Shane Michael Hammond v Moore Business Systems Australia Ltd

[1995] IRCA 451

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 2733 of 1995

B E T W E E N :

SHANE MICHAEL HAMMOND
Applicant

AND

MOORE BUSINESS SYSTEMS AUSTRALIA LTD
Respondent

Before:       Judicial Registrar Murphy
Place:         Melbourne
Date:          8 September 1995

REASONS FOR DECISION

In this proceeding under Part VIA of the Industrial Relations Act 1988 (the Act) the issues were whether the Applicant was in breach of his duty of good faith and fidelity to the Respondent, and if upon the Respondent forming the view that that was the position, the Respondent had accorded the Applicant his rights under the Act.

Background facts
The Respondent is a multi-national printer and supplier of business stationery.  In the course of its operations in Australia it prints business forms on its own account and also arranges for the work to be done by contractors. 

The Respondent’s business involves sales staff obtaining orders from clients.  Those orders are then referred to the Procurement Department.  In this department, Procurement Officers either arrange for the work to be completed by the Respondent’s own staff or arrange for the work to be contracted out.  In the period prior to July 1993, the Respondent referred its contracted work to a number of suppliers.  In July 1993, it decided to use its purchasing power to obtain more competitive prices and executed agreements with two preferred suppliers.  These were two printers, Trendprint Pty Ltd (Trendprint) and Midland Press. 

The Procurement Officers were instructed to channel as much contracted work to those two companies as possible so that the Respondent could meet minimum monthly quotas under its contracts with them.  Pricing for work to those companies was pursuant to a pricing schedule agreed between the parties.  Although about 80% of the work referred to those preferred suppliers was pursuant to the pricing schedule, certain work did not fit the pricing schedule.  This work was priced by the Respondent pursuant to an earlier agreement with those printers.

A particular type of work, overprinting, had been referred to Midland Press and Trendprint for some years previously pursuant to a pricing agreement.  That type of work was also allocated to other printers including a printer known as SRG Press. 

The Applicant has been employed by the Respondent for some 21 years, primarily in sales support areas.  He commenced as a Procurement Officer during 1991.  Whilst employed at the Respondent, and prior to 1991, he met the Managing Director of Trendprint, Mr. Beruldson (Beruldson), in the course of his duties.  At some stage the Applicant introduced his wife to Beruldson and, prior to 1991, she commenced doing some casual work for Trendprint.  In February 1991 the Applicant’s wife,  Sandra Mary Hammond, registered the business name SMH Press.  She then established a business performing sub-contract overprinting work for Trendprint.  The printing press that was used was owned by Trendprint and used by Trendprint during its business hours.  After hours and at weekends, the Applicant commenced performing the actual printing for his wife’s business venture.  He also completed some of the invoices of that business directed to Trendprint, delivered some of them and collected some of the resulting payments from the Trendprint premises.

From the time that the Applicant commenced as a Procurement Officer, he, along with the three other Procurement Officers at the Richmond premises of the Respondent, continued to allocate any overprinting work to Trendprint and other printers.  From July 1993, as a result of a meeting, it was agreed that in relation to two particular major clients of the Respondent, the Applicant would allocate overprinting work to Trendprint whilst another Procurement Officer would allocate overprinting work for another particular client to another printer.  Whether a particular overprinting job was referred by the Applicant or other Procurement Officers to Trendprint or not depended on whether Trendprint were in a position to perform the work within the requirements of the customer.  In the event that Trendprint were not able to do this then the work would usually be referred to another printer, SRG Press.

Beruldson gave evidence that the price of all work referred to Trendprint by the Applicant was in accordance with the pre-existing price agreement between Trendprint and the Respondent.  He further stated that at no stage did the Applicant offer any additional overprinting work to Trendprint or otherwise favour Trendprint in any way.  The Applicant gave the same evidence.

The Respondent discovers SMH Press
In about April 1995 the existence of SMH Press was brought to the Respondent’s attention by an informant.  The informant provided to
Mr Timothy Evans (Evans), the Operations Support Manager of the Respondent, three invoices of SMH Press to Trendprint which had the Respondent’s job number on them.  Evans ascertained that the SMH Press address was the same address as the Applicant’s and that the Applicant’s initials were “SMH”.  Concerned that the material revealed a breach of the Respondent’s Business Conduct Policy Statement (the statement), Evans consulted with Mr Desmond Dwyer (Dwyer), the Human Resources Manager of the Respondent, and determined to investigate the matter. 

