Claxton & Anor v The Guitar Centre Southbank Pty Ltd [2003] QIRC 141 (2003) 173 QGIG 1270

1270 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 15 August, 2003 ########################################################################################################################### QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 74 – application for reinstatement Craig Claxton and Caroline Hammond AND The Guitar Centre Southbank Pty Ltd (Nos. B560 and B561 of 2003) COMMISSIONER THOMPSON 5 August 2003 Application for reinstatement – Witness evidence – Termination of Claxton not harsh, unjust or unreasonable – Hammond severed employment relationship – Applications dismissed.` DECISION Background Applications were received from Mr Craig Claxton and Ms Caroline Hammond (applicants) on 1 April 2003 in which they alleged that their employment had been terminated by The Guitar Centre Southbank Pty Ltd (respondent) in a harsh, unjust and unreasonable manner. For convenience to both the applicants and the respondent, the applications were heard conjointly. Applicants The case for the applicants was supported by evidence given to the Commission by Mr Claxton, Ms Hammond, Mr Ian Wilks and Mr Charlie Murry. Note: Mr Murry also provided an affidavit that was tendered in the proceedings by the respondent. Claxton The evidence of Mr Claxton came before the Commission by way of two (2) affidavits. On 15 March 2003, having returned from six (6) weeks’ long service leave, Mr Claxton found that he had been unilaterally dismissed from his employment and “locked out” of the business premises. Mr Raymond Rowe, the majority shareholder of the respondent company, who raised several accusations of impropriety at the time of the dismissal, had not previously given Mr Claxton the opportunity to respond to the allegations. Any suggestion of impropriety was strongly rejected by the witness on the basis that he had managed the business with honesty and integrity over a ten year period. His evidence included references to the following: • background of the company • 10 years as manager • holding twenty-five (25) fully paid ordinary shares – Mr Rowe holding the remaining seventy-five (75) shares • at paragraph 9 of his first affidavit, he raised a number of issues: “During the past 10 years I had irregular short holidays (with no leave loading) because of my responsibilities to the company. For example – • Banking • Paying staff wages/shop rent • Premises Security • Paying suppliers accounts • Selecting stock.”. -- 1 of 12 -- 15 August, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 1271 • wages and salary package • wages in real terms reduced in the past two and a-half years • allowance for motor vehicle costs • management responsibilities • paragraph 16 of the first affidavit “From the company’s inception in 1993 I was responsible for virtually every aspect of the day to day running of the company. This included:– 1. All aspects of employing staff ranging from interviews, staff selection (this was extremely important given the highly specialized nature of the company); 2. staff training (Again this was extremely important given the highly specialized nature of the company and it’s reputation as ‘The Professional’s Guitar Shop’); 3. paying wages, superannuation 4. taxation, insurance, workers compensation etc 5. handling the difficult transition to the GST regime, including establishing a complete new computerized 6. stock control/cash drawer system without any help from Mr Row 7. advertising and promotion 8. premises security 9. all company banking from day to day requirements to arranging foreign currency transfers (on a semi-regular basis) to the paying of supplier accounts. 10. dealing with the various levels of government consistently throughout the past 10 years for the required permits licences and registrations. This included obtaining a second hand dealers licence through the Office of Fair Trading and registration as a ‘workplace’ under the Workplace Health and Safety Act. 11. I had to liaise with the local police over issues such as stolen guitars, attempted and actual break-ins, assaults to persons in and about the shop, persons suffering from drug overdoses in and about the shop. 12. I negotiated with the City Council to review their decision regarding the removal of on street parking in the immediate vicinity of the shop in Melbourne Street, and after speaking with the Lord Mayor: I successfully had the parking reinstated. 13. Negotiating with various landlords that have owned the building since 1993. 14. Negotiating with various suppliers, electricians, electronic repairmen, luthiers or guitar repairers.”. • working hours • 38 hour week (nominal) – often worked up to 60 hours • no regular meal breaks • out of hours work • shop security • On call 24 hours a day, 7 days a week, 365 days a year • received countless calls from security monitoring centre – majority between 10.00 p.m. and 4.00 a.m. • numerous calls – malfunctions • advertising, marketing and goodwill • various roles • workshops • development • on-line catalogue • at paragraph 32 of Mr Claxton’s first affidavit, he stated: “My long working hours, the dedication and talent of all the staff who worked on the premises achieved the profile of the Guitar Centre Southbank, which I believe, is now regarded as one of the leading guitar shops in Australia. I created a culture in The Guitar Centre Southbank that was unique in Queensland if not in Australia. We were repeatedly told that our service was friendlier, more knowledgeable and professional and superior to that of our competitors. We frequently received unsolicited letters, emails and phone calls to that effect.”. • product selection • stock control • increase in stock on hand – over 10 year period. In Mr Claxton’s second affidavit, he responded to the affidavit of Mr Row, taking exception to a significant amount of the content contained within the document. On the issue of motor vehicles, at paragraph 12 of the second affidavit, he stated: “In relation to the motor vehicles I believed that I had kept Mr Row informed that my package included a car and when Caroline turned assistant manager I decided that her employment package included a car also. These were decisions I took in the ordinary course of the day to day running of the company and then subsequently informed Mr Row of orally or by letter. At no time prior to the dismissal did he object.”