Serventi v John Holland Group Pty Ltd [2006] FCA 1049 (11 August 2006)

Last Updated: 15 August 2006

FEDERAL COURT OF AUSTRALIA

Serventi v John Holland Group Pty Ltd [2006] FCA 1049

EMPLOYMENT LAW – the contract of service and rights, duties and liabilities as between employer and employee – discharge and breach – circumstances justifying dismissal –misconduct

































ROBERT SERVENTI v JOHN HOLLAND GROUP PTY LTD, WILLIAM WILD AND GRIDCOMM PTY LTD
NSD 698 OF 2004

MADGWICK J
11 AUGUST 2006
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 698 OF 2004

BETWEEN:	ROBERT SERVENTI APPLICANT/CROSS RESPONDENT
AND:	JOHN HOLLAND GROUP PTY LTD FIRST RESPONDENT/FIRST CROSS CLAIMANT WILLIAM WILD SECOND RESPONDENT GRIDCOMM PTY LTD SECOND CROSS CLAIMANT
JUDGE:	MADGWICK J
DATE OF ORDER:	11 AUGUST 2006
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.	The application be dismissed.

2.	By consent and without admissions the cross claim be allowed.

3.	The parties are to bring in short minutes as to the amount and form of the judgment to be entered in respect of the cross claim.

4.	The applicant is generally to pay the respondents’ costs but as to particular matters canvassed at the hearing the parties are to confer and bring in short minutes.

5.	The parties have liberty to apply with respect to orders 2-4.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 698 OF 2004

BETWEEN:	ROBERT SERVENTI APPLICANT/CROSS RESPONDENT
AND:	JOHN HOLLAND GROUP PTY LTD FIRST RESPONDENT/FIRST CROSS CLAIMANT WILLIAM WILD SECOND RESPONDENT GRIDCOMM PTY LTD SECOND CROSS CLAIMANT
JUDGE:	MADGWICK J
DATE:	11 AUGUST 2006
PLACE:	SYDNEY

REASONS FOR JUDGMENT

HIS HONOUR:

Introduction

1 This is a claim concerning allegedly unlawful termination of employment brought by the applicant against his former employer, John Holland Group Pty Ltd (‘John Holland’), and its managing director, William Wild, alleging breach of contract and breaches of s 52 and s 53B of the Trade Practices Act 1974 (Cth), and s 42 and s 46 of the Fair Trading Act 1987 (NSW) and a breach of contract. John Holland and one of its subsidiaries, GridComm Pty Ltd (‘GridComm’) cross claim against Mr Serventi alleging contraventions of s 181 and s 182 of the Corporations Act 2001 (Cth), and breaches of fiduciary and contractual duties.

2 As was acknowledged at the hearing, the case boils down to whether Mr Serventi so misbehaved as to warrant his summary dismissal. In my opinion he did.

Background

3 The case centres on the conduct of Mr Serventi in 2003 in his capacity as a senior employee of John Holland, and as the General Manager and a director of GridComm, and his subsequent summary dismissal from that position without pay in lieu of notice or redundancy pay. The alleged conduct in question, which is itself largely uncontroverted, comprised four kinds of alleged serious and wilful misconduct. However, as the case unfolded, it is sufficient to deal with only one of these, namely, Mr Serventi’s taking of John Holland’s vehicles for the private use of his son, Anthony, who was not an employee of John Holland. Without prejudice to the major issue, Mr Serventi agreed to pay for reasonable loss incurred by John Holland in relation to those vehicles.

4 In response to the alleged misconduct, John Holland summarily terminated Mr Serventi’s employment, without payment in lieu of notice; however, other entitlements such as annual leave and superannuation were paid in full. Mr Serventi claims that he reasonably or at least actually believed that he was entitled to take the vehicles for his son’s use.

Relevant legal principles

5 The law relevant to this case may be simply stated.

6 An employer is entitled to summarily dismiss an employee for serious and wilful misconduct. Such misconduct must be of a kind that, as a practical matter, is likely to make maintenance of the contract of employment impractical. Some employees have special obligations of conduct and confidence that are relevant to such a question of misconduct. A senior manager of a company who is also a director is an example. Mr Serventi was that.

