Sxiq Pty Ltd v Kalmus
[2019] VSC 429
•28 June 2019
| 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 the Magistrate misapplied the law relating to summary dismissal of an employee on the grounds of serious misconduct.[6] For the reasons which follow, I accept this submission. The appeal will be upheld and the orders made on 16 August 2018 will be set aside.
[4]Ibid [116].
[5]Ibid [118].
[6]Appellant, ‘Notice of Appeal’, 30 August 2018, 2.
Does SXIQ’s notice of appeal raise a question of law?
Mr Kalmus, who appeared on his own behalf, submitted that the grounds in SXIQ’s notice of appeal ‘are in truth complaints about factual findings made by the Magistrate, including her ultimate finding that summary dismissal was not justified.’[7]
[7]Respondent, ‘Outline of Submissions’, 23 April 2019, 2.
Whether a particular evaluative judgment is reasonably open on the facts of a particular case is a question of law.[8] Further, where the facts as found support the legal description given to them is a question of law.[9] This principle is not confined to the question of whether the facts as found answer a statutory description or satisfy statutory criteria. It extends to whether the facts as found can support the legal description given to them.[10] The question of whether the facts as found by the Magistrate support a finding that Mr Kalmus did not engage in serious misconduct within the meaning of clause 19 of his contract of employment is a question of law.[11]
[8]Comcare v PVYW (2013) 250 CLR 246, 297 [142] (Gageler J).
[9]Vetter v Lake Macquarie City Council (2001) 202 CLR 439, 450 [24] (Gleeson CJ, Gummow and Callinan JJ).
[10]Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2014] VSCA 353, [169] (Whelan JA).
[11]Amaca Pty Ltd v Frost (2006) 67 NSWLR 635, 646 [55] (Spigelman CJ); Collector of Customs v Agfa–Gevaent Ltd (1996) 186 CLR 389, 394–5 (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ).
Background
The background to the proceeding in the Magistrates’ Court is not contentious. It was summarised by Her Honour as follows:
The defendant, SXIQ Pty Ltd, formerly known as Southern Cross Computers Systems Pty Ltd (Southern Cross) was established in around 1981. The plaintiff, Mark Kalmus, became its sales director in 1996 and its chief executive officer in 2003.
In 2006, Mr Kalmus and his business partner, Chris Palmer, bought the shares in Southern Cross through their respective companies, Mandossa Pty Ltd (Mandossa) and Lendossa Pty Ltd (Lendossa). At the time, Mr Kalmus was the sole director of Mandossa, which owned 50% of the ordinary shares in Southern Cross and Mr Palmer was the sole director of Lendossa, which owned the other 50% of shares. Mandossa is also apparently the trustee of Mr Kalmus’ family trust.
Mr Kalmus and Mr Palmer were also directors of Southern Cross at the time and were appointed as secretaries in 2007.
In May 2016, Mandossa and Lendossa agreed to sell 80% of their shares in Southern Cross to Ingenio Pty Ltd (Ingenio). Ingenio’s sole director is John Hanna.
The sale of Mandossa and Lendossa’s shares to Ingenio was completed in late June 2016. Mandossa and Lendossa each retained 20% of their shares in Southern Cross.
Accordingly, at present, Ingenio owns 80% of the shares in Southern Cross and Mandossa and Lendossa each own 10% of the shares in Southern Cross.
According to the ASIC current and historical extract for Southern Cross, Mr Hanna also became registered as a director and the secretary of Southern Cross on 29 June 2016. Mr Kalmus remained a director of Southern Cross until 8 December 2016 and a secretary until 28 June 2016. Similarly, Mr Palmer remained a director until 9 November 2016 and a secretary until 28 June 2016.
Mr Kalmus was also offered a twelve month employment contract with Southern Cross in May 2016. Broadly speaking, the rationale behind Southern Cross’ decision to employ Mr Kalmus as director of business operations was to ensure a smooth transition after Ingenio became the majority shareholder of Southern Cross and Mr Hanna became the managing director.
Whilst the offer of employment stated that the start date was 1 June 2016, the start date was delayed until late June 2016 or early July 2016, because the completion of the sale of the shares was delayed until around this time.