. Relating to the double payment of wages at paragraph 14 of the second affidavit: “In relation to paragraphs 52 through to 63 of Row’s affidavit I say that I did not normally draw cheques to double pay wages of the staff including myself and any double payments were mistakes or monies paid in lieu of overtime. I would have to have access to the books and records and sufficient time to investigate this, to be more specific.”. Payment of personal insurance premiums, paragraph 20 of the second affidavit: “Referring to paragraphs 76 through to 80 I admit that the company was paying personal life insurance policy premiums for both myself and Caroline as in my view we were essential to the business and I had previously been sick.”. -- 2 of 12 -- 1272 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 15 August, 2003 Mr Claxton was subjected to a comprehensive cross-examination process which covered a range of matters including: • applicant’s employment status prior to his ceasing employment • long service leave • authorising double payment of wages • company motor vehicle – lease payment arrangements • Ms Hammond’s company vehicle • level of Ms Hammond’s remuneration (page 28, line 2 of transcript): “Bradley: So that for the financial year that ended the 30th of June 2001, Ms Hammond had been on a salary of 40 and a half thousand a year, roughly speaking. And for the year that ended the 30th of June 2002, she’d been on a salary of 48 and a half thousand, roughly? Claxton: That reflected her increased responsibility, shouldering the burden while I was off sick, on sick leave.”. • time and wages records • payment of bonus to the applicant • web site development. Hammond Ms Hammond, the second applicant in the proceedings, gave evidence of commencing employment in mid 1999 as a part-time employee, then progressing to the position of Assistant Manager. On returning to work on 15 March 2003, she believed that she was dismissed from her employment following comments made by Mr Row. At paragraph 3 of her affidavit, she stated: “Mr Row has given me no formal indication of my employment status, but when I attended the store premises at 135 Melbourne Street, South Brisbane on March 17 at 9.50 am just prior to the shops opening time. I was instructed to ‘get the fuck out of here!’.”. In light of her past service she believed that the failure of Mr Row to communicate her employment status or give any reason for her dismissal that the termination was harsh, unjust and unreasonable. Whilst employed, her evidence was that she had a range of duties which included: • stand-in Manager on occasions when Mr Claxton was ill • consulting over stock purchases • ordering stock • research assistance in construction of web site • digital photography and backgrounds • staff training. Under cross-examination, questions were put to Ms Hammond on matters including: • employment status (page 42, line 32 of transcript): “Bradley: Right, but so – but what you say there isn’t correct, on its face. He’s told you, hasn’t he, that so far as he understood it, that you ceased employment with the company last year? Hammond: But at no point did I cease employment with the company. Bradley: Yes, but Mr Row has told you - - ? Hammond: Mr – that’s true, Mr Row has told me - - Bradley: - - that he though you had ceased employment with the company last year? Hammond: That is true, yes. Bradley: So, the true position is, Mr Row has given you a formal indication of his view of your employment status? Hammond: Yes. Bradley: Which is that you’re not an employee? Hammond: Basically, yes. -- 3 of 12 -- 15 August, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 1273 Bradley: And that you haven’t been since last year, some time last year? Hammond: That is Mr Row’s opinion, yes.”. • working arrangements (hours) during employment • discussion with Mr Claxton and Mr Row on or around 17 March 2003 • letter to Mr Row – seeking clarification of her employment • working arrangements of co-workers • photographs for web site • pay rates (page 68, line 22 of transcript): “Bradley: Then in February 2000 you started to be paid a full-time wage, is that right? Hammond: Yes. Bradley: Of $585 a week? Hammond: I believe so. Bradley And that stayed the same right through till the end of the year 2000? Hammond: I think so, yes. Bradley: And then on the 1st of January 2001 your salary from $585 to $934? Hammond: Yes, that’s right.”. • disputation with Mr Row and Mr Claxton over money issues. Wilks Mr Wilks is the Managing Director of a web site development company that had been contracted by the respondent company (Mr Claxton) in November 2002 to build a web site and catalogue system. His evidence related to working closely with both applicants and referred to work carried out in the first fourteen (14) days of December 2002 and the final twenty-one (21) days of January 2003. In cross-examination, he addressed numerous questions relating to the work on the web site. Murry The final witness for the applicants, Mr Murry, gave evidence of being approached by Ms Hammond to take a position with the company in 1999 and remained in employment until June 2001. He covered the range of duties performed by Ms Hammond and, at paragraph 2 of his affidavit, stated that she “was occasionally delegated managerial responsibility by Craig Claxton”. A second affidavit provided by Mr Murry was tendered in cross-examination. This evidence contained a detailed explanation of his duties whilst employed, and made reference to the working arrangements of the applicants. Respondent Evidence was presented on behalf of the respondent by Mr Row, Mr Shane Winders, Mr James Zaghini, Mr Christopher Stevenson and Mr Luke Clyburn. An affidavit was also tendered by Ms Jodie Thompson which was an uncontested audit of the respondent business’ financial affairs. Row Mr Row, the principal witness for the respondent, is the majority shareholder of the company, holding 75 of the 100 ordinary shares issued. In terms of his employment history, the Commission was informed that, after completing an