CATCHWORDS INDUSTRIAL LAW - Termination of employment - misappropriation of funds - whether allegation made out - procedural fairness - adequacy of investigation - whether termination harsh, unjust or unreasonable. Industrial Relations Act 1988, ss.170DC and 170DE Schaale -v- Hoechst Australia Limited (1993) 47 IR 249 Nicolson -v- Heaven and Earth Gallery Pty Limited (1994) 126 ALR 233 Bostik (Australia) Pty Limited -v- Gorgevski (No. 1) (1992) 36 FCR 20 Byrne -v- Australian National Airlines Limited (1994) 51 IR 10 Gregory -v- Philip Morris Limited (1988) 80 ALR 455 PETER JAMES HENDRIE & ANOR -v- COMMONWEALTH INDUSTRIAL GASES LIMITED NO. VI 1292 of 1994 Before: MURPHY JR Place: MELBOURNE Date: 25 JANUARY 1995 INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1292 of 1994 BETWEEN: PETER JAMES HENDRIE & ANOR Applicant AND COMMONWEALTH INDUSTRIAL GASES LIMITED Respondent MINUTES OF ORDER 25 January 1995 Judicial Registrar Murphy THE COURT ORDERS THAT: 1. The application is dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1292 of 1994 BETWEEN: PETER JAMES HENDRIE & ANOR Applicant AND COMMONWEALTH INDUSTRIAL GASES LIMITED Respondent REASONS FOR JUDGMENT (EX TEMPORE) (Revised From Draft Transcript) 25 January 1995 Judicial Registrar Murphy Introduction This is an application under Subdivision C of Part VIA of the Industrial Relations Act ("the Act") in which the applicant, Peter James Hendrie, seeks reinstatement to his position as production supervisor at the Hastings plant of the respondent, and alleges that the respondent is in breach of ss.170DC and 170DE of the Act. Background The applicant has been employed with the respondent for the past eight years. For the previous three years, he was a contractor exclusively with the respondent. At the time of his termination, he was employed as production supervisor at the Hastings plant. He had the supervisory position for five years. In his position he was responsible for production at the site. He was also involved with liaison with customers and he had responsibility for a petty cash float of $1,050.00 and had an authority to purchase goods up to the value of $500.00. The procedure of the company in relation to petty cash is that is used for minor consumable items such as milk, first aid and meals, as well as other items that are not ordered in the ordinary course of purchasing by the respondent. When an item is purchased using the petty cash, the invoice or receipt is retained and details of the purchase are entered in a petty cash reimbursement sheet. These amounts are then totalled and with the accompanying invoices or receipts forwarded to the applicant's supervisor in the Dandenong office for authorisation. Once the petty cash reimbursement is authorised the details are forwarded to the accounts department of the respondent at Preston and a cheque is raised which is then forwarded to Hastings to be cashed in order to replenish the float to its usual sum of $1,050.00. In the evidence were the detailed procedure manuals of the respondent in relation to petty cash which specify how moneys are to be withdrawn and which set out that receipt vouchers are to be raised for each such withdrawal. The Circumstances Giving Rise To The Termination On 20 December 1993 the applicant attended at a local steel merchant, K and K Steel Pty Ltd and ordered a quantity of steel. Part of that steel was to be bent so that it could be fitted to his campervan as a roof rack. He returned to the merchant on 24 December and ordered some additional steel. Both duplicate invoices are in evidence and were addressed to the respondent "CIG". The first invoice is also marked "c/o Peter". Only the first invoice contained steel for his personal use. The balance of the steel he said was to make tent poles to be used in the erection of shelters over a compressor which was soon to be maintained, or to be used generally at the site. The applicant gave evidence that he collected some of the steel from the merchant, but that the balance of it was delivered to the respondent's site at Hastings. He worked on the roof rack of the campervan after hours at the site over the Christmas-New Year period and then took some leave. Before doing so, he gave no instructions to anyone about the use of the balance of the steel for tent poles. When he returned from his holidays, he found that the invoices for the steel had not been paid. His evidence as to whether he had the original invoices at that point was unclear. He gave evidence that he obtained faxed copies of the invoices from the steel merchant and sent a contractor of the respondent, Mr Sweeney, down to the steel merchant to pay the invoices. The applicant did not have the funds to pay his share of the first invoice and the total amount due, $143.20, was paid from the petty cash float. He stated that at that stage he should have put an IOU in the petty cash tin. He said that the $46.00 which was the value of the steel relating to the campervan was attributable to him as a loan. He said that in keeping with his practice in May 1994 he completed a complete petty cash reimbursement sheet from a pile of receipts and invoices which he had in his desk