31 December 2018 included in APRA’s letter of 20 April 2018, were correct. Mr Roberts advised that he believed they were. Director Hassall advised that if ASL had breached the internal trigger on Tier 1 capital as at 31 December 2017 there should have been a breach reported.

    Director Hassall noted he did not recall the issues raised by APRA at the teleconference on 16 April being discussed at the Audit Committee meeting on 17 April. Mr Roberts advised that his recollection is that APRA’s concerns with capital, expressed on 16 April 2018 were raised at the Audit Committee meeting. Directors Dinnie and Bels confirmed Director Hassall’s recollection that APRA’s concerns regarding capital were not discussed at the 17 April Audit Committee.

    Second NPP Funding Complaint

23. On 17 May 2018, Mr Jay sent to Mr Lawler a draft email that had been prepared by Mr Jay and other members of his executive team, which he was seeking Mr Lawler send to the ASL Board. Mr Jay was seeking Mr Lawler send the email to the ASL Board as if the email was composed by him (Mr Lawler). That email constitutes the “Second NPP Funding Complaint”.

24. The draft included the statement, “let me reiterate from the outset that the regulatory capital issue that is before us is solely attributed to a decision of the Board in 2014”. Mr Jay conceded in cross-examination that had Mr Lawler sent the email to the Board, the Board would have assumed that the communication reflected Mr Lawler’s own views. Mr Jay would not accept that one of the purposes of sending the draft email was to use Mr Lawler as Chair of the Board as a conduit for communicating his views. Mr Lawler did not send the email. Mr Lawler’s email in response to Mr Jay reads as follows:

    Thanks for that, David.

    The board did indeed make the decision to fund the NPP via a monthly charge rather than the recommendation of management to raise capital.

    This decision was strongly influenced by the “aligned” directors.

    The board is not blaming management for this decision.

    There are at least three board members who were not on the board when the decision was taken. These three are all “aligned” directors.

    They are the most vocal about management not highlighting the effects of the decision.

    They are correct Management has not sufficiently highlighted the issue. This is the only point management can be criticised on. You are now in the processing [of] improving this reporting.

    Cheers, Dave

25. In cross-examination Mr Jay refused to accept that Mr Lawler “agreed with the directors that management had not done enough to explain to the Board the impact of the decision to adopt the operational funding model for the NPP”.

26. Mr Jay considered it appropriate for him, as CEO, to be ghost writing a communication from Mr Lawler as Chair to the Board.

    Third NPP Funding Complaint

27. On 30 July 2018, Mr Jay sent an email to Ms Bels, inviting her to comment upon Ms Westman’s performance review for the 2018 financial year. Included in Ms Bels comment was a statement “…although primary responsibility for capital issues raised by APRA rests with Line 1…”.

28. Mr Jay became miffed about this statement and later that afternoon emailed Mr Lawler stating, “NO it rests with the Board for failing to follow the recommendation of the CEO, with this as an outcome was called out”. This email constitutes the “Third NPP Funding Complaint”.

29. On 3 August 2018, Mr Jay sent a further email to Mr Lawler containing a draft email to Ms Bels. The draft email stated the following:

    … I need to pull you up on your comment “primary responsibility for the capital issues raised by APRA rests with Line 1”. Primary responsibility for the Regulatory Capital issues raised by APRA rests with the Board. The Board chose the method for funding the NPP Program and in doing so went against the very clear recommendation of the Executive Team. The impacts of the Regulatory Capital by adopting such an approach were called out at the time.

    I note that a recent meeting of the Board one of the newer Directors reflected that that decision taken was simply wrong.

30. Mr Jay gave evidence in his first affidavit that he sent that email to Ms Bels. There is no evidence that he did so. Ms Bels gave evidence that she did not receive the above email from Mr Jay.

    Mr Jay’s Year in Review

31. On 28 August 2018, Mr Jay sent an email to Mr Dinnie attaching a paper depicting the CEO’s year in review. The paper comprised his self-evaluation in relation to his performance, and that of the wider executive team, in the 2018 financial year (Year in Review).

1. Further, the Consultant Risk Complaint was not directed at, or concerned with, Mr Jay’s employment in a substantive way. It was not as a matter of substance about Mr Jay’s employment. The issue concerned concerns received from ASL staff about operational matters regarding the engagement of external consultants to undertake a review of expenses at ASL.

2. I am satisfied that the Consultant Risk Complaint is not the exercise of a workplace right within the meaning of s 341(1)(c) of the FW Act.

