Supreme Court New South Wales

• Medium Neutral Citation: Susanna Ma v Expeditors International Pty Ltd; Susanna Ma v Expeditors Pty Limited [2014] NSWSC 859
• Hearing dates: 2, 3, 4, 5 & 6 June 2014
• Decision date: 30 June 2014
• Jurisdiction: Common Law
• Before: Nicholas AJ

Decision

See paragraphs 151, 152, and 153.

• Catchwords: EMPLOYMENT - contract of employment - termination by employer on payment of five weeks salary in lieu of notice - inadequate notice - period of reasonable notice - whether employees conduct involved actual or potential conflict of interest - whether employees conduct amounted to breach of contractual, fiduciary, and statutory duties - whether employer entitled to resist claim for damages for unfair dismissal.; DAMAGES - whether employee entitled to pro rata bonus - long service leave - calculation of "ordinary pay" under s 3(1) Long Service Leave Act 1955 - whether the amount of the worker's average weekly wage under s 3(1)(b) includes superannuation contributions.
• Legislation Cited: Corporations Act 2001 (Cth); Long Service Leave Act 1955 (NSW); Long Service Leave Regulation 2011 (NSW)
• Cases Cited: Bell Group Limited & Ors v Westpac Banking Corporation & Ors [2008] WASC 239; Franklins Pty Ltd v Metcash Trading Limited [2009] NSWCA 407; Hastings Deering (Australia) Ltd v Smith (2004) NTCA 13; Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41; Jongwaard v Dall (1992) SAIRC 11; Karacominakis v Big Country Developments Pty Ltd; [2000] NSWCA 313; Lyon v IOOF Victorian Friendly Society (1996) 230 IRC 27; May v Lilyvale Hotel Pty Ltd (1995) 68 IR 112; Quinn v Jack Chia (Australia) Limited (1992) 1 VR 567; Rankin v Marine Power International Pty Ltd (2001) 107 IR 117; Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301; Rogan-Gardiner v Woolworths Limited (No. 2) [2010] WASC 290; Secretary of the Treasury v Public Service Association & Professional Officers' Association Amalgamated Union of NSW [2014] NSWCA 138; Settlement Agents Supervisory Board v Property Settlement Services Pty Ltd [2009] WASCA 143; Scott v Sun Alliance Australia Limited (1993) 178 CLR 1
• Category: Principal judgment
• Parties: Plaintiff: Susanna Ma; Defendant/Cross-Claimant: Expeditors International Pty Ltd
• Representation: Counsel: Plaintiff: K. Nomchong SC; Defendant/Cross-Claimant: A.R. Moses SC; Y.Shariff; Solicitors: Plaintiff: Robert Patrick Higgins, Carroll & O'Dea; Defendant: Andrew Ball, DLA Piper Australia
• File Number(s): 2012/277366; 2012/71891
• Publication restriction: No

Judgment

1 The plaintiff is a former employee of the defendant. Her employment was terminated on 6 June 2011. In these proceedings, the plaintiff claims damages consequential upon her dismissal, including compensation in lieu of reasonable notice of termination of her contract of employment including a pro rata bonus, and accrued long service leave entitlements.

2 The defendant denies the claims. In its cross claim it claims the plaintiff engaged in misconduct prior to the termination of her employment which would have justified summary termination. It claims that in breach of her contractual, fiduciary, and statutory obligations, the plaintiff failed to disclose a conflict of interest and related party transactions as required under the defendant's policies and financial/corporate certification processes. As cross-claimant, the defendant seeks an order for the repayment of the termination payments made to the plaintiff, and damages. The conduct complained of was the alleged failure to disclose an actual or potential conflict of interest when the plaintiff authorised the payment of invoices for cleaning services provided by businesses in which her brother, Mr Wilson Ma was involved.

3 The case proceeded on the basis that if it was found that under the cross-claim the defendant had established that the plaintiff's alleged misconduct justified summary termination of her employment the plaintiff's claim would be dismissed. It was also agreed that if the plaintiff succeeded on her claim the amounts of the components of any damages award should be left to the parties' legal representatives for finalisation with regard to the length of the period of notice found to be reasonable.

4 The plaintiff was born on 20 October 1962, and is currently 51 years of age. She holds a degree of Bachelor of Commerce.

5 The defendant is an Australian subsidiary of an USA-based corporation, Expeditors International of Washington Inc ("Expeditors Inc"). It operates a logistics and shipping business in the South Pacific region as part of the parent company's worldwide operations. The defendant acquired the business of Samev Pty Ltd on 1 August 1988, which operated an Australian-based logistics and shipping business.

Background

6 The following narrative is taken from the Schedule of Agreed Facts provided to the Court, and otherwise is supported by the evidence.

7 The plaintiff commenced employment with Samev Pty Limited on 5 January 1987, in the position of Accounts Supervisor. She was provided with a letter of appointment dated 5 January 1987. There was no other written agreement.

8 Mr Jean-Claude Carcaillet was the founder and Managing Director of Samev Pty Limited.

9 In 1988, Samev Pty Limited entered into a joint venture agreement with Expeditors Inc.

10 In 1988, the defendant was registered as a corporation pursuant to the Corporations Act 2001 (Cth) and thereafter acquired the business of Samev Pty Limited. Following the acquisition, Mr Carcaillet continued in the position of Managing Director of the defendant. In 1997 Mr Carcaillet was appointed as Senior Vice President, Australasia and Public Officer of Expeditors Inc. He was not a director of Expeditors Inc. and never appointed to the Board of Directors of that entity.

11 On 1 July 1988, the plaintiff's employment was transferred to the defendant. By letter of the same date, the defendant advised the plaintiff that she would retain the same salary and arrangements as she had with Samev Pty Ltd.

12 In late 1988, the plaintiff was appointed to the position of Regional Financial Controller, South Pacific Region. The plaintiff remained in that role until the termination of her contract on 6 June 2011.

13 On 6 September 1990, the defendant altered the plaintiff's remuneration package so that in addition to the plaintiff's base salary, the defendant paid a quarterly bonus calculated at 1 per cent of the defendant's local gross sales, provided that the profit was at or above budget.

14 From 1 January 1992, the plaintiff's bonus was varied so that it was calculated at 13% of the total branch bonus pool (the pool being 25% of the branch gross profit after head overheads) but was also subject to the financial performance of the District branch (Revised Bonus).

15 On 15 May 1992, the plaintiff was appointed as the Company Secretary of the defendant.

16 On 26 August, 2002, the defendant confirmed that the plaintiff's remuneration package at that time was comprised of:

(a) base salary of $70,000 (gross) per annum;

(b) a car allowance of $1660 per moth plus reimbursement of oil and petrol expenses;

(c) cash allowance for medical insurance;

(d) bonus (being the continuation of the Revised Bonus agreed to in 1992); and

(e) superannuation calculated on the total of salary, bonus and all (2002 Employment Terms) allowances.

17 The letter dated 26 August 2002 also required the plaintiff to comply with all company policies.

18 One of the policies that applied to the plaintiff's employment was the Expeditors' Code of Business Conduct (the Code). It was issued to all of Expeditors' employees across its global operations, including the plaintiff, in May 2004. It required the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel or the Chair of the Audit Committee to be informed of any actual or potential conflict of interest. It also specified that only the Board of Directors of Expeditors Washington Inc, could waive compliance with the Code for executives and directors.

19 In July 2003, the defendant varied the plaintiff's remuneration package by the inclusion of a monthly phone allowance of $23 per month to the 2002 Employment Terms. The phone allowance was increased to $60 per month as from 3 September 2007.

20 The plaintiff's superannuation was paid on the basis of the percentage prescribed by the Superannuation Guarantee Legislation on the total of the plaintiff's salary, bonus and all allowances.

21 At no time was there an express term as to termination in the contract between the plaintiff and the defendant.

22 The plaintiff's PAYG payment summaries identified total amounts paid to the plaintiff for each immediately preceding financial year. Those amounts for the years ending 30 June 2006 to 30 June 2011 (inclusive) are set out as follows:

Year Ending	Gross payments	Total allowances
30 June 2006	$540,349	$20,196
30 June 2007	$622,702	$20,196
30 June 2008	$754,425	$20,566
30 June 2009	$943,574	$20,640
30 June 2010	$671,896	$20,640
30 June 2011 (plaintiff's employment terminated on 6 June 2011)	$686,653 (including termination payments)	$19,231

23 From in or about January 2010, the plaintiff was required to electronically complete and submit "Quarterly Certification Forms" which required her to disclose any conflicts of interest or any potential conflicts of interest as defined in the Code. It also required her to certify that she had disclosed a related party transaction to a Corporate Controller. From January 2010 until the time her employment was terminated, the plaintiff completed and submitted the Quarterly Certification Forms.

