Supreme Court New South Wales

• Medium Neutral Citation: Sharma v Bibby Financial Services Australia Pty Ltd [2012] NSWSC 1157
• Hearing dates: 25, 26, 27 July 2012; 21, 22, 23 and 24 August 2012
• Decision date: 26 September 2012
• Jurisdiction: Equity Division
• Before: Bergin CJ in Eq

Decision

Plaintiff entitled to payment of amount equivalent to 6 months salary in lieu of notice and Special Bonus of $1.4 million plus interest

• Catchwords: [CONTRACT] - whether employment contract terminated without cause or terminated for serious misconduct - whether compliance with process for termination for serious misconduct - whether proper grounds for termination for serious misconduct - justification - whether conduct discovered after purported termination struck at the root of the employment contract - whether such conduct would justify a loss of trust and confidence in the relationship
• Legislation Cited: Evidence Act 1995; Sexual Discrimination Act 1984 (Cth)
• Cases Cited: Briginshaw v Briginshaw (1938) 60 CLR 336; Gillies v Downer EDI Limited [2011] NSWSC 1055; Hodgson v Amcor Ltd [2012] VSC 94; Sargent v ASL Developments Limited (1974) 131 CLR 634; Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; Siagian v Sanel Pty Ltd (1994) 122 ALR 333; Tullett Prebon (Australia) Pty Limited v Purcell [2009] NSWSC 1079; Zhu v Sydney Organising Committee for the Olympic Games & Ors [2001] NSWSC 989
• Texts Cited: Effectively preventing and responding to sexual harassment: A Code of Practice for Employers, Australian Human Rights Commission (2008 edition)
• Category: Principal judgment
• Parties: Ashley Lalit Sharma (Plaintiff); Bibby Financial Services Australia Pty Ltd (Defendant)
• Representation: GP McNally SC/D Stewart (Plaintiff); IM Neil SC/LP Menzies (Defendant); People and Culture Strategies (Plaintiff); Gillis Delaney Lawyers (Defendant)
• File Number(s): 2009/291197
• Publication restriction: Nil

Judgment

1 These proceedings arise out of the termination of the Executive Service Agreement (the Contract) between the plaintiff, Ashley Lalit Sharma, and the defendant, Bibby Financial Services Australia Pty Ltd, in either February or March 2009. The main issue in the proceedings is whether the defendant terminated the plaintiff's Contract and employment on 4 February 2009 without cause pursuant to clause 13.2 of the Contract or whether it terminated the Contract and employment on 24 March 2009 for cause (serious misconduct) pursuant to clauses 13.3 and 13.5 of the Contract.

2 The Contract is dated 3 June 2002 and was originally between the plaintiff and Bibby Group of Factors Ltd, a company registered in England (Bibby UK). The defendant was incorporated on 9 August 2002 and on 28 November 2002 the Contract was novated to it with effect from 1 December 2002.

3 The defendant and Bibby UK conduct the business of debt factoring; providing working capital for businesses by using their invoices (as opposed to their assets) as primary security. The debt factoring options include invoice discounting and full service factoring. In the former, the defendant deals directly with the client in purchasing the debt at a discount (approximately 20%) and does not have any direct contact with the debtors. In the latter, the defendant purchases the debts and notifies and deals directly with the debtors of the client in recovering the debts.

4 Between 2001 and June 2002 the plaintiff worked for Orix Australia Corporation Limited (Orix) in its Factoring Division where Gregory Wayne Charlwood and Steven Davies were also employed. Bibby UK approached Mr Charlwood with the proposal that he, the plaintiff and Mr Davies take up employment with Bibby UK to establish a factoring business in Australia. That business was subsequently established and is operated by the defendant. Mr Charlwood is the Managing Director, Mr Davies is the Operations Director and until February 2009 the plaintiff was the Sales Director.

The Contract

5 The plaintiff's employment as the Sales Director of the defendant included the obligation to perform the duties listed in Schedule 1 of the Contract (cl 3.1). Those duties included: exercising the powers and functions and performing the duties vested and assigned to him by the defendant (1(a)); performing his duties to the best of his ability and knowledge (during or outside business times) (1(b)); serving the defendant faithfully and diligently (1(c)); promoting the interests of the defendant (1(d)); acting in the defendant's best interests (1(e)); complying with all of the defendant's directions (1(f)); and complying with all laws applicable to his position and duties (1(g)). The plaintiff also agreed not to act in conflict with the defendant's best interests (cl 3.2(a)).

