[2020] FWC 5049

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Matthew Johns
v
Zone RV Pty Ltd
(U2020/3408)

COMMISSIONER SIMPSON

BRISBANE, 18 SEPTEMBER 2020

Application for unfair dismissal – Conflict of Interest – Despite procedural flaws dismissal not unfair

[1] On 23 March 2020, Mr Matthew Johns made an application under s.394 of the Fair Work Act 2009 (the Act) alleging that he had been unfairly dismissed by his employer, Zone RV Pty Ltd (Zone).

[2] I issued directions for filing material and listed the matter for hearing on 20 and 21 July 2020. Zone did not raise any jurisdictional objections and as such the hearing dealt only with the merits of the case. At the hearing, Mr Johns represented himself. Ms Peall of Mylegal Pty Ltd was granted leave to represented Zone.

BACKGROUND

[3] Mr Johns was an employee of Zone and held several roles, including Managing Director, Sales Manager, and Director Sales Marketing and Product. Mr Johns was also a Director of the company, and additionally was a shareholder of the company. Mr Johns was associated with the company from its creation in 2015 and was a co-founder of the company along with Mr David Biggar, and had worked for its predecessor, Composite Caravans Australia.

[4] In late 2019 and early 2020, Mr Johns proposed Zone engage Mr Mitch Elder, an electrical engineer with experience with motor vehicles, to design and implement installation of an auto-levelling system known as the Planum system. Zone agreed to engage Mr Elder.

[5] Subsequent to Mr Elder’s engagement, Mr Johns incorporated a company, Planum Pty Ltd, (Planum) of which Mr Elder was the Director and controlled 50% of shares. Mr Johns was the only other shareholder and controlled the remaining 50% of shares in Planum.

[6] Mr Johns was approached about his ownership of shares and it was alleged he had a conflict of interest. Mr Johns met with Mr Biggar and other directors to discuss the allegations. An attempt at mediation was made. Mr Johns asserts this not a genuine attempt at mediation and did not resolve the dispute.

[7] A Special Resolution of shareholders on 2 March 2020 voted that Mr Johns should be removed as a Director of the company. Subsequent to this meeting, on 2 March 2020, Mr Johns’ employment was terminated by way of a letter which read:

“Matthew Johns
[address redacted]

Dear Matt,

Notice of Employment Termination

We regret to advise as a follow on from the outcome of the Special Resolution held on 2 March 2020 by the Shareholders of Zone RV Holdings Pty Ltd resulting in your removal as a Director of Zone RV Holdings Pty Ltd and Zone RV Pty Ltd that your employment with Zone RV Pty Ltd will also cease.

Following the review and investigations, as an employee of the company you have also breached the Conflict of Interest requirements outlined in the Zone RV Pty Ltd Code of Conduct which you signed on 10 May 2017. The Code of Conduct outlines the standards required as a condition of employment, and in your key leadership role you must not only maintain the standard at all time but demonstrate the standards as a director and employee.

This gross misconduct breach relates to your involvement with the Planum system and lack of disclosure of the conflict to the shareholders and your employer and was the same matter considered by the shareholders.

As such your employment with Zone RV Pty Ltd will cease on 2 March 2020.

Termination benefits

Your employment termination benefits will consist of:

• Payment in lieu of notice 4 weeks.

• Accrued entitlements - all unpaid accrued entitlements will be paid out.

• Any pro-rata adjustments appropriate to the current pay period.

Confidentiality

Please note your obligations to maintain the confidentiality conditions post your employment is covered by your employment contract and the conditions within the shareholder agreement which you are a signatory to with Zone RVHoldings Pty Ltd, continue post your employment.

Return of Assets

You are required to return in working order all assets belonging to the company be they be held at the company, your residence or alternative sites.

These assets include but are not limited to:

• mobile phone

• laptop

• hard copy documentation

• electronic documentation

• copies of any information on storage devices

• security codes and security devices

• bank security devices

• company passwords

You are not entitled to retain copies or make copies of any intellectual property information, or sales or marketing or operational documentation that you have gained or process through your employment with the company either as an employee or as a director.

You must not to delete or erase any documentation or data from the business systems or communication mediums.

The company reserves its right to protect its interests and to act on any breaches or non-compliance on these matters.

Please return these to the company by 2pm Friday 6 March 2020 at [address redacted].

Motor vehicle

Please return the company vehicle allocated to you in a clean condition by 2pm Friday 6 March 2020 at [address redacted].

Matt, we regret the circumstances that have led to this decision and your employment termination, but we appreciate the contribution you have made to date and wish you well in your future endeavours.

Dave Biggar
For and on behalf of Zone RV Pty Ltd”

[original text kept]

LEGISLATION

[8] s.394 of the Act sets out:

“394 Application for unfair dismissal remedy

(1) A person who has been dismissed may apply to the FWC for an order under Division 4 granting a remedy.

Note 1: Division 4 sets out when the FWC may order a remedy for unfair dismissal.

Note 2: For application fees, see section 395.

Note 3: Part 6 1 may prevent an application being made under this Part in relation to a dismissal if an application or complaint has been made in relation to the dismissal other than under this Part.

(2) The application must be made:

(a) within 21 days after the dismissal took effect; or

(b) within such further period as the FWC allows under subsection (3).

(3) The FWC may allow a further period for the application to be made by a person under subsection (1) if the FWC is satisfied that there are exceptional circumstances, taking into account:

(a) the reason for the delay; and

(b) whether the person first became aware of the dismissal after it had taken effect; and

(d) prejudice to the employer (including prejudice caused by the delay); and

(e) the merits of the application; and

(f) fairness as between the person and other persons in a similar position.”

[9] Further, ss.385 and 387 relevantly provide as follows:

“385 What is an unfair dismissal

A person has been unfairly dismissed if the FWC is satisfied that:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(d) the dismissal was not a case of genuine redundancy.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388.”

“387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.”

[10] As to remedy, s.390 provides:

“390 When the FWC may order remedy for unfair dismissal

(1) Subject to subsection (3), the FWC may order a person’s reinstatement, or the payment of compensation to a person, if:

(a) the FWC is satisfied that the person was protected from unfair dismissal (see Division 2) at the time of being dismissed; and

(b) the person has been unfairly dismissed (see Division 3).

(2) The FWC may make the order only if the person has made an application under section 394.

(3) The FWC must not order the payment of compensation to the person unless:

(a) the FWC is satisfied that reinstatement of the person is inappropriate; and

(b) the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case.

Note: Division 5 deals with procedural matters such as applications for remedies.”

EVIDENCE AND SUBMISSIONS

[11] Mr Johns provided a witness statement of 23 June 2020, 1 and a further statement in reply of 10 July 2020.2 Mr Elder completed a Statutory Declaration of 21 April which he also adopted as evidence in the matter.3 For Zone, Mr Biggar,4Mr Keith Bailey,5 and Mr Martin Bell all provided witness statements dated 3 July 2020.6

[12] Mr Biggar said that Mr Johns was a Director of Zone and a Shareholder of Zone RV Holding Pty Ltd which owns the shares in Zone.

[13] Mr Biggar said he had other commercial interests besides Zone, the main one being Cure Composites. He said Cure Composites was formed in 2007 and he had advised the other shareholders that Cure Composites manufacturing the external panels of caravans and was the backbone of why Zone was formed and is the reason many external shareholders bought into the business. Mr Biggar said Mr Johns worked for Cure Composites for a period of time as a project manager and a small start-up business was started which did not proceed and was wound up and was offered shares in Composite Caravans Australia to build caravan panels for the DIY market.

[14] Mr Johns said in December 2014 Mr David Biggar incorporated Composite Caravans Australia Pty Ltd (CCA), as a do it yourself kit caravan supplier. Mr Johns said CCA was incorporated specifically to assist another struggling company Cure Composites Pty Ltd sell more of the fibreglass panels they made which are used for the caravan walls, roof and floor. Mr Johns was asked if when he went into business with Mr Biggar he was aware of Mr Biggar’s other business interests. He said he was aware of Cure Composites.

[15] Mr Johns said his employment started when Mr Biggar offered him a role in setting up a website for CCA at no pay in exchange for 10% of company shares and this work was performed for around one year. Mr Johns said during this time he continually discussed with Mr Biggar building complete caravans however Mr Johns said Mr Biggar stated he did not want to go down that path.

[16] Mr Johns said Mr Biggar was also now involved in a company called CL Composites in Melbourne that was a new business established to sell the composite panels (same as Cure Composites once made) to the caravan industry of which the majority of manufacturers are based in Melbourne.

[17] Mr Johns said he borrowed $50,000 from his mother to purchase another 15% of company ownership in CCA and that money was used in the general running of the company. Mr Johns said at that stage he was further involved in the business, doing all of the CAD design work for the company, ordering parts, setting up trade accounts and still hands on, on the floor. Mr Johns said he was working extremely long hours while Mr Biggar spent 50% of his time in Melbourne leaving most of the executive level management work to himself.

[18] Mr Johns said in November 2015 Zone was incorporated after engaging a marketing agency to develop the name and branding along with a digital marketing strategy. Mr Johns said it became known to him, once Mr Biggar had exhausted a project called the Aries project with other associates, that during the RV Innovation period he had been working on another business specifically to manufacture and sell completed caravans as Mr Johns had been suggesting Composite Caravans should do, without his knowledge.

[19] Mr Johns said it was only disclosed to him when it was discussed that Zone needed a business plan itself to raise capital and the plan from the defunct project was used. Mr Johns said this was his first experience with Mr Biggar’s level of disclosure in other interests.

[20] Mr Johns said a decision was made to align the business with a caravan dealer and a number of sales were made at a caravan show that needed cash flow financing of around $200,000 which he personally secured and underwrote with his brothers business at zero interest to Zone. Mr Johns said Zone used a modified version of the Aries business plan to sell 25% of its shares in an equity raise to Drifters in 2015.

[21] Mr Johns said during this time he was at Zone full time, Mr Biggar remained in Melbourne 50% of his time and he took on the role of Managing Director. Mr Johns said during this time Mr Biggar was the salesperson for CL Composites and would regularly enter other manufacturers to discuss the methods of manufacturing caravans with composite panelling, the

same process that was being used and proprietary techniques refined at Zone RV. Mr Johns claimed Mr Biggar would divulge confidential information from these manufacturers to him and possibly other Zone team members such as production techniques and volumes.

[22] Mr Johns said at some time during this period Zone stopped getting the walls and roof panels from Cure Composites and began having them delivered from Melbourne from CL. Mr Johns said this decision was made solely by Mr Biggar with no input or disclosure from him or the other shareholders and at seemingly no benefit to Zone.

