[2020] FWC 1168

FAIR WORK COMMISSION

DECISION

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

Philip Smith
v
Mass Nutrition Currajong Pty Ltd T/A Fit Empire & Wellness
(U2019/6996)

COMMISSIONER HUNT

BRISBANE, 3 MARCH 2020

Application for an unfair dismissal remedy – Small Business Fair Dismissal Code – employer believed on reasonable grounds the applicant’s conduct was sufficiently serious to justify immediate dismissal.

[1] On 17 June 2019, Mr Philip Smith made an application to the Fair Work Commission (the Commission) pursuant to s. 394 of the Fair Work Act 2009 (the Act) alleging his dismissal from Mass Nutrition Currajong Pty Ltd T/A Fit Empire & Wellness (Fit Empire & Wellness/Respondent) was harsh, unjust and unreasonable.

[2] The Respondent raised a jurisdictional objection, that the dismissal was in accordance with the Small Business Fair Dismissal Code (the Code). No other jurisdictional objections were made.

[3] It is not in dispute, and I so find that Fit Empire & Wellness is a small business employer in accordance with s.23 of the Act, employing one employee, Mr Smith, at the time of his dismissal. 1

[4] I am satisfied that Mr Smith’s annual earnings were less than the high income threshold applicable at the date of his dismissal. Mr Smith’s application was made within the 21-day statutory time limit. It is necessary to determine if the dismissal was made in accordance with the Code. If it was, the application must be dismissed. If it was not, it is necessary to determine if the dismissal was unfair pursuant to s.387 of the Act.

Determinative Conference

[5] The matter was listed for hearing before me in Townsville on 25 October 2019. Mr Smith appeared on his own behalf and gave evidence. Ms Debbie McCarthy and Mrs Paula Pool, both Directors of the Respondent appeared and gave evidence. After obtaining the views of the parties, I decided to hold the matter as a determinative conference.

Background

[6] Mass Nutrition Currajong was established in May 2014 and commenced operation in August 2014 out of a shopfront location in Townsville, Queensland. In August 2017, the business name was changed to Fit Empire & Wellness. It operates a retail store selling supplements for human consumption.

[7] Mr Smith commenced employment with the Respondent on 26 August 2014 as a full-time manager. He is a 25% shareholder of the business, and is also a Director. Mrs Paula Pool, Mr Luke McNally and Ms Debbie McCarthy are fellow Directors.

[8] Mr Smith’s responsibilities as Manager of the store were to handle all day-to-day operational requirements, including promotion and marketing, management of staff, ordering of stock and processing payments of accounts and wages. This required Mr Smith to have full access and control of the Respondent’s bank account. 2 He was paid $65,000 per annum, increasing to $75,000 per annum. In addition, he received an untaxed amount of $85 per week towards vehicle costs.

[9] In early 2019, an external company accountant reviewed the business accounts. Following the review, a Directors’ meeting was held on 14 February 2019. Mrs Pool, and her husband, Mr Patrick Pool, and Ms McCarthey attended the meeting, however Mr Smith was unable to attend despite the meeting being changed. The accountant advised that the business was at risk of insolvent trading if immediate steps were not taken to address the financial management of the business. The discrepancies indicated that company funds may not have been used appropriately when compared with the turnover of the business.

[10] Ms McCarthy and Mrs Pool gave evidence that Ms Simone Gehringer, Mrs Pool’s bookkeeper, took over all financial transactions for the Respondent, including all banking on 30 May 2019, at which time they were able to fully review the financial situation and noticed a significant number of suspicious and unauthorised transactions.

[11] On 13 June 2019, Mr Smith was presented with the following show cause letter:

“Phil,

Re: Show Cause Letter

As you are aware, we have been undertaking a detailed review of the operational procedures and financial transactions over the last two years of Fit Empire Wellness & Nutrition.

Alleged Unauthorised Transactions

The purpose of this letter is to inform you that we have identified a number of financial transactions within the business account that require an explanation from you.

The transactions are:

• 20/02/2019 – Virgin Australia - $225.01

• 08/10/2018 – ATM Withdrawal Port Douglas - $250.00

• 05/03/2018 – Mater Hospital - $450

• 05/03/2018 – Queensland X-Ray - $ 215.10

• 07/03/2018 –Private Emergency Pimlico - $190.00

• 17/08/2017 – Hertz Australia - $370.82

Please provide written clarification as to whether the above transactions were for business or personal use.

If any of the above transactions were for personal use, please provide evidence that the amounts have been reimbursed to the business as well as the dates that the amounts were deposited back into the account.

Vehicle Allowance

We confirm that you are provided with a vehicle allowance of $85.00 per week. This amount compensates you for all expenses relating to the use of your vehicle while at work. We are aware that the following unauthorised transactions have been made by you since October 2017:

• 1/7/17 – 30/06/2018 – Motor vehicle Fuel of $ 545.97

• 18/10/2017 – Attention to Detail - $ 400.00

• 22/12/2017 – Pickering’s Auto Group - $708.05

• 09/07/18 – Queensland transport - $ 396.67

• 06/12/18 – Pickering’s Auto Group - $ 910.59

Please ensure that the total amount of $2,661.28 is reimbursed into the business account immediately.

Proof of Purchase

We are aware that a number of transactions within the "Purchases Account" and "Suspense Account" in Xero have been entered without any proof of purchase. Please provide copies of all receipts in respect of those transactions as soon as possible.

Request to Show Cause

As you are aware, we have previously spoken with you about our requirement that company funds should not be used for personal expenses, and that where this had happened, the amounts needed to be immediately repaid into the business account.

We require your written response to the above matters by close of business, Friday 14 June 2019. Please be aware that failure to provide a satisfactory explanation by this time may result in disciplinary action being taken against you, or termination of your employment.

Regards

Paula Pool & Debbie McCarthy”.

[12] Mr Smith did not provide a written response to the matters raised in the show cause letter by close of business, Friday 14 June 2019. In the Form F2 – unfair dismissal application, Mr Smith stated that he had commitments on the evening of 13 June 2019, and he worked at the store on 14 June 2019, and therefore he did not have time to provide a response. He considered that a meeting would have been “much better”.

[13] On 15 June 2019, Ms McCarthy and Mrs Pool made the decision to terminate Mr Smith’s employment. The termination letter reads as follows:

“Phil

Re: Notice of Termination

We refer to our letter to you dated 13 June 2019 and confirm that we have not received any response from you in relation to our requests for an explanation regarding the unauthorised transactions.

We consider that your failure to respond to this reasonable and lawful direction, coupled with the misappropriation of company funds, amounts to serious misconduct.

Accordingly, we hereby advise you that your employment is terminated with immediate effect.

The company will satisfy any entitlements you may have to unused leave.

We also require to you hand over any company assets including – Mac Pro Lap Top, Shop Keys, Tasting Drink Stacks or any other items that have been purchased by Fit Empire Wellness & Nutrition immediately.

Failure to return any Company owned assets will warrant Police Action.

