Industrial Relations Commission of New South Wales in Court Session CITATION: Austin v NF Importers Pty Ltd & Anor [2005] NSWIRComm 353 APPELLANT Bruce Austin FIRST RESPONDENT PARTIES: NF Importers Pty Ltd SECOND RESPONDENT WJF Holdings Pty Ltd FILE NUMBER(S): IRC 2534 of 2005 CORAM: Wright J President; Walton J Vice-President; Backman J CATCHWORDS: Appeal - Application for leave to appeal - Unfair contract - Reasons for judgment - Findings of credibility - Standard of proof for finding of falsification of email - Procedural fairness - Leave to appeal refused - Appeal dismissed - Costs. LEGISLATION CITED: Industrial Relations Act 1996 s 106 Abboud v The State of New South Wales (Department of School Education) (1999) 92 IR 32 Antonakopoulos v State Bank of NSW (1999) 91 IR 385 Austin v NF Importers Pty Ltd & Anor [2005] NSWIRComm 136 Box Valley Pty Ltd v Price (2000) 97 IR 484 Briginshaw v Briginshaw (1938) 60 CLR 336 Four Sons Pty Limited v Sakchai Limsiripothong (2000) 100 IR 400 Franklins Ltd v Webb (1996) 72 IR 257 Gow v Cronulla Sutherland Leagues Club Ltd (2002) 119 IR 122 Humphries v Cootamundra Ex-Services and Citizen's Memorial Club Ltd (2002) 128 IR 37 CASES CITED: Inspector Moore v Blacktown City Council (2003) 124 IR 59 King v State Bank of New South Wales (No 2) (2002) 126 IR 407 Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 Mohammed Shakiq v Boral Australia Gypsum Limited [2003] NSWIRComm 182 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 Pastry Cooks Union v Gartrell White (No 3) (1990) 35 IR 70 Starr v Commissioner of Police [2001] NSWIRComm 226 State Rail Authority of New South Wales v Earthline Constructions (In Liq) (1999) 160 ALR 588 Whisprun Pty Ltd (formerly Northwest Exports Pty Ltd) v Dixon (2003) 200 ALR 447 HEARING DATES: 10/12/2005 EXTEMPORE JUDGMENT DATE: 10/21/2005 APPELLANT Mr R de Meryrick of Counsel Brazel Moore & Daly Solicitor: Mr P Moore LEGAL REPRESENTATIVES: FIRST AND SECOND RESPONDENTS Mr J Fernon SC Carroll & O'Dea Solicitor: Mr P Punch JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION FULL BENCH CORAM:WRIGHT J, President WALTON J, Vice-President BACKMAN J Friday 21 October 2005 Matter No IRC 2534 of 2005 Bruce Austin v NF Importers Pty Ltd and Anor Application by Bruce Austin for leave to appeal and appeal against the decision of Justice Staff given on 27 April 2005 in Matter No IRC 1966 of 2002 REASONS FOR JUDGMENT OF THE COURT [2005] NSWIRComm 353 1 On 27 April 2005 in Austin v NF Importers Pty Ltd & Anor [2005] NSWIRComm 136, Staff J dismissed Mr Bruce Austin's complaint brought in proceedings under s 106 of the Industrial Relations Act 1996 that his employment contract with NF Importers Pty Ltd was unfair in relation to its termination. Mr Austin has sought leave to appeal from that decision. 2 On 12 October 2005, after hearing both parties' submissions, the Full Bench delivered an ex tempore judgment in which leave to appeal was refused and the appellant was ordered to pay the first and second respondent's costs of the appeal. The Full Bench declined the respondents' application for indemnity costs. These are the reasons for our decision to refuse leave to appeal and dismiss the appeal. 3 The crux of the decision below was stated at [127] and [150] - [151]: [127] It was the applicant's conduct, that is, knowing and allowing the illegal copying of software to take place as the IT Manager, that in my view, and I so find, amounted to a serious breach of Mr Austin's duty, responsibilities and obligations to his employer which justified summary dismissal. ... [150] ... A manager of an IT Department who is informed by an employee that illegal software is being used and who fails to act upon this information commits a fundamental breach of his duty of fidelity towards his employer. The breach was such that the respondent's reaction cannot be characterised as constituting unfair conduct or as rendering the contract of employment in some way as being unfair. [151] For these reasons, I am unable to characterise the actions of the respondent in terminating the applicant's services summarily as constituting or creating an unfair contract for the purposes of s 106. 4 The leading authority on the grant of leave to appeal is the judgment of the Full Bench in Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 at 381 - 382: see King v State Bank of New South Wales (No 2) (2002) 126 IR 407 at [52]; Inspector Moore v Blacktown City Council (2003) 124 IR 59 at [13]; and Mohammed Shakiq v Boral Australia Gypsum Limited [2003] NSWIRComm 182 at [10] - [11]. It is unnecessary to restate the principles laid down in that case, although it is clear that leave to appeal will not lightly be granted and that some issue of real significance in the interests of justice will need to be identified for such an application to succeed. 