24 The plaintiff did not notify the CEO, the CFO, the General Counsel or the Chair of the Audit Committee of Expeditors Inc of any conflict of interest after the Code was introduced in May 2004 up to the date of her termination.

25 In the Quarterly Certifications submitted by the plaintiff between January 2010 and the date of her termination on 6 June 2011, the plaintiff did not notify any conflict of interest or a related party transaction.

26 Relevant to the Cross-Claim are the following agreed facts.

27 In 1992, the defendant entered into a cleaning contract with AM Cleaning Services (AM) in which the plaintiff's brother, Mr Wilson Ma, had an involvement. The plaintiff had no involvement in the negotiations for that contract or in the terms and conditions that were set.

28 AM provided cleaning services to the defendant in respect of its facilities located at Banksmeadow, New South Wales (Banksmeadow facilities) including for the period from 16 January 2008 to 14 May 2010.

29 From 28 May 2010 the cleaning services were provided to the defendant at the Banksmeadow facilities by MX Cleaning Services (MX).

30 The ABN and Business Name for AM was registered to Matthew Stephen Hole between 24 May 2000 and 26 August 2009. However, when served with a subpoena in these proceedings seeking the production of documents relating to AM and its contract with Expeditors, Mr Stephen Hole responded by a letter indicating that he had no involvement with Expeditors at all.

31 The ABN for MX has been registered to Mui Chee Ma since 28 January 2010.

32 The parties do not agree as to the nature of Wilson Ma's involvement in or association with AM or MX in the period 16 January 2008 to 6 June 2011.

33 In the period 12 January 2008 to 27 May 2011, AM and MX submitted to the defendant a total of 94 invoices for payment. The plaintiff signed 82 of these 94 invoices as "OK to pay".

The Plaintiff's Employment

34 From the commencement of her employment with Samev Pty Limited on 5 January 1987, the plaintiff was under the control and supervision of Mr Carcaillet until his retirement on 31 August 2010. Following the transfer of her employment to the defendant on 1 August 1988, her duties included (a) planning, implementing, managing and controlling all financial activities; (b) responsibility for accounting, financial management, forecasting, banking; (c) supervising and mentoring a team of accounting staff; (d) management of local accounting functions; (e) managing cash flow, supervising and reviewing monthly/quarterly management reporting; (f) ensuring compliance with applicable reporting policies, standards, and procedures; and (g) conducting the internal control audit.

35 In late 1988 the title of the plaintiff's job was changed to "Regional Financial controller" and, in time, she became responsible for the accounting for 6 branches within the South Pacific region. She was authorised to approve and process a wide range of operational and administrative company expenses for payment. In particular, the plaintiff was authorised to approve invoices for cleaning services rendered by AM and, from 28 May 2010, by MX. The expenses considered by the plaintiff were subject to branch internal audits, as well as annual audits conducted by KPMG Australia Pty Limited. The plaintiff came to assist the internal audit for overseas branches and, from about 2008, she was involved in periodic internal audits of all branches in the South Pacific region.

36 Mr Carcaillet said (affidavit 17 June 2013):

"23. As the financial controller for the South Pacific Region, it was Ms Ma's responsibility to administer payroll, including remuneration, bonus calculations and superannuation contributions for the employees within the region. As such, I am aware that Ms Ma knew that superannuation contributions were paid based upon the employee's total remuneration without regard to the statutory superannuation cap. At all times Ms Ma attended to this responsibility in accordance with my directions and requirements, and I would review and approve Ms Ma's monthly payroll calculations prior to pay being processed."

37 The terms of the relevant employment contract were contained in the defendant's letter to the plaintiff of 26 August 2002. It provided for a salary of $70,000 per annum, plus a monthly bonus amounting to 13 per cent of the total South Pacific branch bonus. Other entitlements included a car allowance of $1,660 per month, a monthly health bonus, and superannuation contributions. It was a condition that the plaintiff complied with the current company employment policies.

38 By letter of 26 May 2004 to all employees, Mr Peter Rose, chairman and chief executive officer of Expeditors Inc, distributed the Code. Relevantly, it included the following:

"1.1 Introduction

...

We expect each of our directors, officers and employees to read and understand this Code. Violations of law, regulation, our corporate policies or this Code may lead to disciplinary action, including dismissal.

...

1.3 Conflicts of Interest

Expeditors prohibits employees from requesting or accepting for personal benefit any service, money or other consideration, directly or indirectly, in exchange for influence in any part of Expeditors' business. Further, employees are prohibited from engaging in conduct that is, or appears to be, in conflict with the interests of Expeditors or its customers.

In particular, no director, officer or employee shall:

...

* Conduct business on behalf of Expeditors with immediate family members, which include spouses, children, parents, siblings and persons sharing the same home (whether or not such a person is a legal relative).

Directors, officers and employees must promptly notify the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel or the Chair of the Audit Committee of any actual or potential conflict of interest.

...

1.17 Waivers of Code of Business Conduct

Any waiver of this Code for executive officers or directors may be made only by the Board of Directors and will be promptly disclosed as required by law or stock exchange regulation."

39 From about January 2010 a quarterly certification process was implemented which required certain employees, including the plaintiff, to complete a pro forma certificate which, inter alia, confirmed the accuracy of financial statements and information, compliance with internal controls and with the Code, and disclosure of related party transactions. Relevantly, the certificate contained the following:

"6. Except for items reported to the Corporate Legal Department, if any, to the best of my knowledge there have been no violations or possible violations of our Code of Business Conduct by employees, agents, third party brokers, or other parties that represent Expeditors, which includes among other items:

...

d. Conflicts of interest.

7. Related party transactions such as sales, purchases, loans, transfers, leases, guarantees, contractual commitments and amounts receivable from or payable to related parties (excluding intercompany transactions) have been disclosed to the Country Controller, Regional Controller or Corporate Controller, as appropriate.

...

Related party:

Related parties are family members and businesses that they may own (fully or partially) or businesses in which they are directors, shareholders or executives".

40 From about January 2010 to the end of her employment, the plaintiff completed and submitted the quarterly certificates. It is common ground that she gave no notification of any actual or potential conflict of interest, and/or of a related party transaction as contemplated by the Code or under the certificate.

41 Mr Carcaillet retired on 31 August 2010. He described his relationship with the plaintiff thus (affidavit 17 June 2013):

"11. Over the twenty-three years that I worked with Ms Ma, we came to form a close-knit team. Our professional relationship developed to a point where we would instinctively know the other's habits and positions on particular business decisions. There would be frequent occasions where I would provide suggestions to Ms Ma on the undertaking of certain activities or the implementation of particular business plans, only to discover that Ms Ma had already taken these steps. This close understanding contributed to the efficient operation of the South Pacific region and the overall success of Expeditors within the region."

12. I also came to quickly appreciate Ms Ma's high level of trustworthiness and honesty, as well as her high attention to detail. Throughout Ms Ma's employment, I would frequently refer to her as my 'watchdog'. This term reflected the fact that I highly trusted Ms Ma to oversee the financial affairs of the Expeditors' South Pacific Region and raise any issued or concerns with me as quickly and as responsibly as possible."

42 Nevertheless, Mr Carcaillet monitored and supervised the plaintiff's work and discussed it with her almost daily. The plaintiff's evidence is that for the 23 year period from 1987 to 2010, she received only positive performance reviews from Mr Carcaillet.

43 From 1 September 2010 the plaintiff reported directly to Mr Carcaillet's successor, Mr Paul Arthur.

44 On 5 January 2011 Mr Arthur proposed to the plaintiff variations to the terms of her employment, which included a change to her job description, and a 50 per cent reduction of her monthly bonus. The proposal was rejected, and thereafter, until May 2011, communications between them were inconclusive.

45 By letter of 10 May 2011 to the plaintiff, Mr Arthur set out the terms of offer of a new employment contract. The plaintiff considered the proposal contained a number of terms which she had previously disputed and rejected, and others less favourable than those of the existing contract. By email of 17 May 2011 to Mr Paul, the plaintiff sought clarification of aspects of the offer, and advised that she was unable to accept it. At a meeting between them on 31 May 2011 the proposal was discussed but no agreement was reached.

