Watts v Cadbury Schweppes Pty Ltd

DECISION NO:147/97

CATCHWORDS

INDUSTRIAL LAW -. TERMINATION OF EMPLOYMENT - complaint of UNLAWFUL TERMINATION - SUMMARY DISMISSAL - CONDUCT AND PERFORMANCE - VALID REASON - SERIOUS MISCONDUCT - OPPORTUNITY TO RESPOND - dishonestly claiming fitness allowance

Workplace Relations Act 1996 (C'th) (formerly Industrial Relations Act 1988) Ss 170DB, 170DC, 170DE(1), 170EA,

Bartucciotto v Euro Printing Company Pty Ltd, unreported, IRCA 72/96, von Doussa J, 21 February 1996

Byrne v Australian Airlines Ltd (1995) 131 ALR 422

Dickinson v Woolworths Safety Pty Ltd, (1995) AILR 7-012

Elvidge v Burswood Resort Management Ltd, unreported, IRCA 631/96, Ritter JR, 16 December 1996

Fargie v Freedom Foods (Australia) Pty Ltd, unreported, IRCA 498/96, Parkinson JR, 14 October 1996

Garbutt v Stothers (1996) 69 IR 319

Gibson v Bosmac Pty Ltd (1995) 60 IR 1

Kenefick and others v Australian Submarine Corporation Pty Ltd, (1996) 65 IR 366

Laws v London Chronicle (Indicator Newspaper) Limited [1954] 2 All ER 285

Lupoi v Phillips Fox, unreported, IRCA 485/96, Ritter JR, 3 October 1996

Nettlefold v Kym Smoker Pty Ltd, unreported, IRCA 469/96, Lee J, 4 October 1996

Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199

North v Television Corporation Ltd (1976) 11 ALR 599

Selvachandron v Peteron Plastics Pty Ltd (1995) 62 IR 371

Yew v ACI Glass Packing Pty Ltd, unreported, IRCA 596/96, Wilcox CJ, 11 December 1996

WATTS -v- CADBURY SCHWEPPES PTY LTD

WI 1002 of 1996

Before : RITTER JR

Place : PERTH

Date of Judgment : 5 MAY 1997

IN THE INDUSTRIAL RELATIONS COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )

WI 1002 of 1996

B E T W E E N:

ROBERT LESLIE WATTS

Applicant

A N D:

CADBURY SCHWEPPES PTY LTD

Respondent

MINUTE OF ORDERS

5 MAY 1997 PERTH RITTER JR

THE COURT ORDERS THAT:

The application be dismissed.

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

IN THE INDUSTRIAL RELATIONS COURT )

OF AUSTRALIA )

WESTERN AUSTRALIA DISTRICT REGISTRY )

WI 1002 of 1996

B E T W E E N:

ROBERT LESLIE WATTS

Applicant

A N D:

CADBURY SCHWEPPES PTY LTD

Respondent

REASONS FOR DECISION

5 MAY 1997 RITTER JR

INTRODUCTION

This is an application under section 170EA of the now-called Workplace Relations Act 1996 (the "Act"). The applicant seeks the remedy of compensation in respect of the allegedly unlawful termination of his employment by the respondent.

Until 20 December 1995, the applicant was employed as a sales account executive in the confectionary division of the respondent in Western Australia. He had been promoted to that position on 27 September 1995. In all, the applicant had worked for the respondent or companies later acquired by it in various positions for a total of about 18 years, although there were breaks in this period of service.

The applicant's employment was summarily terminated by the respondent's director of human resources, Mr Douglas Loveless. The summary termination occurred because Mr Loveless believed that the applicant had fraudulently forwarded a false invoice to the respondent with the intention of receiving a payment from the respondent to which he was not entitled. The invoice involved purported to be an invoice from Orbit Fitness Specialists, number 15873, for health club membership for one year costing $535. The invoice was forwarded to the respondent's human resources office in Melbourne on or about 17 November 1995. The forwarding of the invoice to the respondent by Mr Watts was for the purpose of obtaining a cheque in the amount of $455. This amount comprised the total amount of the supposed health club membership, less $80. It was the amount which the respondent would pay to employees at or above Mr Watts' level as part of a company fitness programme .

Mr Loveless generally worked at the respondent's head office in Melbourne, but came to Western Australia to deal with the issue, amongst others, of the invoice submitted by Mr Watts.

The applicant admitted that he forwarded a false invoice to the respondent, but denied that he had acted in a fraudulent or deceitful manner. The applicant asserted that he was going to use the amount that he received from the respondent to join his local health club, being BC The Body Club - Willetton.

The applicant alleged that the termination of his employment by the respondent contravened sections 170DC, 170DE(1) and 170DB of the Act. The respondent denied each of these alleged breaches of the Act. The respondent submitted that Mr Watts' conduct not only provided a valid reason for termination under section 170DE(1) of the Act, but was also such that no notice or compensation in lieu thereof was required under section 170DB of the Act. The respondent also submitted that there had been no contravention of section 170DC of the Act because the respondent had given Mr Watts an opportunity to explain his actions at a meeting on 20 December 1995, immediately prior to the termination of his employment.

The respondent presented its case first. The respondent called as witnesses:

Ms Suzanne Lutkens, a member of the respondent's human resources department in Melbourne;

Mr Leslie Guest, the WA state manager of the respondent;

Mr Loveless; and

Mr Joseph Ferraro, the sales director of the respondent, who worked in Melbourne.

The applicant gave evidence in support of his case and called as witnesses:

Mr Craig Bryant, a human resources and remuneration manager of the respondent in Melbourne;

Mr James Capewell, formerly the WA key account manager of the respondent; and

Mr Paul Douglas, formerly the WA sales manager of the Sugar Division of the respondent.

Both Mr Capewell and Mr Douglas were also summarily terminated by the respondent on 20 December 1995 for similar reasons to that of the applicant.

THE COMPANY FITNESS PROGRAMME

As set out earlier, on 27 September 1995 Mr Watts was appointed to the position from which he was terminated. A letter of that date was sent to and received by Mr Watts. The letter set out the terms and conditions of his employment. Under the heading "Fitness Programme " the following was typed:-

"To encourage participation in the fitness programme, and to assist you to maintain your physical fitness at a level appropriate to meet the demands of the business, the company will meet the costs of your joining and remaining a member of an approved gymnasium or fitness club whilst you are employed by the company.
The company will contribute up to $500 for fitness clubs, provided that you pay the first $80 each year."

That is, if an employee's annual health club membership was $580, the respondent would contribute the maximum amount of $500.

Ms Lutkens was the person employed by the respondent who arranged for the letter dated 27 September 1995 to be sent to Mr Watts. She had no specific recollection of sending the letter, but was the person who ordinarily forwarded such letters to employees on "her payroll". Ms Lutkens recalled that Mr Watts was one of the employees on "her payroll".

Ms Lutkens said that ordinarily, there would have been other documents enclosed with the letter of appointment, including a pamphlet on the company fitness programme. Whilst Ms Lutkens could not specifically recall sending this document to Mr Watts, she said that it would ordinarily form part of the package sent to a newly-promoted employee such as Mr Watts.

In his evidence in chief, Mr Watts denied receiving the company fitness programme pamphlet and said that the first time he saw this document was some time after his termination when Mr Capewell showed it to him. In cross examination this evidence was changed. Mr Watts admitted that the police showed him the pamphlet in an interview on 15 January 1996.

The applicant's counsel, in his closing written submissions, submitted that there was no evidence that Mr Watts received the pamphlet. I do not accept this submission. In my opinion, the evidence of the practice of Ms Lutkens, as she explained in her evidence, is such that an inference can be drawn that the pamphlet was sent to, and would have ordinarily been received by, Mr Watts.

I have some doubts about the veracity of Mr Watts' denial that he did not receive the pamphlet, given my doubts about his credibility generally, as will be set out later. However, I do not have to finally determine the issue. In part, this is because the letter of appointment contained a summary of the fitness programme.

