Maurice Mahar v Myer Stores Pty Ltd
[1995] IRCA 395
•23 August 1995
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1832 of 1995
B E T W E E N :
MAURICE MAHAR
Applicant
AND
MYER STORES PTY LTD
Respondent
Before: Judicial Registrar Chancellor
Place: Melbourne
Date: 23 August 1995
REASONS FOR DECISION
This is an application pursuant to s.170EA of the Industrial Relations Act with respect to the termination of the employment of Maurice Mahar as a store administration manager by Myer Stores Pty Ltd on 16 February 1995.
Mr Mahar was the only witness called by the Applicant.
The Respondent called the following witnesses:
Murray Taylor who was the state administration manager for the Respondent for Victoria and Tasmania during the relevant period;
John Barker who is an investigator/loss assessor employed by the Myer Grace Bros. Group;Mark Wylie who is the national operations manager risk control for the Myer Grace Bros. Group;
Vince Randazzo who has been the state zone manager for the Respondent for Victoria and Tasmania since May 1994; and
Elisabeth (Lisa) Kokkin the state personnel manager for the Respondent.
Mr Mahar is 43 years old and is married with three children. He commenced with Myer Ballarat in March 1975 and was gradually promoted through the organisation working in positions as credit officer, credit manager, office manager, sales manager, stock manager and finally store administration manager, initially in an acting capacity from August 1992 and then in a full capacity until his termination on 16 February 1995. The evidence was that Mr Mahar was a good and loyal employee who had an unblemished record of service.
In his role as store administration manager Mr Mahar was responsible for the budgeting and financial control of the Ballarat store. He had a budget of approximately $400,000 for each six month period including a relatively small amount for an entertainment budget.
For the six month period from August 1994 to January 1995 Mr Mahar initially allowed an entertainment budget of $3,500 - $2,000 for staff and management Christmas parties, $1,000 for in-house meals and $500 for expenditure by the store manager Colin McKinnon on entertainment. Mr McKinnon requested more money for entertainment so the total budget was increased to $4,500, with an allowance of $1,500 for Mr McKinnon. The amount allowed for Mr McKinnon’s entertainment was obviously a very small percentage of the overall store budget. The $4,500 budget for entertainment expenses was submitted to head office as a part of the overall budget and was not queried.
The Applicant’s termination related solely to his alleged breach of duty and failure to apply due diligence by failing to properly control the store manager’s use of his portion of the store entertainment budget.
Mr Mahar had only worked at the Ballarat store within the Myer Group. He was of the view that the entertainment budget could be used at the discretion of the store manager as long as it was legitimately used for entertaining clients. Mr Mahar formed this view on the basis of the practices of the previous store managers at Ballarat.
Colin McKinnon was the store manager from 1981 to 1987. His golf club fees were paid by Myer. Dennis Hudson, who was at that time the store administration manager, authorised payment of those accounts and Mr Mahar was well aware of this fact as he was the accounts payable clerk who actually attended to the payment. Mr Hudson had also authorised payment of restaurant bills, in-house entertainment and on some occasions the taking home of beer for home entertainment by Mr McKinnon.
John Shadlow was the store manager from 1987 to 1990. Mr Mahar said that he spent little on entertainment and in particular that he did not play golf.
Colin Coster was the store manager from 1990 to 1991. He claimed payment of his golf club fees from the entertainment budget and those fees were authorised for payment by Dennis Hudson. Mr Coster was a regular entertainer mainly by way of restaurant lunches and Mr Hudson always authorised payment by the Respondent.
Nigel Genders was the manager from 1992 to June 1994. He entertained very occasionally at restaurants and never played golf. He usually only entertained people from head office who were in the district.
Mr McKinnon returned to the position of store manager at Ballarat in June 1994. Mr Mahar believed that Mr McKinnon had a large entertainment account when store manager at Geelong leading up to that time. There had been a $2m refurbishment of the Ballarat store and Mr Mahar believed that Mr McKinnon was specifically returned to the Ballarat store to be a high profile store manager and to boost the store’s profile and sales.
Mr Mahar gave evidence that the procedure adopted by Dennis Hudson in relation to meals taken outside the store was to observe the invoice, ensure that the names of persons entertained were placed on the invoice and, if satisfied that entertainment was taking place, authorising payment of the invoice. To Mr Mahar’s knowledge this system was never criticised by senior management or by the Myer auditors.
The evidence of Mr Mahar in relation to the past practices of the Ballarat store was not contradicted by the Respondent, nor was it disputed that Mr McKinnon was a high profile appointment to the Ballarat store.
This case revolves around four major areas of alleged entertainment expenditure by Mr McKinnon.
1. Mr McKinnon’s membership fee at the Ballarat Golf Club.
2.The taking by Mr McKinnon to his home of alcohol paid for
by Myer.
3. The payment of bills for restaurant meals.
4. The payment of bills for meals delivered to Mr McKinnon’s own residence. On half a dozen occasions only one meal was delivered and on somewhat fewer occasions two meals were delivered.
