North v GIO Australia Ltd

[1997] IRCA 8

DECISION NO:8/97

CATCHWORDS

INDUSTRIAL LAW - UNLAWFUL TERMINATION - EMPLOYMENT CONTRACT - VALID REASON - CONDUCT AND PERFORMANCE - SERIOUS MISCONDUCT - employee disclosing confidential information contrary to express instruction.

Workplace Relations Act 1996 (Cth) ss170 DE, 170EDA





North v Television Corporation Ltd (1976) 11 ALR 599
Gooley v Westpac Banking Corporation (1995) 59 IR 248
 Wadey v Y.W.C.A. Canberra, (unreported, IRCA, Moore J, 12 November 1996)









NORTH v GIO AUSTRALIA LTD  
VI96/2120


Before:  MURPHY JR
Place:  MELBOURNE
Dates of Hearing:     22 & 23 JANUARY 1997
Date of Judgment:    23 JANUARY 1997

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI96/2120

BETWEEN:

KENNISTON STEWART NORTH
and
FINANCE SECTOR UNION OF AUSTRALIA
Applicants

AND

GIO AUSTRALIA LTD
Respondent

BEFORE:     MURPHY JR
PLACE:       MELBOURNE
DATE:          23 JANUARY 1997

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1. The application is dismissed.

Note: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI96/2120

BETWEEN:

KENNISTON STEWART NORTH
and
FINANCE SECTOR UNION OF AUSTRALIA
Applicant

AND

GIO AUSTRALIA LTD
Respondent

BEFORE:     MURPHY JR
PLACE:       MELBOURNE
DATE:          23 JANUARY 1997

REASONS FOR DECISION
Delivered ex tempore - revised from the transcript

In these proceedings the first applicant seeks compensation on the grounds that, contrary to s170DE(1) of the Workplace Relations Act 1996 (Cth) (formerly the Industrial Relations Act 1988 (Cth)) (“the Act”), his employment was terminated without valid reason.  The respondent asserted that the applicant had committed an act of serious misconduct. 

Background.
Although there has been a large volume of evidence before the Court about the relationship between the respondent and intermediaries such as agents and brokers, the central issue to be determined is whether the respondent has made out its onus of proof that it had a valid reason to termination the applicant's services.  The valid reason relied on by the respondent was that the applicant had disclosed, contrary to an express instruction, confidential information, namely that the respondent intended to terminate its engagement with all brokers including one in particular, Overton Insurance (Brokers) Vic. Pty Limited (“Overton”).

The circumstances leading to the applicant's dismissal commence on 21 March 1996.  At that stage, at a meeting of territory and other senior managers, a decision was taken to recommend to the Sydney head office of the respondent that the Victorian brokers be cancelled.  The applicant was responsible for brokers in the Melbourne metropolitan area.  It was common ground that at that meeting it was made clear by the applicant and Mr Williams, the State Manager Personal Insurances, that this decision or recommendation remain confidential so that the adverse impact on the respondent's business relationships with other intermediaries could be properly managed.

The applicant disagreed with the decision to terminate the retainer of all brokers.  He was of the view that some brokers could be converted into agents and he had a discussion with Mr Howard, the Network Operations Manager, to this effect.  Soon after this he produced a memorandum (Exhibit R4) outlining some of the implications of cancelling the arrangements with brokers and suggesting other options. 

The matter comes to the respondent’s attention.
The matter that led to the applicant's termination came to the attention of the respondent in a somewhat strange manner.  On 16 April Mr Moyle, a director of Overton, happened to run into Mr Howard at the AFL Centenary Ball.  He mentioned to Mr Moyle that the relationship between Overton and the respondent was about to cease because his brokerage was to be cancelled.  Mr Howard noted the information but did not confirm with Mr Moyle that that was to be the case.  The following day Mr Howard contacted Mr Moyle.  The latter confirmed the conversation of the night before and further offered to confirm it in writing.

The same day the applicant was asked, in general terms, at a meeting with Mr Tufrey, the Manager Personal Insurance Underwriting Sales and Service, whether he had released the information of the 21 March decision to anyone outside the respondent.  He denied that he had done so.  In the minutes of that meeting (Exhibit A1) the following is recorded:

“If questioned by a broker on the cancellation issue [the applicant] has advised that whilst he would not confirm this, the strategy was never denied.”