To some extent, the pamphlet was out of date in that it referred to the respondent providing a maximum contribution of $450 rather than the $500 referred to in the letter of appointment. Under the heading of "The Way The Scheme Works", the pamphlet stated that up to the maximum contribution, the respondent would meet the costs of the employee joining and remaining a member of a gymnasium or fitness club whilst employed by the company, provided that the employee paid the first $80 each year. The pamphlet set out criteria for acceptance of an organisation as part of the Cadbury Schweppes Health Executive Plan. This included that health facilities must be conducted by a recognised business, under the control of competent instructors, provide a wide range of equipment designed to improve aerobic and muscular performance and that the relevant organisation must provide periodic evaluations of fitness, be prepared to bill the company and provide an indication to the company of the attendance of employees using the service.

There was evidence that the implementation of the programme was not always strictly in accordance with the pamphlet. For example, Ms Lutkens gave evidence that the fitness rebate could be claimed in one of two ways, the first was as described in the pamphlet, and the second was in circumstances where the employee had already paid the membership fee directly. In those circumstances the employee could send in a receipt evidencing the payment and the respondent would reimburse the employee up to $500, less the $80 employee contribution. In addition, Mr Capewell said in his evidence that he had, in the past, claimed and been paid his rebate for the annual membership fee for a squash club.

However, it seems clear from his evidence that Mr Watts was not confused about the terms of the letter of his appointment in relation to the fitness programme or about the way in which he could claim the rebate. In cross examination, Mr Watts confirmed that the letter of appointment indicated that if he joined an approved gymnasium or fitness club, the respondent would reimburse him the cost of his membership provided that he paid the first $80 each year. In particular, Mr Watts said that he was not confused about whether the policy could also be used to purchase gym equipment. Indeed, as will be set out later, it was Mr Watts' evidence that he intended to join a health club, so any such confusion would not have been relevant to his situation. Mr Watts also understood the practice that the rebate could either be paid directly to the fitness club by the respondent or to Mr Watts after he had paid for membership and forwarded a receipt evidencing payment to the respondent.

THE RESPONDENT'S RECEIPT OF THE INVOICE

Ms Lutkens received from Ms Jo Peak, another employee in the human resources department of the respondent in Melbourne, a memorandum addressed to Ms Peak from Mr Watts dated 17 November 1995. There was also an invoice attached to this. The memorandum read:

"Jo, as [sic] member of staff, please find my health club membership Inv for 1995. Regards. Bob"

The attached invoice was the invoice I referred to earlier. It purported to be issued by Orbit Fitness Specialists and numbered 15873. It was dated 10 November 1995 and purported to be addressed to Cadburys, Welshpool Road, Welshpool. The description of goods read "1", "quantity", "Health Club Membership for one year". Towards the bottom of the invoice there was ticked "No" next to the expression "Goods taken". The invoice indicated that the amount of $535 had been paid. There was also what appeared to be the signature of Mr Watts under the following, "The equipment described on this invoice, remains the property of Orbit Fitness until all monies are paid. Any debts incurred through collection of unpaid monies will be the responsibility of the purchasee".

Ms Lutkens had formerly lived in Western Australia and was aware that Orbit Fitness Specialists were a supplier of equipment rather than a gymnasium. She went and saw Ms Peak and pointed this out to her. Ms Peak said that she had received a similar invoice and she and Ms Lutkens compared the two. The other invoice that Ms Peak had received was from Mr Douglas. Again there was an accompanying memorandum requesting reimbursement for Mr Douglas' gym membership for 1995. The invoice attached to the memorandum from Mr Douglas was in the same form as that submitted on behalf of Mr Watts. However, Mr Douglas' signature appeared at the point where Mr Watts' signature had appeared on the other invoice. In addition, this invoice was numbered 15673. On examination, the "8", which was the third number of the invoice presented by Mr Watts appeared to be changed in hand from the type-written "6" on the invoice submitted by Mr Douglas. The date on each invoice was identical and appeared to be in the same hand. The invoice that Mr Douglas submitted was in his name. This was written on a line in the invoice above the place where "Cadburys" had been written on the invoice submitted by Mr Watts. The description on Mr Douglas' invoice was "12 months gym membership", and the total was $535.

When Ms Lutkens and Ms Peak compared the two documents, they became suspicious, particularly given Ms Lutkens' knowledge that Orbit Fitness Specialists were not a gymnasium. Mr Bryant, the manager in the section in which Ms Lutkens and Ms Peak were employed, was away at the time. As a result, Ms Lutkens and Ms Peak did not do anything until he returned. This was at most a period of two weeks. When he returned, Ms Lutkens and Ms Peak gave the documentation to Mr Bryant. Mr Bryant was also told of the way in which the documents had the appearance of being false and Ms Lutkens' knowledge that Orbit Fitness Specialists were not running a gymnasium.

Ms Lutkens said that Mr Bryant told her to contact Orbit Fitness Specialists for a copy of the invoices which had the numbers 15673 and 15873. These were subsequently received. Invoice 15673 was indeed issued to Mr Douglas on 10 November 1995 but was for a bench and weight set, punching bag and mitts to a total value of $318. Invoice 15873 was for the hire of some equipment to neither Mr Douglas nor Mr Watts.

Ms Lutkens said that she then asked Orbit Fitness Specialists to confirm that they were not operating a gymnasium and they did so. This was explained to Ms Lutkens over the telephone. After she received this information, she passed it on to Mr Bryant and then ultimately to Mr Loveless. Ms Lutkens was later told to have a cheque drawn and sent to Mr Watts for the amount of $455. This represented the amount of $535 as set out in the invoice less the amount of $80 which would ordinarily be the employee contribution. Mr Bryant told Ms Lutkens to send the cheque to Mr Watts. This was sent by Ms Lutkens under cover of a memorandum dated 13 December 1995. Ms Lutkens had no further involvement in the matter.

The memorandum and cheque were sent to Mr Watts because of a decision made by Mr Loveless that this should occur. Mr Loveless' evidence was that he was first shown the invoices submitted by Mr Watts and Mr Douglas by Ms Lutkens and Mr Bryant. Mr Loveless was informed that Orbit Fitness Specialists were not operating a gymnasium and that there was evidence to suggest that the invoices were "doctored". Mr Loveless also saw the invoices that were subsequently obtained from Orbit Fitness Specialists. Mr Loveless said that he formed the view that there was a prima facie case of attempting to get money from the respondent under false pretences. Mr Loveless also saw the memoranda that were sent by each of Mr Watts and Mr Douglas to Ms Peak.

Mr Loveless took some legal advice which was to the effect that the amount claimed should be paid to Mr Watts pending a continuing investigation into the matter. Mr Loveless also spoke with Mr Ferraro and told him of the potential problem in the Perth office. Mr Loveless wanted Mr Ferraro to be aware of the issue because the employees concerned had expenditure discretions in Mr Ferraro's department. Mr Loveless formed the view that he and Mr Ferraro should travel to Perth to continue the investigation. In part this was because Mr Loveless was concerned that there may be more serious financial dishonesty in the Perth office.

Mr Bryant confirmed Ms Lutkens' evidence of how the matter was brought to his attention. He also indicated that he caused Ms Lutkens to contact Orbit Fitness Specialists and obtain the invoices referred to earlier. He then decided to see Mr Loveless who was his supervisor. He indicated that he saw Mr Loveless on his own. This was different to the evidence of Mr Loveless (who said Ms Lutkens was also present) but I do not think that anything turns on this. Mr Bryant was advised by Mr Loveless to send the cheques to Mr Douglas and Mr Watts. Mr Bryant then instructed Ms Lutkens to do this.

Mr Ferraro agreed that he was spoken to by Mr Loveless who said that he thought there may be a problem with misappropriation of funds in the W.A. office. He said this conversation was on the telephone. Mr Ferraro then went to Mr Loveless' office and was shown the two invoices submitted by Mr Watts and Mr Douglas. Mr Loveless pointed out the appearance of the documents being forged. Mr Ferraro was also told that Orbit Fitness Specialists did not operate a gymnasium. Mr Ferraro agreed that it was decided that he and Mr Loveless should travel to Perth to investigate further.

Mr Loveless and Mr Ferraro travelled to Perth on 19 December 1995 and met with Mr Guest and subsequently Mr Watts, Mr Douglas and Mr Capewell on 20 December 1995. Three meetings were held consecutively with each individual employee. It was at these meetings that each employee was summarily terminated from their employment. Before dealing with the facts of the meetings on 20 December 1995, I turn to the evidence of Mr Watts, Mr Capewell and Mr Douglas about their actions.

