Spartalis v BMD Constructions Pty Ltd - [2014] SADC 37

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
SPARTALIS v BMD CONSTRUCTIONS PTY LTD
[2014] SADC 37
Judgment of The Honourable Justice Bampton
13 March 2014
EMPLOYMENT LAW - TERMINATION AND BREACH OF CONTRACT - GROUNDS - MISCONDUCT - GENERALLY
EMPLOYMENT LAW - TERMINATION AND BREACH OF CONTRACT - TERMINATION OR BREACH - GENERALLY
ESTOPPEL - ESTOPPEL BY JUDGMENT - ISSUE ESTOPPEL - APPLICATION OF ESTOPPEL TO WHAT MATTERS - MATTERS NECESSARY TO DECISION
ESTOPPEL - ESTOPPEL BY JUDGMENT - ISSUE ESTOPPEL - IDENTITY OF ISSUES - ACTIONS BASED ON NEGLIGENCE
The plaintiff was summarily dismissed by the defendant for serious misconduct, without notice or payment in lieu. The plaintiff denies serious misconduct and seeks damages for breach of contract of employment. The plaintiff contends that, at the time of termination, a new contract of employment had been created and reasonable notice was 12 months. Alternatively, the plaintiff argues that a minimum of five weeks' notice was required pursuant to the Fair Work Act 2009 (Cth).
The defendant asserts that there was no new contract of employment, that the plaintiff was terminated for serious misconduct pursuant to the employment agreement, and accordingly was not entitled to any period of notice or payment in lieu.
Prior to trial there were proceedings in the Industrial Relations Court (IRC) relating to the plaintiff's claim for his pro rata long service leave. The IRC found in favour of the plaintiff and in particular found that that he was not engaged in serious and wilful misconduct. The plaintiff subsquently contends that the defendant is estopped from asserting that there was any basis to terminate his employment. Conversely, the defendant argues that the plaintiff is estopped from denying that his actions were negligent.
Held:
(1) No issue estoppel, as contended by the parties, arises.
(2) The plaintiff's employment is governed by the employment agreement; no new contract of emploment came into existence. The requisite period of notice was therefore one months' notice or payment in lieu, or without notice in the case of serious misconduct.
(3) The defendant was not entitled to dismiss the plaintiff without notice; serious misconduct was not established on the evidence.
(4) The plaintiff is entitled to five weeks notice pursuant to the statutory minimum provided by the Fair Work Act 2009 (Cth).
(5) The plaintiff's entitlment is limited to five weeks' salary plus pro rata annual leave.
(6) The plaintiff attempted to mitigate his loss.
Long Service Leave Act 1987 (SA) s 5, s 5(4)(a); Fair Work Act 2009 (Cth); Workers Compensation Act 1971 (SA), referred to.
Blair v Curran (1939) 62 CLR 464; Brewer v Brewer (1953) 88 CLR 1; Milojevic v ROH Industries Pty Ltd (1991) 56 SASR 78; Jackson v Goldsmith (1950) 81 CLR 446; Somodaj v Australian Iron & Steel Ltd (1963) 109 CLR 285; Egri v DRG Australia Ltd (1988) 19 NSWLR 600; Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353; Hoystead v Commissioner of Taxation (Cth) [1926] AC 155; Mitsubishi Motors Australia Ltd v Harbord (1997) 69 SASR 75; Spartalis v BMD Constructions Pty Ltd [2011] SAIRC 60; Quill v Ross Bros Pty Ltd (1959) 77 WN (NSW) 94; W R Knott v Carlton & United Breweries Ltd (1958) 13 IIB 212; Australasian Meat Industry Employees Union v Australian Meat Holdings Pty Ltd (1999) 93 IR 308; Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; Jones v Dunkel (1959) 101 CLR 298; Quinn v Jack Chia [1992] 1 VR 567; Rankin v Marine Power International Pty Ltd (2001) 107 IR 117; Westfield Holdings v Adams (2001) 114 IR 241, considered.

SPARTALIS v BMD CONSTRUCTIONS PTY LTD
[2014] SADC 37
Civil
BAMPTON J.
Introduction

After seven years and ten months’ service Anthony Spartalis (“Mr Spartalis”) was summarily dismissed by BMD Constructions Pty Ltd (“BMD”) on 22 November 2010. Mr Spartalis seeks damages for breach of contract of employment.
Mr Spartalis commenced employment as a Business Manager with BMD on 6 January 2003. The terms and conditions of his employment are set out in the Offer of Employment dated 2 January 2003 (“the employment agreement”).[1]
[1] Exhibit P1.
At the time of Mr Spartalis’ employment, BMD was part of the BMD group of companies and carried on the business of civil construction and related activities.
Urbex Pty Ltd (“Urbex”) was a subsidiary of the BMD group of companies and carried on the business of residential project development.
Mr Spartalis alleges that in or about early 2005 his position and duties fundamentally changed to that of National Manager, Business and Finance for Urbex. In this role he was responsible for financial oversight of the operations of Urbex.
Mr Spartalis says that from in or about June 2007 his duties and responsibilities increased substantially to the point where he had financial control over the entire business of Urbex, which involved 30 to 40 projects throughout Australia.
On 22 November 2010, Urbex’s general manager Mr Wayne Rex (“Mr Rex”) terminated Mr Spartalis’ employment for “gross misconduct” without notice or payment in lieu.
Mr Spartalis brought proceedings in the Industrial Relations Court of South Australia (“the IRC”) against BMD for his pro rata long service leave pursuant to the Long Service Leave Act 1987 (SA) (“the LSL Act”).
BMD denied that it was obliged to pay Mr Spartalis his pro rata long service leave entitlement on the basis that he was guilty of serious and wilful misconduct. The IRC found in favour of Mr Spartalis and in particular found that he was not engaged in serious and wilful misconduct.
Mr Spartalis says BMD is estopped by the IRC decision from asserting there was any basis to terminate his employment. BMD argue that Mr Spartalis is estopped by the IRC decision from denying that his failure to be more proactive and his failure to visit the Ascot Chase development were negligent.
Mr Spartalis, who was aged 47 at the time of termination, says that at that time a new contract of employment had been created due to the fundamental change in his duties, remuneration and position in or about early 2005, or alternatively in or about June 2007.
Mr Spartalis says that it was an implied term of the new contract of employment that the BMD could terminate his employment upon giving reasonable notice or payment in lieu of reasonable notice. Mr Spartalis says that in the circumstances of his employment reasonable notice was 12 months.
Alternatively, Mr Spartalis alleges that the notice period provided for in the employment contract is unlawful as it is below the statutory period of notice required pursuant to the Fair Work Act 2009 (Cth) (“the Fair Work Act”). The Fair Work Act provides that he was entitled to a minimum of five weeks’ notice of termination of his employment.
Mr Spartalis alleges that he has suffered loss and damage in the sum of $282,665.82, being 12 months’ remuneration. He also alleges that he is entitled to a payment for the loss of the chance in respect of a bonus payment of at least $50,000.
Mr Spartalis asserts that he is entitled to payment for the loss of the chance in respect of 1.3 weeks of long service leave and four weeks annual leave that would have accrued during the notice period.
BMD says that there was no new contract of employment created, that Mr Spartalis was terminated for serious misconduct pursuant to clause 12.3 of the employment agreement and accordingly was not entitled to any period of notice or payment in lieu.
Background
Clause 12 of the employment agreement provides for termination of employment. Clause 12.1 provides “we may terminate your employment at any time on one month’s notice in writing or by paying you one month’s salary in lieu of notice.” Clause 12.3 provides:
In the case of serious misconduct your employment may be terminated by us without notice or payment in lieu of notice. Serious misconduct includes but is not limited to:
(a)gross neglect of your duties.
…
Overview of events leading up to the dismissal
At the time of Mr Spartalis’ employment Urbex was a newly established subsidiary of the BMD Group. BMD had a civil construction entity, a civil consulting entity and Urbex, which was the land development entity. Urbex secured land for residential development, planned, designed, marketed and sold it.[2]
[2] T40-41.
BMD asserts that it was entitled to dismiss Mr Spartalis having regard to the commencement of works on Stage 2B of the Ascot Chase development without financier approval of the finance facility that funded the project. Mr Spartalis is identified by the BMD as the person responsible for ensuring that approval was obtained prior to the commencement of works. Mr Spartalis was the signatory to the finance facility contract.[3] It is asserted that the commencement of works on the Stage 2B Ascot Chase development without financier approval had such a serious and significant impact upon the operations of BMD that it was justified in summarily dismissing Mr Spartalis.
[3] Exhibit D4.
Mr Spartalis and his staff conducted the financial analysis for Urbex’s projects. These financial models were used to deliver financial projections and reports in relation to profitability as well as the ongoing financial management of the Urbex work. One of the Urbex projects was the Ascot Chase development; located in Melbourne. This was a joint venture development with the merchant bank Gresham. It comprised staged developments involving the construction of homes and all ancillary civil construction work such as roads and underground services.[4]
[4] The overall financial and legal structure of Ascot Chase is set out in Exhibit D9.
The development was funded by Capital Finance Australia Limited (“CFAL”). CFAL was a subsidiary of BOS International (“BOSI”). The financial facility was valued at $66 million. The financial facility was provided to a development entity called Ascot Chase Nominees Pty Ltd (“ACN”). Mr Spartalis was a director of ACN and his signature appears on the facility for ACN.[5] Mr John Mitsakos (“Mr Mitsakos”) was the Manager of CFAL. The funding was managed by the facility documents. The facility documents required CFAL’s approval for the commencement of construction works prior to the actual commencement of works.
[5] Exhibit D4.
There were allegations during the trial that in the course of Stage 1 and Stage 2A there were breaches of the contract in respect of the commencement of works without financier approval. These breaches were noted by the financier and the subject of adverse comment and instruction for it not to occur again during the project.
The project was managed by the Project Control Group (“the PCG”). The PCG met monthly and included members from all relevant entities involved in the joint venture including the financier.
Renato Calandro was an employee of BMD but also deployed to work in Urbex. Mr Calandro was employed as a Development Manager, based in Melbourne in the Hawthorn office of BMD/Urbex. He was effectively the secretary of the PCG and prepared all reports prior to the PCG meetings. The PCG reports documented all relevant actions and financial reports for the project. The Project Executive Control (“PEC”) meeting was an internal Urbex meeting to manage the Ascot Chase development. The PEC comprised the senior staff of Urbex. The role of the PEC seems to have been to manage the Urbex side of reporting to the PCG.
Mr Richard Stranger was an employee of Urbex responsible for design and construction matters.
Mr Rex was a consultant employed by the BMD group to review the operations of BMD with particular reference to that of Urbex. Mr Rex was elevated to the position of Interim General Manager of Urbex on 11 October 2010.[6] Mr Rex discovered that construction had commenced on Stage 2B without approval from CFAL in early October 2010. He formed the view that Mr Spartalis was responsible for the commencement of works and summarily dismissed him.
[6] Approximately a year after the summary dismissal of Mr Spartalis.
Other personnel mentioned during the trial were Mick Power (the BMD Group Chairman), Mr Mortensen (the BMD Chief Financial Officer), Tony Stocks (Senior Accounting Manager), Jeff Gallus (General Manager of BMD Constructions) and Russell Thomson (CEO of Urbex).
The relevant documentation is:

Exhibit D4 Amended deed facility 14 Sept 2010

Exhibit D6 Emails regarding Stage 2A

Exhibit P4 PCG report 17 August 2010 “Stage 2B Civil Construction tender received. Project Budget $1.8M. Anticipated completion dated End Aug 10 – Contract program date 23 Sept 10.”[7]

Exhibit D13
24 August 2010 emails:

·    from Jeff Gallus to Mr Calandro 9.35am

·    from Mr Calandro to Mr Spartalis and Mr Stranger 9.35/10.05am;

·    from Mr Calandro to Mr Spartalis and Mr Stranger 10.11am;

·    from Mr Calandro to Mr Spartalis and Mr Stranger 10.18am;

·    from Mr Calandro to Mr Spartalis and Mr Stranger 10.36am;

·    from Mr Calandro to Mr Gallus 4.43pm.