The Ballarat Golf Club invoice was addressed to Mr McKinnon dated 3 December 1994 and in the sum of $320.00. Mr Mahar said that Mr McKinnon handed the invoice to him indicating that it had been paid for the last ten years by Myer and asking him to arrange for payment. Mr Mahar recalled having processed golf club fees in the past. He also recalled that prior to Mr McKinnon’s first stint at Ballarat that one of the then Myer directors, Ken Nall, had told the then store manager, Ian Wilson “to get off his butt and join the golf club to meet the people in Ballarat”. Mr Mahar was not concerned about the fees being a genuine entertainment expense but was more concerned about fitting the $320.00 into the budget for the six months ending in January. Mr Mahar authorised the cheque requisition on 9 January 1995. In accordance with normal procedure three people were involved the requisition - one person writing it up, Mr Mahar authorising it, and another person keying it into the computer. The cheque was subsequently sent from head office, presumably without query.
It seems that between July and November 1994 that a box of Tooheys Gold beer was being regularly supplied to Myer Ballarat, generally by Fenwood Food & Liquor. This beer was being loaded into Mr McKinnon’s vehicle at the Myer loading dock and was regularly taken home by him, perhaps every one or two weeks. Mr Mahar said that the beer dockets were initially referred to him. He asked Mr McKinnon what the beer was for and he was told that it was for entertaining at home. Fenwoods was a regular supplier, so after obtaining Mr McKinnon’s advice Mr Mahar approved payment of the account. After the accounts had been authorised for payment on two or three occasions, a precedent was set and the subsequent accounts were not referred to Mr Mahar as they were paid by Trevor Smith, the accounts payable clerk who Mr Mahar said then knew that payment was authorized. A computer request for payment was sent to head office on each occasion and a cheque was duly returned.
In relation to invoices for meals delivered to Mr McKinnon’s home address, Mr Mahar gave evidence that he asked Mr McKinnon why payment should be made and was told that the meals were for entertaining at home. Mr Mahar identified several of the relevant invoices as having been signed by Mr McKinnon and also identified that on a number of occasions names were written onto the invoices in Mr McKinnon’s handwriting. Mr Mahar believed that these were the clients who were being entertained. Mr Mahar said that because of Mr McKinnon’s high profile it was understandable that he was doing quite a lot of entertaining and he accepted Mr McKinnon’s word in relation to the entertaining of clients. Mr Mahar had known Mr McKinnon for twenty years and knew that Mr McKinnon had worked for Myer for almost forty years. He said that he had no reason to doubt Mr McKinnon’s integrity. Mr Mahar believed that if the meals were within budget then payment was quite acceptable.
In relation to single meals, Mr Mahar explained that the store manager was allowed an in-house meal at the cafeteria if he was on duty at a time of late night trading. Mr Mahar said that he queried the delivery of one pizza to Mr McKinnon’s home address and was told that the store cafeteria was closed and that he was entitled to have a meal at home. Mr Mahar authorised payment as being quite legitimate. He said that he was not aware of any specific guidelines in circumstances where the store cafeteria was closed.
In relation to restaurant meals Mr Mahar said that he asked Mr McKinnon to write the names of the clients or managers entertained on the invoices. He said that he told the accounts payable clerk to make sure that the names were on the invoice before authorising payment.
Mr Mahar said that he only saw about 60% of invoices. He said that he had a lot of work to do and did not have the time to investigate every invoice.
The invoices for alcohol and meals totalled something in the vicinity of $400 to $500.
Under cross-examination Mr Mahar agreed that he and Mr McKinnon were the senior managers at the Ballarat store with Mr McKinnon’s responsibility being primarily in the retail area and Mr Mahar’s responsibility being primarily in the financial area. Mr Mahar agreed that it was his primary duty and responsibility to control and protect the assets of the company and he also agreed that it was a central part of that role to substantiate expenditure to make sure that it was both genuine and within budget.
Mr Mahar was taken through a large number of documents and meetings in which his role as store administration manager had been regularly outlined and reinforced in the period between May and September 1994.
In May 1994 a document entitled “Policy for Making Commitments” was distributed to all store administration managers. Mr Mahar recalled that at about that time Mr Taylor had indicated that as a result of fall-out from the Brian Quinn affair and other matters that store administration managers were to watch expenditure very closely. Mr Mahar did not recall anything being specifically said about entertainment accounts or their operation at that time. Mr Mahar said that on the face of it the policy document applied to large contracts and tenders and did not really apply to the type of expenditure being undertaken by Mr McKinnon. Having read the document I must agree that that does not seem to be an unreasonable conclusion on his part. However, Mr Mahar did agree that a paragraph that stated: “No individual has authority to approve his or her own expenses and/or reimbursements” was of general application.
The Policy for Making Commitments document was reissued in September 1994 with some modification. Mr Taylor sought to rely on a paragraph which stated “No individual is to enter into commitments which result in personal gain or benefits to related parties unless it is independently authorised by a manager with appropriate authority”. He felt that this indicated that a store manager’s personal golf club fees could only be authorised by a superior, for example a state manager. However, given that the document seemed to be concerned with outside contracts and tendering it was not immediately apparent that this paragraph should have application to something such as golf club fees.
In June 1994 a series of Standard Operating Procedures were distributed. These included a system of internal control for cheque requisitions. The distribution of the procedures was followed up with a full day meeting on 29 June 1994. Mr Taylor and Mark Lucas addressed the store administration managers in detail on their role. Mr Mahar agreed that his role was as the keeper of the store’s assets and to control spending within the store. Mr Taylor gave evidence that at that meeting he gave an example of inappropriate reimbursement to store managers in another state. In both cases stock and alcohol had been removed from the premises. He indicated that he felt that the situation could have been avoided if the store administration managers had strictly controlled matters. He indicated that the administration managers should make the store managers safe from themselves. He also indicated that if the store administration manager was uncomfortable with any particular area of expense that he should escalate or raise the matter with the next level or higher levels of management. Mr Mahar said that he did not recall hearing the example of the interstate store managers but did agree that the question of escalation was raised.