He attended at the Respondent’s premises at a weekend and checked a large number of procurement orders executed by the Applicant.  From this it appeared that job numbers on the SMH Press invoices to Trendprint were in fact the Respondent’s job numbers and that the writing on the invoices appeared similar to the Applicant’s writing.  Evans concluded from this that there may be some connection between the Applicant and SMH Press.  Evans and Dwyer decided to meet the Applicant to discuss the matter.

The Applicant was called to a meeting on 14 April (Easter Thursday) in Dwyer’s office.  He had no notice of the reason for the meeting.  At the meeting, Dwyer said that the Respondent was investigating what appeared to be a breach of its Business Conduct Policy Statement and was seeking to ascertain the relationship between SMH Press and Trendprint.  Dwyer asked him whether he was aware of SMH Press.  The Applicant replied that he was and that it was his wife’s business and owned by her.  Dwyer then asked the Applicant whether he was involved in doing any work for SMH Press.  The Applicant said no.  The Applicant stated that SMH Press acted as a sub-contractor for Trendprint.  Dwyer said that if there was a connection between the Applicant and SMH Press, then this would be of major concern and would be in breach of the statement.  The Applicant became agitated and appeared shocked during the conversation, and at one stage offered his resignation.  The Respondent’s representatives replied that they were not seeking the Applicant’s resignation but rather seeking to investigate the relationship between Trendprint and SMH Press and Applicant.  In the course of the conversation, the Applicant referred to a NSW officer of the Respondent who he said had been found referring work to his own business.  He told the Respondent’s representatives that that officer had been reprimanded.  Dwyer said he had no knowledge of the matter and said he would investigate it.

The meeting was quite short and at the end of it the Applicant was told that he was to be suspended with pay while the matter was further investigated.  He was invited to provide any further information to the Respondent and told that he would be contacted in the following week.

The Applicant’s version of the conversation essentially accorded with that of the Respondent.  The only difference was that the Applicant denied that he had denied doing any work for SMH Press.  He said that he was never asked by Evans and Dwyer whether he was doing any work for SMH Press.

Immediately after the meeting with the Applicant, Evans and Dwyer had a meeting with Beruldson.  He advised them of the relationship between Trendprint and SMH Press.  He further advised them that the Applicant had been performing the actual printing work for SMH Press on the press located in Trendprint premises in The Basin.  In evidence, he stated that he was surprised that the Respondent took the view that there was a conflict of interest.  He offered to co-operate with the Respondent.  He was also asked whether there was any document in place between Trendprint and SMH Press and he said no.

After the meeting with Beruldson, Evans then sought to obtain written confirmation from Trendprint as to its relationship with SMH Press.  These details were provided by Beruldson and indicated that for the period August 1992 to January 1995 SMH Press had performed work to the value of $93,950 for Trendprint.  The bulk of this work was work that originated from the Respondent.  Beruldson advised Evans that the arrangement with SMH Press was that SMH Press would invoice Trendprint 85% of the value of the order from the Respondent.  The 15% difference was Trendprint’s overhead and profit margin.

Evans checked to ascertain whether any of the management of the Respondent were aware of the Applicant’s involvement with SMH Press.  He found that no-one was aware of the position.

On receipt of all this information, Evans and Dwyer took the view that there was a breach of the Respondent’s Business Conduct Policy Statement.

The Respondent’s Business Conduct Policy Statement
The statement emanates from the Toronto, Canada, head office of the Respondent’s parent company.  It is issued to a number of employees on an annual basis.  It is issued to senior employees and those dealing with persons outside the Respondent.  The employees are required to sign an acknowledgment to confirm that they “understand it and that (I)) have and will continue to adhere strictly to the rules of conduct it sets forth.”  The Applicant signed a statement to that effect on 21 September 1993.  On 4 October 1994, he signed a statement to this effect “I have read and understand the Business Conduct Policy, and will faithfully observe its provisions at all times.”

The statement is accompanied by a foreword from the President of the Respondent’s parent company.  This refers to the importance the group places on its “reputation for honesty and integrity in all business dealings”.  It refers to the need for employees to “have a clear understanding of the basic principles of uncompromising business ethics which motivate our entire organization.”  The foreword goes on to say that the statement presents principles which are intended to assist employees to comply with laws and regulations and with “established business conduct standards” throughout the world.  It further says that “deviation from these guidelines will not be tolerated and strict adherence to them is a condition of continued employment.”  It invites employees to seek clarification in the event of doubt.