7 As Gleeson CJ, Gaudron and Gummow JJ confirmed in Concut Pty Ltd v Worell (2000) 176 ALR 693 (at [25]), citing Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66 (at 81):

‘Conduct which in respect of important matters...is destructive of the necessary confidence between the employer and employee, is a ground of dismissal’.

The respondents’ case here is that, if a senior manager arranged significant private use by a relative of his employer’s assets, knowing that he was not entitled to do so, then as Kirby J put it in Concut at [50]:

‘Given the nature of an ordinary employment relationship, at least as here in the case of a senior employee serving as the Queensland Branch Manager of a private company with national operations, the result reached by the primary judge seems unsurprising and appropriate. The notion that an employer, in such a case, does not enjoy a right summarily to terminate the relationship with such a senior employee, would appear to be an odd one: one out of step with common sense. To suggest that the common law would effectively insist that such parties continue in the personal, and often quite close and trusting, relationship of employment, as if nothing had happened, would seem remarkable. The effect of this would be to demand the employer put out of mind (as it were) the discovery of the misconduct, and continue to pay the employee under the supervening service agreement as if nothing had occurred. This is a conclusion to which a court would need to be driven by clear legal authority or by singular factual circumstances of the case, so far undisclosed in this matter.’ (Footnotes omitted.)

8 The parties accepted that the employer had the onus of establishing serious and wilful misconduct.

9 Dishonest misappropriation of his employer’s assets was alleged against Mr Serventi. Such allegations are serious in the sense discussed in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. As Dixon J put it, ‘[they affect] the process by which reasonable satisfaction is attained’ by the Tribunal of fact: Briginshaw at 363. In such cases, ‘"reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony or indirect inferences’: Briginshaw at 362.

Long service in a company with a particular culture

10 Mr Serventi had been employed by (or credited by Transfield Construction Pty Ltd (‘Transfield’) and John Holland) with service for Transfield since 1957. On 1 February 2003 John Holland acquired Transfield’s business and Mr Serventi and most other Transfield employees became employees of John Holland.

11 At all relevant times Transfield was a privately owned company wholly owned by Transfield Holdings Pty Ltd (‘Transfield Holdings’). The corporate culture of Transfield was, in some respects, akin to a familial organisation and fairly described by a John Holland analyst in 2003 in the following terms:

‘The culture of the company is dominated in many ways by the history of its evolution – a strong Italian founder who remained at the head of the private company, officially or unofficially for fifty years, and made it what it is today.

The culture is characterised by this legacy. Forty percent of the staff employees and thirty three percent of the wages employees are more than fifty years old.

The vast majority of these employees are of Italian descent and have lengths of service greater than fifteen years.

Their preference is for the old ways of doing things, both at a micro level and at a macro level eg: using your own plant and equipment with your own workforce in your own fabrication shop etc – vertical integration.

They have had a "figure" to look up to as the "boss" and problems will emerge as this has now been displaced.

Attempts have been made by the company in the recent years to break down the "silo" mentality that developed over the years. Small fiefdoms were built up with people protecting their own patch. Despite the restructure carried out there is still, from the older employees, a good deal of resistance to this. It is well known that cultural change is difficult to achieve within such groups unless a structured approach is taken to the change management process.

...

The main weakness is that of the dominant group outlined above. This is summarised as:

• Resistance to change (systems, procedures, work methods, management, office location etc)
• Silo mentality – protection of patch
• "Comfort zone" – too long in one position with their attitude that the family will look after me.
• Poor safety record due to the domination of the old ways of doing things and resistance to change the attitudes towards safe working practices.’

12 Mr Serventi originally commenced employment with Transfield as a mechanical engineer, but by the time of the events with which this decision is concerned, he had become one of that company’s most senior and longest-serving managers, holding the position of Executive General Manager of a Transfield division, Transmission Systems and Telecommunications, which was involved in high voltage transmission and communication. Indeed, there had been a time when only the founders of Transfield, Mr Guido Belgiorno-Nettis and Mr Salteri were more senior to him. He rendered great service for Transfield and was highly valued by its founders.