46 At her meeting on 6 June 2011, further discussion took place without agreement. By letter the same day the plaintiff's employment was terminated immediately on payment in lieu of notice. The letter included:

"This letter confirms our discussion earlier today when I decided to terminate your employment immediately on payment in lieu of notice.

You will be paid:

1. for salary accrued to today;

2. in respect of 5 weeks notice of termination based on your salary; and

3. in respect of your accrued but untaken statutory leave entitlements based on your salary.

All payments will be less applicable tax.

Please ensure that you return all Expeditors' property immediately."

47 On termination the defendant advised the plaintiff that she would be paid (gross):

(a) $8,715.00, being five (5) week's base salary in lieu of notice;

(b) $784.00 in superannuation payments by reference to the notice payment;

(c) $15,749.08, in respect of her annual leave entitlements; and

(d) $28,530.00 in respect of her long service leave entitlements;

where the above payments were calculated on the plaintiff's base rate of pay, excluding bonus and allowances. No payment was made of any pro rata bonus for the month.

The Plaintiff's Claim

48 The plaintiff claims that the defendant was in breach of an implied term of the employment contract by failing to provide reasonable notice of the termination of her employment. She contends that, having regard to all the circumstances, a reasonable period of notice was 12 months from the date of termination.

49 According to the plaintiffs' written submissions (5 June 2014) the particulars of damages claimed were calculated on the basis of a notice period of 12 months, and are as follows:

(i) base salary (including bonuses and allowances) being an average of annual income for the five financial years prior to termination (gross) in the amount of $757,700. After deduction of the amount of $8,715 paid in lieu of notice upon termination, the amount claimed is $741,417.

(ii) superannuation; an amount equivalent to the defendant's contributions to the plaintiff's superannuation fund is claimed, less the contribution of the amount of $784 made on termination.

(iii) pro rata monthly bonus is claimed for the period 1 June - 6 June 2011 inclusive in the amount of $8,138.87.

(iv) long service leave in the amount of $265,373.44 is claimed, calculated as an entitlement to 4.89 months based on ordinary pay, including a bonus of $13,880.59 per week ($293,903.44) less the amount of $28,530 (gross) paid on termination.

50 In respect of each item, interest is claimed to the date of hearing.

51 On the other hand, the defendant contends that a reasonable notice period would be between 3 to 6 months. It calculated the gross average annual income over 5 years to be the amount of $750,132, or $62,511 per month.

52 The defendant denies any entitlement of the plaintiff to claim in respect of bonus, superannuation contributions, and long service leave. Further, the defendant contends that the plaintiff failed to mitigate her loss with the consequence that any award of damages should be reduced to the extent it was found the plaintiff had acted unreasonably.

53 I turn first to the issue of reasonable notice. The principles are too well known to justify lengthy recitation. It is sufficient to refer to Quinn v Jack Chia (Australia) Limited (1992) 1 VR 567; Rankin v Marine Power International Pty Ltd (2001) 107 IR 117; (2001) VSC 150; and, Rogan-Gardiner v Woolworths Limited (No. 2) [2010] WASC 290, which provide authority for the approach to be taken for determination of the appropriate period in a particular case. Absent evidence to the contrary, a term of reasonable notice is to be implied into a contract of employment. What length of notice is reasonable is a question of fact to be determined after consideration of all relevant circumstances of the case, mindful that the primary purpose of notice is to enable the employee to obtain new employment of a similar nature. It is to be determined as at the date of termination, with regard to the facts then existing. Relevant factors to be taken into include those referred to in Rankin v Marine Power International Pty Ltd by Gillard J (para 223):

"The factors include the high grade of the appointment, the importance of the position and the size of the salary. Further, it is clear that the nature of the employment is a relevant factor. In addition, factors which pertain to the particular employee which are relevant are the length of service, his professional standing and his age, his qualifications and experience, and the expected period of time it would take for him to find alternative employment."

54 I find the following factors to be of particular relevance in determining what was a reasonable period of notice to terminate the plaintiff's employment.

55 At the time of termination she was 49 years of age, and had been a loyal employee for 24 years, 5 months. Although not of the top echelon, she held a position of significant seniority for many years as regional controller for the South Pacific region, reporting directly to the defendant's managing director. An accounting team of about 14 people reported to her. Mr Carcaillet depended upon her for the supervision and management of the financial affairs of the defendant's operations in its South Pacific region. He regarded her as trustworthy and honest, and observed that she worked with high attention to detail. Following introduction of the quarterly certification process by Expeditors Inc, she was included as one of the high level senior employees required to certify to its chief executive officer and chief financial officer as to the accuracy of financial information, compliance with internal controls, and other corporate governance matters. The plaintiff received a substantial remuneration package which, on an annual average over the five years prior to termination, was for an amount of about $750,000 gross. The package may be taken to be indicative of the high degree of responsibility required of the plaintiff, and the dedication with which she discharged it.

56 Since termination the plaintiff has been unemployed. A matter to be given significant weight, as the evidence demonstrated, is that the plaintiff's prospects of finding suitable employment with similar responsibility or remuneration were low. Given the occasion of abrupt dismissal by the managing director, it may be inferred that it was highly unlikely that the plaintiff would be afforded a favourable reference for future employment.

57 In this context it is convenient to deal with the defendant's contention that the plaintiff failed to mitigate her loss in that she failed to take reasonable steps to procure alternative employment. The evidence as to future prospects overlapped with that relevant to mitigation, so that both questions may be considered together. The plaintiff was challenged in cross-examination as to the extent of the enquiries and applications she made for employment during the 12 months after termination. Contrary to the defendant's submissions, I found her to be a witness of truth, and I accept her evidence. The reliability of her evidence was not undermined in cross-examination, and there was nothing to contradict it.

58 The plaintiff rejected suggestions put to her in cross-examination that she had decided not to actively look for employment, and instead had chosen to live off the financial returns from property investments. In summary, her evidence was that after termination she made numerous applications and enquiries for positions commensurate with her qualifications and expertise, but without success. She gave the following evidence (T137, L20 - T138, L10):

"Q. Ms Ma, you were asked some questions about the documents that you had produced pursuant to the notice to produce. Did you keep copies of every single application that you made in that 12 month period?

A. No, I didn't.

Q. Were all of the applications made in hard copy or online?

A. They were online.

Q. In the 12 month period following your termination from Expeditors, the Australian company, how many jobs did you find that were suitable to you in terms of your qualifications, expertise and seniority?

A. Very limited. Only because I really only work for one single industry and I have no experience with a lot of the without the industry a lot of the jobs that are available are very specific asking for, for example, big four lever, which is the audit firms.

Q. Sorry, I didn't understand, "big four lever", what that?

A. Big four audit firms, which is Deloitte, KPMG, Ernst & Young, so they are after people from the audit firm, or retail or law which I just don't have that background for. So far I have only really seen one job for logistic industry which is where my skill is.

Q. In the 12 month period following your termination did you find any positions with a remuneration level at the same level that you were receiving with the defendant?

A. No, there is none in there.

Q. In relation to the six to eight jobs that you told my learned friend that you applied for, what response did you receive in relation to those applications?

A. I did not meet the criteria that they want.

Q. Were you ever given any more fulsome explanation as to why you were not chosen for the job?

A. I called up a couple of them and find that the 24 years in one company, they have questioned whether I have experience with other companies, which I don't. I can only tell you the response, the question that they asked but they really basically, in general you don't meet the criteria and from experience what they said with my experience is they ask me what kind of software I have used and I have really used Expeditors inhouse software and not an external kind of software, and that is what the training provided for, Expeditors."

59 On the issue of mitigation, the principles were stated in Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313. By Giles JA (Handley, Stein JJA, agreeing):

[187] A plaintiff who acts unreasonably in failing to minimise his loss from the defendant's breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less. This is often misleadingly referred to as a duty to mitigate, although the plaintiff is not under a positive duty. The plaintiff does not have to show that he has fulfilled his so-called duty, and the onus is on the defendant to show that he has not and the extent to which he has not (TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130). Since the defendant is a wrongdoer, in determining whether the plaintiff has acted unreasonably a high standard of conduct will not be required, and the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did (Banco de Portugal v Waterlow and Sons Ltd (1932) AC 452; Pilkington v Wood (1953) Ch 770; Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd (1976) 1 NSWLR 5).