6 The Contract provided for a Total Remuneration package the components of which were an annual base salary and superannuation, renewed annually on 1 January each year (cl 4.1, 4.2 and 4.6).

7 The Contract included the following:

13.TERMINATION

13.1During the first 12 months of employment from the Commencement Date, the Executive's employment may be terminated at any time by:

(a)the Executive giving to the Company 3 months notice; or

(b)the Company giving to the Executive 3 months notice or in its discretion, by the Company electing to pay the Executive an amount equal to the Executive's annual base salary in lieu of notice for that period.

13.2After 12 months from the Commencement Date, the Executive's employment may be terminated at any time by:

(a)the Executive giving to the Company 6 months notice; or

(b)the Company giving to the Executive 6 months notice or in its discretion, by the Company electing to pay the Executive an amount equal to the Executive's annual base salary in lieu of notice for that period.

13.3Despite the provisions of clause 13.1 and 13.2 the Executive's employment may be terminated by the Company at any time without notice or any payment in lieu if the Executive:

(a)disobeys a lawful direction of the Company;

(b)is guilty of other serious misconduct;

(c)breaches clauses 10 or 11;

(d)other than clauses 10 or 11 breaches any material provision of this agreement;

(e)is for any reason unable to perform his duties to the satisfaction of and to a standard acceptable by the Board;

(f)becomes unable to pay the Executive's debts as they become due; or

(g)is found guilty by a court of a criminal offence or guilty of any conduct which in the reasonable opinion of the Company would bring the Company or its business into disrepute.

13.4Termination of the Executive's employment does not affect any accrued rights or remedies of the Executive or the Company.

13.5The Company agrees not to terminate the Executive's employment without bringing to the notice of the Executive the alleged breach or misconduct and giving the Executive the Executive (sic) the opportunity to respond to such allegations prior to any final decision to terminate the Executive's employment. The Company will take submissions (if any) by the Executive into account before any final decision is made. Any final decision will be made in good faith and on the basis of the factual material before the Company including the Executive's response.

8 The plaintiff was entitled to a bonus in accordance with the defendant's bonus scheme set out in Schedule 2 of the Contract (cl 5). That Schedule included provisions in relation to both an Annual Bonus and a Special Bonus. The provisions relating to the Special Bonus are in the following terms:

2.Special Bonus

Definitions

2.1In this paragraph:

'Cap' means A$1,400,000.

'Net Profit' means Net profit after tax.

'Year 1' means the financial year immediately preceding any election to become entitled to the Special Bonus under paragraphs 2.3 to 2.5.

'Year 2' means the financial year in which the election to become entitled to the Special Bonus under paragraphs 2.3 to 2.5 is made.

'Year 3' means the financial year following Year 2 in which the payment of the Special Bonus is made under paragraphs 2.6.

Election of right to Special Bonus

2.2The Executive will, subject to the following provisions, be eligible to receive a Special Bonus calculated by reference to the net profit of the Company. The Executive shall only be entitled to payment of this Special Bonus once from the Company. In order for the Executive to elect to and become entitled to and subsequently be paid the Special Bonus pursuant to this paragraph the Company's Net Profit for the relevant Year 1 and Year 2 must be A$500k or greater in both Year 1 and Year 2. Subject to the cap, the Special Bonus payable to the Executive shall be based upon the following schedule:

Net profit of the Company	Amount of Special Bonus
Less than A$500,000	0%
A$500,000 to A$1,499,999	10%
A$1,500,000 to A$1,999,999	20%
A$2,000,000 to A$2,499,999	30%
A$2,500,000 to A$2,999,999	35%
A$3,000,000 to A$3,499,999	37.5%
Over A$3,500,000	40% (not to exceed the Cap)

2.3The Executive may make a once only election to become entitled to payment of the special bonus ('Special Bonus'). This election must be made by the Executive between 1 September 2006 and 1 September 2009. Election by the Executive shall be made within 30 days of the Company delivering to the Executive signed audited financial statements relating to the Company for Year 1 which establish that the Special Bonus threshold has been reached for Year 1. Once the election is made, payment will be made by the Company and received by the Executive at a time in Year 3 in accordance with paragraph 2.6. The amount of the Special Bonus paid in Year 3 by the Company to the Executive will be calculated in accordance with paragraph 2.7.