[23] Mr Johns said that during 2015 Zone hired Mr Carl Bird in a CFO type capacity but during a week of leave for Mr Johns, Mr Biggar and Mr Bird orchestrated a take-over of the overall management of the business from himself and put Mr Bird as the CEO and offered him the position of Sales Manager as per the signed contract.

2016/2017

[24] Mr Biggar said that on 27 October 2016 Mr Johns began working with Zone in the role of Sales Manager.

[25] Mr Johns said sometime in either 2016/2017 Mr Biggar began discussing the concept of building homes using the same techniques of solid panel manufacturing that Zone had refined and from knowledge he had gained whilst being employed by Zone. Mr Johns said Mr Biggar proceeded to build a house that he lives in using these techniques and during the build used Zone property, consumables, supplier accounts, 12V electric system IP, lighting techniques, panel joining techniques and staff members, often pulling them away from ZONE. Mr Johns said whilst Mr Biggar maintains this was not a commercial enterprise, he intended for it to be one, also building another building for a friend of his in New South Wales. Mr Johns said this is a clear breach of the Zone code of conduct where his personal and financial interest has the appearance of compromising his professional judgement and behaviour in carrying out his duties at Zone.

[26] Mr Johns said during 2017 Mr Biggar cited the conflict of interest he was experiencing by being part of CL and Zone as the main reason to sell his interest in CL making some profit in the share sale. Mr Johns said at the completion of the CL exit ZONE continued to source its composite panels from CL. Mr Johns said Mr Biggar’s good friend who worked with him at CL, Mr William Robinson relocated to the Sunshine Coast with the express intent of setting up a new panel manufacturing facility.

[27] Mr Johns said Mr Biggar during this time was gainfully employed at ZONE and tasked with BOM (material cost of the vans) reduction. Mr Johns said it was discussed before and during this time that ZONE should set up its own panel manufacturing as it would be a guaranteed BOM reduction and a large one at that. Mr Johns said Mr Biggar proceeded instead to actively support Mr Robinson in the establishment of Link Composites (LINK), so called because it was established in a ZONE sublet facility in Link Crescent Coolum Beach, immediately next door to ZONE in what he called an “open book” relationship. Mr Johns accepted Mr Biggar had no involvement in Link Composites however he submitted Cure Composites benefits from Link Composites producing more panels as his other company Cure Composites benefits by doing profile cutting for Link, and it was Mr Biggar’s decision that Zone would not manufacture its own panels when it could have been doing that work.

[28] It was submitted for Zone that Mr Biggar in his evidence made clear as Managing Director that in his view it was not a sound financial decision for Zone to manufacture the panels.

[29] Mr Johns said Mr Biggar provided assistance in a number of areas to establish this business, including but not limited to, his time and use of Zone property. Mr Johns said at no time was Zone involved in this decision making, nor was it made aware that LINK would be manufacturing panels from the Zone sublet facility to service Zone RV’s competitors.

[30] Mr Johns said a further conflict arising from this new arrangement was that Cure Composites, a company Mr Biggar was owner and director of, is the only company that offers a CNC profile cutting and floor panel manufacturing service for the composite panels LINK makes and therefore benefits materially and Mr Biggar personally from Link selling more panels to Zone’s competitors than he would if Zone was making its own panels. Mr Johns said the only logical reason to not establish Zone’s own panel manufacturing facility is so that LINK can service more customers and therefore create more cutting and floor manufacturing work and therefore profit for Cure Composites and materially benefit Mr Biggar.

[31] Mr Johns said as a result of LINK servicing more customers it outgrew the Link Crescent address and has now rented substantial space in Mr Biggar’s own industrial property, so he further benefits from the “non disclosed” conflict of interest. Mr Johns said at no stage were shareholders or himself informed of this conflict of interest or involved in the decision making that led to Mr Biggar to personally gaining from the decision.

[32] Mr Johns asked Mr Biggar if he had other business interests beside Zone and he agreed. Mr Johns asked Mr Biggar what his process for informing other shareholders about these interests was. Mr Biggar said the main other business shareholding was CL Composites a panel manufacturer in Sydney done prior to Zone being formulated. Mr Johns said he was referring to Link Composites when Mr Biggar removed his interest in CL Composites he sought to establish his friend as a panel supplier and his other business Cure Composites benefited from this. Mr Biggar said this was talked about at an Annual General meeting to bring panel manufacturing inhouse and it was decided that Zone did not need enough panel to bring manufacturing in house.

[33] Mr Biggar said the other business did not have a sub-lease, it was his own lease. Mr Biggar said he did not formulate a new company and Cure Composites already had the cutting contract, so nothing was changed.

[34] Mr Johns said to Mr Biggar that he did not comply with the Code of Conduct in regard to his conflict of interest requirements. Mr Biggar’s evidence was to the effect that Zone was always at the top of his priorities in decision making.

Trak Yakka

[35] Mr Johns said around the end of 2018 the shareholders who own the Drifters shares (25%) incorporated a new company called Trak Yakka with the initial product of marketing material to be delivered under the banner Dustem UP TV which would market off road touring

marketing content. Mr Johns said he asked if Zone would be involved in the new business as a joint venture as at the time Zone was doing an excellent job of producing its own digital content and would be bringing its own ideas and approach to content filming trips.

[36] Mr Johns said Drifters pitched an idea to Mr Biggar and himself of a 12-part series that it was proposed Zone would sponsor for the cost of $120,000 for the year. After initial reservations it was verbally agreed to proceed provided the “goal posts” would not be moved on price and timeline. Mr Johns said a few months later a new proposal arrived at the cost of $160,000 plus GST and was immediately rejected by himself.

[37] Mr Johns said the Drifters shareholders lobbied Mr Biggar directly and essentially his decision was muted and the contract proceeded. Mr Johns said from this point his relationship with the Drifters shareholders degenerated, furthermore once Dustem UP actually launched , the results were abysmal. Mr Johns said as a consequence he was tasked with reporting to the Drifters shareholders, much to their unease and he believes this situation created the end result at the shareholders meeting.

Composite airplane project

[38] Mr Johns said that early in 2019 Mr Biggar began another project building a composite airplane. Mr Johns said a large amount of Mr Biggar’s time and focus whilst employed and present at Zone was put into this project. Mr Johns alleged this breached the code of conduct and put his personal interests first. Mr Johns said Mr Biggar was vocal about his plans to turn the project into a business of building more planes on the back of this initial concept, engaging Zone suppliers for future and current works focused solely on commercialising the plane. Mr Johns claimed the manufacturing he was responsible for at Zone took a drastic downward trend during this period. Mr Johns said at no time was this conflict discussed or fully disclosed.

[39] It was submitted for Zone that Mr Biggar is an entrepreneur who looks at various business opportunities and had the opportunity in relation to a project materialised into something to disclose, it would have been disclosed to Zone shareholders.

[40] Mr Johns said around mid-2019 Mr Biggar made a direct comment to him that he was no longer to be involved in product development and made moves to restrict his access to the design department which effectively removed any access to be involved in product development tools. Mr Johns put to this Mr Biggar and Mr Biggar said he did not recall that conversation.

[41] Mr Johns said Mr Biggar took on the development of a new camper trailer and new ute back canopies with Mr Johns input being extremely limited. Mr Johns said later in 2019 he asked for resources to develop new retail products he wished to pursue and was told that would not be made available. One such product was a suspension levelling system.

Idea for self-levelling system

[42] Mr Johns said that in July 2018, he began making enquiries with existing suppliers regarding a combination of available systems to create a self-levelling caravan controller. Mr Johns said that while similar systems exist, a combination of the available systems would create a more complete offering, and he intended to engage those suppliers in providing this system. Mr Johns said that he would often engage suppliers to produce products for use in Zone caravans, which suppliers would also sell to competitors.

[43] Mr Johns said that progress from existing suppliers was slow, and after around 12 months, he had a casual conversation at a barbeque with Mr Mitchell Elder, an electrical engineer who worked on electrical automation systems for electric vehicles. Mr Johns told Mr Elder about the combined system, and Mr Elder said he would be able to develop something using a controller he already had experience with and the development of the system would be relatively straightforward with his ability to customise the coding and system to suit. Mr Elder was Mr Johns’ future cousin-in-law.

[44] Mr Elder said he believed this BBQ was at his home on 31 August 2018 and he had just left a position in a vehicle technology company. Mr Elder said Mr Johns explained that Zone was looking to introduce a self-levelling system and Mr Elder said he believed he could develop the system in about one month. Mr Elder said at the time he intended his own company would not be undertaking the project.

[45] Mr Johns said he discussed engaging Mr Elder with Mr Biggar immediately after and said he was very open with the family relationship and Mr Elder’s background. Mr Johns said Mr Biggar agreed that engaging him would be a good pathway given the lack of movement from the traditional suppliers. Mr Elder was introduced to key managers as the developer of the Horizon levelling system, and consent to discuss the need for the commonly held idea was given. In 2019, Mr Elder then produced a system and installed it on a demonstration camping trailer at no cost to Zone. The system worked well, and Mr Elder was engaged after internal agreement was reached with the company, and Mr Elder was commissioned to produce a full-sized caravan as another demonstration model.

[46] Mr Johns said he and Mr Elder discussed creating a company to market and sell the system and other potential technology-based concepts, and the pair discussed names and potential strategies to market the levelling system.

[47] Mr Biggar said that as a result of Mr Johns owning a shareholding in the Zone RV Holding Pty Ltd (the holding company) and his involvement in Zone (the operating company) as a Director and employee, Mr Johns was aware of Zone’s intention to develop and install auto-levelling systems in Zone’s Summit-series caravans. Zone submitted Mr Johns was also aware of other commercial opportunities where Zone had approached commercial contacts to participate in the development of the auto-levelling system and to on-sell the auto-levelling system to other caravan manufacturers.

[48] Mr Biggar said in early 2019 Mr Johns and himself went to Cruise Master in Melbourne, the company that does the suspensions for Zone, about developing an auto levelling system. Mr Biggar said if Cruise Master had developed it they could have discussed commercial terms, but it never got to that point.

[49] Mr Biggar said Mr Johns introduced Mr Elder as someone who could potentially assist in developing the auto-levelling system. Zone submitted that it and Mr Elder had discussed potential commercial relationships such as a joint venture, partnership, and/or discounted development costs between the parties. Mr Biggar said that Mr Johns disclosed that he was married to Mr Elders cousin. Mr Biggar said Mr Elder had the technical skills to make the project happen.