[188] Whether the plaintiff acted unreasonably is a question of fact.

..."

60 In my opinion the evidence unequivocally shows that the plaintiff made numerous reasonable attempts to search for new employment which were unsuccessful. It established the real difficulty which confronted the plaintiff upon termination, a factor relevant to determination of a reasonable period of notice. On the other hand, the evidence negated the defendant's case that the plaintiff had failed to take reasonable steps to mitigate her damages. In my opinion the defendant's case on this issue was without evidentiary support, and must be rejected.

61 Taking into account the whole of the evidence, with emphasis on the above mentioned matters, in my opinion the proper period of notice was ten months.

The Pro Rata Bonus Claim

62 The plaintiff's claim under this head is for the amount of $8,138.87. She claims it is payable under the employment contract of 26 August 2002. The amount is calculated on a pro rata basis for the four days she worked in June 2011 until termination. The defendant argued that there was no such entitlement under the contract.

63 Relevantly, the contract provided:

"Salary: $70,000.00 per annum, plus a monthly bonus amounting to 13% of the total South Pacific Branch Bonus."

64 Although not relevant to the present claim, the contract also provided that payment of the bonus may be refused if performance was not to the defendant's satisfaction and, further, the bonus program may be changed at any time to follow corporate guidelines.

65 Separate provision was made in respect of extra specified items including a monthly car allowance, superannuation cover and life and disability insurance.

66 The plaintiff's claim turns on the proper construction of the definition "Salary". The language is clear and unambiguous. The term has a composite meaning. It includes a payment of $70,000.00 per annum, plus a monthly bonus equivalent to 13 per cent of the total South Pacific Branch Bonus.

67 In its letter of 6 June 2011 the defendant confirmed termination of the plaintiff's employment immediately on payment in lieu of notice. It stated:

"You will be paid:

1. for salary accrued to today;

2. in respect of 5 weeks notice of termination based on your salary; and

3. in respect of your accrued but untaken statutory leave entitlements based on your salary.

All payments will be less applicable tax."

68 The contract provided for a base salary calculated on an annual basis, and for a bonus calculated on a monthly basis. There was no provision as to the regularity with which payments were to be made. Further, there was no provision to the effect that the plaintiff was not entitled to receive a proportionate part of the annual salary or the monthly bonus which was due and payable at the time of termination or dismissal. In my opinion, the absence of such provisions supports the inference that it was the contractual intention of the parties that remuneration was linked to performance, with the result that entitlement to payment would accrue in respect of the time worked.

69 This intention is reflected in the letter. In my opinion it evidences the defendant's acceptance of the plaintiff's contractual entitlement to payment of salary, and other items of remuneration, on an accrued or pro rata basis. In particular, the letter obviously conveyed the defendant's undertaking or agreement to pay "for salary accrued to today" and for accrued but untaken statutory leave entitlements. There is no justification under the contract for recognising entitlement to a proportionate part of the annual salary but refusing to do so in respect of the monthly bonus.

70 As the amount of the accrued bonus has not been paid, the defendant is liable to the plaintiff for it. Accordingly, I find the plaintiff is entitled to recover from the defendant the amount of $8,138.87.

The Long Service Leave Claim

71 The plaintiff alleges that on termination she was entitled to long service leave in the amount of $293,903.44. As she was paid the amount of $28,530 for long service leave, her claim is for the balance, namely the amount of $265,373.44. The defendant denied entitlement to any amount in excess of the amount it has paid.

72 The Long Service Leave Act 1955 ("the Act") provides for a worker's entitlement to long service leave. It was common ground that the plaintiff was a worker within the Act. Except as otherwise provided, every worker shall be entitled to long service leave on ordinary pay in respect of the service of the worker with an employer (s 4(1)). The parties are at issue as to the quantification of the plaintiff's ordinary pay for the purposes of the Act, the determination of which turns on the proper construction of the relevant provisions.

73 Relevantly, the Act provides:

3 Definitions

(1) In this Act, unless the context otherwise indicates or requires:

Ordinary pay, in relation to any worker, means the sum of:

(a) where the worker is, on the prescribed date, remunerated wholly in relation to an ordinary time rate of pay fixed by the terms of the worker's employment:

(i) the amount of the ordinary remuneration of the worker, as on the prescribed date, or

(ii) the average weekly amount of the ordinary remuneration which was earned by the worker as a worker during that part of the period of 5 years ending on the prescribed date during which the worker was so remunerated,

whichever is the greater,

(b) where the worker is, on the prescribed date, remunerated otherwise than wholly in relation to an ordinary time rate of pay so fixed-the amount of the average weekly wage which was earned by the worker as a worker (being the average of the amounts received by the worker each week under those terms after excluding any amount payable to the worker in respect of shift work, overtime or other penalty rates) during the period actually worked by the worker during:

(i) the period of 12 months,

...

(c) the average weekly amount of bonuses received by the worker as a worker employed by the person who is the worker's employer on the prescribed date during:

(i) where paragraph (a) (i) or (b) (i) applies for the purpose of calculating the worker's ordinary pay, the period of 12 months,

...

(2) For the purposes of:

(a) the definition of ordinary pay in subsection (1) and of subsection (2A),

(b) paragraph (a) of that definition, ordinary remuneration, in relation to a worker, means the remuneration for that worker's normal weekly number of hours of work calculated at the time rate of pay fixed by the terms of that worker's employment for his or her work under the terms of that worker's employment reduced by any amount payable to that worker in respect of shift work, overtime or other penalty rates or, where 2 or more time rates of pay are so fixed, the amount of remuneration for that worker's normal weekly number of hours of work calculated at the higher or highest of those rates and so reduced,

(c) paragraph (c) of that definition, bonus, in relation to a worker, means any amount received by that worker under the terms of that worker's employment under any bonus, incentive or other similar scheme, not being an amount taken into consideration in determining the amount of the average weekly wage of that worker referred to in paragraph (b) of that definition, and

...

(2C) Despite anything to the contrary in this section, the ordinary pay of a worker is not to include or be increased by the amounts paid under any bonus, incentive or other similar scheme if the annual amount of the worker's ordinary pay (excluding any amounts so paid) exceeds the amount prescribed by the regulations for the purposes of this subsection.

4 Long service leave

(5)(a) Where the services of a worker are terminated otherwise than by the worker's death and any long service leave:

(i) to which the worker was entitled has not been taken, or

(ii) accrues to the worker upon such termination and has not been taken, the worker shall, subject to subsection (13), be deemed to have entered upon the leave from the date of such termination and the employer shall forthwith pay to the worker in full the worker's ordinary pay for the leave less any amount already paid to the worker in respect of that leave."

74 Under Long Service Leave Regulations 2011, clause 4 provides that for the purposes of s 3(2C) of the Act the prescribed annual amount of a worker's ordinary pay is $144,000.

75 In Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301 Hely J held:

"[99] Entitlement to long service leave flows to the applicant from s 4(5) of the Long Service Leave Act 1955 (NSW). Again, for a person in the position of the applicant, his entitlement is to be calculated by reference to his "ordinary pay" which is not to include or be increased by amounts paid under any bonus, incentive or similar scheme: s 3(2C)."

76 The plaintiff claims that her ordinary pay is to be calculated under paragraph (b) of the definition of "Ordinary pay" in s 3(1) of the Act.

77 The calculation proceeds as follows. As her average weekly wage for the 12 month period prior to termination was greater than the five year average amount, it is the relevant period. For this period the plaintiff was remunerated in the amount of $90,640 (being base salary of $70,000.00 and regular allowances of $20,640) giving an average weekly wage of $1,743.08.

78 Under paragraph (c) of the definition of "Ordinary pay" there is to be added to this amount the average weekly amount of bonuses received during the period of 12 months prior to termination. The total amount of bonuses received is claimed to be $631,150.26 (including the unpaid pro rata bonus of $8,138.47) giving an average weekly bonus of $12,137.51.

79 Accordingly, the plaintiff claims ordinary pay in the amount of $13,880.59 per week, being the sum of the average weekly wage and the average weekly bonus. On this basis the provisions of s 3(2C) of the Act would not apply as the ordinary pay (excluding bonuses) does not exceed the prescribed amount of $144,000.