and included on that sheet an entry for reimbursement of the $143.20 previously paid by Mr Sweeney. He said "it slipped past me" and it was a mistake that it included the $46.00 attributed to his personal use. He gave evidence that at the site it was common practice for staff to borrow money from petty cash and it was not his practice to put an IOU in the petty cash tin. The petty cash reimbursement sheet was in evidence and it lists a number of petty cash reimbursement items, mainly for meals, of amounts of less than $20.00. The largest amount is the $143.20 for the steel, and it is the second item in a list of 16. The reimbursement sheet was submitted to the Dandenong office of the respondent shortly after 11 May. Shortly prior to this, Mr Giannone, who was the applicant's superior at Dandenong, had attended at the Hastings plant while he was working on night shift. At that time he had been shown a partially completed petty cash reimbursement sheet containing about five items and which contained an entry for reimbursement of the steel from the steel merchant. There was a conflict on the evidence as to whether the reimbursement sheet was, as given in evidence by the applicant, completed at a single sitting, or whether in fact it was partially completed when viewed by Mr Giannone in early May. On this issue I prefer the evidence of Mr Giannone, that he viewed a partially completed sheet in early May, because it was this partially completed sheet which was brought to his attention by an employee which prompted him to follow the matter up subsequently. The matter that was brought to the attention of Mr Giannone was that the applicant may have been intending to seek reimbursement from the respondent for steel which had been for his personal use. Mr Giannone took no action at this time but chose to wait and see if the claim for reimbursement was made by the applicant. The claim was made and was submitted about 11 May to the Dandenong office and to the applicant's former supervisor, Mr Damian Walsh. He approved the claim and in early July the successful claim for reimbursement came to Mr Giannone's attention. He consulted with Mr Walsh and Mr Walsh's view was that the claim for reimbursement for the steel which was for personal use warranted an investigation. Advice was sought from the personnel manager of the respondent, Mr Seppings, and an investigation was undertaken. As a result of the conversations between Mr Walsh and Mr Giannone, they had a discussion with Mr Sweeney, and after consultation with Mr Seppings, the decision was taken to suspend the applicant from duty on full pay pending a full investigation. He was called to the Dandenong office on 14 July and advised that he had been suspended on full pay pending an investigation into "misappropriation of CIG funds". There was no discussion with him at that point into the allegations against him. Mr Giannone and Mr Walsh then attended at the Hastings site on 18 July and interviewed a number of employees. Mr Walsh took notes of those interviews and the typed version of them was admitted into evidence. On 19 July a meeting was held between Mr Walsh, Mr Giannone and the applicant. The purpose of this meeting was to give the applicant the opportunity to respond to the matters which had been investigated. At that meeting the applicant said words to the effect that he had "been guilty of being a dick head" and that he "had made an honest mistake". At the meeting the applicant indicated that not all of the steel was for his personal use but that some of it was for tent poles for the site. He said that he was very busy and had a lot on his mind. He was unable to explain why he had failed to repay the money over the 5 month period from February. The applicant gave evidence that in the course of this meeting he offered to repay the money. The witnesses for the respondent deny that this offer was made and I accept their evidence on this point. After the meeting of 19 July there were further discussions between Mr Walsh, Mr Giannone and Mr Seppings and it was agreed that there would be a further meeting at which time the matter was to be concluded. That meeting took place on 22 July at Preston and at the commencement of the meeting Mr Seppings indicated that the purpose of the meeting was to determine whether or not the allegations were made out and what was to be the outcome. Mr Seppings chaired the meeting and after he had opened it Mr Walsh then outlined details of the investigation and invited the applicant to respond. Mr Seppings gave clear evidence that it was made clear to the applicant the serious view that the respondent took of the matter of alleged misappropriation of funds and that if the allegation was found proven then he would be terminated. The applicant stated that the issue of termination was not raised until the end of the meeting. On this point I reject his evidence and accept the evidence of Mr Seppings, a person with considerable experience in industrial relations and personnel matters, that he set out the agenda of the meeting at the commencement of it. Mr Walsh outlined the evidence which had been gathered and invited the applicant to