[50] Mr Martin Bell, a Manager employed at Zone said that Mr Johns introduced Mr Elder to himself and Mr Brad Marshall, also of Zone. Mr Bell said at the meeting they discussed the auto levelling system. Mr Bell said that Mr Johns told him that he met Mr Elder at a BBQ and that he was experienced with electronics and was working for a company that was involved in electric cars.

[51] Mr Bell said in October 2019 Mr Elder installed a trial auto levelling system to a caravan which was to feature in a caravan competition and there were several operational issues with the first few installations.

[52] Mr Johns accepted during cross examination that he had discussed establishing a separate company with Mr Elder before the meeting on 10 January 2020 but described these discussions as “beer coaster” discussions. Mr Johns could not recall the dates. Mr Johns accepted that he did not discuss with the other shareholders of Zone the idea of establishing a separate company with Elder beforehand.

[53] Mr Elder said he agreed to establish a company with Mr Johns to take the product to market. Mr Elder said a formal agreement had not yet been made about share equity.

10 January 2020 meeting

[54] On 6 January 2020, Mr Johns said Mr Martin Bell called a meeting via email with Mr Elder and the production and design heads of department to discuss the system Mr Elder had created for future installs. Mr Elder said in his statutory declaration that Mr Bell contacted him to arrange the meeting on 10 January. He repeated this in his oral evidence.

[55] Mr Elder said the discussion was concerning how quickly he could produce a complete kit of his Horizon Control System to install in the 2020 Summit Series Vans. He said he was aware Zone had already advertised this kit as part of the Summit Series Vans and taken orders for multiple vans. He said he was informed at the meeting Zone had 5 confirmed orders and a couple of others pending requiring the kit. He said a price of $5000 per kit was quoted verbally by Mr Johns and was verbally accepted by Zone at this meeting.

[56] Mr Elder gave evidence that he said he would be more comfortable proceeding with the commercialisation of the product if he had a purchase order for those first 5 units. He said he was instructed to organise purchase orders with “Brett” the procurement officer who was not in attendance at the meeting.

[57] Mr Elder said Mr Marshall then asked several questions about Planum including who was involved and he said Mr Johns responded that Planum was a partnership between himself and Mr Elder which they had verbally agreed to previously.

[58] Mr Elder said the question was also asked if the company was established and does it have appropriate insurance to which Mr Elder said Mr Johns responded that they had not set up the entity with ASIC and the other government departments nor did they have insurance at that point but would be organising it. Mr Elder said he responded that he had professional indemnity insurance but that should not come into play with this arrangement with Planum as it will be a separate legal entity.

[59] Mr Elder said most of the talking in regard to Planum at the meeting was done by Mr Johns. Mr Elder said the meeting ended with all parties in agreement that Zone was happy to purchase the Horizon Caravan System kit from Planum and would provide a purchase order for the 2020 Summit series vans they had on order.

[60] Mr Bell accepted that he called the meeting on 10 January. Mr Johns said that he, Mr Elder, Mr Bell, Mr Terrance Lunney, and Mr Brad Marshall were present at the meeting, and that during the meeting Mr Johns and Mr Elder were on one side of the table and everyone else was on the other side. Mr Johns said that it was obvious that he and Mr Elder were speaking on behalf of Planum Pty Ltd, the name of the company that he was in partnership with Mr Elder in. Mr Johns said he explained the capacity of the now-completed system to those present and presented the company logo among other things in the mostly verbal presentation. Mr Johns accepted that he was wearing a Zone T-Shirt at the meeting.

[61] Mr Johns said that Mr Marshall asked questions about the company structure including the question “Who is Planum'', which Mr Johns said he answered was Mr Elder and himself. Mr Johns said there were a number of other questions regarding details such as insurance, and he said he responded to most of these on behalf of Planum. Mr Johns argued it was clear enough who Planum was and that after the meeting, Mr Marshal sent a review and plan email addressed to Mr Elder and Mr Johns, and the others present at the meeting were carbon copied into the email.

[62] Mr Johns said that at this meeting, he was very careful and clear to leave the final decision of whether to continue using the Planum system on the caravans to the other Zone employees. Mr Johns said the other employees agreed, with Mr Bell providing verbal confirmation, and the decision was made to use the system on the Summit caravan series moving forward.

[63] Mr Johns said they briefly discussed the possibility of a more basic system being developed that could be used on more of the range in the future. Mr Johns said this was further
discussed openly at a pre-design meeting in which the specifications of the upcoming Limited-Edition vehicles were discussed. Mr Johns said he suggested using Planum, but Mr Bell stated he thought it best to wait until the middle of the year and offer the aforementioned base Planum system. Mr Johns said the decision to use the system on both occasions was Mr Bell’s decision.

[64] Mr Bell said that during the meeting Mr Marshall asked about product liability and insurance cover and Mr Elder responded:

“I have personal public liability insurance and I will be responsible for any claims”.

[65] Mr Bell said Mr Johns then said:

“We will work something out from Zones point of view”.

[66] Mr Bell said he took this statement to mean that Mr Johns was talking on behalf of Zone.

[67] Mr Bell said Mr Johns then stated that the system would be called Planum and then explained what Planum meant. Mr Bell said at the time he did not think much about the statement but later thought that there might be more to it and thought maybe Mr Johns was more involved with Planum then had been disclosed. Mr Bell said at the meeting a group decision was made to work with Electric Avenue (Mr Elders company). Mr Bell said he thought they (Zone including Mr Johns) were doing it from Zones point of view. Mr Bell said Cruisemaster couldn’t commit, and Mr Johns had introduced Mr Elder. Mr Bell said it was agreed the system would be installed in top range caravans only. Mr Bell said he did not recall Mr Marshall asking who was Planum.

[68] Mr Bell said after the meeting he mentioned to Mr Biggar that maybe Mr Johns was more involved with Planum then he was aware. Mr Bell said he was concerned as General Manager about getting “buy in”, which I took to mean support, from the team on the floor to make the installation run smoothly and Mr Elder would be working with the Zone team for the installations. Mr Bell said at the time Mr Biggar did not think anything was going on and that the relationship was a commercial one between Zone and Mr Elder. Mr Bell said he left it at that at the time.

[69] Mr Biggar said that on 10 January 2020 a meeting was held at Zones premises to discuss installation of the auto-levelling system and potential commercial relationships with Mr Elder. Mr Biggar said he was not present but aware the meeting was being conducted.

[70] Mr Biggar said a decision was made at the meeting to work with Electric Avenue, Mr Elders company to install the auto levelling system to Zones summit series caravans. Mr Biggar said after the meeting Mr Terry Lunney and Mr Martin Bell approached him and said words to the effect:

“Are you completely across what is going on with the new Horizon Levelling System?”

[71] Mr Biggar said at the time he thought Mr Lunney and Mr Bell were talking about a possible joint venture or partnership between Zone and Electric Avenue.

[72] Mr Johns accepted that in accordance with his employment agreement he was required to use his best endeavours to promote and protect the best interests of Zone. It was put to him that it would have been reasonable for the other employees in the meeting of 10 January to believe this was what he was doing in the meeting. Mr Johns maintained that the other employees knew he was speaking on behalf of Planum in the meeting. He also maintained he was promoting and protecting the best interests Zone.

[73] Mr Johns was asked if he was aware at the meeting that Zone was already advertising the auto-levelling system as part of its summer series. Mr Johns said an auto levelling system was already on one van and Zone had committed to the system for the summit series prior to the meeting.

[74] Mr Johns was asked whether he was aware Zone already had 5 orders for the auto-levelling system at the time of the 10 January meeting. Mr Johns said he would have been aware that Zone had the summit series caravans on order.

[75] Mr Johns accepted there were no other Zone shareholders in the meeting. He accepted that he did not advise the other shareholders he was incorporating Planum as a vehicle to distribute the auto levelling system.

[76] A statutory declaration was filed by Mr Johns from Mr Marshall. Mr Johns said he obtained this statutory declaration from Zone. Neither party called Mr Marshall as a witness. Mr Johns has sought to rely on the contents of the statutory declaration for the purpose of corroborating his claim that he made clear his involvement in Planum to staff of Zone at the meeting on 10 January. Mr Johns’ submission was to the effect that it could be inferred from the failure of Zone to call Mr Marshall as a witness that he would have supported Mr Johns’ claim. It was submitted in response for Zone that Mr Marshall said in his statutory declaration that the details provided in response to his question were minimal and vague.

13 January 2020 Incorporation of Planum

[77] Mr Biggar said on 13 January Mr Johns and Mr Elder incorporated Planum and Mr Johns failed to disclose his involvement in Planum to Zones shareholders. Mr Johns said the paperwork for incorporation was completed on 10 January however agreed incorporation did not occur until 13 January. Mr Elder said it was Mr Johns who completed the paperwork for the incorporation of Planum. Mr Elder was asked when he realised Mr Johns was a 50% shareholder in Planum. He said this was when he received a letter from ASIC advising Mr Johns had made it a 50/50 share split. He said he did not formally agree to that beforehand.

[78] Mr Elder said he was not aware of whether the shareholders of Zone knew that he and Mr Johns were incorporating Planum for the purpose of commercialising the self-levelling system.

[79] Mr Biggar said in his oral evidence he understood Mr Johns was managing the auto levelling project for Zone and the reason Mr Johns wanted the product in the vans was because he thought it was a good sales tool.

12 February 2020 Planum Invoice

[80] Mr Biggar said on 12 February Planum issued an invoice for $2,200 for 1 Demo Expedition Kit and install and 1 x Demo Bunk Van Kit and install to Zone.

Discussion between Mr Biggar and Mr Johns 13 February 2020

[81] Mr Bell said in February Mr Elder was on site installing the system wearing a Planum T Shirt and he witnessed Mr Elder giving a Planum T Shirt to Mr Johns. Mr Bell said Mr Elder told him he was going to Japan with his wife for a few weeks and Mr Bell asked who was organising the commissioning of the vans and Mr Elder said Mr Johns would do it. Mr Bell said he again raised his concern with Mr Biggar that Mr Johns was more involved with Planum than he had disclosed. Mr Bell gave evidence that at no stage prior to 10 January 2020 or after did Mr Johns advise him that he was a shareholder in Planum.

[82] Mr Biggar said that on 13 February Mr Elder was onsite overseeing an installation of an auto levelling system to a caravan and writing Standard Operating Procedures for the system. Mr Biggar said Mr Lunney approached him and asked him if he had seen the new Planum T-Shirts. Mr Biggar said he subsequently became concerned that the relationship between Mr Johns and Mr Elder might be that of a commercial arrangement. In his oral evidence Mr Biggar said as at 13 February he had not heard of the term Planum and wanted to know what was going on.

