Philip Donnan v Purkiss Rural Management Pty Ltd

[2010] FWA 851

[2010] FWA 851

FAIR WORK AUSTRALIA

DECISION

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

Philip Donnan
v
Purkiss Rural Management Pty Ltd
(U2009/891)

COMMISSIONER ROBERTS SYDNEY, 24 FEBRUARY 2010

Termination of employment - jurisdictional motion (Small Business Fair Dismissal Code).

[1] This decision concerns an application lodged on 11 September 2009 by Mr Donnan pursuant to s.394 of the Fair Work Act 2009 (the Act). The Respondent to Mr Donnan’s application is Purkiss Rural Management Pty Ltd (Purkiss or the Company).

[2] The application was dealt with by a Fair Work Australia conciliator on 2 and 7 October 2009 but the conciliations were unsuccessful. Purkiss also raised the issue of the Small Business Fair Dismissal Code (the Code) and claimed that the substantive application was beyond jurisdiction as the Company had complied with the Code.

[3] The motion and the arbitration came before me for hearing in Coffs Harbour on 17 December 2009. Mr Donnan represented himself and Purkiss was represented (by permission, and with the consent of Mr Donnan) by Mr R Morris, solicitor. Directions had been issued on 29 October 2009 for the filing of submissions, witness statements and other documentary materials. That process was completed on or about 8 December 2009

[4] Mr Donnan gave sworn evidence on his own behalf and Mr R Eccles (the Respondent’s Proprietor) gave sworn evidence for Purkiss. Other statements/declarations were tendered by both parties in support of their respective cases. The statements/declarations were from persons who were not available for cross-examination and were therefore excluded by me as each party objected to the statements provided by the other side in such circumstances.

Background

[5] Mr Donnan entered employment with Purkiss as its Operations Manager on or about 5 January 2006 and his termination of employment took effect on or about 8 September 2009. Purkiss maintains that Mr Donnan’s employment was terminated due to performance issues after he had been counselled and provided with additional assistance but failed to rectify the performance issues identified by Purkiss. Mr Donnan maintains that no reason was given for his dismissal. The Company further maintains that it adhered to the Code in effecting the termination of employment.

Legislative Framework

[6] Section 385 of the Act provides:

“385 What is an unfair dismissal

A person has been unfairly dismissed if FWA 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.”

[7] Section 388 of the Act provides for the Minister to declare a Small Business Dismissal Code. That code was declared on 24 June 2009 and commenced operation on 1 July 2009. The Code provides:

“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.”

[8] It is not disputed that Purkiss is a small business as described in the Act, employing fewer than fifteen full time equivalent employees.

[9] Firstly I must decide if Purkiss complied with the Small Business Fair Dismissal Code.

Evidence

Mr Donnan

[10] Mr Donnan gave sworn evidence and submitted two witness statements. 1

[11] In his first witness statement, Mr Donnan said:

“1. I was employed by Purkiss Rural commencing Thursday 5th January 2006 in the position of Operations Manager.

2. During my time there Purkiss Rural operated with approximately seven (7) Full Time Equivalent employees.

3. I was dismissed on Monday 7^th September 2009 after over three years and eight months of continuous employment without any reason other than ‘Purkiss Rural is going in a new direction and you’re not part of that’. This indicated a redundancy but I was replaced on Tuesday 8^th September. I did not resign, nor was I offered any opportunity to resign.

4. I was given no any other reason for the dismissal.

5. I did not and have never stolen goods or money from the business.

6. I have never defrauded the business.

7. I did not threaten violence against any other person while on the premises or outside of it. This includes other the owners, employees, customers or suppliers [sic].

8. I have fully complied with all occupational health and safety procedures in the workplace and have never committed any breaches that would threaten any employees, customers or suppliers with any harm.

9. I was involved in non compliance of payments to the Australian Taxation Office for BAS, PAYG and Superannuation from December 2006 to 2007. This was addressed in a verbal counselling session in August 2008 and transferred of all these responsibilities to a bookkeeper in September 2008.

10. Apart from this one occasion there has never been any other warning for my conduct or performance in the total period of employment with Purkiss Rural either verbal or written.