13 At various times during his many years at Transfield, a number of benefits, beyond the usual, were conferred upon Mr Serventi, for example, a loan to assist in the purchase of a house. These benefits were conferred in an ethos at Transfield which, especially before the rigours of the Fringe Benefits Tax regime introduced in the mid 1980’s, allowed senior managers a considerable amount of latitude and accorded them some informal perquisites. For example, it was within the authority of managers to allow employees to make reasonable, modest use of Transfield equipment for private, non-work purposes, when the equipment was not at the time required for business purposes. (The movement of the equipment into an employee’s custody was however documented.)

Transfield sold – Mr Serventi joins John Holland

14 In December 2002, Mr Belgiorno-Nettis, the managing director of Transfield Holdings, announced that Transfield was to be sold to John Holland, a subsidiary of Leighton Holdings Limited, a well-known public company. At a staff meeting in December 2002, employees were addressed by Mr Belgiorno-Nettis and Mr Wild on the implications of the sale. Mr Belgiorno-Nettis assured employees that John Holland had agreed to employ all Transfield employees on the same terms and conditions that had applied during their time at Transfield. Mr Wild gave a similar assurance that ‘as far as possible’ employment with John Holland would be offered on the ‘exact same terms and conditions’ as those applicable at Transfield.

15 Around this time, Mr Serventi had a meeting with Mr Wild. The two men discussed several staff members within Mr Serventi’s division, and also Mr Stephen Sasse, who was the General Manager of ‘Human Resources and Industrial Relations’ at Transfield, and later the General Manager of ‘Human Resources, Industrial Relations and Safety’ at John Holland. Mr Serventi told Mr Wild that he did not use Mr Sasse in his division, and indicated his disapproval of Mr Sasse’s approach to industrial relations. Mr Wild later repeated the substance of this conversation to Mr Sasse, although the timing of this disclosure was disputed: Mr Wild said that it occurred prior to Mr Serventi’s employment being terminated, and that at that time he formed the opinion that neither Mr Serventi nor Mr Sasse ‘was particularly fond of the other’. Mr Sasse asserted that he was not informed of Mr Serventi’s views until after Mr Serventi had left GridComm. It does not matter. I accept that Mr Sasse and Mr Serventi did not suit each other and that Mr Sasse would not have been sorry to see Mr Serventi in a position where he might be dismissed for misconduct.

16 At Mr Serventi’s suggestion, either Transfield or John Holland paid for Transfield employees in Mr Serventi’s division who were considering contracts of employment with John Holland to have legal advice. Around this same time, Mr Sasse had commenced monitoring the emails of an employee, Mr Jason Power, who worked under and reported to Mr Serventi. Mr Power was then the General Manager of a Transfield subsidiary. Mr Sasse explained the email surveillance (in a facsimile to John Holland’s legal representatives with the subject heading ‘Serventi’) by reference to the view that ‘we [John Holland] knew he [that is, Power] was being mischievous’. This is unattractive but does not impinge on Mr Sasse’s credibility which, as to essential matters, I generally accept.

17 In late December 2002, Mr Serventi made an unsuccessful proposal to Transfield for a ‘management buyout’ of his division of Transfield, and then unsuccessfully approached Mr Wild about a future management buyout from John Holland.

18 In this context, Mr Serventi says that Mr Wild told him that if he commenced employment with John Holland, then:

‘...we will set you up to run the division exactly as you have with Transfield, nothing is to change, only the sticker. You’ll remain in the same position and I want to ensure that all your key people are in the same position. You will maintain all the existing systems in managing all the people with the same traditions and customs you had in Transfield. I want you to keep the same culture. I want you to be totally comfortable’.

Mr Wild acknowledged that John Holland had adopted an approach of ‘minimum change/business as usual’ during the course of the acquisitions. For this purpose, ‘minimum change’ and ‘business as usual’ had the meaning that ‘people will generally continue to work in the same office for the same boss doing the same thing’. Mr Wild said that John Holland:

‘hoped to achieve that objective by keeping the division intact and with the same management. However, whilst we did want to keep the division intact and operating essentially as it had previously, this did not mean that we would compromise the governance requirements that dictated the behaviour of a public company.’

