Industrial Relations Commission of New South Wales CITATION: Helen Miriam Ross and A E R Pty Ltd [2005] NSWIRComm 1140 APPLICANT Helen Miriam Ross PARTIES: RESPONDENT A E R Pty Ltd FILE NUMBER(S): 5817 of 2003 CORAM: McLeay C Unfair dismissal - termination of employment - conflict of interest - summary dismissal - no proper procedure followed - attempts to undermine credibility - cash payments not properly recorded - applicant admitted providing fraudulent information to ATO - difference as to whether she operated under instructions - work performance issues - onus on respondent to justify summary dismissal - onus fulfilled - application dismissed CATCHWORDS: Industrial Relations Act 1996 LEGISLATION CITED: Pastrycooks Employees, Biscuit Makers Employees and Flour and Sugar Goods Workers Union v Gartrell White [No.3] (1990) 35 IR 70 CASES CITED: Wang v Crestell Industries Pty Ltd (1997) 73 IR 454 HEARING DATES: 07/21/2005; 07/22/2005 DATE OF JUDGMENT: 08/30/2005 APPLICANT Mr J Law, Agent John F Law & Associates LEGAL REPRESENTATIVES: RESPONDENT Mr T Fox, Solicitor Fox & Associates, Lawyers DECISION: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: MCLEAY C 30 August 2005 Matter No IRC 5817 of 2003 Helen Miriam Ross and A E R Pty Ltd Application by Helen Miriam Ross re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION [2005] NSWIRComm 1140 1 This is an application by Helen Miriam Ross for unfair dismissal against A E R Pty Ltd pursuant to section 84 of the Industrial Relations Act 1996. 2 Ms Ross was employed from 31 May 1999 as a clerk grade 3 on a part-time basis pursuant to the Clerical and Administrative Employees (State) Award. There was some additional duties added to her job as well as a variation in hours. There were no performance issues and indeed she had what was described as a very good relationship with her employer. On the morning of Monday 22 September 2003 her employer, Mr Les Rawnsley approached her in the carpark as she arrived for work and terminated her employment. He provided no reasons for doing so. 3 On the Friday following Ms Ross was issued with an Employment Separation Certificate which described as the reason for the termination of her employment, "conflict of interest between employee and boss of bookkeeping issues". The Employer's Reply to her application for unfair dismissal provided her with a detailed outline of the reasons for dismissal for the first time. 4 The reasons for dismissal included non-provision of accounting detail to the respondent despite repeated requests, rudeness to Mr Rawnsley's wife, improperly and without permission drawing petty cash in respect of personal expenses since at least July 2002, continual refusal to accede to the employer's request to provide financial records or passwords to access the computerised system, the removal of a ducted vacuum system from the employer's premises without payment, disclosure of financial and other business records to the applicant's husband. 5 It is obvious that dismissal without the provision of reasons and without any prior history of warnings is procedurally unfair. 6 Mr Fox conceded that in this case the respondent carries the burden of proving that the dismissal of the applicant was not harsh, unjust or unreasonable. The standard of proof required when an employee is dismissed for criminal conduct is well established, being the civil standard, not the criminal standard. In Pastrycooks Employees, Biscuit Makers Employees and Flour and Sugar Goods Workers Union v Gartrell White [No.3] (1990) 35 IR 70 at 83-84, Hungerford J, said: It is undoubted, in my view, and as Mr Walton conceded, that the onus for making out a case to warrant the intervention of the Commission in ordering reinstatement is on the claimant union: see Re Barrett and Women's Hospital Crown Street [1947] AR (NSW) 565; Re Municipal Employees, Greater Newcastle (Wages Division) Award (Re Wallace) [1949] AR (NSW) 868; Western Suburbs District Ambulance Committee v Tipping [1957] AR (NSW) 273 at 279 and Homebush Abattoir [1966] AR (NSW) at 386. However, it is also undoubted, in my view, that where an allegation of misconduct is raised as a defence or as justification for a particular course of action by an employer, such as in summarily dismissing an employee, then the legal burden, in an evidentiary sense to establish that fact, shifts from the union to the employer: see WD & HO Wills (Australia) Ltd v Jamieson [1957] AR (NSW) 547 at 552, 553; North v Television Corporation Ltd [1976] 11 ALR 599 at 602; Flynn v JC Hutton Pty Ltd (1982) 3 IR 413 at 414; Williams v Printers Trade Services (1984) 7 IR 82 at 84; and Wallace v Deering Auto Electrics (1985) 12 IR 34 at 35. 