[2012] FWA 1251

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The attached document replaces the document previously issued with the above code on 21 February 2012.

The document has been edited to correct a typographical error in paragraph [8] by replacing “2010” with “2012”.

Carolyn Jurott

Associate to Commissioner Asbury

Dated 31 August 2012

[2012] FWA 1251


FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Michelle McKerrow
v
Sarina Leagues Club Incorporated T/A Sarina Leagues Club
(U2010/14622)

COMMISSIONER ASBURY

BRISBANE, 21 FEBRUARY 2012

Application for unfair dismissal remedy - Finding that dismissal was unfair - Reinstatement is inappropriate - compensation appropriate - Insufficient evidence to assess compensation - Parties directed to file further material.

INTRODUCTION

[1] This is an application by Ms Michelle McKerrow under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy in respect of her dismissal by the Sarina Leagues Club Incorporated t/a Sarina Leagues Club (SLC). Ms McKerrow was employed as Functions/Administration Manager from 28 September 2009 until her dismissal on 17 November 2010.

[2] It is not in dispute that Ms McKerrow used funds belonging to the SLC, to pay an invoice on behalf of the Sarina Junior Rugby League Club (SJRLC) for an end of season trip for an Under 16 team. Those funds were repaid by the SJRLC before the transaction was discovered. It is asserted by SLC that Ms McKerrow tried to conceal this transaction, and that it was a gross misuse of SLC funds, constituting misappropriation and fraud. During the hearing of the application, SLC made further allegations to the effect that Ms McKerrow was involved in the disappearance of an amount of $10,000, being money from TAB sweeps. It was contended that this was discovered after Ms McKerrow’s dismissal.

[3] At the conclusion of the hearing the decision was reserved. While the decision was reserved, the representative of the SLC forwarded an email to my Chambers email address, stating that:

[4] The email did not indicate that it had also been forwarded to Ms McKerrow’s representative. My Associate forwarded the email to Ms McKerrow’s representative and a response to both parties, informing the SLC’s representative that it was an inappropriate ex parte communication and that if he wished to make a formal application in relation to this matter he should do so through the normal channels. Ms McKerrow’s representative then sent an email directed to my Chambers email address and to the SLC’s representative, stating that:

[5] The matter was listed for a further hearing on 17 October 2011 for the purposes of ascertaining the course of action proposed by the parties. Mr Porter for the SLC maintained that the Police investigation in relation to Ms McKerrow’s activities in August and September 2010 had no relevance to the FWA application, and that the decision should be released. Mr Porter also said that he had informed FWA of the investigation only as a courtesy.

[6] Mr Smith for Ms McKerrow confirmed that the Police investigation related to the same matters as were subject of the unfair dismissal proceedings, but related only to the disputed transfer of funds to the Junior Leagues Club and not to missing money. Mr Smith submitted that although the standard of proof is different, the Police have greater investigative powers than FWA, and it would be embarrassing if the Police made a finding different to that of FWA.

[7] In the circumstances, I decided to defer the release of this decision pending the Police investigation or advice from Ms McKerrow’s representative to the effect that the decision should be released. I also made it clear that unless there was a formal application for reopening, I would not give consideration to the fact that Ms McKerrow was subject to a Police investigation, or to other matters not in evidence in the hearing.

[8] On 10 February 2012, Ms McKerrow’s representative forwarded an email to my Chambers indicting that Ms McKerrow had instructed that she sought the release of the decision without further delay. That email was copied to the representative of the SLC, and in the absence of communication to the contrary, I can only assume that the SLC position that the decision should be released, remains unchanged. Accordingly, I have decided this application on the evidence that was before me in the hearing, and my decision in relation to Ms McKerrow’s application for an unfair dismissal remedy is set out below.

PRELIMINARY MATTERS

[9] Pursuant to s.396 of the Act there are a number of preliminary matters required to be considered prior to the merits of the application. The application was made within the time required in s.394(2) of the Act. Ms McKerrow is a person protected from unfair dismissal as defined in s.382 of the Act, and has the required minimum period of employment, regardless of whether or not SLC is a small business employer. The dismissal was not a case of redundancy.

JURISDICTIONAL OBJECTION

[10] In the Employer’s Response to the Application for Unfair Dismissal Remedy - Form F3 - SLC asserted that at the time of the dismissal there were four other full time employees. In response to the question: “Do you have any jurisdictional or other objection(s) to the application?” the following appears:

[11] These assertions were dealt with by FWA on the basis that SLC had raised a jurisdictional objection on the basis that the Small Business Fair Dismissal Code was complied with.

[12] Following a Directions Conference, the matter was listed for hearing in relation to both the jurisdictional objection on the ground that the Small Business Fair Dismissal was complied with, and, in the event that SLC did not succeed with that objection, the question of whether the dismissal was unfair. Directions were issued requiring SLC to file submissions and statements of evidence from any witnesses to be called in relation to these issues.

[13] The submissions filed on behalf of SLC in relation to the Small Business Fair Dismissal Code stated that SLC has 17 employees. The matter was listed for further Directions, in order to clarify the basis of the jurisdictional objection. At the commencement of the hearing in Mackay, SLC withdrew the jurisdictional objection relating to the Small Business Fair Dismissal Code, on the basis that it is not a small business employer as defined in s.23 of the Act. The hearing of the unfair dismissal application then proceeded to deal with the issue of whether McKerrow’s dismissal was unfair because it was harsh, unjust or unreasonable.

LEGISLATION

[14] In deciding whether a dismissal is harsh, unjust or unreasonable, FWA must take into account the following matters as set out in s.387 of the Act:

[15] The criteria in s.387 go to both procedural and substantive matters, and FWA is required to weigh the evidence and material before it and to decide on balance whether a dismissal is harsh, unjust or unreasonable. A termination of employment may be:

EVIDENCE AND SUBMISSIONS

Witnesses

[16] Evidence was given in support of the application by Ms McKerrow. Evidence was given for SLC by Mr Garry Peter Hill, Manager and Mr Alfred Abdullah, Secretary of the Board.