We remind you of your continued obligation to keep confidential information as confidential to the company and/or its clients. If you have any queries, please contact Paula Pool.

Regards

Paula Pool & Debbie McCarthy”

The Legislative Framework

[14] Section 385 of the Act defines the meaning of “unfair dismissal” and states as follows:

“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

(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.”

[15] Section 388 of the Act provides:

“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.”

[16] The Small Business Fair Dismissal Code was declared by the Minister for Employment and Workplace Relations on 24 June 2009, and states:

“Small Business Fair Dismissal Code

Commencement

The Small Business Fair Dismissal Code comes into operation on 1 July 2009.

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.”

[17] If I determine that Mr Smith’s dismissal was not in accordance with the Code, it is necessary for me to consider if the dismissal was harsh, unjust or unreasonable pursuant to s. 387 of the Act, which states:

“387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

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

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

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

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.”

Summary of evidence

[18] As noted above, Mr Smith was a shareholder of the business, owning 25%. Each Director contributed start-up capital in proportion to their respective shareholdings. Ms McCarthy contributed $100,000, and funded Mr Smith’s capital contribution via a private loan arrangement, whereby Mr Smith agreed to repay Ms McCarthy $50,000. It is Ms McCarthy’s evidence that Mr Smith has failed to pay the loan back, and owes Ms McCarthy $34,000 plus interest. 3

[19] Mr Smith stated that he worked up to six days per week, and that there were many occasions where he was required to work seven days due to staff shortage or events held on a Sunday. 4

[20] Mr Smith states that he was a Managing Director of the business, and that he was responsible for:

• All outreach, attending fitness groups, gyms, charity events, on-site group talks;

• Sales and Marketing of the Business;

• All business purchasing, including purchases of goods and services relation to the operation of the business; and

• All other operations of the business.

[21] Director meetings were held monthly, where each Director of the business reviewed the finances that were provided two days prior. During the determinative conference, Mr Smith stated that the Directors would go through the finances “line by line” during the monthly meetings. 5 Mr Smith also stated that each Director had access to the business’ bank accounts at all times. During the determinate conference, Ms McCarthy contested Mr Smith’s statement that the Directors would go through the finances “line by line”, and stated that the services of an accountant had been enlisted to manage the business’ finances.6

[22] Ms McCarthy stated that concerns regarding Mr Smith’s use of company funds for personal expenditure had been raised during company minutes, and had been recorded in the minutes. Minutes of a meeting held on 10 July 2015 tendered by the Respondent stated, “No personal banking to be done on business account”. 7

[23] An email dated 14 September 2016 was admitted into evidence. The email was sent to all Directors, and it notes two transactions by Mr Smith were included. It then stated:

“I’d like to think that we are all on the same page and under no circumstances we are using our companies funds for personal use.”

[24] The first transaction included in the email was for car transport express, totalling $659.94, however this was paid back by Mr Smith in dividends. The second transaction was in relation to legal fees, which total $688.52.

[25] During the determinative conference, Mr Smith maintained that he was of the understanding that this amount had also been paid through his dividends, to which Ms McCarthy denied, stating the amount was still outstanding. I put to Ms McCarthy why this amount was not included in the show cause letter. Ms McCarthy stated based on legal advice, she included examples of use of the company funds that could be supported by evidence at the time. In her witness statement, Ms McCarthy stated that following the dismissal, a more detailed analysis of company account had been undertaken that it was discovered that Mr Smith had been “regularly making direct use of company funds without approval” and that “some transactions appear to be hidden amongst other legitimate expenditure”. 8

[26] I also put to Mr Smith during the determinative conference whether he chose to disregard the direction in the email dated 14 September 2016 due to the apparent continued use of company funds for personal use as described in detail below. Mr Smith, in response, stated that he did not believe expenses were personal use. 9

Private expenditure

[27] Ms McCarthy gave examples of private expenditure by Mr Smith from company accounts without permission of the Respondent, which included flights, withdrawal of cash by Mr Smith’s girlfriend in Port Douglas, private medical expenses and hire car costs for personal travel. Ms McCarthy said that there was never any permission given by the Respondent for Mr Smith to use company funds for this expenditure. A summary of this private expenditure as provided by Ms McCarthy is as follows:

Date	Item	Amount incl GST
12/09/2016	Private Legal Fees - Roberts Nehmer	$688.52
17/08/2017	Hertz Australia	$370.82
05/03/2018	Mater Hospital	$450.00
05/03/2018	Qld Xray	$215.10
07/03/2018	Emergency Fee Pimlico	$190.00
08/10/2018	Girlfriend withdraws cash - ATM Port Douglas	$250.00
20/02/2019	Virgin Flight	$225.01
Dec '16 to Apr ‘17	Orpheus Island Holiday (paid in instalments)	$4,299.00
Total:	$6,688.45

Private legal fees ($688.52)

[28] Ms McCarthy said in her statement that during 2017 and 2018, Mr Smith was incurring significant legal expenses to defend criminal assault charges. Ms McCarthy said Mr Smith was given permission by the Respondent to take his leave entitlements in cash payment so he could use these funds towards his own personal legal expenses instead of taking the leave and that leave would be paid as cash into Mr Smith’s account to then be applied towards his legal expenses. Ms McCarthy said that financial records showed Mr Smith still used company funds for his own private legal fees on one occasion.

[29] In his statement, Mr Smith said he was represented by law firm Anderson Telford Law in the criminal matter, and not law firm Roberts Nehmer Mckee.

[30] At the determinative conference there was some discussion about this issue. Mr Smith accepted the legal fees paid by the Respondent were for advice regarding his other business, The Phil and Arnie Show Pty Ltd, and the costs related to Mr Smith setting up his own company. Ms McCarthy accepted she was aware of the legal expenses, and said the legal fees were attributable to advice received from the law firm relevant to a loan owed by The Phil and Arnie Show Pty Ltd to Dammac Pty Ltd, a company owned by Ms McCarthy. She said that this was not an expense of the Respondent, and Mr Smith should not have made payment for these fees from the Respondent’s funds.

[31] Mr Smith said that he believed the legal bill related to a document between himself and Ms McCarthy. Mr Smith said that he understood he paid the legal bill by bank transfer at the time, but that the cost was covered by director’s dividends and that he did not receive dividends that month.

[32] Ms McCarthy accepted that this transaction was not included in the show cause letter. When I asked Ms McCarthy why this amount had been excluded, Ms McCarthy said that subsequent to the show cause letter, the accounts were scrutinised in more detail and further unauthorised transactions were identified.