Mr Kalmus’ employment contract was subsequently terminated by Southern Cross without notice as of 6 February 2016 [sic] because Southern Cross had formed the view that Mr Kalmus had engaged in serious misconduct.[12]
[12]Kalmus v SXIQ Pty Ltd (Magistrates’ Court of Victoria, Magistrate J Grainger, 15 August 2018) [1]–[10] (emphasis in original).
In the current proceeding, Mr Kalmus put in issue the date on which he commenced employment as Director of Business Operations. He submitted that he commenced employment in this position on or about 30 June 2016.[13] The Magistrate concluded that Mr Kalmus commenced employment as Director of Business Operations on 29 June 2016.[14] Immediately prior to this time he had been employed as Chief Executive Officer. Her Honour’s conclusion that Mr Kalmus commenced employment as Director of Business Operations on 29 June 2016 was plainly open to her.
[13]Respondent, ‘Outline of Submissions’, 23 April 2019, 2.
[14]Kalmus v SXIQ Pty Ltd (Magistrates’ Court of Victoria, Magistrate J Grainger, 15 August 2018) [81].
The ScotPac debtor finance facility
Pursuant to a deed dated 5 May 2015, SXIQ (under its former name Southern Cross Computer Systems Pty Ltd) entered into a debtor finance facility with ScotPac (‘the deed’).[15] Under the deed, ScotPac agreed to pay SXIQ 80 per cent of the value of invoices for goods purchased by or services provided to customers of SXIQ. SXIQ was liable to repay the amount advanced on the invoices within 90 days of receipt of payment. Upon receiving full payment from its customer for the goods purchased, SXIQ was liable to remit the 20 per cent balance to ScotPac.
[15]Exhibit MAS-1 to the affidavit of Mark Andrew Schofield sworn 6 September 2018, 1–41.
Pursuant to clause 22.1 of the deed, SXIQ provided the following warranties to ScotPac:
(b)Any copy invoice given to ScotPac is exactly the same as the invoice given to the customer or, if the invoice is a recipient created tax invoice, is exactly the same as the invoice given by the customer.
(c)The client has performed all obligations required for the enforcement of the account.
(d)The account is an existing, legal, valid, binding, undisputed and enforceable payment obligation for its net value as evidenced by an invoice, is payable in full by the customer by no later than the recourse date and is capable of being transferred by the client to ScotPac.[16]
[16]Ibid 13 (emphasis in original).
…
(k)The goods purchased by, or the services provided to, the customer are in accordance with the agreement, are the goods or services described in the invoice and they have been delivered to and accepted by the customer or have been fully performed. The customer is satisfied with the goods or services.
(l)The client has paid on time all fees, duties, taxes (including GST) and charges to enable the goods to be delivered to the customer or the services to be performed.[17]
…
(s)The invoice is dated no earlier than the date the goods were accepted by the customer or performance of the services was completed, and no later than seven days after that date.[18]
[17]Ibid (emphasis in original).
[18]Ibid 14 (emphasis in original).
Clause 33.3(c) of the deed provides that ScotPac may terminate the deed immediately, without notice, if:
A representation or warranty by a transaction party under a transaction document or any other agreement with ScotPac or any entity which is related to ScotPac is not true or is misleading in any material respect.[19]
[19]Ibid 20 (emphasis in original).
Under the deed, the definition of ‘transaction party’ includes SXIQ.[20] The definition of ‘transaction document’ includes the deed.[21]
[20]Ibid 35, 37.
[21]Ibid 35.
The Telstra invoices
In late June 2016, Telstra placed an order for 1020 computer monitors to be provided by SXIQ. Invoices in respect of 475 of the monitors were in evidence in the current proceeding (‘Telstra invoices’).[22] The invoices record the delivery address for Telstra as being either ‘Cato Lane/Level 15 Hawthorn East’[23] or ‘Cato Lane/Level 20 Hawthorn East’.[24]
[22]Ibid 114–126.
[23]Ibid 127–130.
[24]Ibid.