Reason given at time of dismissal

[17] Ms McKerrow was dismissed on 17 November 2010, for what was said by Mr Hill, to be gross misuse of Club funds. 2 In the Employer Response to the unfair dismissal application - Form F3, it is asserted that Ms McKerrow was dismissed for misappropriation of funds and fraud. In the written submissions filed on behalf of SLC in accordance with Directions for the conduct of this matter, it was contended that Ms McKerrow engaged in serious misconduct by:

[18] Mr Hill said in his evidence to the Tribunal that to the best of his knowledge, there has never been an approach from the SJRLC for the payment of any account on their behalf, and that each club has debtors and creditors and pays its bills. If there was an approach from any of the other clubs in relation to the payment of an account, the matter would have to be considered by at least four members of the Committee of the SLC either in a special meeting or at least a telephone meeting. An employee of one club would not have authority to pay an account for another club. Ms McKerrow’s conduct in transferring a considerable amount of money out of the funds of the SLC to pay another club’s invoice, was seen as serious misconduct.

[19] In her evidence, Ms McKerrow said that she was employed by the SLC as Functions/Administration Manager and the position was described as being second in charge to the General Manager, Mr Hill. At the time of commencing employment, Ms McKerrow informed Mr Hill that she had been asked to be Treasurer of the SJRLC and was concerned that this could create a conflict of interest. Mr Hill told Ms McKerrow that this would not be a problem as all of the clubs worked together, and that she might like to set aside an afternoon each week to complete her duties for the Junior League. Ms McKerrow subsequently accepted the position as Treasurer of the Junior League.

[20] Ms McKerrow’s role with SLC included the payment of bills and payroll. The weekly payroll run was between $10,000 and $12,000 and accounts payable could be up to $20,000 per week. Ms McKerrow said that these transactions were completed by her without prior authorisation from Mr Hill or the Committee, and Mr Hill would go through the Mind Your Own Business (MYOB) file at the end of each month, and they would discuss any questions or concerns he may have had.

[21] Ms McKerrow said that the SLC was run on a daily basis by Mr Hill, and that the Secretary, Mr Abdullah and a Committee Member, Mr Parfitt would drop in most days and would be available to sign necessary paperwork. When Mr Hill was away, Ms McKerrow was in charge of the SLC. In August 2010, Mr Hill was away on a fishing trip with Mr Parfitt. Mr Abdullah was also away. The SJRLC needed to pay an account to a business called Sportsnet, for the Under 16 end of season trip. SJRLC could not pay the amount on time by internet transfer, because the daily limit was $5,000, and a second cheque signatory was not available. As a result of the absence of Mr Hill, Mr Abdullah and Mr Parfitt, Ms McKerrow could not check whether she should assist the Junior League, but believed that such assistance was part of the purpose of the SLC and that she was duty bound to provide it.

[22] Ms McKerrow authorised a transaction in which $12,000 of SLC’s funds was used by the SJRLC as “a sort of short term bridging loan” to fund the Under 16’s end of season trip. The Junior League repaid the sum of $12,000 on 9 September 2010, some 19 days later. The transaction was recorded in the MYOB accounts, and Mr Hill did not question the transaction when he performed his end of month check of those accounts.

[23] The MYOB accounts indicate that the money was repaid by the SJRLC on 31 August, when it was actually paid on 9 September. Ms McKerrow conceded that there is an error of 9 days in the recording of the money being repaid and said that this could have occurred because the MYOB software reverted to 31 August following an earlier entry.

[24] In support of the proposition that there is a close relationship between the SLC and the Junior League, Ms McKerrow tendered the Constitution for Sarina Leagues Club Inc. and a document entitled “History of Sarina Rugby League” taken from the SLC’s website. The second object stated in the SLC’s Constitution is to promote, foster, support and encourage rugby league within Sarina and the surrounding district. Further, SLC is bound by its constitution to allocate funds to the Sarina Junior Rugby League Football Club providing an annual net profit has been moved and carried at an annual general meeting, and funds so allocated must not be less than $2000. 3 By virtue of clause 25 of its constitution, the Board of SLC consists of 7 Directors, elected from persons including one Director from two nominees of the SJRL.

[25] Under cross-examination, Ms McKerrow agreed that each of the clubs generally dealt with their own invoices and it was not common for an invoice for the Junior League to be dealt with by the SLC, but maintained her belief that she had authority to pay the invoice. Ms McKerrow also maintained that the MYOB entry showing that the amount was repaid on 31 August was a genuine mistake and that it was possible that the journal entry number was out of sequence because dates could default to earlier dates, and journal entry numbers were based on the dates that they were entered rather than on the dates when things occurred. Ms McKerrow agreed that in the month of August 2010, anyone looking at the journal would not see any difference in the balance, because the $12,000 amount was shown as going in and out in the same month. Ms McKerrow also said that if the amount of $12,000 had been entered on 31 August, but had not been banked on that date, it would show in the bank reconciliation as being neither deposited nor reconciled. According to Ms McKerrow, the bank reconciliation is what was shown to the Board of SLC for their meeting in September, and the $12,000 was quite clearly shown, albeit on an incorrect date.

[26] In response to the proposition that she did not have authority from SLC to use its funds to pay an invoice from a totally distinct organisation, Ms McKerrow said that she believed she had authority and the SLC and the SJRLC were linked. Ms McKerrow was asked whether, in the absence of the Manager, she had sought authority to approve the transaction and said that she had not done this. Ms McKerrow also conceded that she was not absolutely certain that Mr Abdullah was away on the day in question, but that this was her belief at that time.

Procedure followed in effecting the dismissal

[27] Ms McKerrow said that on 17 November 2010, about three months after she had authorised the transaction concerning the SJRLC, and more than two months after the money had been repaid by the SJRLC, Mr Hill asked her to accompany him to the outdoor area of the SLC to “talk for a minute”. Ms McKerrow met with Mr Hill, Mr Abdullah and Mr Allan Matson outside in a covered area used as a bar. Ms McKerrow was not informed that she was being asked to attend a disciplinary meeting, or that her employment was in jeopardy, and did not ask for a support person to be present. Ms McKerrow said that had she known what was coming, she would have insisted on a formal meeting behind closed doors, with a support person present.