   First Board Strategy Session Meeting Complaint - SOC [80]

3. The “First Board Strategy Session Meeting Complaint” is said to arise from the failure of the ASL Board to hold a Board Strategy Session Meeting.

4. Mr Jay gave evidence in his first affidavit that at the October 2017 Board Meeting the Board agreed that a strategy session was to occur as part of the February 2018 Board Meeting (“Board Strategy Session”). He says that due to the events that expired during the February 2018 Board Meeting, the Board Strategy Session was postponed to a later date.

5. Mr Jay states that in or around early 2018 (it is pleaded as “in or around early 2019”) he complained to Mr Lawler that the directors had not committed to a date for the Board Strategy Session. This complaint to Mr Lawler is identified as the First Board Strategy Session Meeting Complaint. The terms of the complaint are not in evidence.

6. In oral examination in chief, Mr Jay asserted that he made numerous attempts to arrange a Board strategy session through phone calls and emails to directors. He said that nobody could commit to one date.

7. Mr Jay agreed in cross examination that the only person on the ASL Board to whom he made the First Board Strategy Session Meeting Complaint was Mr Lawler. Mr Lawler did not give evidence in the proceedings.

8. In his affidavit evidence, Mr Willis said that Mr Jay did not inform him at any stage that he had made the complaint as alleged. Mr Willis says that Mr Lawler did not advise him of that complaint. Mr Willis stated in his affidavit evidence that he did not recall Mr Jay discussing the Board Strategy Day when he met with him on 14 November 2018.

9. Mr White in cross examination recalled that after the February 2018 strategy meeting was postponed there was a delay in scheduling a further meeting for reasons related to dates and timing.

10. Mr Jay’s uncorroborated recollection is not, of itself sufficiently persuasive evidence of what took place. However, the logic of events would support a conclusion that Mr Lawler and Mr Jay would have discussed the rescheduling of a Board meeting session.

11. However, I am not satisfied that the First Board Strategy Session Meeting Complaint was a complaint within the meaning of s 341(1)(c) of the FW Act because it did not involve on its terms any request, either expressly or implicitly, for consideration, redress or relief by Mr Lawler and/or the Board. Indeed, the terms of the complaint are not in evidence. Mr Jay was displeased that the directors had not committed to a date for the Board Strategy Session. The language is more directed at a criticism of the Board for failing to commit to a date.

12. I am further not satisfied that the First Board Strategy Session Meeting Complaint was directed at, or concerned with, Mr Jay’s employment in a substantive way. The First Board Strategy Session Meeting Complaint was not “made in the exercise of, or otherwise to protect or vindicate some right or entitlement”. The scheduling of a Board strategy session was an operational matter and unrelated, as a matter of substance, to the functions and responsibilities of the CEO.

13. I am satisfied that the First Board Strategy Session Meeting Complaint is not the exercise of a workplace right within the meaning of s 341(1)(c) of the FW Act.

    Board Strategy and Self-Assessment Complaint - SOC [86]

14. The “Board Strategy and Self-Assessment Complaint” is said to arise from the Board Strategy Session Meeting held on 14 February 2019 that the applicant attended with ASL directors and the Executive Team. Mr Jay gave evidence that the Board Strategy Session Meeting was facilitated by Mr J Williams, a former director of ASL.

15. Mr Jay gave evidence that on 15 February 2019 he had a teleconference with Mr Willis to discuss the Board Meeting and Board Strategy Session Meeting the previous day. He states that Mr Willis and he exchanged words to the following effect:

    Mr Jay: I have some feedback for the Board concerning the strategy session yesterday. It was clear that some Board members had not read their board papers nor the strategy papers. This was identified by John Williams. It was clear that some Board members had not done their homework on the Self-Assessment against APRA review of the CBA. It was embarrassing in the meeting, particularly in front of my team. How do I hold them accountable for delivery when the Board does not own its own actions?

    (Board Strategy Session and Self-Assessment Complaint)

    Mr Willis said: This is why the governance committee now has carriage of the action. I want a piece of work that shows how the numbers come together. The focus going forward should be on payments and services that enable additional revenue. I need a piece of work to demonstrate what a new member brings to the bottom line. An independent cost structures review is also to be done. I would like to sit down with the CFO to understand the numbers and structures.

16. Mr Jay relies upon a document that he refers to as a “record of that discussion which I made at the time of the discussion”. That note records relevantly “not read papers”.

