Kagiyama v Southern Cross Limousine Pty Ltd

[1997] IRCA 1

DECISION NO:1/97

CATCHWORDS

INDUSTRIAL LAW - complaint of UNLAWFUL TERMINATION - whether termination for engaging in conduct detrimental to employer’s interest and for lying about it was termination for VALID REASON - whether conduct justified SUMMARY DISMISSAL - whether employee accorded adequate OPPORTUNITY TO RESPOND to allegations

Workplace Relations Act 1996 (formerly Industrial Relations Act 1988) ss 170DC, 170DE, 170EA, 170EDA, 347

Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427

KENJI KAGIYAMA v SOUTHERN CROSS LIMOUSINE PTY LTD

No. NI 3562 of 1995

Before:           MARSHALL J
Place:            MELBOURNE (HEARD IN SYDNEY)
Date of hearing:   13 DECEMBER 1996
Date of order:     13 DECEMBER 1996
Date of publication
of reasons:       6 JANUARY 1997

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA           
NEW SOUTH WALES DISTRICT REGISTRY     
  No. NI 3562 of 1995

B E T W E E N :  
  KENJI KAGIYAMA
  Applicant

A N D  
  SOUTHERN CROSS LIMOUSINE PTY LTD   Respondent

BEFORE:   MARSHALL J

PLACE:    SYDNEY

DATE:     13 DECEMBER 1996

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1.   The application be dismissed.

2. Costs pursuant to s 347(1) of the Workplace     Relations Act 1996 be reserved.

Note:  Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
  No. NI 3562 of 1995

B E T W E E N :  
  KENJI KAGIYAMA
  Applicant

A N D  
  SOUTHERN CROSS LIMOUSINE PTY LTD
  Respondent

BEFORE:   MARSHALL J

PLACE:    MELBOURNE (heard in Sydney)

DATE:     6 JANUARY 1997

REASONS FOR JUDGMENT

On 7 September 1995 the applicant, Kenji Kagiyama, filed in the New South Wales District Registry of the Court an application under s170EA of what was then the Industrial Relations Act 1988, and which on 25 November 1996 became known as the Workplace Relations Act 1996 (“the Act”). Mr Kagiyama sought the remedies of reinstatement and compensation in respect of what he alleged to be the unlawful termination of his employment by the respondent, Southern Cross Limousine Pty Limited (“Southern Cross”), on 8 August 1995. At the hearing of the matter I was informed by counsel for Mr Kagiyama that the remedy of reinstatement was no longer sought.

On 14 September 1995 the District Registrar referred the matter to the Australian Industrial Relations Commission (“the Commission”) for conciliation.  On 14 November 1995 Commissioner Hodder certified that the Commission had been unable to settle the matter by conciliation.

The proceeding was heard by Judicial Registrar Locke on 15 March 1996. The case before the Judicial Registrar proceeded with Mr Kagiyama commencing to call his evidence first, although the onus is on the respondent to prove a valid reason for the termination. See s170EDA Workplace Relations Act 1996. At the conclusion of the applicant’s case before the Judicial Registrar, Southern Cross elected not to adduce evidence. On 7 November 1996 the Judicial Registrar delivered reasons for judgment in which she dismissed the application. Mr Kagiyama applied to the Court for a review of the exercise of power by the Judicial Registrar. The review was heard on 13 December 1996. At the conclusion of the hearing I dismissed the application and stated that I would give my reasons for so doing as soon as practicable. These are those reasons.

BACKGROUND FACTS

Mr Kagiyama commenced employment with Southern Cross as a bilingual tour guide/driver on 1 August 1993.  Mr Kagiyama’s first language is Japanese.  Southern Cross provides driver-supplied hire car services to Japanese tourists.  It also promotes and sells optional tours to tourists who use its hire car services.  It subcontracts with tour operators to promote their tours in the course of its hiring activities.  Mr Kagiyama was required to promote these tours as part of his duties.