Clause 5 of the statement in the section headed “Corporate and Employee Integrity” reads:-

“5.    Conflict of Interest and Duties

No Moore employee shall be in a position of having any undisclosed or avoidable conflict between duties and responsibilities as an employee of Moore and personal interests.

It follows, therefore, that a Moore employee shall not serve a competitor or a supplier in any way; he or she shall not have any financial interest in a competitor or a supplier which could dilute or give the appearance of diluting his or her loyalty to Moore and shall avoid any activity or interest that could in any way impair the integrity and good name of Moore.  Finally, the employee shall have no conflicts of interest between the duty to act in the best interests of Moore and any duties in respect to any other activity or organisation with which he or she is involved.  For example if a Moore employee serves on the board of directors of a charitable organisation, the employee must withdraw from any meeting or other situation in which a specific transaction between Moore and the charitable organisation is or might be involved.

It further follows that no Moore employees shall undertake on behalf of Moore any business relationship with another business, which is related in any way to the Moore employee, on terms less favourable to Moore than are available from a similar business relationship with any unrelated third party.”

In addition to the statement, in 1985 the Applicant was required to sign confidentiality agreement.  Clause 4 of that provides:-

“The Employee shall during the term of his employment devote his full working time and energy to the business of the Employer and shall not during that period directly or indirectly engage in any other business or commercial venture that is involved in the provision of business forms and related activities.”

The Applicant’s evidence was that he had not read in detail either of the documents referred to above.  He said that employees regarded the statement something of a joke and that management did not comply with it.  Dwyer’s evidence, on the contrary, was that the requirement for an annual signature of the statement was part of the culture of the Respondent and that it was taken very seriously.  Dwyer acknowledged that employees were not actually taken through the statement.

The decision to terminate
Upon receipt of the information from Beruldson, Evans and Dwyer discussed the information they had received and formed the view that the conduct of the Applicant as revealed show a serious breach of the statement and required the termination of the employment of the Applicant.  The matter was discussed with other senior managers and an interview was arranged with the Applicant on 24 April.  On the preceding Wednesday, the Applicant had contacted Evans to ascertain the progress of the investigation and on the preceding Friday he had a similar telephone conversation with Dwyer.  In neither of the conversations did the Applicant provide any information in addition to that he had provided in the interview on 14 April.

On 24 April, Dwyer and Evans met with the Applicant.  Dwyer’s version was that he outlined to the Applicant the results of the investigation and asked the Applicant to comment.  The Applicant acknowledged the inconsistency between the statement that he had made at the previous meeting and admitted that he was personally involved in doing the work for SMH Press.  Dwyer then said that the Respondent found that the matter was a serious breach of the statement and that it had made a decision to terminate the Applicant’s employment.  He expressed regret that the Respondent had to make such a difficult and harsh decision involving an employee of such long service.  He invited the Applicant to put any further material which he may have before the Respondent and said that the decision to terminate him would not be put into effect until Wednesday, 26 April, at 5 p.m.  He was advised that he would receive 4 weeks pay in lieu of notice and his other outstanding entitlements.  Subsequent to that, he had no further significant contact with the Applicant. 

Dwyer said that the reason the Respondent terminated the Applicant’s employment was that the Respondent saw the Applicant as being in serious breach of the statement because of the conflict of interest involved in the Applicant’s activities with SMH Press.  He pointed out to the Applicant in the second meeting the importance that the Respondent placed on the statement and on the honesty and integrity of its employees.  He also said that the Applicant had not informed anyone within the Respondent of the relationship, and that the relationship had been a substantial one.  He further said that the reason for the termination included the fact that the Applicant had not been totally frank with him and Evans in the first meeting.

Findings on the evidence
There was no major conflict between the parties on the circumstances of the operation of SMH Press.  The only real area of conflict was in relation to what occurred at the two meetings.  Essentially, the Applicant denied that he had been directly asked whether he was involved with doing work for SMH Press and denied it.  I accept the Respondent’s evidence however that he was directly asked this question and that he falsely denied his involvement during that first meeting.  Another area of conflict was that the Applicant said that in the second meeting, Dwyer effectively said that he was terminated at the commencement of the meeting and failed to give him an opportunity to make any comment on the result of the investigations.  On this issue, I accept the evidence of Dwyer and Evans that, although the decision to terminate the Applicant had been taken prior to the meeting, at the meeting he was given the opportunity to comment on the results of the investigation before he was advised that his employment was terminated.  Another area of conflict was that the Applicant said that Dwyer was not aware that he had over 20 years experience but, on this point, I accept Dwyer’s evidence that he knew from the start that the Applicant had over 20 years service with the Respondent, and took this into account.