Mr Mahar attended a further meeting on 6 July 1994 which again stressed that the store administration managers were the keepers of the store’s financial integrity. Mr Mahar agreed that he had to make sure that all expenditure was legitimate and that bad practices had to be eliminated.
In August 1994 a role clarity session was held in which a position description for store administration managers was released. This indicated that the managers were responsible for identifying and minimising activities involving risk or shrinkage and to protect the assets of the store. Obviously there were a very wide range of other functions to be carried out.
Mr Taylor, who had been with Myer from October 1992 had the role of leading, supporting and guiding the store administration managers. He said that from February 1994 the role of the store administration managers had been changed to some extent meaning that their role was more important in terms of controlling expenses and budgets.
The Respondent also sought to rely on the Coles Myer Ltd Code of Conduct and the Myer Grace Bros. Code of Conduct in support of its case.
The Myer Grace Bros. code of conduct came in a small pamphlet which apparently was distributed to all employees. Mr Mahar had some recollection of seeing it but did not recall its particular details. Under the heading of “Meals and Entertainment” the code stated “meals and entertainment are not to be accepted or extended unless it occurs in the normal course of business dealings. ... entertainment may only be provided or reciprocated by an employee within the reasonable limits and with the approval of the line manager”
Mr Mahar was unaware of the requirement that entertainment be provided with the approval of a line manager. Mr Mahar clearly felt that it was his role to provide the relevant approval and authorisation. Clearly, Mr Randazzo was also unaware of the code of conduct requirement as he gave evidence that the store administration manager could authorise external entertainment expenditure if it was bona fide and up to the sum of $250.
The Coles Myer Ltd Code of Conduct which was a much larger document and which Mr Mahar formally acknowledged receiving contained the following paragraph:
“Company property and merchandise is not to be removed from Myer premises without authorisation”
And also:
“Company assets must not be used for personal gain - this includes falsification or improper use of company expense accounts”.
Mr Mahar’s evidence was that he authorised the removal of alcohol and further that he did not believe that Mr McKinnon was improperly using the expense account. He also stated that he felt that the entertainment was being carried for the benefit of the Myer Ballarat store.
In his evidence Mr Taylor also sought to rely on the hospitality code and petty cash rules when criticising Mr Mahar’s performance. The hospitality code was to be found on a cosmos internal E-mail bulletin board. The code, dated December 1991, stated in part:
“Hospitality is an exceptional event which must always be approved in advance”.
Mr Mahar said that he knew nothing of the document. Obviously Mr Hudson, the prior store administration manager at Ballarat, had not seen it as that was not his practice. He had never sought prior approval and was never criticised for failure to do so. It would seem that Mr Randazzo was also unaware of the hospitality code requirements in relation to entertainment as he did not raise any such criticism of Mr Mahar.
Relying on the hospitality policy and petty cash rules, Mr Taylor expressed the view that he thought it was inappropriate for a lesser manager to authorise a superior manager’s entertainment expenses. This involved a particular interpretation of the two documents and perhaps is not even the correct assertion. In any case I find that this was not a matter that was sufficiently brought to the attention of managers and in general it seems that the procedures concerning entertainment expenses were not documented and presented with sufficient particularity and clarity for the information of store administration managers.
In cross-examination Mr Taylor indicated that he felt that the policy had been clearly spelt out and he was of the view that everyone knew that you had to go upstairs in order to approve entertainment expenses. However, it seems clear that neither Mr Mahar nor Mr Randazzo were aware of that policy.
In relation to the various expenses in issue Mr Taylor expressed the view that the payment of golf club expenses might be all right if approved by Mr McKinnon’s direct line manager. He also expressed the view that entertainment of clients involving alcohol and meals might also be acceptable if it had been previously approved. In relation to the question of beer being placed into Mr McKinnon’s boot he said that the removal of company property from premises was totally inappropriate and should have been challenged. He felt that failing to look at 40% of the invoices was failing to do the job properly. He also indicated that only requiring the name of the client being written on the docket was a breakdown of internal control and that the client name ought to have been substantiated or alternatively that the matter ought to be have been escalated.
In cross-examination it was put to Mr Mahar that the golf club expense was a personal expense that in accordance with the September 1994 Policy for Making Commitments document ought to have been authorised by a manager with appropriate authority. Mr Mahar indicated that he did not believe that it was personal but to build business up and he was not aware that it might have to be approved by a more senior manager. In a record of interview he had indicated that he felt the golf club expense was a part of Mr McKinnon’s remuneration package but eventually Mr Mahar conceded that it was not part of the remuneration package but an expense account that could be used at Mr McKinnon’s discretion. Mr Mahar was heavily criticised for not confirming that the golf club membership was used for business reasons. He indicated that he assumed that Mr McKinnon would play golf with clients and network in order to find new business. Mr Mahar was unable to provide a single instance when he could name clients who were entertained or new business developed as a result of the golf club membership.