[83] Mr Johns said around the 13 February and after the first commercial installation of the Planum system was well advanced Mr Biggar entered his office and asked what his commercial arrangement with Planum was. Mr Johns said he informed Mr Biggar immediately that he was a shareholder in Planum. Mr Johns said Mr Biggar became irate and very confrontational. Mr Johns said he tried to explain to Mr Biggar that he had simply followed the precedent Mr Biggar and the Drifter shareholders had set when establishing other interests. Mr Johns accepted he had not advised Mr Biggar of his intention to incorporate Planum before 13 February.

[84] Zone submitted on 13 February Mr Biggar realised that Mr Johns had incorporated an entity by the name of Planum Technologies Pty Ltd and was now a 50% shareholder in Planum Technologies Pty Ltd. Planum now had a supply agreement with Zone, and had invoiced Zone for work completed by Planum in the amount of $2,200.

[85] Mr Biggar said on 13 February he met with Mr Johns to discuss his involvement in Planum. Mr Biggar’ said in his oral evidence at this point he wanted to find out what were the commercial terms Zone had for the project. Mr Biggar’s evidence was that during the meeting of 13 February 2020 he discussed the concerns of company shareholders regarding Mr Johns’ conduct in not disclosing his involvement in Planum Technologies Pty Ltd and Mr Johns’ responses during the meeting were confrontational, belligerent and displayed a clear lack of insight. Mr Biggar said he was frustrated that he found out his business owner had formalised a company to sell into his own business.

[86] Mr Biggar said he told Mr Johns he had a duty to notify the other shareholders of his involvement with Planum. Zone submitted that Mr Johns was given every opportunity to respond to the allegations against him at the meeting of 13 February 2020, and to notify the other shareholders of his involvement in Planum. Mr Biggar said he was also frustrated because Mr Johns maintained he could do what he had done because he said Mr Biggar had also done it. Mr Biggar said his previous business was the vehicle to start up Zone, and supported Zone financially.

[87] Zone argued Mr Johns’ behaviour was a breach of the Code of Conduct, and Mr Johns had knowingly and intentionally sought to improperly gain a profit from his knowledge of confidential information gained whilst employed by Zone. Zone submitted Mr Johns’ behaviour was a breach of his Employment Contract by not using his best endeavours to promote and protect the interests of the employer.

[88] Zone argued Mr Johns had also breached ss.181, 182, and 184 of the Corporations Act 2001 (Cth) by not exercising his powers and discharging his duties in good faith, improperly using his position to gain an advantage for himself or someone else, and committing an offence by being reckless or intentionally dishonest and failing to exercise his powers and discharge his duties in good faith in the best interests of the corporation or for a proper purpose.

[89] Zone said its concerns included that Mr Johns had breached the Code of Conduct as he had knowingly and intentionally sought to improperly gain a profit from his knowledge of confidential information gained whilst employed by Zone.

[90] Zone denied that Mr Johns had fully disclosed his interest in Planum prior to 13 February 2020. Zone conceded it was aware that there was a familial relationship between Mr Elder and Mr Johns, but said there was no disclosure by Mr Johns of the incorporation of Planum and Mr Johns’ shareholding in that company until Mr Biggar asked what Mr Johns’ commercial involvement was with Mr Elder on 13 February 2020.

[91] Zone said Mr Johns was informed by Mr Biggar on 13 February 2020 that he had breached Zone’s Code of Conduct, and that Mr Johns was obliged to notify all shareholders of his involvement with Planum Technologies Pty Ltd.

[92] The Code of Conduct includes a section governing personal and professional behaviour:

“Personal and professional behavior

Throughout your employment with Zone RV, it is expected that you:

• conduct yourself in accordance with all Zone RV policies and procedures, as varied from time to time

• ensure your conduct and communication reflects the Zone RV Values

• devote your full time and attention to Zone RV's business during your working hours

• advocate tor Zone RV

• uphold the professional image of Zone RV when arriving and leaving work premises

• be responsible for treating all team members, customers, suppliers and anyone who you may come into contact with in your role with dignity, courtesy and respect

• not engage in any form of physical or verbal conduct which a reasonable person would deem to be unwelcome, offensive, humiliating or intimidating. This includes, but is not limited to:

◦ aggressive shouting or swearing

◦ any form of physical abuse

◦ racial slurs

◦ taunting

• treat as confidential and not discuss sensitive information with any party within or outside of Zone RV. This includes, but is not limited to:

◦ Zone RV intellectual property including design, process and development of Zone RV caravans

◦ company financials

◦ customer information

◦ individual remuneration and performance information

If you are in a team leadership role, you will also be expected to:

• cultivate a positive atmosphere

• act as a role model for other team members

• lead by example and hold your team to account on the code of conduct

• support and assist your team members and their development

• use all reasonable efforts to protect and promote the interests of Zone RV”

[93] The Code of Conduct also specifically addressed conflicts of interest:

“Conflict of interest

Conflict of interest refers to situations where your personal and financial interests may compromise, or have the appearance of compromising, your professional judgment or behaviour in carrying out your obligations to Zone RV. Where such a conflict does arise, or you think it has or may arise, the issue should be discussed with your manager immediately.

A Zone RV team member or any of his or her immediate family may not accept, directly or indirectly, any gift or entertainment that can reasonably be perceived as an attempt to influence Zone RV's business decisions or that exceeds local and/or business outcome.”

[94] The Code of Conduct stated that Behaviour that is inconsistent with the policy would not be tolerated and will result in disciplinary action up to and including termination of employment or contract:

“ZONE RV CODE OF CONDUCT AGREEMENT

As an employee or contractor working at Zone RV including any subsidiaries, you are expected to uphold the Zone RV Code of Conduct. Zone RV is a business leading the way in our industry. We are a professional, bold and innovative company that upholds strong core values, and expects all interactions with any representative of Zone RV to match the Zone RV brand.

This policy applies while you are:

• at work or surrounding work premises

• engaging in work-related activities; and/ or

• at a work-related or Zone RV endorsed function

• any other place or situation where you could be perceived as representing Zone RV.

Behaviour that is inconsistent with this Policy will not be tolerated and will result in disciplinary action up to and including termination of employment or contract.”

[95] Mr Johns said he accepted he had signed the Code of Conduct but did not recall reading it. Mr Johns was asked if he acknowledged to Mr Biggar when it was raised with him that he had a duty to inform the other shareholders. He responded he was unaware that he had to and had informed managers and this was what the Code of Conduct required, not shareholders.

14 February 2020

[96] Mr Johns said there were two other similar conversations (as that on 13 February) over the following two/three weeks. Mr Johns said he attempted to find resolution with Mr Biggar in each discussion, asking a number of times what Mr Biggar would like a solution to be, for which he had no response nor gave Mr Johns any indication of how he would like the situation to proceed. Mr Johns said at no stage did Mr Biggar discuss any breach of employment contract or code of conduct in these conversations nor give him instructions to discuss the conflict with shareholders however it became clear Mr Biggar was personally campaigning for the shareholders to side with him in the disagreement.

[97] Mr Biggar gave evidence that on 14 February 2020, Mr Johns approached him on the factory floor to discuss the matters raised on the 13 February 2020. Mr Biggar said Mr Johns said words to the effect of 'Are we going to talk any further about this?' Mr Biggar said 'Have you changed your position?' and Mr Johns said words to the effect of 'No, I have not.' Mr Biggar said he responded: 'Then we have nothing further to talk about.' 7

15 February Mr Johns departs for filming

[98] In his oral evidence Mr Johns sought to clarify with regard to the timeline of events that from 15 February to 24 February he was away in remote locations filming in connection with work.

19 February 2020 Meeting

[99] Mr Bell initially said at a meeting in January but amended it to say 19 February 2020 at a pre-design meeting, Mr Jonathan Clark-Monks told him that Mr Johns had stated that the Planum System was going to be installed in all future caravans. Mr Bell said this statement made him suspicious about Mr Johns’ involvement in Electric Avenue because there was uncertainty regarding stability of the system and whether the product was going to be commercially viable from Zones perspective. It appears from the evidence Mr Bell may have been mistaken about his amended date of 19 February however not much turns on it there was no dispute Mr Biggar confronted Mr Johns on 13 February.

21 February 2020

[100] Mr Biggar said that on 21 February he approached Mr Keith Bailey an Independent Business Consultant to Zone, seeking advice on how best to resolve the conflict between Mr Johns and Zone.

[101] Mr Bailey gave evidence that he had extensive experience as a Board Advisor, CEO Mentor, Interim CEO/GM, Business Start-ups, Restructuring and Growth Management. Mr Bailey gave evidence that he is a Fellow, Australian Institute of Company Directors, Fellow, Governance Institute of Australia, Fellow, Institute of Managers and Leaders, Fellow, Australian Interim Executive Association, and a Member of the Turnaround Management Association and a Certified Chair of the Advisory Board Centre.

[102] Mr Biggar said he commented to Mr Bailey he was concerned about the breakdown in the trust and a potential lack of confidence in Mr Johns from shareholders due to Mr Johns’ lack of transparency.

[103] Mr Biggar said that Mr Bailey requested copies of Mr Johns’ Employment Contract, Code of Conduct and Shareholder Agreement. Mr Bailey gave evidence that he first became aware of the issue on 21 February on a routine site visit. He said he was approached by Mr Biggar seeking advice about how to resolve the conflict.

[104] Mr Bailey said in particular Mr Biggar was concerned about the breakdown in the trust in the relationship and the lack of confidence in Mr Johns from shareholders due to a lack of transparency.

24 February 2020

[105] Mr Biggar said that on 24 February he again approached Mr Johns and said words to the effect of:

“As a Director and Employee, you have broken the rules. I strongly recommend you take action to let the shareholders know, otherwise I will.”

[106] Zone submit that Mr Johns showed no indication of a willingness to disclose his actions to the other shareholders. Mr Biggar said in his oral evidence he did not want to be seen to be part of what happened, and it was important that Mr Johns let the other shareholders know what he had done.

[107] Mr Johns said during the second conversation Mr Biggar informed him that one of the parties involved in the Drifter shareholdings indicated to him he wanted Mr Johns’ directorship terminated. Mr Johns said Mr Biggar also told him he “didn’t give a fuck” about the levelling system but if it took off Mr Johns would have a problem to answer too. Mr Johns said Mr Biggar also indicated on a number of occasions that he felt he was able to have other business interests, but Mr Johns was not. Mr Johns said none of the three conversations with Mr Biggar were documented, witnessed or scheduled and each of them ended with Mr Biggar standing in his office while Mr Johns sat and he verbally berated him.