17. Mr Jay gave the following evidence regarding the Board Strategy Session:

    194.During the Board Strategy Session, the Directors did not engage with the strategic options proposed by Mr J Williams and instead debated ASL’s general strategic direction. As a result of their discussions, it appeared to me that the Directors had not read the pre-requisite materials ahead of the meeting.

18. Mr Willis gave evidence that he did not agree with Mr Jay’s characterisation of what occurred at the meeting. He said this:

    35.I refer to paragraphs 193 and 194 of the Jay affidavit. I attended the Board strategy meeting on 14^th February 2019. I do not agree with Mr Jay’s characterisation of what occurred at the meeting. A short time prior to the event, the format of the meeting was changed from a very structured agenda to a more general discussion regarding the company strategic direction. As a result, there was not enough time to review in detail all of the specific proposals that had been raised by Mr John Williams. I do not agree that that was a consequence of any failure by the directors to read the material that had been distributed to them ahead of the meeting.

    36.To my observation, the fact that some proposals were not covered in detail reflected two things. The first was the change in format referred to above. The second was that the Board was not satisfied with the proposals that have been prepared by Mr Jay’s management team. For example, I recall that, at the start of the Strategy Session, Mr Robert Ryan said words to Mr Jay to the following effect:

    Ryan: “We should be concentrating on the NPP. We’ve invested a lot of money in the NPP and we need a strategy that will maximise the amount of revenue to be generated from the new platform”.

    37.I do not remember everything that was said at the Strategy Session. However, my recollection is that, by the end of the meeting, the general consensus was that management needed to go back and prepare a revised strategy that was more focused on the concerns raised by Mr Ryan and other directors who had expressed similar views.

19. Mr Willis agreed that he had a telephone conversation with Mr Jay on 15 February 2019. He did not recall the precise words that were spoken. He did recall that Mr Jay said words generally to the effect that he did not agree with the strategic direction that the Board had endorsed at the strategy meeting. Mr Willis said that Mr Jay did not state that he was making a complaint and Mr Willis did not understand by his words that he was making a complaint about those matters, but expressing his professional views regarding what he believed was the optimal strategy for ASL.

20. Mr Willis’ evidence was unchallenged.

21. It was put to Mr Jay in cross examination that the above conversation did not occur in those terms. Mr Jay did not agree with that proposition.  

22. Accepting the conversation between Mr Jay and Mr Willis occurred in the terms expressed by Mr Jay, I am not satisfied that the Board Strategy and Self-Assessment Complaint comprised a complaint within the meaning of s 341(1)(c) of the FW Act because it did not involve seeking consideration, redress or relief by Mr Willis and/or the Board. The statement by Mr Jay could not reasonably be understood in context as an expression of a grievance. Mr Jay was critical of the Board.

23. Further, the Board Strategy and Self-Assessment Complaint was not directed at or concerned with Mr Jay’s employment in a substantive way. The manner in which the Board Strategy Session was conducted was not as a matter of substance about Mr Jay’s employment. It was not directed at his relationship of employment. Rather, it was concerned with operational matters regarding the content and conduct of the Board Strategy Session. Mr Jay has failed to satisfy the requirement in s 341(1)(c) of the FW Act that the complaint be “in relation to” his employment.

24. I am satisfied that the Board Strategy and Self-Assessment Complaint is not the exercise of a workplace right within the meaning of s 341(1)(c) of the FW Act.

25. The “Notice Period Complaint” (SOC [89]) was abandoned by the applicant.

    Complaints made during the Notice Period

    4 April 2019 Complaint – SOC [90]

26. At paragraph [90] of the SOC, Mr Jay pleads that on 4 April 2019 the First Respondent sent a further letter to the Applicant titled “Confirmation of Notice of Termination of Employment and Direction” (4 April Letter).

27. Mr Jay pleads that the 4 April letter confirmed that 12 months’ notice had been given on 1 April 2019 and directed the applicant not to enter ASL premises, contact or have communication with any ASL customer or client, or employee or remain or become involved in any aspect of ASL’s business except as required by ASL as advised by the chairman from time to time. This is described by Mr Jay as the “Direction Not to Work”.

28. The parties filed a Consolidated Statement of Agreed and Disputed Facts and Issues. At paragraphs [32] and [33] of that document, an issue in dispute remains whether, by making the directions defined as the “Direction Not To work” in paragraph 90 of the SOC, ASL took “adverse action” against the Applicant and, if so, whether that action was taken because of or for reasons which included, any of the Pre-Termination Complaints and/or the Notice Period Complaint. The Notice Period Complaint was not pressed by Mr Jay.