In relation to the beer being placed into Mr McKinnon’s boot and being taken home, Mr Mahar was challenged on the basis that he was effectively allowing Mr McKinnon to authorise his own payment by allowing many of the accounts to go direct to Trevor Smith. He was also criticised for not substantiating the legitimacy of the beer being taken home. Mr Mahar recalled two conversations when Mr McKinnon had indicated that he had entertained in order to get a car park opened on stocktake trading night and on another occasion to get the footpath fixed up outside the door of the Ballarat premises. This was inconsistent with his record of interview in which Mr Mahar said that he had not spoken to Colin about taking alcohol home and indicated that he did not believe it was a significant amount. I accept Mr Mahar’s evidence that he did have discussions with Mr McKinnon on at least two occasions concerning the use of the beer and I accept his explanation that he was somewhat surprised that he was being interviewed and did not recall those discussions at the time of the interview. However, I must say that it seems to me that the regular taking of alcohol ought to have raised some alarm bells with Mr Mahar and that he ought to have pressed the matter further.
In relation to restaurant and home meals Mr Mahar was attacked on the basis that he made no real attempt to substantiate the clients who were being entertained. Mr Mahar conceded that he did not know any of the clients who were named on the invoices but argued that he would not be able to check in any case. He said that he relied upon Mr McKinnon’s integrity. He also took the view that entertaining at home was probably considerably cheaper than entertaining at a restaurant or elsewhere. Again, it would seem that Mr Mahar ought to have been more rigorous in his checking of the home meals in particular.
Mr Randazzo gave evidence that matters concerning Mr McKinnon’s expenditure were first brought to his attention in late November or early December 1994. He was given information that the Ballarat store manager was up to something and that morale was low. Mr Randazzo contacted Mr Barker asking him to investigate the matter. Mr Barker gave evidence that he was contacted by his immediate supervisor Mr Wylie in late 1994. It was indicated to him that Mr McKinnon was allegedly using meals and alcohol for his private use. Mr Barker gave evidence that in September/October or perhaps later in 1994 he contacted Mr Randazzo to get further details. Mr Randazzo conceded in cross-examination that the initial contact may have been earlier than late November or early December.
Mr Barker attended at the Ballarat store and spoke to a number of store officers including Gail Barnes who advised him of the movement of alcohol from the dock and into the managers car and Brendan Gause who obtained the relevant accounts and invoices in relation to meal and alcohol expenditure.
Mr Barker said that in late 1994 or early 1995 that he discussed the invoices with Mr Randazzo. Mr Randazzo’s evidence indicated that he received a report in January 1995. Mr Randazzo was aware of allegations that alcohol was being removed from company premises in the store managers car and that meals and alcohol were being used for private use. Mr Randazzo indicated to Mr Barker that the use of alcohol and meals was outside normal store guidelines.
On 27 January 1995 Mr Randazzo and Lisa Kokkin attended Ballarat and spoke to Mr McKinnon. Ms Kokkin gave evidence that Mr Randazzo accused Mr McKinnon of alleged inappropriate practice and behaviour in relation to expenditure at restaurants, meals to his private home and alcohol being placed into his car at the Myer loading dock. Mr McKinnon told them that the meals were his entitlement and that such meals had been authorised by the zone director many years ago. Mr Randazzo told him that he was only entitled to personal meals at the in-store cafeteria and that things had changed and that all these expenses were to cease forthwith. Mr Randazzo said that Mr McKinnon apologised and agreed with the proposition that people at the store may not see his behaviour as being correct.
As at 27 January 1995 Mr Randazzo knew of all of the allegations with the exception of the golf club fees but obviously did not think it was necessary to take any action against Mr McKinnon. Further, at no stage did he speak to Mr Mahar. Given the manner in which the Respondent has presented its case in this matter this seems to have been a very major omission on the part of Mr Randazzo. The Respondent has argued that effectively the store administration manager is there to keep the store manager in line and that if anything untoward happens he is to be held responsible. Despite the fact that in approximately November 1994 Mr Randazzo was aware of improper expenditure and use in relation to meals and alcohol by Mr McKinnon he at no stage spoke to Mr Mahar. Mr Mahar was not warned that there was any potential problem nor was he told to effectively lift his game in relation to his monitoring of Mr McKinnon’s expenditure. Again, on 27 January no attempt was made to speak to Mr Mahar in relation to his performance as store administration manager. I must say that it seems strange indeed that Mr Randazzo moved from a position on 27 January where he did not seem to deem it necessary to speak to Mr Mahar in relation to the matter to a position on 16 February where he saw it necessary to dismiss Mr Mahar.
Mr Randazzo gave evidence that over the ten days following 27 January that he spoke to other persons at the Ballarat store indicating what had taken place in relation to Mr McKinnon. In particular he told Gail Barnes and Brendan Gause that the matter had been investigated, that Mr McKinnon had been spoken to and things would cease. Apparently they indicated that they were unhappy with that result indicating that morale was low and that there had been improper conduct. Mr Randazzo then decided that the matter should be reopened for further investigation.
Mr Barker interviewed Mr McKinnon on 15 February. His record of interview was tendered in evidence. In relation to the golf club fees Mr McKinnon indicated that he thought it was part of the store manager’s position and projection, that he had asked Mr Mahar to pay it, that it was queried but that Mr McKinnon had said that it was okay. In relation to the beer Mr McKinnon said that he had entertained at other functions or at home and that it was used for company purposes. He said that he had entertained non-Myer people from Ballarat and had taken alcohol to other locations. He indicated that no-one had ever told him that entertaining off site was not permissible. However, in his interview Mr McKinnon was very evasive when asked questions in relation to what persons had given him authority to entertain off site, have his golf club fees paid and other matters.