2.4If the Executive has become eligible for the maximum Special Bonus of the Cap by virtue of the net profit of the Company being at least A$3,500,000 for two consecutive financial years, notwithstanding that no election is made by the Executive under paragraph 2.3 the Special Bonus shall be paid to the Executive within 60 days of the Company delivering to the Executive signed audited financial statements for the second of such financial years unless the Company and the Executive agree to a later payment date.

2.5In the event that the Executive does not make an election to the Special Bonus and the Special Bonus has not been automatically triggered by virtue of the net profit being at least A$3,500,000 for two consecutive years the Special Bonus shall be automatically triggered on 1 September 2009. At this time the Special Bonus shall be calculated in accordance with paragraph 2.7.

2.6In the event of the Executive making an election to receive the Special Bonus, payment of the Special Bonus shall be made in Year 3 within 30 days of the Company delivering to the Executive signed audited financial statements of the Company for Year 2.

2.7The amount of the Special Bonus payable to the Executive shall be determined by the Company based upon the formula set out in paragraph 2.2 above provided that if payment of the Special Bonus is made pursuant to paragraph 2.3, on Executive election, the net profit used in the calculation under paragraph 2.2 shall be the net profit for Year 2.

2.8Notwithstanding any of the provisions under this clause 2 relating to the Special Bonus, the Executive shall forfeit any and all rights to the Special Bonus if his employment is terminated for any reason described in clause 13.3 of the agreement.

2.9In the event the Executive's employment with the Company terminates:

(a)prior to 1 September 2006 (where the Company terminates the Executive's employment except for cause under paragraph 2.8), the Executive will be deemed to have made the election to become entitled to payment of the Special Bonus (and the year in which the employment terminates shall be deemed to be Year 2 of the election period). Payment of the Special Bonus will be calculated and made in accordance with paragraphs 2.2 to 2.7 inclusive.

(b)prior to 1 September 2006 (where the Executive terminates employment with the Company), no right to a Special Bonus shall accrue to the Executive.

(c)on or after 1 September 2006 the Executive shall be entitled to elect to receive the Special Bonus in accordance with paragraph 2.3 above.

2.10Despite paragraph 1 of this Schedule, the Executive will not receive an Annual Bonus in any year that the Employee receives a Special bonus under paragraph 2 of this Schedule.

The early years

9 The relationship between the plaintiff and Messrs Charlwood and Davies was not without complexity. On 29 August 2003 they wrote to the plaintiff about a number of "significant concerns" that caused them to question whether they could continue to work with him. They advised him that they had decided to "lay down" their concerns and that if he failed to make a significant effort to overcome them they would regrettably work towards his dismissal as a director.

10 The "significant concerns" were identified as: aggressive and unwarranted remarks directed to his fellow directors in earshot of other staff; an inability to accept a credit decision; debate of matters for the purpose of winning rather than debating matters that he believed in; attempting to mislead them; undermining their decisions with other staff; failing to follow reasonable directions; and interfering in operations proper due diligence.

11 The plaintiff responded to these criticisms both informally by email on 1 September 2003 and more formally by a detailed letter on 5 September 2003. The plaintiff claimed that he had taken the concerns most seriously and would endeavour to accommodate them. Those concerns appear to have dissipated and the plaintiff's salary was increased each January at the review until 2009.

Directors Pact - late 2008

12 On 24 November 2008 Mr Charlwood wrote to the plaintiff and Mr Davies by email in the following terms:

Subject: Directors Pact

Guys, it is very important to me that we become a strong team where (sic) know we can rely on each other. We have all spoken about this in recent times and I think we are committed to being a tight team. At the end of the day each of us three should see the other two as their ally and friend. I know we have had our problems in the past but lets just put all that behind us and forge forward and make this business great and get some nice bucks in bonus. Apart, we won't succeed with a good bonus, together we will. As a sign of our commitment can you please acknowledge that you will accept and abide by our Director's Pact.

