Mr Eli Oren v Garry Crick Auto Group P/L T/A Daimler Trucks Suncoast

[2014] FWC 6553

[2014] FWC 6553

FAIR WORK COMMISSION

DECISION

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

Mr Eli Oren
v
Garry Crick Auto Group P/L T/A Daimler Trucks Suncoast
(U2014/6540)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 22 SEPTEMBER 2014

Summary: whether dismissal harsh etc - performance issues re audit report - consumer credit obligations - weight given to regulatory risks and focus given to training.

[1] This matter concerns an application by Mr Eli Oren (“the Applicant”), who is seeking an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (“the Act”). The Applicant was dismissed from his employment on 28 March 2014 (having been employed since October 2011) as a business manager with Daimler Trucks Suncoast, which is a subsidiary of the Gary Crick Auto Group Pty Ltd (“the Respondent”).

[2] The Applicant had been initially employed as a trainee business manager but had been promoted to the more senior position upon completion of his traineeship in January 2012. It appears that the role of a business manager is to arrange and sell finance and insurance products to customers who purchase vehicles. The Applicant was paid on the basis of a base salary supplemented by commission on the sales of such financial products.

[3] In performing these duties the Applicant’s conduct is regulated by the National Consumer Credit Protection Act 2009 (“the NCCP Act”).

Applicant’s perspective

[4] On 21 March 2014, a selection of the Applicant’s files were subject to an audit. The purpose of the audit was to establish whether the business managers had been “operating in accordance with the legislative requirements under FSR (Financial Services Reform) which governs the areas of both Finance and Insurance” and otherwise to ensure that the Respondent was operating under the industry best practice.

[5] The auditor returned later in the day and raised issues about various documents being incomplete in respect of various of the files. The Applicant claimed that this was not an unusual situation (as the documents that comprise the files arrived from multiple sources) and that he retained the full files on his hard drive. The Applicant later claimed that the complete hard copy files needed to be retained for limited periods and electronic copies would suffice after that (so he said he was advised). I deal with this issue further below.

[6] The Applicant claimed that the auditor then raised a query as to why he had not been disclosing the availability of a consumer credit insurance product. The Applicant contended that he explained that the financial product referred to was directed at providing consumer credit insurance up to $100,000 and his transactions generally exceeded that amount and the product therefore was not relevant to his customers.

[7] About a week later, the Applicant was requested to attend a meeting with the dealer principal, Mr Cameron O’Hara. The manager for the respondent, Mr Dale Christensen, was also present at the meeting.

[8] Mr O’Hara indicated that the audit as completed had indicated that the Applicant had breached legislation which had exposed the Respondent to risk and as a result of the audit, the decision had been made to dismiss the Applicant from the Respondent’s employment immediately.

[9] Mr O’Hara was said to have further commented that the Applicant had not complied with the regulations for the finance and that documents were missing from the files. Mr O’Hara was said to have conceded that he did not understand finance, could not explain the audit findings in any detail, and that the Applicant’s direct manager, Mr Don Holden (who was the Group Business Manager), was unable to attend to explain the situation more comprehensively. The Applicant was not permitted an opportunity to examine the audit report himself, or to respond to the claims as appeared to have been made out in the audit report.

[10] The Applicant was dismissed on the basis of the audit report.

[11] The Applicant was informed, following the dismissal, that if he wanted an opportunity to reply to the circumstances he would need to discuss this with the Group Business Manager.

[12] Mr O’Hara then was said to have offered the Applicant an opportunity to tender his resignation in lieu of being dismissed. The Applicant did not take up this offer.

[13] The Applicant’s pay slip issued at the time of his dismissal refers to payment for two weeks (72 hours) notice in lieu.

[14] The Applicant contends that the Respondent’s employee handbook indicates that in respect of gross misconduct which warrants instant dismissal:

In all instances the employee will be given the opportunity to defend or explain their behaviour in a formal counselling with the opportunity to have a witness present. An employee may be suspended pending the outcome of an investigation.

[15] The handbook also states that:

All employees will be afforded the opportunity to respond as a result of any disciplinary interviews. Furthermore, you will be afforded the opportunity to have a witness present during any such counselling/interviews.

[16] The Applicant also cited the employee handbook in respect of the following:

In the event that there is a breach of discipline there is a clear process that will be followed:

Verbal warning - For minor breaches of discipline or failure to achieve satisfactory standards a counselling session will occur and/or a verbal warning given, normally by your supervisor or manager.