apprenticeship as a fitter and turner, he worked in the area of guitar manufacture. Since July or August 1990, his principal employment has been as a tour director for a company based in London which requires him to be absent from Australia for approximately nine (9) months in each year. When in Australia, he works at the Kinman Guitar Craft Factory, usually for two (2) or three (3) months each year. In 1993, an opportunity arose to purchase the Kinman retail business at South Brisbane and, following an approach to Mr Claxton, an arrangement was entered into where Mr Claxton became a part-owner of the business and filled the role as full-time Manager. -- 4 of 12 -- 1274 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 15 August, 2003 An understanding was reached between Mr Claxton and himself as to how the business would operate and that he would be kept abreast of business developments and proceedings whilst he worked overseas. At the commencement of the arrangement, it was agreed that Mr Claxton would receive the same level of wages that he had been receiving as an employee of the Kinman group and it wasn’t until 1997 that Mr Claxton advised that he had been unilaterally increasing his wages by a small amount. The increases were accepted without question by Mr Row who acknowledged that, at the time, there was no question arising out of Mr Claxton’s performance. In 1997, on being approached by Mr Claxton, he agreed for the company to lease a vehicle for Mr Claxton (who had been forced to sell his own motor vehicle due to personal circumstances) even though the company had “no real need” for the vehicle. There was an agreement that Mr Claxton would offset some of the vehicle costs by reducing his weekly wage. In conducting the acquisition of the vehicle, Mr Claxton purchased the vehicle in his own name, with the lease payments being made by the company. In early 1997, Mr Row became aware that Mr Claxton, without approval, had made payments to himself of bonus, each of $1,000.00. On confronting Mr Claxton, Mr Row received a response that such bonuses were justified, which he did not accept, and he then informed Mr Claxton that this action should not continue into the future without his agreement. It was later agreed that Mr Claxton would, each year, receive a dividend/bonus arrangement of around $4,000.00 per annum. Mr Row would generally return to Australia in December of each year, and in 2002, when he sought to pay for his flight by way of the company credit card, he was advised that there was insufficient credit available. On contacting Mr Claxton, he was advised that “because of financial difficulties of the company, we have to discuss on your return to Australia the agreed arrangement of the company paying your flights and the bonus system.”. In February 2003, he began a process of familiarising himself with the financial and other affairs of the business. A number of matters gave cause for concern, which included: • lower than normal amount in bank account; • payment of residual debt ($17,600.00) for Mazda 323; • leasing of Mazda 121 for Mr Claxton’s partner – Ms Hammond; • payment to the applicant of $500 for a directors fee (not agreed or authorised by Mr Row); • level of stockholding down from usual level; • existence of an overdraft; and • matters relating to the ownership of vehicles and payment with company funds on lease arrangements. He was, at the time, unable to raise his concerns with Mr Claxton as he had gone on leave. In a meeting with Mr Winders, his financial planner, that was held in mid February 2003, a number of allegations were levelled by Mr Winders in respect of business impropriety by Mr Claxton, including the possible possession of a number of guitars, property of the business. Shortly thereafter, Mr Row, on his solicitor’s advice, arranged for the company accountant to conduct a thorough investigation into the company from the time of incorporation to the present. In providing information to the accountant, he became aware of a “number of occurrences where both Craig and Caroline had been paid wages twice for the same week”. It was also evident that Mr Claxton was also paying himself wages in advance of the due date. On this matter, at paragraph 56 of his affidavit, he stated: “Even though Craig had paid himself twice for the same week ending period of 13 September 1997, the second wages cheque Craig drew for this period is still 11 days in advance of the week ending period. This was one of a number of examples of the double payments made by Craig to himself and Caroline.”. Other instances relating to overpayment of wages also came to light which included bonus wage payments, which were made to Mr Claxton, which had not been agreed to by Mr Row. The amount of monies was $5,500 for the period from 1995 to present. Evidence was given to the Commission of director loans that had been made available to Mr Claxton and of life insurance policy premiums being paid for both applicants out of company funds. On 12 March 2003, the witness received a telephone call from Mr Claxton, where he took the opportunity to raise a number of concerns, in particular, the payment of $17,600.00 lease residual of the motor vehicle and the lease of a vehicle for Ms Hammond. Later that same evening, Mr Claxton again called the witness where a range of matters were discussed, which included: • term life payments; • higher wages paid to both applicants from mid 2002; • payment of a director’s fee to Mr Claxton. -- 5 of 12 -- 15 August, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 1275 Mr Claxton, according to the witness, made further contact on 16 March 2003 and requested that he be allowed to come the shop on the following day to collect some personal effects. At around 9.50 a.m. on 17 March 2003, both applicants attended the shop where an exchange between Mr Row and Mr Claxton, in respect of financial matters previously discussed, occurred. In the course of those discussions, Ms Hammond entered the office with Mr Row, acknowledging, in evidence, that he told her to “fuck off”. At the end of the discussion, he went and spoke to other persons in the shop and at the same time observed Ms Hammond removing photo’s from behind the counter, which were of both applicants