5 If an appeal seeks, by and large, to challenge findings of fact or the exercise of discretion of a member of the Commission, it will face a significant hurdle obtaining leave to appeal. In Box Valley Pty Ltd v Price (2000) 97 IR 484, the Full Bench stated at [4]: In any event, we think it should be emphasised, as clearly as we may, that appellate review is not available under this statute as of right, but requires the requisite degree of importance to attract leave to appeal. Mere contest as to findings of fact which might otherwise remain open on the evidence will generally, in the absence of other considerations, not attract leave. 6 We do not intend to refer at length to the numerous matters raised by Mr Austin in support of his application for leave. It is sufficient to observe that almost all of the matters appealed against are findings of fact which, in our view, were reasonably open to the trial judge. Not only that; the findings of fact pertaining to the heart of the dispute resulted from Staff J's conclusion that he should not rely on Mr Austin's evidence where it conflicted with the evidence of the witnesses called by the respondents, each of whom his Honour found to be reliable. Findings of this nature were described by Kirby J in State Rail Authority of New South Wales v Earthline Constructions (In Liq) (1999) 160 ALR 588 at [92] as the very limited class of cases where trial judges enjoy true advantages over appellate courts: those cases where the decision depends upon "resolving a clash of critical oral testimony, oath against oath." There is nothing in this case to suggest that Staff J's findings, based on assessments of the credibility of witnesses, manifest "clear, compelling, palpable or plain errors" sufficient to warrant an exception to the rule of appellate restraint in this class of cases (see Whisprun Pty Ltd (formerly Northwest Exports Pty Ltd) v Dixon (2003) 200 ALR 447 at [94] and [97] - [98] per Kirby J). 7 Other matters described in the Notice of Appeal as "matters appealed against" misrepresent what his Honour in fact found and hence cannot properly form the basis for an appeal: paragraphs (3), (4) and (7) of the Notice fall into this category. Mr Austin's complaints in relation to redundancy pay are equally misconceived. Staff J found that the termination of Mr Austin's services was justified on the basis of serious misconduct. This finding was reasonably open to his Honour. In these circumstances, Mr Austin's contention that "the contract was unfair in not providing for redundancy pay" cannot be sustained. 8 Two grounds of appeal merit further discussion. The first relates to the appropriate standard of proof in the case of a finding relating to dishonesty. In the court below, Mr Austin gave evidence that he sent an email to the general manager of the first respondent on 15 October 2001 stating his belief that staff were engaged in illegal copying of software. Staff J found, on the balance of probabilities, that the email was in fact sent on 19 February 2002 (after the general manager had been advised by a third party of the illegal copying of software and confronted Mr Austin) and that the email of 15 October 2001 was a fabrication, concocted by Mr Austin. 9 We agree with Mr Austin's submissions that the approach of the High Court in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 provides the approach that should apply to findings of this nature which relate to a serious allegation. However, we are not satisfied that Mr Austin has relevantly demonstrated error. The High Court has stressed on many occasions that Briginshaw v Briginshaw does not displace the burden of proof in civil cases which remains on the balance of probabilities. Rather, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove; a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of illegal or fraudulent conduct (see the discussion of Mason CJ, Brennan, Deane and Gaudron JJ in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449 - 450 and the decision of the Full Bench of the Commission in Four Sons Pty Limited v Sakchai Limsiripothong (2000) 100 IR 400 at [10] - [11]). 10 The mere fact that Staff J described the finding as having been made on the balance of probabilities does not necessarily disclose an error of law. In this case, we consider that the evidence relied upon by Staff J was of a sufficient strength to support the finding made, bearing in mind the seriousness of the allegation. In any event, we agree with Staff J's express observation that the finding was not necessary to the ultimate resolution of the case and further note that it was not, of itself, determinative of his Honour's assessment of Mr Austin's credibility, which was based on a variety of factors. 