The Magistrate concluded that the ‘billing and delivery address on the invoices for the monitors was clearly the address for Southern Cross’ warehouse, not Telstra’s address, and at no stage during the hearing did Mr Kalmus suggest that this was a normal business practice.’[25] The Magistrate also concluded that ‘there was no evidence before me that Telstra had asked to be pre–invoiced for the monitors or had asked Southern Cross to store the monitors on its behalf or agreed to this being done.’[26] There was no evidence that the invoices which were prepared in late June 2016 were ever sent to Telstra.[27] The monitors were eventually delivered to Telstra in February 2017.[28]
[25]Kalmus v SXIQ Pty Ltd (Magistrates’ Court of Victoria, Magistrate J Grainger, 15 August 2018) [29].
[26]Ibid [32].
[27]Ibid.
[28]Ibid [31].
There is no express finding by the Magistrate as to the value of the 1020 monitors which were the subject of the invoices prepared in late June 2016. Mr Cawthorn, who appeared for SXIQ, submitted that the value was approximately $350,000.[29] The value of the invoices for the 475 monitors which are in evidence in the current proceeding is approximately $115,000.[30] It is clear that the value of the invoices for all 1020 monitors exceeded $290,000.[31]
[29]Transcript of proceeding (4 June 2019), 14.17, 29.12–29.14.
[30]Exhibit MAS-1 to the affidavit of Mark Andrew Schofield sworn 6 September 2018, 114–130.
[31]Ibid, 157–158.
The Telstra invoices email chain
The Magistrate made detailed findings regarding a chain of emails created in late June 2016 which related to the Telstra invoices. Her Honour’s findings were as follows:
On 28 June 2016 at 7:35pm, Andrew Harris, an employee of Southern Cross, sent an email to Chris Palmer in relation to some (R30) laptops, monitors, docks, cameras and SSDs (solid-state drives) that Telstra had ordered from Southern Cross, which apparently had yet to be delivered and which Southern Cross had yet to invoice Telstra for.
Mr Harris’ email updated Mr Palmer in relation to the state of the orders. In relation to the monitors, the email stated:
Monitors = [1020] (SCCS [Southern Cross] has 209 in stock). The rest are on hold at Synnex for SCCS. To my knowledge we can request these to be sent to us as they have been reserved for SCCS.
Buy – $145
Sell – $220
GP = $76,500
At the end of the email, Mr Harris asked Mr Palmer ‘how would you like us to tackle the above in relation to end of year invoicing’. Mr Palmer answered in an email sent at 7:59pm, ‘Invoice as much as humanly possible’.
Whilst these emails were not sent to Mr Kalmus, when Mr Harris replied to Mr Palmer the following morning at 8:08am, he CC’d Mr Kalmus into that email, which included the earlier emails between him and Mr Palmer. Mr Harris also CC’d Susan Poulter and Peter Bain, other employees of Southern Cross. Mr Harris’ email stated:
CP,
Will do.
Susan/Peter, please let me know this morning if you need us speaking with Synnex about the monitors. Credit limits/Terms etc. As per the below they are in stock at Synnex reserved for SCCS [Southern Cross].
At 8:58am Susan Poulter sent an email to Andrew Harris and Chris Palmer and CC’d Peter Bain Mark Kalmus and Andrew Stoker. Her email stated:
Andrew,
Now onto the other items:
We don’t have the monitors on order with Synnex. Zoran urgently needs to provide confirmed buy prices and bid details so they can be ordered. Your team must also ask Synnex and hand–hold them about delivering directly to our customer – ‘Telstra’ at Cato Lane Hawthorn East. The truck can actually come to Southern Cross’ warehouse at 2 Hall St, and will then be escorted over to the rear of 3 Hall Street (otherwise known as Cato Lane) to unload there, but the delivery advice and consignment note must not say it is being delivered to Southern Cross or 2 or 3 Hall St. It could perhaps state ‘call Southern Cross on 03 9804 1700 to arrange a site access’. Synnex must also deliver to us in full today/tomorrow. Philip will need to urgently send the invoice details to Peter so he can arrange a matching payment.
You’ve listed the docks and the cameras – is there any chance we will get them tomorrow if we order today? Are they even in country? If there is a chance of getting them tomorrow, also need buying details etc urgently.