MR WATTS' EVIDENCE ABOUT HIS ACTIONS

Mr Watts said that in late 1995 Mr Douglas spoke to him about the use of his fitness allowance. Mr Watts said that Mr Douglas told him that the fitness allowance could not be passed over to the next calendar year, so that Mr Watts should use it before the end of 1995. Mr Watts said that within the next day or so he went to BC The Body Club in Willetton and asked them about joining the club. Mr Watts said that he spoke to a female employee. Mr Watts said that she told him that he would need to pay in full up front and then a copy of the contract could be given to Mr Watts and sent off to Cadburys for reimbursement. Mr Watts said that given his financial situation he was not in a position to pay the amount up front. Mr Watts said that when he spoke to the employee, she did some rough "workings-out" of the cost of membership. Mr Watts tendered in evidence a copy of a document which he claimed were the "workings-out" by the female employee. On the back of a BC The Body Club document were written the amounts of "$295" and "$495" and "$30 per month". Mr Watts indicated that the employee "just did some rough workings-out that I could pay $30 per month if I so wished or there were some other costings to six months membership, but it was done very roughly on paper".

After this, Mr Watts went back to the office and spoke to Mr Douglas about having been to BC The Body Club in Willetton. Mr Watts explained his situation to Mr Douglas. Mr Watts said that Mr Douglas told him that what he had done in the past and was going to do again this year was to go to Orbit Fitness Specialists in Cannington. Mr Douglas said he had a receipt for gym equipment to a certain amount of money and "what you could do is take a copy of that and obviously make changes to it that are honest in what you are claiming and the amount of money you are claiming". Mr Watts thought that this was a strange way to do things but that Mr Douglas had said that "at the end of the day it [the rebate] is part of your package, you are entitled to claim that and providing you join a health club, you are not doing anything unlawful". Mr Watts said that he thought that this was a strange way to do something but could see Mr Douglas' point and that if down the track the company wished to find out how he had spent the money he would have his gymnasium membership. Therefore, although he thought it was a strange way to operate, he did not see any problem with what was suggested. Mr Watts said that because Mr Douglas was senior to him, he was inclined to take notice of what he had told him. In particular, Mr Guest had told him when he was first promoted, to liaise with Mr Douglas and also Mr Capewell in all facets of his position.

Mr Watts said that he spoke to Mr Douglas again and they discussed the urgency of submitting the invoice to the respondent before the end of the financial year. In addition, Mr Watts said that he had holidays booked and that it would be a good time to join a gym whilst he was on holidays. Mr Douglas said that an original Orbit Fitness Specialists invoice was on his desk and that he was going out if Mr Watts wanted to take a copy of it. Mr Watts therefore took a copy of the invoice. He made changes to the document to indicate that he was paying for a twelve-month health club membership. He said that he changed the invoice from gym equipment to a health club membership because he did intend to join BC The Body Club - Willetton after he received the rebate he was claiming from the respondent.

He then submitted the invoice and the memorandum referred to earlier to Ms Peak at the head office of the respondent in Melbourne. Mr Douglas told him that it was Ms Peak who should be sent the memorandum and invoice.

After the invoice was submitted, Mr Watts duly received from the respondent the cheque for $455. Mr Watts deposited this into his bank account. Mr Watts did not draw on the cheque he received because he was dismissed prior to the cheque being cleared. Mr Watts said that his intention was to go to BC The Body Club in Willetton and join it, as soon as the cheque had cleared.

Mr Watts therefore rationalised his actions as not being dishonest. This was because he was entitled to be paid the amount of $455 for joining a gymnasium. Although at the time of presentation of the invoice to the respondent he had not joined a gymnasium, he intended to do so with the amount which the respondent was going to forward to him. Therefore, the memorandum and invoice submitted to the respondent were only technically deceptive in his view.

As stated earlier, Mr Watts said that he obtained a copy of the original invoice 15673 rather than that which was altered by Mr Douglas and submitted to the respondent. Mr Watts said that he copied this document and then blanked out the name of Mr Douglas, the signature of Mr Douglas, replacing it with his own, and inserted the description on the invoice he submitted to the respondent. Mr Watts did not accept that he altered the number of invoice "15673" to "15873". Mr Watts said that he was not "100% sure that I made that change". He said that it could have been made by somebody else. When asked who he thought could have changed this, Mr Watts said "well, it was on the desk". It was later suggested to Mr Watts that the reason why he did not want to admit that he made a change to the invoice number was because it looked deceitful. Mr Watts answered, "It does look deceitful, you're right, it does". It was also put to Mr Watts that it would look like his actions were premeditated. Mr Watts said, "yes, you could say that". Mr Watts also agreed that it would be an attempt to deceive the respondent.

I will later comment on other aspects of Mr Watts' evidence.

THE EVIDENCE OF MR CAPEWELL

The evidence of Mr Capewell was not particularly relevant to the actions of Mr Watts. Mr Watts was asked whether he had any dealings with Mr Capewell before he made his claim under the fitness programme. He answered that they just had a general discussion sometime about that part of the package but it was mainly Mr Douglas with whom he spoke. Mr Capewell did not give evidence of any relevant conversations with Mr Watts about claiming the fitness programme rebate.

Mr Capewell said that in 1989 and 1990 he had made a claim for the fitness rebate for his membership fees of a squash club. Then, in 1994 he made a claim against some gymnasium equipment that he had purchased. The equipment was purchased from Orbit Fitness Specialists. Mr Capewell obtained a cheque from the respondent to reimburse him for the purchase of this equipment. Mr Capewell did not make a claim in 1995. In April or May of 1994 he said that he discussed with Mr Douglas making use of his fitness programme allowance to purchase home gym equipment. Mr Capewell said that Mr Douglas thought this was a pretty good idea. Mr Capewell agreed in cross examination that the invoice that he presented to the respondent to obtain his rebate in 1994 was from Orbit Fitness Specialists with the description that the invoice was for his 1994 "annual gym fee". Mr Capewell said, however, that when he purchased the gym equipment, he thought his allowance could be used for that purpose. He said that he requested that Orbit Fitness Specialists make out the invoice for an annual gym fee, on reliance on something that an employee at the Melbourne office of the respondent had told him.

This evidence, although explanatory of Mr Capewell's position, is not directly material to the position of Mr Watts.

THE EVIDENCE OF MR DOUGLAS

Mr Douglas made a claim for the fitness programme rebate in 1994. In that year he sent a memorandum dated 5 May 1994 and an invoice from Orbit Fitness Specialists of the same date, to the human resources department in Melbourne. Mr Douglas said that he purchased a fitness bike from Orbit Fitness Specialists. He said that the bike cost about $470 or $490. However, the invoice submitted had a total amount of $580 and said that it was for his "1994 annual gym fee".

In 1995, Mr Douglas also made a claim for the fitness programme rebate. He did this by going to Orbit Fitness Specialists and obtaining an invoice for gym equipment. This invoice was the original invoice number 15673, referred to earlier, for gym equipment to a total value of $318. Mr Douglas was asked if he did anything to the invoice. He said that he took off the description "gym equipment", inserted "1995 annual gym fee" onto the document and changed the total from "$318" to "$535". He forwarded this to the respondent with a memorandum to Ms Peak dated 10 November 1995. Mr Douglas said that he changed the invoice for the 1995 year so that it matched the invoice of the previous year. He said that this was what he believed he had to do to make a claim.

Mr Douglas said that he had discussions with Mr Watts at about that time regarding the company fitness programme. Mr Douglas said that he thought that Mr Watts said he wanted to join a fitness club. Mr Douglas said that he told Mr Watts how he had claimed the fitness rebate. Mr Douglas said that his conversation with Mr Watts was probably a couple of days after he got the invoice from Orbit Fitness Specialists, which was on 10 November 1995. Mr Douglas elaborated on the conversation that he had with Mr Watts. Mr Watts wanted to join a gym. Mr Douglas said he did not and that he was buying gym equipment. Mr Douglas said he had an invoice from Orbit Fitness Specialists. He told Mr Watts what he was doing "to get the gym equipment. And that I had done it the year before, there'd been no problem. And if he wanted to save himself time, and grab a copy, the invoice was on my desk".