and celebrities that had visited the store, before leaving the premises. A series of letters were, in the following weeks, exchanged between the parties, including their respective solicitors. His evidence, in respect of Ms Hammond, was that he had not been involved in any of the circumstances regarding her employment, and had little knowledge of her actual duties and responsibilities whilst employed by the company. Information provided by other employees had led him to believe that her employment had ceased with the company on or about 2 November 2002. On whether Ms Hammond had been terminated by himself, he stated in paragraph 106 of his affidavit: “I did not and have not dismissed Caroline from employment with the company. I did not do this on 17 March 2003 or at any other time. My comment to Caroline on 17 March 2003 was a response to her unwanted intrusion into my discussion with Craig. I wanted her to leave the office. Even after my comment to her, she did not leave the office until Craig asked her to do so.”. Further, on 17 March 2003, the actions and demeanour of Ms Hammond were not that of a person coming to work or a person having been dismissed from employment. His evidence included specific details of the overpayment of Ms Hammond and other employment related matters. Issues raised in the cross-examination of Mr Row included: • employment arrangements following the departure of the applicants • detail of Ms Hammond’s work duties • Ms Hammond’s account of being told to “get the fuck out of here” • corporate entity – directors rights (page 122, line 40 of transcript): “Anderson: However, your majority shareholding gives you an apparent authority in the company; is that right? Row: Only in the fact that I hold more shares. Anderson: Yes. And that’s a power that’s exercisable only in the general meeting, isn’t it? Row: As a major shareholder I believe that I would in a meeting, yes, have - - Anderson: Yes, in a general meeting. But otherwise as directors of the company you’re each directors and neither was managing director? Row: I don’t recall.”. • witness’ role in the business • raising of operational concerns with Mr Claxton (page 125, line 18 of transcript): “Anderson: Okay. That also, I suggest, is consistent with your approach, which has been you haven’t discussed everything with Mr Claxton? Row: No, I did not discuss everything with Mr Claxton. Anderson: Okay. You haven’t – so when you’ve had concerns, you haven’t always raised those with Mr Claxton? Row: No, I haven’t. Anderson: And when Mr Claxton has had concerns and expressed those to you, you haven’t always responded to them? Row: Maybe not. Anderson: Okay. That having been said, at all times, you’ve had access, if you wanted it, to the company books and records? Row: I have. Anderson: They’ve always been held at the shop at – at South Brisbane? Row: Yes. Anderson: And when you’ve returned and been working in the business, it’s been your practice to look at the records? Row: Cursory glances.”. -- 6 of 12 -- 1276 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 15 August, 2003 • authority of Mr Claxton to make business decisions • audit report – investigation • decision to terminate Mr Claxton • double payment (page 141, line 46 of transcript): “Anderson: We just focus on the double payments. A double payment is, on any view, an error that can be a quite innocent administrative error, can’t it? Row: I don’t believe it was innocent, no. Anderson: It can be. I’m not asking about your belief, but it – it’s an error that can be made innocently, isn’t it? Row: No other errors are made for any other employee. Only for Ms Hammond and Mr Claxton. So therefore I came to the conclusion that it wasn’t an error.”. • complaint to police over missing guitar. Winders Mr Winders gave evidence of knowing each of the parties for a number of years in both a professional and personal capacity. He recalled various conversations in recent years with Mr Claxton relating to Kinman guitars from the shop being stored at his home. In the middle of 2002, in another discussion with Mr Claxton, he had been told that “the shop paid out the lease on the Mazda it is mine and the shop has leased a new care for Caroline”. That conversation, according to the witness, started him thinking. At paragraph 11 of his affidavit, he recalled a discussion with Mr Claxton that took place towards the end of November 2002: “Towards the end of November 2002, I had another discussion with Craig at the shop. To the best of my recollection, Craig said to me words to the effect, ‘Caroline was becoming very stressed in the shop with customers wasting time, and customer shoplifting and she is now working less hours and she was looking at stopping work altogether at the shop’. Craig informed me further that the shop was still paying Caroline a wage. Craig gave me the impression this was a voluntary thing because he seemed to suggest Caroline worked only when she wanted. This was when I was told that both Craig and Caroline were going away on holidays together to Western Australia in early 2003 to relax.”. Such was his concern at the information he had obtained from Mr Claxton that he decided to raise the issues with Mr Row on his return from overseas. At a meeting on or around 14 February 2003, he informed Mr Row of the details relating to the business activities of Mr Claxton and it was his view that the information was of a surprise to Mr Row. Cross-examination covered such issues as: • professional relationship with the company • knowledge of Mr Claxton’s financial affairs • discussions with Mr Claxton relating to the use of store owned equipment • Mr Claxton’s alleged taking of stock (page 179, line 30 of transcript): “Anderson: You don’t think it’s strange that somebody would admit to taking valuable stock from the store in which they worked, home for themselves? Winders: I would find it strange, yes. Anderson: But what I’m suggesting to you is that it’s so strange that it’s ludicrous. In fact, he didn’t say that to you at all? Winders: No. Anderson: He didn’t say, ‘I’ve decided to keep them all myself.’? Winders: You’re incorrect, he most definitely did.”