[28] Ms McKerrow believed that Mr Hill wanted to discuss an amount of money, around $10,000, that had gone missing, as she was aware that there was an investigation being conducted. Ms McKerrow said that she was not concerned about this because she had nothing to do with the missing money. Ms McKerrow was questioned about the $12,000 SJRLC transaction and said that she answered all of the questions truthfully. Ms McKerrow said that the questions she was asked gave her the impression that Mr Hill, Mr Abdullah and Mr Matson believed that she had tried to cover up the transaction by entering the return of the funds at an earlier date than the date upon which it actually occurred. At the conclusion of the meeting, Ms McKerrow was asked to go back to her desk, where she continued to work.

[29] A short time later, Ms McKerrow was called into Mr Hill’s office and told that her employment was to be terminated immediately as the Committee was not happy with her answers. When Ms McKerrow asked for further clarification, Mr Hill told her that he did not agree with the decision but had been told that he should carry it out as it was his job. Mr Hill also recommended that Ms McKerrow seek legal advice regarding unfair dismissal, and asked Ms McKerrow to hand him her keys and mobile telephone and told her to collect her things and leave immediately. Mr Hill told Ms McKerrow that she would be paid full entitlements and provided with a record of the interview. Ms McKerrow said that she offered to collect these documents and when she returned a week later, was provided with the payslip and told that the Committee had instructed Mr Hill not to provide her with the record of interview.

[30] Ms McKerrow disputed that she said in the meeting with Mr Hill and the Committee members, that it was a mistake and that she should have had the transaction authorised, or that it was an error of judgment. Ms McKerrow also denied that she stated in response to a question about why she had not contacted Mr Abdullah that she did not think of it. Further, Ms McKerrow denied that Mr Hill said anything to her about being dismissed for gross misuse of funds and maintained that Mr Hill gave no reason whatsoever.

[31] Ms McKerrow said that she was not notified of the reasons for her dismissal or given an opportunity to respond to the reasons given in the Employer’s Response to the application (Form F3). Ms McKerrow also said that she was completely unaware that she was being accused of misappropriation of funds and fraud, until an FWA Conciliator provided her with a copy of the Employer’s Response by email, during the Conciliation Conference conducted on 17 December 2010. Further, Ms McKerrow said that she was not given any warning about unsatisfactory work performance regarding any aspect of her employment.

[32] Ms McKerrow also said that she was being used as a scapegoat for the $10,000 amount that had gone missing, so that the community would be given the impression that she had been dismissed as the perpetrator of an offence. In the four months since her dismissal, and at the date this matter was heard, Ms McKerrow has had no contact with the Queensland Police Service in relation to any investigation of any matter.

[33] Mr Hill and Abdullah said in their evidence that on 12 November 2010 they were told “certain things” by a member of the SLC Board of Directors. This caused Mr Hill to attend SLC on 15 November 2010 and check the MYOB records and the SLC’s bank statements. After considering those records, Mr Hill and Mr Abdullah decided to meet with Ms McKerrow. During a meeting in relation to the dismissal on 17 November 2010, Mr Hill asked Ms McKerrow about the transaction on behalf of the SJRLC and was told that Ms McKerrow had paid a bill for the SJRLC, which had to be paid by a certain date. When asked about the discrepancy between the bank statement and the MYOB records with respect to when the money was repaid, Ms McKerrow said that the bank statement was correct, that she must have made a mistake, and she was not trying to cover anything up. Mr Hill said that Ms McKerrow conceded that she had made an error of judgment and should have sought authorisation for the transaction. Further, Ms McKerrow said that the Junior League did have sufficient funds to pay for the trip. When asked why she had not contacted Mr Abdullah or Mr Matson to ask about the matter, Ms McKerrow said that she did not think about it.

[34] Mr Hill said that the meeting was to find out why the transfer had taken place, and agreed that there was no intention that it would be a disciplinary meeting. Mr Hill also said that he did not know what the SLC Board was going to do, and that he was later informed that the Board considered that Ms McKerrow’s conduct with respect to the SJRLC transaction was misappropriation and fraud.

[35] Mr Abdullah said that after the discussion with Ms McKerrow, he had a conversation with Mr Hill and Mr Matson, and instructed Mr Hill to dismiss Ms McKerrow immediately. Mr Hill agreed that he told Ms McKerrow that Mr Abdullah and Mr Matson had instructed him to dismiss her immediately, for gross misuse of club funds. Mr Hill said that Ms McKerrow responded by saying: “Are you serious?” to which he responded by saying: “Yes, they have asked me to dismiss you, can you gather up your belongings and give me your keys and phone and please leave the building”.

Matters discovered by SLC subsequent to dismissal

[36] At the commencement of the hearing of this matter, Mr Porter on behalf of the SLC sought to tender a forensic accounting report received by SLC on the previous day. Mr Porter said that this report related to accounting procedures over the past 12 months and was relevant to the principle that where an employer becomes aware of some action of an employee after dismissal, that matter could be relied on to justify the dismissal. The author of the report was not available to give evidence. Mr Porter provided no further information in relation to exactly what the conduct said to be established by the report was.

[37] It was also indicated that SLC had provided the report to the Queensland Police Service and that an investigation was being undertaken. Ms McKerrow, through her legal representative, indicated that she wished to proceed to have her unfair dismissal application heard and determined, and did not wish to have the matter adjourned to await the outcome of the Police investigation. Ms McKerrow gave her evidence, was cross-examined and excused. The cross-examination of Ms McKerrow was limited to the disputed transaction involving the SJRLC. Neither the report, nor what it was said to establish in relation to Ms McKerrow being responsible for the disappearance of other sums of money, was put to Ms McKerrow in cross-examination.