[108] Mr Johns asked Mr Biggar whether he gave Mr Bailey a direction to contact the other shareholders about the issue while Mr Johns was still away, and he said yes. Mr Biggar agreed in his oral evidence he had already spoken to other shareholders at this time.

25 February 2020

[109] Mr Johns said in his written evidence he took it upon himself to reach out to one of the other shareholders in an attempt to get some guidance. Mr Johns said in his oral evidence this conversation was with Mr Phil Duthie and was on 25 February. Mr Johns said the other shareholder said it would be a good idea to have a mediated discussion and that it seemed like something that was readily resolvable and clarity around Mr Biggar’s previous and ongoing conflicts of interest was also needed.

[110] Mr Johns maintained this was his first opportunity to discuss the issue as he had been away in regional Victoria. It was put to Mr Johns as he did not leave until 15 February he could have contacted other shareholders on 14 February. He said he was preparing to go away and he did not have a direction to do that. Mr Johns accepted he had phone and email contact at this time, but he was extremely busy.

26 February 2020

[111] Mr Biggar said that on 26 February he met with Mr Bailey again to discuss whether Mr Bailey would mediate with Mr Johns to see if there was a way to resolve the matter. Mr Bailey said that on 25-26 February Mr Biggar asked him to assist with mediation between Mr Johns and Zone. Mr Bailey said he advised he was not a qualified mediator however he was willing to assist to try to resolve the matter.

[112] Mr Johns said he agreed and discussed the mediation with Mr Biggar and Mr Biggar suggested using Mr Keith Bailey who is a restructuring and interim management professional / specialist working under Mr Biggar’s engagement on a number of tasks at Zone. Mr Johns said he believed Mr Bailey did not have prior knowledge of the situation and agreed that he would be suitable. Mr Johns said he discussed the possibility of mediation with Mr Biggar on 26 February.

27 February 2020

[113] Mr Bailey said on 27 February Mr Biggar asked him if he could prepare for and to facilitate the mediation between Mr Johns and Zone on 28 February 2020. Mr Bailey said he requested the contact details for the other shareholders Mr Burton and Mr Duthie to assist with the background exploratory and views of the parties. Mr Bailey said Mr Biggar contacted Mr Johns to advise of the intent to meet on 28 February.

[114] Mr Bailey said on 27 February he contacted two external independent shareholders Mr Burton and Mr Duthie seeking their input and position on the background to the matters and related issues regarding the breach of the Shareholders Agreement, breach of the Code of Conduct and breach of the Employment Contract, and to explore potential pathways for a resolution between the parties. Mr Bailey said in his oral evidence their shareholders comments included there was an abuse of trust, he oversteps the mark, the actions were covert, that the deed had been breached there was a clear conflict of interest, that Information Technology was being used for personal gain, and they must have had some interaction with Mr Johns because they said he appeared to show no remorse.

[115] In relation to the response view expressed by Mr Johns that Mr Biggar had not declared conflicts Mr Bailey said the other shareholders said they were aware of Mr Biggar’s other interests both before and after Zone was formed and they were not relevant. Mr Biggar said the shareholders seemed distressed and believed the issue may not be able to be resolved. Mr Bailey the shareholders were somewhat distressed and seeking a genuine apology and sense of remorse from Mr Johns for what had occurred and then they would we assess.

28 February 2020 discussions involving Mr Bailey

[116] Mr Johns said that on 28 February 2020 he met with Mr Bailey. Mr Johns said there was no formal invitation provided prior to the discussion and only Mr Bailey and himself in the discussion. Mr Johns said immediately it became apparent that Mr Bailey had spoken to not only Mr Biggar but to all of the shareholders, whom Mr Johns had not even discussed the matter with. Mr Johns said Mr Bailey clearly indicated the same as Mr Biggar that the Drifter shareholder had indicated to him he wanted Mr Johns terminated. Mr Johns said it was also apparent Mr Bailey was under instruction to discipline him rather than mediate a director’s dispute discussion.

[117] Mr Johns said he was then excused from the discussion thinking Mr Biggar would then give his version of events and they would meet all together to discuss. Mr Johns said however he was recalled to the board room and told Mr Bailey had again spoken to all the shareholders and Mr Biggar and he was to go home and he would be in touch with next steps, likely a shareholders meeting to vote on special resolution to remove Mr Johns as director. Mr Johns said he had not seen the meeting notes, nor was there a witness to corroborate them being taken accurately.

[118] Mr Biggar said that on 28 February 2020, Mr Bailey met with Mr Johns. Zone submitted that the purpose of the meeting was to explore the issues in conflict, to mediate where possible, and for Mr Johns to put forward his version of events and suggest possible options to resolve the matter.

[119] Mr Biggar said that after the meeting Mr Bailey consulted with various shareholders including himself, Mr Burton and Mr Duthie as to their position on the matter. Zone submitted that during the discussion, Mr Bailey formed the view that Mr Johns showed no acknowledgement of wrong-doing and continued to defend his actions. Mr Bailey advised Mr Johns that if there was a loss of trust with the shareholders there were implications to his roles as a Director and employee and that his employment would likely be terminated.

[120] After the meeting Mr Biggar and Mr Bailey met with Mr Johns again to advise of the intent to hold a Shareholders Special Resolution on Mr Johns’ position as a Director. Mr Bailey requested Mr Johns leave the worksite until further notice and the conclusion of the Shareholder meeting. Mr Johns was informed of and agreed to the requirement to attend the Shareholder Meeting, as a Shareholder and Director.

[121] Mr Bailey said on 28 February he met with Mr Biggar and Mr Johns to explain the purpose of the meeting scheduled for that morning was to explore the matter and to mediate where possible, and to provide Mr Johns with an opportunity to put forward his version of events and potential pathways to resolution. Mr Bailey said Mr Johns was advised that he consulted other shareholders as part of his preparation.

[122] Mr Bailey said he developed a meeting plan which was fairly structured and he met with Mr Johns and Mr Johns explained the background to the matter and related events which was generally consistent with the information collected from the shareholders and Mr Biggar and confirmed the key actions in dispute had taken place. Mr Bailey said he was trying to understand Mr Johns self-awareness of the issues.

[123] Mr Bailey said the discussions indicated that there had been a number of discussions between Mr Johns and Mr Biggar discussing the issues over the preceding weeks. Mr Bailey said they went through the process and Mr Johns showed no remorse for his actions, repeatedly attempted to justify his actions and failed to acknowledge the seriousness of the matter and the potential consequences. Mr Bailey said Mr Johns referred to Mr Biggar’s other interests and that that was something he could do as well. Mr Bailey said Mr Johns appeared silent or dismissive concerning the issues, and Mr Johns explained that he had not yet made a profit from the events and believed there was no case to answer and refused to accept the seriousness of his actions and events.

[124] Mr Bailey said that Mr Johns justified his position by stating that Mr Biggar had other business interests outside of Zone, implying that he was justified to do likewise, and he believed that Mr Biggar was acting in a conflict of interest.

[125] Mr Bailey said the other shareholders rejected the allegations against Mr Biggar as they said they had prior knowledge of those interests beforehand and dismissed that justification from Mr Johns. Mr Bailey said he mentioned to the other shareholders that Mr Johns had offered as a resolution opting out of Planum and selling his shares. Mr Bailey said that was not accepted because the other shareholders did not see that as the issue that caused the conflict and wanted to draw it back to Mr Johns acknowledging what he had done.

[126] Mr Bailey said Mr Johns failed to understand and acknowledge that the relationships Mr Biggar had with other business interests were formed before his involvement with Zone, that the other shareholders were aware of Mr Biggar’s involvement with the other businesses and that some shareholders had decided to become shareholders in Zone because Mr Biggar had pre-existing connections with the other businesses that would advantage Zone.

[127] Mr Bailey said he outlined the different responsibilities and accountabilities of being a Director, Shareholder and Employee with Mr Johns, given the roles were somewhat intertwined within the roles at Zone.

[128] Mr Bailey said he explained that a breach of the Shareholders’ Agreement specifically related to a breach of a conflict of interest and lack of disclosure was also a breach of duties as a Director of the Respondent Company and a breach of duties as an employee.

[129] Mr Bailey said Mr Johns was advised he should consider some Director training and attend a Director course through the AICD or the Governance Institute. Mr Bailey said Mr Johns was asked what was likely to be the preferred outcome to resolve the matter and Mr Johns indicated a preference to continue working as if nothing had happened and continue on as normal.

[130] Mr Bailey said Mr Johns continued to maintain the same responses and downplayed the seriousness and expressed a sense of entitlement by setting up Planum and referring to ventures that Mr Biggar had to justify his action.

[131] Mr Bailey said given the exploratory discussions with Mr Johns and the shareholders, he formed the view that there was little likelihood of the matter being easily resolved and there was no clear path to resolving the issues between the parties. He said this was based on Mr Johns’ unwillingness to acknowledge the seriousness of the matter, lack of remorse, the breach of Zone’s Code of Conduct, and the breakdown in the relationship.

[132] Mr Bailey said he advised Mr Johns that if he had issues of trust with the shareholders there were implications to his roles as Shareholder, Director and Employee (as a senior manager) and that his employment would likely be terminated.

[133] Mr Bailey said after the meeting he consulted with the other shareholders Mr Burton, Mr Duthie, and Mr Biggar on their position which resulted in the shareholders requesting a Shareholders Special Resolution Meeting, preferring 2 March.

[134] Mr Bailey said subsequently Mr Biggar and himself met with Mr Johns again to advise of the intent to have a Shareholders Special Resolution on his position as a Director by meeting on 2 March and requested that he leave the worksite until further notice and the conclusion of the Shareholder meeting. Mr Bailey said Mr Johns was informed of and agreed to the requirement to attend the Shareholder meeting, as a shareholder and Director. Mr Bailey said he indicated that the other shareholders had requested that he draft up the Special Resolution and to coordinate the Shareholder meeting.

[135] Mr Johns asked Mr Bailey if it was normal for a mediator to reach a conclusion. Mr Bailey said he was trying to find common ground. He said what the shareholders were seeking was not forthcoming from Mr Johns and the offer to sell his shares and Mr Johns’ views about Mr Biggar being conflicted meant he could not find common ground.

[136] Mr Johns put to Mr Bailey that he did not tell him the shareholders were seeking a genuine apology. Mr Bailey said he did not think it was appropriate to give Mr Johns the answer, and from Mr Johns’ responses Mr Bailey said it was apparent he was not remorseful. Mr Bailey said the offer to sell the shares was secondary.

