Qureshi v De Haas (No 2) [2009] NSWIRComm 139 (19 August 2009)

Last Updated: 21 August 2009

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION :
Qureshi v De Haas (No 2) [2009] NSWIRComm 139



FILE NUMBER(S):
IRC 214

HEARING DATE(S):
6 August 2009

DATE OF JUDGMENT:
19 August 2009

PARTIES:
Zia Qureshi (Appellant)
Eric De Haas (Respondent)

CORAM:
Boland J President Walton J Vice-President Marks J


CATCHWORDS: APPLICATION FOR LEAVE TO APPEAL - unfair contract - application for leave to appeal based on four issues: failure to give adequate reasons; no basis for notice period awarded; bonus scheme; costs - judge not required to make specific finding on each piece of disputed evidence -provision for notice period based on unfair employment contract - bonus scheme was unfair as it offered inadequate protection - application challenges finding of facts and discretion following therefrom - application for leave to appeal raises no substantial issue of principle or law - no basis that attracts grant of leave - leave to appeal refused

LEGAL REPRESENTATIVES
Mr F Austin of counsel (Appellant)
Mr A Metcalfe of counsel (Respondent)
Solicitor:
Barwick Legal

CASES CITED:
Ainger v Coffs Harbour City Council [2005] NSWCA 424
Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66
Brown and ors v Rezitis and ors [1970] HCA 56; (1970) 127 CLR 157
De Haas v Chloer Pty Ltd, in liq. (formerly Business Catalyst International Pty Ltd) and Another [2008] NSWIRComm 227
Hosemans v Commissioner of Police (No 4) [2005] NSWIRComm 409
Inspector Lai v Rexma Pty Ltd and Another [2008] NSWIRComm 78; (2008) 172 IR 210
Qureshi v De Haas [2009] NSWIRComm 46
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
State of South Australia v McDonald [2009] SASC 219
Webb v Goulburn Masonic Village [2004] NSWIRComm 258; 136 IR 309

LEGISLATION CITED:
Industrial Relations Act 1996 s188
Legal Profession Act 2004


TEXTS CITED:




JUDGMENT:

INDUSTRIAL COURT OF NEW SOUTH WALES

FULL BENCH

CORAM: BOLAND J, President
WALTON J, Vice-President
MARKS J

Wednesday 19 August 2009

Matter No IRC 214 of 2009

ZIA QURESHI v ERIC DE HAAS (NO 2)

Application by Zia Qureshi for leave to appeal and appeal against a judgment of Justice Backman given on 2 February 2009 in De Haas v Chloer Pty Ltd, in liq. (formerly Business Catalyst International Pty Ltd) and Another [2008] NSWIRComm 227.

JUDGMENT OF THE COURT

[2009] NSWIRComm 139

1 This is an application by Mr Zia Qureshi for leave to appeal and to appeal from a judgment of Backman J given in De Haas v Chloer Pty Ltd, in liq. (formerly Business Catalyst International Pty Ltd) and Another [2008] NSWIRComm 227. The appeal proceedings are constituted by an amended application filed 27 July 2009.

2 Mr Qureshi was the chief executive, director and majority shareholder of Chloer Pty Ltd, formerly known as Business Catalyst International Pty Ltd, which went into liquidation on 26 May 2006 and was the employer of Mr Eric De Haas, the respondent in these proceedings. The corporation was a party to the original proceedings. The appellant was joined into the proceedings and was found liable to pay compensation to the respondent on the basis of the principles established by the High Court of Australia in Brown and ors v Rezitis and ors [1970] HCA 56; 127 CLR 157.

3 The appellant's application came before the Full Bench on 6 August 2009. In its narrative on leave, the respondent opposed leave being granted and submitted that the question on leave should be dealt with separately prior to hearing submissions as to the merits of the appeal. Having read the written submissions that had been filed by the parties, the Full Bench acceded to the respondent's submission. Having heard the oral submissions on leave, the Full Bench refused leave and indicated that it would make formal orders and provide reasons for doing so at a later time. We now make those orders and provide our reasons.

4 By s 188 of the Industrial Relations Act 1996, leave to appeal is required. Section 188 is in the following terms:

188 Appeals to Full Bench by leave only

(1) An appeal to a Full Bench of the Commission under this Part may be made only with the leave of the Full Bench.