80 In the result the plaintiff claims:

4.89 months x 4.33 weeks per week x $13,880.59 per week = $293.903.44

81 Adjusted for the payment of $28,530 already made, the balance claimed is $265,373.44.

82 The defendant challenged the plaintiff's calculation of ordinary pay. It submitted that the ordinary pay was to be calculated under sub-para (a)(i) of the definition which required account to be taken of her total remuneration. The defendant accepted that the plaintiff's calculation of average weekly wage should take into account the amount of her base salary and regular allowances as she submitted. However, it contended that the amount claimed by her was wrong, in that the calculation failed to take into account any amounts referrable to superannuation, the payment of which was a component of her remuneration under the employment contract. It was put that under her contract of 26 August 2002, her remuneration consisted of a number of components, including base salary, superannuation, a discretionary bonus, and other benefits. It was put that, excluding bonuses, the plaintiff's remuneration was as shown below:

Year	Base	Leave Loading	Car	Phone	Medical	Super	Total
2009/2010	$70,000	$1,296	$19,920	$720	$6,140	$62,212	$160,287
2010/2011	$65,958	-	$18,562	$671	$5,678	$48,497	$151,108

83 Thus it was put that inclusion of the superannuation contributions caused the annual amount of the plaintiff's ordinary pay to exceed the prescribed amount of $144,000, thereby attracting the application of s 3(2C) of the Act, which precludes the inclusion of a bonus amount.

84 The principles of statutory construction were recently stated in Secretary of the Treasury v Public Service Association & Professional Officers' Association Amalgamated Union of NSW [2014] NSWCA 138 by Bathurst CJ (Beazley P, Meagher JJA agreeing):

"33 The relevant principles have been stated on a number of recent occasions by the High Court. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; (2009) 239 CLR 27 the plurality emphasised, at [47], that construction must begin with the text itself and whilst the language applied is the surest guide to legislative intention, the meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision and in particular the mischief it seeks to remedy. Determination of the purpose of a statute or a particular provision may be based not only on the express statement of purpose in the statute itself but also by inference from its text and structure, and where appropriate, by reference to extrinsic material: see also Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012)87 ALJR 98 at [39] and Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 at [23]-[26]."

85 The first issue is whether the plaintiff is a worker who was remunerated wholly in relation to an ordinary time rate of pay fixed by the terms of her employment under para (a) of the definition of "Ordinary pay", or whether she is a worker who was remunerated otherwise than wholly in relation to an ordinary time rate of pay so fixed, under para (b) of the definition. It follows that the question which of para (a) or para (b) applies in a particular case is to be determined by consideration of the terms of the worker's employment by which he or she is remunerated.

86 The expression "ordinary time rate of pay" is not defined in the Act. The question requires analysis of the terms of employment in order to ascertain whether they fix an ordinary time rate of pay. Assistance may be derived from the provisions of s 3(2)(b) which states that for the purpose of para (a) of the definition of ordinary pay, the term "ordinary remuneration" means the remuneration for the worker's normal weekly hours of work calculated at the time rate of pay fixed by the terms of that worker's employment, reduced by amounts payable in respect of shift work, overtime or other penalty rates.

87 The expression "ordinary time rate of pay" was explained in Scott v Sun Alliance Australia Limited (1993) 178 CLR 1 at 5:

"The expression "ordinary time rate of pay" is well known in the industrial relations field in Australia and New Zealand. It and similar terms have long been used in legislation. Unless the context otherwise requires, "ordinary time rate of pay" means the rate of pay for the standard or ordinary hours of work in contrast to the overtime or penalty rate of pay for hours of work other than the standard or ordinary hours. When expressed by reference to a week, it refers to the product of multiplying that hourly rate by the standard thirty-five, thirty-eight or forty hour week, as the case may be, fixed by legislation, industrial award or agreement."

88 These provisions show that the legislature has recognised that not all employees are remunerated solely by reference to "ordinary time rate of pay" as that expression has been understood in the industrial context. Provision is made for the employee who is remunerated otherwise than wholly by reference to such an ordinary time rate of pay (cf: Hastings Deering (Australia) Ltd v Smith (2004) NTCA 13, paras 55-59).

89 It is evident from the employment contract of 26 August 2002 that it does not fix an ordinary time rate of pay as that term should be understood. Accordingly, in my opinion, the defendant's submission that the plaintiff's ordinary pay for the purposes of the Act is to be calculated with regard to the provisions of para (a) of the definition fails at the threshold.

90 As the plaintiff was remunerated otherwise than wholly in relation to an ordinary time rate of pay the relevant task is to determine the amount of the average weekly wage within under (b) of the definition. Under para (b), the amount to be determined is:

"...the amount of the average weekly wage which was earned by the worker as a worker (being the average of the amount received by the worker each week under those terms after excluding any amount payable to the worker in respect of shift work, over time or other penalty rates) during the period actually worked by the worker..."

91 The expression "the average weekly wage which was earned by the worker" is defined to mean "the average of the amounts received by the worker each week under those terms after excluding any amount payable to the worker in respect of shift work..."

92 In my opinion, it is tolerably plain from the words of para (b) that the basis upon which the amount of the average weekly wage is computed is confined by the terms of the definition. The necessary exercise requires identification of the amounts received by the worker under the terms of employment excluding any amount payable in respect of the matters specified.

93 In its context, the term "amounts received" is to be understood to mean the amounts actually received by, or paid to, the worker. The intention that ordinary pay is to be calculated with regard to amounts received by the worker is supported by the words in para (c) of the definition "amount of bonuses received", and in section 3(2)(c) which defines "bonus" to mean "any amount received by (the) worker..." under any bonus, etc, scheme. For the purpose of each of paras (a) and (b) the word "remunerated" should be given its natural and ordinary meaning, and understood to mean "paid".

94 In this context, the observations of Hely J in Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301 (para 96) are apt:

"[96] ...Amounts paid by the company to a superannuation fund may be a cost to the company in consequence of the employment, but the employee cannot access the benefits derived from those contributions except in the circumstances permitted by the trusts on which the fund is constituted. The employer's contributions to that fund are not part of the employee's ordinary pay."

95 In my opinion, where para (b) applies the matters to be taken into account in calculating the amount of the average weekly wage is confined as I have found. It follows that for the purposes of para (b) no account is to be taken of other items or components which might otherwise be regarded as part of the worker's overall remuneration package for services rendered in his or her employment.

96 For the submission that the component of ordinary pay under para (a) of the definition should be calculated with regard to the plaintiff's total remuneration package the defendant sought support from a number of authorities (e.g. May v Lilyvale Hotel Pty Ltd (1995) 68 IR 112, Jongwaard v Dall (1992) SAIRC 11, Lyon v IOOF Victorian Friendly Society (1996) 230 IRC 27) in which the scope of the terms "remuneration" and "ordinary pay", and related concepts, were considered. All were determined with regard to the legislation, and the terms of employment in the particular case. Sometimes they afforded helpful, but not determinative guidance, for the approach to be taken. In the end, the question in this case was one of interpretation of the relevant provisions of the Act.

97 In my opinion, the defendant's submission that ordinary pay is the worker's total remuneration less bonuses has no foundation. It must be rejected. Accordingly, I hold that the defendant has failed in its objection to the amount claimed by the plaintiff for long service leave. In the result, her claim does not attract the application of s 3(2C) of the Act.

Conclusion

98 For the above reasons, on the plaintiff's claim I find that:

(1) The proper period of notice was ten months, and the plaintiff is entitled to an award of damages in an amount to be agreed or assessed;

(2) The plaintiff is entitled to payment by the defendant of a pro rata bonus in the amount of $8,138.87;

(3) The plaintiff is entitled to payment by the defendant of the balance payable for long service leave in the amount of $265,373.44.

The Cross-Claim

99 In essence, the defendant claims the plaintiff was guilty of misconduct, which would have justified summary termination of her employment. The alleged misconduct was not discovered until some time after its termination.

100 The conduct complained of was that, in breach of her contractual, fiduciary, and statutory obligations, she allegedly failed to disclose an actual or potential conflict of interest in authorising the payment of invoices submitted to the defendant by businesses under the names AM Cleaning Services (AM) and MX Cleaning Services (MX) in which her brother, Mr Wilson Ma, was said to be involved. The claim relates to the plaintiff's authorisations between 16 January 2008 and 6 June 2011. Relevantly, AM provided cleaning services which it invoiced to the defendant between 16 January 2008 and 14 May 2010. MX provided similar services which it invoiced to the defendant between 28 May 2010 and 6 June 2011.

101 The following is a summary of the circumstances in which AM was engaged by, and provided services, to the defendant. The facts were uncontroversial or established by the evidence.