13 On 29 November 2008 the plaintiff wrote to Mr Charlwood and Mr Davies in response as follows:

Subject: Re: Directors Pact

Greg and Steve

I committed to our business success in July 2002, when we signed our contracts with Bibby Financial Services.

If it helps renewing our vows again, then I am delighted to reaffirm my commitment. I very much look forward to getting our AUD1.4m special bonus in due course (God willing).

Mr Wright's employment

14 David Wright was employed with the defendant as the Sales Manager for New South Wales. He travelled to Australia in March 2008 to be interviewed for the role and had accepted an offer of employment with the defendant at that time. However he discussed the proposal to come to Australia at length with his family and because his wife was only "99 per cent certain" and he needed her to be "100 per cent" certain, he decided not to take up the employment (tr 235). Mr and Mrs Wright had very young twin boys and a factor that prevented Mrs Wright from being 100 per cent certain was the difficulty her mother (who assisted with the twins) was having obtaining a visa to come to Australia (tr 361).

15 It was later in 2008 that there was a further approach from Mr Wright to commence employment with the defendant. He accepted employment and travelled to Australia with his family, including his mother-in-law, in September 2008. He had the month of September 2008 to settle his family in to Sydney and commenced work with the defendant on about 7 October 2008. In mid-December 2008 he returned to the UK without notice.

16 Mr Wright reported directly to the plaintiff. The period of Mr Wright's employment was very short and the manner of his departure from the defendant's employment and return to the United Kingdom (UK) in December 2008 is quite complex. The tensions within Mr Wright's personal life in December 2008 were obviously intense. He had infant twins; his wife was hospitalised with a serious illness; and his mother-in-law, who assisted with the care of the twins, had decided to return to the UK. However Mr Wright claimed that the cause of his departure from the defendant's employment and his return to the UK was the alleged sexual harassment by the plaintiff. After his return to the UK, Mr Wright wrote an email to the Head of the Human Resources Department (Global) of Bibby UK, Ms Miriam Koller, on 8 January 2009 setting out the detail of his claims in this regard.

The defendant's investigations - January 2009

17 Ms Koller travelled to Australia in January 2009 and conducted interviews with a number of employees of the defendant. Ms Koller accepted during her cross-examination that only one of the persons she interviewed gave "some small support" to Mr Wright but not with regard to the specific allegation of sexual harassment (tr 167).

18 Mr Charlwood gave the following evidence in cross-examination (tr 105-107):

Q.Of course to your knowledge none of those other witnesses that were interviewed corroborated any sexual harassment, did they?

A.That's correct.

Q.So notwithstanding that none of them corroborated any sexual harassment, you decided that Mr Sharma should be dismissed because of sexual harassment?

A.That's correct.

...

Q.But you've already said not five minutes ago that none of the witnesses that were interviewed corroborated sexual harassment?

A.Well, they said there was inappropriate behaviour.

Q.You said none of them corroborated sexual harassment. That was your evidence, wasn't it?

A.Yes, it is, but our assessment of it was that that was the nature of it.

Q.But there was no corroboration of any physical contact whatsoever, was there?

A.No.

Q.There was no corroboration of any of the precise allegations that were made by Mr Wright, were there?

A.No.

Meeting - 4 February 2009

19 On 4 February 2009 Mr Charlwood informed the plaintiff that there was "a very serious problem in the business" and that they "needed to talk about it quickly". The plaintiff met with Mr Charlwood and Ms Koller at the Mecure Hotel later that morning. The plaintiff's affidavit evidence in relation to the conversations that occurred at the meeting on 4 February 2009 was not challenged. He said that the following conversation occurred:

Koller:This is going to be really painful but we have decided to terminate your contract.

Plaintiff:What for?

Koller:Your conduct is unbecoming of a director.

Plaintiff:On what basis did you come to this conclusion?

Koller:I have spoken to a couple of people at work and they think you are aggressive.

Plaintiff:Can you give me some examples.