Virgin Flight ($225.01) & Hertz Australia ($370.82)

[33] Ms McCarthy gave evidence that a Virgin Airlines flight was paid for from company funds on 20 February 2019, at a time when the company was in “dire financial circumstances” and unable to pay its suppliers. Ms McCarthy’s evidence was that this occurred at a time when the company bookkeeper put the Respondent on notice that it was close to trading insolvent if drastic changes to financial management did not occur. Ms McCarthy said that the flight was for training Mr Smith wanted to do, however Mr Smith never obtained company permission to undertake the travel and training. 10

[34] In his witness statement, Mr Smith said the following in reply:

“Virgin Australia charge relates to a course I attended in Brisbane in February 2019. I personally wore the larger cost of the course, the flight down, car hire. The entire course should have been paid by the business, but I chose to put the flight home on the business only. The benefits of the course would be reflected in our day to day interactions with customers. Fit Empire has a strong reputation within the Townsville and wider community for knowledge and expertise. Both the course in August 2017 and February 2019, aided in further building that reputation and aiding our customers. The questioned charge of $370.00 relating to Hertz Car Hire was an expense I placed on the business, which I felt was fair as I was attending a course which personally cost me $2500. This course would allow us to hold an International Thorne Research Practitioner account and sell their products instore, which I then did, and have continued to do as stock currently remains in store.” 11

[35] At the determinative conference Mr Smith was asked whether he requested or was authorised to use company funds for the car hire fees and flights. Mr Smith said they he not sought authorization, and accepted that he authorised himself to use the Respondent’s finances for the cost of the flight and hire car.

[36] Mr Smith said that the courses he attended would benefit the business. He said that the fight and care hire charges were to facilitate his attendance at courses that he said would benefit the business.

[37] During the determinative conference, Ms McCarthy said that on 14 February 2019, the Directors held a meeting where they determined the business was in debt by upwards of $38,000. Mr Smith said he did not attend that meeting but was aware that the business was not doing well. I had the following exchange with Mr Smith:

Commissioner:	“By 20 February when you put your Virgin flight on the business car, you understand that the company is not doing well.
Mr Smith:	The idea of the business flight as I said before, I paid for the entire course-
Commissioner:	I understand, but do you- Were you aware that the business was not doing well?
Mr Smith:	I was not so aware but I was trying to do everything I could to build the business back up again and that course would have allowed me to do that which is why I opted to pay for it personally and still attend it and I chose the lesser of two evils to put it on the business which was only $200 and something dollars. So that’s why I did that.
Commissioner:	You didn’t tell anybody that you were going to spend $225.01 on the Virgin flight.
Mr Smith:	No, I believe I made that decision myself.”

ATM Withdrawal at Port Douglas ($250.00)

[38] Ms McCarthy gave evidence that Mr Smith withdrew $250 cash from the company account for his own personal use on 8 October 2018, which was never returned. Ms McCarthy said that she did not accept Mr Smith’s explanation that his girlfriend accidentally used the company card, and said that Mr Smith should not have given his girlfriend the personal identification number (PIN) for the Respondent’s bank card.

[39] Mr Smith’s evidence was that the $250 withdrawal was a mistake by his girlfriend when he gave her his wallet and she used the company card, rather than his own personal card. At the determinative conference, Mr Smith said that all of his cards had the same PIN, and that his girlfriend did not know which card to use.

[40] In Ms McCarthy’s reply witness statement, her evidence is that no-one should have access to business funds outside of the card holder, and that giving a PIN to another person for a card that you have no authority to withdraw cash from is unauthorised and inappropriate. Ms McCarthy denied that the cash taken was deposited back to the business.

[41] In his written statement, Mr Smith stated that he had replaced the cash via a cash deposit once back in Townsville. 12 However, during the determinative conference he said that he placed the $250 into the till at the store.

[42] Mr Smith was questioned at the determinative conference regarding why the cash was paid back into the till and not deposited. Mr Smith said it was easier to put the money into the till. I asked Mr Smith when he had become aware of the unauthorised withdrawal? He answered that he became aware approximately 20 minutes after it occurred, when his girlfriend returned and had put the card back into the wrong place in his wallet.

[43] During the determinative conference, Mr Smith stated that he believed that the matter had been discussed, and he had advised of the error and that he had repaid the money. I questioned Mr Smith as to why he did not reply to the show cause letter with such a response; he replied that he believed the issue could have been discussed in a conversation, rather than in a show cause letter response. Mr Smith said he thought the issue had been discussed at a Director’s meeting, and that he told the Directors the money had been put back and was told this was okay.

Medical expenses ($855.10)

[44] Ms McCarthy’s evidence is that Mr Smith used the company debit card to pay for his own medical treatment costs, valued at $855.10 for private patient fees when he presented to the emergency department at Mater Hospital with chest pains. Ms McCarthy stated that this amount had never been repaid.

[45] Mr Smith’s evidence is that the hospital charges related to experiencing a high level of chest pain as he was driving home from the gym one evening. The Townsville Mater Hospital was the closest to his current location, and he chose to go to their emergency ward. On arrival, and throughout his admission, he said he was told he would be required to pay. He discovered that the only card he had with him was the business debit card, and as he was admitted to the Hospital overnight, he could not leave to retrieve his personal cards.

[46] Mr Smith stated that the expenses had been discussed at the next Director’s meeting, and he had agreed to repay the figure. He had not done so as he said that it had slipped his mind. In his witness statement he claimed that he would be happy to make the payment to the Respondent.

[47] The Respondent was asked at the determinative conference if Mr Smith was reminded to repay the medical expenses. Ms McCarthy said he was reminded by Mr Ian Yesberg, bookkeeper. Mr Smith replied that he had been reminded once.

Motor vehicle costs

[48] Ms McCarthy gave evidence that she discovered that Mr Smith was using the company debit card to fill his car with fuel regularly in addition to the weekly mileage allowance, and said that the Respondent had not permitted Mr Smith to use company money for this private purpose. Ms McCarthy said she had determined that from 4 July 2017 to 13 May 2019 the Applicant spent $2,776.05 including GST putting fuel into his car using company funds and without authorisation. 13

[49] It is noted that the show cause letter detailed an allegation of $545.97 attributable to fuel expenses for the period 1 July 2017 to 30 June 2018. Ms McCarthy discovered the additional fuel expenses post-dismissal.

[50] Ms McCarthy also said that Mr Smith spent funds without permission directly from the Respondent company accounts for other motor vehicle related reasons which were itemised as follows: 14

Item	Amount incl GST
Car detailing	$400.00
Pickerings Auto Group – Car Service	$708.05
Qld Transport – car registration	$396.67
Pickerings Auto Group – Car Service	$910.59
Transport of girlfriend’s car	$688.00
Total	$3,103.31

[51] It is noted that the amount of $688.00 attributed to the transport of Mr Smith’s girlfriend’s car was not included in the show cause letter.