Exhibit D14 Letters from GHD on behalf of Ascot Chase nominees to Project manager BMD Constructions 15 September 2010 stating BMD authorised to proceed with Stage 2B.

Exhibit P1 tab 36 Letter BMD to GHD 29 September 2010 regarding notice of delay/ regarding commencement of works.[8]

Exhibit P1 tab 41 Email from Mr Spartalis to Mr Rex 11.18am and email Rex to Spartalis 8 October 2010 3.07 pm.

Exhibit D12 PCG report 15 October 2010 stating “Stage 2B Civil Constructions contracts submitted to CFAL for approval. Commencement pending updated cash flow information.”

Exhibit D8 PEC report 26 October 2010 stating “Stage 2B Civil Constructions contracts submitted to CFAL for approval. Commencement pending updated cash flow information.”

Exhibit P1 tab 52 Emails from Mr Calandro to Mr Spartalis and Mr Rex 17 November 2010 2.37 and 3.37pm.

Exhibit D10 Circular Resolution 24 November 2010.
[7]    T289-299.
[8]    T337-338; 370.

Preliminary issue for determination

For the reasons discussed below I find that BMD is not estopped by virtue of the IRC proceedings from asserting that Mr Spartalis’ employment was terminated on the basis of serious misconduct.
I also find that Mr Spartalis is not estopped from denying that his failure to be more proactive and to visit the Ascot Chase site in order to determine whether or not construction work had commenced constituted negligence.
Substantive issues for determination
Having determined that there is no issue estoppel, the following matters require determination:
1.Whether Mr Spartalis’ employment is governed by the employment agreement or whether a new oral contract of employment came into existence between Mr Spartalis and BMD in about 2005 or in or about 2007;
2.Having determined which contract of employment applies, the circumstances in which the employment contract could be terminated with particular reference to the required period of notice;
3.Whether BMD was entitled to dismiss Mr Spartalis without notice on 22 November 2010;
4.The impact of the Fair Work Act requirement of five weeks’ notice on the termination of Mr Spartalis’ employment;
5.What, if any, is Mr Spartalis’ loss and damage arising out of the termination of his employment; and
6. Whether Mr Spartalis mitigated his loss.
Estoppel
The IRC proceedings
During the IRC proceedings BMD argued that Mr Spartalis was not entitled to payment on the basis that he was terminated on the ground of serious and wilful misconduct pursuant to s 5(4)(a) of the LSL Act. Section 5 of the LSL Act provides:
5—Long service leave entitlement
…
(3)Subject to subsection (4), a worker who has completed seven years service (but less than 10 years service) is, on termination of the worker’s service, entitled to a payment equal to the monetary equivalent of 1.3 weeks leave in respect of each completed year of service.
(4)A worker is not entitled to a payment under subsection (3) if—
(a) the worker’s contract of service is terminated on the ground of serious and wilful misconduct on the part of the worker; or
…
Mr Rex, who was called as a witness for BMD, produced during the IRC proceedings a handwritten document which particularised the basis upon which it was alleged that Mr Spartalis had engaged in serious and wilful misconduct. The six allegations were as follows:
1.Permitting a breach of the deed of loan facility of loan facility, documents 1.1.2 and 1.1.5 to occur with respect to stage 2B;
2.Failing to provide updated cash-flow reports and information requested by Mr John Mitsakos or CFAL employees in a timely fashion to ensure the facility continued;
3Failed to maintain an updated project cash flow for both joint venture boards, Ascot Nominees and Urbex Pty Ltd;
4.Not directing Renato Calandro to not provide off-the-record approval for commencement of construction for stage 2B;
5.Knowing that the commencement of works for stage 2B prior to finance approval would jeopardise the continuation of the facility worth $66 million which was crucial to the ongoing financial viability of the whole project. He failed to ensure such work did not commence;
6.Breaching his;
(a) fiduciary duties as director of Ascot Chase Nominees Pty Ltd;
(b) employee duties as an employee of BMD by deliberately providing inaccurate and misleading cash-flow forecasts that he knew to be inaccurate.
The Magistrate considered the evidence and concluded:
Perhaps the [plaintiff] should have been more proactive and visited the site with those persons who could have assisted him in determining whether or not construction work had commenced. In this regard his behaviour may be regarded as negligent. However I do not regard his behaviour as being “so deliberate, so reckless, so mindful of any canons or careful conduct as to amount to serious and wilful misconduct.”
[Footnotes omitted.]
The principles concerning issue estoppel are well established. The rule provides that a final decision, once given by a competent tribunal, forever binds the parties and all those who claim through them in respect of any issue of fact or law which was legally indispensable to that decision.[9] However, no estoppel arises concerning evidentiary facts, no matter how fundamental they may have been in the chain of proof or reasoning concerning the decision on an ultimate issue.[10]
[9] Blair v Curran (1939) 62 CLR 464, 531-532; Brewer v Brewer (1953) 88 CLR 1, 15-16.
[10] Blair v Curran (1939) 62 CLR 464, 532.
It is not every fact in dispute in the prior proceedings which attracts the operation of the rule. Estoppel is confined to ultimate facts and does not extend to evidentiary facts. There can be no estoppel unless what is put forward is inconsistent with a former finding or decision. In Milojevic v ROH Industries Pty Ltd,[11] Debelle J identified one of the means of distinguishing evidentiary facts from ultimate facts. He said: [12]
One means of determining what are evidentiary facts as distinct from ultimate facts is to identify the issues in the first action and determine whether they are identical with what is sought to be litigated in the second action: see New Brunswick Railway Co v British and French Trust Corp Ltd [1939] AC 1; Ramsay v Pigram (1968) 118 CLR 271 at 277.
[11] (1991) 56 SASR 78.
[12] Milojevic v ROH Industries Pty Ltd (1991) 56 SASR 78, 83-4.
It is permissible for a court to have regard to the record of the earlier proceedings for the purpose of ascertaining what has been determined in those proceedings and for the purpose of determining what might be the subject of an issue estoppel.[13]
[13] See for example, Jackson v Goldsmith (1950) 81 CLR 446, 467; Somodaj v Australian Iron & Steel Ltd (1963) 109 CLR 285, 299; Egri v DRG Australia Ltd (1988) 19 NSWLR 600, 607.