After the meeting of 17 April the respondent sought written confirmation from Mr Moyle that the applicant had indeed provided the information to him.  This was done by letter of 19 April (Exhibit R1) which read:

“I refer to recent conversations with Ken North where he told our office that our Agency is being cancelled and a letter was "on its way". 

Ken indicated on another occasion that all "Brokers" were being cancelled.  As you can understand it is extremely difficult for Overton's to support GIO when we get such information.”

On 30 April the applicant was again interviewed about the matter.  In the interview, details of which are recorded in Exhibit R6, the applicant confirmed that the information of the decision made by the respondent on 21 March was to remain confidential to those privy to that meeting.  In the interview the applicant stated that leaking of the information, in his view, would not cause damage because the damage had already been done to the respondent's business.  He stated that business was already being withdrawn by brokers as a result of rumours in the market place.  The applicant accepted that the respondent had the right to demand that the confidentiality of its information be respected.  He denied advising Mr Moyle, and stated that Mr Moyle was a liar if he said he had done so.  He further stated that the information had been leaking from the respondent in any event. 

On 6 May Mr Tufrey obtain a further letter from Mr Moyle (Exhibit R2).  It read:

“I refer to my letter to Trevor Howard dated 19th April, 1996 and confirm in early April, Ken indicated all Brokers (After Ken tried to Save us) were being terminated.”

At the meeting on 30 April the applicant was invited to provide a written response to the allegation that he had provided the confidential information to Mr Moyle.  He subsequently provided a seventeen page handwritten memorandum (Exhibit R7) in which he denied he had released confidential information.  The memorandum stated that he had been told by a number of brokers that the respondent intended to terminate their relationship.  He further explained how, when he was confronted with this information, he had responded to the suggestions made by the brokers.  He also stated that the disclosure of the decision had been made by staff of GIO including Mr Grant. 

The document indicated that he had been discussing with Mr Moyle and Overton the possibility of buying into that business.  Further he had been chasing financial details of the business but not receiving any satisfactory response.  He also indicated that he had obtained information about Overton, including that there were deficits in its trust account, and that the overdraft was nearly exhausted.  The applicant indicated that the reason why Mr Moyle had a motive to provide to the respondent the information that he did was:

“He is too gutless to tell me to go so probably feels the only way to get me to lose interest in the business is to create waves for me at GIO.  I honestly feel that this was his only reason for doing this and if my actions in steadfastly trying to buy into the business have caused this furore well then I apologise from the bottom of my heart.”

The memorandum also pointed out that he had been discussing the relationship between the respondent and Overton, and the possibility of it being cancelled because of unsatisfactory loss ratios, since September 1995. 

After receiving this memorandum Mr Tufrey deliberated on the matter and recommended to Mr Williams, his superior, that the applicant be terminated.  Mr Williams then sought approval from the Sydney head office to do so.  He received that approval. 

Before the decision was actioned a final interview with the applicant took place at which he was accompanied by a representative of the second applicant.  At that interview the applicant again denied the allegations.  Further, although offered the opportunity to do so, he chose not to resign.  At the interview Mr Williams formed the view that he did not accept the applicant's denial that he had conveyed the information to Mr Moyle.  He considered that, despite the applicant's long period of unblemished service with the respondent and with its predecessor business the SIO, he had lost confidence in the applicant.  He determined to proceed to terminate the applicant's services.

Evidence on the central issue.
The evidence in this case covered a range of matters but the central issue is whether to accept the evidence of the applicant or that of Mr Moyle on the central allegation.  Mr Moyle's evidence centred around conversations he had with the applicant shortly prior to the AFL Centenary Ball which took place on 16 April last year. Mr Moyle gave evidence that shortly prior to that function he had a conversation or conversations with the applicant to the effect that the brokerage of Overton was to be cancelled.  His evidence was that the applicant told him:

“He was going to talk to someone at GIO about the cancellation and then he said that all brokers were being cancelled.”