As part of the ongoing investigation Mr Randazzo had eventually decided that Mr Mahar should be spoken to on the basis that he “should have kept the store manager honest”. In the record of interview dated 15 February Mr Mahar gave similar explanations to those provided to the Court. He had paid the golf club fees on the basis that these had regularly been paid by Myer and were part of Mr McKinnon’s salary package. He said that he was aware of previous managers having claimed for meals outside the store and was aware that Mr McKinnon was regularly taking home beer in order to entertain at home. When asked if he believed that payment of the expenditure was wrong Mr Mahar replied “No”. Mr Mahar said that he had asked Mr McKinnon to write the names of persons he entertained on the invoices but admitted that he had never been at the golf club or with Mr McKinnon when he entertained outside the store. Mr Mahar reiterated that he believed that they were legitimate expenses.
In his evidence Mr Mahar accepted that the record of interview provided an accurate indication of what was said but with one exception. The record of interview indicated that Mr Mahar said that Mr McKinnon said that “for the last ten years he had had his golf club membership fees paid for by the company and that he was not about to start paying now”. Mr Mahar says that he did not add the words “and that he was not about to start paying now”. I accept Mr Mahar’s evidence on this point. Mr Wylie was in attendance at the interview and made handwritten notes. There is no indication that the phrase “and that he was not about to start paying now” was used by Mr Mahar. Further, there was direct conflict between Mr Barker and Mr Wylie in relation to the typing of the notes. Mr Wylie said that he typed up the record of interview, but given that Mr Barker’s reference is on the bottom of the record of interview and that Mr Barker says that he typed it and that Mr Barker was the officer in charge of the investigation it seems to me that in all probability Mr Barker did type up the document. Mr Barker had been privy to an earlier conversation in which someone had alleged that Mr McKinnon had said “that he was not about to start paying his golf club fees now” and it seems likely that Mr Barker has recollected that conversation and this explains why the words are added into the record of interview.
On 15 February Mr Randazzo and Ms Kokkin discussed the matter in Ballarat. They examined invoices and the golf club requisition. They knew that Mr McKinnon had been interviewed. They discussed the correctness of the expenditure and Mr Mahar’s role in processing and authorising the expenditure.
Later on that day Ms Kokkin and Mr Randazzo went to speak to Mr McKinnon but found only a letter of resignation.
They then spoke to Mr Mahar and Mr Randazzo advised Mr Mahar that there were serious issues involved and that Mr Mahar would be suspended with pay to allow further investigation.
The matter was discussed with other members of the Ballarat store. Mr Randazzo and Mr Kokkin spoke to three senior managers within the Myer organisation giving them a thumb nail sketch of what occurred and seeking their advice. This included a discussion with Steve Grapsas the general manager industrial relations. Mr Randazzo also discussed with Murray Taylor and Mark Lucas the content of meetings which had been held in 1994. Prior to meeting with Mr Mahar, Ms Kokkin and Mr Randazzo discussed what would take place at the meeting and also discussed possible outcomes including giving a formal warning, demoting Mr Mahar, asking him for his resignation and dismissing him from employment. They reviewed the statements, invoices and documents and then proceeded to the interview. Mr Randazzo gave evidence that he had not read the typed copy of Mr McKinnon’s interview prior to interviewing Mr Mahar.
At the interview Ms Kokkin took handwritten notes in summary form. A couple of days later she typed up a summary of her notes for her own records. At the interview the relevant matters were discussed in some detail. In relation to the golf club membership Mr Mahar indicated that he felt that Mr McKinnon had a discretion in relation to the entertainment account and that golf club invoices had been processed by him in the past when he was an administration clerk.
Mr Mahar said that he believed the beer and meals were being used to entertain but was unable to provide evidence of who was entertained. In relation to meals at home Mr Mahar said that on one occasion he questioned Mr McKinnon who said that he was entitled to a meal because he was travelling late back from Melbourne and Mr Mahar said that in his mind he wouldn’t do it himself. Mr Mahar conceded that he was aware of a request to escalate matters if he had concern or suspicion. He said that he did not raise these matters because he felt that they were at the discretion of the store manager and although there was some doubt the amounts involved were not significant. After some discussion in which Mr Randazzo outlined the Myer position Mr Mahar said “I suppose I was negligent in my position.” Mr Mahar said that he was unaware of any impact on morale and indicated that he had never tried to hide any of the matters. All of the invoices and requisitions were processed and all the alcohol was loaded into Mr McKinnon’s car at the Myer dock. He said that no manager had ever complained to him about what was taking place. Mr Mahar also conceded in the interview that he may have been intimidated by Mr McKinnon and his higher profile. Mr Mahar said that he felt that entertainment was a grey area and that different store managers had placed a different emphasis on entertainment.
In his evidence Mr Randazzo said that during the course of the interview Mr Mahar conceded that expenditure on the beer, meals and golf club fees was not right.
I reject the evidence of Mr Randazzo that Mr Mahar made those concessions. In cross-examination Mr Randazzo said that Mr Mahar told him that he knew what the store manager was doing was wrong. I do not accept Mr Randazzo’s evidence on this point. The handwritten notes of Ms Kokkin and her typed summary make no reference at all to any such admissions being made on the part of Mr Mahar. These are obviously very important matters and in my view if such admissions had been made they would clearly have been recorded. In his evidence Mr Randazzo denied that Mr Mahar had said that he asked Mr McKinnon to put the names of persons he entertained on invoices but I find Mr Randazzo’s recollection to be highly unlikely as Mr Mahar had confirmed that request in his interview with Mr Barker on the previous day.
