Sxiq Pty Ltd v Kalmus - [2019] VSC 429

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S ECI 2018 01064

SXIQ PTY LTD (formerly known as SOUTHERN CROSS COMPUTER SYSTEMS PTY LTD) (ACN 005 770 598)	Appellant
v
MARK KALMUS	Respondent

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 June 2019
DATE OF JUDGMENT:	28 June 2019
CASE MAY BE CITED AS:	SXIQ Pty Ltd v Kalmus
MEDIUM NEUTRAL CITATION:	[2019] VSC 429

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APPEAL – Whether appeal grounds raise a question of law – Respondent involved in preparation of false invoices to artificially inflate Appellant’s revenue prior to end of financial year – Magistrate erred in finding that the Respondent’s conduct did not justify summary dismissal – Appeal allowed – Magistrates’ Court Act 1989 s 109.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr P G Cawthorn QC	Nicholas O’Donohue & Co
For the Respondent	In person

HIS HONOUR:

On 15 August 2018, a Magistrate ordered SXIQ Pty Ltd (‘SXIQ’), formerly known as Southern Cross Computer Systems Pty Ltd, to pay Mr Kalmus $49,275. This sum equated to three months’ salary of $45,000 plus superannuation contributions of $4,275. Under his contract of employment, this amount was payable to Mr Kalmus upon termination of employment unless SXIQ was entitled to terminate his employment on grounds of serious misconduct.

The current proceeding is an appeal pursuant to s 109 of the Magistrates’ Court Act 1989. In the proceeding at first instance, SXIQ contended that Mr Kalmus had engaged in serious misconduct. It submitted that he was involved in the creation of false invoices in late June 2016 in respect of 1020 computer monitors which Telstra had ordered from SXIQ. Those invoices were subsequently presented to SXIQ’s financier, Scottish Pacific Business Finance Pty Ltd (‘ScotPac’). ScotPac paid SXIQ 80 per cent of the value of the invoices pursuant to a debtor finance facility. SXIQ submitted in the proceeding at first instance:

(a) The payment from ScotPac artificially inflated SXIQ’s revenue and profit for the financial year ending 30 June 2016;[1]

(b) ScotPac was not liable to make the payment because the computer monitors had not been delivered to Telstra;[2] and

(c) Mr Kalmus had a direct financial interest in inflating SXIQ’s revenue for the financial year ending 30 June 2016 by reason of a share sale agreement pursuant to which a company which he controlled sold its shares in SXIQ to a third party.[3]

[1]Kalmus v SXIQ Pty Ltd (Magistrates’ Court of Victoria, Magistrate J Grainger, 15 August 2018) [12].

[2]Ibid [59]–[60].

[3]Ibid [52].

The Magistrate rejected SXIQ’s submission that Mr Kalmus had engaged in serious misconduct justifying summary dismissal under the terms of his contract of employment. Her Honour concluded that Mr Kalmus’ conduct was not objectively so serious as to justify his dismissal without notice.[4] As a result, he was entitled to damages equivalent to three months’ notice in accordance with the terms of his contract.[5] SXIQ challenges this finding. It submits that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] VSC 429
Decision Date: 28 June 2019

CaseChat Overview and Summary

Sxiq Pty Ltd brought a claim against Kalmus for his role in creating false invoices that artificially inflated the company's revenue prior to the end of the financial year. The case was heard and determined in the Magistrates' Court of Victoria, and subsequently appealed to the Supreme Court of Victoria. The central issue in the appeal was whether the grounds for appeal presented a question of law and whether the magistrate erred in deciding that Kalmus' conduct did not warrant his summary dismissal.

The Supreme Court considered whether the appeal grounds correctly identified a legal question, specifically whether the magistrate had erred in their assessment of Kalmus' conduct. The Court found that the appeal grounds did indeed present a question of law, as they challenged the magistrate's decision on the basis of legal error. The appeal contended that Kalmus' actions constituted a serious breach of trust and duty, justifying his summary dismissal under the relevant provisions of the Magistrates' Court Act 1989.

The Court examined the magistrate's findings and concluded that there had been a legal error in not recognising the gravity of Kalmus' conduct. The Court held that the magistrate had erred in their assessment and that Kalmus' actions warranted summary dismissal. Consequently, the appeal was allowed, and the decision of the Magistrates' Court was set aside.

The Supreme Court of Victoria ordered that Kalmus be summarily dismissed from his position. The Court's decision emphasised the importance of recognising and addressing serious breaches of trust and duty within corporate structures, highlighting the need for appropriate legal consequences to be imposed.

Orders