[52] In his witness statement, Mr Smith said in relation to the above expenses that the car detailing was to remove vinyl company signage that his personal vehicle had been wrapped in and was previously accepted by the Respondents. Relevant to the Pickerings Auto Group car service charges and the Queensland Transport registration expenses, he stated that they were vehicle expenses necessary to have a vehicle available within the business. He stated that the expense related to his girlfriend’s transport was paid back via directors’ dividends. 15

[53] Mr Smith further said that there was no fuel or vehicle policy in place, and as the Managing Director of the Respondent, he used his Director’s discretion to charge items back to the Respondent in order to fulfil his duties as the store manager. 16

[54] Minutes provided by the Respondent dated Friday 14 August 2015 include an agenda item which says that “Car allowance of $3000 = $57 per week discussed. All agree this is suitable and pays PS fuel for work related care use and care.” 17

[55] However, the contract provided by the Respondent 18 provides for a weekly motor vehicle allowance of $85. Ms McCarthy gave evidence Mr Smith did not ever sign the employment contract, but that as far as she was aware, Mr Smith agreed with the terms and conditions applying to his employment and never raised any issues with the employment contract.19

[56] Mr Smith said in his witness statement:

“My personal vehicle was the only vehicle used for company purposes in order to attend external events, daily duties, etc. The operating costs and wear and tear of the vehicle far outweighed the allowance given and as the managing director of the business I made decisions to apply some of the costs to the company. No other director was available and as stated previously, these expenses were listed on the monthly, quarterly and yearly P&L with zero objections. Additionally, they were fully disclosed in the bank transactions.” 20

[57] At the determinative conference, Mr Smith stated that the $85 per week vehicle allowance did not cover his expenses. The following exchange occurred:

Commissioner:	“The Respondent says you were paid $85 a week, tax free dollars, to fuel your car and to cover your expenses.
Mr Smith:	But that’s- at times, as I mentioned to you before, Commissioner, that that wasn’t enough to do that.
Commissioner:	Well how much would $85 cover?
Mr Smith:	For my vehicle? Less than half of my repayments.
Commissioner:	Repayments?
Mr Smith:	So less- the wear and tear on the vehicle reduces the cost of the vehicle, reduces the resaleability of the vehicle.
Commissioner:	Sorry, your repayments – are you talking about ownership of the car?
Mr Smith:	I’m talking about all of the above. I’m talking about everything to do with the vehicle, so the wear and tear, the tyre wear for example, those tyres on my vehicle are very expensive, you know.
Commissioner:	Well, there’s a kilometre rate for every vehicle and depending on the size of the vehicle it might be 80 cents a kilometre or a dollar a kilometre or so. It doesn’t cover the cost of the car, it covers fuel, depreciation and the registration and the like.
Mr Smith:	And things like wear and tear.
Commissioner:	Yes.
Mr Smith:	So, I’m-
Commissioner:	They’re not obliged to cover your car repayments.”

[58] I asked Mr Smith about the distance he would drive during a regular business week. Mr Smith had difficulty estimating a distance but said he would drive about 150 kilometres a week when the business was busy.

[59] I asked further questions of Mr Smith regarding vehicle allowances, as follows:

Commissioner:	“What sort of vehicle do you drive?
Mr Smith:	A GTI.
Commissioner:	Is that a small car?
Mr Smith:	Yeah, it’s a Turbo hatchback, yeah.
Commissioner:	It’s probably about 85 cents a kilometre on the RACQ rates. So that’s about 100 kilometres. That covers all your wear and tear, depreciation, fuel, servicing.
Mr Smith:	I would challenge that figure.
Commissioner:	Challenge what figure?
Mr Smith:	I would challenge the 80 cents a kilometre figure, it would cost more than that.
Commissioner:	Well the RACQ puts rates and the ATO has rates. You can’t challenge them.
Mr Smith:	I’m saying in comparison to the $85 that I’m saying. I’m saying that it would- there weeks, and hence the expenses, there were weeks in which the vehicle cost more than that and those decisions were made.
Commissioner:	I’m just telling you that if it was 85 cents a kilometre for your particular vehicle then what you’re being paid would cover about 100 kilometers.
Mr Smith:	I understand that but those references were never checked. We never- that was never referenced.
Commissioner:	I understand that because I’m telling you right now and you don’t know.
Mr Smith:	No, I don’t know, I don’t know, and I appreciate the information but in the discussion of that figure that we created that was never discussed, we’ve never discussed the 80 cents a kilometre figure.
Commissioner:	You decided that it wasn’t enough.
Mr Smith:	As a director I made a decision, that’s correct.”

Orpheus Island Holiday ($4,299)

[60] In late 2016, Mr Smith placed a bid on a silent auction with Southern Cross Austereo. The silent auction allows businesses to place bids on packages that include various amounts of advertisement time on the radio and additional prizes.

[61] Ms McCarthy’s evidence is that Mr Smith used company funds to purchase a radio advertisement package that included 20 fifteen-second airtime slots between 6:00 am to 6:00 pm, and 20 thirty-second airtime slots between 6:00 am to 6:00 pm. The package also included two nights for two people at Orpheus Island.

[62] Ms McCarthy’s evidence is that the cost of the holiday component of the advertising was $4,299.90, and the total cost to the Respondent was 10 payments of $1,196.58 covering the cost of the advertising and the holiday.

[63] The Respondent asserts that at no time did Mr Smith disclose he had used the Respondent’s funds for this holiday.

[64] In his written statement of evidence, Mr Smith stated the following:

“…As businesses have 6 months to use the advertising campaigns the package we purchased was put together for us for the charity sale day I had planned the following May, McMass Day, where money from each purchase would be donated to Ronald McDonald House Charities. The Orpheus Island Trip was the prize offered and is not charged; it is simply put as an invoice reference. Another example of no involvement in the operations of the business.”

[65] In Ms McCathy’s reply material, a silent auction notice claims that the advertising is valued at $3,3760, the cost of the holiday is valued at $3,960, with a total of $7,720. Mr Smith bid $4,299.90.

[66] During the determinative conference, Mr Smith stated that the Respondent received $4,000 worth of advertisements on account of him having made the successful bid. The following was put and answered:

Commissioner:	“The advertising was worth $3,760 including GST. And you bid $4,200.
Mr Smith:	That’s correct. That’s part of the offer they offer. And you’re allowed to use it in 6 months. That’s where the value came in.
Commissioner:	Did you tell anyone in the business?
Mr Smith:	They were aware I was spending money for advertising. This was purchased in December 2016 and it was used for a charity event we did in March 2017.
Commissioner:	But you and your partner went to Orpheus Island?
Mr Smith:	We received the prize, that’s true.
Commissioner:	Did you tell anyone in the business that is what you received?
Mr Smith:	I am unaware if I did or not to be honest Commissioner.
Commissioner:	So you didn’t.
Mr Smith:	I am unaware to be honest. There’s things that they have no knowledge which I have emails stating they do.
Commissioner:	Did you tell anyone in the business that you spent $4,200-
Mr Smith:	On advertising?
Commissioner:	Well it’s not advertising. It’s – you’ve made a silent bid – by which some of the benefit is advertising. The benefit is an all-expenses paid for exclusive resort.
Mr Smith:	Yeah it wasn’t an all expenses paid for. But I understand what you are saying. You bid on the advertising. The prizes are irrelevant. They are a little treat for being a good customer to the station. They do it twice a year for high end customers. Any customers that have a certain threshold, they offer it to everyone. You don’t bid on the prizes, you bid on the packages. The reason I chose that package (inaudabile). It had a large package. We stretched it out and got more from it, we adjusted.”