1 March – Notice of Special Resolution

[137] Mr Bailey said that on 1 March 2020, a Shareholders Deed - Notice of Special Resolution was issued to Shareholders coordinating the Shareholders' Meeting for 2 March 2020. The resolution was that Mr Johns be removed as a Director of Zone RV Holdings Pty Ltd effective from 2 March 2020.

[138] Mr Johns said he heard nothing until around 12pm on 1 March when he received an email informing him of a meeting to vote on a special resolution. Mr Johns submitted The Corporations Act at section 249H requires 21 days’ notice for this type of meeting of shareholders.

[139] Mr Johns said the short notice of this meeting was a deliberate and calculated move by the Zone and Mr Bailey, to remove his ability to gain proper legal advice and also discuss the situation prior to the vote with the remaining shareholders and therefore clear up the misrepresentation provided by Mr Bailey to them.

[140] It was put to Mr Johns that section 203C of the Corporations Act, provides for a director to be moved by resolution as does the shareholders deed and the shareholders deed has no time limit for this to occur. It was also put that 249H2 of Corporations Act refers to Annual General Meetings and is not relevant to special resolutions, and section 249H(3) refers to public companies not private companies. Mr Johns responded section 249H refers to general meetings and is relevant.

[141] Mr Bailey said the 21 days in the Corporations Act refers to public companies which Zone is not, the deed provided a capacity for a director to be removed at any time. Mr Bailey said 100% of shareholders agreed to meet and the quorum requirement was met. It was put to Mr Bailey the timeframe was unfair given the invitation was issued on a Sunday and the meeting held on the Monday. Mr Bailey said everyone knew what the intent of the resolution was by mid-morning on 28 February.

2 March 2020 email of Mr Johns to shareholders and Shareholders meeting

[142] Mr Johns said on receiving this letter he attempted to reach out to Mr Biggar and discuss the situation and clearly put forward his position. Mr Johns said Mr Biggar’s response was as follows;

“I have had several conversations with you in person already, all of which confirmed we are not on the same page. Mediation has taken place and I have reflected on all of the notes taken by you and it’s clear where you stand with this so I don’t feel the need to talk further. Happy to debrief tomorrow after a resolution has been reached.”

[143] Mr Johns said he also reached out to Mr Phil Duthie a 5% shareholder who responded:

“Matt, I think given where things are at (and given there have been a series of 1 on 1 discussions already) any further discussion is best held with all shareholders present in the meeting tomorrow before the motion is tabled. From my perspective I am dismayed that things have reached this point. It was my hope that you would have taken any action necessary to recognize and acknowledge the misjudgements made, and unwind the pathway taken, and do everything possible to try and restore the trust with Dave and not put at risk what has been achieved over the past 4 or 5 years. I would like to think this is still possible. Regards Phil”

[144] Mr Johns said in dismay and panic from his inability to respond to any of the events he penned an email trying to reason with the shareholders. Mr Johns said in this email he takes ownership for making the mistake of following the precedents set by Mr Biggar and accepts there is a conflict of interest in his actions albeit a fully disclosed one. Mr Johns said the email only speaks to the directorship vote and nothing to do with his employment position which he was not aware was even in question or able to be decided by a shareholder vote. The email read as follows:

“Hi guys,

I wanted to reach out pre the meeting today to get my thoughts down and try and limit the time impact on you all for this afternoon but also have some clarity around my position as I feel it has been muddied but Firdays [sic] events.

The last few weeks but particularly the last 4 days have been very difficult for me and I have been trying to decipher how we have come to this stage. Midweek I had a discussion with Dave, in which I felt we had moved somewhat past the communication roadblocks that were stopping the discussion to get a resolution and had a plan to move forward. That plan involved asking an impartial person to mediate a discussion to resolve outstanding questions about the perceived precedence and find a solution to this specific issue. I went into that meeting believing that was the intention however the meeting was more of a disciplinary meeting, Keith had spoken to everyone other than myself prior to the discussion. I felt, as is the process for mediation, I was required to explain my initial position on how this situation has arisen in the first place. I did that in the expectation that he would then mediate a discussion to put the outstanding areas of non-agreement to bed. Instead Keith made some kind of decision and called all of the shareholders and sent me home, no discussion about the notes he took in our meeting, I have not seen these notes to verify if they are accurate.

So I guess that is what brings us to this meeting this afternoon. Background; the horizon leveling system is an idea that I have had since the first trailer we build with air suspension, it may have even been in RV Innovations days. I couldn't believe "auto level" didn't level your trailer on a campsite. As at that stage there was no way of controlling the drawbar height there was no option to create a campsite level on 3 axis. Fast forward 4 years and the electric jack solved that problem and we started discussions with suppliers about developing a system. We gave them a concept and they basically took a year to tell us they were nowhere in developing a system. Around the same time it was made clear to me that I was no longer part of product development. For example, I had no input in the canopy project and was told there was no design or project planning resources available to work on any concepts I had particularly in retail style components.

From that it was clear to me that the company had no interest in following this idea further so it was sidelined until I had a conversation with my cousin in law at a BBQ about his autonomous EV's. Eventually that discussion lead to talking about their suspension control systems and I asked if it could be adapted to a 3 point leveling system. He said the same controller they already used could have code written.tp do the job and I asked him to look into it. We discussed running a trail system on a demo trailer ZONE was building for camper trailer of the year competition. He made a system, wrote the code and installed the whole air system (on site at ZONE) including the controller at no cost to ZONE, and we took out most innovative at that comp. That trailer was then sold, for fairly close to retail I believe and since he has helped the customer with the use of the system and has had to help train the customer on basic operation of his ZONE components (non suspension related). During the concept and initial validation we didn't discussion commercial terms. I guess I assumed he would be selling it to ZONE but the discussion did arise about the establishment of a company, he asked if I could help with naming and logo work ect and he offered me shares in the business and I assumed that would allow some input into keeping it ZONE centric.

I realise this is the exact moment I have made a very poor judgement call. I should have talked with Dave immediately and then we should have engaged with the other shareholders to create a pathway forward. From seeing past behaviours and making assumptions around them I thought my involvement in that business creation was something that was ok. I clearly understand the conflict of interest and clearly understand my mistake. I have been asking for clarification on the other situations, until now I do not have a clear answer on them but I know that what I have done is wrong and am focused solely on that.

For full transparency on the system it has about $1500 of material margin, no labour or overheads. This may get to $2500 in a best case scenario but more likely in the middle. Currently there is 10 ordered but the capacity is probably 1 a week. So at capacity it 100k return but before wages (he is the only employee) and overheads, warranty replacements ect ect. Sure if that number gets to 2 systems a week it would be profitable but very unlikely to ever financially benefit me especially as the window is closing with other products being developed to rival this system. Aside from that I believe this is a very good system. It benefits the customer through user experience, will benefit the caravan by having automatic safety checks to ensure the correct airbag height is reached in travel, could potentially log destruction data ect. I think it would be a loss to ZONE to miss the opportunity to continue to be the leader-as eventually everyone will use a 'similar system. In hindsight I think if the result is ZONE owning what are currently my shares it may be able to take the product to better levels and have a viable retail return in -the long run. As a company we have drastically slowed our innovation, whilst I understand why I know the market is catching up with ZONE and I really saw this as an inexpensive way to make another huge leap and maintain a competitive edge. Needless to say, I feel I have other such concepts that can continue to benefit ZONE in the same way in the future (done correctly of course) along with a number of currently running projects, (all internal) that need to be seen through to completion.

As stated at the start of this email, mid last week I met with Dave, communicated my understanding for the mistakes I had made and was seeking to make a resolution, I apologies I have not shared those thoughts with you all. In fact from the first conversation about this with Dave, even though it was heated and I handled the situation terribly, J asked for what was required to reach a resolution. For how I have handled it Dave and putting you in this position, I am sorry and to everyone else for creating the situation we are currently in. I have done what I have done thinking it was in the best interest of ZONE, that has been my sole focus for 5+ years and want that to be my focus moving-forward and I am asking everyone to see the work and dedication of my time there as the performance indicator when making your decision today, not this mistake for which I have been seeking a resolution and willing to take whichev.er pathway is decided to rectify it.

Regards,
MATT”

[original text kept]

[145] Mr Biggar said that on 2 March he received an email from Mr Johns sent to all shareholders admitting that his actions were a conflict of interest and that he had not communicated this to the shareholders. Mr Bailey said the email from Mr Johns was sent at 9.31am admitting that he breached the conflict of interest and had handled the situation poorly.

[146] Mr Bailey said on receiving the email from Mr Johns from Mr Biggar, he contacted Mr Biggar, Mr Burton and Mr Duthie to establish their individual views on the disclosure from Mr Johns and if this would assist to resolve the matter or influence their voting intent of the Special Resolution. Mr Bailey said all indicated that it would not influence their position nor voting intent as the damage had already been done, and the acknowledgement was too late and should have been done in the appropriate forum when the conflict was first discovered.

[147] Mr Bailey said he received the shareholder ballots progressively from 9.53am to 12.53pm with the exception of Mr Johns. Mr Bailey said the Shareholder meeting opened at 2pm by conference call and Mr Johns was given the opportunity to address the Shareholders and Mr Johns referred to the email. Mr Bailey said there was minimal dialogue in the meeting and it was solely to review the outcome of the Special Resolution.

[148] Mr Bailey said he read out the results of the Shareholder ballot, not having disclosed them before the meeting.

[149] Mr Johns said he was due to go on paternity leave in 2 weeks of this meeting being held,

a point Mr Biggar was aware of. Mr Johns said all shareholders voted in the affirmative and the resolution passed effectively removing him as director. Mr Bailey said all 5 Shareholders voted with the Special Resolution being passed with 81.6% of the votes cast in favour of removing Mr Johns as a Director. Mr Bailey said Mr Johns held 18.4% of the votes and voted against the Special Resolution. Mr Bailey said the meeting closed at 2.03pm and a copy of all of the ballots was emailed to all Shareholders.

[150] Zone said that Mr Johns failed to inform all shareholders of his involvement with Planum Technologies Pty Ltd until he sent the email dated 2 March 2020.

[151] Mr Biggar said that the Shareholder Agreement included the condition that if a Director was removed from the holding company, they would also be removed from the operating company, Zone. After the Shareholders decision to remove Mr Johns as a Director, Mr Johns asked Mr Biggar what the next step was, and Mr Biggar said that Mr Johns would be issued with a letter of termination. Mr Johns was given the termination letter on 2 March 2020. Mr Biggar said that there was no option but to terminate Mr Johns’ employment.