Thanks
In an email sent at 1:03pm later that day, Ms Poulter reiterated her instructions in relation to delivery of the monitors. Her email stated:
I asked Bill to work with Synnex on the odd delivery arrangement and urgency for the monitors, and he and Andrew Stoker were very helpful working through it all. The order for the required monitors has been placed with Synnex and Andrew S was following up to ensure they understood/recalled that they must be delivered to ‘Cato Lane’ tomorrow. Andrew S will also be arranging for the monitors and USP docks we have here for the same set of orders to be invoiced and delivered to ‘Cato Lane’.
Ms Poulter’s email also provided the recipients with an update in relation to the orders for the laptops (R30) and the SSDs (solid-state drives).
The next email in this chain of emails was from Andrew Stoker, which was sent at 8:40pm on 29 June 2016 to Susan Poulter, Andrew Harris, Chris Palmer, Peter Bain and Mark Kalmus. In relation to the monitors, Mr Stoker wrote:
Hi all,
Here is the [sic] my take on where we are at with Telstra at the moment. Synnex have promised the hot desk Samsung monitor delivery tomorrow, what we don’t know is if it’s all of them together or split delivery across 2 days as some had to come from interstate.
A little later, at 8:53pm, Mr Kalmus sent an email to Mr Stoker stating, ‘Many thx for your efforts stokes’.
Mr Kalmus also sent an email to Susan Poulter, Andrew Harris, Andrew Stoker, Chris Palmer and Peter Bain on 30 June 2016 at 8:57pm that stated, ‘Thx Harro’ in reply to an email from Mr Harris informing Mr Kalmus and the other employees who were part of the email chain that in relation to the monitors, ‘400 coming from Synnex Melbourne on a Synnex truck today’ and that the remaining which were ‘coming from Synnex Sydney was due to leave yesterday (Bill is checking the status from Synnex this morning)’.
Mr Hanna gave evidence that when these emails came to his attention in early January 2017, he formed the view that the invoice for the monitors contained a false billing and delivery address and were, accordingly, false invoices.[32]
[32]Kalmus v SXIQ Pty Ltd (Magistrates’ Court of Victoria, Magistrate J Grainger, 15 August 2018) [15]–[25] (emphasis in original).
The Magistrate made the following findings in respect of the Telstra invoices and Mr Kalmus’ knowledge thereof, as well as the subsequent lodging of the invoices with ScotPac for payment:
·The billing and delivery address for Telstra was false, in the sense that it was deliberately untrue.[33]
[33]Ibid [35].
·Save for the billing and delivery address, in all other respects the invoices were genuine.[34] The invoices referred to genuine purchase orders from Telstra.[35]
[34]Ibid [39].
[35]Ibid [40].
·The invoices could not fairly be characterised as false.[36]
[36]Ibid [42].
·Mr Kalmus was not involved in creating false invoices or in a scheme to create false invoices. He did not approve such a scheme and he was not involve in presenting false invoices to ScotPac.[37]
·In the email which he sent at 8.53pm on 29 June 2016 and 8.57pm on 30 June 2016, Mr Kalmus was expressing his approval of the steps being taken to get the monitors delivered to SXIQ by the end of the 2015/2016 financial year and to create invoices for those monitors, including Ms Poulter’s direction to insert a false billing and delivery address for Telstra in the invoices for the monitors, which gave the false impression that the monitors had been delivered to Telstra.[38]
·There was undisputed evidence that, in late June 2016, Mr Kalmus had a financial interest in ensuring that SXIQ’s revenue for the 2015/2016 financial year was as large as possible as a result of the share sale and purchase agreement between Mandossa and Ingenio.[39]
·Mr Kalmus was involved in and approved the scheme to create the invoices with the false delivery address.[40]
·Mr Kalmus was involved in and approved the invoices being presented to ScotPac.[41]
·SXIQ breached the warranties in the finance deed when its employees provided the invoices to ScotPac for payment as the monitors had not been delivered to Telstra and accepted by them and, accordingly, all obligations required for the enforcement of the account had not been performed.[42]
·ScotPac made a payment to SXIQ when it was not properly due.[43]
·The payment from ScotPac artificially increased SXIQ’s revenue for the 2015/2016 financial year.[44]
·Mr Kalmus was aware that ScotPac was going to make a payment when it was not properly due and that this would artificially increase SXIQ’s revenue for the 2015/2016 financial year.[45]
[37]Ibid [43].
