Mr Paul Cooney v SMSF Audits Pty Ltd

[2016] FWC 1431

[2016] FWC 1431

FAIR WORK COMMISSION

DECISION

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

Mr Paul Cooney
v
SMSF Audits Pty Ltd
(U2015/12634)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 3 MARCH 2016

Summary: small business fair dismissal code - obligation to consider jurisdictional exclusion regardless of position of parties - registered auditor – self-managed superannuation funds - regulatory obligations to maintain records and audit documentation - whether conduct amounted to serious misconduct - Regulation 1.07 - whether reasonable foundation to reasonable belief that summary dismissal was warranted.

[1] This decision concerns an application by Mr Paul Cooney under s.394 of the Fair Work Act 2009 (“the Act”). Mr Cooney is seeking an unfair dismissal remedy arising from his summary dismissal from his full time, permanent position as a registered self-managed superannuation fund auditor (with SMSF Audit Pty Ltd (trading as SMSF Audit Services – Chartered Accountants and Advisers) (“the employer”). The employer provides auditing services. Its sole Director is Mr Craig Morrissey.

[2] Mr Cooney had performed his duties with the employer from 13 January 2014 to 2 November 2015 (the date on which his dismissal took effect).

[3] The employer is a national system employer and Mr Cooney is a person protected from unfair dismissal. The employer also is a small business for the purposes of the definition under section 23 of the Act. As such, the employer may effect a dismissal by way of the Small Business Fair Dismissal Code (“the Fair Dismissal Code”) as provided for under s.388 of the Act. The relevance of the Fair Dismissal Code will be dealt with at a later stage in this decision, following a consideration of the evidentiary cases.

[4] Mr Morrissey terminated Mr Cooney’s employment by way of correspondence (drafted on 21 October 2015 but not given to Mr Kearney until he returned from a period of leave on 2 November 2015) on the basis of the following explanation:

“Reference is made to our discussion on the 21 October 2015.
As discussed, I have lost confidence in your ability to complete the work in a professional and competent manner. It appears as though you will not be able to adhere to work processes and standards.

Accordingly, I must terminate your employment with SMSF Audits Pty Ltd.
My decision is based on:

• failure to meet required processes and procedures:



• failure to work as a member of the SMSF Audits Team, and



• release of confidential information to third parties.

I have obtained statements from a number of staff with respect to these issues and your behaviour.

[…]” (sic)

[5] Mr Cooney claims that upon returning from annual leave on Friday 30 October 2015, he was unable to access his email. Upon making enquiries as to why he could not access the network, he was informed by a co-worker that he had been dismissed from his employment. The dismissal correspondence was received by Mr Cooney on Monday 2 November 2015.

[6] The dismissal correspondence refers to a discussion which purportedly took place on 21 October 2015. Mr Cooney contends that he was on annual leave and in transit on that day, and no discussion took place. Mr Cooney went further and contended that he had never had any discussion with Mr Morrissey about any matters relating to his employment at any time. Mr Cooney claimed also that at no time over the course of his employment was any issue of unsatisfactory job performance raised with him and he had never received any warning, be it verbal or in writing. To the contrary, the employer’s website maintained positive testimonials from clients managed by Mr Cooney, so it was claimed.

[7] Consequently, Mr Cooney argues that he was unaware of any issues or allegations in respect of his conduct or work performance. Further he maintains that he was not given any opportunity to respond to any issues or allegations that were made against him.

[8] In respect of the claim that Mr Cooney had released confidential information to third parties contained in the dismissal correspondence, Mr Cooney contended that he had never released such information to any person.

[9] Mr Cooney was also unaware of any statements by staff as to issues related to his work performance or conduct.

[10] Mr Cooney also raised various statutory and other entitlements that were not discharged in the course of his employment. Mr Cooney has avenues for dealing with such matters outside of this application.

[11] That said, Mr Cooney generally argued that his dismissal was harsh unjust and unreasonable for reason that he was unaware of any allegations made in respect of his work performance or conduct, and had been denied procedural opportunities to address those concerns (had they ever existed as a fact).