19 Mr Serventi was formally offered employment in the position of General Manager of GridComm on certain written terms and conditions on 6 January 2003. There was some dispute about which letters in what form passed between whom, but that dispute does not bear on the outcome of the case.

20 On 31 January 2003, Mr Serventi signed the letter of offer in an amended form, having made deletions by hand to the letter of offer and the terms and conditions document. A memorandum from Mr Serventi to Mr Sasse regarding the letter of offer was also provided. One week later Mr Serventi received a letter from Mr Wild setting out the terms of John Holland’s retention bonus plan.

21 On 1 February 2003, John Holland formally acquired the business of Transfield. On 1 February 2003 Mr Serventi, and the vast majority of Transfield employees, were transferred to John Holland pursuant to the arrangements between John Holland and Transfield. Mr Serventi commenced employment with John Holland as General Manager of Gridcomm and shortly thereafter became a director of GridComm. Gridcomm was a John Holland subsidiary and, at relevant times, its business included the design and construction of power transmission systems and telecommunications infrastructure. Mr Serventi was given the privilege of naming GridComm – a gesture on the part of Mr Wild intended to reassure Mr Serventi as to the level of control and direction he would have over the GridComm division as General Manager, or, in other words, to ‘give him a feeling that he had his own empire, or the empire that he had [at Transfield] was to continue’.

Suggestions of misconduct by Mr Serventi – a John Holland conspiracy?

22 In August 2003, Mr Sasse commenced an investigation into Mr Serventi, apparently following a suggestion by an anonymous informant that Mr Serventi’s bank accounts should be examined. Among other things, Mr Sasse made inquiries of John Holland staff and retained PriceWaterhouseCoopers (‘PWC’) to conduct inquiries including a ‘suspicious transactions analysis’ and arrange covert surveillance of the Serventi family home. As early as the engagement of PWC, Mr Sasse had as an objective to be ‘rid of Serventi’ if the evidence warranted it. However, I reject the suggestion that either Mr Sasse or Mr Wild had no serious objection to Mr Serventi’s giving his son the use of the vehicles and that they did not honestly believe that such warranted his dismissal for misconduct. I also do not believe that Mr Sasse acted out of mere general enmity towards or dislike of Mr Serventi.

23 Over the following couple of months, and in light of information obtained from the investigation into Mr Serventi’s conduct, Mr Sasse, in consultation with Mr Wild, considered John Holland’s options for dealing with what appeared to be the alleged misconduct Mr Serventi.

24 This process occurred against a background of John Holland’s preparations for the restructure of GridComm. It was put by Mr Serventi that the reorganization would make him surplus and that the complaints by the John Holland executives about his arranging the use of the vehicles by his son was exaggerated and used as an excuse to avoid paying his compensation for redundancy.

25 On 2 October 2003, Mr Serventi attended a meeting with Mr Wild and Mr Sasse during which Mr Wild said the several allegations relied on by John Holland to Mr Serventi. According to Mr Serventi, when questioned about his conduct, he replied (relevantly as to the vehicle use):

‘... My... son...[Anthony was] employed on a project in Western Australia at Christmas with Transfield... I’ve certainly let my son use a car if it’s spare when his own car is broken down as I did at Transfield. I have done this many times for others with Transfield’.

26 According to Mr Wild (and Mr Sasse’s account is similar), when Mr Serventi was challenged about his son’s use of the car, he said words to the effect: ‘there was a vehicle free and Anthony needed one. The company had vehicles for sale and I selected one of the these while it was sitting there.’ The only claim that anything was justified by past practice at Transfield was made in relation to another John Holland complaint, namely Mr Serventi’s use of company employees at his own home. Mr Serventi said that such use was occasional and ‘It was done at Transfield in the old days’. Mr Sasse’s brief notes taken at the time of this interview record Mr Serventi as saying: ‘number of cars for sale’.