[17] The employee handbook goes on to set out further steps in the discipline process. The first of these is the provision of a first written warning, which is then proceeded by a final written warning. Termination of employment follows where there is continued unsatisfactory behaviour or performance and/or a further breach of policy and procedures.

[18] The Applicant cited the audit in part as an annexure to his witness statement.

[19] The audit as cited by the Applicant made the following comments under the following headings:

Manual application - Other

Garry Crick folder used. Yes. Notes not detailed, applications not complete. [Specified Customer] had no application on folder, no GAW, no Privacy but approved. Deal for [...] GAW signed, Privacy signed application okay but missing employers address and no notes.

Privacy signed

Yes. Not always in folder on application

Cash options letter signed

Yes. Not always complete

Detailed notes on file

Yes. Not enough details on folders.

Site copy of credit guide in every finance folder

Yes. Eli needs more attent to detail throughout the entire job, he is leaving major holes in the procedures.

[20] The Applicant complained that the audit made adverse comment about the management of the [Specified Customer] file (see above), but that file was from 2013 (outside the auditable period) and was not before the auditor.

[21] The Applicant also contended that had his hard drive files been scrutinised the apparently missing documentation would have been provided to complete the audit.

[22] The Applicant concedes that he had a discussion with Mr Don Holden on or about 8 February 2013 in relation to an earlier audit. This discussion is referred to below and is said by the Respondent to have taken place on 15 February 2013.

[23] The Applicant contends that Mr Holden in the course of that meeting discussed with him the difference between GAW and FSG. The Applicant claims that Mr Holden gave him no warning at that stage or at any other time about the performance of his duties (which is a point of significant departure from the facts as asserted by the Respondent). Nor, the Applicant claimed, had the Respondent ever undertaken any performance appraisals in relation to his work performance.

[24] In this regard, the Applicant contends that his work performance prior to this time had been exemplary. In this respect he claims that his sales performance was 115% above his KPI’s the previous year and he was one of the top finance business managers for Mercedes-Benz and had only recently come in the top 4 Mercedes-Benz Finance brokers in the country for 2013. He had been congratulated by Mr O’Hara and Mr Garry Crick for his efforts in this regard.

Respondent’s perspective

[25] The Respondent contends that the Applicant was trained comprehensively in order to ensure that there was a continuing commitment to compliance with the NCCP Act. In addition, there were regular monthly in-house meetings to emphasise the importance of compliance.

[26] The Applicant was also subject to independent audits, of which there were two. The first of these audits, which I have referred to above, was said to have revealed “significant shortcomings” in respect of the Applicant’s performance. Mr Don Holden informed the Applicant at the meeting that took place in relation to this audit (on 15 February 2013) that he must ensure compliance or else the company would be in jeopardy.

[27] Mr Holden gave evidence that the March 2014 audit was carried out in relation to 17 files and that there were five files that failed to meet acceptable standards in relation to gathering information sufficient to disclose credit positions to credit providers and other documents required under privacy laws in relation to submitting applications to credit providers.

[28] The range of matters referred to in the audit report were considerably more expansive than that set out above.

[29] The audit report provides an extensive examination of the various applications. In summary, it includes the following kinds of findings (which are set out in the terms as expressed in the audit):

• Applications are poorly taken and documented. Most applications written in the folder were 50 – 70% incomplete.



• Due to incomplete applications it was difficult to assess that the correct data was being submitted to the finance company.



• Credit card was not disclosed on deal [...].



• GAW was present in only some of the deals checked.



• Need to be ticking and dating front of the finance folder as a diary note of delivery of the GAW, FSG and PDS.



• In all deals checked there were no [loan] options letters evident.



• Deal with [...] Amount insured on certificate of currency was $252,000 yet the amount truck was financed for was $277,362.



• Deal with [...] Application states mortgage payment of $2000 per month with a balance of $1.8 million????



• Retail buyers order does not match the figures submitted to the finance company. In most cases this is due to tray or body being fitted. In some cases there was a trade that was not shown. It is essential that the deal pack contains a signed buyers order that mirrors the figures submitted to the finance company.



• No deal file notes at all.

[30] The Respondent had various concerns as a consequence of the audit. By not disclosing a customer’s full liabilities and financial commitments as required the Applicant was not complying with his duty of care, in so far as his conduct could have led to “unconscionable lending”. The particular concerns in this regard were that the Applicant did not make sufficient enquiries into the customer’s financial background and failed to obtain all the financial commitments and credit card liabilities as part of the loan process. Because of this the Applicant had not been compliant with ASIC RG209.