(2) The Full Bench is to grant leave to appeal if, in its opinion, the matter is of such importance that, in the public interest, leave should be granted.

(3) The Full Bench may deal with an application for leave to appeal separately and without conducting a hearing into the merits of the appeal.

(4) This section does not apply to an appeal made by the Minister.

5 The circumstances under which leave to appeal will be considered are now firmly established by authority of this Court. The relevant principles were summarised in Hosemans v Commissioner of Police (No 4) [2005] NSWIRComm 409; 150 IR 263. That judgment concerned proceedings before the Industrial Relations Commission of New South Wales, but the principles apply equally to proceedings before this Court. At [5], the Full Bench said:

5 The law and practice governing leave to appeal is well settled and does not require restatement: see Knowles v Anglican Church Property Trust (No. 2) (1999) 95 IR 380. However, two principles warrant particular mention: first, leave will not be lightly or automatically granted (see King v State Bank of New South Wales (No 2) [2002] NSWIRComm 353; (2002) 126 IR 407 at [52]- [55] and Knowles at 381 - 382) and, subject to the requirements of s188 (2) of the Act, will not, generally, be granted unless the appellant demonstrates that the appeal ‘raises substantial issues of principle or law or has wider implications for the jurisprudence of this Commission, including whether the decision has widespread practical application’ (see Knowles at 382) or raises issues going to the proper administration of justice. Secondly, leave will rarely be granted where an appeal primarily seeks to challenge findings of fact which are otherwise reasonably open on the evidence: Box Valley Pty Ltd v Price [2000] NSWIRComm 117; (2000) 97 IR 484; Austin v NF Importers Pty Limited [2005] NSWIRComm 353 at [5].

6 The nature of the proceedings at first instance were described by Boland J, President, in a judgment dealing with a stay application in Qureshi v De Haas [2009] NSWIRComm 46. His Honour said, in part:

Background

[2] The judgment at first instance concerned a claim by Mr Eric De Haas (‘the respondent’) under s 106 of the Industrial Relations Act 1996, that the contract of employment between the respondent and the appellant was unfair, harsh, unconscionable or against the public interest. The factual background of this matter was complex and involved the employment contract between the two parties and a collateral arrangement in the form of an ‘Employee Participation Trust Scheme’. The principal grounds in support of the respondent's application for relief were summarised by Backman J at [1] of her judgment:

‘[1] The present proceedings are brought by the applicant under s 106 of the Industrial Relations Act 1996. In the amended summons for relief the applicant seeks declarations and orders that his contract of employment was unfair, harsh, unconscionable or against the public interest. The principle (sic) grounds relied upon in support of the claim are the failure of the first respondent to provide for reasonable notice or payment in lieu of notice upon termination, and the respondents' failure to afford the applicant procedural fairness, natural justice and substantive fairness in relation to the circumstances of the applicant's termination of employment. Declarations are also sought that the contract between the applicant and the first respondent contained a related condition or collateral arrangement, namely the BCI Employee Participation Trust Scheme (the Scheme) and that in relation to this Scheme it was unfair because the applicant was unfairly induced by representations made by the respondents to participate in the Scheme. The Scheme was also alleged to be unfair in relation to its operative terms at the time of the applicant's termination of employment. Declarations are also sought by the applicant that his contract of employment “became unfair” because of a variation said to have occurred between the period 9 December 2002 and 28 February 2003 whereby the applicant's salary was reduced by 30 per cent. Monetary orders are sought in relation to each head of unfairness. In addition the applicant seeks interest and costs.’

[3] The respondent relied on five grounds to contend that the contract and/or the collateral arrangement was or became unfair. Backman J, however, found only three of those grounds established. First, her Honour found that there was insufficient evidence to justify the respondent's dismissal based on poor work performance, and that on the evidence there was no proper basis for the view that the respondent had breached any duty of confidentiality. As the respondent had been terminated whilst on leave, without any prior warning or counselling and without the opportunity to respond to the allegations (which her Honour found unsubstantiated), the contract was unfair or became unfair as it permitted the appellant to terminate the respondent's employment without affording him procedural fairness.

[4] Secondly, Backman J found that the payment in lieu of notice was unfair, given the circumstances of the respondent's termination and the potentially serious consequences that the termination could have had on the respondent given his seniority, experience and age.