7 Whilst the standard of proof in unfair dismissal cases requires that matters be proved on the civil standard and not on the criminal standard it is necessary in cases where, as here, dismissal is for criminal conduct, that the balance must weigh more heavily in favour of the allegation of misconduct than would otherwise be the case. 8 In Wang v Crestell Industries Pty Ltd (1997) 73 IR 454 at 463-4, a Full Bench of the Commission said: The principle applicable in relation to the onus and standard of proof in a reinstatement case concerning summary dismissal for serious misconduct involving criminal activity by the employee is that the employer must establish, to the reasonable satisfaction of the Commission, that the employee was guilty of the misconduct alleged. The onus of proof in such a case is on the employer and the standard of proof must be such as to enable a positive finding that the misconduct occurred. The standard is, of course, the civil and not the criminal one, but the requisite degree of satisfaction must have regard to the seriousness of the alleged conduct and the gravity of the consequences of the finding. The satisfaction must be such as to warrant a positive finding of the type referred to by the High Court of Australia in M v M (1988) 63 ALJR 108 and by Dixon J in Brigginshaw v Brigginshaw (1938) 60 CLR 336 at 362. See also Shop, Distributive and Allied Employees' Association, NSW Branch v Jewel Food Stores (1987) 22 IR 1 and Coles Myer Ltd v Shop, Distributive & Allied Employees Association (NSW) (1989) 27 IR 299. We should further observe that the evidence in a reinstatement case involving criminal activity may well establish that the employee was guilty of conduct which, whilst falling short of criminal conduct, nevertheless constitutes serious and wilful misconduct justifying dismissal and refusal of reinstatement. 9 If proper procedure had been followed there was no possibility of any alternative outcome having been reached if the respondent's evidence is to be taken as fact. Mr Rawnsley, the owner of the business, gave evidence that there were serious performance issues and that substantial monies had been taken from the business for Ms Ross' personal use. On the other hand the applicant's evidence was that no improper action had taken place. She said that she took part of her salary in cash on the request of the respondent, because of cash flow problems in the business. She said that she noted all of the cash available to her originally in the wages book and then in what she called a "cash ledger". Ms Ross also acknowledged that she was responsible for preparing the group certificates of the respondent and that in 2002 and 2003 she prepared and authorised, by her signature, her own group certificate. She claimed that cash was taken out of the business by Mr Rawnsley and by another employee, Mr Brace and that no records were kept except those which she kept herself in regard to payments to herself. She claimed that casual employees, including Mr Rawnsley's son, were paid by cash from time to time. 10 Mr Rawnsley's version of events was that Ms Ross agreed to take a reduction in wages to assist in the company's cash flow. He said this was reflective of their very good working relationship and that he had always intended to make it up to her. He did in fact provide air conditioning system to her home and various electrical work. He said that he took cash from the business as his own wages and always to the amount equivalent to what was recorded on the books as his wages. He said that he had paid no-one cash in hand except to the amounts recorded in the business records or as he expected were recorded in the business records by Ms Ross. 11 In this case it is necessary to determine whether to accept the evidence of the applicant or the evidence of the respondent as they are both mutually exclusive. Before doing so it is useful to examine the evidence presented by other witnesses. 12 The affidavit of Brinley Brace was accepted into evidence without the requirement for his attendance. It was limited to a description of an incident in the work place on Friday 19 September 2003 when Mr Rawnsley's estranged wife attended the work place. Mr Brace overheard the end of a conversation between Mrs Shirley Rawnsley and the applicant, describing Ms Ross as "stressed and emotional". He then heard Ms Ross tell Mr Rawnsley over the phone to "get your butt back to the office as I do not want to be caught in the middle of your domestic problems". Mr Rawnsley returned to the work place a short time later and after a few words with Ms Ross, Ms Ross left for the day. 13 There was nothing in Mr Brace's evidence that was contradicted by that of anyone else. Unfortunately it goes no further than a brief description of the events surrounding the incident and does not assist the Commission to determine the question at hand. 14 Evidence of Mr Colin Ross, Ms Ross' husband, described a developing business relationship between himself and the respondent. He said: At the time of my wife's dismissal, I had not received any remuneration as agreed. I estimate my commission would have been approximately $800.00 in existing sales and $500.00 in prospective sales. 15 Under cross-examination, Mr Ross conceded that there was no firm agreement between himself and the respondent about the rate of commission or that he would receive commission, he had not provided a draft written agreement to Mr Rawnsley although he had undertaken to do so, and he did not know if any sales took place that could have caused remuneration to be owed to him. In short, there may have been no remuneration owing. 16 If Mr Ross' purpose in providing his affidavit evidence was to undermine Mr Rawnsley's credibility then he failed to attain that goal. Rather, his oral evidence showed that his affidavit evidence was unfounded and only served to discredit himself. 