29. Neither the applicant nor respondent made oral or written submissions with respect to this complaint.

30. On the assumption that this complaint is pressed, regard should be had to the EEA and my earlier findings with respect to the effect of cl 15.1(c) and cl 16.1 and 16.2 (See paragraphs [309] – [319]).  Clause 15.1(c) allows ASL, in its “absolute discretion”, to require Mr Jay to work through only part of the 12-month notice period. Clause 16.1 is an express term of the EEA allowing ASL to require the Executive to comply with “restrictions” contained in cl 16.2 throughout the whole of the notice period. Those restrictions in cl 16.2 are as contained in the 4 April Letter.

31. The 4 April 2019 letter confirmed Mr Jay’s termination and 12 months’ notice had been given on 1 April 2019. The applicant does not point to any express or implied term in the EEA providing Mr Jay with a right to work. Pursuant to the EEA, ASL retained the right to give lawful and reasonable directions to Mr Jay.

32. Mr Jay does not point to any compensable injury as a result of the correspondence. The correspondence did not alter Mr Jay’s position to his prejudice within the meaning of Item 1(c) of s 342(1) of the FW Act.

33. I am satisfied that the Direction Not to Work Complaint is not an exercisable workplace right within the meaning of s 341(1)(c) of the FW Act.

    7 June 2019 Complaints – SOC [95]

34. On 7 June 2019 Mr Jay, through his solicitors, caused a letter to be written to ASL concerning the following:

    (a)referred to the complaints previously made during Mr Jay’s employment and pleaded at 18, 21, 25, 26, 28, 38, 39, 40, 47, 52, 55, 57, 58, 61, 65, 70, 80 and 86;

    (b)made complaints regarding ASL’s contravention of the EEA;

    (c)complained that ASL had taken adverse action and continued to take adverse action against Mr Jay because of him having and proposing to make further complaints and enquiries.’;

35. The 7 June 2019 correspondence was sent after Mr Jay had been given his notice of termination.

36. On 17 June 2019, Mr Jay received a letter from Mills Oakley which alleged that he had been the perpetrator of bullying towards an unnamed member of staff at ASL. Mr Jay said in his first affidavit that this was the first time that he had been made aware of these allegations. Mr Jay submits that the Bullying Allegations came as a direct result of him making the 7 June 2019 complaint. No evidence is relied upon in the making of that submission.

37. Mr Willis gave evidence of the context of the Bullying Allegations. Mr Willis notes that the response from ASL contained in the 17 June 2019 letter stated:

    We are instructed that the only ‘complaints or inquiries’ concerning allegations of bullying and harassment, to make reference to your client, are complaints in which your client was the alleged perpetrator, not the complainant.

38. Mr Willis points out that the above statement was made in response to an assertion contained in the 7 June 2019 letter as follows:

    2. bullying and harassment by a company director towards our client, other executives (including a company director of ASL);

39. Mr Willis gave evidence in his affidavit that the Bullying Allegation in the 17 June 2019 letter was made in response to Mr Jay’s allegations. Mr Willis was not challenged on this evidence.

40. I accept the submission of the respondents that the responsive allegations raised in the 17 June 2019 correspondence of which Mr Jay complains did not alter his position to his prejudice within the meaning of Item 1(c) of s 342(1) of the FW Act. The allegation neither injured him at the time nor prejudicially altered his position: Bowd (Supra) at [167].

41. I am satisfied that the 7 June 2019 Complaints are not the exercise of a workplace right within the meaning of s 341(1)(c) of the FW Act.

    28 November 2019 Complaints – SOC [98]

42. On 28 November 2019 Mr Jay, through his solicitors, caused a letter to be written to ASL concerning the following:

    (a)complained that ASL purported to deal with Mr Jay’s complaints and inquiries without providing any supporting evidence, investigational further inquiry;

    (b)complained that ASL had victimised Mr Jay;

    (c)complained that ASL’s conduct had impacted Mr Jay’s health;

    (d)complained that ASL had used Mr Jay’s personal American Express card without his authorisation; and

    (e)complained in relation to ASL’s conduct.

43. At paragraph [99] of the SOC, Mr Jay pleads that in response to and because of the 28 November 2019 Complaints ASL directed Mr Jay to show cause, on 12 December 2019, why his employment should not be terminated for serious misconduct.

