Mr David Armstrong v Taxation Management Services Pty Ltd ATF TMS

[2015] FWC 4879

[2015] FWC 4879 [Note: Appeals pursuant to s.604 (C2015/5234) were lodged against this decision - refer to Full Bench decisions dated 6 October 2015 [[2015] FWCFB 6789], 2 December 2015 [[2015] FWCFB 8094]] and 16 March 2016 [[2016] FWCFB 1179]] respectively for result of appeals.]

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr David Armstrong
v
Taxation Management Services Pty Ltd ATF TMS
(U2014/1566)

COMMISSIONER RIORDAN SYDNEY, 6 AUGUST 2015

Application for relief from unfair dismissal.

[1] This decision is in relation to a notification under section 394 of the Fair Work Act, 2009 (the Act) by Mr David Armstrong (the Applicant) claiming that he has been unfairly dismissed by Taxation Management Services Pty Ltd (TMS).

[2] Mr Armstrong represented himself in the proceedings. TMS was represented by its owner and principal, Mr John Hoff. Mr Hoff was assisted by his father, Mr Phillip Hoff. I note that TMS has only 3 employees.

[3] On behalf of the Applicant, Witness Statements were attested by Mr David Armstrong, Mrs Lorel Armstrong (nee Webber) and Mr Dean Taylor. I accepted a statutory declaration from Ms Caroline Burt. On behalf of TMS, witness statements were attested by Mr John Hoff and Ms Yanan Gou. I accepted a witness statement from Ms Alyssa Jenaway without objection from Mr Armstrong, on the basis that she was not available to attend due to the amended hearing schedule.

Background

[4] Mr Armstrong was employed by TMS as an accountant on 9 October 2011. He was allegedly dismissed on 11 March 2014. He was allegedly provided with an extended notice period until 30 April 2014. On 3 April 2014, Mr Hoff advised Mr Armstrong not to come back to the office anymore. Mr Armstrong allegedly resigned on 8 April 2014. Mr Hoff summarily dismissed Mr Armstrong on 11 April 2014.

[5] The delay in the hearing of this application has been due to a Police investigation in relation to a break in at the offices of TMS on 9 April 2014. Whilst Mr Armstrong was a person of interest during this investigation, no charges were laid by the Police.

[6] This is a highly unusual case. Mr Armstrong and Mr Hoff were good friends for 8 years. According to Mr Hoff the friendship ceased on 4 April 2014 when he formed the view that Mr Armstrong was trying to disadvantage TMS.

[7] The following provisions of the Act are of relevance in unfair dismissal proceedings:

Legislative Provisions

381 Object of this Part
(1) The object of this Part is:
(a) to establish a framework for dealing with unfair dismissal that balances:
(i) the needs of business (including small business); and
(ii) the needs of employees; and
(b) to establish procedures for dealing with unfair dismissal that:
(i) are quick, flexible and informal; and
(ii) address the needs of employers and employees; and
(c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.
(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a “fair go all round” is accorded to both the employer and employee concerned.

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
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.

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.
23 Meaning of small business employer
(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.
388 The Small Business Fair Dismissal Code
(1) The Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code.
(2) A person’s dismissal was consistent with the Small Business Fair Dismissal Code if:
(a) immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and
(b) the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.

Summary Dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

[8] I have decided to initially deal with the issue of Mr Armstrong’s summary dismissal on 11 April 2014, on the basis that if I find that Mr Hoff has acted in accordance with the provisions of the Act, then the other issues in relation to the alleged dismissal of 11 March 2014 simply fall away and become irrelevant.

[9] Mr Armstrong was told not to come to work for the remainder of his notice period on 3 April 2014. Basically, he had been put on “gardening leave”.

[10] The office of TMS was broken into by an unknown person on the evening of 9 April 2014. Mr Hoff is of the strong opinion that Mr Armstrong committed the offence based on the actions of the thief.

[11] Mr Hoff advised the FWC and the Police that the following items had been stolen from the office:

● Mr Armstrong’s diary;

● Documents from Mr Armstrong’s desktop;

● Documents from Mr Hoff’s office pertaining to Mr Armstrong’s employment.

[12] I note that nothing of any value, such as computers, laptops or petty cash was stolen during this break and enter. I have taken this into account.

[13] Mr Hoff also advised that he had engaged IT consultants to search TMS’s computer system to ascertain whether any material had been stolen or the system compromised. The IT consultants advised Mr Hoff that somebody had logged into TMS’s computer system and downloaded information onto a USB. The log in details that were used were that of Mr Armstrong. Mr Armstrong claims that he left his log in details on a post it note with Mr Hoff when he left. Mr Hoff denies the existence of any post-it note. There is some debate as to whether the log in details that were provided by Mr Armstrong at the hearing, which he claims was the information that he provided to TMS when he left on 3 April 2014, would actually provide access. The code is two characters short to work the system. I have taken this into account.

[14] A significant client of TMS is a friend of Mr Armstrong and was also a witness in these proceedings, Mr Dean Taylor. Mr Taylor operates a business and is a resident of Geraldton, a town 418 km north of Perth.