102 In about 1992 the defendant required a new office cleaner. The plaintiff's brother, known as Mr Wilson Ma, managed a contract cleaning business. The plaintiff introduced Mr Ma to Mr Carcaillet. Mr Carcaillet negotiated an agreement with Mr Ma for the provision of cleaning services to the defendant. He told Mr Ma that the plaintiff was the financial controller, and directed him to send his invoices to her for payment. The plaintiff had no involvement in the negotiations, or the decision to engage her brother. Thereafter, Mr Carcaillet was responsible for dealings with Mr Ma and renegotiation of the contract from time to time. It appears that from about 2002 Ms Mancuso, the defendant's Sydney manager, shared responsibility for the supervision of expenditure of the Sydney branch.

103 The plaintiff's evidence included (affidavit 29 May 2013):

"54. Mr Ma would issue a fortnightly invoice to the Defendant under the name of his cleaning company, and I was responsible for arranging payment for his invoices following approval by Mr Carcaillet."

55. At the start of the cleaning contract between Mr Ma and the Defendant, Mr Caircallet confirmed that I was authorised to approve and process the payment of the invoices issued by Mr Ma's company in respect of the cleaning costs. This authorisation was conditional upon the invoice being for the standard cleaning charge agreed by Mr Carcaillet, Mr Carcaillet said to me words to the following effect:

JCC: 'You have general authorisation to approve and pay the cleaning invoices as long as they are for the regular fortnightly charge. If they deviate from the regular charge, let me know so I can review and authorise'.

56. Following this discussion, I would approve and process payments for Mr Ma's invoices, unless they were irregular or higher than the agreed fortnightly charge. On those occasions, I would discuss the invoices with Mr Carcaillet."

104 Mr Carcaillet's evidence included (affidavit 17 June 2013):

"42 Once a month, Ms Ma and I would prepare P&L statements for the company which would require a review of the operating costs of the Sydney office. Due to this process, both Sue Ma and I were aware of the janitorial and cleaning costs being paid to Wilson Ma. I would also conduct monthly meetings with Ms Mancuso following the issuance of our P/L reports during which time we would discuss the operating costs of the Sydney office, including janitor and cleaning costs. Although Ms Ma was the Financial Controller for the South Pacific Region, it was Ms Mancuso's responsibility, as the Sydney Branch Manager (as well as myself) to manage and supervise the expenditure of the Sydney branch.

...

44 To the best of my recollection, a few senior managers, including Ms Mancuso, as well as some clerical staff, were fully aware that Wilson Ma was Ms Ma's brother. I recall that on a number of occasions I approached Ms Mancuso in order to discuss various cleaning issues, during which time I would use the term 'Sue's brother'. I also note that I used this particular term to describe Wilson Ma within the email referred to in paragraph 31 of this affidavit."

105 In about May 2004 the Code was published to employees. Under clause 1.3 employees were "...prohibited from engaging in conduct that is, or appears to be, in conflict with the interests of Expeditors or its customers". It included:

"In particular, no director, officer or employee shall:

...

* Conduct business on behalf of Expeditors with immediate family members, which include spouses, children, parents, siblings and persons sharing the same home (whether or not such a person is a legal relative).

Directors, officers and employees must promptly notify the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel or the Chair of the Audit Committee of any actual or potential conflict of interest."

106 On 29 November 2004 Mr Carcaillet sent the plaintiff his response to Ms Mancuso's request for clarification of the application of the Code to employees in respect of, inter alia, conflicts of interest. With respect to conflicts of interest, he recited the definition in clause 1.3 of the Code, and said:

"I do not see how this could apply to us not being able to buy flowers from Effie or to use Sue's brother for our cleaning"

107 On 30 November 2004 the plaintiff received an email from Mr Carcaillet sent to all employees. Relevantly, it included:

"The purpose of this email is to attempt to answer your questions and clarify Expeditors position:

(1) Conflicts of interest

...

Our position on this is that Senior Management needs to be made aware of any possible conflict of interest or of any employee's outside transactions that may influence Expeditors business.

-For example it is OK buying flowers from Effie M, we have approached her and noone (sic) related to her has either given her the business or used his/her influence to try and get her to obtain the business. It would not be OK, if, say Maria had tried to coerce us to buy flowers from Effie.

-It is also OK using someone's brother in law to help fix our electrical problems as long as the costs of the service has been checked against other contractors and found to be competitive and noone (sic) related to him has either given him the business directly or used his/her influence to try and get him to obtain the business.

-It is not OK however for a EI employee to buy services on behalf of EI or goods from a related party without prior clearance from an officer of the Company, eg a DM cannot appoint his brother in law to run his cartage services (too close to the wind).

BEST BEFORE PROCEEDING WITH THESE TYPES OF DEALINGS TO GET CLEARANCE FROM AN OFFICER OF THE COMPANY."

108 On 8 January 2010 Mr Carcaillet sent the plaintiff an email received from Mr Brad Powell, the chief financial officer of Expeditors Inc, advising of the commencement of a quarterly certification process with which senior employees of the defendant, including Mr Carcaillet and the plaintiff, were required to comply.

109 Accordingly, each quarter, the plaintiff completed and sent to the chief executive officer and chief financial officer of Expeditors Inc a pro forma certificate as to various matters including:

"6. Except for items reported to the Corporate Legal Documents, if any, to the best of my knowledge of my knowledge there have been no violations or possible violations of our Code of Business Conduct by employees, agents, third party brokers, or other parties that represent Expeditors, which includes among other items:

...

(d) Conflicts of interest

7. Related party transactions such as sales, purchases, loans, transfers, leases, guarantees, contractual commitments and amounts receivable from or payable to related parties (excluding intercompany transactions) have been disclosed to the Country Controller, Regional Controller or Corporate Controller, as appropriate."

110 Thereafter until termination, the plaintiff completed and sent the certificates each quarter.

111 The defendant alleged that disclosure was required under clause 1.3 of the Code and clauses 6 and 7 of the quarterly certificates. The failure to disclose was said to be wrongful, being conduct which was, during the relevant period, in breach of express and implied contractual duties, fiduciary duties, and s 182(1)(b) Corporations Act 2001, which relevantly provides:

"182 Use of position-civil obligations

(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:

...

(b) cause detriment to the corporation.

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection."

112 The nature of the conflict was explained by Senior Counsel for the defendant as follows (T 295, ll 42-48):

"MOSES: ...Can I assist your Honour by just making it clear, the position. The position is that the conflict of interest here has to be not putting yourself in a position that would appear to put you in conflict with the interests of Expeditors.

Now, what is happening here is by approving or monitoring the payments to be made to her brother in breach of the prohibition contained in the last dot point, she was putting herself in that position, otherwise the words mean nothing in the last dot point...

(and T297 ll 10-18)

MOSES: ...the conflict of interest contention,... it's very clear what it is....in a circumstance where you are a fiduciary and the position that she held with the defendant, where you are authorising payments to your brother, that relationship, brother and sister, gives rise to either an actual, potential or appearance of a conflict of interest where you would prefer the interests of the sibling over that of the company. "

113 Although in oral submissions the defendant maintained there was an actual conflict, the primary submission was there was a potential, or the appearance of, conflict in that it might appear that the plaintiff was in a position to prefer the interests of her brother over the interests of the defendant.

114 The plaintiff accepted that under her employment contract she was bound to comply with the Code and the certification process. She also accepted that she gave no notification of any actual or potential conflict of interest as required by the Code, and had made no disclosure of any related party transaction as contemplated in clause 7 of the certificate.

115 In cross-examination, she did not accept that by authorising invoices she was conducting business on behalf of the defendant, and denied there was a conflict of interest arising out of her brother's involvement in AM. She relied on Mr Carcaillet's email of 29 November 2004, which she had understood to say there was no conflict. Her position was, there being no conflict, the obligation under clause 1.3 of the Code did not arise. She also denied that she had engaged in a related party transaction which required disclosure under clause 7 of the certificate.

116 Mr Carcaillet said he had instructed the plaintiff to approve the invoices. He denied there was any transaction, and, hence, any related party transaction, between the plaintiff and Mr Ma, or that there had been any conflict of interest between her and the defendant.

Consideration

117 The crucial question is whether, in the particular circumstances, the plaintiff's conduct involved an actual or potential conflict of interest. The approach to be taken is guided by well-established principles.

118 In Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 Mason J said:

(at p 97) "That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

...