[67] A document admitted into evidence demonstrates that Mr Smith sent the following to Orpheus Island’s reservation unit on 22 March 2017:

“Good afternoon,

Firstly, thank you for the opportunity to visit your beautiful resort.

My partner and I were the lucky ones to purchase the voucher to visit Orpheus Island from the recent Southern Cross Austere auction…..”

[68] I referred to the above email in the determinative conference. The exchange with Mr Smith is as follows:

Mr Smith:	“That’s purely a wording thing. That directed at Orpheus Island, not MN. If I had sent it to MN, it would have said advertising. It’s simply directed at Orpheus island, it’s just a choice of wording. It’s not related to the voucher purchase as I said before, you bid on the actual advertising. You get the holding portion of it.
Commissioner:	I understand how it works.
Mr Smith:	I am just saying, it’s just a choice of wording. I understand where your questions are coming from –
Commissioner:	Well I haven’t asked you questions. It states here “my partner and I were the lucky ones to purchase the voucher to visit Orpheus Island”. Is that true?
Mr Smith:	Were we the ones that purchased it?
Commissioner:	Yes you represented to Orpheus Island reservation that you and your partner were the lucky ones to purchase the voucher.
Mr Smith:	Well it is pretty lucky. It is lucky to be honest. People bid on all these prizes. The chance that you get this prize is fantastic.
Commissioner:	Did you tell anybody?
Mr Smith:	I am unaware if I did or not to be honest okay? Apologies, Commissioner.”

Cash handling

[69] The Respondent submitted that there were considerable cash discrepancies within the business. Ms McCarthy gave evidence that on multiple occasions it was raised by the Respondent’s bookkeeper, RBS, that there appeared to be cash missing from business accounts based on a reconciliation of cash sales and profit and loss statements. In summary:

• 16 June 2017 – RBS advised via email that there appeared to be $16,000 missing in the bank account;

• 24 June 2017 – RBS advised via email there appeared to be $8,127 in cash missing from business accounts based on a reconciliation of cash sales and profit and loss statements;

• 23 January 2018 – RBS advised via email $20,000 cash discrepancy remaining unaccounted for; and

• 10 June 2018 – RBS raised concern about $5,980 held in cash not appearing in bank accounts. Mr Smith replied that the cash was in his possession and would be banked in the coming week. Ms McCarthy gave evidence that only $3,630 of the $5,980 was repaid to the company.

[70] Ms McCarthy’s evidence was that since Mr Smith’s termination, all cash takings have been banked each week or every few days, and there was a significant difference in cash banked per month, despite lower sales.

[71] Ms McCarthy referred to cash banking comparisons by Mr Smith from 10 July 2017 to 12 February 2019 (21 months) which totalled $48,450, or a monthly average of $2,307.14 banked. She compared this to banking from 13 June 2019 to 18 August 2019 (after Mr Smith’s dismissal) which totalled $8,305 or a monthly average of $4,512. 21

[72] Mr Smith said that the email of 23 January 2018 (identifying a $20,000 cash discrepancy) actually referred to cash in the bank compared to the same quarter of the previous year and had nothing to do with missing cash. Mr Smith said that the email showed simply that the bank balance was lower than it was at the end of the same quarter the previous year. 22

[73] In relation to the other issues, Mr Smith said that the cash issues could be explained by errors in cashing out where staff might press ‘cash’ by mistake instead of ‘EFTPOS’ on the till for customer payment, leading to discrepancies in EFTPOS versus cash sales in reporting. 23

[74] In relation to the cash banking comparisons since his dismissal, Mr Smith said that demonstrating that two single months have had high cash deposits doesn’t reflect anything except that there were high cash deposits for those specific months, and in a business where the average sale is over $100, cash sales could fluctuate dramatically from month to month. 24

[75] It was put to Mr Smith at the determinative conference that he had misappropriated cash by not ringing up sales in the store. Mr Smith denied this allegation.

Mobile phone costs

[76] The Respondent submitted that Mr Smith utilised company funds to pay his private mobile phone bill. Ms McCarthy said she was unable to find a record of precisely what amount was agreed, but concerns were raised by both the bookkeeper and the Directors that phone charges generally were exceptionally high for such a small business.

[77] Mr Smith said in his statement in relation to mobile phone costs:

“As a large part of the business was operated on via my mobile phone and at my home, it was more than warranted that those expenses be business expenses. Unlike the other directors, I worked on the business’ social media platforms, website, and was available by phone to our customers throughout the day and evening as in order to gain maximum reach via social media (how many online viewers see your posts), you have to follow a posting schedule. These times don’t fall in line with traditional business hours. Additionally, any external sales performed at events was done through my phone data connection. Photos of events and contact with accounts were done through my phone both in and outside of business hours. There was no discovery as claimed. Similar to the vehicle charges, phone charges were listed on the monthly, quarterly and yearly P&L reports and available 24/7 to all directors via the bank statements. the fact the Telstra call the data package the “Entertainment Package” is out of my control and has zero relevance to this claim.” 25

[78] I note that the contract of employment provided by the Respondent to Mr Smith contemplates a telephone allowance at clause 3.2, but no amount has been included. 26

[79] The issue of mobile phone charges was not put to Mr Smith in the show cause letter.

Stock discrepancies

[80] Ms McCarthy’s statement said that in 2018, the Respondent had been left with an irreconcilable stock discrepancy, which was raised at Directors’ meetings and recorded in minutes. Ms McCarthy said Mr Smith could not explain where this stock was located or how this discrepancy arose, and that the issue of stocktakes was always shrouded in secrecy. She stated that despite many requests, Mr Smith never performed any form of accurate stocktake of the business. 27

[81] Ms McCarthy said that while Mr Smith was employed by the Respondent, he conducted his own private business preparing meal plans for clients in exchange for cash payments. Ms McCarthy said that the Respondent now suspected Mr Smith may have sold supplements belonging to the Respondent to private clients on a cash basis, and this cash was kept by Mr Smith. Ms McCarthy also said that she believed Mr Smith may have used the Respondent’s stock for his own personal benefit in his private business or for cash sales that were never properly accounted for and may have possession of stock belonging to the Respondent on his premises for a new business enterprise. 28

[82] Mr Smith denied that he had any stock in his possession, and said his business is 100% service based.

[83] At the determinative conference, Ms McCarthy stated that when she and Mrs Pool took over the running of the store, the Respondent received forensic financial account advice that stock identified in a February 2019 accountant’s meeting, that was physically missing in the store, must have been removed from the store. It was put to Mr Smith at the hearing that he had taken the stock. Mr Smith denied this allegation.

[84] The issue of stock discrepancies was not directly put to Mr Smith in the show cause letter.

Request to Mr Smith to purchase business

[85] In early March 2019, Ms McCarthy and Mrs Pool considered the business to be a liability, and after obtaining legal and financial advice, they wished to walk away from the business. Ms McCarthy stated that she considered the business relationship to be untenable, and the debt was significant. Ms McCarthy and Mrs Pool were advised to offer their shares to Mr Smith.

