Tullio Cofrancesco v Parramatta Leagues Club Ltd T/A Parramatta Leagues Club Limited
[2010] FWA 8954
•30 NOVEMBER 2010
Note: An appeal pursuant to s.604 (C2010/5943) was lodged against this decision - refer to Full Bench decision dated 28 March 2011 [[2011] FWAFB 1450] for result of appeal.
[2010] FWA 8954 |
|
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Tullio Cofrancesco
v
Parramatta Leagues Club Ltd T/A Parramatta Leagues Club Limited
(U2010/8074)
COMMISSIONER RAFFAELLI | SYDNEY, 30 NOVEMBER 2010 |
Termination of employment - Chief Executive Officer, Chief Financial Officer - statutory and other obligations of senior officer.
[1] This decision concerns an application by Mr Tullio Cofrancesco (the Applicant) alleging that his termination by his former employer, Parramatta Leagues Club Limited (the Respondent) was unfair.
[2] Section 385 of the Fair Work Act 2009 (the Act) defines unfair dismissal. In that regard, there is no dispute that the Applicant was dismissed, that the small business fair dismissal code does not apply and that this was not a case of genuine redundancy. The question before me is whether the dismissal was harsh, unjust or unreasonable.
[3] There is some necessary background to the matter. The Respondent is a large and prominent club. For many years the Chief Executive Officer was Mr Denis Fitzgerald. The Chief Financial Officer was the Applicant. The Chief Executive Officer and Chief Financial Officer and other senior managers were ultimately under the control of the Respondent’s Board of Directors.
[4] However, not surprisingly, and given the length of Mr Fitzgerald’s period as Chief Executive Officer, the majority of the Respondent’s Board of Directors reflected a group that supported Mr Fitzgerald’s management of the Respondent’s affairs. There was, in short, a “Fitzgerald team” that was supportive of the Chief Executive Officer and senior managers over many years. In recent times, some opposition emerged to Mr Fitzgerald.
[5] In elections for the Respondent held in late April 2009, the pro-Fitzgerald Board members were defeated and the majority of the Board reflected persons who were not supportive of Mr Fitzgerald’s management of the Respondent. Soon after the taking over the running of the Respondent by the new Board in May 2009, Mr Fitzgerald’s services as Chief Executive Officer came to an end.
[6] The Applicant, although long associated with Mr Fitzgerald, was given the opportunity to take the role as Chief Executive Officer. He did this in an acting role and he was later confirmed in that position.
[7] Soon after taking over, the new Board took steps to have the firm of Findlay and Associates provide a report in respect of any inappropriate use of club resources in the lead up to the 2009 elections. Mr Jude Findlay of Findlay and Associates provided a report to the Respondent in May 2009. It found, amongst a number of things, that club resources had been used inappropriately to organise a promotion amongst members of the Asian community. This aimed to increase the level of electoral support for Mr Fitzgerald’s Board supporters, known as “Team PLC”. The promotion was largely centred around the club restaurant, known as Tingha palace. That report made adverse findings about Mr Fitzgerald’s participation in that promotion. No findings were made in respect of the Applicant.
[8] Findlay and Associates were later engaged to provide a review of the organisational structure of the Respondent. During these latter investigations, it came to light that Mr Fitzgerald had retained legal services and expended club money in a private defamation matter and possibly without any, or any proper, Board approval. Because of the Applicant’s position as Chief Financial Officer at the time, he became the focus of Mr Findlay’s investigation.
[9] On Friday, 26 March 2010, the Applicant was interviewed by Mr Belling, solicitor for the Respondent, and Mr Findlay. The interview concerned the outcome of Mr Findlay’s investigation. It raised a number of allegations concerning the Applicant’s conduct when he was the Chief Financial Officer and leading up the Respondent’s elections. It also explored his conduct since he became Chief Executive Officer.
[10] There were a range of meetings and correspondences between the parties, and I will return to those when addressing the broad issue of due process. On 9 April 2010, the Applicant received correspondence from the Respondent which alleges that he had been involved in expending club monies and resources in support of the electoral ticket and not for the benefit of the Respondent or its members. There were a range of other allegations.
[11] One of these allegations and findings was “facilitating the payment to F.W Ewart and Ewart of (at least) $39, 000 on or about 4 May 2010 in circumstances where Mr Cofrancesco knew or ought to have known those payments were unauthorised or even if authorised were paid in breach of section 10(1)(i) of the Registered Clubs Act”.
[12] As a result of that and other findings, the Applicant’s contract of employment was terminated with immediate effect on 9 April 2010.
[13] The Respondent acted on the basis of findings in respect of a range of conduct by the Applicant. This included failure to be honest with the Respondent after he became Chief Executive Officer. The Respondent does not seem to have acted on the basis of any single transgression of the Applicant.