[5] Thirdly, her Honour found that the terms of the collateral arrangement, namely the BCI Employee Participation Trust Scheme ("the Scheme") was unfair. At [132]-[133] her Honour said:

[132] The issue for determination is whether the Scheme as it was presented to the applicant as an eligible unit holder and as it emerged in its final form in the executed Trust deed was unfair. In my view, the Scheme in its terms manifested unfairness because it contained no express provisions for the redemption of units in the event of a participant's termination of employment except in the event of retirement. The only option open to a participant whose employment was terminated was to formally apply for a redemption of units to the trustee. In these circumstances, the participant was utterly dependent upon a favourable exercise of discretion by the trustee. In circumstances such as those encountered by the applicant, where his employment was terminated without cause, the Scheme offered inadequate protection to him as a participant relying on a favourable exercise of discretion for the redemption of his units. It cannot be ignored, given the facts, that the same person who engineered the applicant's termination, that is, the second respondent, was also the sole director of both the trustee and manager of the Trust. The second respondent was of the firm belief that the actions of the applicant in copying his email of 29 April 2003 to other Scheme participants constituted a breach of his duty of confidence which warranted summary dismissal. The second respondent's evidence was that upon receipt of the email he telephoned the applicant and informed him, "you are finished with the firm and someone will be in touch to organise the termination arrangements". Allegations of poor work performance advanced by the second respondent as a justification for the applicant's termination were without substance. Nor, as I have found, was the allegation that the applicant breached a duty of confidence, sustainable on the evidence. Given these facts, it may be reasonably inferred that had the applicant formally applied for a redemption of his units, his application would have been rejected in the exercise of discretion. These facts serve to illustrate that the Scheme lacked reasonable and proper, protective provisions to allow unit holders to redeem their units. The absence of such protective provisions, manifested unfairness in the Scheme's operation: see for example GIO Australia Limited and Another v O'Donnell (1996) 70 IR 1 at 24.

[133] The same facts, in my view, reveal also that the Scheme became unfair by reason of the second respondent's conduct in terminating the applicant's employment without proper cause. The applicant's only opportunity to redeem his units, and recoup his loss was to formally apply to the second respondent as sole director, of both the trustee and manager. It was then up to the second respondent in his capacity as trustee or manager, to decide whether to exercise a discretion under the Trust and grant the request. Given the circumstances of the applicant's termination, and the dissatisfaction expressed by the second respondent towards the applicant, coupled with his refusal to see him because he “was not willing to waste any more time” on any objective view, the applicant was in a difficult position with regard to the success of an application to redeem his units. These circumstances combine in my view to facilitate the finding that the Trust operated unfairly against the applicant at the time of his termination. The consequence for the applicant was that he assumed liability for outstanding payments on the loan, as well as the interest payments, and lost any entitlements to the value of his units in the Scheme.

[6] Backman J rejected the claim that the Scheme was unfair because the respondent had been unfairly induced into it as a result of representations made by the appellant. Further, her Honour found that the salary reduction of 30 per cent for the period 9 December 2002 and 28 February 2003 was not unfair as ‘the evidence, which was unchallenged, does sustain a finding of an economic downturn which impacted adversely on the [appellant's] business and provided a justification for the salary reductions.

[7] Her Honour indicated that she would make the following orders:

[179] Consequent upon the findings of unfairness which I have made I have assessed a reasonable payment in lieu of notice to the applicant upon termination of his contract of employment at an amount equivalent to five months salary. The period of five months takes into account the payment of four weeks salary made to the applicant as part of his termination payment and the fact that the applicant was successful in obtaining employment on 1 September 2003 at a salary level commensurate to the salary he was earning while employed by the first respondent at the date of the termination of the contract of employment. The orders that will be made with regard to this claim, therefore, will be for a payment to the applicant representing three months gross salary at the rate paid to him at the time of termination of the contract of employment. With regard to the Scheme I have assessed compensation payable to the applicant at $25,739.00. This amount takes into account the applicant's payment of the loan principal following termination of the contract of employment in an amount of $20,000.00 and interest payments made on the loan following the termination of his contract of employment in an amount of $5,739.00. The second respondent therefore is to pay the applicant an amount equivalent to three months gross salary to be calculated on the applicant's gross salary payable as at the date of the termination of the contract of employment. In addition the second respondent is to pay the applicant an amount of $25,739.00. Interest should also be paid by the second respondent on both amounts in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. Interest shall be payable from the date of the filing in Court of the amended summons for relief which was 23 August 2007. The second respondent shall pay the applicant's costs of the proceedings in an amount as agreed or assessed.