[86] On 6 March 2019, Ms McCarthy and Mrs Pool met with Mr Smith at the shop. They both asked him if he would purchase their shares. When Mr Smith did not respond, they both offered their shares to him at no cost. Mr Smith stated that he was interested, and he would seek advice from his accountant. The women sought a prompt response.

[87] On 6 March 2019, a letter signed by Mr Smith, Ms McCarthy and Mrs Pool was sent to the real estate managing the lease of the property, to advise that an extension of the lease beyond late August 2019 would not be sought.

[88] On 5 April 2019, Ms McCarthy, Mr and Mrs Pool met with Mr Smith at the shop to obtain from him an answer relevant to the shares. Mr Smith informed them that he would not agree to the proposal put.

[89] Ms McCarthy’s evidence is that this left her and Mrs Pool in a difficult position, which had taken a toll on each of the women personally and financially. On 31 May 2019, the RBS bookkeeper took over all financial transactions and payments. It was shortly after this time that Ms McCathy states the discovery of suspicious and unauthorised transactions was made. Ms McCarthy attended upon the ANZ bank on 14 June 2019 to ensure that all automatic payments were ceased, and she removed Mr Smith from the bank accounts. She stated that the matter had been reported to the Queensland Police, however she did not nominate a date when this occurred.

[90] Ms McCarthy’s evidence is that she and Mrs Pool agreed that the business could no longer continue to have debts mount and creditors remain unpaid whilst Mr Smith was the manager. After obtaining legal advice, the two women formed the view that they needed to terminate Mr Smith’s employment to protect the business from future losses and exposure to creditors and other possible claims. It is Ms McCarthy’s evidence that they believed that he had stolen money and goods from the business. They felt that he had been given ample opportunity to explain his conduct and to repay monies, which he had failed to do.

Consideration

Was the dismissal consistent with the Small Business Fair Dismissal Code?

[91] A dismissal will not be an unfair dismissal if the employer is a small business and the dismissal was consistent with the Code. I have earlier found that the Respondent is a small business employer within the meaning of s.23 of the Act. The Respondent submitted that the dismissal was a summary dismissal consistent with the Code.

[92] As noted above, the Code provides that it is fair 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.

[93] It is important to note that the Respondent is only entitled to rely on the information it knew at the time of the dismissal which formed what it says is its belief on reasonable grounds that Mr Smith’s conduct was sufficiently serious to justify immediate dismissal. While other matters have come to the Respondent’s attention since the dismissal, these are not matters that can be relied upon in consideration of the Code. These other matters could only be considered if the Commission finds that the Code has not been complied with, and would therefore be appropriately considered under s.387 of the Act.

[94] Accordingly, for the sake of clarity, the only considerations the Respondent had to demonstrate its belief that Mr Smith’s conduct was sufficiently serious to justify immediate dismissal are those matters contained within the show cause letter.

[95] The following matters are therefore not included in the consideration relevant to whether the Respondent complied with the Code:

• Private legal fees ($688.52);

• Orpheus Island Holiday;

• Cash handling;

• Mobile phone costs;

• Stock discrepancies;

• Fuel expenses greater than $545.97; and

• Transport of girlfriend’s car.

[96] Regulation 1.07 of the Fair Work Regulations 2009 states:

“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.”

[97] The question of whether the belief of the Respondent that Mr Smith engaged in conduct sufficiently serious to warrant summary dismissal was based on reasonable grounds is to be determined objectively. It is also relevant to consider whether the Respondent had carried out a reasonable investigation into the matter resulting in Mr Smith’s immediate dismissal.

Did Ms McCarthy and Mrs Pool believe that Mr Smith had engaged in conduct sufficiently serious to justify immediate dismissal?

[98] Ms McCarthy and Ms Pool resolved, in June 2019 to put to Mr Smith the following matters, requiring Mr Smith to address each of them and repay them:

• 20 February 2019 - Virgin Australia flight - $225.01;

• 8 October 2018 - ATM Withdrawal Port Douglas - $250.00;

• 5 March 2018 - Mater Hospital - $450.00;

• 5 March 2018 - Queensland X-Ray - $215.10;

• 7 March 2018 - Private Emergency Pimlico - $190.00;

• 17 August 2017 - Hertz Australia - $370.82;

• 1 July 2017 – 30 June 2018 – Motor vehicle Fuel of $ 545.97;

• 18 October 2017 – Attention to Detail - $ 400.00;

• 22 December 2017 – Pickering’s Auto Group - $708.05;

• 09 July 2018 – Queensland transport - $ 396.67; and

• 06 December 2018 – Pickering’s Auto Group - $ 910.59.

[99] While a number of these issues were historical, dating back to July 2017, it appeared, and during the determinative conference it was accepted by Mr Smith, that a number of these transactions had not been repaid. These include the Virgin flights and car hire expenses, vehicle costs, and Mater Hospital fees.

[100] Ms McCarthy’s evidence is that a thorough investigation had been carried out and accountants and bookkeepers had provided the Respondent with advice to support the view the Respondent had reached regarding the unauthorised transactions.

[101] The show cause letter required Mr Smith to respond to specific alleged unauthorised transactions and requested Mr Smith provide written clarification as to whether the above transactions were for business or personal use. The letter also required that, if any of the above transactions were for personal use, Mr Smith was to provide evidence that the amounts have been reimbursed to the business as well as the dates that the amounts were deposited back into the account.

[102] Mr Smith did not respond to the letter and did not contact the Respondent regarding the letter. He worked in the shop during the relevant day he was required to address the Respondent’s serious concerns. During the determinative conference, Mr Smith accepted that a number of the payments were authorised only by himself and were not repaid. Mr Smith sought to explain during the determinative conference that he considered, as a Director and a shareholder of the Respondent that he could authorise expenses for his benefit, at his discretion.

[103] Mr Smith stated that he was responsible for of the transactions identified by the Respondent in the show cause letter, including where his girlfriend had withdrawn money, and he had yet to repay the Respondent for any of those transactions.

[104] It is clear to me from Mr Smith’s evidence that he did not regard the Virgin flight and car hire as personal expenses. Instead, he reasoned that because other Directors within the business had benefited from the Respondent paying for relevant courses and travel associated with attending courses, his decision to pay for the return flight and the car hire on the Respondent’s card was ostensibly for the benefit of the Respondent. It is noted that at no time prior to his dismissal did Mr Smith provide such an explanation to the Respondent to explain these unauthorised expenses.

[105] Relevant to Mr Smith charging to the Respondent charges for his private vehicle registration, car servicing and the fuel charges known to the Respondent at the time of sending the show cause letter, Mr Smith considered that these were matters that he, as a Director, could authorise. Mr Smith did not, in the time frame afforded to him to respond to the show cause letter, provide any explanation as to what the charges were for, or whether he asserted that he had a right to purchase them on the Respondent’s debit card.