[12] Mr Morrissey explained through his evidence that the services provided by his business are regulated through various statutory arrangements, including the Superannuation Industry (Supervision) Act 1993 (“the SIS Act”), amongst other instruments, that set professional standards and competencies for auditors.

[13] Mr Morrissey also explained that an auditor must comply with the competency standards published by the Australian Securities and Investments Commission (“ASIC”) under s.128Q of the SIS Act, which includes the Guidance Statement GS 009 AS 230 (“GS 009”) for auditing self-managed superannuation funds (as made pursuant to s.227B of the Australian Securities and Investments Commission Act 2001).

[14] Mr Morrissey had been statutorily obliged to report the failure to obtain evidence and meet obligations as required by GS 009 and Australian auditing requirements, to ASIC.

[15] Mr Cooney, according to Mr Morrissey, was permitted to work from home and visit the office weekly to obtain and return audit files and audit evidence. When so doing, Mr Cooney was said by Mr Morrissey to have been required to discuss with Mr Morrissey, work progress and audit procedures and processes. It was during these visits, that Mr Morrissey claimed he advised Mr Cooney verbally about the importance of giving effect to the required processes and procedures.

[16] Mr Morrissey also claimed that between August and September 2015, Mr Cooney was observed using a USB drive to copy unknown electronic data from the employer’s computers. Mr Cooney was also said to have been seen to leave the premises with the electronic data, which allegedly was contrary to the employer’s intranet policy. Mr Morrissey complained that Mr Cooney had not returned the USB or any other of the employer’s electronic data stored on his home computer to the employer upon the termination of his employment and had retained private client information.

[17] Mr Morrissey held that Mr Cooney had relevant experience in auditing super funds. Mr Morrissey also claimed that between 1 July 2014 and 30 June 2015 Mr Cooney worked on 691 super fund audits. Mr Cooney was said to have signed off on 611 of these audit reports. In the period 1 July 2015 to 31 October 2015, Mr Cooney completed 142 super fund audits. In August 2015 Mr Cooney had attended an annual training course in respect of audit procedures, processes, and auditing standards. This training included information related to the evidence required for audit completion and the preparation of audit and data recording procedures.

[18] At a point in time, possibly in July 2015, a routine Quality Assurance Review (QAR) of audits completed by Mr Cooney was undertaken by the employer’s Audit Director, Ms Maria Olivotto.

[19] Ms Olivotto had been employed by the employer in her role for some 18 months. Prior to that she had been employed as an Audit Executive with the Australian Taxation Office for 14 years. She holds a Bachelor of Business (Accountancy) and is a member of the CPA Australia (having completed the Practice Management Program), and is a registered Self-Managed Super Fund Auditor and Taxation Practitioner.

[20] The QAR conducted by Ms Olivotto selected 13 audits ostensibly completed by Mr Cooney during the 2014-1015 financial year, and included audits ostensibly completed by him after the August 2015 training program.

[21] Ms Olivotto gave evidence that the QAR revealed that Mr Cooney had failed to comply with a range of prescribed audit processes and procedures, including:

• ASA 230 - audit documentary



• ASA 300 - planning and audit



• ASA 500 - audit evidence



• ASA 560 - subsequent evidence



• ASA 710 - comparative information; and



• ASA 580 - writer representations.

[22] These appear to all be breaches of GS 009. Ms Olivotto also contended that the QAR indicated a failure on Mr Cooney’s part to report to ASIC serious breaches of the SIS Act

[23] Ms Olivotto claimed that her overall opinion was that Mr Cooney failed on numerous occasions to meet his responsibilities as a registered auditor.

[24] Ms Olivotto also gave evidence that in the post termination period she had continued to audit Mr Cooney’s super fund audits and had identified another five super funds in which there had been deficiencies in respect of the required standards. These audits had been carried out by Mr Cooney during September 2015 (after such time as he had carried out his refresher training in the prior month).

[25] Mr Morrissey claimed that the QAR revealed that Mr Cooney had not been following the required processes for obtaining property searches in respect of properties owned by superannuation funds. There were also other practices (such as shorthand annotations) which Mr Morrissey held to be inadequate for purposes of meeting the requirements of GS 009.