Mr Douglas said that he did not think that he had done anything wrong because he had done the same thing the previous year.

When cross examined, Mr Douglas said that he spoke with Mr Watts after he obtained the invoice from Orbit Fitness Specialists dated 10 November 1995. He said that he told Mr Watts what he had done and that if Mr Watts wanted a copy of the invoice, it was on his desk. He elaborated by saying he told Mr Watts he had bought gym equipment and that he "had put it down" as gym membership to "send it through" so that he could claim his gym membership fitness allowance for that year.

In contradiction to the evidence of Mr Watts, Mr Douglas said that it was the altered invoice which he left on his desk rather than the original one. The original invoice he had taken home. Mr Douglas said that he did not recall discussing with Mr Watts making the details on the two invoices coincide. In particular, he said that he did not discuss with Mr Watts the amount of $535 being written on both invoices. Mr Douglas said that Mr Watts told him that he had sent the invoice but he did not see the invoice which Mr Watts had sent. When shown the two invoices, Mr Douglas said that he did not make the change in the numbers on the invoices from 15673 to 15873.

Mr Douglas accepted that he had no intention at any time of purchasing gym membership.

Mr Douglas accepted that the amount which was inserted in the invoices from Orbit Fitness Specialists which he submitted to the respondent in both 1994 and 1995 was greater than the amount he had actually paid for gym equipment. For example, the 1995 invoice had the amount of $535 inserted when he had actually paid $318 for gym equipment. Mr Douglas said that this "was just a figure". He agreed that it was more than the amount he spent on gym equipment but said he did not get that much back from the respondent because of the $80 initial contribution from the employee. Mr Douglas said that he did not discuss with Mr Watts the finer details such as how much he had been spending on gym equipment and what had to be written down on the invoice.

A major difference between the evidence of Mr Watts and that of Mr Douglas is the evidence they gave about which invoice Mr Douglas left on his desk. Mr Watts' evidence was that it was the original; Mr Douglas said that it was the altered copy. I do not accept the evidence of Mr Watts on this point. His evidence would have it that he saw and copied the original invoice, which had $318 as the total value of gym equipment purchased, and changed this to $535, and it was pure coincidence that Mr Douglas also changed the original invoice to claim a gymnasium membership of the same amount. I cannot accept this was a coincidence given that the $535 claimed did not relate to the actual cost of any purchased gymnasium membership or equipment and was not the maximum amount that could be claimed under the fitness programme. In my opinion, Mr Watts and Mr Douglas both claimed $535 as the amount of their annual gymnasium membership because they either discussed and agreed this, or because Mr Watts picked up the altered invoice of Mr Douglas, saw that he was claiming $535 as the annual membership, and followed suit. The latter possibility is consistent with Mr Douglas' evidence. In his interview with the police on 15 January 1996, Mr Watts said at one point, differently to his evidence at trial, that he obtained and made changes to Mr Douglas' altered invoice.

I also do not accept that Mr Watts did not change the third number on Mr Douglas' invoice from "6" to "8". Realistically, in my opinion, there are only two people who could have changed it, Mr Douglas and Mr Watts. Mr Douglas denied making this change and I have no reason to doubt this evidence. Mr Watts had a motive to change the number. This is because if there was a comparison of the invoices submitted by Messrs Watts and Douglas, suspicions would have been raised if the invoices had the same number. The suggestion by Mr Watts that someone else who saw the invoice on Mr Douglas' desk could have changed the invoice number was, in my opinion, a desperate attempt to try and avoid the obvious conclusion that he had changed the invoice number, for the purpose of potentially deceiving the respondent.

THE MEETINGS ON 20 DECEMBER 1995

As stated earlier, Mr Loveless and Mr Ferraro travelled to Western Australia on 19 December 1995. On 20 December 1995 they had a breakfast meeting with Mr Guest. Mr Guest was shown the relevant documents. After that, the three of them attended at Orbit Fitness Specialists. They confirmed that there was no gymnasium there and that the business only sold gymnasium equipment. Mr Loveless then asked Mr Guest to arrange a meeting with Mr Watts, Mr Capewell and Mr Douglas. Mr Douglas was interviewed before Mr Watts.

Of the interview with Mr Watts, Mr Loveless said that he asked if Mr Watts understood the fitness policy and he said he did. Mr Loveless then referred to Mr Watts' claim for the fitness programme rebate and showed Mr Watts the invoices submitted by Mr Douglas and himself. He said that he believed that the invoices were a false claim against the company for gymnasium membership for a gymnasium which did not exist. He said that the invoices were doctored and that money had been claimed under false pretences. Mr Loveless said that Mr Watts admitted his conduct. He said that Mr Watts explained that he had gone to a gymnasium near his home but that they had refused to accept a Cadbury's cheque for his membership fee. He said that he submitted the Orbit Fitness Specialists' invoice for the purpose of obtaining money from the company and then joining his local gym. Mr Loveless said he found it difficult to accept that a gymnasium would refuse a $450 cheque from Cadbury Schweppes. Mr Loveless asked which gym it was so that he could make contact with them. Mr Watts could not provide an answer to this. Mr Watts was asked why he did not speak to Mr Guest about the matter and he had no answer for that. Mr Loveless asked Mr Watts whether there was any reason why he should not be dismissed and Mr Watts shrugged his shoulders. Mr Loveless said that as there was no plausible explanation for Mr Watts' conduct, he was summarily dismissed. Mr Loveless then asked Mr Guest to take the company's property from Mr Watts and have him escorted off the premises. He also asked Mr Guest to report Mr Watts' conduct to the police. Mr Watts was later charged with fraud by the police. He was committed for trial after a preliminary hearing. However, the prosecution entered a nolle prosequi at Mr Watts' first appearance at the District Court. I was told by Mr Pratt, for Mr Watts, that the reason for this was that the prosecution accepted that Mr Watts had not obtained money from the respondent by reason of his false pretence, as the respondent were aware of the false pretence before deciding to pay the money to Mr Watts.

When cross examined, Mr Loveless denied that Mr Watts mentioned in the meeting that he was going to join BC The Body Club - Willetton. He said that he asked for the name of the health club but this was not provided. Mr Loveless said that he thought an offer was made to go out and see the health club but Mr Watts had not agreed to this.

Mr Loveless said that when he made the decision to terminate Mr Watts' employment, he was aware that Mr Watts had been a very satisfactory employee to that time.

Mr Loveless said that the meeting with Mr Watts would have taken about 20 minutes in all. He said that the meeting with Mr Capewell was longer and that with Mr Douglas was shorter. He said that the meeting with Mr Douglas was shorter because his admission of his conduct was more direct.

In his evidence, Mr Guest said that he was telephoned by Mr Loveless on 19 December 1995. Mr Loveless advised him that there appeared to be a problem with three employees in Western Australia "fiddling" their health club allowance. He was told that the three employees were Mr Douglas, Mr Capewell and Mr Watts. Mr Loveless told Mr Guest that he was coming to Perth with Mr Ferraro the following day to speak to the three employees.

Mr Guest agreed with the evidence of Mr Loveless about the breakfast meeting and the trip to Orbit Fitness Specialists.

He was then present at the interviews with Mr Douglas, Mr Watts and Mr Capewell. Mr Loveless asked whether Mr Watts knew what the company fitness programme was for, and Mr Watts said he did. Mr Guest said that Mr Watts was shown and acknowledged changing the invoice. Mr Watts said he did this because he needed cash to join a gymnasium. He was asked why he did not organise for the company to be billed directly. Mr Watts said that the health club would not accept direct billing, they wanted cash. Mr Loveless asked for the name of the gymnasium or where it was located and Mr Watts could not name it. Mr Loveless said that he did not believe that Mr Watts was intending to join a gymnasium. Mr Loveless said that he believed that Mr Watts had forged documents to obtain money from the company. He was then asked if there was any reason he should not be dismissed. Mr Watts answered "No". Mr Watts looked distressed and shrugged his shoulders. Mr Loveless then indicated that Mr Watts was dismissed as of that moment. Mr Guest described the interview as being not very long, maybe twenty minutes.