44. Mr Willis gave evidence in his affidavit that as a result of receiving information extracted from ASL’s corporate travel account in August 2019, he was concerned that Mr Jay may have breached his employment contract by, in effect, converting business-related expenditure into personal expenses and he should be given an opportunity to explain his use of the travel credits. Mr Willis gave evidence that ASL’s reasons for referring to Mr Jay’s absence from work in the “Show Cause Letter” dated 12 December 2019 did not include the 28 November 2019 complaints. Mr Willis was not cross-examined on this evidence.

45. I accept the submission of the respondents that the responsive allegations raised in the correspondence of which Mr Jay complains did not alter his position to his prejudice within the meaning of Item 1(c) of s 342(1) of the FW Act. The allegation neither injured him at the time nor prejudicially altered his position: Bowd (Supra)at [167].

46. I am satisfied that the 28 November 2019 Complaint is not the exercise of a workplace right within the meaning of s 341(1)(c) of the FW Act.

    24 December 2019 Complaints and Inquiries – SOC [100]

47. The “24 December 2019 Complaints and Inquiries” are pleaded as follows:

    (a)complained that ASL had purportedly conducted an investigation into his complaints and inquiries and not notified or permitted him to participate (as the complainant);

    (b)inquired regarding the particulars surrounding the purported investigation;

    (c)inquired about the facts and circumstances in relation to the Failure to Follow Direction Allegation;

    (d)complained that ASL did not provide Mr Jay with work since 1 April 2019 and accordingly contravened clause 15.1(b) of the EEA;

    (e)complained regarding ASL not refunding ASL’s unauthorised transactions which his personal American Express card was used; and

    (f)complained about the unreasonable conduct in relation to the Show Cause Direction and the immensely negative impact on Mr Jay’s health and well-being before Christmas.

48. The respondent submits that there is no allegation made in the pleading that ASL took any form of adverse action against Mr Jay because of, or for reasons that included, the 24 December 2019 Complaints and Inquiries. The applicant made no submission to the contrary.

49. I accept the respondents’ submission.

50. I am satisfied that the 24 December 2019 Complaint and Inquiry is not the exercise of a workplace right within the meaning of s 341(1)(c) of the FW Act.

51. The 30 April Complaints and Inquiries and the 17 February 2020 complaints were abandoned by the applicant.

    THE REASONS FOR THE TERMINATION OF MR JAY’S EMPLOYMENT

52. As is clear from my reasons, I am not satisfied that any of the complaints or inquiries claimed by Mr Jay qualified as the exercise of workplace rights.

53. I have found that the complaints or inquiries either were not made, were not in the nature of complaints or inquiries, were not sufficiently related to Mr Jay’s employment or were not of a kind that Mr Jay would relevantly be able to make. Strictly, that ends the matter.

54. However, I will consider the reasons for Mr Jay’s dismissal, contrary to my earlier findings, that each of the alleged complaints/inquiries constituted the separate exercise of a workplace right.

55. It is necessary to have regard ss 360 and 361 of the FW Act.

56. Section 360 of the FW Act relevantly provides:

    360 Multiple reasons for action

    For the purposes of this Part, a person takes action for a particular reason if the reasons for the action include that reason.

57. Subsection 361(1) provides:

    361      Reason for action to be presumed unless proved otherwise

    If:

    (a) in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and

    (b) taking that action for that reason or with that intent would constitute a contravention of this Part;

    It is presumed that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise.

58. Section 361 puts the onus of proof on the employer to prove the actual “operative and immediate reason” an action was not taken for a reason that contravenes a provision in Part 3-1 of the FW Act. The onus falls on ASL and Mr Willis to prove that the adverse action was not taken because Mr Jay exercised workplace rights – to prove that the reasons for Mr Jay’s dismissal did not include the exercise by Mr Jay, either individually, or cumulatively of the workplace rights.

1. In Qantas (Supra), the plurality emphasised at [31], “the importance for the correct application of s 340 of a careful identification of the true reasons for adverse action which is alleged to contravene s 340”.