[14] I approach my task by examining just one of the allegations against the Applicant. If that conduct provides a valid reason for termination, it is not necessary for me to consider other transgressions. I have decided to concentrate on the legal expenses paid for the benefit of Mr Fitzgerald.
[15] At or about late 2008, News Limited published various articles critical of Mr Fitzgerald. Mr Fitzgerald considered taking defamation actions against News Limited. Minutes of the Respondent’s Board meeting on 18 December 2008, indicate that it resolved to engage the firm Clayton Utz for the limited purpose of obtaining preliminary advice in relation to alleged defamatory material concerning Mr Fitzgerald.
[16] According to the evidence of Mr Findlay, which is set out in paragraph 73 of his written statement (Exhibit PLC 4), notwithstanding the limited retainer, legal fees were incurred and paid by the Respondent in the following manner:
“(a) at a meeting of the Board of Directors Club on 23 December 2008, an invoice of Clayton Utz was tabled, dated 19 December 2008, in an amount of $8, 250.00;
(b) on 18 February 2009, a cheque requisition was drawn in the sum of $8250 in favour of Clayton Utz;
(c) on 27 February 2009, a second invoice in the amount of $440.00 was rendered by Clayton Utz;
(d) on 18 March 2009 a reminder notice was rendered by Clayton Utz in relation to their invoice dated 27 February 2009 in the sum of $440.00;
(e) on 23 March 2009, a cheque requisition was drawn in the sum of $440.00 in favour of Clayton Utz;
(f) on 18 March 2009, the Club’s solicitors rendered an invoice dated 18 March 2009 in an amount of $6,230.96 in relation to Mr Fitzgerald’s defamation proceedings;
(g) on 23 March 2009, a cheque requisition was drawn in the sum of $6,230.96 in favour of F.W Ewart and Ewart;
(h) on 1 May 2009, the Club’s solicitors rendered invoice in the amount of $39,186.00 said to be an account of future fees in relation to Mr. Fitzgerald’s defamation proceedings;
(i) on 4 May 2009, a cheque requisition was drawn in the sum of $44,526.63 in favour of F.W Ewart and Ewart.”
[17] According to the evidence of Mr Findlay (which was not challenged in this regard) only the amount of $8,250 referred to in [16] (a) and (b) above was subject of approval by the Board.
[18] The attachment to Mr Findlay’s statement included correspondence from F.W Ewart and Ewart (the Respondent’s solicitors at the time) of 1 May 2009 addressed to Mr Fitzgerald. It included as follows:
“Dear Denis
RE: NEWS LIMITED
--------------------------------------------------------------------------------------------------------
We refer to the writer’s discussion with you and confirm the anticipated costs related to the work completed to date is made up as follows:
Mr P Gray, SC | $4, 950.00 |
To amount of unrendered costs to date, tax invoice to be supplied from Clayton Utz. | $18,000.00 |
Unrendered costs of this firm, tax invoice to be supplied | $2,200.00 |
$25,150.00 | |
The projected costs for senior counsel to settle the draft Statement of Claim, as referred to in the recent e-mail is basically calculated as follows: | |
Anticipated costs of Mr Gray, settling 1 day plus reading between $5,000-$8,000, say | $8,000.00 |
Anticipated costs of Clayton Utz | $2,500.00 |
Filing fee | $1,436.00 |
Anticipated company search fees | $100.00 |
Estimated costs as to further involvement in the firm, Including Conferences and attendances, say | $2,000.00 |
Total | $39,186.00 |
For the purpose of enabling costs to be paid upon tax invoices being received, taking into account the figure set out above, it may be appropriate if we receive a cheque payable to the firm’s trust account in the sum of $39,000.00, so the same may be paid immediately upon receipt.
We shall be pleased to discuss this matter should you so desire.
Yours truly
F W Ewart & Ewart”
[19] As can be seen from [16] above, that amount was paid on 4 May 2009.
[20] It is clear that, in addition to the payment of 4 May 2009 being without authorisation by the Board, it was for costs unrendered to date and for projected costs.
[21] The payments have been sought and made in some haste, that is, before an invoice from Clayton Utz had ever been received. Even more extraordinary is the payment for anticipated costs.
[22] The evidence was that the invoice from the Respondent’s solicitors was issued two days after the result of the Board elections were declared. Payment was made on 4 May 2009, the day before the new Board took control.
[23] It was the evidence of Mr Findlay that Mr Fitzgerald may have used his position as an employee of the Club and as its Chief Executive, to use Club money for his own purposes without prior approval from the Board of Directors. Further, that the timing of the issuing and payment of the invoice for future work, was designed to ensure that the payment was made prior to the investiture of the new Board.