Mr Guest said that there was no reason why Mr Watts could not have discussed with him the appropriate way to claim the gymnasium allowance if the health club he was intending to join had indicated that they would not accept a cheque from Cadbury Schweppes. He said that Mr Watts was quite entitled to see him on this type of issue and that they spoke almost every day. They got on well and worked out of the same office, which was not a large office.

In cross examination, Mr Guest said that he believed that during the interview, there was an offer to go with Mr Watts to the health club he said he was going to join.

Mr Guest said that he did not recall Mr Watts saying that he had been to BC The Body Club in Willetton. Mr Guest could not recall whether Mr Watts said in the interview that Mr Douglas had said that it would be "okay" to claim the fitness programme rebate in the way in which he did.

Mr Ferraro's evidence about the interview with Mr Watts was not dissimilar. He said that Mr Loveless produced the two Orbit Fitness Specialists invoices that had been submitted. Mr Loveless intimated he thought they had been forged. Mr Loveless said that Orbit Fitness Specialists was not a gymnasium but supplied gymnasium equipment. Mr Watts said something like that he intended to join gymnasium. Mr Loveless made reference to the changes on the documents and Mr Watts admitted that he had falsified the invoice. Mr Ferraro said there was no other discussion, it was "pretty straightforward" and Mr Loveless then terminated the services of Mr Watts. He thought that the whole interview took 10 to 15 minutes, although it was difficult to be precise.

When cross examined, Mr Ferraro said that although he did not have any direct input into the meeting, if he had disagreed with the decision to terminate Mr Watts' services, he would have counselled Mr Loveless. Mr Ferraro agreed that Mr Watts said he intended to joint a gym. However, he regarded this as irrelevant. Mr Watts had obtained shareholders' money on a representation that he had joined a gymnasium. Mr Ferraro's recollection was that Mr Watts did not explain which gymnasium he intended to join. Mr Ferraro said that Mr Watts was a manager who was entrusted with a half million dollar discretionary expenditure budget. The integrity and honesty of such a person was paramount. Mr Loveless had asked whether Mr Watts understood the company fitness programme, and the latter said he did.

Mr Ferraro recalled that Mr Loveless asked whether there was anything else going on in the Perth office. However, he could not recall Mr Watts' reply. He did not think that Mr Watts mentioned Mr Capewell or Mr Douglas during the interview. He could not recall, for example, Mr Watts saying that Mr Douglas showed him how to make the fitness programme rebate claim.

Mr Ferraro was asked whether there was an offer by Mr Loveless to go to the health club that Mr Watts said he intended to join. Mr Ferraro said that he was not one hundred percent sure on this but that maybe Mr Loveless did say that; "take us to the gym". He did not recall what Mr Watts said about this. He did not recall BC The Body Club - Willetton, being mentioned at the interview. Mr Ferraro had a vague recollection of Mr Watts saying that he needed cash to pay for health club membership. Mr Ferraro said the interview took 10 to 15 minutes in all.

Mr Watts, in his evidence of the interview, said that Mr Loveless showed him the invoice that he had submitted to the respondent. He was asked what the document was. He said that it was a document that he had sent for this year's health club membership. Mr Loveless said the company believed the document was fraudulent and unlawful changes had been made to the document. Mr Watts was asked what he had to say about it. Mr Watts' reply was that he did not see it as being unlawful when he made the changes. This was because his intention was always to join a gym. Mr Watts said that Mr Loveless raised his voice a bit and became "a little bit standoverish". Mr Watts said he was accused of being in a rort with two other managers. He was asked what other scams they were into and he had answered that there were none whatsoever. Mr Watts said the interview continued with Mr Loveless saying that the company believed he was being dishonest and had tried to steal from it. He was then summarily dismissed. Mr Watts was asked whether he sought to explain himself during the discussion. Mr Watts said he thought "they would have asked probably certain questions in that area, but I've got to be honest, I was so distraught - it was a very nerve-racking time and I probably would have just shrugged my shoulders and said, you know, nah, because I really felt it pointless. I could see what was happening in front of me.". Mr Watts said the meeting was very quick, no more than ten minutes.

When cross examined, Mr Watts agreed that he was asked by Mr Loveless whether he knew what the company's fitness policy was. He agreed that he said he did. He was also asked if he had made a claim on the health and fitness policy and admitted that he had done. Mr Watts was then shown the invoice that he submitted to the respondent. Mr Loveless said that he had formed a view that the invoice was false. Mr Loveless said he believed that he had attempted by the false invoice to obtain money from the company. Mr Watts said that he admitted making changes to the document but did not recall saying that he attempted to obtain money from the respondent. Mr Watts did not have a clear recollection of his response to the accusations made to him but agreed that he "may have just said: no, that wasn't my intentions". Mr Watts agreed that he explained that it was his intention to join a gymnasium. However, he did not accept that he told Mr Loveless that he falsified the invoice because he went to a gymnasium near his home which had refused to accept a Cadbury's cheque. Mr Watts said that he did not tell Mr Loveless that the gymnasium would not accept a Cadbury's cheque. However, he did say that he had been to a gymnasium near his home. He agreed that he said that the gymnasium needed the money up front and that he did not have it. Mr Watts accepted that Mr Loveless asked him what was the name of the gymnasium that he went to. Mr Watts did not recall not answering this question, but instead recalled telling Mr Loveless that it was BC The Body Club at Willetton. Mr Watts agreed that he did not mention this in his evidence in chief. He did not recall being asked at the interview whether there was someone who could be contacted at the gymnasium. He did not recall an offer being made that Mr Loveless and the others present could go to the gymnasium. Mr Watts agreed that he did not offer to contact the gymnasium to verify his explanation. Mr Watts did not recall saying at the interview that Mr Douglas had showed him how to alter the invoice.

Mr Watts recalled Mr Loveless asking him whether there was any reason why he should not be dismissed. Mr Watts' response was "not really, no".

To the extent that there is any significant discrepancies as to the content of the interview on 20 December 1995 between the evidence of Messrs Loveless, Ferraro and Guest on the one hand and Mr Watts on the other, I prefer the evidence of the former. I had no reason to doubt the evidence of any of these three witnesses. There was nothing about either the content of their evidence or their demeanour which caused me to doubt their evidence. On the other hand, as I will detail further later, I was not impressed with Mr Watts as a witness. In my opinion, Mr Watts was asked by Mr Loveless at the meeting which health club had indicated they required initial payment in full in cash. This was a natural question for Mr Loveless to ask, given the explanation that Mr Watts had given. Also, I accept the evidence that Mr Watts did not say in response to this that it was BC The Body Club - Willetton. In my opinion, if a specific health club had been mentioned by Mr Watts, Mr Loveless would have investigated the situation further by speaking to them. The fact that he did not do this tends to confirm the evidence that Mr Watts did not indicate that he had seen BC The Body Club - Willetton. It is also significant that none of Mr Loveless, Mr Guest and Mr Ferraro had any recollection of Mr Watts mentioning BC The Body Club - Willetton. As I will set out later, I do not accept the evidence of Mr Watts of his alleged attendance at BC The Body Club - Willetton prior to submitting the invoice to the respondent.

OTHER ASPECTS OF MR WATTS' EVIDENCE

I have set out earlier some parts of the evidence of Mr Watts which I have not accepted. In addition, there are a number of other areas where I found Mr Watts' evidence to be unacceptable, unconvincing and/or lacking conviction.

The need to submit the claim before the end of the financial year

Mr Watts' evidence on this topic was inconsistent and unconvincing. The respondent's fitness programme allowance could be paid to employees once each calendar year. The rebate was applicable to a health club membership of twelve months. Therefore, whether an employee intended to join a health club in the December of one year or the January of the next, they could still obtain the fitness programme rebate. There was no necessity to make a claim prior to the end of a calendar year if somebody wanted to join a health club and obtain the rebate for a twelve-month membership. Yet, in his evidence, Mr Watts initially said that there some need to make the fitness rebate claim prior to the end of the calendar year When the issue was first raised in his evidence in chief, Mr Watts said that he spoke to Mr Douglas about the latter using his fitness allowance. Mr Watts said that this prompted him to think that he should be doing something himself because as Mr Douglas had said to him, the allowance could not pass over to the next year "so you may as well . . . get it up and running before the end of the year". Mr Watts then gave evidence about his alleged attendance at BC The Body Club - Willetton and further conversations with Mr Douglas. At one point he said that they again spoke about the urgency of making a claim before the end of the year. At this point, Mr Watts added that he had his holidays booked and he thought that this was an appropriate time to join a health club because he had not been for a while and was obviously going to be a bit sore from it all.