[26] Because of the scale of the errors and audit failures detected in the QAR, and noting that all of Mr Cooney’s audited funds may be affected by Mr Cooney’s practices, Mr Morrissey decided to review the funds and to consider a refund to all affected clients. Mr Morrissey claimed that the employer faced a potential liability of some $248,490 as a consequence of Mr Cooney’s performance as an auditor.

[27] Mr Morrissey also claimed that Mr Cooney had falsified a timesheet/payslip for work performed allegedly on 2 October 2015. Mr Morrissey complained that Mr Cooney was at that time in Sydney for purposes of attending the NRL Grand Final. Mr Morrissey claimed that Mr Cooney had not been at home engaged in work on the employer’s behalf or at the employer’s office on 2 October 2015.

[28] Mr Morrissey gave evidence that on 20 October 2015 he met with Ms Olivotto and it was decided to terminate Mr Cooney’s employment on the basis of “serious misconduct”.

[29] Mr Morrissey generally argued that Mr Cooney had been wilful and deliberate in his behaviour, which was potentially causing risk to the reputation, viability or profitability of the business. Mr Cooney had also, according to Mr Morrissey, intentionally misled his employer and breached the Internet and intranet access policies of his employer.

Relevant legislative provisions

[30] Section 385 of the Act sets out four requirements each of which must be satisfied in order for the Commission to find that a person has been unfairly dismissed:

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.

Note: For the definition of consistent with the Small Business Fair Dismissal Code: see section 388. [my emphasis]

[31] By its reference in s.385, s.388 provides as follows:

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.

[32] Section 23 provides a definition of a "small business employer" for the purpose of the Act. Relevantly, s.23(1) provides that "A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time". There was no dispute that SMSF Audits was a small business employer at the time of Mr Cooney’s dismissal.

[33] The Fair Dismissal Code declared by the Minister under s.388(1) of the Act is set out below.

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.

Other dismissal

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee's conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee's response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer's job expectations.

Procedural matters

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.

[34] The Full Bench went on to say in Ryman v Thrash Pty Ltd[2015] FWCFB 5364;

“[39] To be clear, nothing stated above is to be taken as suggesting that in relation to such a dismissal it is necessary for the Commission to be satisfied that the serious misconduct which is the basis for the dismissal actually occurred, in order for the dismissal not to be unfair. This was explained in Pinawin T/A RoseVi.Hair.Face.Body v Domingo 14:

"[29] … 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."

[40]Whether the employer had "reasonable grounds" for the relevant belief is of course to be determined objectively.

[41] In summary, drawing on the conclusions stated above and the ratio in Pinawin, we consider that the "Summary dismissal" section of the Code operates in the following way:

(1) If a small business employer has dismissed an employee without notice - that is, with immediate effect - on the ground that the employee has committed serious misconduct that falls within the definition in reg.1.07, then it is necessary for the Commission to consider whether the dismissal was consistent with the "Summary dismissal" section of the Code. All other types of dismissals by small business employers are to be considered under the "Other dismissal" section of the Code.

(2) In assessing whether the "Summary dismissal" section of the Code was complied with, it is necessary to determine first whether the employer genuinely held a belief that the employee's conduct was sufficiently serious to justify immediate dismissal, and second whether the employer's belief was, objectively speaking, based on reasonable grounds. Whether the employer has carried out a reasonable investigation into the matter will be relevant to the second element”

[35] But what might constitute serious misconduct for the Fair Dismissal Code’s purposes?

[36] The Full Bench in Ryman v Thrash Pty Ltd [2015] FWCFB 5264 considered the scope of meaning of serious misconduct for purposes of the Fair Dismissal Code and concluded as follows

“[37] Notwithstanding that the Code, and its accompanying checklist, were apparently designed to be read as "stand alone" documents by small business employers, we prefer the view that the reference to "serious misconduct" is to be read as bearing the meaning in reg.1.07. The types of conduct expressly referred to in the Code as constituting serious misconduct are all encompassed by the reg.1.07 definition, so no direct inconsistency is apparent. The fact that the checklist invites inclusion of "some other form of serious misconduct" suggests that the identified types of conduct were not meant to be exhaustive, and it is otherwise difficult to conclude that they were meant to be exhaustive given that they do not include other types of behaviour which may well constitute misconduct justifying summary dismissal, such as sexual harassment, bullying or significant non-compliance with a lawful and reasonable direction. And, as earlier discussed, the lack of any recognised meaning at law of the expression "serious misconduct" means that the definition in reg.1.07 is necessary to give the expression a clear content.