(p 102) ..the duties of the fiduciary vary with the circumstances which generate the relationship... it is now acknowledged generally that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case.

...

(p 103) The fiduciary's duty may be more accurately expressed by saying that he is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the persons whom he is bound to protect (Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461 at 471).

...

(p 104) In Phelan Judge Learned Hand in discussing the nature of the conflict that gives rise to the fiduciary's liability to account, said:

"Was that such a conflict as invokes the doctrine? It enables the beneficiary to hold the fiduciary liable for any profits he may make, or losses he may cause, in order to deprive him of any inducement that will affect his absolute and disinterested loyalty; and there is no doubt that an expectation or hope of future advantage may do so, even though it is not secured to him as an existing legally protected interest. Therefore, if the doctrine be inexorably applied and without regard to the particular circumstances of the situation, every transaction will be condemned once it be shown that the fiduciary had such a hope or expectation, however unlikely to be realized it may be, and however trifling an inducement it will be, if it is realized. We do not understand that it is to be applied so rigidly, or to so literal an extreme. ... we have to determine the scope of the implementary rule that dispenses with the need of proving that his personal interest had any part in determining the fiduciary's conduct; indeed, with a rule that altogether forbids any inquiry whether it had any such part. We have found no decisions that have applied this rule inflexibly to every occasion in which the fiduciary has been shown to have had a personal interest that might in fact have conflicted with his loyalty. On the contrary in a number of situations courts have held that the rule does not apply, not only when the putative interest, though in itself strong enough to be an inducement, was too remote, but also when, though not too remote, it was too feeble an inducement to be a determining motive."

119 In the Bell Group Limited & Ors v Westpac Banking Corporation & Ors [2008] WASC 239 Owen J said:

"[4506] The courts have developed a pragmatic, commonsense approach to the scope of the conflict of interest rule by requiring a real sensible possibility of conflict before finding that a conflict of interest exists. In Boardman v Phipps [1967] 2 AC 46; Boardman v Phipps [1967] 2 AC 46 at 124 Lord Upjohn said:

In my view it means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you can imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict.

...

[4508] The test for ascertaining a possible conflict is objective. It is not necessary to establish fraud, dishonesty or bad faith: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; Regal (Hastings) Ltd v Gulliver [1967] AC 134 at 137. In order to assess whether or not there is a real or substantial possibility of conflict the court must adopt the position of the reasonable person looking at the relevant facts and circumstances of the particular case.

...

[4512] One way of ascertaining whether the interest of the fiduciary is remote or insubstantial is to ask whether the interest is such that a reasonable person would think there was a real or substantial possibility of the fiduciary being swayed by it. In this way, tests for the identification of the 'interest' and for the 'possibility of a conflict' would be applied bearing in mind a similar rationale."

120 A comprehensive summary is found in Settlement Agents Supervisory Board v Property Settlement Services Pty Ltd [2009] WASCA 143 per McLure JA (Owen, Newnes JJA agreeing):

"[71] A conflict of interest and duty can arise where the personal interest of the fiduciary is pecuniary or non-pecuniary, direct or indirect. A non-pecuniary interest includes an interest by way of association, whether by way of kinship or business connection. Whether the interest is within the conflict rule will depend on (inter alia) the nature, intensity and duration of the association.

[72] Not all interests are within the conflict rule. The interest must give rise to a conflict or a real or substantial possibility of a conflict: Hospital Products (103) (Mason J). There are other formulations of the required connection such as "a sensible, real or substantial possibility" (Clay v Clay (2001) 202 CLR 410) and "a significant possibility" (Chan v Zacharia (1983) 154 CLR 178 at 198). The extension to cover a real or substantial possibility of a conflict serves at least two functions. First, it is intended to signify that not all personal interests come within the conflict rule. An interest will not fall within the conflict rule if it is too remote or insubstantial: Hospital Products (103) (Mason J). Secondly, an anticipatory breach of the conflict rule can be restrained: Re Thomson; Thomson v Allen [1930] 1 Ch 203.

[73] The existence of a conflict of interest and duty (actual or otherwise) is not conditioned on proving that the fiduciary acted with the intention (purpose or motive) of advancing its personal interests:Hospital Products (103). An example illustrates the point. A director of a company will have an actual conflict of interest if the board of that company is to consider a resolution that the company enter into a financially significant transaction with another company in which the same director has a controlling interest. The director's personal interest is indirect and the conflict is actual not potential. This is to be contrasted with the doctrine of actual and apprehended bias applicable to public officers and officials.

[74] The object of the first limb of the conflict rule is to prevent a person who has undertaken to act for someone else from allowing any personal interest to sway or influence that person away from the proper performance of his or her duty to the principal: Chan v Zacharia (198-199). A conflict of interest and duty will exist if the interest in question is in opposition to, or in tension with, the duty of loyalty. That will be the case if there is a real and sensible possibility that the interest might sway or influence an agent away from the proper exercise of its duties (which includes powers) to the principal.

[75] The test as to the existence of a conflict or a real and substantial possibility of a conflict is objective. It is to be determined from the standpoint of the objective observer with knowledge of all relevant facts and circumstances: Boardman v Phipps [1967] 2 AC 46 at 124.

[76] The same general principles apply to the second limb of the conflict rule which requires a fiduciary to avoid a conflict of duty and duty. There must be a conflict or a real and sensible possibility of a conflict: Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165. A conflict will exist if the duties are inconsistent or irreconcilable. That will be the case if the interests of the persons to whom the duties are owed are in opposition or adverse to each other. The test of the existence of a conflict of duty and duty is objective.

[77] It may be a defence to an action based on breach of the conflict rule if the client has given its fully informed consent to the fiduciary continuing to act: Maguire v Makaronis (1997) 188 CLR 449. What action, if any, a fiduciary must take beyond disclosure will vary depending on all of the circumstances of the case: Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187."

The Interest of Mr Ma

121 As a preliminary matter it is convenient to ascertain Mr Ma's interest in the cleaning businesses. The plaintiff disputed that Mr Ma had an interest in AM or MX during the period 16 January 2008 and 6 June 2011 as alleged in the cross-claim. It was disputed that Mr Ma was, or was named, Mui Chee Ma. The evidence on the issue was scant.

122 It was common ground that, in about 1992, Mr Ma and Mr Carcaillet negotiated the contract for cleaning services by AM. Mr Carcaillet recalled that Mr Ma sold his cleaning business in about 2008, and continued to perform cleaning duties for the defendant. Mr Carcaillet understood that Mr Ma continued to do so after August 2010.

123 An ASIC search of the business name "AM Cleaning Services" showed it was registered on 24 May 2000 and cancelled on 26 August 2009, during which period it was held by one Mathew Stephen Hole. AM's invoices showed its business number as BN97726612. In his letter of 2nd November 2012, in response to a subpoena to produce documents, Mr Hole advised he was the sole trader of AM between 24 May 2000 and 24 May 2006, and its records showed no involvement with the defendant, Mr Ma, or Mui Chee Ma.

124 MX's invoices from 28 May 2010 showed its business number as ABN29760641925. An ABN Look Up search of the number showed it has been held in the name of Mui Chee Ma since 28 January 2010. An ASIC search showed that "MX Cleaning Services" was not a registered business name.

125 The paucity of evidence suggests the defendant proceeded on the assumption that during the relevant period Mr Ma had some pecuniary interest in AM and MX. Taken overall, I find it impossible to make a finding as to the nature and extent of Mr Ma's interest in the businesses. Mr Carcaillet's evidence goes no further than providing some support for an inference that the defendant assumed he had an interest, at least until about August 2010.

126 However, for present purposes it is sufficient to regard the uncertainty as a significant factor to be taken into account in determining the existence or possibility of the conflict alleged.

The Conflict Issue

127 The interest in question is said to be the personal interest of the plaintiff by way of kinship in authorising the invoices of AM and MX. The task for the Court is to objectively examine the facts to determine whether the plaintiff acted in a way in which there was a conflict, or a real and sensible possibility of a conflict that the interest might influence her away from the proper performance of her duties to the defendant.

128 The circumstances in which the conduct complained of for the relevant period necessarily include the circumstances in which the plaintiff was first required to authorise AM's invoices in about 1992 and continued to do so until termination.