respond. In the course of his response the applicant claimed that he had sent Mr Sweeney down to pay the invoices to the steel merchant along with some money for a milk bill. It was pointed out by Mr Walsh that there were no entries for such a milk bill around the time of the steel reimbursement entry. At that point the applicant said that he could not remember. The applicant claimed that in the course of this meeting too he offered to repay the money. The respondents' version was that no such offer was made and I accept their version on this point. In the course of this meeting Mr Walsh stated that the applicant stated that he did not do any work in company time. Mr Walsh had replied that this was not the issue and that the issue was misappropriation of funds. During the course of the meeting the respondent's representatives adjourned to consider the responses that the applicant had made and sought clarification of some issues. After the clarification they again adjourned and considered the matters that had been put. After this consideration they rejected the applicant's version that it was an honest mistake that the claim for reimbursement had been made. Mr Seppings gave evidence that they had formed the view that it was an action of a wilful nature by someone in a supervisory position. The respondent did not condone the misuse of moneys; the applicant's clear service record did not override the misappropriation of funds. At the conclusion of the interview Mr Seppings indicated to the applicant that he was to be terminated and he was handed a letter of termination. Mr Walsh then raised the possibility of resignation and payment in lieu of notice of some $4,000.00 but this course of action was rejected by the applicant. In the course of his evidence the applicant stated he was very busy over the period from the time that the account had been paid and in particular when he made the claim for reimbursement, and he was working long hours. In cross-examination these matters were put to the witnesses of the respondent but they responded that although the position that the applicant held was a senior position and at times was busy, at other times when the plant was operating satisfactorily there were times when it was not as busy as maintained by the applicant. It was also put to the respondent that the applicant had raised with the respondent the possibility of a change of position. The respondent's witness Mr Giannone did say that the applicant had raised with him the possibility of a change of position. Much of the thrust of the applicant's representative's submission was that the applicant's conduct could be excused on the basis of the pressure of the position. While I accept his evidence that there was some pressure in the position, I prefer the evidence of Mr Walsh that in the position that he held there were times when he was busy and other times when production operated smoothly, and thus there was time to attend to paper work and other duties. The Court's preference for the evidence of the respondent on the issue of the level of pressure in the position is relevant to the issue as to whether or not the Court should accept the applicant's version of events. Assessment Of The Evidence Acceptance of the applicant's version of events relies heavily on accepting his credibility as a witness. His evidence was that this was an honest mistake and that he failed to reimburse the petty cash both before and after the claim for reimbursement was made. He maintained this version of events which he had given to the respondent at the time of the investigation. The applicant was heavily tested in cross-examination and when pressed he became a vague and unsatisfactory witness. He was unable to give a satisfactory explanation for matters which demanded an explanation, an explanation which he ought to have been able to give. One example was his failure to identify the receipt for $143.20 from the steel merchant. That receipt was in the possession of the respondent and could only have been provided to the respondent by the applicant attached to the petty cash reimbursement form. No explanation was given as to what had happened to the original invoices of the steel merchant. Similarly his explanation for the use to which the balance of the steel which he had ordered was to be put was vague in the extreme. In contrast the witnesses of the respondent were impressive. They corroborated each other and their version was also corroborated by the contemporaneous notes of the two meetings which were taken by Mr Walsh. Findings In Relation To The Allegation In order to determine whether the respondent had a valid reason to terminate the applicant's employment, it is necessary for the court to determine whether the respondent did terminate the applicant's employment for the reason given, namely serious misconduct. It is also necessary for the Court to determine for itself the truth of the allegation against the applicant. The respondent/employer on 22 July 1994 rejected the applicant's explanation of the circumstances of the claim for reimbursement and concluded that he had misappropriated company funds. On the evidence which was before