11. Purkiss Rural has never offered any training. All training was my own initiative and included TAFE Retail Manager Certificate IV (Distinction) and in house training for myself and other staff.”

[12] In his second witness statement, Mr Donnan said that when employed it was his job to manage Purkiss’ retail store and he was to be paid a salary plus a profit share. His evidence went on to detail the economics of the business and its financial performance during the period of his employment.

[13] Mr Donnan went on to say that he had been counselled by Mr Eccles in August 2008 concerning his performance and all financial duties were removed from his control and allocated to a dedicated bookkeeper in late September 2008. During 2009 his relationship with Mr Eccles deteriorated until he was summarily dismissed on 7 September 2009 when Mr Eccles said words to the effect that Purkiss was going ‘in a new direction and you’re not part of that there is no one reason in particular.’ He then handed over company keys and card. The next day he briefed his replacement and found that he was locked out of the Company’s computer system. Over the period 18 September 2009 to 4 December 2009, he was paid his accrued annual leave and a total of four weeks’ pay in lieu of notice.

[14] Attached to Mr Donnan’s second witness statement were a number of documents concerning such matters such as sales and profit figures and organisational charts. I have paid regard to those documents.

[15] In cross-examination, Mr Donnan:

• Agreed that his profit share was to be linked to both his personal performance and that of the store. 2



• Agreed that his ongoing employment could be terminated if he was not performing to expectations. 3



• Agreed that there had been a significant problem in 2008 concerning non-payment of taxation liabilities. 4



• Disagreed that the Company’s accounts were inaccurate for the months of June, July and August 2008. 5



• Agreed that it was his job to reconcile accounts. 6

[16] The cross-examination continued, examining the issues of disposal of out of date stock and financial matters. Considerable time was devoted to the question of profit sharing arrangements but such matters are not relevant to this decision.

[17] Mr Donnan agreed that maintenance of stock and inventories was his responsibility. 7 He denied that he lacked “understanding and care of the impact of the overstock position on the viability of the business”.8 He denied being verbally reprimanded concerning inventory control.9

[18] Mr Donnan denied using Purkiss’ computers and resources to assist him in his ‘side business’ as an Amway distributor. 10 He agreed that he approached Purkiss customers concerning Amway while he was employed.11 He denied that Mr Eccles had requested him to refrain from such activities.12 He believed that Purkiss received increased business as a result of his Amway representations.13 Mr Donnan denied received training by Purkiss, in particular training in MYOB accounting.14

Mr Eccles

[19] Mr Eccles gave sworn evidence and submitted two witness statements 15.

[20] In his first witness statement, Mr Eccles, in summary, said:

• As well as being the Proprietor, he is a technical salesman for the Respondent with a degree in Applied Agricultural Science and twenty years experience in the agricultural sector. Since about January 2006 he has overseen the operations of Purkiss.



• When the Applicant was first employed, he held himself out as a person with managerial skills including financial management and inventory control.



• In December 2007 Mr Donnan was counselled in relation to failing to renew a company vehicle’s registration. That failure cost Purkiss some $2,000.



• In June 2008 he discovered that the Applicant had failed to lodge Goods & Services Tax (GST) returns since September 2006 and that tax deducted from staff wages had not been remitted to the Australian Tax Office for some twelve months. A similar situation applied to superannuation contributions. Rectification of this failure cost the Company $22,000 in interests and fines. Mr Donnan was told that his failure was unacceptable.



• A later examination of Company accounts showed them to be inaccurate. Mr Donnan was again counselled and reprimanded.



• Correcting the accounts involve over 100,000 entries being redone and checked.



• Mr Donnan was uncooperative in assisting with rectifying tax, superannuation and accounting errors.



• In June 2008 he discovered that Purkiss was severely overdue in paying a major supplier over $80,000.



• The Applicant lied to him about payments to suppliers. A major supplier cancelled the Respondent’s account with it. This resulted in a need to source the same product from another company at a total loss of $9,000. Purkiss also lost access to bio-technological information and research which affected the Company’s competitive advantage.