This was prior to his conversation with Mr Howard at the ball.  Mr Moyle conceded that he had conversations with the applicant about the performance of the brokerage, and of the philosophy of GIO to get rid of their brokers.  He said he was not confusing the conversations.  He also said, as confirmed in his letter of 6 May, the applicant had told him he "was trying to save you". 

The applicant emphatically denied that he had conversations in these terms with Mr Moyle at this time.  He stated that he had been pestering Mr Moyle for the financial records of the business to no avail, but he denied he had conveyed the information to Mr Moyle.  He maintained that he had kept previous decisions on cancellation of brokers confidential and there was no reason for him to breach confidence on this occasion.  The applicant re-affirmed that Mr Moyle had a motive to criticise him to his employer.  This was to get him off his back from pressing to obtain details in relation to the purchase of a share of the business.

The applicant also denied that he had any motive to provide the information to Mr Moyle.  He said that when negotiating with Mr Moyle about an interest in the business he had made it clear to Mr Moyle that he was not to provide him with any favours.  Mr Moyle also said that he did not expect any favours from the applicant.  The applicant did not accept that the information about the cancellation of the brokers would be a negotiating lever in relation to the value of the business of Overton.

This is contrary to the evidence of Mr Phillips, an insurance broker, that the broking agreement with the respondent would be of value to a broker.  It is also contrary to the evidence of Mr Moyle that some ten per cent of the revenue of the Overton business was with the respondent, although Mr Moyle, as a business decision, had been winding this down. 

The respondent called Mr Brancatti, an employee of Overton, who allegedly overheard a conversation wherein the applicant had advised Mr Moyle that the respondent intended to cancel the brokers.  Mr Overton, a director of Overton, also gave evidence.  His evidence was to the effect that the applicant had told him that the respondent "could cancel" the agency.

Respondent’s evidence accepted.
On the central issue of credit I am unable to accept the applicant's evidence.  I prefer to accept the evidence of Mr Moyle.  I do so without giving any weight to the evidence of Mr Brancatti or Mr Overton.  The applicant's evidence of Mr Moyle's motives to make up the information he conveyed to Mr Howard was unsatisfactory.  The statements made to the respondent in the two letters of Mr Moyle were specific and were not of a nature that Mr Moyle had any reason to fabricate against the applicant.  He had no reason to impugn the applicant with the respondent.

Further, the fact was that the decision to terminate the brokers had been taken on 21 March, and the applicant knew that.  The applicant regarded it as a fait accompli.  The applicant had, however, as confirmed in Exhibit R4, fought to save the brokers.  This is what Mr Moyle stated in his letter of 6 May.  Further, I find the applicant's denial of his motivation for making the statement to Mr Moyle lacking in credibility.  He was pressing Mr Moyle to purchase a share of the Overton business.  His failure to disclose this information in the context of any subsequent purchase would expose him to criticism of a lack of good faith with his other directors.  Further, the information was very relevant to the value of the Overton business.  In addition, the applicant disagreed with the decision of the respondent.  All these reasons lead me to prefer, on a direct conflict in this evidence, the version of Mr Moyle. 

A second element of counsel for the applicant's attack on the respondent's decision was that the information was already in the public domain.  The evidence led by the applicant on this point did not show that at any time after 21 March the respondent had released those privy to the decision at the meeting from the express duty to keep the information confidential.  The applicant gave no evidence that he had been released from the direction made by Mr Williams at that meeting. 

In the interview of 30 April he told Mr Tufrey that Mr Ryan had been leaking information. Subsequently Mr Ryan denied this to Mr Tufrey.  Mr Porteous, an employee of the respondent, said that at some stage Mr Ryan “speculated or postulated” that the respondent might be getting rid of its brokers.  His evidence did not go to the specific detail that the respondent had actually made a decision to terminate the brokers’ retainers.

Mr Street, a broker Effected by the 21 March decision, said that there were rumours in the marketplace, but he was not aware that the decision had been taken until he was advised by mail on 9 May that his brokerage had been terminated.  Mr Phillips, another broker, said that he was advised by a staff member in late March that the respondent was about to cancel its brokers.  The applicant, when confronted with this information, had neither confirmed nor denied it to him. 

I do not accept the submission that the information that a strategic decision to cancel the remaining brokers had been made by the respondent had entered into the public domain.  I am satisfied that the information supplied by the applicant to Mr Moyle was confidential information of the respondent, the applicant knew it was confidential and had no authority to convey it to Mr Moyle. 