the respondent that conclusion was clearly open to it. It was reached after a proper investigation and due deliberation by the same staff who gave evidence. The Court is similarly of the opinion that the action of the applicant here constituted serious misconduct which provided a valid reason for the termination of his employment. I regard the applicant's evidence that the payment for the steel constituted a loan and that the claim for reimbursement constituted an honest mistake as unsatisfactory. I reject his evidence that he forgot that part of the steel was for his own use and for that reason he failed to reimburse the $46.00, which he said was attributable to his own use. It strains credibility that he could fail to remember the need to refund the respondent in circumstances where the steel was for his own campervan and where the amount of the claim for the steel stands out as being far and away greater than any of the other claims for reimbursement on the petty cash reimbursement form. I find that he deliberately sought reimbursement from the respondent in circumstances where he was not entitled to do so. It is unnecessary for me to conclude whether the extent of the wrongful claim is the full $143.20, or only the $46.00 which the applicant admits was for his own use. It is sufficient to find that he made the claim for reimbursement and took no action over the 5 month period to put the matter in order. In coming to my conclusion on this aspect I have taken into account the serious nature of the allegations, but I am satisfied on the evidence before me that the innocent explanation proffered by the applicant must be rejected in favour of the conclusion reached by the respondent. Was There A Breach Of Section 170DC Of The Act? The representative of the applicant strongly argued that the conduct of the investigation failed to accord procedural fairness to the applicant. It was asserted that from the time that Mr Giannone became aware that there might be a problem with the petty cash at Hastings he had a duty as the applicant's supervisor to bring the matter to the attention of the applicant. Rather than do this Mr Giannone waited and when it was revealed to him in early July that the claim for reimbursement had been made he proceeded to commence an investigation rather than bring the matter to the applicant's attention. The applicant was suspended from duty and did not have the opportunity to participate in the investigation or to respond at the first possible opportunity. Rather he was left to "stew" for 5 days before being given an opportunity to state his case at the meeting which took place on 19 July. The applicant also asserted that the procedure of the respondent was flawed by reason of the failure of the respondent to indicate in the final interview, at the commencement of the interview, that termination was a possible outcome. I have already indicated that I reject the applicant's evidence on this point. I accept the evidence of Mr Seppings, who stated that he fully explained the agenda for the final meeting to the applicant and the applicant assented to the course of action proposed. Counsel for the respondent on the other hand argued that the investigation satisfied the requirements of section 170DC. The Court was referred to the decision of Schaale -v- Hoechst Australia Limited (1993) 47 IR 249 where at 252 Heerey J said that: "The award has to operate 'in a practical way in a commercial and industrial environment.' ... Employers are not required to have the skills of police investigators or lawyers. By inspecting the site of the alleged entry and taking statements from potential witnesses, it seems to me that the respondent has acted quite reasonably." In Nicolson -v- Heaven and Earth Gallery Pty Limited (1994) 126 ALR 233, at 243 Wilcox CJ said in relation to section 170DC: "The paragraph does not require any particular formality. But this does not mean that it is unimportant or capable of profunctory satisfaction." In my opinion the respondent has complied with the requirements of 170DC. It was not necessary for Mr Giannone to bring any matter to the attention of the applicant when the potential irregularity was brought to his attention in early May. He was entitled to assume that the applicant would properly discharge his duties in relation to petty cash by only claiming amounts for reimbursement which had been properly incurred for company purposes. When the incorrect reimbursement did come to his attention he was entitled to treat the matter seriously and to bring it to the attention of his superiors. Advice was sought from Mr Seppings and the decision taken to suspend the applicant with pay and to undertake an investigation. The investigation which was undertaken was reasonable. As part of that investigation the applicant was invited to put his version of events in the meeting of 19 July and at the later meeting of 22 July. The claim that there was a failure to comply with section 170DC is therefore not made out. Was The Termination In Breach Of Section 170DE Of The Act? The applicant also contends that the termination of employment contravenes section 170DE(2) of the Act on the basis