Issue estoppel extends not merely to courts having the same jurisdiction, but to all courts of competent jurisdiction.[14]
[14] Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353, 453 (Menzies J). See also Hoystead v Commissioner of Taxation (Cth) [1926] AC 155, 167.
A number of decisions have held that findings made by tribunals can create an estoppel in civil proceedings instituted in a superior court.[15]
[15] See, for example, Somodaj v Australian Iron and Steel Ltd (1963) 109 CLR 285; ERGI v DRG Australia Ltd (1988) 19 NSWLR 600; Mitsubishi Motors Australia Ltd v Harbord (1997) 69 SASR 75; Milojevic v ROH Industries Pty Ltd (1991) 56 SASR 78.
Consideration
The IRC considered there may be situations where the misconduct is serious but the element of wilfulness may be absent.[16] The Magistrate commented that Mr Spartalis’ conduct may be regarded as negligent[17] but did not regard his conduct to amount to serious and wilful misconduct and observed that:[18]
Situations which may justify summary dismissal may not amount to serious and wilful misconduct as that phrase is to be construed in the context of the LSL Act, being an act of a remedial industrial character.
[16] Spartalis v BMD Constructions Pty Ltd [2011] SAIRC 60, [91] per Ardlie IM.
[17] Spartalis v BMD Constructions Pty Ltd [2011] SAIRC 60, [96] per Ardlie IM.
[18] Spartalis v BMD Constructions Pty Ltd [2011] SAIRC 60, [96] per Ardlie IM.
The authorities dealing with estoppels created by worker’s compensation tribunals establish that an estoppel can arise from the decision of a tribunal even where the tribunal has no jurisdiction to determine the causes of action which are the subject of the subsequent proceedings in which the estoppel is alleged to arise. It follows that the ultimate findings of fact which were indispensable to determining the claim for entitlement to long service leave in the IRC proceedings are, as a matter of law, capable of creating an estoppel in the present common law action for breach of an employment contract.
The ultimate facts determined in the IRC proceedings were that the six grounds advanced by BMD as the basis for terminating Mr Spartalis’ employment did not amount to serious and wilful misconduct for the purpose of s 5(4)(a) of the LSL Act. Although the Magistrate did not expressly state whether each of the six grounds alone, or in combination with each other, amounted to serious and wilful misconduct, the finding that Mr Spartalis was entitled to payment for long service leave involved an implicit (in some cases explicit) rejection of each ground as amounting to serious and wilful misconduct. I am of the view that the findings were indispensable facts in establishing Mr Spartalis’ entitlement to long service leave.
That is, however, not the end of the matter. Issue estoppel is an exclusionary rule of evidence. As such, it will only operate to preclude parties from contending to the contrary any point or matter of fact which, having been distinctly put in issue between them in prior litigation, has been finally determined.[19] It is therefore necessary to determine whether the issue determined in the IRC proceedings is the same issue to be determined in the present matter. If not, then no issue estoppel arises.
[19] Hoystead v Commissioner of Taxation (Cth) [1926] AC 155.
The issue of whether or not BMD is estopped from asserting that Mr Spartalis’ conduct amounted to serious misconduct for the purpose of the present matter turns on whether the phrase “serious and wilful misconduct” referred to in the LSL Act involves the same inquiry to be undertaken to determine “serious misconduct” under the common law.
In Milojevic v ROH Industries Pty Ltd, the Court considered whether the term “injury” as defined in the Workers Compensation Act 1971 (SA) equated to what the common law would regard as an injury for the purpose of an action in negligence, and hence create an estoppel in the latter action. Debelle J observed that while such inquiries are not determinative of the existence of an estoppel, in some cases the fact that a particular word may be invested with a statutory meaning may be a relevant matter.[20]
[20] Milojevic v ROH Industries Pty Ltd (1991) 56 SASR 78, 84-5.
In Quill v Ross Bros Pty Ltd,[21] Street CJ drew a distinction between conduct that may amount to negligence at common law and conduct amounting to serious and wilful misconduct. He observed:[22]
...it is clear that the applicant was guilty of negligence, but it is not every piece of negligent behaviour which will justify drawing a conclusion that serious and wilful misconduct has been established. Negligence may be infinitely variable in its degree of culpability. It may be a mere minor inadvertence or it may be something so deliberate, so reckless, so unmindful of any canons of careful conduct, as to amount to serious and wilful misconduct. But in between those two cases there is the wide field where tribunals of fact must apply their minds to the question whether they are satisfied that serious and wilful misconduct has been established...
[21] (1959) 77 WN (NSW) 94.
[22] Quill v Ross Bros Pty Ltd (1959) 77 WN (NSW) 94.
In W R Knott v Carlton & United Breweries Ltd,[23] the Court considered the meaning of “serious and wilful conduct” in respect of an earlier Victorian equivalent of the LSL Act. Gamble J considered the expression “serious and wilful misconduct” in relation to a provision that disentitled an employee to long service leave. His Honour stated that it should be borne in mind that in considering entitlement to long service leave the court is not concerned with the right of the employer to summarily dismiss the employee and that it is quite clear:[24]
… that facts which may justify summary dismissal may not amount to serious and wilful conduct as that phrase is to be construed in a clause dealing with a forfeiture by a worker or his dependants of rights created by an act of a remedial industrial character.
[Emphasis added]
Gamble J then continued:[25]
The basic word, is of course, “misconduct”. The word is not apt to describe a breach of contract and is more appropriate to describe generally some reprehensible or culpable activity. However, it is quite clear on analysis that the word is used in the Act solely in relation to conduct which constitutes a breach of contract of service. It is clear therefore that the word is intended to describe a particular type of breach of contract, namely one which according to the current and generally accepted moral standards of the community would be regarded as reprehensible and deserving of censure in the circumstances.
…
The word “serious” is the measuring rod for the gravity of the misconduct. All the elements of the conduct called in question must be taken into account including the probable effect of the conduct upon the safety and well-being of the employer’s business, his property and other employees, the fact that the conduct is in breach of a regulation, an award or determination and also the subjective elements such as the knowledge and skills which the worker ought reasonably to have possessed and the motivation and general state of the mind of the worker at the time.
The word “wilful” has many shades of meaning varying from perverse and stubborn to “done or suffered of his own free will or choice”. In the context in which the word is used in the Act and particularly having regard to the fact that it is part of a clause which is to operate as a forfeiture of rights and as a disqualification the word in our view postulates the existence of some reasonable area of freedom of choice. The Oxford Dictionary meaning “done or suffered of one’s own free will and choice” seems to us to express the essential character of the word “wilful” as it is used in this section of the Act…
[23] (1958) 13 IIB 212. Cited with approval in Australasian Meat Industry Employees Union v Australian Meat Holdings Pty Ltd (1999) 93 IR 308.
[24] W R Knott v Carlton & United Breweries Ltd (1958) 13 IIB 212, 214.
[25] W R Knott v Carlton & United Breweries Ltd (1958) 13 IIB 212, 214.
A number of subsequent authorities have also considered the phrase “serious and wilful misconduct” in respect of Acts and Awards bearing an industrial character. In Australasian Meat Industry Employees Union v Australian Meat Holdings Pty Ltd,[26] the Court considered the meaning of serious and wilful misconduct in the context of an Interim Industrial Award. Dowsett J observed:[27]
Each of the words “serious”, “wilful” and “misconduct” is capable of bearing different shades of meaning. The matter is further complicated because the language with which I am directly concerned appears in the context of entitlement to pro-rata long service leave payments, but refers to action taken in a different context, namely dismissal. At least in theory, it is possible that an employee’s alleged misconduct could be such as to justify his or her dismissal whilst not being serious or wilful misconduct for the purposes of the provision relating to loss of long-service leave benefits.
[26] (1999) 93 IR 308.
[27] Australasian Meat Industry Employees Union v Australian Meat Holdings Pty Ltd (1999) 93 IR 308.
The test for determining whether conduct amounts to serious and wilful misconduct for the purpose of a statutory provision, although often informed by common law concepts, involves a process of statutory construction in which the context of the Act as a whole is considered. This can be contrasted with the common law principles applicable to summary dismissal. Briefly stated, the right to terminate a contract of employment for breach or repudiation involves the application of common law principles. A contract may be terminated where there has been a breach of a condition or essential term of a contract or a sufficiently serious breach of a term of an intermediate or non-essential term of a contract.[28] A contract may also be terminated on the grounds of repudiation. In Blyth Chemicals Ltd v Bushnell,[29] Dixon and McTiernan JJ observed:[30]
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.
[28] See for example, Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115.
[29] (1933) 49 CLR 66.
[30] Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66, 81.
Accordingly, the contractual principles relevant to Mr Spartalis’ claim in this matter are of a broader scope and involve different considerations to those applicable to determining whether the his conduct amounted to serious and wilful misconduct for the purpose of the LSL Act. Conduct that amounts to serious and wilful misconduct for the purpose of the Act will not necessarily amount to grounds for breach of contract at common law.
Accordingly BMD is not estopped from asserting that Mr Spartalis engaged in serious misconduct in these proceedings.
Mr Spartalis is also not estopped from denying that his conduct constituted negligence. There was no specific finding by the Magistrate that his conduct was in fact negligent. The Magistrate said “perhaps” Mr Spartalis should have been more proactive and that his conduct may be regarded as negligent.
The witnesses
Mr Spartalis was the only witness to give evidence in his case. BMD called Wayne Rex, and by subpoena Renato Calandro and Richard Stranger.
Mr Spartalis
Role at Urbex
When Mr Spartalis started work at Urbex in 2003, there were three employees; Russell Thomson (the CEO), Richard Stranger and himself. As Business Manager, his role was finance oriented. Mr Stranger had an architectural and design background so he was more involved in the planning and delivery of projects whereas Mr Thompson oversaw the whole of the business.[31]
[31] T40/13-17.
During the establishment stage of Urbex, his role involved assessing new opportunities, setting up accounting and establishing reporting systems. Once projects were secured (a number of which were joint ventures) Urbex had to deal with other partners. Mr Spartalis said at that time he engaged in an onerous sort of reporting regime keeping the partners informed as well as the internal management and the board.[32] He was required to report on planning processes, delivery processes, the actual building and construction and marketing delivery of the land. Mr Spartalis said he specifically reported on cash flow, profit and loss, and basic accounting.[33]
Promotion
[32] T41/9-13.
[33] T41/19-21.
Mr Spartalis said he was promoted during the course of his employment to the National Manager, Business and Finance within Urbex, although he could not say precisely when. He could not recall there being any documents, letters of offer or a contract that documented that promotion.[34] At the time he was promoted the number of projects managed by Urbex grew from four or five to about 20 or 30 located in Townsville, Mackay, Brisbane, Sydney and Melbourne.[35]
[34] T42/22.
[35] T43/13-16.
As a result of his promotion Mr Spartalis’ remuneration increased and he received bonuses of $50,000 to $60,000, which he had not received as Business Manager. In his new position he became responsible for a senior accounting manager and an accounts payable employee.
Mr Spartalis’ income was; $235,958.00 for the financial year ending in 2005, $268,808 for the financial year ending in 2006, $287,169 for the financial year ending in 2007, $299,407.00 for the financial year ending in 2008, and $310,317 for the financial year ending in 2009.[36]
[36] T44-45.
Mr Spartalis understood that the discretion in relation to the payment of bonuses was exercised by Mr Power.[37] He said bonuses were not available to everyone and that because of his position he was eligible for bonus payments.
[37] T106/10-15.
Mr Spartalis accepted that the global financial crisis had a dampening effect on the market, and accepted that that would have had a necessary effect in relation to the profits that could be generated from the sale of residential land and ultimately the company’s capacity to pay bonuses.
Reporting Structures
At the time he was terminated, Mr Spartalis said four employees reported to him. In September 2010, a new business structure was introduced; Mr Rex became the General Manager and Tony Stocks became General Manager of Finance. When his position changed to National Manager, Business and Finance, Mr Spartalis reported to Tony Stocks. Mr Spartalis said his duties at that time “hadn’t significantly changed from what they were prior to the restructure.”[38] He still managed the commercial/financial aspects of Urbex.
Mr Calandro
[38] T52/35-38.
Mr Spartalis said that Mr Calandro did not directly report to him in relation to financial matters, but rather that they would discuss and look at matters together.[39] He said Mr Calandro had authority to enter into contracts, for example constructions contracts. He said the way “the delegations worked was there was an escalation chain so that once one contractor amount was in excess of that person’s limit it would jump to the next person.”[40]
[39] T116/6-7.
[40] T117/13-22.
Mr Spartalis accepted that in respect of finance matters that related to projects in which Urbex was involved between 2003 up until October 2010, the “buck stopped with him.”[41]
[41] T133/15-18.
When asked what protocols or controls were in place to ensure that only contracts were entered into for civil works after they had been given approval by the financier he said “generally our most Senior manager in Victoria (Mr Calandro) was managing that.”[42]
[42] T155/30-32.
It was put to Mr Spartalis that it was also part of his own role. He said:[43]
No I don’t believe so. We had state managers in every region. Their responsibility was to manage the day-to-day operations of the projects that we were involved in, including having delegated authority to enter into contracts with contractors and consultants and whatever we needed to procure. That’s how we operated.
Ascot Chase
[43] T157/7-13.
From the commencement of the Ascot Chase project until his dismissal, Mr Spartalis’ role related to the reporting and accounting side of the project.
The financial arrangements of the Ascot Chase project were documented in 2009. Mr Spartalis’ name appears on the Facility Agreement with CFAL as the contact person for some of the entities associated with Urbex and its interests.[44]
[44] Exhibit D4.
Mr Spartalis accepted that it was part of his responsibility to see that Urbex complied with their part of the obligations under the deed.
The Ascot Chase project was broken into Stage 1A and 1B, 2A and 2B and 3A and 3B. The funding was to occur in stages over time.
Mr Spartalis said that Mr Calandro managed the overseeing of the contracts in relation to civil works. He said Mr Calandro was authorised to enter into contracts on behalf of the Urbex side after bringing it to the PCG for endorsement.[45] He said that the PCG had the ultimate authority to enter into those contracts.[46]
[45] T151/29-32.
[46] T152/7.
His involvement in Stage 1 was to help establish the reporting process and to account for that component of the project as it was delivered, marketed and sold.[47] His role was also to work with Mr Calandro to supply cash flows in a timely fashion.[48]
[47] T64/18-19.
[48] T61/8.
In 2009 Mr Spartalis was alerted to the fact BMD Constructions wanted to commence work without CFAL approval. CFAL said no.[49]
Stage 2A
[49] Exhibit P1, tab 16.
Mr Spartalis agreed Stage 2A should not have commenced until the financier had approved it. When asked who gave the authority for Stage 2A works to commence he said “I assume that our development manager (Mr Calandro) and BMD Constructions civil manager would have had to agree, but I can’t say.”[50]
[50] T73/13-20.
Mr Spartalis was informed that Stage 2A civil work commenced without a contract being approved on 11 May 2010 in a copy of an email from Mr Mitsakos.[51] Upon receiving that email he thought he had a conversation with Mr Calandro, but does not have any specific recollection:[52]
I imagine I asked Mr Calandro to work as quickly as possible to make sure that we have got all our approvals and everything in place. We could have even asked BMD to stop work, I don’t know.
[51] Exhibit D6.
[52] T169/23-27.
Mr Spartalis recalled that once the Stage 2A works had commenced CFAL had to rush it through an approval at their end to make sure they could get funding for that stage.[53] He did not play any role in commencing the construction. He said it would be for the BMD Constructions manager to commence construction along with Mr Calandro who would have to agree as to when construction would begin.
[53] T58/1-3.
Mr Spartalis could not recollect if he made any inquiries to find out how the problem arose.[54]
[54] T169/28.
Mr Spartalis said that in an attempt to prevent the same thing happening again, he counselled Mr Calandro during an informal chat in a car, whilst they were on their way back from a meeting in Melbourne. The chat occurred possibly a couple of months after the 11 May 2010 email, at a time when issues around Stage 2B works commencing had started to surface. Mr Spartalis testified that he said to Mr Calandro, “It doesn’t matter how much pressure BMD are putting on you to begin, until you have all your approvals signed off, you can’t allow any construction to start.”[55] He remembered the discussion because:[56]
… we were in his car and I was being driven with others to the airport or at a hotel. Again, I can’t remember which, but it was – I suggested to them that no matter how much pressure he’s under to begin construction, because that was often the case, that until all approvals were in place, given what happened on 2A, we should never ever let that happen again.
He thought Mr Calandro had agreed with him.
[55] T170/21-24.
[56] T59/1-8.