[15] Mr Armstrong would occasionally meet Mr Taylor on the weekend to deal with his tax and business issues when Mr Taylor was visiting Perth. It was therefore appropriate for Mr Armstrong to have possession of Mr Taylor’s files at his home, perhaps not on a permanent basis but certainly on a regular basis.

[16] When Mr Hoff requested and then demanded that the files of Mr Taylor be returned to the office of TMS, following Mr Armstrong being stood down, the files were returned in a loose fashion with the pages not contained in a file. Mr Hoff claims that a number of files and important pages pertaining to Mr Taylor were not returned.

[17] One of the files not returned was the billing file. This meant that Mr Hoff could only charge Mr Taylor an estimate of what work he thought had been undertaken by Mr Armstrong. Mr Taylor, after receiving the estimated account, had a discussion with the recently dismissed Mr Armstrong. At this meeting, either Mr Armstrong or Mr Taylor suggested that Mr Taylor should ask TMS for an itemised account. An itemised account could not be provided by TMS because the billing sheet/billing file was no longer in existence, a fact that would have been well known to Mr Armstrong at this point in time if he had removed or destroyed this information from the TMS file. I have taken this into account.

[18] Mr Armstrong was dismissed by the issuing of the following correspondence:

“11 April 2014

Mr D J Armstrong

Dear David

Re: Letter of termination

I refer to previous correspondence, particularly my email to you this morning. In my email this morning I identified that you had:

(a) Failed to return company property, including complete client files which had been specifically requested from you in my letter to you of 8 April 2014;
(b) Failed to attend at a meeting scheduled to discuss the return of such property and files.

As a consequence of the above I set out that you had breached your obligations to:

(a) Serve the company faithfully and diligently;
(b) Act in the company's best interests; and
(c) Refrain from acting or giving the appearance of acting contrary to the company's interest.

I again requested that you return all company property and all client files (complete) to me at the office before noon today.

I note that you did not attend at the office at noon today and have sent an email to me at 1.40 pm today in which you state that you have complied with my request for the return of complete client files and all company property.

As I am in possession of particular files identified in my letter that you have returned, it is obvious to me that there are documents missing from those files. I can only assume that you have retained those documents and do not intend to return them to the company. You are acutely aware that the documents are necessary for the company to continue with its work for these clients.

In relation to your failure to attend the scheduled meeting you assert that your child was sick and that you had to look after the child. You do not say why this prevented you from contacting me prior to the scheduled time to advise me of your predicament and to request a deferment of that meeting. Your further reasons for failing to attend at this meeting are ambiguous or factually incorrect. I conclude that your failure to attend was deliberate and wilful.

You have not provided any meaningful comments in relation to the breaches of your obligations set out in my email to you this morning.

As further noted in my email, a failure by you to return company property comprising the complete client files by noon today would result in a termination of your employment without further notice.

There is nothing in your email to me today that provides any or any legitimate reason as to why you have not complied with this requirement. If you are aware of the location of the client files or documents relating to those files you have had the opportunity to advise me. You have not done so.

The retention of company property, including client files and or documents from those files is clearly a serious and wilful breach of your contractual obligations.

As indicated in my earlier email I herein notify you that your employment with the Company is terminated, effective immediately. I shall arrange for the payment of your salary, to the end of today, as well as any other accrued entitlement, to be paid to you on the usual pay day.

I remind you of your restraint obligations as set out in clause 14 of your contract. As it is evident to me that you have retained documents from particular client files I will be advising those clients of your post termination obligations and will seek to enforce those obligations against you if necessary.

Yours faithfully
John Hoff” 1

Consideration

[19] I am satisfied and find that TMS is a small business and is subject to the Small Business Fair Dismissal Code.

[20] The provisions of s 388 required Mr Hoff to believe on reasonable grounds that Mr Armstrong’s conduct was sufficiently serious to justify summary dismissal.

[21] In Pinawin v Domingo 2the Full Bench of the FWC clarified the appropriate tests to be applied:

“[27] Deputy President Bartel in Narong Khammaneechan v Nanakhon Pty Ltd ATF Nanakhon Trading Trust T/A Banana Tree Cafe  3 said:

“[60] At the outset it is appropriate to note that unlike a consideration of the dismissal of an employee of a business that is not a small business employer, the function of FWA is not to determine on the evidence whether there was a valid reason for dismissal. That is, the exercise in the present matter does not involve a finding on the evidence as to whether the applicant did or did not steal the money. The application of the Small Business Fair Dismissal Code involves a determination as to whether there were reasonable grounds on which the respondent reached the view that the applicant’s conduct was serious enough to justify immediate dismissal. As such, the determination is to be based on the knowledge available to the employer at the time of the dismissal, and necessarily involves an assessment of the reasonableness of the steps taken by the employer to gather relevant information on which the decision to dismiss was based.”