In his evidence Mr Randazzo also indicated that he believed Mr Mahar had been unco-operative in his interview with Mr Barker. Mr Barker made no such complaint and indeed it seems that it was Mr McKinnon who was unco-operative and that Mr Randazzo was mistaken on this point. Mr Randazzo also alleged that Mr Mahar had not been co-operative in the interview that he held with Mr Mahar and that he had not properly answered questions. I am unable to accept that version of events as it seems to me that Mr Mahar made every effort to explain his position.
Following the interview Mr Randazzo invited Mr Mahar to go away and think about the matter whilst he and Ms Kokkin also considered the matter. The evidence of Ms Kokkin and Mr Randazzo was that they again discussed the options. They felt that the option of counselling and providing a first and final warning was not appropriate because of the ramifications to the store. They also felt that if counselling had been an option that demotion would have been required because Mr Mahar could not be trusted in the role of store administration manager. Mr Randazzo gave evidence that he felt that Mr Mahar had clearly failed to discharge his duty as administration manager. Mr Mahar had failed to escalate when he had some doubt. He had turned a blind eye, there was an adverse impact on the morale and fibre of the store, the expense budget was skewed in favour of entertainment, Mr Mahar had not followed correct paper work and procedure and had failed in his role to be aware and check the store manager. Mr Randazzo felt that the role of administration manager had changed, that the culture had changed and that although the expenditures may have been reasonable in the past they were not at this time. Mr Randazzo was happy that that message had been clearly passed on to Mr Mahar and felt that the amount of money involved was irrelevant. Mr Randazzo had been a store manager in the past and felt that the type of expenditure involved was very unusual and therefore should have been escalated.
Ms Kokkin said that they also took into account Mr Mahar’s long service, the fact that he had never been counselled or warned and his personal situation in that his wife worked part-time at Myer and that Ballarat was a fairly small town. She felt that demotion was not appropriate because there had been a fundamental and significant failure to manage and to escalate and the effect on other staff in terms of culture, morale and role model was poor indeed.
In her summary of the reasons to terminate Ms Kokkin said that Mr Mahar had knowingly allowed expenditure not deemed appropriate to be made; failed to manage the financial property and assets of Myers; and had failed to raise or escalate issues of doubt.
I am unable to accept Ms Kokkin’s conclusion that Mr Mahar had knowingly allowed expenditure that was not appropriate.
Mr Randazzo and Ms Kokkin then met with Mr Mahar. He was asked to resign but refused point blank. Mr Mahar indicated that he felt the decision should be reconsidered. He said that he had provided good and long service to the company and deserved a second chance. He asked Mr Randazzo to revisit the facts as he wanted to make sure that matters were clearly understood. He said that he was sick to the stomach about the issue and hadn’t slept. He said that he didn’t know that he was doing something wrong and reiterated that he always thought that it was the store managers role and that there were no proper guidelines. He said that there would be trouble replacing him as good administration managers didn’t jump out of trees.
Mr Randazzo refused to discuss the matter further and told Mr Mahar that he was dismissed and that the decision was final.
Mr Mahar had obviously not expected to be dismissed given the explanation that he provided and given his long and loyal service to the Myer Group. Ms Kokkin said in her evidence that when the interview with Mr Mahar had commenced that she had said “this is a serious matter and could result in your dismissal”. I find that she did not use these words. That was not Mr Randazzo’s recollection of the event nor was it Mr Mahar’s. That alleged comment was not put in cross-examination to Mr Mahar nor was it contained in the handwritten notes or typed summary notes of Ms Kokkin. Although it was something that perhaps she had planned to say I find that it was not said at the commencement of the interview.
WAS THERE A VALID REASON FOR TERMINATION?
The requirements of subsection 170DE(1) should not impose a severe barrier to the right of an employer to dismiss an employee. The Respondent will have succeeded in satisfying the onus with respect to a valid reason if it shows that a reason which is sound, defensible and well founded exists: see Northrop J. in Selvachandran v Peteron Plastics Pty Ltd 7 July 1995, pp 6 & 7. In my opinion the Respondent has established a valid reason in this case. On balance, in the strictest sense, Mr Mahar failed to carry out his duty as a store administration manager in a full and proper manner. In particular, in relation to the meals delivered to Mr McKinnon’s home and the alcohol taken away in the boot of Mr McKinnon’s car, it would seem that alarm bells ought to have been ringing and that Mr Mahar should have taken more detailed and appropriate steps to substantiate the actual use of the expenditure. Further, in a situation where Mr Mahar had some doubts about the expenditure his duty required him to escalate the matters to more senior levels of management. His failure to do so may have allowed improper use of the Respondent’s monies and assets.
WAS THERE A BREACH OF SECTION 170DC OF THE ACT?
In my opinion each of the allegations upon which the Respondent’s decision to terminate was based were clearly put to the Applicant. The matters of the golf club fees, the home and restaurant meal expenses, the alcohol expenses and failure to monitor the store manager were all raised and discussed in considerable detail. Mr Mahar was given every opportunity to provide an explanation in relation to each of the matters.
WAS THE TERMINATION HARSH, UNJUST OR UNREASONABLE?