that it was harsh, unjust and unreasonable. In support of this it was argued that the respondent should have accepted that it was an honest mistake and not an attempt to misappropriate funds. It was suggested that it was an honest mistake which could have been made by a person under the pressure that the applicant was under. It was contended by the applicant that the respondent had failed to take proper account of his period of service and his unblemished record in deciding to terminate him. The respondent sought to defend the decision as one which was taken after proper investigation and one which reflected the seriousness of the matter as found by the investigation. The applicant held a position of responsibility and on the material it was open to Messrs Walsh, Seppings and Giannone to conclude that there had been a deliberate attempt to misappropriate company funds. Such a matter was serious, and it matters little that the amount involved was $46.00 as alleged by the applicant or $143.20 which was the total of the two invoices. In the decision of Bostik (Australia) Pty Limited -v- Gorgevski (No. 1) (1992) 36 FCR 20, the majority at 28 stated in relation to the words "harsh, unjust or unreasonable": "These are non-technical words which are intended to apply to an infinite variety of situations where employment is terminated. We do not think any redefinition or paraphrase of the expression is desirable. We agree with the learned trial judge's view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable." In the case of Byrne -v- Australian National Airlines Limited (1994) 51 IR 10, Black CJ considered the words and at 11 said: "I would observe however that the issues in such cases are not confined to whether the employer has acted unreasonably; the issues will include whether the termination was harsh or unjust. Although there is an obvious overlap between the words 'harsh', 'unjust' and 'unreasonable', they describe different concepts, and it may well be said that to dismiss an employee who was in fact not guilty of any misconduct is objectively 'unjust', notwithstanding that in a procedural sense the employer's conduct was not unreasonable and the decision to dismiss was one the employer might properly have arrived at." The respondent referred to the decision of Gregory -v- Philip Morris Limited (1988) 80 ALR 455 where at 462 of the decision, Jenkinson J says, in relation to the word "harsh": "It is in my opinion only a termination which is harsh of the employer to impose, as well as being harsh in its effect on the employee, that contravenes the sub-clause. And it is only a termination which is unjust of the employer to impose, as well as working injustice to the employee, that effects such a contravention." In the same case the same judge discussed the word "unreasonable" and at 457 said that the meaning of the word "unreasonable" should be understood in the sense: "which it has come to bear in many legal contexts when applied in characterisation of human conduct, that is, failing to conform to a course of conduct which a reasonable person would, in the judgment of the tribunal of fact, have adopted in all the circumstances." He went on to say that the question is ultimately one of fact and: "This question requires a determination, by reference to moral values and prudential considerations current in the community, of what the tribunal of fact thinks a reasonable employer in the circumstances would have decided to do at the time when the respondent terminated the appellant's employment." In this case I have concluded that there was a reasonable investigation and that the investigation did not breach section 170DC of the Act. Further, in my opinion, the actions taken by the respondent in the light of the material before it were reasonable. It is reasonable for an employer, having reached the conclusion that there has been a significant misappropriation of company funds by a person in a position of responsibility, to terminate that person's employment. Similarly it was not harsh for the respondent to take the action that it did in the circumstances, given the Court's finding that it rejects the applicant's account that there was an honest mistake. The actions taken were not unjust because procedural fairness was accorded to the applicant. The conclusion that there was a misappropriation of funds, one which I have found was open to the respondent, is such that it was open to the respondent to conclude that this overrode any matter personal to the applicant, such as his length of service and good record. It follows from this that the termination was not in breach of section 170DE of the Act, and I propose to dismiss the application. Order Of The Court The order of the Court is that the application is dismissed. I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment of Judicial Registrar Murphy as recorded in the draft transcript and revised by the Judicial Registrar. Associate: Dated: Representative for the Applicant: M. Addison Solicitor for the Respondent: Minter Ellison Morris Fletcher Counsel for the Respondent: Mr N. Green Dates of hearing: 23 & 24 January 1995 Date of Judgment: 25 January 1995