When first cross examined about this issue, Mr Watts agreed that if one was trying to obtain twelve-months' health club membership, it mattered little whether a claim was made on the company fitness programme at the end of 1995 or the beginning of 1996. When later cross examined on the same issue, it was again put to Mr Watts that the factor of not being able to pass the fitness rebate over to a subsequent year was irrelevant if one was intending to join a gymnasium for twelve months. Mr Watts replied that he did not give it a great deal of thought. "I mainly wanted to join before I went on holidays. That was the main reason . . .". A little later in the cross examination, Mr Watts added that he had heard that for 1996 the fitness programme amount of $500 would be subsumed in one's salary package so that the rebate could not be separately claimed for 1996.

It can be seen that Mr Watts' evidence on this issue was not consistent. In my opinion, this reflects upon the credibility of the explanation given for the reason why Mr Watts wanted to make a claim prior to the end of 1995.

Mr Douglas said to make honest changes to the invoice

As set out earlier, Mr Watts' evidence was that Mr Douglas had told him that he could submit to the respondent a copy of the Orbit Fitness Specialists invoice that Mr Douglas had, if Mr Watts made honest changes to it. When cross examined, Mr Watts said that what he meant by that was changes which were honest in what he was claiming. For example, he said that there was gym equipment described on the invoice but that he had no intention of purchasing gym equipment. Therefore, this would be changed on the invoice to be submitted by Mr Watts. It was put to Mr Watts that Mr Douglas would not have said to make honest changes because his intentions were far from honest. Mr Watts disagreed with this.

Later in cross examination it was put to Mr Watts, and he agreed, that when interviewed by the police on video on 15 January 1996, he did not say anything about Mr Douglas' instructions to only make honest alterations to the invoice. Mr Watts agreed with this and said "it just didn't come to mind at that time". This places some doubt on Mr Watts' evidence about the instruction to make honest changes.

Further doubts about this evidence occur because of the evidence of Mr Douglas. Nowhere in his evidence did Mr Douglas indicate that he told Mr Watts to make honest changes to the invoice. Indeed the evidence of Mr Douglas suggests that he would not have said this to Mr Watts. This was in part because the changes that Mr Douglas was making to the invoice were not honest. For example, Mr Douglas changed his invoice from "the purchase of gymnasium equipment" to "gymnasium membership". Mr Douglas said in evidence that he told Mr Watts that this was what he was doing. In addition, Mr Douglas changed the amount recorded on the invoice as having been spent. The purchase of gymnasium equipment had cost $318 but Mr Douglas changed this to $535. The effect of this was that Mr Douglas would receive a cheque from the respondent for $455 which was $137 more than Mr Douglas had spent on purchasing gymnasium equipment.

Given his evidence about his actions and conversations with Mr Watts, I do not accept that Mr Douglas told Mr Watts that the changes to be made to the invoice should be honest ones.

Mr Watts did not know that Mr Douglas was not claiming the rebate
for the purchase of gymnasium equipment

During his cross examination, Mr Watts agreed with the proposition that he did not know whether Mr Douglas was going to be claiming gymnasium equipment as he had done in the past. However, when Mr Douglas gave evidence, he said that "I told him [Mr Watts] that I had bought gym equipment and that I had put it down as gym membership to send it through so I could claim my gym membership fitness allowance for that year". Although on its own this answer does not clearly indicate which year Mr Douglas was talking about, this is clarified by the question which preceded this answer. The question asked was "You told him that you had made the changes to this invoice, did you?". The invoice referred to in the question was the invoice for the 1995 year.

I prefer the evidence of Mr Douglas on this point. This is therefore another area where the evidence of Mr Watts is rejected.

The failure to discuss the issue with Mr Guest

Mr Watts' evidence was that he was informed by BC The Body Club - Willetton that they would not bill the respondent directly for his membership fee, he would need to pay the amount in full and could then send a copy of the contract to the respondent for reimbursement. Mr Watts said he could not afford to pay the amount up-front. Mr Watts said in evidence that he discussed this with Mr Douglas. He claimed that Mr Douglas' advice was, in effect, that it would be all right to submit a false invoice indicating he had already paid his membership fee to a different entity, and then use the rebate, when it was paid, to join BC The Body Club - Willetton. If it was given, this was very strange advice as Mr Watts himself acknowledged in his evidence. It is surprising, if it be true, that Mr Watts simply accepted this advice, given his age, position in the respondent and work experience.

There is, in my opinion, no sound explanation for his failure to raise the issue with Mr Guest. Mr Watts agreed with Mr Guest's evidence that they saw each other daily and that they got on well. Therefore, given the strange advice given by Mr Douglas, one would have expected Mr Watts to have checked it with Mr Guest as the WA state manager. The fact that he did not do so suggests that the explanations for his conduct were not as innocent as he made out. So too does his alleged rationalisation that submitting the Orbit Fitness Specialists invoice "was not a problem" because he intended to join a health club. Mr Watts' explanation that when he was first promoted he was told by Mr Guest to liaise with Mr Douglas in all facets of the job as Mr Douglas "knew the ropes" is not, in my opinion, an adequate explanation for failing to check with Mr Guest the very odd advice that Mr Douglas supposedly gave.

In the circumstances, one would have expected Mr Watts to have simply seen Mr Guest, explained the situation and asked whether Mr Watts could be given the amount of the rebate by the respondent before joining the health club. Mr Watts said in evidence that this did not occur to him. This in itself is difficult to accept.

The claimed attendance at BC The Body Club - Willetton

In the end, I am unable to accept that Mr Watts did attend at BC The Body Club - Willetton in the manner he described, prior to submitting the invoice to the respondent. There are a number of reasons for this. Firstly, there is the failure to raise with Mr Guest the attitude of BC The Body Club - Willetton as described in the previous paragraph, in light of the advice allegedly received from Mr Douglas.

Secondly, the rough "workings out" that Mr Watts said were made by the employee of BC The Body Club - Willetton bore no relation to the amount that Mr Watts claimed on the invoice as being the twelve-monthly health club membership. Mr Watts tried to cover this in his evidence by saying that the amount of $495 was written on the document and that there was another $40 that the employee had mentioned which could be paid for additional membership rights. Mr Watts suggested that the use of the swimming pool or a private locker could have been an extra $40 per year, giving a total of $535. Later, Mr Watts said that there was "another benefit that they had there and obviously it was $40, but I can't recall whether it was your own locker or swimming pool or aerobics or whatever, but it was something else". I find this evidence difficult to accept, given that the amount of $535 or an additional $40 was not written on the document from BC The Body Club.

Thirdly, another thing which combines to make the alleged attendance of Mr Watts difficult to accept is that when he was interviewed by the police on 15 January 1996, he did not mention the document that he allegedly had evidencing his discussion with the employee at BC The Body Club - Willetton. Whilst on its own this may be insignificant, as there may well be relevant things that someone would forget to tell the police during the anxious experience of an interview, it gains significance from its combination with the other factors here mentioned.

Finally, there was the lack of endeavour made by Mr Watts to locate the employee that he claimed to have seen at BC The Body Club - Willetton. This person was potentially an important witness to Mr Watts both in relation to the criminal charge that he had faced and also in these proceedings. This is because this person may have been able to confirm the fact, timing and content of Mr Watts' attendance at BC The Body Club - Willetton. This would have been important evidence to support Mr Watts' case. Accordingly, one would have expected him to make substantial efforts to find the employee. However, according to the evidence of Mr Watts, quite the opposite occurred.

In his evidence in chief, Mr Watts said that after he was interviewed by the police, he went back to BC The Body Club - Willetton. He said "I never spoke to anyone, I just briefly looked around to see if I could see that lady there . . . but unfortunately no she wasn't there". He then said that he had not tried to find her again.

When cross examined, Mr Watts said that he went to the reception area of the health club and could not see the employee there. He said that he then left the health club. He said that it did not occur to him to ring up or make enquiries of the people who were there as to what had happened to the employee. He also said that he had not instructed his solicitors to try and locate the employee.