A Court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which lead to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual employee is clearly relevant, but of course not conclusive. Other matters have to be considered such as the gravity of the employee’s misconduct: see Byrne & Frew v Australian Airlines Ltd 1994 120 ALR 274 at page 301.
The employer is required to ascertain whether there are any mitigating factors, either associated with the alleged ground for dismissal, or arising from the employee’s past record and future prospects: see Gray J in Bostik (Australia) Pty Ltd v Gorgevski 1992 36 FCR 20 at page 35.
In my opinion there are a number of matters that indicate that the termination of employment was unfair in the particular circumstances of this case. Mr Mahar had been a long serving and dedicated employee of Myer for some 20 years. His record of service was impeccable, there being no indication that he had been warned or counselled in relation to any matters arising from his employment. Indeed, he had steadily worked his way up through the levels at Myer and reached the position of store administration manager. Given the fact that he is over 40 years of age and a middle manager the effects of termination upon him were likely to be devastating and that proved to be the case as he has had great difficulty in finding suitable employment. These are clearly very important matters on the question of mitigation. Except in the case of a matter justifying summary dismissal, one would normally expect that a process of warning or counselling should take place. This might be said to be particularly so in the case of a first offence after so many years of excellent service.
Further, it is my view that the Respondent failed to properly take into account the past history of the Ballarat store and the relatively recent change in culture which had only been introduced in the prior twelve months. Although both Mr Taylor and Mr Randazzo felt that the types of expenditure involved were rare or unusual or not generally known at Myer, this was clearly not the case at Myer Ballarat. The practice had developed over a large number of years that expenses such as golf club fees and meals were paid on quite a regular basis. Although it might be said that particularly in terms of the alcohol and home delivered meals, that alarm bells should have been ringing, they would have been ringing far quieter in the case of Mr Mahar because of his prior experience. Further, as I have indicated I reject the evidence of Mr Randazzo and Ms Kokkin that Mr Mahar knowingly approved improper expenses or admitted that payment was not right. Indeed, this is entirely inconsistent with the fact that all invoices, accounts and requisitions were processed through the normal Myer system, generally involving checking by at least two or three persons and the provision of a cheque from head office. Mr McKinnon’s car was being loaded in the Myer dock and obviously many people were aware of that fact. There was no attempt made to hide any of the matters, which confirms my impression of Mr Mahar that although he had some disquiet over some of the items of expenditure that he was prepared to accept them as proper. At the most, in my view this represents an error in judgment rather than a dereliction of duty. All of the accounts and receipts were there to be audited and checked.
Further, when considering the matter of mitigation, I find that the Respondent did not take proper account of its own failure to train, to supervise and to warn Mr Mahar in relation to this matter. Although there had been a number of documents issued and a number of training sessions held, given the significant changes that were taking place, adequate follow up was also required. The fact that Mr Randazzo did not speak to Mr Mahar when he became aware of some unusual expenses in November 1994 and indeed failed to speak to him on 27 January 1995 when he was aware of the majority of matters involved in this case, indicates a major inconsistency on the part of the Respondent. Further, a number of the documents upon which Myer, and in particular Mr Taylor, sought to rely were ambiguous and difficult to understand and obviously in some cases difficult to even find. Mr Randazzo did not understand the procedures in the manner that Mr Taylor felt they ought to be carried out. On Mr Randazzo’s version of events he must have known that the Applicant was responsible for the authorisation of accounts which are now said to be totally unacceptable and yet Mr Randazzo did nothing about it. At the very least, if he had spoken to Mr Mahar in November of 1994 it is highly unlikely that the golf club fee would have been paid. On 27 January Mr Randazzo was prepared to forgive Mr McKinnon and indeed not even consult with Mr Mahar.
Further, despite the large amounts of documentation produced, there is nothing in evidence which attempts to identify what might be legitimate entertainment expenses and precisely how they ought to be controlled.
The Convention contained in Schedule II to the Act indicates in paragraph 8 that the employment of a worker should not be terminated for unsatisfactory performance unless the employer has given appropriate instructions and written warning. Myer’s own internal documents would suggest that warning is the appropriate initial step. Given Mr Mahar’s length of service and outstanding and excellent record it seems quite remarkable that he was not given such an opportunity in this case and it is not surprising that this was his immediate reaction when told of his dismissal.
Although the sums involved may be irrelevant where a matter of principle is in issue, the fact is that in this particular case something in the vicinity of $800 in a half yearly budget of $400,000 was involved and indeed, there was absolutely no personal gain on the part of Mr Mahar.
Further, although Mr Mahar admitted after lengthy discussion that he may have been negligent he did this after counselling and discussion and certainly did not make an outright admission. I am unable to accept Mr Randazzo’s evidence that he thought that Mr Mahar was trying to hide something and didn’t answer openly. Certainly it was not the impression that I got after reading the records of interview and indeed making my own assessment of the Applicant.
Although much was made of an alleged loss of morale at the Ballarat store as a result of Mr McKinnon’s expenditure I note that Mr Maher was given what appears to have been a very large and supportive farewell party after his termination.