[38] We therefore consider that the "Summary dismissal" section of the Code applies to dismissals without notice on the ground of serious misconduct as defined in reg.1.07.”

[37] The Full Bench therefore construed that the meaning of serious misconduct for purposes the Fair Dismissal code reflected the definition of serious misconduct as defined in Regulation 1.07 of the Fair Work Regulations 2009 (“the Regulations”).

[38] Regulation 1.07 of the Regulations provides as follows:

1.07 Meaning of serious misconduct

(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.

(2) For subregulation (1), conduct that is serious misconduct includes both of the following:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

(i) the health or safety of a person; or

(ii) the reputation, viability or profitability of the employer's business.

(3) For subregulation (1), conduct that is serious misconduct includes each of the following:

(a) the employee, in the course of the employee's employment, engaging in:

(i) theft; or

(ii) fraud; or

(iii) assault;

(b) the employee being intoxicated at work;

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.

(4) Subregulation (3) does not apply if the employee is able to show that, in the circumstances, the conduct engaged in by the employee was not conduct that made employment in the period of notice unreasonable.

(5) For paragraph (3)(b), an employee is taken to be intoxicated if the employee's faculties are, by reason of the employee being under the influence of intoxicating liquor or a drug (except a drug administered by, or taken in accordance with the directions of, a person lawfully authorised to administer the drug), so impaired that the employee is unfit to be entrusted with the employee's duties or with any duty that the employee may be called upon to perform. [My emphasis]

[39] It was uncontested that the employer’s business was a small business for purposes of s.23 of the Act, and the Fair Dismissal Code had application where a dismissal was made in accordance with its terms.

[40] Given a summary dismissal had been effected by a small business, I raised with the parties in advance of the hearing the likely relevance of the Fair Dismissal Code and requested their submissions. The Applicant made some comment on the applicability of the Fair Dismissal Code in the course of the closing submissions. Mr Morrissey, however, made no submission of substance in relation to the Fair Dismissal Code. But that does not mean that the dismissal of Mr Cooney should not be tested against consistency with the Fair Dismissal Code regardless. So much was made clear by the full bench in New England and Western Tenants Advice and Advocacy Service Inc [2013] FWCFB 9206:

“[7] We do not consider that the Commission in an unfair dismissal case is entitled not to consider and deal with the question of whether a dismissal is consistent with the Code on the basis that the parties decline to deal with the question in their respective cases. The Act requires the matter to be dealt with even where the parties do not address it.”

[41] Mr Morrissey identified a number of grounds on which he considered the dismissal to constitute serious misconduct.

[42] One of these grounds was that Mr Cooney had on 1 October 2015 travelled to the 2015 NRL grand final in Sydney. Mr Morrissey claimed that Mr Cooney prepared a false claim for 7.5 hours of work completed on 2 October 2015. As a consequence, Mr Cooney was said to have created a false and misleading time sheet and wage claim. This amounted to an allegation of fraud or theft on Mr Morrissey’s part.

[43] The evidence led in this matter however, was that Mr Cooney had not travelled to Sydney on 2 October 2015 but had done so in the company of a personal friend on the following day.

[44] There is no evidence before me that Mr Morrissey conducted a reasonable investigation that gave rise to a reasonable apprehension that he had been misled by Mr Cooney in respect of his wage claim. Mr Morrissey appears only to have jumped to a conclusion, as opposed to taking some reasonable steps to reach a reasonable state of belief. Such steps in this case would have involved raising the matter with Mr Cooney.