27 Mr Wild and Mr Sasse acknowledge that, later in the conversation, after he was handed a letter terminating his services ‘on the grounds of serious and wilful misconduct’. Mr Serventi said ‘I can’t accept it was wilful misconduct’. When Mr Wild asked what else it was, Mr Serventi said ‘it was allowed in Transfield. Someone in my position gets those kinds of benefits in Transfield’.

28 It is fair to say in Mr Serventi’s favour, that he was rather ‘ambushed’ by what seems to have been a torrent of questions and no warning. Nevertheless, this is not a case where the employer was obliged to accord procedural fairness of the kind that many public employees would have as their right. (The statement of claim alleged that there was an implied term in the contract of employment to give Mr Serventi such a right but, not surprisingly, no more was heard of it in the case. No particular circumstances were shown to warrant the implication, nor is such a term implied into employment contracts generally).

29 The upshot of the meeting was that Mr Wild forthwith terminated Mr Serventi’s employment without payment in lieu of notice or for redundancy, although his leave entitlements were paid out. Mr Serventi was informed by letter that his employment had been terminated on the basis of serious and wilful misconduct.

30 Shortly after Mr Serventi’s departure from John Holland, GridComm was restructured.

Mr Serventi’s use of company vehicles for his son’s private purposes

31 It is now convenient to outline the impugned conduct in more detail. As mentioned earlier, the substance of this conduct was ultimately, as I understand it, admitted by Mr Serventi. It is the context and significance of such conduct and Mr Serventi’s state of mind about it that remained in contention.

32 It was a condition of Mr Serventi’s contract of employment that John Holland would pay for him to have a privately owned motor vehicle for business and other use. The contract provided that Mr Serventi’s ‘Total Fixed Remuneration’ would include the costs of meeting this requirement. The written contract contained no term that might entitle Mr Serventi to use any other John Holland or Gridcomm vehicle for private purposes.

33 In September 2002, Mr Serventi instructed a subordinate, Mr Frank Maggio, the ‘Human Resources Coordinator’ for Mr Serventi’s Transmission division to make cars available to his son on several occasions. Mr Serventi asked Mr Maggio whether there was a four wheel drive vehicle (4WD) in good condition available for his son. Mr Maggio indicated there was such a vehicle available.

34 A day or so later Mr Serventi and Anthony came to pick up the vehicle. Mr Serventi rejected the one offered by Mr Maggio, saying that it was an old vehicle, not in good enough condition. Mr Maggio said it was the ‘only 4WD ute available’. Mr Serventi instructed him to take another 4WD vehicle from another employee, Mr Rosato, who was on sick leave and give the latter another vehicle.

35 Mr Rosato’s vehicle had been allocated to him for several years in his capacity as a Transmission division supervisor. The vehicle was not a ‘pool’ vehicle but part of Mr Rosato’s remuneration package. As such there was no log book for it. Mr Maggio then gave Mr Rosato a substitute Toyota Corolla which was ‘the office pool vehicle’. Mr Rosato was not happy about this. Mr Maggio said in evidence:

‘I had concerns about the correctness of doing what Mr Serventi told me to do, but because I was under a direction from him, the General Manager, I did not question him. I would ordinarily question an employee taking a Tool of Trade pool vehicle as to when the vehicle would be returned and what project it was needed for. If it was for personal use, it had to be approved. However, Mr Serventi was my boss and had an authoritarian style. If anyone else was to use a vehicle for personal use, they would have to get authorisation directly from Mr Serventi in his capacity as General Manager. Therefore I did what Mr Serventi told me to do without questioning him.’

36 In May 2003 another supervisor had an urgent need for a 4WD vehicle and Mr Maggio asked Mr Serventi whether he could return the 4WD he and his son had taken. Mr Serventi agreed to do so. It was returned in a damaged condition. Mr Serventi asked whether there was another car available. Mr Maggio told him that the only one was a Toyota Corolla, the ‘office pool vehicle’. That vehicle was used for work errands by office staff. Mr Serventi said ‘It will have to do. Give it to Anthony in exchange’. This was done. The Corolla was delivered to Pymble (where Mr Serventi’s home was) by another GridComm employee, Mr Northcroft.