[24] It was also the evidence of Mr Findlay that in his role as Chief Financial Officer of the Respondent, the Applicant had facilitated the payment by the Respondent of the legal fees (set out in [16]) in connection with Mr Fitzgerald’s defamation proceedings.
[25] It was also Mr Findlay’s evidence that his investigation revealed that in respect to the cheque in the sum of $6,230.96 in favour of F.W Ewart and Ewart, the Applicant had directed another employee of the Respondent, to draw the cheque and that the Applicant was one of the signatories to the cheque. In respect to the cheque in the sum of $44,526.63 in favour of F.W Ewart and Ewart, the Applicant had directed another employee of the Respondent, to draw the cheque and that the Applicant was one of the signatories to the cheque.
[26] According to his written statement (Exhibit C1) the Applicant said that he was not aware that the payment to the Respondent’s solicitors were in relation to a private/personal matter of Mr Fitzgerald. The invoices were authorised for payment by Mr Fitzgerald and processed in the normal manner by the finance department.
[27] It was also the evidence of the Applicant that it was the custom and/or protocol that the Chief Executive Officer had the authority to approve the payment of legal expenses without reference to the Board. He also indicated that the procedure for the processing of payments required a member of management and a director on the Board to countersign each cheque. Each payment was to contain supporting documentation, normally an invoice approved for payment by the responsible manager, that is, either the Chief Executive Officer or the manager of the relevant section.
[28] It was also his oral evidence that if requests for payment were properly and correctly authorised, and there was no reason to question anything about the payment, the payments were processed.
[29] He reiterated that he had done nothing wrong in respect of those cheques. He had followed the established procedures and protocols in processing all those payments. He did not recall any thoughts at the time when the cheques were being signed that there was anything untoward.
[30] In his cross-examination, he agreed that as the Chief Financial Officer of the Respondent, he had an obligation to ensure corporate governance compliance and internal audit practice.
[31] It was his responsibility to ensure that all payments were correctly and properly authorised. He also agreed that he had to apply some assessment of the appropriateness or otherwise of significant expenditure by the club. He agreed he had to ensure that the monies were being spent for the Respondent’s benefit, and that it was not being expended for the personal benefit of a member of the Respondent or a director of the Respondent or an employee of the Respondent.
[32] In respect of cheques, he explained that the payments would come his way after it had been approved by a relevant manager. All the paperwork would be attached, that he would have viewed it and would make sure that the authorisation was done correctly and he would then have countersigned the cheque with a director. He explained that if it looked like a legitimate business expense and properly authorised, he would have signed it provided it was within the authorisation limits of the relevant manager.
[33] He indicated that he was not aware that the cheque for $39,000 payable to F.W Ewart and Ewart was in relation to Mr Fitzgerald’s personal defamation action. It was not unusual for Mr Fitzgerald to approve legal payments and certainly $39,000 was within his authority.
[34] He indicated that, given the way it was presented, it appeared to be a legitimate business expense. He did not think it was appropriate to enquire about it at the time.
[35] He also indicated that alarm bells did not ring for him even though the invoice was issued essentially the day after the election results were known. Nor did the fact that the payment was being made on 4 May 2009, the day prior to the investiture of the new Board or that the existing Board was in caretaker mode. In his view, Mr Fitzgerald was still the Chief Executive Officer, notwithstanding the situation with the new Board.
[36] I was taken to the Award Flexibility Agreement dated 9 December 2008 in which the responsibilities and duties of the Applicant, as Chief Financial Officer, were outlined. That employment agreement contains a position statement and duty statement which includes at clause 6.3:
“The manager shall be responsible for providing the Board of Directors advice on the implementation and adherence to the code of practice guidelines as amended from time to time by Clubs NSW.”
[37] The job description attached to the agreement included the following tasks:
“Ensures the club implements and complies will all relevant legislative compliance matters, including Clubs NSW best practice guidelines, best practice corporate governance practices.
Maintains knowledge of corporate governance, compliance and internal audit standards, practices and procedures.”
[38] I was also taken to the relevant provision of the Registered Clubs Act 1976 (NSW) at section 10(1)(i). This provides that:
“A member of the club, whether or not he or she is a member of the governing body, or of any committee, of the club, shall not be entitled, under the rules of the club or otherwise, to derive, directly or indirectly, any profit, benefit or advantage from the club that is not offered equally to every full member of the club.”
[39] The Applicant had indicated in cross-examination that he agreed that he was aware of and understood his obligations under that section of the Act.
[40] On the basis of the evidence before me, it is clear that the Applicant, aware of his responsibilities to the Respondent, participated in payments of monies belonging to the Respondent for purposes not for the Respondent, and he was aware of that fact.