17 Mr Ross' further evidence was a description of events following the incident on 19 September when he described his wife arriving home "in a very distressed state". Similarly, he described his wife's phone call to him after her dismissal on Monday 22 September 2003 and Mr Rawnsley's refusal to provide reasons for the dismissal when Mr Ross attended the work place to pick up his wife. 18 As to the evidence of the applicant, Ms Ross admitted that: · She was solely responsible for the bookkeeping, the wages records and the banking for the respondent. · From 29 January 2001 to about 30 June 2001 she paid herself $50.00 a week cash in hand, having reduced her recorded weekly payments by the same amount. · From about 1 July 2001 until the termination of her employment, she took $100.00 a week cash, further reducing her recorded weekly wage. · She produced and authorised group certificates on behalf of the respondent including them only the wages recorded and excluding the cash in hand amounts. · She kept her own weekly tally of the cash payments sometimes taking amounts equal to receipts provided for personal expenses and sometimes simply writing "cash taken" for amounts up to $12,000.00. 19 Ms Ross said that she took cash on Mr Rawnsley's request because of the problems with cash flow in the business. Each week she recorded the amount "owed" to her and took the actual cash when it became available. The business had many cash transactions but the amount available varied, particularly on a seasonal basis, she said. Ms Ross claimed that Mr Rawnsley frequently pocketed cash and also paid cash to Mr Brace and to some casual workers including Mr Rawnsley's son. 20 Mr Rawnsley in response denied ever requesting Ms Ross to take cash payments. He said he did not approve the payments or have any knowledge of them. He had no knowledge of the so called "cash ledger" kept by Ms Ross. Mr Rawnsley said that all wages were paid in cash in accordance with the records kept by the business and that any cash taken by himself was equivalent to his wages. He said that the business always had a cash flow problem and that Ms Ross accepted a reduction in pay to assist the business. Acknowledging that she enjoyed the flexibility of working for the respondent and that Mr Rawnsley would "quote repay her, in some way, as and when I could". She had received, he said, in May 2002 an air conditioning system installed in her home worth approximately $6,000.00. She had also received electrical work worth about $2,000.00 in June or July 2003. 21 There were also issues between the parties about the development of other business interests. Mr Ross provided toner cartridges for photocopiers, printers and faxes to the respondent. He also became involved in the supply of ducted vacuum systems, a sideline to the respondent's primary business of supply and installation of air conditioning systems. Without repeating the detailed evidence provided on this issue, I am satisfied that the business relationship between Mr Ross and the respondent was peripheral to and not a cause of the termination of the employment relationship. 22 Ms Ross did the respondent's payroll since August 1999. Payroll records were kept manually for each of the five or six employees of the respondent. Mr Rawnsley said he had never seen the payroll records until after Ms Ross' dismissal. Mr Rawnsley said he did not know of the allocation of $50.00 cash per week to herself. From 4 July 2002 Mr Rawnsley said that Ms Ross was paid $100.00 a week car allowance because of her use of her own vehicle for banking and to visit customers in their homes to carry out "surveys". He said: Accordingly, I agreed to a $100.00 per week car allowance being paid to Helen. My reasoning was that the company was already paying Helen's petrol expenses, although I did not at the time know the full extent of those expenses, and payment to her of a car allowance would remove the need for her to be reimbursed for those expenses. Furthermore, I valued the contribution which she made to the company and I acknowledged that she had previously taken a pay cut during hard times and I saw this, in part, as an increase in her wages which would go some way towards restoring her previous level of wages. As I understand it, whether a $100.00 was paid by way of an increase in wages or as a car allowance, it made no difference to the company. Again, as I recall it, it was Helen who said to me words to the effect: " I have spoken with John Dorrington [the accountant] who says it's better for me to take it as a car allowance." I agreed and thought no more of it. 23 Mr Rawnsley said he was not aware that Ms Ross continued to reimburse herself for petrol out of petty cash while receiving the car allowance. 