[38] When Mr Porter opened the case for the SLC, he stated that it was his intention to rely on the forensic report to establish that SLC had reasonable grounds to conclude that in addition to the disputed transaction involving the SJRLC, Ms McKerrow was responsible for two missing amounts of money totalling $10,000. When it was pointed out to Mr Porter that he had not put this allegation to Ms McKerrow and that she had given her evidence and been excused, and her representative had closed her evidentiary case, Mr Porter contended that there was no requirement for him to have cross-examined Ms McKerrow in relation to two missing money. It was submitted that the evidence of Mr Hill and Mr Abdullah would establish that they had come to a reasonable conclusion that Ms McKerrow had engaged in serious misconduct.

[39] Reference was made to a High Court decision in “Shepherd” in support of the proposition that if the employer discovers something after an employee is dismissed, and comes to a reasonable conclusion that the employee was responsible, the employer can rely on that matter as providing a valid reason for dismissal. No further details of the High Court decision were provided and I assume that the reference is to the decision in Shepherd v Felt & Textiles of Australia Ltd 4, a case dealing with an action in damages for wrongful termination of a contract under which a sales representative agreed to act as an agent for the sale of certain products. In that case, Rich J said that the plaintiff’s misdeeds provided a defence to the action for damages, even though the defendant was not aware of those misdeeds until after the termination of the contractual relationship.

[40] In the circumstances, and at the insistence of her representative, leave was given for Ms McKerrow to be recalled and for her to give further evidence and be cross-examined. Ms McKerrow agreed that part of her duties at SLC involved collating banking of funds in several accounts and placing money in sealed bags with a deposit slip. Those bags were then placed into a briefcase, which was put into a safe, before being taken to the bank. Ms McKerrow agreed that there were two amounts of money which did not make their way to the bank and said that she became aware of this in October when Auditors became involved. Ms McKerrow said that she would be aware that money had not been credited to bank accounts when they were reconciled, if they had been entered correctly, or if someone had not falsified the records. Ms McKerrow rejected the proposition that she was the only person who prepared banking and entered information into MYOB, and said that Mr Hill and “another lady” were also responsible for these tasks.

[41] A discrepancy would not be picked up if someone had taken an amount of money out of the bank account in MYOB and put it somewhere else. An amount would only show up as a discrepancy if it was entered correctly as being deposited to the bank. Ms McKerrow said that she did not pick up the two missing amounts of money when reconciling accounts at the end of the month, because they were not there and had not been allocated to a bank account.

[42] Ms McKerrow was shown the Forensic Accounting Report and agreed that it showed two amounts of money which had not been banked as follows:

[43] Ms McKerrow agreed that those amounts were not banked and said this was established by SLC’s auditors. Ms McKerrow also agreed that she wrote deposit slips out for both amounts and maintained that she placed both amounts, with those deposit slips in one of the satchels to be banked. Ms McKerrow said that she was not responsible for taking money to the bank, and this task was undertaken by Mr Hill or SLC’s Handyman, Mr Black, on the basis that it was thought to be unsafe for a woman to carry what could be fairly large sums of money.

[44] Mr Porter, on behalf of the SLC, did not cross-examine Ms McKerrow about the forensic report or the missing amounts of money. Further, the proposition that Ms McKerrow had anything to do with those missing amounts of money was not put to her in cross-examination.

[45] Mr Hill said in his evidence that Ms McKerrow had the responsibility of entering all payments and receipts in the MYOB system for creditors and he took care of some of the banking in relation to poker machines. During the week, Ms McKerrow had responsibility for preparing money for banking and on the weekends this was done by Mr Hill, other than one weekend per month when Ms McKerrow usually relieved him. Deposit slips would be completed for banking and cheques and deposits would be placed in an EBD bag. A receipts slip would be filled in, including the date and the amount of cheques and cash, and stapled to the deposit book. Everything would be put into a briefcase which in turn was placed in the safe room. The same process would be followed for poker machines and TAB sweeps. The amounts would be banked into a general account carrying daily trading monies or a poker machine account into which TAB sweep monies were also banked.

[46] The safe room is a solid brick room with a solid core door encased in stainless steel sheeting, and has two locks. During the day only one of the locks is locked and although two are supposed to be locked at night time, this did not always occur. According to Mr Hill, there had been many attempts to jemmy open the safe room door during a break-in but no one had ever succeeded. Ms McKerrow had a key to the safe room. Keys were also held by Mr Warren Black and Mr Hill. There was a master key held by bar staff which opened that area and cleaners also had a key. Anyone seeking to access the room, would be seen by either Mr Hill or Ms McKerrow if they were in their respective offices.

[47] The missing money was identified on 14 or 15 October 2010, when SLC had an annual audit following the end of its financial year on 30 September 2010. Mr Hill was informed that there were two amounts of money in relation to TAB sweeps that were missing and had not been deposited into the bank. The TAB had “swept out” the two amounts but there was no actual deposit of money into the poker machine account where it was always put. When advice was received from the auditor that the money had not been banked, Mr Hill informed the Treasurer and the Chairman of SLC and an emergency Board meeting was convened. It was then suggested that a forensic audit be conducted and BDO was engaged at the suggestion of Clubs Queensland. BDO was engaged just before Mr Hill dismissed Ms McKerrow. The Forensic Audit Report was received on 30 March 2011, the day before this matter was heard. SLC referred the Report to the Queensland Police Service on the day it was received.

[48] Mr Hill was asked whether SLC had come to any conclusions about who may have been responsible for the missing money and said:

“We didn’t come to conclusions. We came to thoughts - thoughts about it. We had our suspicion but as far as a conclusion, it’s a bit hard to say conclusively”. 5

[49] Mr Hill also said that based on reasonable grounds, SLC believed that either Ms McKerrow or the person who took money to the bank, was responsible for the missing money. Under cross-examination, Mr Hill agreed that Ms McKerrow is not named in the Forensic Accounting Report. Mr Hill also agreed that the Report had been prepared for the Queensland Police Service and that Ms McKerrow may be a suspect in the view of the Police. Mr Hill further agreed that he may be a suspect. Mr Hill said that Ms McKerrow had taken money to the bank but it was the usual practice that either he or the Groundsman would take money to the bank.