[106] I am satisfied that as of 15 June 2019, having issued to Mr Smith the show cause letter, and Mr Smith failing to respond to the letter, Ms McCarthy and Mrs Pool believed that Mr Smith had engaged in conduct sufficiently serious to justify immediate dismissal and that this conduct falls within the conduct within Regulation 1.07 of the Fair Work Regulations 2009. I find that their belief was correctly based on his conduct as an employee, and not of that as a Director or shareholder of the Respondent.

Was the belief based on reasonable grounds?

[107] When undertaking a business trip, generally an employee will seek prior authorisation from their employer to expend the employer’s funds. In my experience, they typically will not undertake the travel and use the employer’s debit card, while awaiting the employer to address them on the travel only after it comes to the attention of the employer.

[108] Mr Smith did not seek approval from the Respondent for the cost of the course that he wished to attend, and he paid for his own flight from Townsville to Brisbane, together with the cost of the course. If he had truly considered that the Respondent ought to pay for his attendance at the course he wished to attend, I am certain that he would have requested payment for all of the costs associated with the course.

[109] Mr Smith elected, without informing anybody else, to charge his return flight and car hire (for an earlier course) to the Respondent. When asked by the Respondent in the show cause letter to explain these charges, or to repay the amount, he elected not to respond. In his application to the Commission, Mr Smith stated that the Respondent should have paid for the entire course.

[110] I do not accept Mr Smith’s argument that he was entitled to charge the Respondent’s debit card for matters authorised by him on account of him being a Director, as opposed to being an employee. During the determinative conference, Mr Smith appeared to me to have a conflated understanding of his responsibilities as a Director, shareholder and employee.

[111] I find that the belief held by Ms McCarthy and Mrs Pool, that Mr Smith had, in the course of his employment, improperly used the Respondent’s funds to pay for a personal flight and for car hire, and that his conduct was sufficiently serious to justify immediate dismissal, was based on reasonable grounds.

[112] Relevant to the charges made by Mr Smith to the Respondent’s debit card for medical expenses from March 2018, I find that it would have been readily apparent to Mr Smith that these were personal expenses requiring him to promptly reimburse the Respondent. He had not done so in more than 15 months. At the determinative conference in October 2019, more than 18 months following the expenses being charged to the Respondent, he stated that he would repay the Respondent.

[113] Mr Smith elected not to respond to the Respondent when asked about these expenses. He had hoped there would be a meeting to discuss the matters. He did not request a meeting. Without having received a response from Mr Smith, I find that the belief held by Ms McCarthy and Mrs Pool, that Mr Smith had improperly used the Respondent’s funds to pay for his personal expenses, and that his conduct was sufficiently serious to justify immediate dismissal, was based on reasonable grounds.

[114] Similarly, I find that Mr Smith improperly failed to inform his employer that on 8 October 2018, his girlfriend had accidentally withdrawn $250 from the Respondent’s bank card, and not Mr Smith’s. In his written evidence he stated he had made a cash deposit once he returned to Townsville. During the determinative conference, he stated he had deposited it into the shop till. His evidence was incredibly inconsistent and implausible. I do not accept his evidence that he put $250 into the shop till, or that he told anybody that he had done so.

[115] Mr Smith took no action at the time to address the matter, despite his evidence that he knew, when he opened up his wallet that his girlfriend had used the incorrect card. There is evidence that Mr Smith was made aware of the financial difficulty the Respondent was in. Mr Smith elected not to respond to the Respondent when asked about the $250 withdrawal. I find that the belief held by Ms McCarthy and Ms Pool, that Mr Smith had permitted an unauthorised transaction, without seeking to rectify the transaction, amounted to conduct that was sufficiently serious to justify immediate dismissal, was based on reasonable grounds.

[116] In relation to the vehicle expenses, while I accept that Mr Smith may have held a belief that the cost of running his vehicle exceeded the allowance paid to him, Mr Smith had every opportunity to raise this with the other Directors. Mr Smith failed to do so, instead preferring to unilaterally authorise various transactions using the Respondent’s funds. Mr Smith’s evidence during the hearing was that the vehicle allowance did not cover the car repayments, completely misunderstanding the purpose of a vehicle allowance. It is not to assist an employee with repayment of a vehicle; rather, to cover costs of depreciation, wear and tear and running costs.

[117] Whilst the transactions were certainly not fresh, and could reasonably have earlier come to the attention of the Respondent, at no time did Mr Smith inform the Respondent that he was both in receipt of an $85 per week vehicle allowance, and had decided to charge his car registration, servicing and other charges to the Respondent.

[118] When presented with the information on 13 June 2019, Mr Smith failed to respond. Without having received a response from Mr Smith, I find that the belief held by Ms McCarthy and Mrs Pool, that Mr Smith had improperly used the Respondent’s funds to pay for car registration, servicing and detailing, was sufficiently serious to justify immediate dismissal, was based on reasonable grounds.

Conclusion

[119] I have carefully weighed up the evidence of the Respondent wishing for Mr Smith to take ownership of the Respondent at no cost, and the decision not to renew the lease, against Mr Smith’s conduct. While I accept that Ms McCarthy and Mrs Pool considered that they were drowning in debt and it required them to stem all losses, I do not accept that they terminated Mr Smith’s for any reason other than his conduct. From late May 2019, when the bookkeeper provided a fresh, objective set of eyes on the Respondent’s accounts, it became apparent to the Respondent that Mr Smith’s conduct was sufficiently serious to justify immediate dismissal. Appropriate and prompt action was taken to address those concerns.

[120] I am satisfied that the Respondent complied with the Code.

[121] If I am incorrect in determining that the dismissal was in accordance with the Code, I must consider whether the dismissal was harsh, unjust or unreasonable. The criteria I must take into account when assessing whether the dismissal was harsh, unjust or unreasonable are set out at s.387 of the Act:

“387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

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

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

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

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.”

Valid reason - s.387(a)

[122] As discussed above, Mr Smith made numerous unauthorised transactions that were charged to the Respondent’s business account. I am satisfied these constitute a valid reason for dismissal.

[123] After the dismissal the Respondent submitted it discovered a number of other issues which have been discussed above, including stock discrepancies, cash handling discrepancies, mobile phone costs charged to the business, and the holiday to Orpheus Island. These were not reasons for the dismissal as they were discovered post-dismissal.

[124] Relevant to the consideration in s.387, facts justifying dismissal, which existed at the time of the dismissal, should be considered, even if the employer was unaware of those facts and did not rely on them at the time of dismissal. 29 Facts which existed at the time of the dismissal, but came to light after the dismissal may justify the dismissal when it would otherwise be harsh, unjust or unreasonable or render the dismissal harsh, unjust or unreasonable.30 Ultimately, the Commission is bound to determine whether, on the evidence provided, facts existed at the time of termination that justified the dismissal.31

[125] The further issues such as the holiday to Orpheus Island, and the charge of private legal fees points to Mr Smith’s reckless indifference towards the limits of his use of the company business card and accounts. Mr Smith’s justification of the Orpheus Island trip as a benefit to the business is difficult to believe when he reported the expense as ‘advertising costs’ and failed to disclose the benefit of a holiday at an exclusive private island resort for himself and his girlfriend. The fact that he bid and paid an amount greater than the value of the advertising was completely lost on Mr Smith, even at the determinative conference. His attitude that he could make these charges because he was a Director was absolutely galling. His evidence that he and his girlfriend were “lucky” to win the holiday demonstrates, in my view, his complete naivety as to the transaction, or his unsuccessful attempt to convince the Commission that there was no personal benefit in the package purchased by him using the Respondent’s funds.