37 In August 2003 Mr Serventi told Mr Maggio that the Corolla needed a service and instructed Mr Maggio to make another car available while the service was being carried out. Mr Maggio arranged for a third vehicle, a Camry station wagon to be provided. On 12 September 2003, by arrangement between Mr Serventi and Mr Maggio, Anthony came in and exchanged the Camry for the Corolla.

38 The second and third vehicles had company log books. Mr Maggio logged the second car as having been delivered ‘to Pymble’ by Mr Northcroft and being used by Mr Serventi, during the three and a half months his son had it, for ‘various T/systems’ trips. He made a similar entry in respect of the third vehicle, the Camry, when it was returned and Anthony again took the second vehicle, the Corolla.

Mr Serventi’s case

39 In evidence, Mr Serventi admitted to having taken cars from the pool, including in circumstances where ‘it’s spare [and] when [his son’s] own car is broken down’. He admitted to having instructed Mr Maggio to assign a spare pool car to his son and that it was used by the son. However, Mr Serventi claimed an entitlement so to arrange matters, on the basis of a continuance of an alleged ‘custom and practice’ at Transfield. Such continuance, he claimed, was a condition of his employment at John Holland. In short, Mr Serventi claimed that John Holland had authorised such conduct. Mr Serventi said:

‘It had always been my responsibility at Transfield to allocate vehicles in my Business Unit. The allocation was in accordance with the needs of the particular project a person was working upon. At no time during my employment at John Holland was I ever informed or was it suggested to me, that the allocation of pool vehicles was not within my authority or that the authority I had at Transfield was now different at John Holland. Indeed, I understood from the conversation I had with [Mr Wild], that I was to have the same authority I had at Transfield – "nothing was to change only the sticker".’ (Original emphasis.)

40 Mr Serventi put forward several examples designed to show that he may have believed that taking a company-owned vehicle for his son’s use for months on end was within what he regarded as his managerial prerogative. On analysis none of the examples singly, nor all collectively, demonstrated any such thing. There were instances of short term favours to employees for genuine emergencies; no doubt (I would accept) short-term loans to employees of trucks for local carrying, again as a favour, and so on. The only long-term provision of a Transfield vehicle pointed to was for Mr Serventi’s witness Jason Power. But that was arranged with Mr Power’s supervising manager and there was a practical and readily understood justification for it from Transfield’s viewpoint.

41 There was no such justification for Mr Serventi’s equipping his son for long periods with a company car, involving substantial private use of the car by his son. Anthony at most had done a few weeks’ vacation work for the company in another State. There was no need or desirability that either Transfield or John Holland should foster especially good or friendly relations with him. Anthony had no urgent need which might naturally excite a compassionate response by his father’s employer. Mr Serventi was handsomely remunerated including by provision of a good quality vehicle made available for his private use.

42 Mr Serventi’s family was a close one. It is very likely that he knew that substantial use was being made of the vehicles he had put into his son’s possession.

43 Anthony did not give evidence.

44 Thus the first car, the 4WD utility, was taken for over seven months; the second car, the Corolla sedan, was initially taken for over four months, and then later for a period of approximately two weeks; and the third car, the Camry station wagon, was taken for approximately three weeks. In consequence, Mr Serventi arranged for his son the continuous availability of a company vehicle for more than a calendar year. Over almost the whole of that year substantial use of the vehicle was made – roughly a tank of petrol per week was used.

45 At a late stage in the trial, Mr Bruce James, the CEO of Transfield between 1999 and 2002 (having taken over from Mr Belgiorno-Nettis), swore an affidavit tendered by the respondents. He was not required for cross-examination. Mr James had been employed in various positions at Transfield since 1975 and was asked to comment on several ‘assumptions’ pertaining to Mr Serventi’s time at Transfield. In relation to the use of Transfield vehicles, and in particular, the assumption that ‘[w]hilst Robert Serventi was employed by Transfield Construction, on at least two occasions he took a Transfield vehicle home for a period in the order of six months for the use of his son’, Mr James said:

‘Mr Serventi was not entitled to do this. I did not know that Mr Serventi had ever engaged in this practice. If I had been asked by Mr Serventi to authorise such a practice I would have refused to authorise it. I was not asked to authorise this practice’.