[152] Mr Johns said later that day he received a letter of termination stating his termination was a follow on from the outcome of what he described as “the unlawfully held” shareholders meeting. Mr Johns said the shareholders meeting was used as the first listed reason for termination in the termination letter. Mr Johns said the way in which the shareholders meeting was called and the description of the reason for this meeting in the notice did not outline an employment matter was also being considered and therefore he was not afforded his right to request to having a support person and by the way of this meeting and the previous meeting with Mr Bailey being intentionally misrepresented by the Respondent to remove this right and to manipulate the outcome of both meetings in an unfair and prejudice manner.

[153] Mr Johns said for the first time he was also notified of an alleged breach of the ZONE RV Code of Conduct specifically the conflict of interest clause. He said this clause refers to situations where personal and financial interests may compromise or have the appearance of compromising professional judgement or behaviour in carrying out obligations. It also states where one may arise to discuss with your manager immediately. Mr Johns said other directors did not report previous conflicts in the past.

[154] Mr Johns said he acknowledged a conflict of interest however his disclosure of the conflict arising from his involvement in Planum was made even before Planum was incorporated, with the General Manager and the other managers most likely to see a potential conflict from his involvement and the decision to use the system was ultimately left with them.

[155] Mr Johns said at no stage was he able to respond to this allegation nor was he made aware it was being levelled against him making the letter of termination manifestly unfair. Mr Johns said whilst he was provided 4 weeks’ pay in the termination letter he was not afforded any of his other entitlements such as the continued use of a motor vehicle which he later had to claim himself under an amount of animosity from the Respondent.

Apparent ongoing dispute

[156] It appears from the evidence there may be an ongoing dispute around ownership and use of the system. Mr Johns submitted that at no stage was there any discussion between Zone and Mr Elder about any kind of commercial relationship other than he was engaged just as the traditional suppliers had been to develop a system that Zone would use. Mr Johns submitted that Mr Biggar had many opportunities to engage in that conversation had he thought there was any reason for that to be not the case as he had many conversations with Elder over that period.

[157] Mr Elder also said that there has never been any commercial discussion with anyone at Zone except for Mr Johns. Mr Elder said he has never been given any intellectual property such as drawings or specifications from anyone at Zone.

[158] Mr Elder said he has had several conversations with Mr Biggar after Mr Johns filing his application for unfair dismissal.

[159] Mr Johns agreed he was the director of sales, marketing and product at the time of termination. Mr Johns was asked whether it would have been reasonable to expect that he would be speaking with Mr Elder on behalf of Zone about the auto levelling system given his role. Mr Johns disagreed, he said Mr Elder was working more with Mr Bell then himself. Mr Johns indicated it was not his project.

[160] I asked Mr Johns during his evidence if he could recall whether there were any directors’ meetings where the disclosing of interests was raised. He said he did not recall that. I also asked Mr Johns whether he gained any financial benefit from the invoice issued to Zone. He said Mr Elder had performed work and provided materials and the invoice did not cover the costs. Mr Johns said he had not yet received any financial benefit from Planum. He said his involvement was marketing which was his strength and it was his perception that he was doing the right thing by Zone.

[161] I asked Mr Johns whether the arrangement between Zone and Planum was ongoing or was it terminated. Mr Johns said the arrangement was not ongoing as he said Zone had said while he is involved with Planum Zone will not be dealing with Planum. Mr Johns said he was no longer involved with Planum as the situation had resulted in a complete breakdown in that relationship as well.

[162] I asked Mr Johns whether any other businesses were approached to carry out the work that Planum was to carry out. Mr Johns named a number of other companies that had approached however nothing came of those approaches.

[163] It was put to Mr Johns that there was no imbalance of power between himself and Mr Biggar as they were both directors and shareholders. Mr Johns said there was an imbalance because Mr Biggar owned significantly more shares.

[164] Mr Johns said he had commenced casual employment with another business from 5 July 2020 earning approximately $2000 per week.

CONSIDERATION

Section 387 of the Act

[128] It is necessary in considering whether the dismissal is harsh, unjust or unreasonable, to have regard to the matters in s.387 of the Act:

s.387(a) - whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees)

[165] When considering whether a valid reason for termination exists, the decision of North J in Selvachandran v Peterson Plastics Pty Ltd (1995) 62 IR 371 at 373 provides a useful definition:

“In its context in s.170DE(1), the adjective “valid” should be given the meaning of sound, defensible or well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason for the purposes of s.170DE(1). At the same time the reasons must be valid in the context of the employee’s capacity or conduct or based upon the operational requirements of the employer’s business. Further, in considering whether a reason is valid, it must be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. The provisions must “be applied in a practical, common-sense way to ensure that the employer and employee are treated fairly.”

[166] As noted above, Mr Johns was dismissed after a majority of shareholders voted for him to be removed as a Director of Zone. The termination letter identifies that Mr Johns also breached Zone’s Code of Conduct.

Conflict of interest

[167] In equity, a person with fiduciary obligations, such as a director in a company, must disclose conflicts of interest or any information that might raise such a conflict. Similarly, the Corporations Act 2001 (the Corporations Act) also requires directors to disclose material personal interests.

[168] Sections 182 and 183 of the Corporations Act prohibit an employee of a corporation, including a director, from gaining an advantage from their position or information respectively:

“Section 182 – Use of position--civil obligations

Use of position--directors, other officers and employees

(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a) gain an advantage for themselves or someone else; or

cause detriment to the corporation.

Note: This subsection is a civil penalty provision (see section 1317E).

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1: Section 79 defines involved .

Note 2: This subsection is a civil penalty provision (see section 1317E).”

Section 183 – Use of information--civil obligations

Use of information--directors, other officers and employees

(1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the corporation.

Note 1: This duty continues after the person stops being an officer or employee of the corporation.

Note 2: This subsection is a civil penalty provision (see section 1317E).

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1: Section 79 defines involved .

Note 2: This subsection is a civil penalty provision (see section 1317E).”

[169] Section 191 of the Corporations Act sets out the circumstances in which a director must disclose material personal interest:

“Section 191 - Material personal interest--director's duty to disclose

Director's duty to notify other directors of material personal interest when conflict arises

(1) A director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless subsection (2) says otherwise.

(1A) For an offence based on subsection (1), strict liability applies to the circumstance, that the director of a company has a material personal interest in a matter that relates to the affairs of the company.

Note: For strict liability , see section 6.1 of the Criminal Code .

(2) The director does not need to give notice of an interest under subsection (1) if:

(a) the interest:

(i) arises because the director is a member of the company and is held in common with the other members of the company; or

(ii) arises in relation to the director's remuneration as a director of the company; or

(iii) relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members; or

(iv) arises merely because the director is a guarantor or has given an indemnity or security for all or part of a loan (or proposed loan) to the company; or

(v) arises merely because the director has a right of subrogation in relation to a guarantee or indemnity referred to in subparagraph (iv); or

(vi) relates to a contract that insures, or would insure, the director against liabilities the director incurs as an officer of the company (but only if the contract does not make the company or a related body corporate the insurer); or

(vii) relates to any payment by the company or a related body corporate in respect of an indemnity permitted under section 199A or any contract relating to such an indemnity; or

(viii) is in a contract, or proposed contract, with, or for the benefit of, or on behalf of, a related body corporate and arises merely because the director is a director of the related body corporate; or

(b) the company is a proprietary company and the other directors are aware of the nature and extent of the interest and its relation to the affairs of the company; or

(i) the director has already given notice of the nature and extent of the interest and its relation to the affairs of the company under subsection (1);

(ii) if a person who was not a director of the company at the time when the notice under subsection (1) was given is appointed as a director of the company--the notice is given to that person;

(iii) the nature or extent of the interest has not materially increased above that disclosed in the notice; or

(d) the director has given a standing notice of the nature and extent of the interest under section 192 and the notice is still effective in relation to the interest.

Note: Subparagraph (c)(ii)--the notice may be given to the person referred to in this subparagraph by someone other than the director to whose interests it relates (for example, by the secretary).

(3) The notice required by subsection (1) must:

(a) give details of:

(i) the nature and extent of the interest; and

(ii) the relation of the interest to the affairs of the company; and

(b) be given at a directors' meeting as soon as practicable after the director becomes aware of their interest in the matter.

The details must be recorded in the minutes of the meeting.

Effect of contravention by director

(4) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.

Section does not apply to single director proprietary company

(5) This section does not apply to a proprietary company that has only 1 director.”

[170] Directors are not required to give notice where they have given standing notice of a material interest. Section 192 provides circumstances where a director may give such standing notice and how it must be given:

“Section 192 – Director may give other directors standing notice about an interest

Power to give notice

(1) A director of a company who has an interest in a matter may give the other directors standing notice of the nature and extent of the interest in the matter in accordance with subsection (2). The notice may be given at any time and whether or not the matter relates to the affairs of the company at the time the notice is given.

Note: The standing notice may be given to the other directors before the interest becomes a material personal interest.

(2) The notice under subsection (1) must:

(a) give details of the nature and extent of the interest; and

(b) be given:

(i) at a directors' meeting (either orally or in writing); or

(ii) to the other directors individually in writing.

The standing notice is given under subparagraph (b)(ii) when it has been given to every director.

Standing notice must be tabled at meeting if given to directors individually

(3) If the standing notice is given to the other directors individually in writing, it must be tabled at the next directors' meeting after it is given.

Nature and extent of interest must be recorded in minutes

(4) The director must ensure that the nature and extent of the interest disclosed in the standing notice is recorded in the minutes of the meeting at which the standing notice is given or tabled.

Dates of effect and expiry of standing notice

(5) The standing notice:

(a) takes effect as soon as it is given; and

(b) ceases to have effect if a person who was not a director of the company at the time when the notice was given is appointed as a director of the company.

A standing notice that ceases to have effect under paragraph (b) commences to have effect again if it is given to the person referred to in that paragraph.

Note: The notice may be given to the person referred to in paragraph (b) by someone other than the director to whose interests it relates (for example, by the secretary).

Effect of material increase in nature or extent of interest

(6) The standing notice ceases to have effect in relation to a particular interest if the nature or extent of the interest materially increases above that disclosed in the notice.

Effect of contravention by director

(7) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.”

[171] Whether an interest is material is a question of substance and judgment. A key determinant is whether the interest has the capacity to affect a director’s ability to discharge their fiduciary duty.

[172] While Mr Elder’s familial relationship with Mr Johns appears to have been known to Mr Biggar, and potentially to other directors, Mr Johns arguably made use of his knowledge that Zone was looking for a supplier and his position as a director of the company to gain a benefit for Mr Elder, that benefit being the supplier contract.