The Respondent led no evidence to suggest that the Applicant had favoured Trendprint in the allocation of overprinting work.  Also, it accepted that at all times the Applicant had complied with the pre-existing pricing agreement between the Respondent and Trendprint.  There was also evidence which was not contested that the Applicant had been a very hard worker for the Respondent and had given it long and faithful service.

The Applicant was strongly cross-examined as to whether or not he derived any financial benefits from the activities of his wife’s business.  He denied any direct financial benefit and said that his wife was responsible for the monies received from Trendprint.  He did accept however that the family had a joint mortgage and that he received an indirect benefit from the monies flowing to his wife from her business.  The Applicant’s evidence on this matter was a grudging acceptance of some benefit.  His evidence was unsatisfactory given the concession by his counsel that an amount of some $135,000 was paid to SMH Press by Trendprint over the period February 1991 to January 1995.  He denied that at any time he performed any work for SMH Press during business hours.  In the absence of evidence from the Applicant’s spouse that the business made no money and/or that she quarantined the funds received from the Applicant, I am satisfied that the Applicant received a financial benefit from the business.

Was the Applicant in breach of his duty to the Respondent?
The Respondent viewed the Applicant as being in breach of clause 5 of the statement.  It said that it saw the Applicant as having an “undisclosed or avoidable conflict between duties and responsibilities.”  Evans and Dwyer also said they saw the Applicant as serving one of the Respondent’s suppliers, namely, Trendprint, through the involvement of the Applicant in SMH Press.  It was the Applicant’s evidence that he did not see that there was anything wrong with what he was doing and it had not occurred to him to raise it with the Respondent at any stage.  He had not read the statement in any detail and was not aware that it contained the conflict of interest provision.

The statement was attacked by the Applicant’s Counsel as, on its face, not being strictly applicable to the Respondent.  I reject that analysis.  While some of the terminology is inapplicable, a close reading of the document as a whole shows that it is intended by the Respondent’s parent to apply to signatories to it, wherever employed.

It was common ground that a substantial proportion of the overprinting work of the Respondent was sent to Trendprint.  Further, a substantial proportion of the work performed by SMH Press was the Respondent’s work.  The Applicant also admitted in cross-examination that, in relation to any particular order for overprinting work issued by him to Trendprint, there was a possibility that it would end up at SMH Press.  He refused to accept that there was a probability given that at the time Trendprint was also doing its own overprinting work.

It was the contention of the counsel for the Applicant that there was no actual breach of the statement here and no actual conflict between the Applicant’s duty to Moore and his interest or involvement in SMH Press.  It was clear from the evidence it was at least likely that, in relation to any particular overprinting order sent by the Applicant to Trendprint, it would be contracted by Trendprint to SMH Press.  I am also satisfied that the Applicant received a benefit from work done by SMH Press by virtue of the relationship with his wife.

Having regard to those matters I am satisfied that the Applicant was in breach of the statement.  The Applicant had, I find, a direct financial interest in SMH Press.  This interest arose from his relationship with his spouse and the fact that he was performing all the physical labour, as well as some of the clerical work, associated with the operations of SMH Press.  In his capacity as Procurement Officer of the Respondent, he was required to allocate overprinting work to Trendprint and, where necessary, to other contract printers.  In performing those duties, I accept that he at no time favoured Trendprint in relation to the price at which the work was done, because it was performed pursuant to a pre-existing price agreement.  I am satisfied, however, that by virtue of the need to ensure that customer requirements were met, the Applicant placed himself in a position where in certain circumstances he was in a position to favour Trendprint over another contractor.  Further, I am satisfied that his interest did create an “undisclosed or avoidable conflict” between his duties and responsibilities and his personal interests.  He had a duty to the Respondent to perform his duties to properly serve its customers’ needs, yet he had a concurrent interest in the Respondent channelling the maximum possible volume of overprinting work to Trendprint at the existing price level.  He has put “himself in such a position that he has a temptation not faithfully to perform his duty to his employer.” (Boston Deep Sea Fishing & Ice Company v Ansell (1888) 39 Ch.D 339, 357. He is acting as an agent who, in effect, is “receiv(ing) money from the person with whom he is dealing.” (Boston Deep Sea Fishing (above)).  I am further satisfied that his involvement in SMH Press could dilute or give the appearance of diluting his “...loyalty to Moore .. and could ... impair the integrity and good name of Moore.”