2. The principles that inform the Court’s approach to its task under ss 360 and 361 are well established. They are conveniently summarised in Alam (Supra) at [14]:

   (a)in order to attract the application of s 361, an applicant should allege with sufficient particularity both the action said to constitute “adverse action” and the particular reason or particular intent with which it is said the action was taken;

   (b)the party making the allegation that adverse action was taken “because” of a particular circumstance must establish the existence of that circumstance as an objective fact. That is, it is for the applicant to establish all the elements of the alleged contravention other than the reasons of the respondent for taking the adverse action;

   (c)an employer takes adverse action in contravention of s 340 if a proscribed reason is a “substantial and operative” reason for the action or if the reasons for the action include the proscribed reason;

   (d)the discharge of the s 361 onus requires proof on the balance of probabilities and usually requires decision-makers to give direct evidence of their reasons for taking the adverse action;

   (e)the determination of why an employer took adverse action against an employee requires an inquiry into the actual reason or reasons of the employer and is to be made in the light of all the circumstances established in the proceeding;

   (f)while the evidence of the decision-maker as to the reasons for the taking of the adverse action may, if accepted by the Court, satisfy the s 361 onus, such evidence is not a necessary pre-condition;

   (g)the Court’s rejection of the evidence of the decision-maker as to the reasons for the adverse action will ordinarily be “a weighty consideration and often a determinative consideration” in the determination of whether the reason alleged by the applicant was a substantial and operative reason for the action, but such a rejection does not relieve the Court from considering all the evidence probative of whether the reason asserted by the applicant has been negated. When there is evidence of a broad range of facts and circumstances, which are not dependent on acceptance of the decision-maker’s evidence about his or her asserted reason for the dismissal, such evidence must be taken into account in assessing whether the reasons asserted by an applicant were a substantial and operative reason for the action;

   (h)even if the reasons advanced by a respondent as the actual reasons for the decision are accepted, the absence of evidence that there were no additional reasons or that the actual reasons did not include the alleged proscribed reasons, may result in a failure to rebut the presumption;

   (i)the decision-maker’s knowledge of the circumstance asserted by an applicant to be the reason for the adverse action, and even its consideration, does not require a finding that the action was taken because of that circumstance. Nor does the fact that the adverse action has some association with a matter supporting a proscribed reason; and

   (j)adverse action taken against a person because of conduct resulting from the exercise of workplace rights may not offend the s 340(1) prohibition.

   (Citations omitted)

3. In Qantas (Supra), Gordon and Edelman JJ observed at [63]:

   Section 361 of the Act establishes a rebuttable presumption that the adverse action was taken for the reason alleged, or with the intent alleged, if taking action for that reason or with that intent would constitute a contravention of Pt 3–1 of the Act (which includes s 340). A person takes action for a particular reason if the reasons for the action include that reason. The presumption in s 361 recognises that the decision maker is uniquely placed to know the reasons for their action and should thus be made to prove them. An employer can discharge that onus by proving that none of its substantial and operative reasons for the adverse action was to prevent the exercise of workplace rights.

4. For the reasons that follow, I have concluded that the respondents’ evidence concerning the reasons for the dismissal of Mr Jay is reliable. In my view, none of the conduct that Mr Jay complains he was subjected to was taken because of, or for reasons that included that he had made the complaints or inquiries upon which he relies. There are a number of reasons for reaching this conclusion.

5. Firstly, each of the directors gave evidence in their affidavits of the reasons why they voted to terminate Mr Jay’s employment. Each of the director’s evidence was tested to varying degrees in cross examination. It was not put to any witness that their evidence regarding the reasons for terminating Mr Jay’s employment were false or that the decision to terminate him was actuated by the complaints and inquiries upon which Mr Jay relies. Each of the directors gave evidence denying they voted to terminate Mr Jay’s employment because of, or for reasons that included, any of the alleged complaints or inquiries referred to in Mr Jay’s SOC.

6. The Board minutes of the ASL Board were in evidence. Those minutes constitute contemporaneous evidence regarding the reasons for Mr Jay’s termination. None of the minutes refer to the complaints or inquiries. Nothing in the minutes provided a basis to infer that the reasons for Mr Jay’s termination included any of the complaints or inquiries. Those minutes are consistent with the evidence given by ASL directors.

7. The respondents contend that one of the fundamental difficulties for Mr Jay is that there is no contemporaneous evidence that supports his contention that the complaints upon which he relies were in the minds of the directors when they made the decision to terminate his employment.

8. ASL is an organisation whose members comprise credit unions, mutual banks, building societies and ‘neo-banks’ providing payment services to many thousand customers. As an ADI, ASL is required to comply with the APRA Prudential Standards. The Prudential Standards required ASL to maintain adequate capital to act as a buffer against the risks associated with its activities. The key requirements of the Prudential Standards required ASL to have an ICAAP, to maintain required levels of regulatory capital and to inform APRA of any adverse change in actual or anticipated capital adequacy.