46 In relation to the use of Transfield employees, Mr James was asked to comment on an ‘assumption’ that Mr Serventi had directed a fellow Transfield employee, Mr Northcroft, to assist a tradesman who was carrying out maintenance work and renovations on Mr Serventi’s home. In response, Mr James stated that:

‘Mr Serventi was not entitled to do this. I did not know that Mr Serventi had ever engaged in this practice. If I had been asked to approve such a practice I would not have agreed.

I have further been asked whether my answer above would be different in the event that Mr Northcroft at the relevant time was not engaged in other duties. My answer would not change.’

47 In relation to the use of Transfield fuel, Mr James was asked to comment on an ‘assumption’ that from time to time Mr Serventi would direct Transfield employees to fill the fuel tank of his private vehicle with diesel from the tank at the Seven Hills depot. In response, Mr James stated that Mr Serventi was not entitled to do so, and that Mr James was unaware that such directions had been issued by Mr Serventi.

48 In my view, there was no custom and practice at Transfield as alleged by Mr Serventi. Nor was there any basis for him to think that there had been. It is an affront to common sense to suggest that a senior manager in a company would have the right or would think he might have the right, without at least securing the express agreement of the person or board to whom he answered, to make a motor vehicle available for substantial and entirely private use over a lengthy period by a relative, in circumstances where that relative had no special or urgent need for the vehicle. Mr James’ evidence must be accepted.

The Context

49 A ‘zero–tolerance’ approach was taken by both Transfield and John Holland to cases of theft by blue-collar employees; theft of relatively minor items led to summary dismissal.

50 There was a John Holland code of ethics generally made available to employees. It stressed, among other things, the need for ‘integrity’ and ‘using company assets and resources only for legitimate business purposes’. Common sense and such an approach would indicate the necessity for visible scrupulosity by managerial staff in dealing with company assets.

51 The introduction and policing of the Fringe Benefits Tax regime and necessary accounting procedures for compliance, in existence since the 1980’s, was in general, known to Mr Serventi. FBT requirements were taken, both at Transfield and John Holland, to require strict accounting for the value of the private use made by employees of company assets and of company funds expended for the private benefit of employees. As a senior manager, Mr Serventi knew about this.

52 On the take-over of the Transfield business, John Holland executives including Mr Wild were at pains to explain to the incoming Transfield staff, including managers, the high accounting standards and levels of practice regarded by John Holland as necessary and appropriate to the operations of a subsidiary of a public company. This must have percolated through to Mr Serventi.

Dishonesty despite a ‘paper trail’

53 Much was made on Mr Serventi’s behalf of the fact that there was a ‘paper trail’ to show that the vehicles were ‘booked out’ to Mr Serventi and that he likely knew that there would be such records.

54 Mr Serventi certainly did not tell Mr Maggio to ensure there were no such records and it is likely that he would have known (and during the relevant period he did come to know) that there would be records of the assignment of the company’s vehicles to him.

55 But he also believed, in my opinion, that Mr Maggio had enough wit to see to it that the records did not immediately show that Mr Serventi was taking the cars simply to give them to his son. Mr Serventi was the ‘boss’ of Transfield and later of GridComm. He had done Mr Maggio some favours in the past. In my opinion, the justified inference is that he believed that Mr Maggio knew which side his bread was buttered on. He did not need to tell Mr Maggio what to do.

56 As to the rest of the paper trail, (the petrol card records and so on), whatever Mr Serventi’s state of mind about them, he did not desist from a course of conduct that, even if not in its actual inception, after some period – a month at the most, had become dishonest, on account of those likely records. Failure to advert to the records or a belief in his own indispensability or invincibility may well have accounted for this.