On 9 February 1994 Mr Kagiyama executed an Executive Service Agreement (“the agreement”) with Southern Cross.  The purpose of the agreement as stated in the recitals thereto, was inter alia to “record the terms and conditions governing the Driver-Guide’s employment by the Company as more fully set out in this Agreement.”  The agreement contained provisions in respect of inter alia remuneration, responsibilities and obligations, ‘termination and expiration’ and, relevantly for the purposes of the present application, ‘covenants by Driver-Guide’.  In this regard clause 7.6 of the agreement provided:

“The Driver-Guide specifically undertakes and covenants to the Company that in consideration for the Company agreeing to employ the Driver-Guide, the Driver-Guide shall not during the term of this Agreement be engaged, concerned or interested, whether directly or indirectly, in any other business in competition with the business of the Company.”

Southern Cross contended that Mr Kagiyama, in the course of his duties and in breach of this covenant, distributed to tourists a brochure advertising shopping and optional tours on behalf of a business known as Enjoy Travel Information Service (“Enjoy Travel”).  The proprietor of the business was Mr Kagiyama’s then partner.  Southern Cross alleged that Mr Kagiyama also attempted to distribute these brochures to other of its employees.  It claimed that in distributing these brochures, Mr Kagiyama jeopardised its contracts with other tour operators.

Southern Cross principally relies on two conversations which occurred between Mr Kagiyama and Mr Tsomu Yura on its behalf as establishing a valid reason for the termination.  The first of these conversations occurred on 6 August 1995 and the second occurred on 8 August 1995.  Southern Cross alleges that as a result of this second conversation Mr Yura, on its behalf, formed the view that the employment relationship could not continue due to a justified loss of confidence in Mr Kagiyama.  It is therefore necessary to set those conversations in context.

THE FIRST CONVERSATION

On or about 6 August 1995 Mr Yura received a telephone call from one of his competitors, Mr Imaeda, who asked him if he knew about Enjoy Travel.  Mr Yura said that he did not.  Mr Imaeda said that he had heard that Mr Kagiyama and a Mr Ono, who was at that time also employed by Southern Cross, were working for Enjoy Travel and selling optional tours on its behalf.

Mr Yura gave evidence that subsequent to that telephone conversation he approached Mr Kagiyama and asked him if he knew about Enjoy Travel.  Mr Kagiyama said that he had heard of it.  Mr Yura then asked who ran the business, and Mr Kagiyama responded that he did not know.  Mr Yura said that he had heard that Mr Kagiyama was helping Enjoy Travel and asked if that were true.  Mr Kagiyama responded that he had seen the brochures at Sydney airport and had distributed them among his fellow tour guides, but that he was not helping Enjoy Travel at all.  Mr Yura then asked Mr Kagiyama to write a letter of apology to Southern Cross saying that he would not engage in that conduct again.  Mr Yura indicated to Mr Kagiyama that he would remain in the employ of Southern Cross if he produced the letter of apology within three days and accepted a 10 per cent cut in salary.  The first conversation then concluded.

THE SECOND CONVERSATION

At the commencement of the second conversation two days later on 8 August 1995 Mr Yura again asked Mr Kagiyama if he knew who ran Enjoy Travel.  Mr Kagiyama responded that he had a fair idea, but could not tell Mr Yura.  Mr Yura then produced a Certificate of Registration of Business Name and asked whether the named proprietor was Mr Kagiyama’s girlfriend.  According to Mr Yura, Mr Kagiyama then replied “I understand”.  Mr Yura accused Mr Kagiyama of lying, and told him that he (Mr Yura) had lost confidence in Mr Kagiyama.  Mr Yura then told Mr Kagiyama that he was dismissed, and to return his keys, manual and other documents to the office.  Mr Yura gave evidence that he subsequently learned from other drivers in his employ that Mr Kagiyama had approached those drivers and asked them to sell tours on behalf of Enjoy Travel.

The respondent called two further witnesses who were both driver-guides employed by Southern Cross.  Mr Yoshihara gave evidence that Mr Kagiyama approached him at the airport and said that he was starting a new tour operation.  He passed some brochures to Mr Yoshihara and asked him to distribute them saying that there would be a commission of approximately $50 for selling the tours, but Mr Yoshihara returned the brochures to Mr Kagiyama.  Mr Kato gave evidence that he also heard about Enjoy Travel at the airport.  His evidence was that he was approached by an acquaintance who asked him if he worked for Enjoy Travel as he (the acquaintance) had heard that other persons employed by Southern Cross were also working for Enjoy Travel.  Mr Kato gave further evidence of conversations with other persons regarding Mr Kagiyama’s alleged involvement with Enjoy Travel, but he was not approached by Mr Kagiyama directly on that matter.