• Around July 2008 he discovered that Purkiss was 90 days behind in paying its major buying group a total of around $280,000. The buying group claimed that Mr Donnan had lied to it for a considerable time.

[21] Mr Eccles’ further evidence concerned problems with inventory and disposal of out of date stock and the resulting financial effects on Purkiss. He had said words to the Applicant to the effect: “Your handling of our business debts and performance in general has been appalling. If you have any honour you will fall on your sword. This cannot go on in the future.”

[22] “I thought that the Applicant would resign as I considered that he would be able to see that his performance was well below the acceptable standard and was costing the business substantial amounts of money, ruining business relationships and affecting our reputation.”

[23] Mr Donnan had a practice of throwing away statements from creditors, making it impossible to ascertain to whom money was owed, and data was inaccurately entered into the MYOB accounting software making the MYOB records “virtually useless”.

[24] Other issues detailed in Mr Eccles’ witness statement were:

• Failure by Mr Donnan to pursue outstanding debts.



• Mr Donnan’s use of his position to pursue his Amway business.



• Poor customer service.



• Giving away or selling out of date stock, thereby exposing the Respondent to legal liability.



• Failure to undertake stocktake.

[25] Mr Eccles said that the Applicant had been regularly warned between July and October 2008 concerning his inadequate work performance. He went on to say: “In or about this period I considered terminating the Applicant’s employment. I did not do this at that time, as I wanted to Applicant to have an opportunity to assist in unravelling the financial mess that he had got the Respondent into. I was also concerned about losing other staff if I dismissed the Applicant, as it could have appeared that the business was about to close.”

[26] An external consultant undertook a business performance review in February 2009. 16 The review revealed a lack of care and understanding on the part of Mr Donnan in relation to inventory control.

[27] During the period of his employment, the Applicant undertook a number of professional courses which were paid for by Purkiss.

[28] “In or about late August 2009, in light of the Applicant’s failure to rectify his performance and seemingly lack of willingness to address the performance issues, I made the decision to terminate his employment.”

[29] On or about 7 September 2009 he met with Mr Donnan and was accompanied by the Respondent’s bookkeeper. He told Mr Donnan that his employment was going to be terminated and asked him if he wished to go through the reasons. Mr Donnan declined. The Applicant was also offered an additional period of notice if he was prepared to sign a deed of release. In concluding his witness statement, Mr Eccles said: “I verily believe that the Applicant’s incompetence and neglect of duties cost the Respondent in excess of $70,000.00, which continues to rise due to lost rebates. This figure is made up of interest charges from supplies, higher bank fees and interest, late fees from creditors, loss of rebates, legal fees, higher accounting fees and the loss of direct accounts which means that products cannot be purchased at optimal prices and affects the Respondent’s buying power. I verily believe that the Applicant’s conduct has also cost me the good will of people I know in the agricultural industry who as a personal favour allowed me more time to pay debts or took back stock they were not obliged to.”

[30] Mr Eccles’ second witness statement was in reply to that of the Applicant. I have paid regard to the contents of the second witness statement.

[31] In cross-examination, Mr Eccles agreed that his relationship with the Applicant had significantly cooled during 2009. 17 He maintained his evidence that Mr Donnan had been in receipt of several verbal warnings for poor performance.18

Oral Submissions

[32] At the conclusion of witness evidence, both parties made brief oral submissions.

Mr Donnan

[33] The Applicant submitted that although he was in error with the MYOB accounts, the accounts were accurate, “but they just weren’t complete.” 19 He agreed that he had been reprimanded in July 2008 and been removed from all responsibility for such accounts. He went on to say: “Most of Purkiss Rural Management’s arguments today are financial and relate to issues that are over one to two years old and if Rob Eccles was of the mind to dismiss me he should have done it 13 months ago, not in September of this year, 13 months after the event.”20

[34] He went on to say that his involvement with Amway would have had a very minor impact on Purkiss and he only spoke to some 20 customers out of the total of approximately 800. 21