[180] The parties are directed to file agreed minutes of the orders reflecting this judgment and the declarations sought in the amended summons within 14 days of today's date.

7 Although the appellant's submissions on leave to appeal were difficult to distinguish from his written submissions on the merits, the leave submissions were directed at what was said to be a failure by the trial judge to properly engage the appellant's 'case theory' and a failure to properly evaluate the critical points in dispute and to give adequate, sufficient or cogent reasons for the decision to award the two separate sums of money, first in relation to the notice provision and, second, in relation to the unit trust scheme.

8 The 'critical points' or issues which underpinned her Honour's order for the payment of money were identified as (i) the circumstances surrounding the respondent's termination; (ii) the unreasonableness of the notice provision; (iii) the circumstances surrounding the respondent's involvement in the unit trust scheme and the operation of the unit trust scheme. In addition, there was the issue of costs where the appellant submitted that he should have been given an opportunity of making submissions at first instance concerning that issue, but was not.

9 Before dealing with these issues we should note the appellant's submission that there have not been any recent authoritative decisions in this jurisdiction regarding the requirement of a trial judge to give reasons and that, therefore, leave to appeal was warranted. This is not so: see Inspector Lai v Rexma Pty Ltd and Another [2008] NSWIRComm 78; (2008) 172 IR 210 at [36] and cases referred to therein; Webb v Goulburn Masonic Village [2004] NSWIRComm 258; 136 IR 309 at [33]- [39].

The circumstances of the termination of employment

10 As recorded in the judgment of Backman J, the appellant, in his capacity as chief executive of the corporate employer, announced an intention to set up an employee participation trust. Certain key employees were given the right to subscribe for 'shares' in a discretionary trust, 50 per cent of which were to be funded by a loan to each employee through Westpac Corporation and the balance by, in effect, the employer. As will be seen, the respondent borrowed $25,000 from Westpac Corporation and subscribed for 'shares', those shares in the unit trust being used as capital by the employer.

11 By July 2003, the employer was in financial difficulties and the respondent received a letter from solicitors for Westpac asking for payment of an instalment under the loan arrangement which, if not made, would result in the totality of the loan becoming immediately due and payable. The respondent took this matter up with the appellant but received no immediate response. He then sent an email on 2 July 2003 to the appellant that set out his concerns, which he copied to other members of the scheme, all of whom were also employees of the employer.

12 The appellant telephoned the respondent and accused him of being disloyal and of breaching 'confidentiality' by circulating this email to other employees who were members of the trust scheme. The respondent was told by the appellant that his employment was terminated.

13 The appellant maintained throughout the proceedings that the termination of the respondent’s employment was justified because he had circulated his email to other employees and had thus breached a duty of good faith, mutual trust, confidentiality and fidelity in deliberately seeking to embarrass the employer and to put pressure on, in order to be paid out.

14 Although it was acknowledged by the appellant that at [108] of the judgment her Honour noted the Mr Qureshi alleged 'implied duties to act with good faith, mutual trust, confidence and fidelity', it was submitted that in the reasons that followed, her Honour did not engage and evaluate this aspect of the appellant's argument, but rather focused solely on the issue of whether Mr De Hass breached the 'duty of confidence', namely, the confidentiality clause in the contract, by copying his email reply to Mr Qureshi to the other participants.

15 In submitting that Backman J failed to properly deal with the evidence and with the appellant’s submissions and that she failed to give any or adequate reasons for rejecting the appellant’s case, the appellant relied upon a number of authorities, including the judgment of McColl JA in the New South Wales Court of Appeal in Ainger v Coffs Harbour City Council [2005] NSWCA 424. Mason P and Hunt AJA agreed with her Honour’s reasons.