[45] Consequently, Mr Morrissey cannot rely on Mr Cooney’s alleged misconduct on 2 October 2015 for any purpose, let alone that it provided a reasonable foundation to give rise to a genuine state of mind that Mr Cooney had acted to foment a deceit.

[46] Mr Morrissey also claimed that Mr Cooney had breached the Internet and intranet access policy by copying company data and not returning it. An examination of the company’s Internet and intranet access policy does not demonstrate that copying company documentation or data to be a breach of the policy. The internet policy itself refers to prohibitions on downloading software but not on copying data. In any event, there would seem to be no sound reason why an employee who performs duties from home and does not have remote access to the employer’s servers would not make use of portable storage devices to give effect to their duties.

[47] There can be no reasonable basis on which to find a reasonable belief on the part of Mr Morrissey that Mr Cooney had acted in breach of the company’s internet and intranet access policy (to the extent to which I have discussed it above). Mr Cooney has retained data (personal SMSF files referred by accountants to the employer’s business) since his termination and contrary to an express term in his contract of employment (see clause 13 thereof) – but this is post-dismissal conduct.

[48] The letter of dismissal also referred to Mr Cooney having provided sensitive commercial documentation to a third party. There is no evidence to that actual effect, though as mentioned immediately above, Mr Cooney has kept in his possession since his dismissal a volume of materials (some of it at least in digital form) that belongs to the employer and concerns the private commercial arrangements of its clients.

[49] Mr Morrissey otherwise relied upon the QAR results (which revealed that Mr Cooney had not met the required processes and procedures) as providing a basis for the summary dismissal. It is to that matter that I will now turn.

[50] There were a number of QAR audits conducted on Mr Cooney’s work. The first of those was a routine audit conducted in September 2015. A second audit was initiated in what appears to have been September\October 2015 because of the issues and concerns identified in the first audit. That is, Mr Morrissey wished to double check the extent of the problems with Mr Cooney’s audit work by expanding the scope of the audit sample.

[51] The wider audit review revealed the same or a similar range of issues, which led Mr Morrissey to presume the practices, as revealed in relation to the files, were endemic to Mr Cooney’s audit work.

[52] The wider audit concerned a review of SMSF funds audited in September 2015. This was important in Mr Morrissey’s view because they were funds that were audited by Mr Cooney following the August in-house audit training exercise. During this training the auditors were informed of the importance of complying with the requirements of the regulatory environment, including in relation to completing audit documentation, such as the Auditing and Assurance Standards Board Guidance GS 009.

[53] Once the results of the September audit were known and discussed by Mr Morrissey and Ms Olivotto, Mr Morrissey took the step either the same day or the following day to generate the dismissal correspondence referred to above (and which was to take effect upon being received by Mr Cooney upon his return from annual leave).

[54] This was not a circumstance in which the employer acted after some time had passed following the discovery of particular information about misconduct or under-performance. Once the further audit yielded similar results as the initial audit, Mr Morrissey acted to dismiss Mr Cooney.

[55] The audited files, which were stepped through in the course of the proceedings, did in fact yield what on their face were a range of deficiencies in terms of the completion of the relevant documentation upon which the audit approvals were based. That is, the files were in various cases incomplete: worksheets and fully documented signed member statements were missing; account details in which cash assets were held were not in existence; property searches were not in evidence; there was no evidence of any investigation into receivables and loans (in the form of file notes, emails etc.); loan arrangements appeared not to have been probed as to whether they were on commercial terms and\or involved trustees; rental agreements for rental properties were unexplored (to ensure benefits were not being received by trustees or their families). Some auditing tasks were completed in a shorthand style as well, which would have made it difficult for another auditor to comprehend. In essence, there was no comprehensive record of the audit documentation on which another auditor could readily identify the basis of the approval (qualified or not) for the purposes of GS 009.

[56] There was some debate between the parties as to why the files were incomplete. Mr Cooney contended he gave the documentation on a memory stick to an administrative support person as he had seen another employee do this, and assumed that employee had uploaded the data onto the server files (along with some hard copy documents as provided at times). That is, Mr Cooney contended he created all the documents necessary to populate the audit file in accordance with GS 009, but another person was responsible for having not completed the ultimate administrative task.