24 Mr Rawnsley's explanation contrasts sharply with that of Ms Ross who said that the $100.00 payment was a cash offset to the reduced recorded wage, in accordance with an agreement reached between Mr Rawnsley and herself. She said she was authorised to claim petrol expenses including for personal use, from petty cash. 25 Ms Ross claimed that the $100.00 weekly cash payments were recorded by her in a "cash ledger" that was always readily available to the respondent. I have a number of concerns about this statement. The "cash ledger" was a series of small loose pages which were kept under Ms Ross' calculator where they would not have been seen by anyone else including anyone using her desk. They were not kept in a ledger as such. They were never shown to Mr Rawnsley. They did not form part of the official business records. Further, in the "cash ledger" the payments were offset against petty cash dockets for items such as batteries, Panadol, cleaning products, fuel, paper towels, milk, stationery and so on. Ms Ross provided detailed evidence about petty cash. It seems extraordinary to me that Ms Ross would take petty cash out of her own "kitty", as she called it, rather than out of the business' petty cash if any of these were truly business expenses and the "kitty" was money due to her in lieu of wages. If she believed the money was hers because of some agreement reached with her employer, no other justification for taking the cash would be required. 26 From 23 November 2001 a number of entries in the "cash ledger" simply show "cash taken". Other entries show "leave loading" although the amounts shown bear no relativity to loading applicable to any relevant period of annual leave, and Ms Ross could not offer any explanation as to how these amounts were calculated. The entries relating to leave loading, in particular, appear to be fabrications for the purpose of justifying Ms Ross taking money from the business. 27 There is a difference between the parties as to whether or not electrical work at Ms Ross' home had Mr Rawnsley's prior approval. I make no further comment on this because it does not impact on whether or not there was any unfairness in the dismissal. 28 In mid 2003 Mr Rawnsley attended a meeting in Sydney with a friend, Janine Paine and Ms Ross. Following a complaint from Ms Ross that the business' current computer system was quite old and unsophisticated, Mr Rawnsley purchased a new computer, scanner, printer, etc. A number of times when he had asked Ms Ross to provide certain information out of the old computer system, she had made comments such as, "I don't have time at the moment". Therefore when he purchased the new computer he asked Ms Paine to assist him in setting it up in such a way that it operated efficiently. Ms Ross had said you can simply move information over from the old computer to the new, but Mr Rawnsley said he did not want to do this but wanted it set up in a different way and that is the reason he asked for Ms Paine's assistance. Ms Paine was employed elsewhere at the time and so attended the work place after hours to do this. He said: I wanted the computer to be set up in such a way that it did not replicate some of the deficiencies of the existing system. For example, Helen had been maintaining a client list where most of the names of private domestic customers had been entered into the "M" category for "Mr and Mrs ……" rather than the first letter of the relevant surname. Another problem, of which I had been increasingly aware, was that Helen would put through suppliers' invoices as being paid, even to the extent of drawing a cheque, but would not send the cheque. I would not find this out until being advised by a supplier that we had been placed on credit hold at which point I would say to Helen words to the effect: "Why are we on credit hold with such and such a supplier". She would usually say: "Because I put it through as being paid but I haven't sent the cheque yet because there wasn't enough money in the bank to cover it." I expressed to Helen on a number of occasions my dissatisfaction with a system which allowed her to record supplier invoices as having been paid when in fact they were not, since there was an inevitable flow on impact on any information, reports and in particular profit and loss statements which could thereby be generated by the computer and be relied upon. 29 Mr Rawnsley gave a further example of a profit and loss statement showing a net income for the 2002/2003 tax year of around $13,000.00 where if an expense to the Australian Tax Office was shown the statement would properly have shown a net loss of approximately $26,500.00. 30 In setting up the new computer system Mr Rawnsley said that he unearthed these kind of problems and discussed them with his accountant. One of the meetings with his accountant was on Friday 19 September following which he had asked Ms Ross to produce a document which she did not produce during that day. During the weekend Mr Rawnsley further investigated his accounts and discovered the series of petty cash payments which Ms Ross had made to her for personal items or for fuel for her car when she had been paid a car allowance. Mr Rawnsley said that Ms Ross improperly reimbursing herself did not relate to expenses incurred in the course of her employment and formed the view that this was such a gross breach of Ms Ross' employment duties as to warrant summary dismissal. This is why he met Ms Ross at her car when she arrived at work on Monday 22 September and advised her that he no longer needed her services. 