All of this is very implausible if Mr Watts did in fact speak to the employee as he alleged. For all of these reasons, I do not accept the evidence of Mr Watts of his alleged attendance at BC The Body Club - Willetton.

The memorandum to Jo Peak

When cross examined, Mr Watts did not accept that there was anything dishonest about the memorandum to Ms Peak. I will consider the issue of the memorandum a little later when analysing the conduct of Mr Watts. However, his failure to accept that, even on his version of the events, there were aspects of the memorandum to Ms Peak that were dishonest, does not reflect well on his credibility generally. The memorandum said that Mr Watts' health club membership invoice for 1995 was enclosed. This was a blatantly false statement. However, at no time did Mr Watts have the fortitude to accept this.

Due to my findings on the evidence set out above and earlier, I did not find Mr Watts a credible or persuasive witness. I am therefore unable to accept his explanation of his conduct and motives. The impact of this on the case overall will be set out later.

SECTION 170DC

Section 170DC of the Act provides that an employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless the employee has been given the opportunity to defend themselves against the allegations made. This section statutarily enshrines an aspect of natural justice or procedural fairness; see Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 at page 209/210. As stated by the Full Court in Kenefick and others v Australian Submarine Corporation Pty Ltd, (1996) 65 IR 366, the section satisfies a "need for the employee to have an opportunity to respond because . . . a convincing defence to the allegations may persuade the employer not to terminate the employment of that employee". (Page 371) However, as Wilcox CJ said in Gibson v Bosmac Pty Ltd (1995) 60 IR 1 at page 7, the requirements of the section do not require any particular formality. It is intended to be applied in a practical commonsense way so as to ensure that the affected employee is treated fairly. Where the employee is aware of the precise nature of the employer's concern about their conduct or performance and has a full opportunity to respond to this concern, this is enough to satisfy the requirements of the section.

In my opinion, section 170DC of the Act has not been contravened. The respondent gave the applicant the opportunity to answer the allegations about his conduct at the meeting on 20 December 1995. I was a bit surprised that no one took notes at this meeting, but this does not affect whether it satisfied the requirements of section 170DC.

As set out earlier, at that meeting Mr Loveless put to Mr Watts that he believed the invoice submitted was false and that a claim had been made against the respondent for gymnasium membership of a gymnasium which did not exist. He said that he thought the invoices were "doctored" and that money had been claimed under false pretences. Mr Watts had an opportunity to respond to these allegations. The explanations made by Mr Watts have been set out earlier. Mr Watts was also given the opportunity to provide reasons why he should not be dismissed. During his cross examination, Mr Watts accepted that he had indicated to Mr Loveless, Mr Guest and Mr Ferraro that he intended to join a gymnasium but they had not believed him. The fact that he was given the opportunity to explain means that section 170DC of the Act has not been contravened.

SECTION 170DE(1) - THE LAW

Section 170DE(1) of the Act provides that an employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service. In this instance, the respondent's submission was that the actions of Mr Watts constituted a valid reason for the termination of his employment connected with his conduct. The respondent has the onus of proving that there was a valid reason for the termination of Mr Watts' employment; section 170EDA of the Act.

Northrop J in Selvachandron v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373 said that in its context, the adjective "valid" should be given the meaning of sound, defensible or well-founded. His Honour indicated that a reason which is capricious, fanciful, spiteful or prejudiced could not be a valid reason for the purposes of section 170DE(1). His Honour also said that in considering whether a reason is valid, it ought to be remembered that the requirement applies in the practical sphere of the relationship between an employer and an employee where each has rights and privileges and duties and obligations conferred and imposed on them. His Honour said the provisions must be applied in a practical commonsense way to ensure that the employer and the employee are each treated fairly.

In Nettlefold v Kym Smoker Pty Ltd, unreported, IRCA 469/96, Lee J, 4 October 1996, His Honour thought it arguable that the phrase "valid reason" imposed a requirement that in all of the circumstances a termination of employment at the initiative of the employer not be unjust or unfair.

In my opinion, to provide a valid reason for termination, any misconduct of an employee must be of a sufficient quality to warrant such a sanction, taking into account the previous service that the employee has given; see Lupoi v Phillips Fox, unreported, IRCA 485/96, Ritter JR, 3 October 1996; Garbutt v Stothers (1996) 69 IR 319; Fargie v Freedom Foods (Australia) Pty Ltd, unreported, IRCA 498/96, Parkinson JR, 14 October 1996.

The ultimate question in this case is whether in all of the circumstances including his position with the respondent and his employment history, the conduct of Mr Watts was such as to warrant the termination of his employment.

ANALYSIS OF MR WATTS' CONDUCT

Even on Mr Watts' evidence, there was a degree of dishonesty in what he did. The memorandum to Ms Peak was blatantly false. It suggested that the invoice enclosed was Mr Watts' health club membership invoice for 1995. The invoice enclosed did not have this character. The memorandum intimated that Mr Watts had paid for the health club membership described on the attached invoice. Mr Watts had done no such thing. Further, the memorandum implicitly requested the payment of the fitness programme rebate. Mr Watts was not at that time entitled to the rebate as he had not paid for health club membership nor actually joined a health club. On his own evidence, Mr Watts had no intention of joining the "health club" of Orbit Fitness Specialists. As a matter of fact, there was no such health club which he could join.

Mr Watts' actions in changing the invoice were also not honest. This is so whether one accepts that he changed the original invoice of Mr Douglas or the one that Mr Douglas himself had changed. An invoice which evidenced a payment for gymnasium equipment was changed to read as being an invoice for health club membership. This invoice had not been issued to Mr Watts. The invoice was changed so as to give that appearance. The amount on the invoice was changed from $318 to $535. In addition, as I have found, Mr Watts changed the third number on the invoice from a "6" to an "8" so as to give the impression that his invoice was a different invoice from that which was submitted by Mr Douglas.

The conduct constituted by these actions was quite deceptive indeed. It involved a series of false representations by Mr Watts to his employer for the purpose of obtaining the payment of money. It was a payment of money which he was not then entitled to.

Mr Watts' explanation is to the effect that all of this is a "technicality" as he had the alleged intention of joining BC The Body Club - Willetton. In my opinion, the false representations made by Mr Watts cannot be so characterised.

Further, given all of the evidence that I have referred to earlier, I do not accept Mr Watts' evidence that at the time he submitted the fitness rebate claim to the respondent, he had the intention of BC The Body Club - Willetton and paying them $535 for membership. In my opinion, Mr Watts invented the intention to join BC The Body Club - Willetton after the event to support his defence to the criminal proceedings and his present application. The fact that he did not mention BC The Body Club - Willetton in the interview on 20 December 1995 is, in my opinion, a telling factor, and so too is the lack of correlation between the amount of $535 and the information which Mr Watts said he obtained from the health club about the cost of membership. In addition to this, there is Mr Watts' failure to make substantial efforts to locate the employee of BC The Body Club - Willetton whom he claimed to have spoken to. Finally, there is the coincidence of the amount written on the invoice of Mr Douglas and that of Mr Watts. Mr Douglas had no intention of joining BC The Body Club - Willetton or any other health club and said that the amount of $535 "was just a figure". In my opinion, the same applied to Mr Watts. On the evidence placed before me, the amount of $535 did not relate to the amount of an intended membership at BC The Body Club - Willetton. In my view, Mr Watts included the same amount as Mr Douglas on his altered invoice to avoid suspicion in case the invoices were checked.

I therefore have the same view of things as did Mr Loveless. Mr Watts submitted a false invoice and memorandum in an attempt to obtain money from the respondent to which he was not entitled.

SECTION 170DE(1) - CONCLUSION

Overall, I am satisfied that the respondent has discharged its onus and proved that there was a valid reason for the termination of Mr Watts' employment. The valid reason was the gravity of the misconduct of Mr Watts. This provided a valid reason for the termination of his employment even taking into account the length and quality of his previous employment with the respondent.

There are some other submissions that were made by the applicant which I should specifically consider.