16 In those proceedings, McColl JA was required to consider whether a trial judge had provided sufficient reasons for his decision. At [48] and [53], her Honour said:

[48] The primary judge was not obliged to spell out every detail of his process of reasoning (Yates Property Corporation Pty Limited (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 171, 182), however he was obliged to expose his reasons for resolving a point critical to the contest between the parties: North Sydney Council v Lygon (1995) 87 LGERA 435 at 442 per Kirby ACJ; Soulemezis at 270 per Mahoney JA, at 280 per McHugh JA. This obligation lay upon him to enable the parties to identify the basis of his decision and the extent to which their arguments had been understood and accepted: Soulemezis at 279 per McHugh JA. As Santow JA (with whom Meagher and Beazley JJA agreed) explained in Jones v Bradley [2003] NSWCA 81 at [129] it was necessary that the primary judge “ ‘enter into’ the issues canvassed and explain why one case was preferred over another”.

...

[53] Although the primary judge made passing reference to some of the evidence upon which the appellant relied, he gave no reasons for apparently according it little or no weight. Significantly, his Honour failed to address the theory of the appellant’s case, turning as it did on the respondent’s role in creating and failing to rectify the trip hazard she had encountered. This omission leads to the inference that he failed to examine all the material relevant to the question whether the respondent had breached its duty of care (see TCN Channel Nine Pty Ltd v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333 at [150] per Spigelman CJ) - so that there was an ‘error in the process of fact finding’.

17 Of course, as McColl JA acknowledged, it is not necessary for a judge to detail each factor which he has found to be relevant or irrelevant. Nor is a judge required to make an explicit finding on each disputed piece of evidence. It will be sufficient, if the inference as to what is found is appropriately clear: Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 270, 271 per Mahoney JA. Backman J's reasoning and her consequential findings of unfairness are not inconsistent with those authorities.

18 Backman J dealt carefully with the circumstances of the termination and the appellant’s submissions at [107] to [115] of her judgment. In essence, her Honour held that the respondent 'did not breach any duty of confidence' ([113]). Clearly, her Honour was alive to the appellant's submission about an express obligation in the contract regarding confidentiality and the duty of fidelity and good faith that the common law implies.

19 At [115] her Honour said:

115 Although the applicant's standard of work performance was a significant issue during the proceedings, ultimately in my view, it formed no part of the second respondent's decision to terminate his employment. The second respondent's evidence of the telephone conversation following receipt of the 2 July 2003 email from the applicant indicated, quite clearly, that the applicant's employment contract was terminated because the second respondent had formed the view that the applicant had breached his duty of confidence. On the evidence there was no proper basis for this view. Nor was there sufficient evidence upon which an inference may be found that the applicant's work performance was of such a standard that it might justify or warrant the termination of his contract. The applicant was advised of the termination while on leave, by telephone. The termination of his contract occurred in circumstances where the applicant received no warning or counselling and where he was denied the benefit of any procedure under which he could have availed himself of the opportunity to discuss legitimate concerns that his employer may have had with regard to his standard of work, or defend himself against any allegations of misconduct, before termination was effected. His contract contained no express provisions which could operate to protect the applicant from summary termination, that is to say the contract failed to provide for fair procedures on termination (or permitted the respondents to adopt unfair procedures in terminating the applicant's employment). No other basis apart from allegations of poor work performance and allegations of a breach of confidence were advanced by the second respondent as warranting the applicant's summary termination. Given all these circumstances I conclude that the applicant's contract of employment was or became unfair because it permitted the respondents to act unfairly when terminating the applicant's employment without affording him procedural fairness, and in terminating his employment on grounds that were not made out.

20 In the appellant's submission at first instance, which was not included in the Appeal Book and we are only able to comment on it because it is quoted in part in the appellant's submission in the appeal, the appellant defined the common law duty of an employee to act in good faith as a duty of 'mutual trust, confidence and fidelity'. We are not aware of any authoritative decision to the effect that such an implied duty as broad as that contended for by the appellant forms part of Australian contracts of employment generally: see the discussion in State of South Australia v McDonald [2009] SASC 219 at [215]- [239]. Nor are we aware from the material on appeal whether the appellant was able to show at first instance that mutual trust and confidence formed a part of the respondent's contract of employment, but it would seem no attempt was made to do so.