Koller:If you do not resign we will terminate your contract. This process is not a negotiation. We do not have to tell you anything and we have lost trust and confidence in you.

Plaintiff:What about my contribution to the business? You can't just terminate me like this.

Charlwood:We will pay you 75% of your special bonus and give you six months in lieu of notice.

Koller:We are paying you on moral grounds.

Plaintiff:Please put it in writing and we shall go from there.

Charlwood:We will have your termination letter to you by Friday. Don't talk to any staff or clients.

20 Mr Charlwood's recollection of the conversation at the meeting was poor (tr 124). However he did recall Ms Koller saying to the plaintiff "If you do not resign we will terminate your contract" or words to that effect (tr 124). He also recalled that there was something said at the meeting about paying the plaintiff six months in lieu of notice and as he recollected it, "sixth-sevenths" of his Special Bonus (tr 125).

21 Mr Charlwood also gave evidence in cross-examination that by 4 February 2009 he had decided that what Mr Wright was saying "must have been true". He also agreed that there was nothing whatsoever that the plaintiff could say to him that would have any effect on his decision that the plaintiff "had to go" (tr 104; 126; 135). Mr Charlwood accepted that on 4 February 2009 he had the option in his mind of terminating the plaintiff's Contract pursuant to clause 13.2 or invoking clause 13.3 and 13.5 for serious misconduct dismissal. He agreed that he weighed those options up and looked at both possibilities. He gave evidence that he decided that rather than go under the clause 13.3 serious misconduct path, he would go under clause 13.2 because he thought that would save some "unpleasantness" (tr 131-133).

22 Although Ms Koller's affidavit evidence of what was said at the meeting on 4 February 2009 differed from the plaintiff's version of what was said, the defendant (through its Senior Counsel) made the following concession during the course of Ms Koller's cross-examination on the second day of the trial (tr 184):

I wanted to tell your Honour what we told our learned friend a moment ago, we will not be submitting that your Honour should not accept Mr Sharma's account of the proceedings of the meeting on 4 February 2009 and indeed your Honour will recall that we cross-examined Mr Sharma putting to him essentially the substance of his own account and inviting him to confirm that. That's the position upon which we are going forward.

23 In cross-examination Ms Koller admitted that by 4 February 2009 she had decided that the plaintiff "had to go" (tr 161). Ms Koller said that she accepted the evidence that she had gathered without giving the plaintiff an opportunity to comment upon it and without even asking him if it was true (tr 162). Ms Koller was asked about the defendant's grievance procedure and gave the following further evidence in cross-examination (tr 160):

Q.The grievance procedure is designed so as to be fair to both the person who makes a complaint and the person who is the subject of the complaint. That's correct, isn't it?

A.Yes.

Q.And in this case you decided that you would not follow the grievance procedure, didn't you?

A.Yes.

Q.And you agree, do you not, that that could result in Mr Sharma having been treated in an unfair manner?

A.Yes.

Q.And in fact do you now agree that Mr Sharma was treated in an unfair manner?

A.Yes.

The Deed

24 A draft Deed was prepared and provided to the plaintiff (around 9 February 2009) which included the following:

C.The Executive's employment with Bibby was terminated on 4 February 2009.

D.Following negotiations the parties have agreed to resolve all matters between them arising out of the employment relationship and its termination upon the terms and conditions noted in this deed.

...

2.1Within 7 days of the receipt by Bibby of this Deed and the form of Resignation of Director (attached as Annexure A) both executed by the Executive, Bibby will pay to the Executive:

(a)a sum equal to 6 months remuneration based on the executive's Total Remuneration (less appropriate Australian taxes) and less any amounts owed by the Executive to Bibby;

(b)a sum equal to the Executive's entitlement (if any) to a bonus on a pro rata basis calculated in accordance with Schedule 2 of the Agreement (less appropriate Australian taxes) within 21 days from when the audit accounts for the year ending 30 December 2010 are published.

Correspondence

25 The plaintiff's then solicitors, Harmers, wrote to Mr Charlwood on 13 February 2009 advising that they acted for the plaintiff and had been provided with a copy of the draft Deed that had been provided to the plaintiff. That letter included the following:

We act Ashley Sharma, and have been provided with a copy of the Executive Service Agreement between our client and Bibby Group of Factors Limited ("BGFL") dated 3 June 2002 ("Agreement") and a draft Deed of Release.