[31] The reference to “ASIC RG209” refers to the Australian Securities and Investments Commission (“ASIC”) regulations in relation to “Responsible Lending Conduct.”

[32] RG209 sets out the obligations upon credit providers and those assisting in the provision of credit to ensure responsible lending practices. It requires such providers to make reasonable inquiries into and to verify a customer’s financial situation and to make preliminary or final assessments of the consumer’s suitability for the relevant loan.

[33] The audit also disclosed that the Applicant had not fulfilled his job as business manager. This was because the Applicant had not made customers aware of all the financial products that are available. It was a requirement of his position that the Applicant provide customers with loan option letters that outline the range of products, their coverage, and their cost. Mr Holden contended that the Applicant had conceded in his own evidence that he was not offering customers credit insurance loans for the first $100,000 of their liability and that as such he was not offering those loans and had failed in his duty to disclose the availability of the financial products.

[34] Mr Holden contends that following the 2013 audit he sat down with the Applicant and explained the difference between a FSG and a GAW and gave him a verbal warning. The verbal warning was recorded, so Mr Holden said, in his Outlook diary on 15 February 2013 and was also mentioned to the dealer principal, Mr O’Hara. The Applicant, so Mr Holden said, was informed that his performance standards were not sufficient insofar as they did not meet the Respondent’s expectations and were exposing the company to breaches of ASIC regulations.

[35] Mr Holden conceded in his written evidence that the company had only made verbal warnings and had given no written warnings to the Applicant. The Applicant denied any such warnings had been given to him at the time.

[36] In all, Mr Holden contended that the Applicant:

[..] had more than enough training on ongoing basis to know that his failure to comply was evident considering the information covered in those sessions/meetings.

[37] In this respect, the Respondent provided copies of its training materials. On an objective assessment, they are particularly comprehensive and well structured to communicate the key imperatives.

[38] The Respondent denied that the procedure involved in dismissing the Applicant was precipitous and that the Applicant was not given an opportunity to respond to the audit findings.

Legislative provisions

[39] Section 387 of the Act provides as follows:

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.

Consideration

(a) whether a valid reason(s) for the dismissal

[40] The findings of the audit were not substantially challenged by the Applicant. The Applicant called into question some particular matters, such as the negative commentary on the [Specified Customer] transaction for reason it was not a file that he handed to the auditor. It was nonetheless a file the auditor examined and found wanting (and can only reasonably have come into the auditor’s possession by way of the Applicant himself).

[41] The Applicant also called into question the extent to which he was required to maintain consolidated hard copies of documents in a hard copy file. But under questioning he did concede that there was an expectation that consolidated hard copy files had to be retained for a period of six months following the settlement. The files that were audited were in various respects deficient as the report indicated when they should, on the Applicant’s own evidence, have been complete at the time. If they had not been completed at that time, reasonably they had never been completed.

[42] There was some dispute between the parties in respect of the obligation to disclose the availability of loan insurance facilities beneath the (loaned) purchase price of the vehicle. The Applicant contended he had no obligation to make disclosures unless the insurable amount was $100,000 or less.

[43] The employer contended that there was a statutory duty to disclose such insurance facilities to consumers so that they could manage their credit risks (and reduce the employer’s legal exposure in the event of a consumer default on a loan). The training materials in which the Applicant had been trained made no point of distinction on the basis of vehicle (loan) value and offering insurance facilities to consumers. Further, under questioning the Applicant conceded that he would never have been in a position to evaluate whether a consumer would benefit from the availability of such an insurance facility unless he disclosed the facility to the consumer.

[44] It appears to me that the Applicant failed to offer the loan facility that he was obliged to offer on the basis on an ill-founded judgment on his own part, which was contrary to his training and his employer’s legal responsibilities.

[45] It appears to me on the evidence that the Applicant was performing his duties in a business environment that was sensitive to its statutory obligations. Apart from the extensive initial training materials, which were provided by a third party, the Applicant was also trained by in-house process on a monthly basis. The audit reports need to be understood in this context. The first audit of February 2013 draws attention to a number of shortfalls in the Applicant’s procedures. The March 2014 audit showed that the Applicant had not made appreciable gains in improving his performance. The employer reached a view that in the consumer law (and training) setting in which it conducted its business, the Applicant presented too great a risk for it; the Applicant was dismissed with notice paid in lieu.