21 It may be accepted that there is an obligation on an employee to serve the employer faithfully and that such a duty is implied: Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66 at 81-2. Backman J found there was no breach of confidentiality so that, in so far as the duty of good faith encompasses confidentiality, it could not be said that the email sent by the respondent on 2 July 2003 breached either an express or an implied duty of confidentiality. It seems, however, that the appellant was contending that it was the respondent's deliberate attempt, in sending the email, to embarrass the appellant that breached the duty of good faith and constituted a ground for dismissal. But the attempt to embarrass was not the basis upon which the respondent was dismissed. He was dismissed because he breached confidentiality. There was no evidence that the appellant regarded the sending of the email as anything other than a breach of confidentiality. As her Honour noted at [115]:

No other basis apart from allegations of poor work performance and allegations of a breach of confidence were advanced by the second respondent as warranting the applicant's summary termination.

22 However, even if it were asserted that the respondent breached a wider duty of good faith (and that embarrassment was not something relied upon ex post facto by the appellant), there was an absence of evidence that the attempted embarrassment was destructive of the necessary confidence between employer and employee such that it rendered the employment relationship untenable and constituted a proper ground for summary dismissal.

23 In other words, there is no utility in granting leave to appeal on this point if it is unlikely that it could be made good on the evidence.

Compensation assessed at three months’ notice

24 Backman J concluded that instead of a period of four weeks’ notice, which had been given to the respondent, a reasonable period in all the circumstances was three months. This is found at [116]-[121] and [166] of the judgment. In making provision for three months notice, her Honour found that the contract of employment was unfair. This is an orthodox approach within the jurisdiction of this Court.

25 The appellant sought to argue that there was no basis within her Honour’s reasoning for an assessment of three months’ notice. However, matters taken into consideration by her Honour are succinctly referred to in [116], which was as follows:

116 With regard to the Notice provisions the applicant alleged that those provisions in the contract were also unfair or became relevantly unfair at termination because of the applicant's age, his length of service and the loss of non-transferable credits associated with that period of service upon termination, and the post-employment restraints contained in the contract.

26 Further, at [121] her Honour stated:

In addition I also find that the payment in lieu of notice was unfair, given the circumstances of the applicant's termination of employment. At the time of his termination of employment the applicant had served a lengthy period of employment in excess of five years and his work performance had received consistent praise from the respondents. The real reason for the applicant's summary dismissal was his alleged breach of confidentiality. The consequences for an employee of some seniority and experience such as the appellant, and given his age, could have potentially serious consequences. In all of the circumstances, in my view, a payment of four weeks salary was inadequate.

27 At [166] the trial judge determined that the appropriate amount of notice was five months. However, for the reasons given by her Honour, this was reduced to three months:

In the amended summons the applicant claimed $60,000 representing six months gross salary as constituting reasonable notice or payment in lieu of notice to terminate the contract. In my view, given the applicant's length of employment, his age (52 years at the time of termination), his solid work performance demonstrated during the period of his employment, and the circumstances in which his employment was terminated, a payment of five months notice is reasonable. The applicant as part of his termination payment received the equivalent of one months net salary which should be deducted from any compensation ordered by the Court. In addition the applicant, following the termination of his contract, commenced employment with another corporation as a principal consultant on 15 September 2003 on the same level of remuneration he was paid immediately prior to termination of his employment with the first respondent. The fact that the applicant was able to achieve alternative employment two months after termination on a commensurate salary level will be taken into account in mitigation and the compensation payable will be reduced accordingly to three months payment in lieu of notice, after also deducting one month's net salary which was paid to the applicant as part of his termination payment.

28 The appellant’s submissions are founded, in part, upon the reference by Backman J to the fact that the respondent was denied procedural fairness in the circumstances in which his employment was terminated. The appellant misunderstands that this was not a matter that was taken into account in assessing the period of notice but was referred to in passing by Backman J in determining that the contract of employment was relevantly unfair.

29 For our part, we see no substance in the appellant’s arguments concerning the fixing of a notice period of three months.

The unit trust scheme

30 The trial judge dealt with the fairness or otherwise of the unit trust scheme at [122]-[133] of her judgment. Her Honour found at [132] that the scheme was unfair:

In my view, the Scheme in its terms manifested unfairness because it contained no express provisions for the redemption of units in the event of a participant's termination of employment except in the event of retirement. The only option open to a participant whose employment was terminated was to formally apply for a redemption of units to the trustee. In these circumstances, the participant was utterly dependent upon a favourable exercise of discretion by the trustee. In circumstances such as those encountered by the applicant, where his employment was terminated without cause, the Scheme offered inadequate protection to him as a participant relying on a favourable exercise of discretion for the redemption of his units. It cannot be ignored, given the facts, that the same person who engineered the applicant's termination, that is, the second respondent, was also the sole director of both the trustee and manager of the Trust. The second respondent was of the firm belief that the actions of the applicant in copying his email of 29 April 2003 to other Scheme participants constituted a breach of his duty of confidence which warranted summary dismissal. The second respondent's evidence was that upon receipt of the email he telephoned the applicant and informed him, "you are finished with the firm and someone will be in touch to organise the termination arrangements". Allegations of poor work performance advanced by the second respondent as a justification for the applicant's termination were without substance. Nor, as I have found, was the allegation that the applicant breached a duty of confidence, sustainable on the evidence. Given these facts, it may be reasonably inferred that had the applicant formally applied for a redemption of his units, his application would have been rejected in the exercise of discretion. These facts serve to illustrate that the Scheme lacked reasonable and proper, protective provisions to allow unit holders to redeem their units. The absence of such protective provisions, manifested unfairness in the Scheme's operation: see for example GIO Australia Limited and Another v O'Donnell (1996) 70 IR 1 at 24.

31 At [168]-[170] her Honour explained her reasoning in relation to the amount of money to be paid. At [176]-[178] the trial judge discussed the appellant's culpability in relation to the scheme:

[176] In retrospect it may be concluded that the Scheme was an "unfortunate investment", to adopt the second respondent's description. But what is significant is that at the time of the applicant's termination of employment, which I have found was unfair in the circumstances, the Scheme was operational and the applicant's units were worth something. It was at this point in time that if the applicant had applied to redeem his units, and if the second respondent in his capacity as trustee or manager, or both, had exercised his discretion in the applicant's favour, then the units would have been redeemed, and the applicant's loan paid out. In my view the applicant was effectively denied the opportunity to redeem his units. He attempted on several occasions to contact the second respondent, and his letter of 11 September 2003 was not responded to. The second respondent admitted that he was aware of the applicant's attempt to contact him in July 2003 soon before his employment was terminated in order to arrange a meeting, but the second respondent said he had no intention of meeting with the applicant. In his words he was, "not willing to waste any more time on the applicant. I was very busy with work at that time".

[177] It was also the second respondent who directed that the applicant's contract of employment be terminated. He admitted contacting the applicant after receiving the email of 2 July 2003. He telephoned the applicant and accused him of causing serious damage, and breaching his duty of confidence. He told the applicant: "Given the serious nature of the breach, you are finished with the firm and someone will be in touch to organise termination arrangements". It was on the second respondent's instructions that Mr Goldstein telephoned the applicant while he was on leave and informed him that he should not return to work, that effectively, he had been summarily dismissed.

[178] These actions on the part of the second respondent tend to confirm that as director and chief executive officer of the first respondent, and in his role as sole director of both the trustee and manager companies of the Trust, the second respondent had authority over the applicant's terms and conditions of employment, and was, in practical terms, the decision-maker with respect to the terms and operation of the Trust. This state of affairs existed from the beginning of the applicant's employment and from the Scheme's inception. The second respondent also recruited the applicant to work for the first respondent. He actively promoted the Scheme. He attended the meeting with the applicant on 14 December 2001 to clarify the applicant's concerns with regard to some aspects of the Scheme's operations. Given these facts I find that any monetary orders made against the second respondent have the necessary association with or close or real connection to the impugned transactions, being the contract of employment and the Scheme: see Ace Business Brokers at [47] and [48].

32 The appellant, nevertheless, complained that Backman J did not address matters put forward by the appellant as to why there was no unfairness associated with the scheme. In his oral submissions, Mr Austin of counsel for the appellant stated:

Her Honour does not address the fact that in cross-examination the respondent accepts that there were risks that he received the advice. That he understood how the scheme worked: That he understood, that if the employee company, BCI wasn't generating money then dividends couldn't be made to unit trust and therefore the trust couldn't pass on the income. He understood all this. Her Honour hasn't addressed any of these matters.... Nowhere, in those reasons does her Honour consider and evaluate that the respondent Mr De Haas had read and signed the trust deed: That he conceded in cross-examination that he understood the risks associated with the venture: That he had received and obtained legal advice regarding the scheme before entering. Nowhere does her Honour evaluate, the situation that Mr De Haas was an experienced accountant, chartered accountant. He had been the financial controlling officer of a company overseas....