[57] Mr Cooney appeared to have some documentation of the kind that was missing from the audit documentation in his possession at the time of the hearing (such as the facing pages for some fund statements that indicated that they did not need require signed member statements).

[58] The extent of the data Mr Cooney still had in his control and its relevance was unknown.

[59] Mr Morrissey disputed that Mr Cooney had adopted the correct procedure for maintaining audit documentation. He claimed that the person to whom Mr Cooney had given documentation to be uploaded to the server did not perform such duties at all, but in fact was his Personal Assistant who was tasked with other duties.

[60] In any event, the employer said the maintenance of the audit file as the responsibility of the registered auditor. Ms Olivotto put it this way in her viva voce evidence:

MR MORRISSEY: I'd like to ask Ms Olivotto what exactly does ASA 230 paragraph 3 say in response to all the documentation requirements. Can you read that out? Guidance statement, GS009 Auditing Self-Managed Super Funds, which is the - from the auditing insurance standards board, which is what we follow with our auditing of self-managed with super funds. ASA 230, "Audit documentation requires preparation of documentation." Part (3)", which assembled in an audit file on a timely basis, ordinarily not more than 60 days after the date of the auditor's report." So it has to all be assembled in the one place in the audit file on the database. So it can be scanned in and attached, but it's not - it's not the role of the receptionists to scan in any auditors work. The auditors do their own audit report on the computer and they attach it to the file. All auditors attach all of their relevant information into the file, and I do too. We don't have it at home in a box under our bed.

[61] I add that if Mr Cooney was to be believed, in any event, he would have had to have attended at work one day a week for a few hours (as was his practice) and handed the administrative person (Mr Morrissey’s PA) a memory stick and then had the same memory stick returned to him without any action – or else only partial action - taken in respect of the data there-on (and without any relevant interaction between Mr Cooney and the administrative person as to what task was expected to be completed and if it had been completed). I was not fully apprised of the circumstances of the office practices in the small business, but this struck me as a careless process, particularly in a context in which a premium is placed on record creation and retention in order to meet regulatory requirements flowing from the SIS Act.

[62] After such time as his evidence had been taken (and in the course of Mr Morrissey’s cross examination), Mr Cooney also handed up a screen dump that he claimed to be from a memory stick that in some manner was said to give evidence that there was more documentation on at least one or two files than the audit review had indicated. Mr Morrissey rebutted the claim on the basis that he had not intended to print off all materials in a file or to make available any confidential commercial details of his clients, and that the materials as filed were those retained in the audit records. The matter went little further.

[63] The audit processes applying to one particular SMSF attracted considerable comment in the course of the proceeding. The key documentation in that SMSF was written in Arabic. Mr Cooney does not read or speak Arabic. On his own admission, Mr Cooney appears to have initiated very few if any checks on the fund’s management and its actual assets (which was an overseas property) and followed a previous auditor’s outcome and signed off on the fund. It is difficult to see how the file could meet the requirements of Guidance Statement GS – 009, if only as documentation that could be readily understood by another auditor.

[64] Mr Morrissey’s complaint, in essence, was that Mr Cooney’s conduct or negligent performance (as he understood it to be) of his duties, had jeopardised the business in so far as the business has an unspecified liability arising from the prospect of refunding its clients for audits not completed in compliance with statutory stipulations; and that the business was now exposed to a loss of professional standing and a decline in client confidence, along with being exposed to investigation by relevant statutory authorities.

[65] Mr Morrissey’s concerns with Mr Cooney’s conduct and performance on their face meet the definition of serious misconduct set out in Regulation 1.07(b)(2)(ii) of the Regulations. That is, Mr Cooney’s conduct and performance as claimed to be by Mr Morrissey was a species of serious misconduct for purposes of the Fair Dismissal Code in so far as it threatened the reputation and profitability of the business.

[66] Having so found, I turned to consider whether or not Mr Morrissey believed “on reasonable grounds that [Mr Cooney’s] conduct [was] sufficiently serious to justify immediate dismissal.”