When asked why he did not give any warnings or directions to Mr Calandro until that time, given that he had become aware of a problem in relation to Stage 2A in May 2010, he said:[57]
Stage 2A had been resolved fairly expeditiously with the cooperation of CFAL and I thought Mr Calandro from that would understand that we can’t do that again. When it was starting to surface again in 2B I thought it was appropriate for me to counsel him.
[57] T260/1-4.
Mr Spartalis said that he distinctly recalled having a conversation with Mr Calandro about the topic when he was in Melbourne in relation to the Mandalay project. He recalled the two of them being in a car, and telling Mr Calandro that:[58]
AGiven that this had happened on 2A and we cannot allow it to happen on 2B and no matter what consequences in shifting programs, missing profit for the year, we just can’t allow it to happen again.
QWhat was not to happen again.
ABegin works without approvals in place.
Mr Spartalis was asked to look at his electronic diary notes in an attempt to ascertain when he travelled to Melbourne for the Mandalay project. After looking at the diary he said that he attended that meeting on 28 September 2010.[59]
[58] T261/21-25; 27.
[59] T264/29.
Mr Spartalis could not say with 100 per cent certainty that that conversation occurred on 28 September 2010. He believed it may have occurred during another trip to Melbourne. He referred to another date in his diary on 13 September 2010 when he travelled to Melbourne. In cross-examination, Mr Spartalis was asked why he had said in his evidence that there were others in the car with him during the conversation. Mr Spartalis said that he could not explain why he had said that, as it was definitely just he and Mr Calandro in the car.[60]
[60] T274/23-26.
Mr Spartalis could not recall notifying anybody from Gresham in relation to the problem with the Stage 2A civil works.[61] By reference to the emails in Exhibit D6 it would appear Grehsam was aware of the issue. He accepted that it would have been important to notify the joint venture partner of commencement of Stage 2 civil works without financier’s approval. He did not accept that a decision was made to keep that information from them. He accepted that as at 2010, when the issue of the Stage 2A civil works commenced, that a management ethos of a ‘loose tight management regime’ was used. He explained that as “something Mr Thomson used. It was where people highly capable would be quite loose and allow them to manage their own affairs. Where they were more inexperienced we would manage them more tightly.”[62]
[61] T277/7.
[62] T277/31-35.
Mr Spartalis agreed that he considered that Mr Calandro was the person responsible for the Stage 2A civil works being commenced without financier approval.[63] He also agreed that there was no formal system put in place by him to prevent that happening again in relation to Stage 2B, apart from the conversation in Melbourne with Mr Calandro in the car.[64]
Stage 2B
Exhibit D13 (Emails dated 24 August 2010)
[63] T278/25.
[64] T278/34.
Mr Spartalis agreed that Mr Calandro was seeking guidance and approval from him in the email Mr Calandro wrote to him and Mr Stranger on 24 August 2010 at 9.35am and 10:05am.[65] The text of the email provided:
[65] T319/29.
Gents,
Please see below correspondence from BMD constructions seeking endorsement to commence stage 2B civil construction – pending the final CFAL approved contract.
I’d be keen to discuss the matter further particularly in relation to the following points:
1.We can confirm that whilst a PCG approval has been received. However, until the final executed contract is approved by the financier, no funds will be available for the project to pay BMD. Hence any agreement to commence in the interim, is based on BMD absorbing any costs until such time as funds are received from the financier.
2.The PCG is still yet to receive the final GHD tender assessment report which forms the basis of the PCG’s approval – this will be required before any start is made on stage 2B. BMD’s construction program will also be required for GHD to complete this report.
3.BMD’s Tender is based on the Reconfigured stage 2B design, with 44 lots – we will prompt the PCG to ratify this position, based on the Resolution and the follow up from Friday 20 August.
4.If we all agree, we can provide a consent to commence stage 2B on the basis of their acceptance of the above conditions.
5.GHD can provide BMD an interim “letter of intent” to award the contract as they have done with previous stages.
6.We will press with BMD, the need to commence Stage 2B and potentially, achieve completion before Christmas, which will put us squarely on target with our model for stage 2B land settlements in March 2011.
I’d like to be in a position to respond to BMD by the end of the week.
Can we please discuss in a link up later this afternoon? Say 3.00pm Melbourne time?
One of the matters he was seeking guidance on was that BMD Constructions wanted to commence the Stage 2B civil construction without CFAL approval. Mr Spartalis said Mr Calandro’s suggestion, that if he, Mr Stranger and Mr Calandro could all agree to consent to the Stage 2B civil works commencing on the basis that BMD agree to the conditions in paragraphs 1, 2 and 3 of the email, was not an appropriate course of action.[66]
[66] T321/16.
Mr Spartalis said he discussed his view with Mr Calandro during a phone link with Mr Stranger and Mr Calandro on 24 August 2010. He said that during that phone conversation he said they could not go through the same issue that they had with Stage 2A. He said he did not agree to commence works without all of the approvals in place including CFAL approval.[67] Mr Spartalis did not provide a written response to that email from Mr Calandro.[68]
[67] T324/8-11.
[68] T325/12.
Mr Spartalis said that Mr Calandro may have been seeking approval from him in the email sent at 10.18am on 24 August 2010 to him and Mr Stranger,[69] “but he never got it from me.”[70] As I said, Mr Spartalis did not respond to the email in writing.
[69] T325/32-33.
[70] T326/2.
Mr Spartalis said the email Mr Calandro sent to Mr Gallus on 24 August 2010 at 4.43pm, was contrary to his instructions, and further that Mr Calandro was acting without his authority when he sent that email.[71] In that email, Mr Calandro wrote:
Jeff,
Thanks for your note.
I can confirm that PCG approval has been received. However, this is subject to the final GHD tender recommendation report being received by the PCG. BMD’s construction program is required for GHD to complete this report. Hence this is required ASAP.
Additionally, until the final executed contract is approved by the financier, no funds will be available for this project to pay BMD. Hence any agreement to commence in the interim is based on BMD absorbing any costs until such time as funds are received from the financier.
Can you please provide an indication of when (the timeframe) BMD would be likely to commence works once endorsement is received?
If agreed, we can provide BMD an interim “letter of intent” to award the contract for stage 2B on the basis of acceptance of the above conditions.
Can we please discuss in the coming days?
A copy of the email was forwarded to Mr Spartalis and Mr Stranger at 4.45pm on 24 August 2010.
[71] T331/7.
Mr Spartalis reiterated that his position in response to Mr Calandro’s emails never wavered from “Do not touch this Stage 2B without CFAL approval like Stage 2A.”[72] He said that was his position when he was speaking to Mr Calandro in the car in Melbourne in September 2010 and that was also his position during the telephone discussion on 24 August 2010.[73]
Exhibit D14 (letter from GHD to BMD Constructions)
[72] T332/9-11.
[73] T332.
Mr Spartalis said that he had not seen the letter from Mr Greg Healey, the Superintendent’s Representative, to Mr Jason Johnson, Project Manager at BMD dated 15 September 2010 authorising the Stage 2B works before the discovery in these proceedings; he did not recall seeing the letter around the time it was written.[74]
[74] T333.
Mr Spartalis’ evidence was that he did not recall being provided with copies of the two letters dated 29 September 2010 from BMD Constructions Pty Ltd to GHD Pty Ltd.[75] Both are signed by Jason Johnson and addressed to Mr Healey and relate to Ascot Chase (Stage 2B). The first letter relates to a notice of delay; Mr Johnson, on behalf of BMD, writes to indicate that BMD was unable to commence certain works relating to Stage 2B on 16 September 2010 but did commence on 27 September 2010. The second letter advises of practical completion being delayed.
[75] Exhibit P1, tab 36.
Mr Spartalis accepted that the effect of the letters was that BMD Constructions proposed to commence work on 16 September 2010 and for the reasons given in the correspondence that it in fact commenced on 27 September 2010, at which time financier approval had not been given.[76]
[76] T338/26-30.
Mr Spartalis said he attended the PCG meeting on 14 September 2010.[77] By reference to the PCG report dated 14 September 2010,[78] he agreed that the commencement of Stage 2B civil construction works was imminent as at the time of that meeting.[79]
[77] T299/38.
[78] Exhibit P1, tab 32.
[79] T301/6.
Mr Spartalis accepted that at the meeting on 14 September 2010, the topic of CFAL approval was identified as being a necessity for Stage 2B civil construction works to commence. When asked if he had done anything to see whether it had been approved, he said “there was a flow of information between Mr Calandro and CFAL on a range of things including insurances, making sure engineering approvals and all of that were in place. I used to get copied into some of them but not all of them.”[80] He thought Mr Calandro “had it well in hand.”
[80] T303/25-29.
Mr Spartalis was asked whether he was able to see building works and civil construction works when he drove along the Ascot Chase site on Doncaster Street in Melbourne. In response, he said “most development sites have hoarding put up, because construction sites aren’t the most attractive thing, we used to have out marketing, I am not sure what the material is, up along the fences, so it was not possible to see.”[81]
[81] T307-308.
Mr Spartalis said he attended the meeting PCG meeting 15 October 2010, even though he is not listed as an attendee.[82] He said that he did not make any observations on the way to the meeting whilst travelling along Doncaster road, about whether the civil construction work had commenced on Stage 2B.[83]
[82] T311/30-32.
[83] T312/5.
He agreed that the Circular Resolution dated 24 November 2010[84] indicated that the Stage 2B civil works commenced as at 27 September 2010.[85] He agreed that there was nothing in the PCG report dated 15 October 2010 or the PEC report dated 26 October 2010 that suggested the civil works had commenced.[86]
[84] Exhibit D10.
[85] T313/36-37.
[86] T314/8.
Mr Spartalis was asked whether he was aware prior to his termination that “BMD Constructions has progressed eight weeks into a 16-week program…”