[38]Ibid [51].
[39]Ibid [52].
[40]Ibid [53].
[41]Ibid [58].
[42]Ibid [65].
[43]Ibid [67].
[44]Ibid [70].
[45]Ibid [72].
The Magistrate’s conclusion that SXIQ was not justified in summarily dismissing Mr Kalmus was based upon the following findings:
The extent of Mr Kalmus’ involvement in the scheme to create the invoices with the false billing and delivery address was minimal. There was no evidence that Mr Kalmus initiated the scheme or directed any of Southern Crosses’ [sic] employees to create invoices with false billing and delivery addresses or that he directed anyone to provide those invoices to Scottish Pacific Finance for payment at a time when it was not properly due.
Rather, the evidence shows that Mr Kalmus was only indirectly involved in the scheme to create the invoices with the false billing and delivery address, having read the emails in the email chain and having thanked the relevant employees for their efforts.
Similarly, on the evidence before me, Mr Kalmus’ only involvement in the invoices being presented to Scottish Pacific Finance was an indirect involvement arising from having read the emails about the scheme and, being aware of the terms of the finance deed, having expressed his approval of actions that he knew would lead to the invoices being provided to Scottish Pacific Finance for payment before that payment was properly due by thanking his employees for their efforts.
Whilst I accept Mr Hanna’s evidence that he arranged for new invoices to be created and for the profit in relation to the monitors supplied to Telstra to be transferred into the financial accounts for the 2016/2017 financial year and that this evidence was not challenged by Mr Kalmus, there was no evidence before me that Southern Cross was compelled to take such action or that such action was necessary from an accounting or legal perspective, let alone any expert evidence to this effect. In addition, there was no evidence from Telstra that it had any complaints or concerns in relation to when Southern Cross bought the monitors on its behalf or how and when it was invoiced for the monitors nor was there any evidence from Scottish Pacific Finance that it had any complaints or concerns about how and when the invoices for the monitors were provided to it and when it made the payment to Southern Cross.
In addition, whilst I am satisfied that the payment from Scottish Pacific Finance artificially increased Southern Cross’ revenue for the 2015/2016 financial year, I am not satisfied that this gave rise to a conflict between Mr Kalmus’ interests and his duty to Southern Cross, particularly as it does not appear that his conduct resulted in any negative financial or legal consequences for Southern Cross or damaged Southern Cross in any way that was so destructive of the confidence between Southern Cross and Mr Kalmus that it would have been unreasonable to require Southern Cross to continue to employ Mr Kalmus whilst he was given the requisite notice under clause 19 of the terms of employment.
If there were any negative financial or legal consequences flowing from this scheme, these appear to relate to the sale of Mandossa and Lendossa’s shares in Southern Cross to Ingenio under the share sale and purchase agreement.
Further, whilst I accept that when Mr Hanna learnt of the scheme to invoice Telstra for the monitors before they were delivered to Telstra, this diminished his trust and faith in Mr Kalmus, I am satisfied that this was primarily because of its possible impact on the share sale and purchase agreement between Ingenio and Mandossa and Lendossa rather than its possible impact on Southern Cross.
Mr Kalmus’ conduct was also isolated, which Gillard J in Rankin observed will usually not be sufficient to justify immediate dismissal.[46]
[46]Ibid [108]–[115].
Mr Kalmus’ summary dismissal was a result of SXIQ exercising a right of termination under clause 19(c) of his contract of employment. That clause provided:
Subject to clause 20.4 the employment may be terminated by:-
(c)immediately if the employee is guilty of serious misconduct, that is, misconduct of a kind that it would be unreasonable to require the employer to continue the employment during the requisite period of notice.[47]
[47]Ibid [82].
Her Honour concluded that serious misconduct justifying summary dismissal for the purposes of clause 19(c) corresponds with serious misconduct which justifies summary dismissal at common law.[48] This finding is not challenged in the present proceeding.
[48]Ibid [89].