In relation to the question of procedural fairness I have already indicated that there was no specific indication given to Mr Mahar that his actions may have led to his dismissal. Indeed, he was obviously distressed after being advised of his dismissal as there were a number of matters which he wished to put in mitigation and he obviously felt that his point of view had not been entirely understood. There were several matters which he wished to ensure were considered which he did not have the opportunity to put as the decision had already been made. His request to revisit the facts and discuss matters was refused. Although Ms Kokkin and Mr Randazzo said that they considered matters such as length of service, personal situation and so on, it is hard to accept that they were fully aware of those circumstances without first discussing them with Mr Mahar. It also seems that the past practices of the Ballarat store were not investigated with the result that they were given insufficient weight by Mr Randazzo and Ms Kokkin.
In all the circumstances, given what I consider is a failure to properly consider matters in mitigation and given its failure to properly consider its own shortcomings in terms of training, documentation, supervision, warning and counselling, I find that the termination was harsh, unjust or unreasonable. Whilst I accept that a warning or perhaps demotion was justified in the circumstances, termination seems to be excessive. I therefore find that there was a breach of s.170DE(2) of the Act.
REMEDY
The Applicant sought reinstatement to his position as store administration manager at Myer Ballarat.
The case of Liddell v Lembke (1994) 127 ALR 342 establishes the proposition that where there has been a breach of the Act then prima facie reinstatement is to be the remedy.
The Respondent argued that reinstatement was impracticable on the basis that there had been a breach of trust and that Myers ability to discipline and handle and set an example to its other store administration managers would be greatly harmed if the Applicant was reinstated. The Respondent also argued that if the Applicant was to be reinstated in Ballarat that there were few suitable positions available and indeed as a result of his training and abilities that Mr Mahar would be unsuitable for other managerial positions.
I am unable to accept the Respondent’s submission that reinstatement is impracticable. I believe that the demotion of Mr Mahar would have sent an adequate message to other managers. Clearly Myer Stores Pty Ltd has a very large staff and a very large number of managerial positions available. In my opinion it is appropriate that Mr Mahar be reinstated to the Ballarat store. Section 170EE allows reinstatement to the same or similar position. I am unable to accept the Respondent’s evidence that Mr Mahar would be unable to cope with the position of logistics manager or business manager. He has a wide range of experience within the Myer Ballarat store and was considered suitable for the position of store administration manager. Indeed, with the possible exception of Mr McKinnon’s expense account, he seems to have handled the position in a fit and proper manner.
I therefore intend ordering that Mr Mahar be reinstated to the Myer Ballarat store in the position of either store administration manager, logistics manager or business manager.
THE COURT ORDERS:
The Applicant be reinstated by the Respondent to the position of either Store Administration Manager, Logistics Manager or Business Manager at its Ballarat store, and that the reinstatement take effect forthwith;
The Applicant be reinstated on the same salary, remuneration and conditions that applied to him immediately prior to his termination;
The period from 16 February 1995 to 23 August 1995 inclusive be treated for all purposes as continuous employment of the Applicant by the Respondent in the position occupied by the Applicant immediately before the termination of his employment;
The Respondent pay to the Applicant remuneration at his pre-termination rate from 16 February 1995 to 23 August 1995 less any amounts received by the Applicant for work carried out by him in that period;
The Applicant provide the Respondent with written particulars of all remuneration earned by him in the period 16 February 1995 to 23 August 1995 within 7 days.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding thirty three (33) pages are a true copy of the reasons for judgment of Judicial Registrar Chancellor.
Associate:
Dated: 23 August 1995
Solicitors for the Applicant: Mr D Harriss
Purcell, Balfe & Webb
Counsel for the Applicant: Mr J. Bourke
Solicitors for the Respondent: Messrs Phillips Fox
Counsel for the Respondent: Mr P. McCurdy
Date of hearing: 4, 5, 6 & 7 July 1995
Date of judgment: 23 August 1995
C A T C H W O R D S
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - VALID REASON - HARSH, UNJUST OR UNREASONABLE - OPPORTUNITY TO RESPOND - REINSTATEMENT.
Industrial Relations Act 1988 ss. 170DC, 170DE, 170EA, 170EE, Schedule II.
CASES:Selvachandran v Peteron Plastics Pty Ltd (Industrial Relations Court of Australia, Northrop J., 7 July 1995)
Byrne & Frew v Australian Airlines Ltd 1994 120 ALR 274
Bostik (Australia) Pty Ltd v Gorgevski 1992 36 FCR 20
Liddell v Lembke (1994) 127 ALR 342
MAURICE MAHAR -v- MYER STORES PTY LTD
No. VI 1832 of 1995
Before: Judicial Registrar Chancellor
Place: Melbourne
Date: 23 August 1995
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1832 of 1995
B E T W E E N :
MAURICE MAHAR
Applicant
AND
MYER STORES PTY LTD
Respondent
MINUTES OF ORDERS
Judicial Registrar Chancellor 23 August 1995
THE COURT ORDERS:
The Applicant be reinstated by the Respondent to the position of either Store Administration Manager, Logistics Manager or Business Manager at its Ballarat store, and that the reinstatement take effect forthwith;
The Applicant be reinstated on the same salary, remuneration and conditions that applied to him immediately prior to his termination;
The period from 16 February 1995 to 23 August 1995 inclusive be treated for all purposes as continuous employment of the
Applicant by the Respondent in the position occupied by the Applicant immediately before the termination of his employment;
The Respondent pay to the Applicant remuneration at his pre-termination rate from 16 February 1995 to 23 August 1995 less any amounts received by the Applicant for work carried out by him in that period;
The Applicant provide the Respondent with written particulars of all remuneration earned by him in the period 16 February 1995 to 23 August 1995 within 7 days.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
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