Mr Kagiyama agreed in substance with the account of the conversations given by Mr Yura.  He said that he had no intention of working for Enjoy Travel after his first conversation with Mr Yura and would have produced the letter of apology in the specified period if he had remained in the employ of Southern Cross long enough.  He denied any financial involvement with Enjoy Travel and said that he had given the brochures to about eight Japanese tourists for use as a map.  (The brochure was tendered in evidence and contains a map of the Sydney CBD.)  Under cross examination he amended his answer to “less than 20...Well, to about eight people, well it would not be more than about 13”.  He said he commenced handing the brochures out on 3 August 1995, a matter of days before the first conversation with Mr Yura.  He denied that he had been distributing the brochures for about a month before that first conversation.  His evidence on this point conflicts with that of Mr Yoshihara.  Mr Yoshihara gave evidence that his conversation with Mr Kagiyama regarding distribution of the brochures occurred about a month before Mr Kagiyama was terminated.

Mr Kagiyama agreed that he had lied to Mr Yura during the first conversation regarding his knowledge of the proprietor of Enjoy Travel.  He agreed that it was wrong for him to be promoting Enjoy Travel whilst working for Southern Cross, and that he had made a mistake in doing so.  He also agreed that he had offered the brochures to Mr Yoshihara and had mentioned a figure representing commission to him.  He agreed further that he had breached clause 7.6 of the agreement and that in doing so was liable to be dismissed.  Mr Kagiyama denied that in the second conversation on 8 August 1995 Mr Yura accused him of lying, or that he had said that he did not trust Mr Kagiyama and had lost confidence in him.  However he agreed that Mr Yura had terminated him because he had not revealed his partner’s involvement with Enjoy Travel on the occasion of the first conversation.

ISSUES ON REVIEW

Mr Kagiyama alleged that Southern Cross had breached ss 170DE(1) and 170DC of the Act. In respect of s 170DE(1) of the Act, Mr Moore’s primary submission on behalf of Southern Cross was that a valid reason existed for the termination of Mr Kagiyama’s employment based on his conduct in involving himself with Enjoy Travel as its agent in opposition to the interests of Southern Cross and in breach of clause 7.6 of the agreement. Mr Moore also contended that Mr Kagiyama’s conduct in lying to Mr Yura about his knowledge concerning the proprietor of the business Enjoy Travel was conduct which gave rise to a valid reason for the termination of Mr Kagiyama’s employment. Mr Moore contended that through this conduct Mr Kagiyama also sought to disguise his own involvement with Enjoy Travel.

In respect of the alleged breach of s 170DC of the Act, Mr Moore submitted that Mr Kagiyama was given an adequate opportunity at the commencement of the second conversation on 8 August 1995 to correct the answer he had previously given regarding the identity of the proprietor of Enjoy Travel. It is not in dispute that on this second occasion, Mr Kagiyama replied with words to the following effect:- “I have a fair idea but I cannot tell you”. Mr Moore submitted that Mr Kagiyama understood the tenor of the employer’s complaint against him and that in the circumstances the test stated by Wilcox CJ in Gibson v Bosmac Pty Ltd (1995) 130 ALR 245 at 252 that s 170DC of the Act be applied in a practical, common sense way had been satisfied. Mr Moore also submitted that regard ought to be had to the common law principles regarding breach of the employee’s duty of fidelity and good faith as discussed by the High Court in Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 and to the judgment of the Full Federal Court in North v Television Corporation Ltd (1976) 11 ALR 599 regarding dismissal for misconduct.

On behalf of Mr Kagiyama, Mr Walsh submitted that notwithstanding that Mr Kagiyama had been less than frank with Mr Yura regarding his knowledge of the identity of the proprietor of Enjoy Travel, from a practical point of view any harm that might have been suffered by Southern Cross as a result of Mr Kagiyama’s conduct in handing out the brochures had passed by the time the first conversation had concluded and was in any event of short duration. He sought to draw a distinction between the conduct of Mr Kagiyama in handing out the brochures, and his conduct in lying to Mr Yura about the extent of his knowledge regarding the identity of the proprietor of Enjoy Travel.  Mr Walsh contended that the failure of Mr Kagiyama to disclose the full extent of his knowledge during the first conversation was not a valid reason justifying summary dismissal.