[41] I consider that his defence that the payments were authorised by Mr Fitzgerald, and were accompanied by invoices and that, therefore, the practice dictated that payments were to be made is disingenuous.
[42] He was not being paid a substantial salary to act as a rubber stamp. He was expected to bring a high degree of scrutiny to his task. He could not be described as a low-level employee following orders.
[43] It beggars belief that he would not have been aware of the inappropriateness of making a large payment on 4 May 2009 in circumstances where:
• he should have known that the payments were not related to any legal action by the Respondent against News Limited (no such action existed);
• the payments were curious in that there were no invoices from the other law firm (Clayton Utz) and some payments were “projected” and “anticipated”; and
• the entire transaction was being effected after the Board elections and prior to the new Board taking over.
[44] In failing to protect the assets of the Respondent and the interests of its members, he breached his obligations to his employer.
[45] The Applicant knew about section 10(1)(i) of the Registered Clubs Act 1976 (NSW) and his obligations to ensure that the Respondent complied with all relevant legislation, best practice guidelines, corporate governance and audit standards.
[46] The Applicant as the Chief Financial Officer of the Respondent was an “officer” of a corporation within the meaning of that term in the Corporations Act 2001. Relevant provisions of that Act are:
“180 Care and diligence - civil obligation only
Care and diligence - directors and other officers
(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a) were a director or officer of a corporation in the corporation's circumstances; and
(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
...
181 Good faith - civil obligations
Good faith - directors and other officers
(1) A director or other officer of a corporation must exercise their powers and discharge their duties:
(a) in good faith in the best interests of the corporation; and
(b) for a proper purpose.
...
182 Use of position - civil obligations
Use of position - directors, other officers and employees
(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a) gain an advantage for themselves or someone else; or
(b) cause detriment to the corporation.”
[47] The Applicant’s actions or failure to act represents a fundamental breach of his obligations including those imposed by legislation.
[48] I find that his conduct amounts to a valid reason for termination, it being a matter for consideration when assessing the question of whether the dismissal was harsh, unjust or unreasonable (section 387(a) of the Act).
[49] As to whether he was notified of that reason, it is clear from the termination letter of 9 April 2010 that “each of the substantive matters...entitles the Club to summarily” terminate his employment. The payments referred to were one of the issues raised by the Respondent.
[50] There is no doubt that the Applicant understood that he was being terminated for, among other things, facilitating the payments associated with Mr Fitzgerald’s personal legal expenses.
[51] As to whether the Applicant was given an opportunity to respond to any reason relating to his conduct (section 387(c) of the Act), the Applicant said that he was essentially ambushed at a meeting with Mr Belling and Mr Findlay on 26 March 2009.
[52] While he may have been surprised at the meeting, it is clear that he was aware that Mr Findlay was carrying out an investigation. Indeed, on 14 January 2010, he had responded in writing to a series of questions put by Mr Findlay. Those questions concerned the payments in question.
[53] In any case, the meeting of 26 March 2009, was followed by several meetings after and other communications. He was soon represented and assisted by the Club Managers’ Association, Australia. His termination on 9 April 2010, followed among other things, a show cause letter of 31 March 2010. This letter included reference to the alleged conduct concerning the payment of Mr Fitzgerald’s legal expenses.
[54] Mr Cooper of the Association made much of the Respondent’s failure to provide particulars of the allegations. In my view, the Respondent was under no obligation to provide the Applicant with all it had. It did provide a clear series of allegations that enabled responses to be made including in its letter to Mr Cooper of 31 March 2010.
[55] I am satisfied that the Applicant was given an opportunity to respond to the allegations.
[56] As to the Applicant not having the opportunity to have a support person (s. 387(d) of the Act), he was alone at the initial meeting on 26 March 2010. However, from then on, the Applicant was allowed to be accompanied by his representative, Mr Cooper. The absence of a representative on 16 March 2010 may nonetheless have slightly disadvantaged him and I have given this consideration.
[57] The matters referred to in section 387(d)(e)(f) and (g) of the Act are not relevant here.
[58] As to section 387(h), I have given consideration to the extensive length of the Applicant’s employment and the impact of termination on him.
[59] On the basis of all the matters to be considered, including the need to ensure that a “fair go all round” is afforded to both the Applicant and the Respondent, I find that the termination of the Applicant was not harsh, unjust or unreasonable.
[60] Given that finding, the application by the Applicant for an unfair dismissal remedy must be dismissed.
COMMISSIONER
Appearances:
P. Cooper of the Club Managers’ Association, Australia, for the Applicant.
C. Magee, of counsel with C. Fleming, solicitor, for the Respondent.
Hearing details:
2010
Sydney:
September 6 & 7
October 21
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