129 The engagement of Mr Ma, and the supervision of the contracts with the cleaning businesses was undertaken by Mr Carcaillet. There was no involvement of the plaintiff in any dealing between the defendant and her brother. The plaintiff's association with her brother was, at most, a distant one. It is reasonable to conclude that but for the very fact of kinship there was nothing to suggest the plaintiff had a personal interest, direct or indirect, in authorising the invoices. It was not apparent that the plaintiff had a personal interest in authorising the invoices, or might thereby advance her brother's interests to the detriment of the defendant.

130 The defendant, at all material times, was fully aware of the relationship between the plaintiff and Mr Ma. Knowing of the relationship, Mr Carcaillet directed Mr Ma to send the invoices to her, as the financial controller. He instructed her to authorise and process the invoices for payment within the ordinary course of her employment. In practice, invoices for amounts different from the regular fortnightly charge were referred by the plaintiff to Mr Carcaillet for him to review and authorise.

131 The question of conflict was considered by Mr Carcaillet following publication of the Code to employees in May 2004. In his emails of 29 and 30 November 2004 Mr Carcaillet informed the plaintiff, and others, to the effect that the defendant's position was that a commercial arrangement such as that made between the defendant and Mr Ma without the plaintiff's involvement would not give rise to any conflict of interest.

132 Any interest the plaintiff might have had, other than in fulfilling her employment obligations, could only be described as remote or insubstantial. In my opinion, the position taken by the defendant in respect of the engagement of Mr Ma, and for the authorisation of the invoices by the plaintiff, effectively eliminated the prospect of conflict. Put another way, in the circumstances, the potential for a clash of interests never arose.

133 From the standpoint of the objective observer with knowledge of the facts and circumstances in this case, I hold that the defendant has failed to demonstrate actual conflict, or the real and sensible possibility of conflict, for the period 16 January 2008 to 6 June 2011, or at any time prior thereto.

134 This conclusion is reinforced by the lack of evidence as to the nature and extent of Mr Ma's interest in AM or MX, at least for the relevant period.

135 As no actual or potential conflict of interest was established, it follows that the claim that the plaintiff was in breach of duties to disclose must be rejected. I propose to order the cross-claim be dismissed.

136 However, if I am found to be wrong, and it is held there was a conflict, it is appropriate to deal briefly with issues as to the application of the relevant provisions of the Code and the certificate.

137 These instruments were notionally incorporated in the plaintiff's employment contract. Their terms are to be construed with regard to the principles applicable to commercial contracts. The instruments should be given an interpretation which accords with business commonsense, and avoids a result which is commercially nonsensical or inconvenient. The words should not be approached pedantically, or in a manner prone to defeat the evident commercial purpose. The words should be read fairly and broadly (Franklins Pty Ltd v Metcash Trading Limited [2009] NSWCA 407 para 19).

138 I turn first to the issue under clause 1.3 of the Code. The defendant submitted that in authorising the invoices the plaintiff was conducting business on behalf of the defendant with a sibling, thus attracting the obligation to notify the designated officers of any actual or potential conflict of interest. It was put that the plaintiff was in breach of the provision in failing to so notify.

139 Relevantly, clause 1.3 provides:

"...employees are prohibited from engaging in conduct that is, or appears to be, in conflict with the interests of Expeditors or its customers.

In particular, no director, officer or employee shall:

...

* Conduct business on behalf of Expeditors with immediate family members, which include spouses, children, parents, siblings and persons sharing the same home (whether or not such a person is a legal relative).

Directors, officers and employees must promptly notify the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel or the Chair of the Audit Committee of any actual or potential conflict of interest."

140 The underlying intention of clause 1.3, read as a whole, is to guard against persons, including employees, engaging in conduct that is, or appears to be, in conflict with the interests of the defendant or its customers. In my opinion, the expression "on behalf of Expeditors" signifies conduct of the person in a representative capacity. The provision envisages that a conflict will, or may appear to, arise where a person, as a representative of the defendant, conducts or engages in business with an immediate family member. It is conduct of this kind which, according to a commonsense, business like approach to its language, is prohibited by the provision.

141 The plaintiff's duties included approving payments of invoices for a wide range of services issued not only by AM and MX but by others e.g. KPMG, PKF Chartered Accounts, and Hays Recruitment Pty Ltd. Approval and authorisation of invoices by the plaintiff in the ordinary course of her employment were part of an internal accounting process. In my opinion, the carrying out of these duties cannot be reasonably described as the conduct of business on behalf of the defendant so as to attract the application of clause 1.3 of the Code. It follows, that as the plaintiff was under no obligation to notify, her failure to do so was not a breach.

142 The issues under clauses 6 and 7 of the certificate were whether the plaintiff wrongly failed to disclose a conflict of interest, and was involved in a related party transaction. Relevantly the certificate provides:

"6. Except for items reported to the Corporate Legal Department, if any, to the best of my knowledge there have been no violations or possible violations of our Code of Business Conduct by employees, agents, third party brokers, or other parties that represent Expeditors, which includes among other items:

...

d. Conflicts of interest.

7. Related party transactions such as sales, purchases, loans, transfers, leases, guarantees, contractual commitments and amounts receivable from or payable to related parties (excluding intercompany transactions) have been disclosed to the Country Controller, Regional Controller or Corporate Controller, as appropriate.

...

Related party:

Related parties are family members and businesses that they may own (fully or partially) or businesses in which they are directors, shareholders or executives".

143 The defendant maintained that the plaintiff was in breach of the disclosure requirement under clause 6 which was to certify that:

"...to the best of (her) knowledge there have been no violations or possible violations of our Code of Business Conduct by employees..."

144 In my opinion, the claim must be rejected. The evidence was (para 115 above) the plaintiff did not accept that by authorising the invoices she was conducting business on behalf of the defendant, and denied there was a conflict of interest arising out of her brother's involvement in AM. She said she understood from her managing director's emails of 29 November and 30 November 2004 that there was no conflict. Her evidence supports the finding that she was unaware of, and had no knowledge of a conflict. It sufficiently demonstrates the fact that, to the best of her knowledge, there had been no violation of the Code. Accordingly, the defendant's complaint with respect to clause 6 fails.

145 With respect to clause 7, the defendant submitted that, in authorising the invoices, the plaintiff was engaged in transactions concerning amounts payable to businesses in which her brother had an interest. It was put that these transactions were transactions with a related party, as defined, which the plaintiff was required to disclose.

146 For the plaintiff, it was argued that she was not engaged in a related party transaction within the meaning of clause 7. It was also put that the defendant had failed to prove for the period alleged that Mr Ma had an interest in AM and MX, and, hence, that the defendant had not proved he was a related party at any relevant time.

147 In my opinion, a commonsense, businesslike approach to the meaning of the word "transactions" leads to the understanding that it refers to "dealings" or "matters of business" between parties. The application of the clause to "related party transactions" obviously envisages transactions between a party and another party who is a related party as defined.

148 In my opinion there is no rational basis for the proposition either that authorisation amounted to a transaction as that word is ordinarily understood, or that the plaintiff was acting as a party to a transaction when she authorised an invoice for payment. In truth, there was no transaction to which the plaintiff and her brother were parties. The only transaction was the cleaning contract to which the defendant and Mr Ma were parties.

149 The obligation under clause 7 was to disclose related party transactions. There being no such transaction, the obligation did not arise. It follows that the plaintiff's failure to disclose was not a breach.

150 As to the claim of breach of section 182(1)(b) Corporations Act, 2001, the defendant alleged that the plaintiff, as an employee, had improperly used her position to cause detriment to the defendant. Its case was (T 300) the plaintiff had acted improperly in failing to disclose the matters required under the Code and the certificate. As I have found there was no breach of an obligation to notify under the Code, or to disclose under the certificate, there is no foundation for the claim of statutory breach. I reject it.

Summary

151 On the plaintiff's claim I have found (para 98 above) that:

(1) The proper period of notice was ten months, and the plaintiff is entitled to an award of damages in an amount to be agreed or assessed;

(2) The plaintiff is entitled to payment by the defendant of a pro rata bonus in the amount of $8,138.87;

(3) The plaintiff is entitled to payment by the defendant of the balance payable for long service leave in the amount of $265,373.44.

152 I propose to order that the cross-claim be dismissed.

153 The parties are directed to bring in short minutes to give effect to these conclusions. As the questions of interest and costs remain outstanding, absent agreement, the parties should have the opportunity to make submissions on these issues. Accordingly the parties are directed to arrange with my Associate by 4pm 4th July 2014 for the matter to be re-listed for the purpose of hearing any argument.

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Decision last updated: 30 June 2014