as stated in the Circular Resolution dated 24 November 2010.[87] He said “Not that, specifically. Just that 2B has started and that was in that meeting with Mr Rex.”[88]
[87] Exhibit D10.
[88] T249/32.
Mr Spartalis was not aware of the claim for $590,000 worth of work by BMD constructions for civil work on Stage 2B.[89] He said that up until the time of his dismissal, he had not seen and was not aware of any progress claim from BMD Constructions for Stage 2B civil work.
[89] T250/9.
Mr Spartalis said Mr Calandro did not report to him regarding financial aspects but rather they collaborated and discussed and came to conclusions together.[90] Mr Spartalis said, “I never condoned the commencement of Stage 2B without CFAL approval. I didn’t give any instruction (to Mr Calandro), apart from ‘Do not commence Stage 2B without CFAL approval’.”[91]
[90] T369/30-31.
[91] T370/10-17.
Mr Spartalis said that he had no indication that Stage 2B had commenced without finance. When asked whose decision it was to start he said, “Look I can’t really say but I would assume it would have to be agreed with our development manager and the BMD Constructions manager.”[92] He said that Mr Gallus was the person who was authorised by BMD Constructions to manage the civil works in relation to the stages for Ascot Chase, including Stage 2B.[93]
[92] T58/28-30.
[93] T292/33.
When asked again, Mr Spartalis said, “Again I cannot say who actually approved it but again it would have had to be some co-ordination between our development manager team, again headed up by Mr Calandro and the BMD Civil Construction business.”[94] He said the only approval he participated with was the PCG meeting where conditional approval was given subject to getting approvals in place.[95] He stressed that that did not approve the commencement of construction; it approved acceptance of the BMD construct subject to CFAL approval.[96]
[94] T73/24-29.
[95] T73/30-35.
[96] T73/35-38.
Mr Spartalis recalled a telephone meeting on or about 16 November 2010 involving Mr Rex and Mr Calandro and (probably) Mr Stranger, Mr Stocks and Mike Thompson.
Mr Spartalis said that the meeting was the first occasion that he became aware that Stage 2B civil works had commenced without approval.[97] He said that Mr Rex raised it and there was silence. He said they all agreed it was unacceptable and “talked about actions to rectify the situation; the first one being getting it in front of CFAL.”[98]
[97] T285/18.
[98] T285/34-36.
Mr Spartalis did not recall anyone at the meeting providing Mr Rex with an explanation as to why Stage 2B had commenced without approval.[99] During that meeting Mr Rex made no comment about dismissing Mr Spartalis or disciplining Mr Calandro. Mr Spartalis said the topic of who had given permission for Stage 2B to commence was not discussed.[100]
[99] T286/35.
[100] T71.
When asked why he did not tell Mr Rex during that meeting about having told Mr Calandro that he could not proceed to authorise Stage 2B works on 24 August 2010, he said “We were in a larger forum and it wouldn’t have been appropriate at that time to discuss that anyway. Perhaps in private with Mr Rex and Mr Calandro but not in front of the other people who were in the meeting as well.”[101] He believed that the fact he had told Mr Calandro not to proceed would not have given any explanation as to how Stage 2B had commenced anyway.[102] He said, “My focus was on fixing the problem, not covering my bottom during that conversation.”[103]
[101] T339/25-38.
[102] T340/30-32.
[103] T340/37-38.
When asked why he did not raise it with Mr Rex subsequently and/or privately, he said that he did not really get the chance.[104]
Termination
[104] T342/8.
Mr Spartalis was dismissed by Mr Rex at a meeting in Adelaide on 22 November 2010. He said that following a discussion about projections for the current year’s results, Mr Rex asked everyone to leave except him and Tony Stocks.[105] Mr Rex told him that he was the most senior finance person in Urbex and, as he was responsible for the commencement of Stage 2B, his employment would be terminated.[106] Mr Spartalis said that he attempted to suggest that he was not responsible and that he did not know how it had started.[107] Mr Rex called him a liar and that he should have known and could have known. Mr Spartalis said that Mr Rex did not produce anything to suggest that he had or could have known.[108]
[105] T75/15-21.
[106] T75/25-35.
[107] T75/36-37.
[108] T76.
Mr Spartalis said he had not received any warnings, counselling or any comment about delays in providing information to Mr Rex.[109]
[109] T370/23.
Mr Spartalis did not receive any warnings, letters of warning, or counselling sessions from BMD prior to being terminated.[110] Nobody within the organisation ever indicated to him that his employment was at risk.[111]
[110] T375/31-38.
[111] T376/2.
Mr Spartalis said his role developed over the time that he was at Urbex. He said he received on-the-job training. He did not receive any general training about governance procedures, general management protocol, procedures or financial matters. Nor was he sent to any external training courses or programs in corporate governance, general management or financial management.[112] He said he did not undergo formal annual reviews with BMD.
[112] T381/9-15.
Upon termination Mr Spartalis said he was paid annual leave. He was not paid any notice or long service leave.[113] At the time of dismissal he was not permitted to use his car, his phone, his keys or his laptop. There was no letter presented to him at the meeting when he was dismissed. Mr Spartalis subsequently had to request a letter setting out what he would be paid and his separation certificate so that he could apply for unemployment and other benefits for his wife. He has never received a letter explaining the reasons why he was terminated.[114]
[113] T76.
[114] T77.
Mr Spartalis said that about two months prior to his dismissal he had been asked by BMD to move to Brisbane. He was given the option of moving to Brisbane or a redundancy. He did not accept the offer to move to Brisbane and was in the process of working out what he would do when he was dismissed.[115]
[115] T72/28.
Mr Spartalis attended an interview with an employment recruiter (Goodwin Recruitment) in October 2010, prior to being dismissed. He said that he was “gauging what the job market was like at that point in time as part of my decision as to whether to relocate or take a redundancy.”[116] He said he was considering whether he should remain with the BMD group or go elsewhere.
Post-termination
[116] T93/26-29.
After being terminated Mr Spartalis made a plan to gain employment. He considered work with “defence, mining, property development, real estate” and targeted companies that he would send letters of introduction and his resume. He also registered with online employment sites and introduced himself to some recruitment agencies.[117] He kept a record of the jobs he applied for and he had placed entries in his Microsoft Outlook program related to gaining employment.[118] Those entries started on 1 February 2011.
[117] T77.
[118] Exhibit P3, tab 63.
As a result of his termination being described as “gross misconduct” on his separation certificate, Centrelink carried out an investigation, followed up by an interview to determine whether he was entitled to any benefits following his termination.
Mr Spartalis said that between 22 November 2010 and December 2010 he made attempts to obtain employment, but that he did not make a record of any attempts. Mr Spartalis was asked why there was a period of time before he made job applications, he said “traditionally leading into Christmas there is very little advertised, between Christmas and New Year almost up to Australia Day there is virtually – nothing had been advertised during that period.”[119]
[119] T378/16-19.
Mr Spartalis said after he was terminated, “I was pretty shell-shocked. It took me ages just to come to grips with it, I have got a young family, this came out of the blue so I hadn’t even been able to prepare a plan for it, I was pretty dejected for a while.”[120]
[120] T378/21-24.
When asked what he told possible employers during interviews about why he left Urbex he said, “A small white lie, I suggested that I was asked to relocate to Queensland or stay in Adelaide and I chose to stay in Adelaide.”[121]
[121] T378/33-35.
Mr Spartalis gained employment in November 2011. When asked about his efforts over the previous year to gain employment, he said:[122]
I thought I put in a really big effort. I was surprised, I thought I would secure a job much earlier than I did, but as it turned out there were many obstacles that I just didn’t even anticipate in terms of, there were roles that were advertised that recruiters seemingly thought were below me and therefore they wouldn’t even send me to an interview because they just assumed they had their own reputation to uphold and I think he assumed when the next big role came along I would leave the employer where they just placed me, so in the end it came down to picking the more senior roles even thought I did start broadening out as it took longer and longer, to differing roles, but it surprised me how long it took. The job market wasn’t very good.
[122] T379.