11 The second ground of appeal for further discussion relates to procedural fairness which, in our view, raises more significant issues. For the purposes of the application for leave to appeal, the first three allegations in paragraph 22 of Mr Austin's written submissions may be dealt with shortly. Mr Austin submitted that he was denied procedural fairness in that he was denied an opportunity to respond to four enumerated allegations before his services were terminated. However, none of the first three allegations go to the root of the serious misconduct which precipitated Mr Austin's summary dismissal. Consequently, they are less likely to form the basis of a claim that Mr Austin's contract was unfair due to an unfair procedure. As Staff J found at paragraph [150] of his reasons, Mr Austin's misconduct was his failure to act upon information which had come to his attention that illegal software was being used. By way of contrast, the first three allegations relate to the falsification of the email of 15 October 2001 and the methods by which the general manager believed Mr Austin should have become aware of the unlicensed software. 12 However, Mr Austin's fourth allegation - that he was not given an opportunity to respond to the general manager's belief that he had improperly turned a blind eye to the copying of illegal software - goes to the heart of the misconduct relied upon by the respondent, NF Importers Pty Ltd, and we gave anxious consideration whether to grant leave to appeal in relation to the relevant grounds in the application for leave to appeal and appeal. On balance, having regard to the reasons given by Staff J in this respect and the submissions made on behalf of the respondents, we also decided to decline leave in this respect. 13 At paragraphs [152] - [153] of the judgment at first instance, Staff J held: [152] I reach this conclusion [that the summary dismissal was not unfair] notwithstanding an allegation that the respondent failed to follow appropriate processes during the investigative and determinative aspects of the respondent's process. Viewed objectively, the termination of the applicant's employment by reason of his conduct did not, in all the circumstances, constitute relevant unfairness. The alleged failure to follow these provisions, even if established, could have no effect on this conclusion. [153] As Hill J said in Mason v Electricity Commission of New South Wales t/a Pacific Power (1995) 62 IR 436 at 442 (which was endorsed by Walton J, Vice-President, in Gow v Cronulla Sutherland Leagues Club Ltd (2002) 119 IR 122 at 204): Clearly the employer must be a judge in its own cause, may be biased and indeed may have prejudged the matter. But these considerations will not affect a dismissal which is otherwise justified on the merits. 14 If paragraph [152] were read in isolation, it may appear that Staff J concluded that the first respondent's actions did not constitute unfairness prior to considering and evaluating Mr Austin's allegations that he had not been afforded procedural fairness. Such an approach would underrate the potential significance of the failure to observe procedural fairness. 15 As the Full Bench stated in Abboud v The State of New South Wales (Department of School Education) (1999) 92 IR 32 at 50, unfair dismissal cases provide guidance when dealing with a claim under s 106 that the contract has become unfair primarily as a result of the actions of the respondent in terminating it. The correct approach in relation to procedural fairness in unfair dismissal cases has been stated by the Court in a number of cases, including Abboud, Humphries v Cootamundra Ex-Services and Citizen's Memorial Club Ltd (2003) 128 IR 37; Starr v Commissioner of Police [2001] NSWIRComm 226; and Gow v Cronulla Sutherland Leagues Club Ltd (2002) 119 IR 122. Failure to follow an appropriate procedure may result in a dismissal being harsh, unreasonable or unjust; but not every failure of a procedural kind will warrant the intervention of this Court. 