9. In 2015, the ASL Board resolved to tighten the “trigger time” of notification to the CEO on PCR limits to one days’ notice.

10. In December 2017, the ASL Risk Appetite Statement identified ASL as having an extremely low appetite or tolerance in relation to any breaches, including any breaches of APRA requirements.

11. The evidence in these proceedings clearly demonstrated there to be little doubt that capital management and risk management were crucial ongoing priorities for ASL management and Board.

12. Mr Jay contended that ASL’s capital decline was disclosed in the financial reports that were provided to the Board and committees during the period from October 2017 to May 2018 and that it should have been evident to the directors from reading the material that there was a risk that ASL’s total capital would fall below the minimum regulatory requirement.

13. The ICAAP Report for the 2017 financial year, whilst identifying current Capital Position at $6,839,201 (below the $7.5 million internal trigger point) and projected capital to fall to $5,951,184 in June 2018, stated that there were no current plans to increase the level of issued capital. Mr Hassall in cross examination stated that the risk rating for capital issues contained in the papers was ‘minor’ and there was no ‘specific callout’ on an immediate, impending capital issue that was about to face the organisation. Further, Mr Hassall stated that breaches of the ASL capital position whilst technically being recorded in the appendices of the reports were not being specifically captured in other reporting to ‘call out’ that ASL was operating within a risk level.

14. The respondents submitted that as CEO, Mr Jay had a responsibility to monitor movements in capital and to alert the Board that urgent remedial action needed to be taken to prevent ASL breaching its mandated minimum for regulatory capital. I accept that submission. The role of a CEO extends far beyond simply presenting reports to the Board. Mr Jay identified his roles and responsibilities of CEO to include ensuring ASL met its regulatory obligations, ensuring the ASL Board was informed of all material developments relevant to ASL’s affairs and developing ASL’s strategic direction.

15. It became apparent that the Financial Management Report for the period ending 31 January 2018 circulated ahead of the Audit Committee meeting on 14 March 2018 was the first expressed acknowledgement that the spend on the NPP was impacting on ASL regulatory capital with a risk of breach to ASL’s minimum regulatory capital requirement of $5 million. Further, the evidence demonstrated that this was the first time Mr Jay advised the Board that immediate steps needed to be taken to bolster ASL’s capital. Mr Hassall was particularly critical of Mr Jay in this regard. Mr Hassall’s evidence was:

    …We had already reached the low point to capital and only at that time did recommendation start to come forward

    … there was no overt raising that – [an] issue raised that we needed to urgently raise capital in order to prevent the potential for a capital breach.

16. The evidence demonstrated that the board, whilst concerned about the capital decline, were more concerned with the perceived failure by Mr Jay of not highlighting or “calling out” the decline. The Board’s concern were the failures to alert the Board before the amount of regulatory capital had declined. The continuing fall in ASL’s regulatory capital and future projections were not being bought to the Board’s attention in a timely fashion.

17. Ms Bels stated this in examination-in-chief:

    … I would have expected – and this is what I see across my other boards – that I would have expected management in their commentary on the financial report, in the first couple of pages [of] the financial report, to highlight the trajectory of capital and the steps that could be taken to manage that and mitigate that so that it did not become a problem, and I would have expected that to be highlighted well before it became a problem.

18. Mr Hassall was cross-examined about his response to Mr Jay’s Year in Review. In response to a question “So you’re saying what he’s (Mr Jay) is doing is blaming the board?”, Mr Hassall said this:

    He is focusing on one particular component when there were multiple issues around capital management, and yet his only reflection was to point to a decision that was made in 2014…there were multiple challenges that we had around capital management that occurred. Some were related to the NPP funding decision, somewhat related to a capital forecasting, some were related to the effectiveness of our framework; it wasn’t about the actual issue that occurred with capital. It was more about or response to that and the lack of willingness to take accountability, because that creates concerns for the culture of the organisation moving forward, when it will face future issues. It was because he did not accept accountability for the failures that occurred at management level as well as across capital reporting, across forecasting and planning, across yes all of the things that were documented in APRA’s email;

19. Mr White and Mr Hassall felt that Mr Jay was not contributing enough strategic value to ASL. Mr Dinnie considered that the manner in which Mr Jay interacted with ASL members was outdated and in need of change. He considered that Mr Jay’s approach to dealing with APRA had impacted negatively on ASL’s relationship with APRA. Mr Locke and Mr Hassall expressed significant concerns regarding expenses and budgeting.