. • failure to raise his concerns with Mr Claxton. Zaghini Mr Zaghini, who initially commenced employment as a casual shop assistant in January 1999, gave evidence relating to the staffing arrangements at the store for the period of his employment. His evidence focussed on the working arrangements of Ms Hammond and what, in his view, influenced such arrangements. At paragraph 13 of his affidavit, he stated: “I believe, because of Caroline’s relationship with Craig, she had a pretty easy arrangement at work. She would get away with things other staff could not. Caroline:– (i) Could turn up to work late. This was quite regular turning up late at least a few times per week; (ii) Would have longer lunch breaks than other staff; and (iii) Would often leave work a couple of hours early.”. -- 7 of 12 -- 15 August, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 1277 He informed the Commission that, towards the end of 2002, Mr Claxton told him that Ms Hammond was tired of working in the shop and did not wish to continue working there anymore. It was his opinion that after Christmas 2002, Ms Hammond was no longer working full-time at the shop. In respect of Ms Hammond’s role with the web site development, it was restricted to her taking a series of photographs as she was unable to effectively operate the computer. Stevenson and Clyburn The evidence of both Mr Stevenson and Mr Clyburn was similar to that given by Mr Zaghini in that it dealt with, in the main, the working arrangements of Ms Hammond. Mr Stevenson stated that towards the end of 2002, Ms Hammond was only working between one (1) and three (3) days per week and since Christmas had not worked in the shop at all. After Christmas, Ms Hammond would sometimes ring the shop looking for Mr Claxton, only to be advised that he was at Mr Wilks’ office working on the web site. Submissions Applicant The applicant, in written submissions to the Commission, in the first instance, stated that both applicants had their employment terminated by the respondent without notice and that in the case of Ms Hammond, her termination was a constructive dismissal. The submission traced the historical nature of the business and the relationship between Mr Claxton and Mr Row and to some degree, focussing on Mr Claxton’s role and responsibilities. The central issue for determination, in respect of Mr Claxton’s dismissal, was whether it was unfair, either because it was harsh, unjust or unreasonable, or for an invalid reason. It was apparent that his termination was not based upon operational requirements of the business, but for matters of conduct, capacity and performance. In supporting the applicant’s claim that the termination was both harsh and unjust, it was argued that it was not based on reasons referable to his conduct as an employee and because it occurred without the opportunity to respond to the allegations. On the basis that the reason for termination was unrelated to Mr Claxton’s capacity as an employee, means that they were also invalid within the meaning of the Act. The principal grounds relied upon for the termination did not, according to the submission, relate to Mr Claxton’s function as an employee. The grounds being: • Mr Claxton had overpaid himself and Ms Hammond • he had paid himself bonuses and director’s fees and caused the company to make a loan to a third party for reasons related to a loan to himself • he had caused the company to lease motor vehicles for his and Ms Hammond’s use. According to the submission, it was wrong for the dismissal to turn upon Mr Row’s disagreement with the manner in which Mr Claxton caused the business to operate. Mr Claxton had two (2) separate and distinct roles, being on officer and employee of the company, and the matters relied upon for the termination were not matters that were covered under the employee status. As an employee, Mr Claxton’s role to manage day-to-day affairs of the business was not subject to complaint. Mr Row, by virtue of his majority shareholding, had terminated the employment of another director, over director issues and not for reasons relating to Mr Claxton, the employee. Whilst the allegations of double payment levelled against Mr Claxton were not of a substantive nature, in dollar terms, it was conceded by Mr Row as not being a reason to terminate the employment. Further allegations of theft, which were implied in Mr Row’s affidavit, were without substance. The submission claimed that Ms Hammond was the consequential victim of the falling out between Mr Row and Mr Claxton. Ms Hammond had worked according to instructions given by the company and had ceased work at the end of 2002 (as claimed) and, in fact, had been paid through until at least March 2003. She was a genuine employee who had intended to return to work at the end of her holidays and would have done so except for the conduct of the company. Ms Hammond was entitled to believe that she had been discharged from her conduct of employment when told by Mr Row (in March 2003) to “get the fuck out of here”. The evidence from Mr Zaghini that he was told by Mr Row that he did not wish Mr Claxton and Ms Hammond to work there any longer made it apparent that Mr Row wanted Ms Hammond out. It is difficult to accept the assertion of Mr Row that he did not include Ms Hammond in his decision to terminate Mr Claxton’s employment. -- 8 of 12 -- 1278 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 15 August, 2003 Overall, it was advanced that the conclusions of Mr Row to terminate both applicants were based upon hearsay and presumption without the courtesy of any discussion with, or consideration for, either Mr Claxton or Ms Hammond. The unavoidable conclusion is that the dismissal of both applicants was, in the circumstances, unfair. In terms of remedy, reinstatement was sought from both applicants, with it being put that given Mr Row’s absence from the country, and Mr Claxton’s part ownership of the business, that this was achievable. Alternatively, if compensation was found to be payable, then it should be in line with the wage rates contained in the audit report annexed to Ms Thomson’s affidavit. Authorities relied upon by the applicant included: • Byrne v Australian Airlines Limited (1995) 185 CLR 410 • Barsha v Motor Finance Wizard (Sales) Pty Ltd (2002) 171 QGIG 139 • Lincoln Mills (Aust) Ltd v Gough (1964) VR 193 • Lewis v Warner Bros Movie World Enterprises (2000) 164 QGIG 326 • Lawton v NTG Services Pty Ltd (2001) 169 QGIG 12. Respondent The submissions for the respondent were that the applicants had sought to complicate what were, in reality “two relatively simple reinstatement applications”. In dealing firstly with Mr Claxton, it was submitted that he was the manager of the business with the authority to hire and dispense with the services of staff, set their remuneration, hours of work, and leave. Mr Claxton had, in his first affidavit, claimed that from January 2003, he was on long service leave, however, his actions in paying himself wages in a cheque drawn on 31 December 2002 and then preparing a letter on 4 January 2003 advising that he was taking unpaid leave according to the submission, rendered the long service leave claim false. It was not true that, on Mr Claxton’s return from leave, he found himself dismissed, without any understanding as to the reasons, as he had been advised of the various allegations and, in fact, returned two weeks early from his leave to deal with the allegations. Mr Claxton had been deliberately untruthful about his employment status and deliberately evasive about the actual circumstances he relied upon as evidence of the termination of his employment. The submission, at paragraph 11, stated: “The simple fact was that Mr Claxton was on unpaid leave for 3 months from 4 January 2003. He was not due to finish this period of leave until 4 April 2003. When that period ended, his position with the Respondent would have to be determined. This would necessarily involve a discussion with Mr Row. It cannot have been the case that Mr Claxton could impose himself on the Respondent at whatever salary and on whatever terms he chose.”. On the investigation by Mr Row, it was submitted that during February 2003, Mr Row discovered evidence of possible serious misconduct by Mr Claxton in his role as manager of the business. At paragraphs 16 and 19 of the submission, those areas of concern were identified: “16. • On 17 April 2001 Mr Claxton had drawn and paid a cheque for $17,600.00 to Toyota Finance to pay out the residual on a Mazda 323 Astina owned by Mr Claxton; • At about the same time Mr Claxton had cause the Respondent to enter into a lease for a Mazda 121 for Ms Hammond; • As far back as 1994 Mr Claxton had used the Respondent’s funds to make lease payments on a Toyota Corolla owned by him; and • On 9 August 2002 Mr Claxton had paid himself $500.00 as a ‘director’s fee’. . . 19. • a number of occasions on which Mr Claxton had paid himself ($3,544.00) and Ms Hammond ($934.00) wages twice for the same wages period, making overpayments (totalling $4,478.00) often week in advance of the relevant wages period; • previously unknown ( and disclosed) bonus payment made by Mr Claxton to himself, totalling $5,500.00; • a Kinman guitar (worth $2,000.00) built in January 2001 was not recorded in the Respondent’s books or held as stock; • there was no deposit of $4,209.18 for the cost of a Yamaha digital workstation acquired by the Respondent and taken home by Mr Claxton; • the Respondent had lent Mr Claxton $4,500.00 as a deposit on a house; • the Respondent had lent Mr Claxton over $2,000.00 per year for three years to pay for personal insurance; • The Respondent had paid Mr Claxton’s accounting fees for preparation of his personal income tax return for a number of years. . .”. -- 9 of 12 -- 15 August, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 1279 Mr Row, at this point, sought advice from his solicitor and, on 5 March 2003, gave instructions for correspondence to be sent to Mr Claxton setting out details of the allegations. It also advised that the conduct of Mr Claxton amount to a breach of trust, breach of Mr Claxton’s fiduciary obligations as director and a breakdown of the working and business relationship between the directors and shareholders of the company. In all the circumstances, it was reasonable for the respondent to conclude that the deliberate conduct of Mr Claxton was so serious that it could fundamentally undermine the relationship of confidence necessary to maintain the employment relationship. It was stated that Mr Claxton had been given ample opportunity to respond to the allegations of misconduct on 12 and 16 March 2003 (on the telephone). Mr Claxton met with Mr Row on 17 March 2003 and, according to the respondent “did not accept that there had been any wrong doing on his part”. The employment status of Mr Claxton had been uncertain since December 2002, with the respondent contending that they did not dismiss Mr Claxton. This was expanded upon at paragraph 35 of the submission: “The Respondent contends that it did not dismiss Mr Claxton, who was not working for the Respondent at the time of the 5 March 2003 letter, the 16-17 March 2003 conversations or the 1 April 2003 Application. The Respondent may have dismissed Mr Claxton in due course, after receiving the expected and foreshadowed response to the 5 March 2003 letter. It may have been that any final decision would have been deferred until the final report was received from the auditor. However, the occasion for a decision, like the response, never came.”. The submission went to extensive detail in respect of the misconduct allegations against Mr Claxton which, in effect, was that his conduct as a director was more serious than if committed by a non-director. The Auditors report, which became available after the application was filed, identified a range of items that were indicative of a pattern of conduct by Mr Claxton, none of which were challenged in the proceedings. In summary, the respondent contended that a dismissal has not occurred within the meaning of the Act and, therefore, the claim that the dismissal was harsh, unjust and unreasonable, was denied. The situation in respect of Ms Hammond was different than that of Mr Claxton with Mr Row having difficulty in working out whether at around March 2003 she was still working with the company. The auditor’s report established that regular wages for Ms Hammond appeared to cease on 30 April 2002 and that she only received seven (7) payments between then and 31 January 2003. Evidence adduced from other employees noted