57 In any case, Mr Serventi had no right at all to do what he did, and no belief that he did have such a right.

The ‘parallel restructuring’ of Mr Serventi’s division

58 Mr Serventi claimed, as Mr Sasse foresaw he would, that he was the victim of a conspiracy: that the misconduct allegations against him were a mere, colourable cloak for getting rid of him without redundancy pay in the interests of an organisational restructuring that others in John Holland were planning. I attended to the evidence on this matter without, I trust, undue naivety or a blind faith in the captains and lieutenants of industry. Mr Serventi’s case in this respect was simply not made out on the entirety of the material. He was, on the evidence, bona fide dismissed for serious misconduct, even if such dismissal had other benefits for John Holland and for Mr Sasse’s feelings in the matter.

Empathy and analysis

59 I was at first, I confess, minded to find ways to believe and excuse Mr Serventi. He presented a forlorn but attractive figure – an old lion of the Australian construction industry; encouraged by the old guard at Transfield to rule his divisional empire; a man who would look out for his own loyal employees; a man, I originally thought, who might have thought some minor, unorthodox gifts were in his power.

60 As the case unfolded and the sheer scale of the appropriation of the cars to his son became more clearly in focus, it simply became less and less possible to give fair expression to such sentiments. Ultimately Mr James’ evidence delivered the coup de grace. Mr Serventi’s evidence thereafter was unimpressive and undermined what had been an attractive demeanour.

Conclusions

61 Some aspects of Mr Serventi’s position such as his advanced years and his long and meritorious service with Transfield may excite some sympathy, but the case cannot be decided on that basis.

62 This is not a case where what is in issue is whether the application of the law would result in a ‘harsh’ outcome. Mr Sasse was not sorry to see Mr Serventi go. Some other employer might, possibly, despite the seriousness of his misconduct, at least have offered him the chance to resign but John Holland was not obliged to do this. If an employee gives a fellow employee or a supervisor who dislikes him just cause for his dismissal, he cannot complain at law if that lawful consequence follows.

63 There was only Mr Serventi’s evidence to suggest a ‘custom and practice’ at Transfield that might justify his behaviour, and analysis of his stated experiences and examples did not support the existence of any such arrangements. There was unchallenged evidence from Mr James that at Transfield Mr Serventi had no right to do what he did. There is no adequate reason then as to why Mr Serventi would not have understood this.

64 It is inconceivable, in reality, that Mr Serventi thought he had a right to do what he was doing, especially in relation to his son’s use of the vehicle:

• Mr Serventi had had to bargain for a car for himself and its use was guaranteed by express contractual terms;

• There was no question of any short-term emergency for, or humanitarian dispensation to, his son;

• By reason of Mr Serventi’s participation in changing the arrangements as to the cars, it cannot be said that he did not turn his mind to the length of time his son had the use of them;

• He cannot have thought he had a right to do this. He was unable to point to any real precedent with Transfield. The arrangements made in respect of Jason Power were entirely distinguishable: they had a work motive and they were disclosed to Jason Power’s superiors; and

• The sheer time and scale of the use of the car by Mr Serventi’s son takes such use out of the category of a trivial grace-and-favour dispensation.

65 In my view Mr Serventi did not believe he had such a right.

66 Such was serious and wilful misconduct:

• it was dishonest;

• it was overbearing and it relied on the silence of GridComm employees;

• it was destructive of the standards to be expected of other employees;

• there was no excuse for it; and

• there was no relevant mitigating factor – Mr Serventi’s age, length of service with Transfield and so on are not that.

67 John Holland was entitled, by Mr Wild, summarily to terminate Mr Serventi’s employment. His application must be dismissed and, except as to some specific matters, with costs.

I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Madgwick.

Associate:

Dated: 11 August 2006

Counsel for the Applicant:	Mr A Moses
Solicitor for the Applicant:	Haywards Solicitors
Counsel for the Respondents:	Mr G Hatcher SC/Ms M Painter
Solicitor for the Respondents:	Thomson Playford
Date of Hearing:	18, 19, 20, 21 July; 20, 26, 27, 28, 29 September 2005
Date of Judgment:	11 August 2006