[50] Mr Hill said that he completed the Employer Response to the unfair dismissal application with the assistance of Clubs Queensland. In response to the proposition that as a former Police officer he would know that allegations of misappropriation of funds and fraud was a serious matter, Mr Hill agreed that certain proof of such an allegation would be required. Mr Hill also agreed that he told the applicant that she was dismissed for gross misuse of Club Funds, rather than misappropriation and fraud. Mr Hill maintained that gross misuse of funds and misappropriation and fraud were “one and the same”.

[51] The Forensic Accounting Report tendered through Mr Hill identifies two “shortfalls in banking” and an “unauthorised transaction”. In relation to the shortfalls, the report concludes that because the deposits have not been recorded as either having cleared and do not remain as outstanding deposits, a MYOB transaction has been either deleted or reversed. It is also concluded that both amounts have reappeared on the year end bank reconciliation indicating that either a MYOB transaction has been added, or a MYOB adjusting journal has been posted. The Forensic Accounting Report simply confirms with respect to the $12,000 transaction that the money was repaid on 9 September 2010.

CONSIDERATION

Was there a valid reason for the dismissal?

[52] SLC initially relied on the Small Business Fair Dismissal Code, as the basis for asserting that FWA was required to simply determine whether SLC had reasonable grounds upon which to reach the view that Ms McKerrow’s conduct was sufficient to justify immediate dismissal. After withdrawing the jurisdictional objection on the basis of the Small Business Fair Dismissal Code, it was then contended that SLC could establish that it had a valid reason for the dismissal on the basis of demonstrating that it had reasonable grounds for believing that Ms McKerrow had engaged in serious misconduct as defined in s.12 of the Act and Regulation 1.07 of the Fair Work Regulations 2009, which are in the following terms:

[53] It was further contended that the High Court decision in Shepherd v Felt & Textiles of Australia Ltd lent support to this submission on the basis of the reference to the reasonable belief of the employer in that case.

[54] The present case is not one involving a small business employer, and the function of FWA is to determine on the evidence whether there was a valid reason for the dismissal, rather than whether the employer had reasonable grounds upon which to justify summary dismissal. The reasonableness of the belief of an employer about whether an employee engaged in serious misconduct is relevant to the overall consideration of whether a dismissal was unfair, but it is not determinative of whether there was a valid reason for the dismissal. The decision of the High Court in Shepherd v Felt & Textiles of Australia Ltd is not authority for such a proposition. While a valid reason for dismissal is “sound, defensible or well founded” 6, the dismissal must also be justifiable on an objective analysis of the relevant facts7.

[55] The reason for Ms McKerrow’s dismissal is variously said to be serious misconduct amounting to misappropriation of money and fraud or gross misuse of SLC’s funds. The evidence of Mr Hill is that gross misuse of funds was considered by SLC to be the same as misappropriation and fraud. As previously stated, the central question is not whether members of the Board of the SLC had a reasonable belief that Ms McKerrow engaged in the conduct alleged. Rather, the central question is whether the evidence establishes that Ms McKerrow did engage in such conduct. The allegations are extremely serious. The seriousness of the allegations is heightened by the fact that other money amounting to almost $10,000 was missing at the time Ms McKerrow was dismissed, and the implication flowing from the dismissal was that she was responsible for this. That implication morphed into an actual allegation in these proceedings.

[56] The standard of proof to be applied in deciding whether Ms McKerrow engaged in misappropriation and fraud as alleged, is proof on the balance of probabilities. That is the case notwithstanding that the strength of the evidence necessary to establish this to the required standard may vary, because of the seriousness of the allegations 8. It is also the case that a finding that Ms McKerrow has engaged in conduct amounting to fraud or misappropriation, should not be lightly made, and must be based on clear and cogent proof.9

[57] In relation to the $12,000 transfer of funds, I am unable to be satisfied, on the balance of probabilities, that the conduct of Ms McKerrow in paying an account on behalf of the SJRLC, in all of the circumstances of this case, was serious misconduct, whether it is described as misappropriation and fraud, or gross misuse of the funds of SLC. It was not established that Ms McKerrow’s conduct was dishonest. In my view this is an essential element of fraud or misappropriation.

[58] There is no evidence that the $12,000 transferred to the SJRLC was applied for the benefit of Ms McKerrow, or that Ms McKerrow gained any benefit at all from the transaction. The funds were applied as a short term loan, to assist the SJRLC to pay an account so that the Under 16 team could go on an end of season trip. There is a relationship between the SJRLC and the SLC and the payment of the account is not inconsistent with the Objects of the SLC with respect to promoting rugby league and allocating funds to the SJRLC. There is nothing to indicate anything other than an honest belief on the part of Ms McKerrow that she had the authority to undertake the transaction. There was also no evidence to contradict Ms McKerrow’s assertions that Mr Hill was away on a fishing trip and that she believed that Mr Abdullah was also away. In the circumstances where Ms McKerrow was in charge of the operations of the SLC while Mr Hill was absent, the belief that Ms McKerrow had authority to undertake the transaction was not unreasonable.

[59] The amount was repaid by the SJRLC. The date of the repayment was incorrectly recorded. Ms McKerrow provided an explanation for the incorrect recording of the date of the repayment. That explanation was not challenged in cross-examination, and there was no evidence to the contrary. There was no evidence of any benefit to Ms McKerrow from the incorrect recording of the repayment date. Ms McKerrow was not prompted to record any particular date by the discovery of the transaction. The evidence establishes that the transaction was not discovered by Mr Hill until after both the date of the repayment and the date incorrectly recorded as the repayment date. Further, it was not contended by any witness for SLC that the transaction would not have been approved had Ms McKerrow sought approval. Notwithstanding the complaint that the money was paid to a third party on behalf of SJRLC, it appears that the significant issue of concern was with the manner in which the transaction was carried out rather than its substance.