Although the Respondent, in terminating the Applicant, did not rely on it, I am also satisfied that the Applicant was in breach of clause 4 of the Confidentiality Agreement in that, during his period of employment, he “directly or indirectly engage(d) in any other business or commercial venture that (was) involved in the provision of business forms or related activities.”  All of the activities of SMH Press in sub-contracting overprinting work for Trendprint, and in turn the Respondent, came within that clause.

Has there been a breach of a duty of fidelity at common law?
The Respondent also relied on a breach of the Applicant’s implied duty of good faith and fidelity to the Respondent.  The common law test has been set out in the decision of Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 56, 81-82 per Dixon and McTiernan JJ:

“Conduct which in respect of important matters is incompatible with the fulfilment of an employee’s duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal ....  But the conduct of the employee must itself involve the incompatibility, conflict, or impediment, or be destructive of confidence.  An actual repugnance between his acts and his relationship must be found.  It is not enough that ground for uneasiness as to its future conduct arises.”

Here, it was argued by counsel for the Applicant that there was no actual conduct in breach of the Applicant’s duty to the Respondent.  I am satisfied that there was no evidence of any actual conduct which indicated the Applicant favoured Trendprint.  In my opinion, however, the principles of Bushnell’s case (above) make it clear that the question is whether what the employee has done “is destructive of the necessary confidence between employer and employee.”  It is in this respect that the statement is important.  It is clear that the statement sets out a high standard of conduct for employees of the Respondent.  The Applicant, having signed the statement on a number of occasions, and having agreed to be bound by this statement, was in a position where he did have an “undisclosed or avoidable conflict between duties and responsibilities as an employee of Moore and personal interests”.  He was not to “serve ... a supplier in any way” or have a “financial interest in ... a supplier”. 

The fact that the Applicant’s involvement in SMH Press was both avoidable and undisclosed is, in my opinion, enough to characterise the conduct as being destructive of confidence.  This is particularly so given the evidence by the Applicant that, after the preferred contractor agreement in July 1993,  he was required, in the course of his employment, to refer a volume of overprinting work to Trendprint.  He did not disclose, at that stage, his interest through SMH Press, in work being sent to Trendprint.  His failure to disclose this interest in Trendprint is, consistent with authorities from Boston Deep Sea Fishing & Ice Company (above) to Regal (Hastings) Ltd v Gulliver [1967] 2AC 134, destructive of confidence. The test to be applied is objective: Goodchild Fuel Distributors Pty Ltd v Holman (1992) 53 IR 453, 476.

Has there been a breach of a fiduciary duty?
A second basis on which the Respondent’s counsel argued that the Respondent was entitled to dismiss the Applicant was that he had been in breach of his fiduciary duty to the Respondent.  It may be that such a duty is only an aspect of the duty of good faith and fidelity just discussed.  In any event I am satisfied that, having regard to the position of seniority and trust the Applicant held, he was under a fiduciary duty to his employer: Attorney-General (UK) v Heinemann Publishers Aust. Pty Ltd (1987) 75 ALR 353 at 413 per Kirby P; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 68 per Gibbs CJ, 94 per Mason J, 141 per Dawson J. This conclusion is also consistent with the case of Warman v Dwyer (1992) 46 IR 250, 259 and on appeal in the High Court (1995) 128 ALR 201. In the latter decision at 209, the Court said:

“A fiduciary must account for a profit or benefit if it was obtained either (1) where there was conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage or opportunity or knowledge derived from his fiduciary position.  The stringent rule that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure that fiduciaries generally conduct themselves “at a level higher than that trodden by the crowd.”  The objectives which the rule seeks to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage.”

Here, applying these decisions and also the decision in Regal (Hastings) Ltd (above) the Applicant, by virtue of his position with the Respondent, was in a position where he was obtaining a benefit from the referral of overprinting work to Trendprint.  The authorities suggest that the fact that he acted honestly or reasonably provides no defence.  On this basis  I am satisfied that his actions constituted a breach of his fiduciary duty to the Respondent.  This provides a further basis for the Respondent to take the position that there has been a breakdown in the necessary confidence between employer and employee.