A record of Mr Spartalis’ attempts to gain employment was tendered.[123] The first item recorded is at 19 January 2011 when he sent a resume to Goodwin Recruit.[124]
Summary
[123] Exhibit P3, tab 65; Exhibits D16 to D21 are copies of Mr Spartalis’ job applications.
[124] T345/20.
Mr Spartalis’ evidence was at times a little vague. However, I accept his evidence is an honest and reliable account of what occurred. I accept his explanation for the inconsistency in his evidence regarding “others” being in the car when he cautioned Mr Calandro. He said in cross-examination that he was mistaken and only he and Mr Calandro were in the car. I prefer his evidence on critical issues over Mr Calandro’s with respect to the topic of not commencing civil works without financial approval. Having considered all the evidence, I find that he did not give approval for the Stage 2B civil works to commence.
Wayne Rex
Role at Urbex
At the time of the trial Mr Rex was the General Manager of Urbex Pty Ltd. He had held that position since early 2011. In 2010, he was engaged as a consultant by Mr Power, BMD’s Board Chairman, to review the operations of Urbex. The review commenced on 1 June 2010.[125]
Review of Urbex
[125] T407/17-20.
Mr Rex said that Mr Power requested he carry out a review of Urbex as he was greatly concerned, as were some members of the board, about the business. He said the review took longer than the expected two months:[126]
When I got in there I found it was probably a bit more concerning than what I first thought. There were some issues I don’t think anybody appreciated. And then probably three or four weeks into the role of the review, I got a bit sidetracked in trying to dispose of a property for him that he needed for cash flow for the group, so the report got finished but I continued that role. It just kept getting extended and extended.
Mr Rex said that in June 2010, Urbex had a diverse portfolio:[127]
It probably had seven, eight major land projects across Australia and the rest are what I call ‘rats and mice holdings’ which were basically small commercial properties left over, remnants of land subdivisions, so it probably had 30/40 properties on its books of which there was probably seven or eight major active land projects.
[126] T412/1-7.
[127] T412/31-37.
Mr Rex said that Mr Power’s instructions were to review the business in totality, in terms of the way it was structured, the people that were in it, and the operation in terms of the return it was giving back to the Power family. He thought the big issue was the fact that they were concerned a lot of the projects were running well behind time and were not giving the return on the investment they thought they needed.[128]
Ascot Chase Project
[128] T413/3-11.
Mr Rex said that one of the projects in Urbex’s portfolio was the Ascot Chase development. In reviewing the Ascot Chase project he had full access to all the systems, procedures and service information. He reviewed the business case from when the property was bought, which went back many years. He had access to monthly PCG reports, PEC reports, the team of people running it, and access to the financial team based in Adelaide.[129] He said the team in Adelaide included Mr Thomson, Mr Spartalis and Mr Stranger.
[129] T413/30-38.
Mr Rex’s role included carrying out a review of the national group structure and the income whereby he looked at stocks and cash flows:[130]
Basically I reviewed at high levels to look at how it’s been run, how many people, at the staffing, whether it had hit it’s I guess, original benchmark for cost, both from where they bought it, more importantly, what they were saying each year in their annual business planning... basically to pull the thing apart and then make a preliminary review recommendation to make on the overall business.[131]
[130] T414/29-32.
[131] T415/1-6.
During the review he sought information from the Adelaide office in relation to cash flows and modelling which were both controlled by the Adelaide office. As a result he was given access to email and communications in relation to the project on the BMD server. After reviewing the information he became aware that there was a financial arrangement with CFAL in respect of the Ascot Chase development.[132]
Exhibit D4 (Copy of the Financial Agreement)
[132] T417/6.
Mr Rex, referring to the Financial Agreement, said that the Ascot Chase Development was a joint venture, between Urbex and the merchant bank, Gresham. Urbex and Gresham borrowed money from CFAL to undertake that construction.
Mr Rex said, under the agreement, CFAL had the right to attend project meetings and that they had to sign-off before any construction facilities were drawn down:[133]
If you wanted to start another stage of the project, you had to inform them and get their approval prior to starting and there would have been a number of hurdles you would have to meet at different stages which is pretty stock standard in the profession.
[133] T418/1-5.
Mr Rex understood that the CFAL was a subsidiary of BOSI. He said that when the market changed in 2009/2010, BOSI came under extreme pressure whereby they stopped lending in about early 2010 and they got into severe financial trouble overseas and they started looking at their worldwide books and realised they had what they had thought were performing properties, lots in Australia were not performing, particularly on the Gold Coast:[134]
The state of the market boom in 2010 to refund land projects and what you had, you had whole series of financiers that were trying to get out of obligations if they could. They might have commitments, but particularly Bank of Scotland didn’t have the funds to lend to one of their commitments, so they were trying to be more difficult with documentation. So the prerequisites to go drawdown of a loan were becoming more and more difficult. That was just standard industry practice at the time.
[134] T419/12-21.
In relation to the Ascot Chase development he said that the financiers were making it more difficult to meet the prerequisites and that was occurring across the whole industry.[135]
[135] T420/6-9.
Mr Rex said Mr Calandro “managed the operation of the project, which was basically the development delivery; all financial responsibility for the project kept coming back to Adelaide.”[136]
[136] T420/25-28.
He said that was the case on every Urbex major project across Australia, and that he reached the conclusion by June/July 2010 “that it was different to other groups in that the financial control vested in one office, which had nothing to do with the projects.”[137]
[137] T420/33-37.
Mr Rex said that everything with respect to the project got referred back to Adelaide:[138]
It was discussed and Adelaide approved or what had to happen. That was pretty standard; that happened in the Sydney operation, Townsville operation, etc.
…
The only place it didn’t operate was in Brisbane, which was a bit of an anomaly because the Brisbane team, from what I could see, just did their own time. They had no respect for the Adelaide team of Urbex or head office team.
[138] T421/6-9; 11-19.
During his review, Mr Rex requested information from Mr Spartalis. He said it was difficult to get information from the accounting team, and that information from Mr Spartalis would always come late. As a result of that, he said he became more investigative because he found it hard to believe people “couldn’t just mail a cash flow, burn it onto a CD and send it to you overnight. It made me more, I guess, cautious about what was really going on with the financial affairs of the business.”[139]
[139] T421/34-38.
Mr Rex said Urbex was responsible for all the development, financial, and operational management of the Ascot Chase joint venture.
Mr Rex attended the Ascot Chase development in September 2010 for the purpose of dropping in on PCG and PEC meetings. He said that at that time it was running miles behind schedule in terms of the timetable.[140] They had completed Stage 2A and he believed they had commenced Stage 2B.[141] He said they had started to dig trenches, security fencing was up on site, equipment was on site and there was a shed there.[142] He said the Stage 2B civil works had commenced by September 2010.[143] He said he came to that conclusion having made an assessment of where Stage 2B was on the site (which he made from a detailed master plan of the site) and from entering the project office on site along Doncaster Street.[144] He said that he saw from the window of the car; through the mesh fence.[145]
Commencing Stage 2B civil works without financier approval
[140] T426/23-27.
[141] T425/4-8.
[142] T425/9-12.
[143] T425/20.
[144] T425/26-38.
[145] T426/9-12.
At the time he observed that Stage 2B had commenced he assumed the financier had been notified:[146]
I just assumed it had been, yes, well of course you can’t change – every time we start a construction of a new stage or constructed any more houses Ascot Chase had to inform the funder; it was a prerequisite of the finance agreement. You can’t change a financier’s asset without notifying them.
Mr Rex also assumed that Gresham had been advised:[147]
Well you can’t start, basically you need unanimous approval of the joint venture board to start, which was Gresham and Urbex. So, Urbex would have had to make a recommendation to the shareholders at a (PGC) meeting, being Urbex and Gresham.
[146] T426/31-37.
[147] T427/10-14.
Mr Rex said he reviewed the PCG reports in September 2010 or early October 2010. He made the following observations:[148]
I just went to look for the approval and it didn’t say that the approval – it said the approval had been granted, subject to financing all the financial conditions being met, ie the onus was back on the Urbex financial team to get the approval from the banker, being Capital.
Consequences of commencing without financier approval
[148] T427/33-38.
As a result of interpreting that material Mr Rex came to the view that “they had breached the finance agreement and we were in deep trouble.”[149] He said:[150]
The trouble I saw at the time was that BOSI was in deep financial trouble overseas so it would allow them basically a technicality so they didn’t have to pay us any drawdowns for 2B, ie they wouldn’t have to fund it for us, which proved to be the case, and basically it would allow them, could potentially allow them to call in the loan, ie the whole $60 million, which if they called in the loan that had ramifications for the rest of the BMD Group. We would have to notify our corporate bankers that a loan had been called in which would put us under supreme pressure with the corporate bankers. We would be in default of the loan. The other thing was availability of finance in the market was extremely hard to get and we would have had to go back to the market to get new funding if BOSI bailed out on us.
He said CFAL could potentially call back its loan:[151]
Look, if you breached the loan facility they just give you notice, generally it’s 30 days, if they wanted to be really aggressive. But banking is all about relationships so the case for us was, they could call the facility within 30 days, and obviously take legal action to make sure that didn’t occur, but it could be detrimental for you.
[149] T428/5-7.
[150] T429-430.
[151] T430/15-21.
On the basis of his review, he said that had the BMD Group needed to repay $60 million at that point in time, it would have brought the group to its knees financially.[152]
Refinance
[152] T430/25-27.
Mr Rex said BOSI would not loan BMD any more money, they managed to refinance with ANZ. The problem was that BMD had to put up corporate guarantees with respect to getting the new funder in place, and the owner of the company had to give personal guarantees. The interest rates were a little bit higher and their line fee was a bit higher. In the end BMD only got the one finance offer because by that stage, the market had deteriorated to such an extent that there was nobody else left in the market.[153]
[153] T431/12-20.
Mr Rex said that when BOSI would not keep funding them, BMD had to use its own equity and the project slowed down dramatically.[154]
[154] T431/22-26.
He said that when he came to the view that the financier and the joint venture partner had been misled, after reviewing the PCG reports (that did not reflect the fact that the work had started),[155] he was still a consultant. Mr Rex was appointed Interim General Manager on 11 October 2010.
[155] T436/12-13.
Mr Rex said that he did not inform Mr Spartalis or Mr Calandro at that time, that is October 2010. He said he did not speak to anyone he was investigating:[156]
Because I was investigating it, trying to understand myself that – I would take it that there had been a breach and I asked people about a breach, tried to find out as much information as I can about how things have occurred, and that is when I threw it into that telephone conversation.
Mr Rex said he did not interview the people involved to get their version of what had transpired because:[157]
… I just wanted to see what was happening on the ground. I had a whole plethora of information because I had reviewed the business. There were large scale holes in the financial way the business was being run. I either had no real – the financial procedures were very, very difficult to understand for a company of that size.
[156] T487/22-27.
[157] T489/4-7.
Mr Rex agreed that there was no opportunity given to the people involved, or who he perceived to be involved, in the alleged breach of contract to explain. He said the reason no opportunity was given was that, “I thought we had enough information in front of us that demonstrated that basically the head office in Adelaide was controlling all the project staff.”[158]
[158] T489/17-19.
Mr Rex said that if he became aware that Mr Spartalis had told Mr Calandro that the Stage 2B works were not to start without approval and Mr Calandro gave approval anyway, he would still have terminated Mr Spartalis’ employment.
When asked why he did not ring Mr Spartalis he said that this was not the first that that had happened. He said, “It’s important to understand when I reviewed the business there had been other breaches of facilities prior to that on this same project.”[159] He accepted that no one had been disciplined as a consequence of those breaches.[160]
[159] T462/21-24.
[160] T462/25.
When Mr Rex came to the view that the joint venture partner at CFAL had been misled, he discussed it with Mr Mortensen, the CFO of the BMD group, and he recommended a course of action. He came to the view that Mr Spartalis was the person responsible in the Urbex Group for the commencement of the Stage 2B civil work. He said he came to that view because he was the only one in control of finance.[161] He said he was in control of modelling:[162]
If you control the modelling and you control the finance of the group, you’re the only one who is responsible. You’ve got to take some responsibility. It’s a pretty major business and you should be aware of what’s going on.
[161] T437/8.
[162] T437/9-13.
As a result of having come to that view he organised to dial in to the 26 October 2010 PEC meeting.
Mr Rex thought he received the PEC Report No 8[163] prior to the meeting on 26 October 2010. On page 2 of the report there was the heading “Stage 2B civil construction contracts submitted for CFAL approval commencement pending updated cash flow information.” He said that statement was a lie[164] and it was at this meeting Mr Rex asked why construction had started without approval and:[165]
… there was just stunned silence at the end of the phone. I thought ‘this is really weird’ because nobody admitted they had started, nobody said a thing. There was, like, stunned silence.
Mr Rex did not get an explanation from anyone.
Termination of Mr Spartalis
[163] Exhibit D8.
[164] T471/32.
[165] T437/26-30.
Mr Rex and the BMD Group consequently decided the course of action to be taken was to terminate Mr Spartalis. There was a meeting arranged:[166]
I think it was a Monday morning from recollection. I had a general discussion with staff – the financial staff about various projects. Then I had a meeting with Tony and there was another finance – one of the BMD Group finance guys was present by the name of Tony Stocks and we just terminated Anthony.
…
I told him he’d been terminated for gross misconduct or words to that effect.
[166] T438/14-19; 22-23.
In relation to Stage 2B civil works, he said Mr Spartalis said, “It’s not my fault. I’ve got nothing to do with it.” Mr Rex said he did not agree with that view because he said nobody in any of the regional offices did anything without head office approval:[167]
They were control freaks; they were paranoid and particularly with the Melbourne office, Melbourne report everything back. Melbourne and Sydney reported everything back. Melbourne and Sydney reported everything back to Adelaide before they did anything.
[167] T438/30-36.
Mr Rex said he called Mr Spartalis a liar during the meeting on 22 November 2010 because Mr Spartalis said that he did not realise construction had started.[168] Mr Rex said he believed he was lying because he was on-site with him.[169] They used to work at the site sales facility, which adjoined Stage 1 of the project along Doncaster Street. Mr Rex said Stage 2B was 200 to 300 metres from Stage 1.
[168] T475/26-27.
[169] T475/29.
However, when asked whether there was a document with Mr Spartalis’ signature or someone from Adelaide’s signature that could be produced authorising the works, he said:[170]
No there was – within the group at the time there was very little correspondence on anything, they seemed to run by telephone conversations with respect to – there was very little evidence of sign-offs for constructions. What used to happen across the group from what I could see, when they want to start a construction project the development manager or the senior person in that State will get in touch with Mr Spartalis and Mr Stranger. I could find very little evidence of Mr Thomson ever being involved in anything, to be quite honest, from my review of the June/July period and they would appear to authorise construction.
[170] T453/10-24.
Mr Rex acknowledged there was no written document authorising construction to commence.[171]
[171] T453/34-35.
Mr Rex said his conclusion that Mr Spartalis was responsible was based on the 24 August 2010 emails backwards and forwards.[172] I note there is no evidence of any email back or to Mr Calandro from Mr Spartalis on 24 August 2010 other than the phone link up meeting acceptance at 2.07pm.
[172] Exhibit D13.
Mr Rex said he did not provide Mr Spartalis with a letter of termination.[173] He said “HR” told him to dismiss Mr Spartalis and that he did what “HR” told him to do:[174]
It’s a private family company no decisions are made in that company without Mr Power’s authority, Mr Power gave authority to dismiss Mr Spartalis and of course, HR would be informed. We are quite a large organisation. I can’t do anything without the owner of the company’s sign-off.
[173] T457/28.
[174] T458/18-21; 24-25.
When asked how long before 22 November 2010 he started having discussions with Mr Power about terminating Mr Spartalis, he said, “Probably when we realised there was a breach, potential breach of the finance facility.” Mr Rex was asked in cross-examination:[175]
QThat was weeks before 22 November wasn’t it.
ADefinitely.
QAnd despite that, you made no attempt to get a proper explanation from Mr Spartalis.
ADefinitely not.
[175] T458/30-36.
When it was put to Mr Rex that dismissing Mr Spartalis meant getting rid of one of his competitors he said “Mr Spartalis is no competitor of mine.”[176]
[176] T460/37.
Mr Rex agreed that it was apparent Mr Calandro and Mr Gallus, BMD Construction’s manager, were having discussions about the commencement of civil works for Stage 2B. Mr Rex said, “I think it’s perfectly clear that Mr Calandro instructed Mr Gallus, yes to commence Stage 2B.”[177] He also said he surmised by reference to the letter from GHD on behalf of Ascot Chase nominees to Project manager BMD Constructions dated 15 September 2010[178] stating BMD is authorised to proceed with Stage 2B:[179]
That somebody which I am assuming is Mr Calandro has instructed Mr Healey who is the independent superintendent to instruct BMD Constructions to start.
[177] T451/11-12.
[178] Exhibit D14.
[179] T484/12-14.