[60] I accept that fraud and misappropriation with respect to funds belonging to an employer, or gross misuse of such funds, would, if established, constitute a valid reason for dismissal. I also accept that the same can be said of falsification of financial records. However, in the present case, SLC has not established that Ms McKerrow engaged in such conduct, or that there was a reasonable basis for concluding that she had done so. The case law referred to in the submissions advanced by SLC is not on point. The decision of Commissioner Rafaelli in T Cofrancesco v Parramatta Leagues Club Ltd T/A Parramatta Leagues Club Limited 10 dealt with a case where the dismissed employee paid the personal legal bill of the CEO of a football club, in circumstances where the dismissed employee knew that a new Board had been elected and would probably not have approved the payment. The decision of Commissioner Cambridge in T Noanoa v Linfox Pty Ltd11 dealt with a deliberate falsification of records by a dismissed employee.

[61] The payment made by Ms McKerrow did not benefit a particular person, but rather was for the benefit of the SJRLC. Further, SLC has not established that Ms McKerrow falsified records, much less that she admitted to doing so. Even if the evidence of Mr Hill and Mr Abdullah about what Ms McKerrow said at the meeting of 17 November is accepted, and Ms McKerrow did make the statements attributed to her, it is quite clear that those statements do not amount to an admission of falsifying MYOB records. On the evidence advanced by the SLC there was no such admission.

[62] This case also raises an issue as to whether information discovered by the employer subsequent to the dismissal of an employee - after acquired knowledge - can be relied upon to establish that there was a valid reason for the dismissal. It has been established that in considering whether a dismissal was unfair, on the grounds that it was harsh, unjust or unreasonable, under s.643(1)(a) of the Workplace Relations Act 1996, evidence of relevant facts in existence at the time of the dismissal is to be taken into account, even if the employer was unaware of those facts at the time. In this regard, a Full Bench of the Australian Industrial Relations Commission in Metricon Homes Pty Ltd v Bradley 12 cited the following passage from the judgement of Von Doussa J in Lane and Others v Arrowcrest Group Pty Ltd (t/as ROH Alloy Wheels:

[63] It was also noted by the Full Bench in Metricon that the statement of principle articulated by Von Doussa J was adopted by the High Court in Byrne v Australian Airlines Limited. 14 The legislation governing unfair dismissal applications when Metricon was decided - the Workplace Relations Act 1996 - required that in determining whether a termination was harsh, unjust or unreasonable, the Commission was required to have regard to whether there was a valid reason for the termination related to the employee’s capacity or conduct (including its effect on the safety and welfare of other employees). The legislative provisions applicable when Metricon was decided, are not materially different from those in s.387 of the Act, and I accept that SLC would be entitled to rely on matters discovered subsequent to the dismissal of Ms McKerrow to establish that it had a valid reason for the dismissal.

[64] The difficulty in this case, is that the additional matters relied on by SLC to establish that it had a valid reason for the dismissal - the disappearance of two amounts of money totalling almost $10,000 - were known to Mr Hill, Mr Abdullah and presumably other members of the Board, before Ms McKerrow’s dismissal. Ms McKerrow was dismissed on 17 November 2010. The shortfall in banking of $3,351.65 occurred on 22 January 2010 and the shortfall of $5,732.20 occurred on 22 February 2010. The evidence establishes that these shortfalls were identified by SLC’s auditors on or around 14 October 2010, over one month before Ms McKerrow’s dismissal. Ms McKerrow was interviewed by SLC’s Auditors and said that she co-operated and answered all of their questions. There was no evidence to the contrary.

[65] If the Forensic Audit Report delivered to SLC on 25 March 2011 contained some new information, or established Ms McKerrow’s responsibility for the missing money, it was not apparent in these proceedings. The author of the Report did not give evidence. The Tribunal was not taken to any particular aspects of the Report to support these contentions. Ms McKerrow was not cross-examined about her involvement in the missing money, nor was she shown anything in the Report that demonstrated her involvement. It was contended for SLC that there was no need to cross-examine Ms McKerrow in relation to these allegations, because the evidence established that the decision to dismiss Ms McKerrow was based on a reasonable belief that she had stolen the amounts of $3,351.65 and $5,732.20 and this was sufficient to establish that there was a valid reason for the dismissal. For the reasons set out above, this contention is erroneous. My view in relation to this submission was expressed to the SLC’s representative on several occasions during the proceedings, and Ms McKerrow was recalled specifically to give evidence and be cross-examined in relation to these matters.

[66] Further, the documents referred to in the Report such as bank statements and deposit slips appear to be documents that were available to SLC prior to the Report being prepared, and prior to the dismissal of Ms McKerrow. The transactions identified in the Report were recorded in the MYOB system operated by SLC and accessible at all relevant times by Mr Hill or other authorised persons. It is arguable that the Report is not evidence of facts which existed at the time of the dismissal, and were not known to SLC at that time.

[67] Even if the assumption is made that the Forensic Accounting Report establishes facts that were in existence at the time of Ms McKerrow’s dismissal, and that SLC did not become aware of those facts until after the dismissal, I am of the view that it has not been established on the balance of probabilities, that Ms McKerrow was responsible for the missing money.

[68] Ms McKerrow’s evidence was that she did not take money to the bank and that this task was undertaken by Mr Hill or another male employee. Ms McKerrow also stated that she was not the only person responsible for entering transactions into the MYOB system, and that this was undertaken by two other persons, including Mr Hill. Mr Hill said that a conclusion had been drawn by SLC that either Ms McKerrow or the employee who at times assisted Mr Hill to take money to the bank, was responsible for the missing amounts. Mr Hill also acknowledged that the Queensland Police Service could view him as a suspect.

[69] The evidence also establishes that the safe room where money was kept prior to being deposited at the bank was far from safe. Several persons, including cleaning staff, had keys to that room. The two locks on the door were sometimes not locked. When all of the evidence is considered, it is insufficient to support a finding that on the balance of probabilities, Ms McKerrow stole the two amounts from SLC or was in any way responsible for their disappearance. Accordingly, I am unable to accept that these matters constitute a valid reason for the dismissal of Ms McKerrow.