And further:

There is nowhere in her Honour's analysis of the evidence reference to any of the evidence that I have taken Your Honours to. None whatsoever. There is no reference to these very important submissions. This case theory that Mr Qureshi wished to develop: The fact that he couldn't just redeem the units at will. There had to be cash available. There was no cash available. That is another error we say Her Honour made. I will take Your Honours to that. Your Honours say there were sufficient funds. There is with respect no grounds upon which your Honour could come to that determination. All the evidence points to the fact that this company did not have any cash. It is wrong for Her Honour to have come to a finding that there were sufficient funds. It has been proved it was uncontroverted evidence that the money acquired by the senior employees was vested in BCI. The way the trust worked was BCI paid a dividend to the trust. It was only upon the payment of that dividend that the trust would then on an appropriate basis distribute income. The whole case was it was common ground that the BCI couldn't pay the dividend.

33 Backman J was alive to the fact that the respondent was a 'highly qualified accountant with vocational experience in the financial workings of corporations and as a senior and experienced employee' and that he read the relevant trust documents and obtained legal advice before signing them. Indeed, on the basis of this and other evidence her Honour found that the appellant did not, by deception or by misleading conduct, induce the respondent to enter into the Scheme.

34 The trial judge determined that the unit trust scheme was unfair on a relatively narrow ground, namely, that in circumstances such as those encountered by the respondent, where his employment was terminated without cause, the scheme offered inadequate protection to him as a participant relying on a favourable exercise of discretion for the redemption of his units. That discretion was to be exercised by the person who dismissed the respondent without cause. The respondent's case as to compensation did not turn on whether the trust had sufficient liquidity to make a redemption and it does not seem to us that it was relevant whether or not there was sufficient liquidity.

35 The core of the unfairness was that the appellant dismissed the respondent without cause in circumstances where the appellant had the power to allow or not allow the respondent to redeem his units in the scheme. As her Honour observed, having (wrongly) dismissed the respondent for breaching what he regarded as a breach of a duty of confidence it was reasonable to infer that had the respondent formally applied for a redemption of his units, his application would have been rejected in the exercise of discretion. Backman J, in those circumstances, was entitled to arrive at a finding of unfairness and thereby properly discharged her duty to give reasons.

36 There was also complaint made in the appellant’s outline of submissions that the finding of unfairness, and the consequent relief ordered by Backman J, was never part of the respondent’s claim. However, the amended summons specifically makes such a claim confined to the legal liability to repay the Westpac Corporation loan.

37 We note for completeness that even if her Honour had been justified in rejecting the respondent’s claim, the overall amount of the compensation which her Honour determined should be payable by the appellant to the respondent was such that it was within the reasonable limits of any amount that could have been awarded by her Honour consequent upon the findings of unfairness that were made by her. There would, on this basis, be little utility in allowing any appeal on this issue in any event.

The awarding of costs

38 Backman J awarded costs in favour of the respondent on the basis that costs should follow the event. She did not reserve costs.

39 The appellant submitted that he should have been given an opportunity of making submissions concerning the question of costs. However, counsel for the appellant conceded, properly in our opinion, that if leave to appeal was declined or the appeal did not succeed, there would be no utility in contesting the costs order made by her Honour.

40 Furthermore, the respondent’s solicitor wrote to the appellant on 19 June 2009 inviting him to make application to Backman J to reopen the question of costs, citing authority in this Court that would permit such a course of action even after pronouncement of judgment and the finalisation of orders. The appellant declined to accede to this request.

Conclusion

41 Upon the announcement of our intention to refuse leave to appeal, the appellant did not put any submission against the awarding of costs for the appeal. We will, therefore, make the usual order for costs in that respect.

42 The application for leave to appeal raises no substantial issue of principle or law. In essence, it seeks to challenge her Honour’s finding of facts and the exercise of discretion following therefrom. Her Honour's fact findings were reasonably open to her and we can detect no error in the exercise of her Honour's discretion. Accordingly, there is no basis that would attract the grant of leave.

Orders

43 We make the following orders:

1. Leave to appeal is refused.

2. The appellant is to pay the respondent’s costs of the appeal in an amount assessed under the Legal Profession Act 2004, in default of agreement.

3. The stay order of Boland J, President made on 9 April 2009 is dissolved.

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LAST UPDATED:
19 August 2009