20. All of the directors were dissatisfied with how Mr Jay dealt with APRA. The exchange in correspondence between APRA and ASL during April 2018, May 2018 and September 2018 was in evidence.

21. ASL’s fall in regulatory capital drew attention from APRA in April 2018. The evidence before the Court demonstrated that APRA was in discussions with ASL management on 16 and 17 April 2018 advising of APRA’s concerns regarding the “significant reduction in ASL’s surplus capital over minimum APRA requirement of $5m and that ASL was operating within its Capital Conservation Buffer (CCB) during the December 2017 quarter.”

22. The evidence demonstrated that the fact of APRA’s communication with ASL was only brought to the attention of the Board when Ms Bels was contacted by Ms Rubi Westman, ASL’s Chief Risk Officer on 20 April 2018. APRA had forwarded correspondence to Mr Jay, in his capacity as CEO on this day, proposing to engage with ASL’s Board and management on 24 April 2018. In correspondence dated 1 May 2018, APRA summarised a number of concerns discussed in the meeting “regarding the adequacy of ASL’s capital position, inadequacies in the capital management framework-particularly in relation to triggers and response actions; profitability-reasonableness and accuracy of financial forecasts and associated assumptions; and deficiencies in ASL’s Recovery Plan.”

23. On 31 August 2018, APRA sent a letter to Mr Jay seeking a detailed explanation from ASL of the risk assessment undertaken by ASL in relation to its current level of market risk exposure. This correspondence was not brought to the attention of the Board until 5 September 2018 at a Risk Committee meeting. The dispute between the parties as to whether the correspondence was tabled before or after the meeting is of no consequence. The issue raised by Ms Bels was the “proper course of action would have been for the CEO to send it out…”. Mr Hassell noted that the situation was “very disappointing”. Mr Dinnie described the situation as “Again in issue that has been kept from the Board”.

24. On 13 September 2018 APRA sent a letter to Mr Lawler, the content of which Ms Bels regarded as “extremely serious”. This correspondence raised a third element of APRA’s concerns around pricing practices at ASL. Mr Hassell was particularly critical of this not being brought to the attention of the Board. Ms Bels expressed concern with management’s nondisclosure of APRA communications until a formal letter from APRA was received.

25. It is abundantly clear on the evidence that the actual reasons of the decision makers for the adverse action were Mr Jay’s refusal to accept responsibility for the culture of inadequate risk management and reporting that had developed under his leadership. The evidence demonstrated that Mr Jay continued to focus on ASL capital decline as a consequence of a Board decision in October 2014 to adopt the Operational Model of funding for the NPP.

26. The Board’s dissatisfaction with Mr Jay’s handling of the capital crisis stemmed from his refusal to acknowledge or take responsibility for management’s failure to proactively highlight and bring the capital issues (and the associated concerns raised by APRA) to the Board’s attention in a forthright manner, such that the Board no longer had confidence in Mr Jay’s ability to enforce a culture of responsible risk management in the organisation.

27. It would appear on the evidence that, the point was not whether or not the decision in October 2014 concerning the funding of the NPP was a correct decision. The point was that with a CEO that focused on that 2014 decision moving forward and consistently referencing that decision as an explanation or a consequence for regulatory capital levels, influenced critical decisions about ASL’s direction and policies and influenced financial and risk management.

    THE CASE AGAINST THE SECOND RESPONDENT

28. For the reasons contained in this judgement, Mr Jay has failed to establish that ASL took adverse action against him in contravention of s 340 of the FW Act. In those circumstances, Mr Jay has failed to establish that Mr Willis was “involved in” any contraventions of the FW Act within the meaning of s 550(2) of the FW Act.

29. The claims against Mr Willis are dismissed.

    CONCLUSION

30. For the foregoing reasons, Mr Jay’s claims are dismissed. Section 570 of the FW Act applies to limit the court’s capacity to award costs. The respondents may wish to be heard in respect of costs. If either or both of them wish to make a claim or claims for costs they may do so in the usual way, preferably after liaising with Mr Jay about appropriate procedural directions. In the meantime, there shall be no order as to costs.

I certify that the preceding six hundred and forty-six (646) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Goodchild.

Associate:

Dated:       13 February 2025