[70] For the reasons set out above, none of the matters considered individually, constitute a valid reason for the dismissal. I am also of the view that they do not cumulatively constitute a valid reason. The $12,000 transaction was not serious misconduct justifying summary dismissal. At worst, Ms McKerrow was guilty of an error of judgment with respect to the $12,000 payment on behalf of SJRLC, in that she failed to obtain approval for a transaction that involved advancing funds to a related organisation which were repaid (and which Ms McKerrow reasonably believed would be repaid) for a purpose consistent with the objects of SLC. Further, Ms McKerrow undertook the transaction on the basis of an honest and reasonable belief that she had the authority to do so, and that Mr Hill and Mr Abdullah were not available to discuss the matter. This conduct did not provide a reasonable basis for SLC to conclude that Ms McKerrow was also guilty of stealing the two missing amounts of money, particularly in circumstances where there was no other reasonable basis for reaching the conclusion that she was guilty of theft.

Was Ms McKerrow notified of the reason for her dismissal?

[71] There were conflicts in the evidence of Mr Hill about the reasons for the dismissal given to Ms McKerrow. According to Mr Hill, Ms McKerrow was told at the meeting on 17 November 2010, that the reason for her dismissal was “gross misuse of club funds”. The Employer Response to the unfair dismissal application signed by Mr Hill asserted that Ms McKerrow was dismissed for “misappropriation and fraud”.

[72] Ms McKerrow said that at the meeting on 17 November 2010, she was asked a number of questions about the $12,000 transaction and was simply told later by Mr Hill that members of the Committee did not like her answers to questions. Ms McKerrow also said that the first she heard of an allegation of misappropriation and fraud was when the Employer Response Form F3 was sent to her by facsimile during the conciliation conference on 17 December 2010. In the absence of a written notification setting out the reasons for the dismissal, and the inconsistencies in the reasons given to Ms McKerrow in the meeting on 17 November and in the Employer Response to the application for an unfair dismissal remedy, I am unable to accept that Ms McKerrow was notified of the reason for her dismissal.

Was Ms McKerrow given the opportunity to respond to the reasons for her dismissal related to her conduct?

[73] The evidence of Mr Hill and Mr Abdullah about what caused them to raise the issue of the $12,000 transaction on 17 November 2010, and who told them about the matter, was not disclosed in their evidence. I do not accept Mr Hill’s evidence that the meeting on 17 November was not intended to be a disciplinary meeting. It is clear that Ms McKerrow was called to a meeting with very little notice, to discuss serious allegations of a criminal nature. Quite simply, the meeting was a disciplinary meeting and the matters discussed at that meeting resulted in Ms McKerrow being dismissed without notice, shortly after the meeting.

[74] According to Mr Hill, the reason for the dismissal given to Ms McKerrow following the meeting on 17 November 2010, was gross misuse of club funds. Mr Hill also said that in his view, this was the same as misappropriation and fraud, which was later said to be the reason for the dismissal. The assertion of Mr Hill that misappropriation and fraud is the same as gross misuse of funds, was entirely unconvincing, in light of Mr Hill’s evidence that he is a former Police Officer.

[75] I am also of the view that the issue of the two missing amounts of money was the “elephant in the room”, during the discussion with Ms McKerrow on 17 November 2010, about the $12,000 SJRLC transaction. All the parties involved in that discussion knew of the missing amounts of money, and had this knowledge since on or about 14 October 2010. All of the documentation associated with the question of the missing money was in the possession of SLC and would have been examined by its auditors in identifying the amounts involved. There is no evidence that the Forensic Accounting Report contained new information or did anything more than confirm what was already known.

[76] Ms McKerrow suspected that the missing money was to be the subject of the meeting on 17 November 2010. Mr Hill said in his evidence that he thought that either Ms McKerrow or the employee who took the money to the bank was responsible for the money going missing. Mr Hill did not say when he reached that conclusion.

[77] When all of the evidence is considered, it is probable that the missing money was a factor that was weighed in the decision to dismiss Ms McKerrow. This was not a matter that was raised with Ms McKerrow and she was not given an opportunity to respond to allegations that she was responsible for the missing money.

[78] Even if the missing money did not play a part in the decision to dismiss Ms McKerrow, it is the case that she was given no information about what was to be discussed at the meeting, and was expected to respond on the spot to serious allegations of a criminal nature, with no time to consider her position or her responses or to seek advice about these matters. Ms McKerrow held a position of responsibility with respect to handling money with both SLC and the SJRLC. Such allegations had significant implications for Ms McKerrow and the potential to impact adversely on her future career. That SLC did not maintain consistency between the reasons advanced to Ms McKerrow at the point she was dismissed, and those advanced to FWA in these proceedings, is indicative that Ms McKerrow was not given an opportunity to respond to those reasons.

[79] In all of the circumstances, I am unable to be reasonably satisfied that Ms McKerrow was given the opportunity to respond to the reasons for her dismissal.

Was there an unreasonable refusal by SLC to allow Ms McKerrow to have a support person present?

[80] Ms McKerrow did not request that she be allowed to have a support person present at the meeting which led to her dismissal. SLC did not refuse to allow Ms McKerrow to have a support person present. However, the conduct of Mr Hill, Mr Abdullah and Mr Matson in calling Ms McKerrow to a meeting with no notice, to discuss allegations about conduct which they believed to constitute misappropriation of SLC funds and fraud, meant that Ms McKerrow did not have a reasonable opportunity to have a support person present.

Unsatisfactory performance

[81] Given that Ms McKerrow’s dismissal related to alleged serious misconduct, and not to unsatisfactory performance, it is not relevant whether Ms McKerrow was warned.

The size of the enterprise and absence of dedicated human resource management specialists and the impact on procedures followed to effect the dismissal

[82] Although SLC is not a small business as defined in s.23 of the Act, it has only 17 employees. It is also the case that SLC does not employ a dedicated human resource management specialist. However, SLC had access to specialist advice through Clubs Queensland and utilised the services of that organisation to obtain the Forensic Accounting Report. Clubs Queensland also provides specialist advice about industrial relations and human resource management matters. This is not a case of a small business with no access to human resource management advice. It is also the case that Mr Hill is a former Police Officer, and gave evidence of understanding that allegations such as misappropriation and fraud are criminal in nature and require certain elements to be proved.