[28] Deputy President McCarthy in Harley v Rosecrest Asset Pty Ltd T/A Can Do International  4 said:

“[8] For an employer to believe on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal, it is firstly necessary for the employer to establish that the employer did in fact hold the belief that as a matter of fact that (i) the conduct was by the employee; (ii) the conduct was serious; and (iii) that the conduct justified immediate dismissal. This is to be contrasted to the provisions of s.387(a) where FWA, in determining whether there was a valid reason for the dismissal, must find whether the conduct in fact occurred. 

[9] Secondly, it is necessary for the employer to establish that there are reasonable grounds for the employer holding the belief. It is thus necessary for the employer to establish a basis for the belief held which is reasonable. In this regard it would usually be necessary for the employer to establish what inquires or investigations were made to support a basis for holding the belief. It would also ordinarily be expected that the belief held be put to the employee, even though the grounds for holding it may not be. Failure to make sufficient inquiries or to put the accusation to the employee in many circumstances might lead to a view that there were no reasonable grounds for the belief to be held.”

[29] We believe that the approach and observations in these two decisions are correct. There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, there needs to be a consideration whether, at the time of dismissal, the employer held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.

[30] Acting reasonably does not require a single course of action. Different employers may approach the matter differently and form different conclusions, perhaps giving more benefit of any doubt, but still be acting reasonably. The legislation requires a consideration of whether the particular employer, in determining its course of action in relation to the employee at the time of dismissal, carried out a reasonable investigation, and reached a reasonable conclusion in all the circumstances. Those circumstances include the experience and resources of the small business employer concerned.”

[22] Mr Hoff did suspect Mr Armstrong as being the person who broke into the office of TMS. Mr Armstrong asked Mr Hoff the following question during the proceedings:

“Mr Armstrong: But you were certain I’d committed the break in, from what you said? –
Mr Hoff: I was certain. Yes.” 5

[23] Further, the Police Incident Report shows that, Mr Hoff made the following comments to Police on 10 April 2014 when reporting the break in at 7.45am:

“ PO Entry

M/O: Unknown offender/s have tried to force the locking mechanism open to the locked office door. Caller states that seal on the double doors have been tampered with and look as if someone has tried to push an unknown object through the gap between the two doors. There is only superficial damage to the seals. Caller is unsure if entry has been gained. Caller suspects that it may be a disgruntled (employee) who was advised that he is being investigated and possibly dismissed. His name is ARMSTRONG, David. Caller believes that ARMSTRONG would be after paperwork that could damage the business. Caller has a meeting with him this morning at 10.00 to discuss the situation. Caller stated that the building was not broken into and that offender could have been in the building after he had left for the day and locked his office.” 6

[24] Having discovered the break in on 10 April 2014, Mr Hoff could have expected to find any number of the computers missing from the office, files strewn all over the floor or items of any value to have been stolen. Instead, he found documents pertaining to Mr Armstrong’s employment to be missing, Mr Armstrong’s log-in name to be the last user on the computer of Ms Gou and after investigation by an external IT specialist, a report that identified Mr Armstrong’s login details were used to access the computer system and that company information had been transferred to a USB from that computer at that time. I have taken this into account.

[25] Mr Hoff was also convinced that Mr Armstrong was attempting to defraud TMS. Mr Hoff had repeatedly asked for all files in Mr Armstrong’s possession to be returned. Mr Armstrong continually delayed and frustrated this process. When Mrs Armstrong finally returned the file of Mr Taylor, the billing sheet had been removed from the file, thereby denying TMS the opportunity to accurately bill Mr Taylor for the work performed. Mr Hoff regarded this scenario as an attempt by Mr Armstrong to defraud TMS. I have taken this into account.

Conclusion

[26] I am not required to make any finding against Mr Armstrong in relation to the theft or alleged fraud at TMS.

[27] However, as I stated earlier, that is not the test in relation to section 388 for a small business. The question is whether Mr Hoff believed that Mr Armstrong’s conduct was serious enough to justify his summary dismissal and whether he had reasonable grounds in coming to that conclusion.

[28] After taking into account all of the submissions and volumes of evidence submitted by the parties at the reasoning of the Full Bench in Pinawin v Domingo, I find that Mr Hoff did have reasonable grounds for reaching the conclusion to summarily dismiss Mr Armstrong in accordance with the Small Business Fair Dismissal Code. It is peculiar in the extreme that a thief would break into an office, steal only items that were linked to a recently dismissed and suspended employee, log on to a computer using the login details and password of the recently dismissed employee and steal unspecified information from the computer system, then leave without taking any good or chattel of any monetary value.

[29] Mr Armstrong’s application for an unfair dismissal remedy is dismissed. Having found that Mr Armstrong’s summary dismissal was in accordance with the Act, it is not necessary for me to deal with the issue of the alleged dismissal on 11 March 2014.

COMMISSIONER

 1   Exhibit T2

 2   [2012] FWAFB 1359

 3   [2010] FWA 7891.

 4 [2011] FWA 3922.

 5   PN1097

 6   MFI1

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