Did the Respondent have a valid reason to terminate the Applicant’s employment?
It follows from my findings above that, due to the breaches of the Applicant’s duty of good faith and fidelity, and of his fiduciary duty to the Respondent, the Respondent had a valid reason “connected with (his) capacity or conduct” to terminate his employment (s170DE(1) of the Act). I am satisfied that the reasons given by Dwyer were sound reasons particularly given his lack of candour in the first meeting, the extent of the involvement of the Applicant in SMH Press, and the volume of business. I am also satisfied that the reasons were valid given the conclusion of the Respondent that the Applicant was in breach of the statement. The Respondent has therefore discharged its onus of proof under s170DE(1) of the Act.

Was the Applicant denied procedural or substantive fairness?
The Applicant’s counsel also argued that the circumstances of the termination were such that the Respondent breached ss170DC and 170DE(2) of the Act. It was said that the Applicant was not given any proper opportunity to respond to the allegations that were made against him and that, in any event, they had not been properly investigated.

It was the Applicant’s evidence that he believed that following the first meeting with Dwyer and Evans, the Respondent’s officers were going to analyse his performance as a Procurement Officer, as distinct from his involvement with SMH Press.  I prefer the Respondent’s version of events of the conversations over that of the Applicant’s.  I am satisfied that the Respondent knew full well that it was his involvement with SMH Press that was the issue as far as the Respondent was concerned after the first meeting on 14 April.  There was no need for any more extensive investigation by the Respondent.

It was also said by the Applicant in evidence that the decision to terminate him was a fait accompli and that the Respondent was not interested in listening to anything that he put.  I do not accept his evidence on this point.  I am satisfied that in the conversation on 14 April the Applicant was invited to put any further material to the Respondent in relation to the matters that it was investigating.  The Applicant, on his own evidence, had two conversations with both Evans and Dwyer before the further meeting on 24 April.  He did not proffer any further material to them at that time.  Further, I am satisfied that he was given an opportunity at the meeting of 24 April to provide further information to Dwyer.  This opportunity continued for a further business day and, again, was not availed of by the Applicant.

A further matter that was put was that the Respondent had not properly investigated the circumstances surrounding the employee in New South Wales who allegedly had been only reprimanded for a similar breach of the statement.  I am satisfied that Dwyer obtained the information that this in fact had not occurred.

I am satisfied that all times the Respondent, which was acting on legal advice, did accord the Applicant adequate opportunity to respond to the matters which were putting his employment in jeopardy and, thus, the Respondent has complied with its duties under both s170DE(2) and s170DC of the Act.

A further matter that was put by counsel for the Applicant was that the Respondent had failed to take into account the Applicant’s long record of service.  I am satisfied that Dwyer was fully aware of the Applicant’s service and that the Respondent did take it into account before the decision to terminate him.  Clearly, length of service is a relevant consideration in determining whether or not particular actions justify a dismissal, but I am satisfied that these events were treated as serious by the Respondent and that termination of employment, given the extent of the involvement of the Applicant in SMH Press, was not, for that reason “harsh, unjust or unreasonable.”

A further matter that was put which it was said made the termination harsh was the fact that the Respondent did not consider whether to impose some lesser penalty on the Applicant, such as an undertaking by him to cease the activity.  I am satisfied that this did not vitiate the termination or make it harsh.  Clearly, the breach was a serious one given the Applicant’s annual undertaking to abide by the statement.  This was no trivial action in conflict with his duties.  The Respondent deliberated over the matter and reached a decision which reflected a position any reasonable employer would have come to.  I find that, in these circumstances, it could not be said that the decision to terminate the Applicant was harsh, unjust or unreasonable.

Having regard to these matters, the Applicant has not discharged his onus of proof under ss.170DC and 170DE(2) of the Act.

Entitlements on payment in lieu of notice
A further matter claimed by the Applicant was that, although he was paid 4 weeks pay in lieu of notice upon termination, he was not paid accrued annual or long service leave and employer superannuation contributions on that payment.  (He was paid all entitlements that had accrued to the date of termination).

The Respondent did what many employers do when they choose to terminate a contract of employment.  It paid the Applicant four weeks pay instead of requiring him to work out a period of notice.