[83] In my view, these factors should have impacted on the procedure followed in effecting the dismissal so that appropriate consideration was given to the serious nature of the allegations against Ms McKerrow and she was afforded a reasonable opportunity to defend herself, before the decision to dismiss her was taken. This did not occur.

Other relevant matters

[84] As previously stated, the allegations against Ms McKerrow were extremely serious and of a criminal nature. Ms McKerrow held a position where she was required to handle money, and allegations such as fraud, misappropriation and gross misuse of SLC funds, would be likely to have a significant impact on her ability to continue to work in such an area. On the evidence advanced on behalf of SLC, Ms McKerrow’s conduct in relation to the $12,000 transaction did not involve fraud or misappropriation. Notwithstanding this, SLC continued to make assertions that could not be sustained on the evidence before FWA. An example of this is the submission filed on behalf of SLC in FWA after the hearing of the application, wherein it was asserted that Ms McKerrow admitted to falsifying MYOB records. That assertion was at odds with the evidence of SLC’s own witnesses in the hearing, and for reasons set out above, was wrong.

[85] SLC is a club with a Board made up of members of the local community. Representatives of other clubs including the SJRLC with which Ms McKerrow also had involvement, are members of the SLC Board. Ms McKerrow’s dismissal was effected at a time when amounts of money had gone missing from SLC. Ms McKerrow asserts that she was a scapegoat in relation to the missing money and that members of the community would believe that she had some involvement. In my view, that assertion is reasonable and probably correct.

[86] Further, but for the matters which led to Ms McKerrow’s dismissal, there is no evidence of any issue being raised with her in relation to her conduct or work performance, in the course of her employment with SLC.

CONCLUSIONS

[87] For all of these reasons, I have concluded that the dismissal of Ms McKerrow was unfair because it was harsh, unjust and unreasonable. The dismissal was harsh because of its consequences for Ms McKerrow as an employee responsible for the handling of large sums of money. The dismissal was also harsh because it was effected in a summary way. The dismissal was unjust, because on the evidence advanced on behalf of SLC, Ms McKerrow was not guilty of misappropriation of funds or fraud.

[88] The dismissal was also unreasonable because it was decided on inferences that could not reasonably have been drawn from material before the employer. At best, the transaction was unauthorised and Ms McKerrow failed to take reasonable steps to seek authorisation to undertake it. The transaction did not involve misappropriation or fraud. On the evidence of witnesses for SLC, there was no basis upon which it could have been inferred that Ms McKerrow admitted to falsifying MYOB records. If the facts surrounding the missing money can properly be described as after acquired knowledge, they are not sufficient to establish that Ms McKerrow was responsible.

REMEDY

[89] FWA may order a remedy for unfair dismissal as provided in s.390 of the Act. As required by s.390(1)(a), I am satisfied that Ms McKerrow was a person protected from unfair dismissal at the time she was dismissed. I am also satisfied that Ms McKerrow was unfairly dismissed. As required by s.390(2) Ms McKerrow has made an application under s.394 of the Act.

[90] I am satisfied that reinstatement of Ms McKerrow is inappropriate. Ms McKerrow was dismissed in circumstances where members of the Board of SLC believed that she was guilty of misappropriation and fraud. Ms McKerrow does not seek reinstatement, and according to submissions filed on her behalf, has obtained other employment. I consider that in all of the circumstances of this case, an order for payment of compensation is appropriate.

[91] There are difficulties in determining compensation given that both parties failed to call evidence about relevant criteria, and information required to make the assessment is found only in submissions. In the absence of evidence in relation to the criteria in s.392(2)(a) of the Act, Ms McKerrow is directed within 7 days of the date of release of this decision to file in FWA and serve on SLC, an affidavit setting out evidence in relation to the relevant matters FWA is required to consider in deciding compensation pursuant to s.392 of the Act. SLC is directed within 14 days of the date of this decision to file in FWA and serve on Ms McKerrow, an affidavit setting out any evidence it wishes to call in relation to relevant matters in s.392 of the Act.

[92] Within 21 days of the date of release of this decision each of the parties are directed to advise FWA whether they seek to cross-examine a witness for the other party. If no cross-examination is required, the matter will be determined on the basis of material on the file. If cross-examination is required, the matter will be listed for further hearing.

COMMISSIONER

Appearances:

Mr J. Smith on behalf of Applicant.

Mr E. Porter on behalf of the Respondent.

Hearing details:

2011.
Mackay:
March 31.
Brisbane:
October 17.

 1   Stewart v University of Melbourne (U No 30073 of 1999 Print S2535) per Ross VP citing Byrne v Australian Airlines (1995) 185 CLR 410 at 465-468 per McHugh and Gummow JJ.

 2   Statement of Garry Peter Hill Exhibit 7 paragraph 7.

 3   Exhibit 2 Constitution of Sarina Leagues Club Inc. paragraph 31(2) and 36.5(2)

 4   (1931) 454 CLR 359.

 5   Transcript dated 31 March 2011 at PN308.

 6   Selverchandron v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373.

 7   Rode v Burwood Mitsubishi Print R4471 at [90] per Ross VP, Polites SDP, Foggo C.

 8   Brinks Australia Pty Ltd v Transport Workers’ Union of Australia PR922612 per Giudice J, Acton SDP and Hingley C at [7].

 9   Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd and Others (1992) 110 ALR 449 at 449-450.

 10   T Cofrancesco v Parramatta Leagues Club Ltd T/A Parramatta Leagues Club Limited (U2010/8074) [2010] FWA 8954 per Rafaelli C

 11   T Noanoa v Linfox Pty Ltd (U2010/10878) [2011] FWA 306 per Cambridge C

 12   Metricon Homes Pty Ltd v S Bradley (C2008/3385) [2009] AIRCFB 374 per Giudice J, McCarthy DP and Blair C

 13   (1990) 27 FCR 427 at 456

 14   Byrne v Australian Airlines Limited (1995) CLR 410 per Brennan CJ, Dawson and Toohey JJ at 430 and McHugh and Gummow JJ at 468.

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