[35] “The point about all the other things that Mr Eccles has brought up since July 2008, none of those issues have been counselled with me. I was unaware that they were causing him problems and if he had taken the time and effort to sit down and actually have a proper counselling session to discuss it I could have explained the situation, or realised where I was falling short of his expectations and been able to improve it. As it was Mr Eccles did not. We completely disagree on all the points where he thinks he's counselled me. If he did then I've taken it just as another complaint that he's had in the process of walking through the office.” 22

Mr Morris

[36] Mr Morris submitted that the evidence of Mr Eccles should be preferred to the evidence of Mr Donnan, citing Mr Donnan’s alleged reluctance to admit facts adverse to his interests. He went on to say: “In closing I would say that the respondent complied with the Code. He was provided with warnings, given a chance to rectify his performance over 12 months. The applicant knew that, would have known that he had to improve and the evidence before you on behalf of Mr Eccles is that there were repeated sessions and conversations and that the applicant referred to at the end of his submissions that there should have been a proper counselling session.” 23

[37] Mr Morris also relied upon his opening statement at the commencement of proceedings and I have paid regard to that statement.

Conclusions and Finding

[38] In the case before me, it is not in contest that Purkiss is a small business employer. It is also not contested that Mr Donnan was a person protected from unfair dismissal in that his employment exceeded one year and his annual earnings were less than the high income threshold. The first matter for me to consider is whether the dismissal of Mr Donnan was consistent with the Code. The terms of the Code are set out earlier in this decision.

[39] Mr Donnan maintains that he was subjected to summary dismissal but, on balance, I do not agree. He was paid the correct period of notice even though the payments were not made to him in a timely manner. That fact might give rise to some other form of possible action by the Applicant but it does not constitute summary dismissal in my view and I so find.

[40] Now I am required to pay regard to the second and third paragraphs of the Code. In doing so, I note my conclusion that the evidence of Mr Eccles is to be preferred over of Mr Donnan where the two are in conflict.

[41] I find that there was a valid reason for Purkiss to dismiss Mr Donnan due to his evident incapacity to perform the job he was employed to do. I further find that he was warned verbally and should have been aware that his continued employment was at risk if his performance did not improve. I further find that Mr Donnan was given a reasonable chance to respond to Purkiss’ concerns and a reasonable opportunity to rectify the problem. There is no doubt that Mr Donnan received a high level of support from Purkiss, including the provision of training. Work that he proved incapable of performing to the standard required was removed from him and allocated to other persons and external advice was sought by Purkiss to assist Mr Donnan in the performance of his duties. It appears to me that this is a situation where Mr Donnan was unable to perform his duties to any reasonable level of competence and he engaged in conduct which was intended to camouflage that lack of competence. The job appears to have been simply beyond him. In saying this, I do not impute any dishonesty to Mr Donnan’s conduct. The Amway activities he undertook whilst in the employ of Purkiss have not been a factor in the making of this decision.

[42] Therefore, I repeat my finding that there was a valid reason for the termination of Mr Donnan’s employment based on his performance. I further find that Purkiss substantially adhered to the Code in effecting the dismissal of Mr Donnan. Having determined that the termination of employment was consistent with the Code, it follows that Mr Donnan’s employment was not unfairly terminated. The application is therefore dismissed. An order reflecting this decision is in PR993390.

COMMISSIONER

Appearances:

P Donnan, the Applicant.

R Morris, solicitor, for Purkiss Rural Management Pty Ltd.

Hearing details:

2009.

Coffs Harbour:

December 17.

 1   Exhibits Donnan 1 and Donnan 2.

 2   Transcript PNs76-78.

 3   Transcript PN79.

 4   Transcript PN85 and following.

 5   Transcript PN108.

 6   Transcript PN119 and following.

 7   Transcript PN199.

 8   Transcript PN218.

 9   Transcript PN220.

 10   Transcript PN242.

 11   Transcript PNs255-256.

 12   Transcript PN259.

 13   Ibid.

 14   Transcript PN260.

 15   Exhibits Purkiss 3 and Purkiss 4.

 16   Appendix E to Exhibit Purkiss 3.

 17   Transcript PN390.

 18   Transcript PNs415-416.

 19   Transcript PN431.

 20   Transcript PN432.

 21   Transcript PN433.

 22   Transcript PN435.

 23   Transcript PN444.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR993389>