As a matter of law the breaches of duty I have found constitute serious misconduct.  On that basis there was no requirement for the Respondent to give any notice, or pay compensation instead of notice.  This is because the misconduct is:

“of a kind such that it would be unreasonable to require the employer to continue the employment during the notice period.”  (s.170DB(1)(b))

In any event I am satisfied that the claim for an amount of accrued annual and long service leave on a payment made instead of notice is misconceived.  It is misconceived because both of those entitlements only accrue as a result of service.  When a payment in lieu of notice is made in order to terminate an employment contract, the employment relationship ends and no further entitlements accrue: Siagian v Sanel Pty Ltd (1994) 1 IRCR 1, 23.

Where the employer takes such an action then the employee is entitled to payment of compensation calculated pursuant to sub-sections 170DB(4) and 170DB(5).  Those provisions require payment of the “total of all amounts” ... “the employer would have become liable to pay to the employee because of the employment continuing” during the notice period set out in s.170DB(2).

Sub-section 170DB(5) sets out how the amount is calculated. There is no reference to service related entitlements. The provisions refer to payments related to ordinary hours of work and loadings. There is also no reference to superannuation contributions.

Annual and long service leave entitlements and superannuation contributions are not, during the subsistence of the employment relationship, entitlements paid in monetary form.  It defies logic to require an employer that has terminated the employment contract by a payment instead of notice, to make an additional payment of accrued annual and long service leave and superannuation on that payment.  The matter is squarely decided by the comments of Wilcox CJ in Siagian (above).

It is also contrary to the principle that a party to a contract is entitled to perform that contract in a manner most advantageous to it. Consistently with this principle the terminating party makes a payment in lieu of notice, dispenses with any requirement for further service, and ceases to accrue any further liability to the dismissed employee. S.170DB(4) ameliorates the position of the dismissed employee by requiring payment of amounts which would have been paid, and only those amounts, over the notice period. Annual and long service leave and superannuation contributions are not contemplated by the provisions. There is no foundation for the amounts claimed. I therefore refuse this part of the application.

Order of the Court

The application is dismissed.

MINUTES OF ORDERS

THE COURT ORDERS:

1. That the application is dismissed.

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

I certify that this and the preceding twenty-three (23) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy.

Associate:            
Dated:  8 September 1995

Solicitors for the Applicant:    Mr R Westmore of
  Leddra Westmore & Co.
Counsel for the Applicant:     Ms S Cohen

Solicitors for the Respondent: Murray Kellock of
  Mallesons Stephen Jaques
Counsel for the Respondent:   Mr A Flower

Date of hearing:  17 & 18 August 1995
Date of judgment:                   8 September 1995

C A T C H W O R D S

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - UNLAWFUL TERMINATION - BREACH OF CONTRACT - VALID REASON - PROCEDURAL FAIRNESS - OPPORTUNITY TO RESPOND - employee having interest in supplier to employer - non-disclosure of interest - whether breach of duty of good faith and fidelity - whether breach of fiduciary duty - whether annual and long service leave accrues on WAGES IN LIEU OF NOTICE

Industrial Relations Act 1988 ss.170DB, 170DC, 170DE

CASES:Blyth Chemicals Ltd v Bushnell (1933) CLR 56

Boston Deep Sea Fishing & Ice Company v Ansell (1888)
39 Ch.D 339
                  Attorney-General (UK) v Heinemann Publishers Aust. Pty
                  Ltd (1987) 75 ALR 353
                  Warman v Dwyer (1992) 46 IR 250, (1995) 128 ALR 201
                  Regal (Hastings) Ltd v Gulliver [1967] 2 A.C. 134

Goodchild Fuel Distributors Pty Ltd v Holman (1992) 53 IR 453

Hospital Products Ltd v United States Surgical Corporation
(1984) 156 CLR 41
                  Siagian v Sanel Pty Ltd (1994) 1 IRCR 1

SHANE MICHAEL HAMMOND -v- MOORE BUSINESS SYSTEMS AUSTRALIA LTD

No. VI 2733 of 1995

Before:  Judicial Registrar Murphy
Place:  Melbourne
Date:  8 September 1995

INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 2733 of 1995

B E T W E E N :

SHANE MICHAEL HAMMOND
Applicant

AND

MOORE BUSINESS SYSTEMS AUSTRALIA LTD
Respondent

MINUTES OF ORDERS

Judicial Registrar Murphy      8 September 1995

THE COURT ORDERS:

1. That the application is dismissed.

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