that Ms Hammond had reduced her working hours at the shop towards the end of 2002 and did not work in the shop at all after Christmas. Ms Hammond appeared to be paid for 12 weeks’ work from January 2003 which was to be holidays with the period of leave finishing on 26 April 2003. On her return to Brisbane in March 2003, unlike Mr Claxton, she did not receive a solicitor’s letter and whilst she may have been a beneficiary of Mr Claxton’s misconduct, the respondent has made no such allegations against her. Ms Hammond, who left the store on 17 March 2003, at Mr Claxton’s request, did not want to return until the dispute between Mr Claxton and Mr Row had been resolved. It wasn’t until 25 March 2003 that she sought any clarification of her employment status. The response to her correspondence from Mr Row’s solicitor on 27 March 2003 reflected Mr Row’s imperfect understanding of Ms Hammond’s employment status. At paragraph 71 of the submission, it was stated: “The Respondent contends that it did not intend to terminate Ms Hammond’s employment and did not in fact do so.”. If the matter of compensation was to be considered, a number of factors that should be taken into account by the Commission should include the payment of wages some six (6) weeks past her alleged termination date and the continued use of the Mazda 121 leased by the respondent. Conclusion Whilst the applications for reinstatement filed by Mr Claxton and Ms Hammond were heard conjointly, it is appropriate that each application be addressed separately for the purpose of determining each of the applications. Claxton The unusual aspect of Mr Claxton’s arrangement of being both a Director (minority shareholder) and employee meant that the Commission is required to give consideration to a range of matters that are different to those of a person whose status in clearly that of an employee. The business relationship between Mr Claxton and Mr Row could reasonably be regarded as both lengthy and cordial to the extent that, until the events of early 2003, there had been no indication of major dissatisfaction from either party. The arrangement itself required Mr Row (the majority shareholder) to place an extreme amount of trust and faith in Mr Claxton to administer and operate the business for the majority of the time, void of any overall direction or supervision. On the evidence before the Commission, it appeared that the formative years of the business partnership had given Mr Row little cause for concern albeit there was the issue of a director’s bonus in 1997 that required addressing. This changed in early 2003 when Mr Row, on return from overseas, in the absence of Mr Claxton, began familiarising himself with all aspects of the business. -- 10 of 12 -- 1280 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 15 August, 2003 He discovered that the company had made the payment of a residual debt ($17,600.00) for a Mazda 323, another vehicle (Mazda 121) had been leased for Ms Hammond (Mr Claxton’s partner) and that it appeared all payments made by the company in respect of the motor vehicles had been made for vehicles that had not been obtained in the name of the business. Unable to contact Mr Claxton, who was in Western Australia on leave, he sought advice from his solicitor that led him to have an investigation of the financial affairs of the business carried out. That investigation identified further issues of concern which included the payment from company funds for term life insurance for both applicants, higher wages paid to both applicants (almost double the previous rate of pay for Ms Hammond) and a range of other payments for Mr Claxton, all of which Mr Row had no previous knowledge. The concerns were raised in phone conversations with Mr Claxton on 12 and 16 March 2003 and again at the meeting held on 17 March 2003. It is the view of the Commission that Mr Row took all appropriate steps in determining the status of concerns that he had with Mr Claxton’s handling of the affairs of the business before then raising those concerns with Mr Claxton. The fact that Mr Claxton was out of town at the time made it all the more difficult to deal with the matters, however the seriousness of the allegations were such to warrant the actions taken by Mr Row in taking control of the business. As the significant majority shareholder in a company that, at least on the evidence, did not appear to have formal company meetings as such, Mr Row, in the view of the Commission, had the authority to have taken whatever action to protect the assets of the company. I am satisfied on the evidence before the Commission that Mr Claxton authorised in his capacity as manager of the store, a number of payments from the business funds for which there was no legitimate justification. Their items included the payments for term life policy, ambulance coverage and payments relating to vehicles not owned or leased in the name of the respondent company. Undisputed evidence before the Commission, in respect of double wage payments to both Mr Claxton and Ms Hammond, has left the Commission with the view that such actions were not, as suggested by the applicants, innocent administrative errors, but calculated action to deliberately obtain from company funds, monies for which there was no lawful entitlement. The significant increase in the wages for Ms Hammond, authorised by Mr Claxton, were, although not admitted, more than likely a ploy to limit payments by Mr Claxton to the Child Support Agency. Putting that aside, the evidence before the Commission did not, in any way, give justification for Ms Hammond’s increase in monetary benefits and, as such, is seen by the Commission as a further decision from Mr Claxton that negatively impacted upon the company. There is little doubt that the failure of Mr Row to involve himself in the affairs of the company, over time, had left Mr Claxton in a position where he was able to “do what he liked” and, from his actions, appeared to put aside the trust which he had been given by Mr Row to advantage both himself and Ms Hammond, to the detriment of the business. This, coupled with his declining attendance at the shop in the proceeding year, left, in the view of the Commission, Mr Row with little alternative but to take