[173] More definitive is Mr Johns’ individual financial benefit from his position as shareholder for Planum. Mr Johns does not deny he was a 50% shareholder of Planum, and thus has a substantial material interest. Mr Johns would benefit if Planum is profitable as a company. Securing a contract with Zone is obviously a financial benefit for Planum, and therefore Mr Johns.

[174] Mr Johns does not appear to have given notice as required under s.191 or s.192 of the Act. While it appeared to be argued by Mr Johns that he gave standing notice in that Mr Biggar was aware of the familial relationship between Mr Elder and Mr Johns, it appears clear that neither Mr Biggar or any of the other directors were given notice that Mr Johns had become a 50% shareholder in Planum until after the initial invoice for work completed. No notice was given in a director’s meeting or recorded in minutes.

[175] Section 192(6) provides that if there is a substantial increase of an interest, notice must again be given at a director’s meeting and recorded in the minutes. Gaining a shareholding of 50% in a company that had been engaged to provide substantial services for Zone would constitute a substantial increase in Mr Johns’ interest in relation to Mr Elder, and would likely represent a new interest in a separate company.

[176] Mr Johns should have provided notice, either at a director’s meeting or in writing as set out under s.191 of the Corporations Act. It is not uncommon for family friends or relatives to provide services for companies, but the fiduciary duty of directors is to ensure that all other directors are aware of any material interest so that any such decision is made with all information available to all directors. Mr Johns did not do so.

Breach of Code of Conduct

[177] Mr Johns signed the Code of Conduct on 10 March 2017. Mr Johns did not deny signing the Code of Conduct but denied having the Code of Conduct put to him at the time of the investigation into his conduct, nor was it referred to.

[178] Zone submitted that Mr Johns appears to submit that incorporating a company with the intention of making a profit using knowledge gained whilst an employee of Zone was justified because Mr Biggar also had alternative business interests.

[179] I have been satisfied that a substantial part of Mr Biggar's other interests were formulated before the existence of Zone, and therefore they are different circumstances to that of Mr Johns. It also appears to be the case from the evidence that the other shareholders of Zone had knowledge of Mr Biggar’s other prior interests and still decided to invest in Zone. In relation to the allegation that Mr Biggar was conflicted over his interest in Cure Composites and its relationship with Link Composites, Mr Biggar gave evidence it was his view it was not in Zones interests to manufacture the panels relevant to the issue and the matter had been the subject of consideration. While there was some dispute around this, the evidence concerning Mr Johns’ allegation in regard to this issue is insufficient for it be made out.

[180] I have also not been persuaded on the evidence that the allegations concerning Mr Biggar’s involvement in exploring innovative house or aeroplane construction ideas (which appear not to have been commercialised) are directly comparable to Mr Johns’ involvement with Planum.

[181] It appears disclosure by Mr Biggar was not formal however the facts concerning his position are distinguishable from that of Mr Johns.

[182] Mr Johns has submitted that the manner in which the Special Shareholders meeting was conducted was in breach of the Corporations Act as he was not afforded 21 days’ notice. It appears that requirement does not apply in this case for reasons addressed in the evidence, however it must be remembered this matter pertains to the employment relation.

[183] I accept that Mr Johns breached his obligations to promote and protect the best interests of Zone, and as a shareholder and director he should have been aware of his obligations to disclose his other interests. I am also inclined to accept Zones argument that trust and confidence was damaged by Mr Johns’ reluctance to concede his conflict of interest from 13 February when first confronted about the issue up to an including the discussions on 28 February. I am inclined to accept the evidence of Mr Bailey that Mr Johns continued to resist making concessions and continued to seek to justify his actions based on his perception that Mr Biggar had engaged in similar conduct.

[184] I have not ignored the argument as put by Mr Johns that he had proposed selling his interests in Planum as a basis to resolve the dispute on 28 February, and his email of 2 March for the first time acknowledges wrongdoing and a conflict of interest.

[185] I have also been persuaded by Mr Johns that to his mind he did not believe at the relevant times that what he was doing was wrong. That however does not excuse his failure to appreciate the seriousness of the issue until the last moment. I am inclined to accept that Mr Johns believed that he had made an attempt to declare his involvement with Planum at the meeting on 10 January, however two significant difficulties remain despite that. Even on Mr Johns’ evidence he was not explicit about his intended role as a director and shareholder of Planum. I have been satisfied from the evidence of Mr Bell that he did not understand what Mr Johns claims he was saying about his involvement in Planum, and continued to believe, not unreasonably in my view, that Mr Johns was in attendance at the meeting in his role as a representative of Zone. Further, the attendees at the meeting were employees and not shareholders.

[186] I do not accept Mr Johns’ claim that because he was required to travel to regional locations in Victoria from 15 February to 24 February, he could not have been expected to address the issue Mr Biggar had asked him to address with the other shareholders on 13 February. It was plain from the evidence Mr Biggar was making clear how seriously he was treating the issue, and justifiably so.

[187] Given the seniority of Mr Johns’ role as director, shareholder and employee manager the expectation of him is higher than might be for the case for a lower level employee without the same breadth of seniority and roles in the company. Having weighed all of the evidence I am satisfied that despite Mr Johns’ last minute concession, significant damage had been done by that stage to the level of trust between the parties because of Mr Johns’ failure to acknowledge the seriousness of his conduct for the weeks leading up to the Special shareholders meeting and given all of the circumstances Zone had a valid reason for termination of Mr Johns’ employment.

(b) whether the person was notified of that reason

[188] Notification of a valid reason for termination must be given to an employee protected from unfair dismissal before the decision is made to terminate their employment, 8 and in explicit9 and plain and clear terms.10

[189] Zone said it gave Mr Johns from 13 February 2020 to 28 February 2020 to disclose his conduct to the other shareholders and concede his actions were improper, which Mr Johns failed to do. After the meeting on 28 February, Mr Johns was ultimately terminated on 2 March as set out above.

[190] It is evident Mr Johns was informed of the alleged misconduct several times in relation to the conflict of interest issue. Mr Johns disputes he was told about the breach of the Code of Conduct and disputes having the Code put to him in investigation meetings. He signed the Code so was aware of it but it should have been put to him. I accept this was a deficiency in the process followed by Zone in effecting the dismissal.

[191] There is some confusion around the reasons given for dismissal in the submissions, Zone argue it was for breach of the Code, as well as the Corporations Act. The Corporations Act breaches are not spelled out in the termination letter and there is no evidence these were put to Mr Johns. Again, this points to a deficiency in the process followed by Zone in effecting the dismissal.

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person

[192] Several meetings occurred with Mr Johns where alleged misconduct was discussed with him by Mr Biggar, and later Mr Bailey. It appears Mr Johns wasn’t given an opportunity to respond at the time of dismissal, the shareholder vote succeeded, ousting him as director, and he was provided a termination letter that day.

[193] I am satisfied Mr Johns was given a reasonable opportunity to respond to the central allegation against him on a number of occasions in February 2020, however note that the Zone did not take proper steps to identify to Mr Johns the specific breaches it later relied upon as set out above.

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal

[194] Where an employee protected from unfair dismissal has requested a support person be present to assist in discussions relating to the dismissal, an employer should not unreasonably refuse that person being present. This does not mean there is a requirement for an employee to be offered a support person by an employer – rather, there cannot be an unreasonable refusal where an employee requests a support person.

[195] Mr Johns said he was not given an opportunity to have a support person present at meetings and did not formally request a support person at the meeting on 28 February 2020 because Zone misrepresented the meeting as a mediation. He said the other meetings were casual conversations that were impromptu or ‘ambushes’ and did not have meeting invitations or agendas with no set outcomes. Mr Johns said he was not informed of the nature of the allegations, and if he was, he would have requested a support person.

[196] Zone submitted that Mr Johns was a Director and Shareholder and therefore there was no imbalance of power during the meetings between Mr Johns and Mr Biggar. Zone said Mr Johns did not request to have a support person attend the meeting of 28 February 2020. Zone said that after the Shareholders' Special Resolution on 2 March 2020, Mr Johns approached Mr Biggar to enquire what would happen next and Mr Biggar advised that his employment would be terminated.

[197] As noted, the Act contemplates whether there was an unreasonable refusal of a support person. In this case, Mr Johns did not ask for a support person, and as such Zone could not have unreasonably refused.

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal

[198] In this case, the decision of Zone to terminate Mr Johns’ related to the Mr Johns’ conduct, rather than unsatisfactory performance. This consideration does not arise.

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal

[199] Zone employs approximately 90 staff. Zone did not make any specific submissions on this point but indicated they did not believe the size of their enterprise impacted on the procedures followed in effecting the dismissal.

[200] I am satisfied given the size of the business that there was likely no impact on the procedures followed in effecting the dismissal.

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal

[201] Zone submitted the circumstances in this instance were unique as Mr Johns was also a shareholder and Director. Zone said that due to the nature of the relationship and status of Mr Johns, Zone was of the view that there was no option but to terminate his employment once the shareholders made the decision to remove him as a Director.

(h) any other matters that the FWC considers relevant

[202] Mr Johns said he spent five years in control of the company’s finances and there appeared to be no issue about his propriety in that regard. Mr Johns is also a father of young children. He gave evidence that he has obtained other employment since his termination.

CONCLUSION

[203] I have taken into account each of the matters that are relevant to this matter as set out in section 387 of the Fair Work Act 2009. Having weighed those findings in totality, including that Zone had a valid reason for termination, however also made some procedural flaws in arriving at the decision to terminate, I am satisfied that the dismissal was not harsh, unjust or unreasonable. On that basis the application is dismissed.

COMMISSIONER

Appearances:

Mr M. Johns appearing on his own behalf.
Ms J. Peall of Mylegal Pty Ltd appearing for the Respondent

Hearing details:

2020,
Brisbane:
20 and 21 July

Printed by authority of the Commonwealth Government Printer

1 Exhibit 1 Witness Statement of Matthew Johns.

2 Exhibit 2 Witness Statement in reply of Matthew Johns.

3 Exhibit 3 Statutory Declaration of Mitchell Elder.

4 Exhibit 4 Witness Statement of Mr David Biggar.

5 Exhibit 5 Witness Statement of Mr Keith Bailey.

6 Exhibit 6 Witness Statement of Mr Martin Bell.

7 Witness Statement of David Biggar, [24].

8 Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, 151.

9 Previsic v Australian Quarantine Inspection Services Print Q3730 (AIRC, Holmes C, 6 October 1998)

10 Ibid.

Matthew Johns v Zone RV Pty Ltd