Summary dismissal is justified by conduct of an employee which is incompatible with the due or faithful discharge of the employee’s duty or inconsistent with the relationship of trust and confidence between employer and employee.[49]
[49]Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66, 81 (Dixon and McTiernan JJ); Concut Pty Ltd v Worrell (2000) 176 ALR 693, 700–701 [25]–[26] (Gleeson CJ, Gaudron and Gummow JJ); Downer EDI Ltd v Gillies [2012] NSWCA 333, [83] (Allsop P, Macfarlan and Meagher JJA agreeing).
Immediately prior to 28 June 2016, Mr Kalmus was the CEO of SXIQ. On 29 June 2016 he commenced employment in position of Director, Business Operations. As such, he occupied a senior management position. Mr Kalmus had knowledge of the proposal to create the Telstra invoices with a false delivery address. He could have taken steps to stop the scheme but did not do so. He had a financial interest in ensuring that SXIQ’s revenue for the 2015/2016 financial year was as large as possible. The false delivery address on the invoices was intended to create the false impression that the goods had been delivered to Telstra, thereby enlivening a right to receive payment from ScotPac. In fact, as the goods had not been delivered, there was no right of payment. The provision of the false invoices to ScotPac was a breach of the warranties in the deed set out above. These breaches conferred upon ScotPac the right to summarily terminate the deed.
Her Honour’s finding that the invoices could not fairly be characterised as false was not open on the evidence. The creation of the false invoices was dishonest conduct. The reason for the inclusion of a false delivery address was to elicit a substantial payment from ScotPac in circumstances when the payment was not due because the goods had not in fact been delivered to Telstra.
The Magistrate concluded that Mr Kalmus had an ‘indirect involvement’ in the scheme to produce the Telstra invoices and then present them to ScotPac for payment.[50] This finding was not open having regard to the following matters. First, as a senior manager, Mr Kalmus could have taken steps to stop the scheme proceeding. Second, he should have taken such steps. The presentation of the false invoices to ScotPac exposed SXIQ to a significant risk. It conferred upon ScotPac the right to terminate the debt financing facility. Third, irrespective of whether Mr Kalmus’ involvement in the scheme was direct or indirect, his involvement constituted a conflict of interest as between his personal financial interests and those of the company. Mr Kalmus had a direct financial interest in maximising the company’s revenue prior to 30 June 2016.
[50]Kalmus v SXIQ Pty Ltd (Magistrates’ Court of Victoria, Magistrate J Grainger, 15 August 2018) [110].
The Magistrate placed weight upon the absence of evidence of complaint from Telstra or ScotPac.[51] The absence of evidence of complaint is of marginal relevance. ScotPac made significant payments to SXIQ which it was not liable to make under the deed because the monitors had not been delivered to Telstra. As a result, ScotPac had a right to terminate the deed as a consequence of conduct which Mr Kalmus knew of and endorsed and which conferred upon him a financial benefit.
[51]Ibid [111].
The Magistrate considered that any negative or legal consequences flowing from the scheme related to the sale of shares under the share sale and purchase agreement.[52] This reasoning fails to take into account the breach of warranties and resulting right of termination of the deed. This was a significant adverse legal consequence flowing directly from the false invoices.
[52]Ibid [113].
The Magistrate concluded that Mr Kalmus’ conduct was isolated.[53] Her Honour referred to the judgment of Gillard J in Rankin v Marine Power International Pty Ltd[54] as authority for the proposition that isolated conduct will not usually suffice to justify summary dismissal.[55]
[53]Ibid [115].
[54][2001] VSC 150.
[55]Ibid [250].
It is questionable whether Mr Kalmus’ conduct is properly characterised as isolated conduct. It involved conduct in respect of the preparation of the invoices and their subsequent presentation to ScotPac for payment. However, even if the conduct is characterised as being isolated, it justified summary dismissal. Mr Kalmus’ involvement in the false invoice scheme involved conduct incompatible with the faithful discharge of his duty and was inconsistent with the relationship of trust and confidence between him and SXIQ.
Conclusion
Mr Kalmus engaged in misconduct of such a kind that it would have been unreasonable to require SXIQ to continue his employment during the three-month notice period. In coming to a contrary conclusion, the Magistrate erred in law. The appeal will be upheld. I shall provide the parties with an opportunity to make submissions on the form of orders to give effect to these reasons, and also on the costs of the appeal.
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