the measures required to remove Mr Claxton from the business. I do not accept the argument advanced on behalf of Mr Claxton that his actions were that of a Director and not an employee, and find that the actions of Mr Row, in effect, amounted to the terminating of Mr Claxton’s employment. The question then arises as to whether the termination was harsh, unjust or unreasonable. Mr Row carried out investigations prior to the meeting on 17 March 2003 and continued to seek further information after that date. In the matter of Byrne v Australian Airlines, McHugh and Gummow JJ, reference was made to: “(ii) Hocking v Public Service Association of South Australia Inc (221) indicates that the task of the Industrial Court under the South Australian legislation was to determine whether, in all the circumstances of the case, the employee had demonstrated that the dismissal was harsh, unjust or unreasonable so that, whilst the method adopted in carrying out the dismissal, as distinct from the dismissal itself, might be said to be unjust or unreasonable, that would not be the end of the matter. An example was given (222) of a dismissal on the strength of a rumour without there first having been an investigation but where, after the dismissal, the employer ascertained facts which proved that the rumour relied upon was correct; the dismissal would not have been harsh, unjust or unreasonable. (ii) In Lane v Arrowcrest Group Pty Ltd (223), von Doussa J considered the example of the dismissal of an accountant who held a position of trust where it was discovered after the dismissal that the accountant had been systematically embezzling money from the employer. His Honour said it would be astonishing if the employer could not resist an allegation that the dismissal was harsh, unjust or unreasonable, within the meaning of the relevant award, by pointing to those facts discovered after the dismissal, so long as they concerned circumstances in existence when the decision was made. His Honour concluded: ‘Whether the decision can be so justified will depend on all the circumstances. A circumstance, likely to favour the decision to dismiss, would be that fraud or dishonest of the employee had caused or contributed to the employer’s state of ignorance. A circumstance likely to weigh against the decision would be that the employer had failed to make reasonable inquiries which would have brought existing facts to its knowledge before the dismissal occurred’.”. The circumstances of the matters referred to in that decision are not so dissimilar from that of Mr Claxton’s termination. Having considered the evidence, material, authorities and submissions before the Commission in these proceedings, I dismiss the application. Hammond In determining the application of Ms Hammond, there are no such overlapping considerations of the role of director or that of employee as for all intents and purposes Ms Hammond had been simply an employee of the respondent company. Although one question to be answered was whether she was an employee at the time she alleges that her termination took effect. -- 11 of 12 -- 15 August, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 1281 For the entirety of her employment, she was also the partner of Mr Claxton which, in normal circumstances, would not need to be raised, however there was sufficient evidence before the Commission to conclude that she was granted considerations not available to other employees more that likely as a result of that relationship. Her level of salary was way in excess of any other (comparable) employee of the company, a company vehicle was supplied and the evidence of her peers was that, in respect of time keeping, conduct and other matters, she was treated noticeably different to them, that being more favourably. Term life and ambulance payments were made from company funds on her behalf. It would be safe to conclude that Ms Hammond’s employment from April 2002 until January 2003 was, at best, spasmodic, with her attendances being less regular than those of previous times. In terms of the payment of wages as mentioned in relation to Mr Claxton, it is reasonable to draw the inference that she may have been a participant (willing or otherwise) in a ploy to reduce Mr Claxton’s obligations to the Child Support Agency. Mr Row made no allegations in respect of Ms Hammond acting improperly, but it was put in the respondent’s submissions that she may have been a beneficiary. The Commission accepts that argument. In evidence, Mr Row was quite emphatic that he did not dismiss Ms Hammond and was of the opinion that her services had ceased many months prior. In telling her to “fuck off” on 17 March 2003 was, according to Mr Row, simply wanting her out of the meeting he was having with Mr Claxton and not dismissal from employment. Mr Row, through his solicitor, replied on 27 March 2003 to Ms Hammond who was seeking clarification of her employment status. He advised that, in his opinion, she had vacated her employment in late 2002. The Commission, after the consideration of the evidence, material, submissions and authorities in the application, determines that Ms Hammond’s employment arrangement was not as put by the applicant in the proceedings and that whilst she continued to be paid by the company, did not perform work in a manner that would be expected of an employee. In other words, she enjoyed the benefits bestowed upon her by Mr Claxton as Manager and when he departed from the company on 17 March 2003, she made no attempt to physically return to work, seemingly accepting that what could be referred to as a “good number” had ceased. I cannot find in favour of the applicant that Mr Row terminated her employment in a harsh, unjust or unreasonable manner on the basis that I have concluded that it was the applicant who severed the employment relationship. The application is dismissed. I order accordingly. J.M. THOMPSON, Commissioner. Hearing Details: 2003 23 and 24 June 4, 14 and 22 July (Written Submissions received) Appearances: Mr R. Anderson of Counsel, instructed by Mr C. Newport of Toogoods Solicitors, for the Applicants. Mr T. Bradley of Counsel, instructed by Mr J. Drakos of Drakos Solicitors, for the Respondent. Released: 5 August 2003 -- 12 of 12 --