[46] In the context of the audit reports and the ongoing training afforded to the Applicant I consider that the employer had a valid (sound and defensible) reason for the dismissal.

(b) whether the person was notified of that reason

[47] The evidence suggests that the Applicant was not notified in advance of the pending reasons for his dismissal. The Applicant was called to a meeting and dismissed.

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

[48] The Applicant’s dismissal was not because of his conduct but because of the performance of his duties as they were commented upon by the audit of March 2014. Absent this audit report the Applicant would have in all likelihood continued his employment.

(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

[49] The circumstances of the dismissal were such that the Applicant was not afforded an opportunity to have a support person in attendance. Thus, there could have been no unreasonable refusal by the employer to allow the Applicant to have such a person present to assist him in the dismissal discussions.

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

[50] Squarely, the reason for the dismissal related to the unsatisfactory performance by the Applicant of his duties. I have set these matters out above. The Applicant was counselled by Mr Holden in early 2013 about the performance of his duties, in respect of a limited range of matters. The audit of March 2014 identified a much wider suite of concerns in relation to the Applicant’s procedures.

[51] The Applicant was given no opportunity to comment upon the audit reports’ findings or on his performance generally. The employer dismissed the Applicant without the benefit of having the Applicant’s explanation for the audit findings.

(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

[52] The employer’s business does not appear to be a small business and the size of the business does not therefore give rise to any reasonable inference that it affected the procedures adopted in the Applicant’s 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

[53] The employer’s business is focused on its commercial operations and the evidence before me was that it has no in-house human resource expertise. The employer was self represented for the purposes of these proceedings. On the balance of probability, having observed the inexperience of the employer’s representatives at the hearing, I reasonably inferred that the absence of human resource management expertise impacted on the procedures the employer followed in effecting the Applicant’s dismissal.

(h) any other matters that the FWC considers relevant

[54] The Applicant claimed to have been disadvantaged financially by the decision, and his working life appears not to have stabilised since the time of the dismissal. The Applicant considers that he has been dealt with harshly.

[55] The Applicant also considers that the harshness of the dismissal is demonstrated in his employer having characterised his dismissal for reasons of “gross misconduct.” But that was a misnomer employed by an inexperienced person to describe the dismissal - the Applicant was dismissed with payment in lieu of notice.

[56] The Applicant, I add, was not a long serving employee; the period of service was a little over two years.

Conclusion

[57] The Applicant was denied an opportunity to respond to the audit report findings. Because he was denied this opportunity his employer in turn was denied an opportunity to consider the Applicant’s explanation for the performance concerns identified in the audit.

[58] The Applicant rightly feels aggrieved by this absence of procedural fairness. He expected more, given the emphasis of the employee handbook.

[59] But in the end, when the Applicant was afforded an opportunity to explain his position by way of his evidence in these proceedings, his defence was far less than robust. I have set these matters out in respect of my considerations as to whether there was a valid reason for the dismissal.

[60] In all, I consider that even if the Applicant had been provided an opportunity to explain his position and respond to the audit findings the outcome would have been no different whatsoever. The audit report findings identified serious deficiencies in relation to the procedures of the Applicant in conducting his sensitive role in the business. His evidence in these proceedings did not lead me to form a belief that the audit was flawed, or that the Applicant’s practices were misunderstood or misinterpreted.

[61] Nor do I think that the decision of the employer was unwarranted in the circumstances. It may be argued, as no doubt the Applicant would argue, that notwithstanding the audit findings the Applicant should have been given further opportunities to improve his performance in the future. But such an argument does not give due weight to the volume and regular nature of the training in the business, or to the statutory duties which frame the employer’s business. The nature of the business, its sensitivities to regulatory risk and the focus on very regular training must be taken into account in evaluating the totality of the relevant circumstances. Needless to say, if the Applicant had merely been the subject of a critical audit report in isolation, the outcome would have been very different.

[62] Taking all the circumstances of the case into account, I consider that dismissal of the Applicant was not harsh, unjust or unreasonable. I therefore dismiss the application under s.394 of the Act.

SENIOR DEPUTY PRESIDENT

Appearances:

Mr E. Oren, Applicant

Mr C. O’Hara and Mr D. Holden, of the Respondent

Hearing details:

Brisbane

2014

12 September

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