Mr Walsh further submitted that the position held by Mr Kagiyama was not one which demanded such a duty of fidelity that conduct of the kind engaged in would justify summary dismissal.  He submitted that by the end of the first conversation enough of the tenor of Mr Kagiyama’s misconduct was known to Mr Yura so as to enable him to make a decision whether or not to terminate Mr Kagiyama’s employment.  He further submitted that on the evidence regarding the contents of the first conversation, it was not open to the court to conclude that Mr Yura placed any particular importance on the identity of the person who ran Enjoy Travel, and that Mr Kagiyama could be excused for thinking that no great importance was placed on that issue.

In so far as the evidence of the two driver-guides, Mr Yoshihara and Mr Kato, was concerned, Mr Walsh submitted that the respondent was not entitled to justify the dismissal ex post facto by reference to matters discovered subsequent to the dismissal.

In respect of s 170DC of the Act, Mr Walsh submitted that Mr Kagiyama was not given an adequate opportunity to defend himself against the particular allegation of misconduct which, he contended, the evidence disclosed as being the real reason for the termination, namely Mr Yura’s assumption upon receiving the Certificate of Registration of Business Name that Mr Kagiyama was financially involved with Enjoy Travel.

CONCLUSION

I reject Mr Walsh’s submissions.  His submission regarding the court’s alleged inability to take into account matters which became known to the employer after the termination is contrary to the position stated by Brennan CJ, Dawson and Toohey JJ in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 430 where their Honours said:

“...facts which existed at the time of a dismissal, but which come to light only subsequently, might justify the dismissal when otherwise it would be harsh, unjust or unreasonable.”

In so holding their Honours applied the judgment of von Doussa J in Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427 at 456.

In the circumstances I do not consider that it is necessary to have regard to the knowledge of Mr Kagiyama’s involvement with Enjoy Travel which Southern Cross discovered after the termination.  In my opinion the discovery by Mr Yura that Mr Kagiyama had lied to him about the extent of his knowledge regarding the identity of the proprietor of Enjoy Travel gave rise to a valid reason justifying summary dismissal.  Given the discovery of Mr Kagiyama’s dishonesty, Mr Yura was reasonably entitled to form the view that he could not rely on the undertaking Mr Kagiyama had given him at the end of the first conversation and could not continue in a relationship of trust with him.  The position of driver-guide is such that the duties of the position must be performed largely unsupervised, and the employer in such circumstances must be able to confidently expect that its employees will perform their duties in its interest.

In the circumstances I am of the view that Mr Yura was entitled to summarily dismiss Mr Kagiyama upon discovering that Mr Kagiyama had lied to him.  I agree with the submissions of Mr Moore that Mr  Kagiyama was given an adequate opportunity at the commencement of the second conversation on 8 August 1995 to correct the answer he had previously given regarding the ownership of Enjoy Travel, and that he understood the tenor of Mr Yura’s complaint against him that regard.  It was for these reasons that the application was dismissed on 13 December 1996, at which time I made the following orders:

1.   The application be dismissed.

2. Costs pursuant to s 347(1) of the Workplace     Relations Act 1996 be reserved.

COSTS

Subsequent to dismissing the application on 13 December 1996 Mr Moore raised with me the question of costs pursuant to s 347(1) of the Act. Counsel agreed that argument on that point should be deferred until publication of these reasons. It is appropriate that I should deal with this question at a time and place convenient to the parties, and I therefore order that the application under s 347(1) be heard and determined at 9.30 am on 11 March 1997 at Sydney. It is anticipated that this matter can be dealt with in three-quarters of an hour.

I certify that this and the preceding 15 pages
are a true copy of the Reasons for Judgment
of his Honour Justice Marshall.

Associate:  
Dated:  

APPEARANCES

Counsel for the Applicant:            P Walsh
Solicitor for the Applicant:           P Cappe

Counsel for the Respondent:           R Moore
Solicitor for the Respondent:          Farmer Campbell Edwards

Date of hearing:  13 December 1996
Date of order:  13 December 1996
Date of publication of reasons:        6 January 1997