[67] The Full Bench in John Pinawin T/A RoseVi.Hair.Face.Body v Domingo [ 2012] FWAFB 1359 (Re: Pinawin)adopted the following approach to this question:

“[29][…] 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.”

[68] In the current case, Mr Morrissey acted upon the audit reviews generated by Ms Olivotto. Ms Olivotto was an experienced auditor with a very strong background in audit compliance. I have set out Ms Olivotto’s qualifications earlier.

[69] There was no contest in this matter that Ms Olivotto was not sufficiently experienced and qualified to conduct the audit. I have set out Ms Olivotto’s experience and qualifications earlier in this decision.

[70] Mr Morrissey reasonably acted on the basis of the advice from Ms Olivotto.

[71] Further, Mr Morrissey did not act precipitously, but sought an additional review of Mr Cooney’s audits in order to establish a belief on reasonable grounds as to the status of the audits conducted by Mr Cooney.

A query of sorts did arise in the course of the cross examination of Mr Morrissey whereupon it was revealed that Ms Olivotto was the partner to Mr Morrissey. But no claim was made that this relationship impacted upon the review. Ms Olivotto was not questioned in this regard in the course of her own evidence. And there was no suggestion of any actual substance that was pursued in the course of the proceedings that Mr Morrissey or Ms Olivotto had an ulterior reason to identify Mr Cooney as a person they sought to remove from their workplace.

[72] As I have mentioned above, Mr Morrissey acted promptly upon the completion of the second review of Mr Cooney’s audits (which reasonably suggested the defects identified were widespread throughout the many hundreds of audits Mr Cooney had completed) and acted to dismiss him from his employment (with the letter of termination taking effect upon the return of Mr Cooney from annual leave).

[73] There is an arguable deficiency in the reasonableness of the investigation conducted by Mr Morrissey and that is the failure to engage directly with Mr Cooney as to his conduct. A number of observations arise in relation to this matter. The business conducted by Mr Morrissey is a small business and Mr Morrissey was not guided by any experienced or qualified advice as to whether more was needed than the evidence he had garnered through the audit reviews.

[74] Mr Morrissey’s view was that the deficiencies as identified were fundamentally indefensible in the context of Mr Cooney being a registered auditor with express regulatory obligations, and no reasonable excuse or mitigating circumstances could have caused him to change his view. Mr Morrissey’s actions must be set in the context of the reasonable expectations that a registered auditor would ensure that there had been compliance with regulatory requirements. As I have mentioned above, Mr Morrissey also acted on the advice of Ms Olivotto, a registered auditor with long experience in audit compliance.

[75] In any event, it appears to me from the state of the evidence that had Mr Morrissey interviewed Mr Cooney in relation to the audit deficiencies, the matter would have dissolved into the very disputes which have been before me in the course of the hearing. Mr Cooney would have held that an administrative employee was at fault and Mr Morrissey would have held that the employee had no role in effecting Mr Cooney’s obligations as a registered auditor and was directed to other functions in the business. That is to say, had Mr Morrissey conducted an interview with Mr Cooney the outcome would have been no different.

[76] In all the circumstances, and noting that the full bench guidance in Re Pinawin is that employers will approach matters differently depending on the particular contexts, and not discussing a particular concern with an employee will be acceptable in a compelling context, I am of the view that Mr Morrissey held reasonable grounds upon which to believe that Mr Cooney’s conduct was sufficiently serious to justify immediate dismissal.

[77] Such a finding does not reflect a finding of fact as to whether or not Mr Cooney’s conduct was sufficiently serious to justify immediate dismissal in an objective sense. As I explained to the parties in my correspondence to them prior to the hearing, the Fair Dismissal Code allows for a dismissal to be found to be fair on the basis of the reasonable belief held by the employer.

Conclusion

[78] Mr Cooney dismissal was made in accordance with the Small Business Fair Dismissal Code summary dismissal provisions.

[79] Mr Cooney’s application under s.394 of the Act must therefore dismissed.

SENIOR DEPUTY PRESIDENT

Appearances:

A Clements,for the Applicant

C Morrissey, for the Respondent

Hearing details:

2016

29 February & 1 March 2016

Brisbane

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