[126] Having considered the evidence, I am satisfied that even if the unauthorised transactions were not in themselves a valid reason for dismissal, this further issue, and particularly the excess fuel costs charged to the Respondent would be valid reasons justifying dismissal. I make no finding on the stock discrepancy issue, the cash handling and the transport of Mr Smith’s girlfriend’s car as there is insufficient information before me. I would not find that the very expensive mobile phone charges constituted a valid reason for the dismissal.

Notification of the valid reason – s.387(b)

[127] From the evidence it appears that Mr Smith was variously made aware of issues in relation to the unauthorised payments as they arose. While in some cases the Respondent did not follow up these unauthorised payments or check to see that Mr Smith had repaid amounts he admitted as owing, Mr Smith was made aware at the time that the Respondent took issue with these payments and was expected to address them. He did not do so.

[128] The Respondent either was reminded of or became aware of the unauthorised transactions on 30 May 2019. After an investigation, they put these to Mr Smith on 13 June 2019 when he received the show cause letter from the Respondent.

[129] I am satisfied Mr Smith was notified of the valid reason for his dismissal.

Opportunity to respond – s.387(c)

[130] Mrs Pool said in her witness statement that the show cause letter was presented to Mr Smith on 13 June 2019. 32 In his Form F2, Mr Smith said he was emailed the letter at 4:30pm on 13 June 2019.33

[131] Mr Smith was given until close of business 14 June 2019 to provide a written response to the allegations in the Show Cause letter.

[132] While this is a short period of time to provide a response, especially given the fact many of the unauthorised transactions were from several years prior to the dismissal, Mr Smith did not seek further time to provide a response. In fact, Mr Smith worked in the shop for all of 14 June 2019 and did not seek to be relieved to prepare a response.

[133] I am satisfied Mr Smith was provided an opportunity to respond.

Unreasonable refusal by the employer to allow a support person - s.387(d)

[134] As Mr Smith was summarily dismissed via the termination letter sent on 15 June 2019, there were no verbal discussions relating to the dismissal and therefore no opportunity for Mr Smith to have a support person present and therefore no unreasonable refusal by the Respondent. As such, this criterion is not applicable.

Warnings regarding unsatisfactory performance - s.387(e)

[135] As the dismissal was not for performance reasons, this criterion is not applicable.

Impact of the size of the Respondent on procedures followed - s.387(f); Absence of dedicated human resources management specialist/expertise on procedures followed - s.387(g)

[136] The Respondent is a small business and had only one employee at the time of Mr Smith’s dismissal. No submissions were made with respect to the Respondent’s size and any impact on procedures followed as a result or absence of human resources management specialists or expertise on the procedures followed.

[137] It is clear the Respondent did not have any human resources expertise or specialists. However, I am not convinced this would have had any impact on the procedures followed.

Other relevant matters - s.387(h)

[138] I have taken into consideration Mr Smith’s assertions that he held a greater discretion to use the Respondent’s funds than an employee who is not a Director. I find against Mr Smith on this issue, as there is no evidence that Mr Smith made any disclosure of the decisions made by him to use the Respondent’s money to benefit himself in the way that it did. I am satisfied that he conducted himself in a deceitful and dishonest manner.

Conclusion

[70] I have concluded that the Respondent complied with the Small Business Fair Dismissal Code and accordingly, Mr Smith has not satisfied the requirements of s.385 of the Act that must be met in order to obtain a determination that he has been unfairly dismissed.

[139] Even if I am wrong in concluding that the Code was complied with, I am satisfied that Mr Smith’s dismissal was not harsh, unjust or unreasonable, and the dismissal was not unfair within the meaning of the Act.

[140] The application is dismissed.

COMMISSIONER

Appearances:

Mr Phillip Smith, the Applicant, on his own behalf.
Ms Debbie McCarthy and Mrs Paula Pool on behalf of the Respondent.

Hearing details:

25 October 2019, Townsville.

Printed by authority of the Commonwealth Government Printer

1 Ibid at [4]

2 Witness statement of Debbie Alison McCarthy dated 23 August 2019 at [15]

3 Ibid at [7]

4 Form F2 dated 25 June 2019 at Question 3, (2)(b)

5 Audio recording of determinative conference at approximately 31:51

6 Ibid at 59:41

7 McCarthy, p 61.

8 Witness statement of Debbie Alison McCarthy dated 23 August 2019 at [24]

9 Audio recording of determinative conference at approximately 53:40

10 Witness Statement of Debbie Alison McCarthy dated 23 August 2019 at [46]

11 Affidavit of Phillip Smith dated 13 September 2019 at [25](c)

12 Ibid at [25](d)

13 Witness Statement of Debbie Alison McCarthy dated 23 August 2019 at [37-39]

14 Ibid at [40]

15 Affidavit of Phillip Smith dated 13 September 2019 at [22]

16 Ibid at [23]

17 Annexures to Witness Statement of Debbie Alison McCarthy, Annexure 3 at 5.1

18 Annexures to Witness Statement of Debbie Alison McCarthy, Annexure 4 – Employee Agreement for Full Time Employees at clause 3.2(a)

19 Witness Statement of Debbie Alison McCarthy dated 23 August 2019 at [14]

20 Affidavit of Phillip Smith dated 13 September 2019 at [21]

21 Witness statement of Debbie Alison McCarthy dated 23 August 2019 at [36]; Annexure 17

22 Affidavit of Phillip Smith dated 13 September 2019 at [16]-[18]

23 Ibid at [17]

24 Ibid at [19]

25 Ibid at [24]

26 Annexures to Witness Statement of Debbie Alison McCarthy, Annexure 4 – Employee Agreement for Full Time Employees at clause 3.2(b)

27 Witness statement of Debbie Alison McCarthy dated 23 August 2019 at [51]

28 Ibid at [52]-[53]

29 Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21 (4 June 1931), [(1931) 45 CLR 359 at pp. 373, 377‒378]

30 Australia Meat Holdings Pty Ltd v McLauchlan Print Q1625 (AIRCFB, Ross VP, Polites SDP, Hoffman C, 5 June 1998), [(1998) 84 IR 1 at p. 14]

31 Lane v Arrowcrest (1990) 27 FCR 427, 456; cited with approval in Byrne v Australian Airlines Ltd [1995] HCA 24 (11 October 1995) at paras 131, 136 (McHugh and Gummow JJ), [(1995) 185 CLR 410 at pp. 467, 468]

32 Witness Statement of Paula Serena Pool dated 23 August 2019 at [21]

33 Form F2 dated 25 June 2019 at Question 3.1

Philip Smith v Mass Nutrition Currajong Pty Ltd T/A Fit Empire & Wellness