I find that Mr Calandro was a man under pressure on site in Melbourne.[230]
Summary
[230] T535/2.
I find that Mr Calandro’s evidence was an attempt by him to distance himself from culpability for the commencement of the Stage 2B civil works. He gave detailed evidence about non-contentious matters. I found his evidence vague and unhelpful with respect to the topic of the Stage 2B approval. I have difficulty accepting his asserted lack of recall about many topics in particular the circumstances around the commencement of the Stage 2A and 2B civil works, and his conversations with Mr Spartalis. He was the recipient of the email from Mr Mitsakos dated 11 May 2010 regarding Stage 2A and emphasising that work must not start until financial approval has been given. He was also the protagonist behind the 24 August 2010 emails.
I prefer Mr Spartalis’ evidence on the critical issues; that is the 24 August 2010 communications and that Mr Spartalis cautioned Mr Calandro not to commence the works without approval.
Richard Stranger
Mr Stranger commenced working at Urbex on the same day as Mr Spartalis in January 2003. He said he has known Mr Spartalis for 13 years and during that time he formed the opinion that he was an expert in the area that he was working in.[231]
[231] T548/1.
As the Development Manager, Mr Stranger was involved in planning and design-related matters. As the business started to grow, he also worked on the delivery and development side of the business. In November 2010 he was appointed the National Development Manager.
Mr Stranger said he had an “interface in terms of financial matters, in terms of project feasibilities that were put together I would, on occasions, provide financial input into project feasibilities.”[232]
[232] T541/3-6.
Mr Stranger said that Mr Spartalis had the role of Finance Manager (in relation to banking and finance covenants) in 2010 and that there would have been other people involved in that aspect of the business as well.[233]
[233] T541/23-25.
Mr Stranger understood that BMD Constructions was required to carry out the civil construction work in relation to Ascot Chase. He agreed that Mr Calandro undertook the development in Victoria in relation to Ascot Chase.
Mr Stranger said he was aware there was a joint venture arrangement in relation to the Ascot Chase development, and that finance was provided from CFAL. He said the financial requirements for Ascot Chase, the cash flow, and the modelling was handled by Mr Spartalis.
Mr Stranger was aware that the financial arrangement required certain approvals to be given by the financier including approvals in relation to the entering into contracts for such things as civil works. He said Mr Calandro would have dealt with Mr Spartalis in relation to such matters.[234]
[234] T544/30.
Mr Stranger said that there were always tensions to a degree between Urbex and BMD in terms of construction works in the Ascot Chase development. He said that they were not unhealthy tensions, but tensions in terms of pricing the program and the quality of the work on occasions that BMD were undertaking. He stated those tensions existed in 2010.
In 2010, Mr Stranger had regular contact with Mr Calandro, several times a day, generally by telephone, as well as email and face to face discussions on occasions. He did not have any concerns in 2010 about Mr Calandro’s ability to follow directions.
Mr Stranger became aware in 2010 that the civil works in relation to Stage 2B of the Ascot Chase development had commenced without the approval of the financier.[235] He did not give any approval for Stage 2B to commence without the financier’s approval.[236]
[235] T546/11.
[236] T546/26.
Mr Stranger could not recall Mr Rex raising the topic of the Stage 2B civil works commencing without approval during a PEC meeting.[237]
[237] T547/13-21.
Mr Stranger said that he was not aware of Mr Spartalis giving approval for Stage 2B works to commence.[238]
[238] T547/30.
When asked why he thought Stage 2B civil works commenced without approval he said there “was significant pressure from BMD to commence construction, they had resources on site that they wished to continue on with work, they didn’t have other projects for them to go to, as I understand it, so they were keen to commence work.”[239] He considered they made a decision to commence work. He did not know the status of CFAL’s approval or otherwise, but he knew there were issues relating to CFAL approval and he understood that BMD were well aware that if they commenced they would have to fund that stage of the project themselves without CFAL funding.[240]
Summary
[239] T548/23-27.
[240] T548/32-36.
I accept Mr Stranger’s evidence.
Mr Stranger was not asked questions by either party about the emails he and Mr Spartalis received on 24 April 2010 from Mr Calandro.[241] He was also not asked about the telephone link up request sent by Mr Calandro on 24 August 2010.
[241] Exhibit D13.
Mr Stranger’s evidence that he was not aware of Mr Spartalis giving approval for Stage 2B works to commence supports Mr Spartalis’ evidence.
Failure to call Mr Gallus, Mr Power, Mr Stocks, Mr Mortensen
Mr Spartalis contends that the failure of BMD to call Mr Gallus, Mr Power, Mr Stocks and Mr Mortensen gives rise to an inference adverse to BMD. Whether any inference can be drawn depends on a number of matters including the asserted significance of these witnesses. Mr Spartalis contends that if anyone knew why and how the works started, it was Mr Gallus. He was the relevant construction manager in Victoria and he was the person asking for authorisation to commence.
In my view, having considered all of the evidence, the failure of BMD to call Mr Gallus is sufficiently material to lead me to draw inferences adverse to BMD.
The pre-conditions for the operation of the principle in Jones v Dunkel[242]have been satisfied. I would expect Mr Gallus, to be called by BMD rather than Mr Spartalis. His evidence would elucidate the issue of who gave approval for the Stage 2B works to commence, and his absence has not been explained. In these circumstances the evidence called by BMD about who authorised the commencement of Stage 2B works may be more readily rejected.
[242] (1959) 101 CLR 298.
What is the contract of employment between Mr Spartalis and BMD?
Mr Spartalis was employed by BMD in 2003 and together with two others established the Urbex office in Adelaide. Mr Spartalis asserts that his employment changed so fundamentally from the terms of the 2003 employment agreement that a new contract resulted in 2005 or 2007.
In 2003, pursuant to the employment agreement, he was engaged as a Business Manger with a salary of $110,000. Clause 1.1 of the agreement provides that his employer “will be a new property related subsidiary of BMD Holdings Pty Ltd yet to be named.” He did not have any employees to supervise and he reported to the Chief Executive Officer. Clause 2.3 allowed for a variation of duties “which are not included in your job description.” Enclosed with the employment agreement was a position description dated 6 January 2003[243] which detailed his role in the company in particular:
“Ensure a smooth transition of projects from through the feasibility, financial approval, establishment and operation phases”
“Maintain close financial management and control of established projects”
“Ensure project management processes (relevant to financial management) are established and maintained”
[243] Exhibit P1, tab 2.
The position description also provided for “such other duties as may be required from time to time by the Chief Executive Officer.”
Mr Spartalis says that in 2005 he was appointed to a far more senior position, that of National Manager, Business and Finance, the most senior financial officer at Urbex, which brought with it title recognition, wider and more senior responsibilities whereby staff reported to him, he received significant and ongoing increases in salary, significant bonuses, certain elements of his duties were assigned to other employees and temporary appointment as joint general manager.
I am not satisfied that the roles and duties undertaken by Mr Spartalis at the time of his termination varied so greatly from the duties undertaken when he commenced employment so as to render the employment agreement redundant. The evidence does not establish that his employment had changed so fundamentally as to take it beyond the original terms of the employment agreement.
All the duties Mr Spartalis described that he was performing as at November 2010 are encapsulated in the Position Description he received at the time of his employment in 2003. I am satisfied that the changes he gave evidence of are a variation to the employment agreement and have not given rise to a new contract. Whilst there were increases in salary and changes in title description, the changes to the working arrangements were not of such a magnitude that a new and very different employment arrangement arose.[244]
[244] Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567.
The circumstances in which the employment contract could be terminated
I have found that Mr Spartalis’ employment was governed by the employment agreement. Therefore, his employment with BMD could be terminated pursuant to clause 12 of that agreement by the giving of one month’s notice or payment in lieu, or without notice in the case of serious misconduct.
Whether BMD was entitled to dismiss Mr Spartalis without notice on 22 November 2010
As discussed above under the heading “Estoppel”, misconduct involves something more than mere negligence, error of judgement or innocent mistake. The employment agreement bears this out by giving one of the examples of serious misconduct as “gross misconduct.” The circumstances justifying summary dismissal must be serious enough to warrant such action because of the potential damaging effects on the employee’s reputation and the trauma that may result.[245]
[245] Rankin v Marine Power International Pty Ltd (2001) 107 IR 117.
BMD bears the onus of proving that the misconduct was sufficiently serious to warrant summary dismissal.
I am not satisfied, having regard to all of the evidence, that it has been established that Mr Spartalis’ conduct justified immediate dismissal.
Mr Rex took some weeks to dismiss Mr Spartalis after becoming aware of the Stage 2B works commencing without approval in early October 2010. He told the “decision makers” at that time and was awaiting instructions, and was also occupied selling property for BMD.
I query whether, by virtue of this delay, BMD was in effect acquiescing in the commencement of the Stage 2B works without CFAL approval. If so BMD cannot rely upon the commencement of Stage 2B works without approval as a valid reason for summarily dismissing Mr Spartalis.
In my view, this delay undermines the alleged seriousness of the conduct. It was Mr Rex’s evidence that proceeding to Stage 2B without financier approval had serious consequences for BMD. Alternative finance had to be obtained, corporate and personal guarantees had to be given to secure the refinancing and a significant loss was sustained. Yet no proper investigation was undertaken by Mr Rex. Surely in order to properly inform the “decision makers” and to afford procedural fairness to Mr Spartalis, Mr Rex was obliged to undertake a detailed investigation into how Stage 2B started without CFAL approval. Mr Spartalis was not given an opportunity to respond or answer the allegation against him. He was given no letter outlining the alleged misconduct. The only elaboration he received was the handwritten note produced at the IRC.
I am satisfied that Mr Spartalis did not know the works had started. There is no doubt given his role and his job description that he ought to have been aware of what was happening with respect to Ascot Chase. He should have supervised Mr Calandro more closely to ensure that financial approval was in place before Stage 2B commenced. In this context, his conduct is negligent. However, negligence covers a wide spectrum of culpability. The question is – did his conduct amount to “serious misconduct” or “gross misconduct”. This must be assessed having regard to all the circumstances surrounding the alleged misconduct. The circumstances include:
·That BMD Constructions wanted to commence works without CFAL’s approval in 2009. BMD argue that this is the first “strike” against Mr Spartalis.
·Mr Calandro allowing Stage 2A to commence without CFAL approval.
·The proposal in Mr Calandro’s email dated 24 August 2010 and 17 November 2010 to BMD financing the project on an interim basis pending CFAL approval.
·Mr Calandro’s asserted lack of recall about the discussions he had on and after 24 August 2010 and what happened prior to sending the email at 4.43pm to Jeff Gallus.
·The fact that Mr Calandro was the person on site in Melbourne and who was being pressured by BMD to give approval to start the Stage 2B works.
·The absence of instruction not to permit the commencement of works again without financial approval from Mr Spartalis prior to the conversation in the car.
·Mr Spartalis’ evidence that he told Mr Calandro not to allow the works to commence without approval. The evidence is that this occurred sometime after the works actually commenced.
·The lack of evidence explaining who from or on behalf of Ascot Chase Nominees Pty Ltd informed Mr Healey, the Superintendant’s Representative (GHD), that BMD’s tender submission dated 9 September 2010 for Ascot Chase Stage 2B had been accepted and that BMD was authorised to commence the construction works.[246] This is the letter which apparently authorised the commencement of works. It is of note the letter appears to have been copied to Mr Shane McGlynn (Urbex). There was no mention of Mr McGlynn during the trial and whether he gave the approval.
·Mr Calandro’s evidence that the statement “contracts submitted for CFAL approval” in the PGC report 15 October 2010 and the PEC report 26 October 2010 were true at the time he prepared the reports.
·The absence of any email or other documentation from Mr Spartalis on or after 24 August 2010 evidencing implicit or explicit knowledge and/or approval of the commencement of Stage 2B works without financial approval.
·The serious and significant impact of the commencement of Stage 2B works on BMD.
[246] Exhibit D14.
BMD contended that the fact that Mr Spartalis knew about BMD wanting to commence work in 2009, that Stage 2A started without financial approval and that the 24 August 2010 emails alerted him to the issue to BMD Constructions wanting to commence works all count against him. Whilst, Mr Spartalis’ counselling of Mr Calandro came too late, the fact that he was aware of Mr Mitsakos’ response in 2009 and May 2010 that approvals and contracts were required supports his evidence that he firmly stated that what happened with Stage 2A could not happen again and that works could not commence without CFAL approval.
BMD submitted that the Court is unable to find that Mr Gallus commenced works on Stage 2B against the advice of Mr Spartalis or others. The evidence points equally the other way. Mr Calandro’s email at 4.43 pm on 24 August 2010 is ambiguous. It makes reference to PCG approval being subject to the final GHD tender report, approval from the financier and that any agreement to commence would be based on BMD absorbing the costs until funds were received from the financier. Reference is also made to an “interim letter of intent”. There was no evidence of an interim letter of intent, unless, as BMD’s counsel suggested, it was the next document in time relied upon by BMD. That is the letter from GHD, the Superintendent’s Representative to BMD Constructions,[247] apparently authorising the construction works. No evidence was called from the author of this letter or Mr Gallus.
[247] Exhibit D14.
There is insufficient evidence to make a finding about who implicitly or explicitly authorised the works. I cannot draw any inference from the 24 August 2010 emails that Mr Spartalis knew and approved the commencement of works as submitted by BMD.
The backdrop to the foregoing is Mr Rex’s review and rationalisation of Urbex which caused a “distraction to Urbex management” and his undisguised disdain for Mr Spartalis; “Mr Spartalis is no competitor of mine.”
Mr Spartalis’ conduct was not serious and wilful misconduct. It was not “gross misconduct” or “serious misconduct”. It was conduct that warranted censure, warning and the giving of notice pursuant to clause 12 of the employment agreement.
If Mr Spartalis was negligent, BMD, as his employer, bears some responsibility. It did not have adequate systems of governance in place. It was a workplace that apparently required review and rationalisation. This was the very reason Mr Rex was engaged and tasked with rationalisation. I cannot be satisfied that, against this background of review, the time it took between Mr Rex becoming aware that Stage 2B had started without financial approval and the dismissal of Mr Spartalis and the matters discussed above, that BMD was entitled to dismiss without notice.
BMD has failed to discharge the onus of establishing there were grounds justifying its summary dismissal of Mr Spartalis.
The impact of the Fair Work Act requirement of five weeks’ notice
I find that BMD was entitled to terminate Mr Spartalis’ employment pursuant to clause 12.1 of the employment agreement. I find that Mr Spartalis is entitled to five weeks’ notice upon termination as the period of notice provided for in Clause 12.1 of the employment agreement is below the statutory minimum notice period of five weeks required pursuant to the Fair Work Act.
Mr Spartalis’ loss and damage as of 22 November 2010 arising out of the termination of his employment
I accept Mr Rex’s evidence that no one in BMD’s employ was paid a bonus in 2010. The payment of bonuses was at the discretion of BMD’s owners. It is undisputed that the global financial crisis had a dampening effect on the market and that would have had a necessary effect in relation to the profits that could be generated from the sale of residential land and ultimately the company’s capacity to pay bonuses.
Mr Spartalis’ entitlement is therefore limited to five weeks’ salary plus pro rata annual leave.
Has Mr Spartalis mitigated his loss?
BMD bears the onus of establishing Mr Spartalis has failed to mitigate his loss. I find that Mr Spartalis did attempt to mitigate his loss in a depressed economic climate and in circumstances where he was dismissed without warning a month before Christmas. He gave evidence that as a result of his termination being described as “gross misconduct” on his separation certificate, Centrelink carried out an investigation, followed up by an interview to determine whether he was entitled to benefits. He applied for jobs, sent resumes, contacted employment firms and personal contacts. He focused on finding employment appropriate to his skills and experience. It is worthy of note that one month’s notice provided for in the employment agreement impliedly recognises and compensates for the disruption, cost and hardship caused by unemployment that usually follows termination.[248]
[248] Westfield Holdings v Adams (2001) 114 IR 241, [38].
Conclusion
In summary my findings are:
·There is no issue estoppel;
·The contract of employment between Mr Spartalis and BMD as at 22 November 2010 was the employment agreement entered into in 2003;
·BMD has not established there were grounds justifying the dismissal of Mr Spartalis without notice on 22 November 2010;
·Mr Spartalis is entitled to judgment in his favour for damages based on five weeks’ salary plus pro rata annual leave.
I will hear the parties as to orders and costs.