16 There are many cases where findings relating to procedural fairness will be critical to the essential elements of the case, particularly in the context of allegations of serious misconduct. In those cases, the employer bears the evidentiary burden of establishing a proper basis for summary dismissal for misconduct: see (Pastry Cooks Union v Gartrell White (No 3) (1990) 35 IR 70 at 83; Franklins Ltd v Webb (1996) 72 IR 257 at 260). Humphries v Cootamundra Ex-Services and Citizen's Memorial Club Ltd provides the following graphic illustration of the manner in which a denial of procedural fairness can cast real doubt upon or taint the finding of serious misconduct and can indicate the need for real caution in evaluating a respondent employer's case: [114] Thirdly, the dismissal was harsh, unreasonable and unjust due to the procedures adopted by the club in terminating the appellant. Notwithstanding that at all relevant times the appellant knew the general nature of the allegations against her, there was, in reality, a deprivation of any proper "opportunity" (to use the language of s 88(b) of the Act) to make out a defence in relation to the allegations made against her, or to give an explanation of the conduct which was said to warrant dismissal. Whilst the respondent appropriately interviewed the appellant and invited her to provide an explanation, she was deprived of the actual records to which the allegations related. This failure so fundamentally affected the appellant's opportunity to give an explanation or provide a defence as to effectively, if not formally, deny that right absolutely. [115] This denial of access to the club records amounted to a substantive failure to provide such an opportunity and thereby was a substantially unfair procedure. To the extent that illustration of this is necessary, this was demonstrated by the fact that, in a sense, the whole process in this case miscarried in consequence of it -- leading not only to the appellant's summary dismissal, but also to the lack of assistance afforded to the Deputy President in hearing the matter, in that his Honour received only limited submissions or analysis because of the lateness of the receipt of the records in question. [116] By virtue of the respondent's unfair investigation procedure, from the outset the appellant was placed in a false position in relation to the allegations. She was, in effect, invited to incriminate herself by providing information to explain conduct which purported to have been her own, but in circumstances in which it was not effectively possible for her to confirm that the anomalies for which she was deemed responsible were even within her command. 17 In some cases, a denial of procedural fairness may give rise to a conclusion that the contract was unfair simpliciter. In Antonakopoulos v State Bank of NSW (1999) 91 IR 385 at 389, the Full Bench stated: We agree with the conclusion of Hill J that procedural issues, that is failure to deal with the matter in a procedurally fair way, may, in certain cases, of themselves, constitute the basis for a determination that a dismissal is harsh, unjust or unreasonable. A failure to adopt a procedure which constitutes a breach of 'an essential prerequisite to, or inviolable limitation on, the exercise of the employer's right to dismiss' or a failure to afford procedural fairness which causes a 'substantial and irrevocable prejudice to the employee' will often vitiate the decision of an employer and warrant, in itself, a determination that the dismissal was harsh, unreasonable or unjust (and hence, establish the basis for a remedy under the Act). Further, a decision to dismiss made upon the basis of procedures which are unfair and where an innocent explanation or other appropriate explanation is reasonably available will normally constitute a firm basis for a determination that a dismissal, so effected, is harsh, unreasonable or unjust. 18 In this case, it was necessary for the trial judge to consider and assess the allegations relating to procedural fairness because they may have had some impact upon the findings relating to misconduct. When paragraph [152] is read in the context of the full decision at first instance (particularly by reference to paragraphs [40], [46], [48], and [143]) we are satisfied that this is in fact the approach Staff J adopted. Having received a letter of demand from the software licensors, the respondent conducted three interviews with Mr Austin in an effort to determine what had happened. It is plain that Mr Austin did not explain matters fully. It is clear from the reasons for the decision at first instance that Staff J was very much aware of and dealt with the question of whether it was incuimbent upon NF Importers Pty Ltd to do more, given their state of knowledge at the time. Even though we might have approached the matter differently, it was open to his Honour to find that no more was required in order to satisfy the demands of procedural fairness. _______________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.