The applicant implicitly submitted that there was a failure to properly investigate Mr Watts' conduct and that this failure meant that there was not a valid reason for the termination of his employment. Specifically, the applicant submitted that Mr Watts offered an explanation of his conduct at the meeting on 20 December 1995 which was not properly investigated. The applicant referred to the evidence of Mr Loveless and a question that was asked of him to the effect that Mr Watts said at the meeting that Mr Douglas had said it would be "okay for him to do it this way, did he not". Importantly, Mr Loveless did not agree with this proposition. He said in answer, "I think he indicated something about: Douglas showed me how to do it or words to that effect" Later it was again put to Mr Loveless that Mr Watts said Mr Douglas had told him "what he was doing was OK". Again Mr Loveless rejected this.

Furthermore, in his evidence in chief, Mr Watts did not assert that he told the meeting on 20 December 1995 that he had submitted the invoice in the way in which he did in reliance on advice that he had received from Mr Douglas. In his cross examination, Mr Watts was asked whether he referred to Mr Douglas in the interview. He said, "not from memory, no. I honestly can't remember exactly".

Therefore I am not satisfied that the role that Mr Douglas may have played in what Mr Watts did was mentioned in such a way so as to oblige Mr Loveless to speak to Mr Douglas about that aspect of the matter before making a decision on whether to terminate Mr Watts' employment. In any event, Mr Loveless had already interviewed Mr Douglas, although it is unclear from the evidence as to whether Mr Watts was discussed during this interview.

The applicant referred to the authority of Dickinson v Woolworths Safety Pty Ltd, (1995) AILR 7-012. This was a decision of the Full Bench of the Employee Relations Commission of Victoria in relation to an application under the Employee Relations Act 1992 (Victoria). The question that the Full Bench had to consider was different from that in the present case. They had to consider whether a dismissal was harsh, unjust or unreasonable, not whether there was a valid reason for termination of employment. In addition, the case was factually different from the present. It involved the termination of employment of an employee who was a services mechanic on a night shift. The termination occurred after the employer had received a written report from a female security guard that the employee had opened his trousers in front of her and shown her his erect penis. The Full Bench found that the investigation process was procedurally deficient, in part because the female security guard was not interviewed by the employer before the dismissal. However, the Full Bench found that the procedural defects did not, overall, subordinate the substantive fairness of the termination, and dismissed the application. In this regard, the decision by the Full Bench is consistent with the later High Court decision of Byrne v Australian Airlines Ltd (1995) 131 ALR 422. In this case, the High Court indicated that lack of procedural fairness is only one matter to be taken into account in determining whether a termination of employment is harsh, unjust or unreasonable; see pages 434 and 462.

Given the different factual and legal circumstances in this case from that in Dickinson, I do not think that the authority is material to my decision.

The applicant also made reference to the decision of Lupoi v Phillips Fox and submitted that the case decided that "for there to be a valid reason for termination, in cases involving alleged misconduct, there must also be a 'well-founded belief, after due enquiry, of misconduct’ (page 31, 32)". This submission does not accurately convey what was intended by the part of the Lupoi judgment referred to. What I intended to there convey was that it could not be argued, in that case, that after due inquiry there was a well-founded belief of misconduct. This was because there was no meaningful inquiry conducted in that case. The judgment did not purport to decide that for there to be a valid reason in a case of misconduct, there needed to be a well-founded belief of misconduct after due inquiry. Indeed, in the later decision of Elvidge v Burswood Resort Management Ltd, unreported, IRCA 631/96, Ritter JR, 16 December 1996, I found as a matter of law that an honest and reasonable belief of misconduct after due inquiry was an insufficient basis on which to prove a valid reason to terminate employment. This view is endorsed by the judgment of the Chief Justice in Yew v ACI Glass Packing Pty Ltd, unreported, IRCA 596/96, Wilcox CJ, 11 December 1996. Although this judgment was handed down five days before my judgment in Elvidge, I was not aware of it at the time of the Elvidge decision.

In this case, I am quite satisfied that the alleged misconduct occurred and that it was significant enough to provide a valid reason for the termination of employment. Further, there was nothing about the investigation into Mr Watts' conduct which places any doubt on the validity of the decision to terminate his employment.

SECTION 170DB

Section 170DB(1) ordinarily requires that an employer must not terminate an employee's employment unless they are given the period of notice required by subsection (2), or compensation instead of notice, of the amount required by subsection (4). The exception to this is section 170DB(1)(b). The exception applies where "the employee is guilty of serious misconduct, that is, misconduct of a kind such that it would be unreasonable to require the employer to continue the employment during the notice period".

In this case, Mr Watts was summarily terminated. He was not provided with notice or compensation in lieu of notice. Therefore, unless the exception contained in section 170DB(1)(b) applies, the respondent has contravened section 170DB of the Act.

von Doussa J in Bartucciotto v Euro Printing Company Pty Ltd, unreported, IRCA 72/96, 21 February 1996, at page 18 said that section 170DB(1)(b) was intended to reflect the common law position as referred to in a passage quoted from the joint judgment of Smithers and Evatt JJ in North v Television Corporation Ltd (1976) 11 ALR 599. The passage was as follows:

"It is of assistance to consider the expression 'misconduct’ by reference to subject matter to which it is related and the context in which it appears. The subject matter is a termination by one party against the will of another of a continuing contract of employment on the ground of breach of one of the terms of the contract. And the context is such as to indicate that certain breaches of non-serious nature, some of which would be within the connotation of misconduct, are not regarded as grounds for termination. In such a situation it is reasonable to interpret the expression "misconduct” as referring to conduct so seriously in breach of the contract that by standards of fairness and justice the employer should not be bound to continue the employment.
This situation would arise if there were conduct inconsistent with the fulfilment of the express or implied conditions of service. It is conduct of that kind which will justify dismissal at common law . . . .
For the purposes of the application of the common law principles to the facts of this case the remarks of the Master of the Rolls in Laws v London Chronicle (Indicator Newspaper) Limited [1954] 2 All ER 285 at 287 and 289 are in point. He said:
'To my mind the proper conclusion to be drawn from the passages which I have cited and the cases which we were referred to is that, since a contract of service is but an example of contracts in general, so that the general law of contract will be applicable, it follows that, if summary dismissal is claimed to be justifiable, the question must be whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service . . . .

I do, however, think (following the passages which I have already cited) that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions, and for that reason, therefore, I think that one finds in the passages which I have read that the disobedience must at least have the quality that it is "wilful”; it does (in other words) connote a deliberate flouting of the essential contractual conditions’".

In my opinion, having regard to these considerations, the conduct of Mr Watts was such as to justify the termination of his employment without notice or compensation under the exception contained in section 170DB(1)(b) of the Act.

In my opinion, Mr Watts was endeavouring to obtain from his employer an amount of $455 to which he was not entitled. This is very serious conduct indeed. The honesty and integrity of any employee, particularly a senior employee, is fundamental. This is particularly so when the employee has considerable autonomy and authority, as Mr Watts did. As I have set out earlier, Mr Watts had a discretionary expenditure budget of one-half million dollars per annum. A person in such a position has to be absolutely trust worthy. Mr Watts' conduct showed that he was not always prepared to be of this character in his dealings with his employer. In relation to the claiming of the fitness programme rebate, he was prepared to put his personal interests above those of his employer, to the detriment of his employer. As Mr Ferraro said, as a manager who was entrusted with a half-million dollar discretionary expenditure budget, the integrity and honesty of Mr Watts was paramount.

In my opinion, the conduct of Mr Watts was a deliberate flouting of one of the essential conditions of his employment. It was misconduct of such a kind that it would be unreasonable to require the employer to continue the employment during any notice period. Accordingly, under section 170DB(1)(b), the respondent was justified in summarily terminating the employment of Mr Watts.

CONCLUSION

For the reasons set out above, Mr Watts' application under section 170EA of the Act is dismissed.

I certify that this and the preceding forty-four (44) pages
are a true copy of the reasons for decision of

Judicial Registrar Ritter.

Associate:

Date: 5 May 1997

APPEARANCES

Counsel for the Applicant: Mr K. Pratt

Solicitors for the Applicant: Crisp & Partners

Counsel for the Respondent: Ms C. Brown

Solicitor for the Respondent: Corrs Chambers Westgarth

Date of hearing: 5, 6 and 19 December 1996

Date of judgment: 5 May 1997

[1997] IRCA 147

05 May 1997