Exhibit D4	Amended deed facility 14 Sept 2010
Exhibit D6	Emails regarding Stage 2A
Exhibit P4	PCG report 17 August 2010 “Stage 2B Civil Construction tender received. Project Budget $1.8M. Anticipated completion dated End Aug 10 – Contract program date 23 Sept 10.”[7]
Exhibit D13	24 August 2010 emails: · from Jeff Gallus to Mr Calandro 9.35am · from Mr Calandro to Mr Spartalis and Mr Stranger 9.35/10.05am; · from Mr Calandro to Mr Spartalis and Mr Stranger 10.11am; · from Mr Calandro to Mr Spartalis and Mr Stranger 10.18am; · from Mr Calandro to Mr Spartalis and Mr Stranger 10.36am; · from Mr Calandro to Mr Gallus 4.43pm.
Exhibit D14	Letters from GHD on behalf of Ascot Chase nominees to Project manager BMD Constructions 15 September 2010 stating BMD authorised to proceed with Stage 2B.
Exhibit P1 tab 36	Letter BMD to GHD 29 September 2010 regarding notice of delay/ regarding commencement of works.[8]
Exhibit P1 tab 41	Email from Mr Spartalis to Mr Rex 11.18am and email Rex to Spartalis 8 October 2010 3.07 pm.
Exhibit D12	PCG report 15 October 2010 stating “Stage 2B Civil Constructions contracts submitted to CFAL for approval. Commencement pending updated cash flow information.”
Exhibit D8	PEC report 26 October 2010 stating “Stage 2B Civil Constructions contracts submitted to CFAL for approval. Commencement pending updated cash flow information.”
Exhibit P1 tab 52	Emails from Mr Calandro to Mr Spartalis and Mr Rex 17 November 2010 2.37 and 3.37pm.
Exhibit D10	Circular Resolution 24 November 2010.