31 While Ms Ross disagreed with much of Mr Rawnsley's contentions, I cannot accept that explanations she provided were adequate. For example, she said if she knew the reason he wanted a certain report she would have responded urgently. This is not sufficient explanation for the lack of available reports. She also tried to blame the accountant for not having noticed items in the profit and loss that belonged not as expenses but as balance sheet items reducing the profit to $6,000.00. These explanations fall far short of adequate. 32 Ms Ross was dismissed in September 2003 and the hearing of this matter occurred in July 2005. The reason for the extensive delay was that there were proceedings between the parties before the Chief Industrial Magistrate regarding the applicant's claim for underpayment of wages. Mr Rawnsley had continued to classify her as a grade 3 clerical officer where she believed she should have been grade 5. The finding of the Chief Industrial Magistrate in matter number 76376/03 given on 26 May 2005 was that both parties were incorrect and that the proper classification should have been grade 4. The proceedings were adjourned at that time to allow the parties to confer as to the quantum of any payment to be made to the applicant in the light of the Chief Industrial Magistrate's decision. 33 In determining the outcome of that matter, the Chief Industrial Magistrate found that he preferred the evidence of the applicant where there was conflict. Unfortunately, and with respect, it is not the same situation in these proceedings. It is not that I found the applicant wanting in the majority of her testimony, but rather that I accept her word that she acted illegally over a lengthy period of time. What I cannot accept is that she did so with the respondent's approval as there is absolutely no evidence to back this up and there was nothing in the respondent's evidence, his demeanour or anything else that suggested that his evidence should not be accepted. It was a very great trust that existed between the parties that allowed Mr Rawnsley to simply carry on his business trusting that Ms Ross was doing the right thing. There is no suggestion that he was setting up Ms Ross for a fall as an excuse to employ some other person, rather he took her and her husband to Sydney for a conference not long prior to the dismissal. He had bought a new computer system when Ms Ross had complained about the old system. The sorts of things he was trying to achieve with Ms Paine's assistance were simply, to my understanding, standard bookkeeping practices such as separating petty cash into its various sub-totals and filing clients' names appropriately rather than grouping them under "M" for Mr and Mrs. These are basic business requirements. Taking into account all of the above, where the evidence of the applicant and that of Mr Rawnsley are in conflict, I accept the evidence of Mr Rawnsley. 34 I am satisfied that Mr Rawnsley had not received from Ms Ross appropriate and timely business reports and that it was more than appropriate for him to request her to provide these. I am also satisfied that there was some conflict in terms of the introduction of a new computer system where Ms Ross could feel that she was losing some degree of her control over the records of which she previously had had total control. I am satisfied that the incident on the Friday afternoon involving Ms Ross, Mrs Rawnsley and then Mr Rawnsley was, although part of the background to the tension between the parties, was not a cause of the termination of employment. I am satisfied that the employment was terminated for reasons related to Ms Ross' work performance, specifically in regard to drawing large amounts of petty cash over a substantial period and refusal to provide appropriate and up to date records from time to time. 35 As to the taking of monies as cash payment, I accept that Mr Rawnsley acted through ignorance in expecting Ms Ross to reduce her salary and that he could make it up for her through the provision of services when it was suitable to the business. He has been found by the Chief Industrial Magistrate wanting in respect to his knowledge of award matters. It was wrong of him to expect her to do the same work for less money regardless of their good relationship. However it does not excuse Ms Ross from specifically breaching the taxation laws or understating her income to Centrelink as she admitted in evidence. While Mr Rawnsley has been in breach of an award (unintentionally, in my view), it is Ms Ross' blatant breach of the taxation laws that is the greater wrongdoing. 36 As I said earlier there was undoubted procedural unfairness in the dismissal of Ms Ross. The effect of procedural unfairness would have added to the stress of the applicant, but I do not accept that proper procedure would have resulted in an outcome different than the termination of her employment. In all I am satisfied that the dismissal took place for good reason. The respondent has fulfilled the onus on it to justify summary dismissal for gross misconduct. 37 It is noted that Ms Ross gave evidence against herself in spite of being warned by me. I have no option but to pass this file to the Industrial Registrar for appropriate action which may include provision of the relevant information to the Australian Taxation Office. 38 The application is dismissed. ____________________ 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.