Did the respondent have a valid reason to terminate the applicant's services? 
The respondent's case was straightforward.  The applicant had, contrary to an express direction of Mr Williams and contrary to paragraph eight of his Employment Agreement (Exhibit R11), disclosed confidential information in relation to an important business matter.  The respondent had investigated the matter, reached the conclusion that he had done so, sought his response, deliberated, reached the conclusion that it had lost confidence in him, and then terminated his services. 

Counsel for the applicant argued that the respondent had not made out a valid reason under s170DE(1) of the Act. This was on the basis that the respondent should not have accepted the statement of Mr Moyle over the denial of the applicant. Further, the information had lost its confidential nature because it was in the public arena. For the reasons that I have earlier indicated, I do not accept either of these submissions. It was clearly open to the respondent to prefer Mr Moyle's statement and reject the applicant's denial. Further, I do not accept that the information had lost its confidential quality.

It was also argued that the investigation was unsatisfactory.  Counsel for the applicant could not point to anything further that the respondent should have done in relation to investigating this matter.

It was further argued that for a loyal employee with this length of unblemished service, termination of employment was disproportionate to the misconduct.  This submission was based on an argument that the term “valid reason” required the termination to be justified in all the circumstances.

The nature of the misconduct that has been made out must be considered in deciding whether it can be said that the decision to terminate was for a valid reason.  In North v Television Corporation Ltd (1976) 11 ALR 599 at 608, Smithers and Evatt JJ said this in relation to misconduct:

“It is of assistance to consider the expression "misconduct" by reference to the subject matter to which it related and the context in which it appears.  The subject matter is the termination by one party against the will of another of a continuing contract of employment on the ground of breach of one of the terms of the contract.  And the context is such as to indicate that certain breaches of a non-serious nature, some of which would be within the connotation of misconduct, are not regarded as grounds for termination.  In such a situation it is reasonable to interpret the expression "misconduct" as referring to conduct so seriously in breach of the contract that by standards of fairness and justice the employer should not be bound to continue the employment. 

This situation would arise if there were conduct inconsistent with the fulfilment of the express or implied conditions of service.  It is conduct of that kind which will justify dismissal at common law....”

These comments were applied in Gooley v Westpac Banking Corporation (1995) 59 IR 248 at 269. It is proper to characterise the applicant's actions in the terms described in North's case. 

In Wadey v Y.W.C.A. Canberra, (unreported, IRCA, Moore J, 12 November 1996) Moore J said:

“It is not for this Court to approach the matter as if it is to make a decision whether termination should occur or not. A range of rational and reasonable views may exist as to whether particular conduct warrants termination. If the view adopted by, or on behalf of, the employer is rational and reasonable then, in my opinion, the employer has established a valid reason for the purposes of s170DE(1). In putting it in this way I am not attempting to depart from the views expressed by Northrop J in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373 which have been referred to, with approval, on a number of occasions since. Lehman was entitled to view Wadey's conduct with the gravity she did. Her decision to terminate was for a valid reason.”

Here I accept the evidence of Mr Tufrey and Mr Williams as to the seriousness with which they viewed the applicant's conduct.  They had lost confidence in the applicant.  Having regard to their evidence I am satisfied that the comments in Wadey are apposite. The termination of the applicant's employment, despite his previous loyal service, was a justified response by the respondent. It was not capricious. The respondent has discharged its onus of proof under s170EDA(1) and s170DE(1) of the Act. The application must be dismissed.

I certify that this and the preceding ten (10) pages
are a true copy of the reasons for decision of
Judicial Registrar Murphy as recorded in the transcript
and revised by the Judicial Registrar.



Associate:      KAREN HALSE
Dated:           23 January 1997

APPEARANCES

Counsel appearing for the applicant:	MR M PERICA
Solicitors for the applicant:	MAURICE BLACKBURN & CO
Counsel appearing for the respondent:	MR M MCDONALD
Solicitors for the respondent:	MIDDLETONS MOORE & BEVINS
Dates of Hearing:	22 & 23 JANUARY 1997
Date of Judgment:	23 JANUARY 1997