We are instructed that on 4 February 2009, you and Miriam Kohler (sic) met with our client and informed him that Bibby Financial Services Australia Ltd ("BFSA") had decided to terminate his employment with that entity. You also sought our client's resignation as a director of BFSA.

There has been no valid termination by that entity where, as you appear to say, BFSA had "assumed" the rights and obligations of BGFL. Specifically, we draw your attention to clause 13.5 of the Agreement.

Our client has a legitimate expectation that you will now attempt to affect the termination of his employment and his removal as a director, in breach of your obligations to him, given that we have now alerted you to these matters.

Accordingly, we place your notice that should you not provide the undertaking below by midday on Monday 16 February 2009 we will approach the Court for urgent interlocutory relief without further notice to you.

26 Harmers sought undertakings including that the defendant would not take any steps or conduct itself in any way so as to effect the termination of the plaintiff's employment or to determine a Special Bonus payable to the plaintiff, without "first complying fully with clause 13.5 of the Agreement".

27 On 16 February 2009 a telephone conversation between Harmers and the defendant's solicitors, Gillis Delaney, took place. As a result of that conversation Harmers wrote to Gillis Delaney on 16 February 2009 setting out the understanding from that telephone conversation. That letter included the following:

1.Understanding of Bibby's position

We understand from our telephone conversation that:

(a)Bibby is not prepared to have a conference to discuss this matter, as suggested in our letter;

(b)Bibby has been purporting to rely on clause 13.2 of our client's Executive Service Agreement dated 3 June 2002 ("Agreement") to initiate the termination, and so did not consider it was necessary to apply clause 13.5 of the Agreement;

(c)Bibby will now, pursuant to clause 13.5, provide Mr Sharma in writing with the allegation of misconduct which Bibby alleges he has engaged in and seek his response to that allegation;

(d)Bibby will consider Mr Sharma's response to that allegation; and

(e)If the termination is confirmed, Bibby will proceed to terminate Mr Sharma's employment without notice or payment in lieu.

2.Response to Bibby's Position

In light of our understanding of Bibby's position, and while reserving our client's rights as to that position, we note the following:

(a)While Mr Gillis did not, during the telephone conversation referred to above, specifically address the undertaking sought in our letter dated 13 February, it would appear from what Mr Gillis said that Bibby has, in effect, agreed to that undertaking.

(b)Given you have now confirmed that Mr Sharma's employment has not yet terminated, Mr Sharma wishes to continue performing his duties. As there is no right under the Agreement for Bibby to place Mr Sharma on garden leave, if it declines this request Bibby will be in further breach of the Agreement.

(c)We disagree with your construction of the circumstances in which clause 13.5 has application, and so ask that you provide is with your interpretation of when clause 13.5 has effect.

(d)Given Bibby has now indicated that it is prepared to comply with clause 13.5, we set out under the following heading a process that we consider would be fair and reasonable in the circumstances.

28 The timetable was then proposed by which the defendant was to provide the plaintiff in writing, via Harmers, by 5pm on 18 February 2009 particulars of the alleged breach of the Contract or misconduct; the plaintiff's response by "written submission" to be provided by 5pm on 24 February 2009; and the defendant to "convey its position in writing" by 5pm on 27 February 2009.

29 On 16 February 2009 Gillis Delaney wrote to Harmers in terms that included the following:

Our client has terminated your client's employment under the Executive Service Agreement dated 3 June 2002 (the "Agreement") pursuant to clause 13.2. Your client's employment under this clause "maybe terminated at any time by the Company giving to the Executive since months notice ... ".

The Deed of Release provided to your client reflects the payment due to your client pursuant to clause 13.2 and a pro rata bonus calculated in accordance with Schedule 2 of the Agreement.

With respect, clause 13.5 of the Agreement only applies if your client's employment under the Agreement is terminated for one or more of the reasons set out in clause 13.3. If your client's employment had been terminated for one or more of the reasons set out in clause 13.3, our client would not be obliged to give your client any notice or payment in lieu of notice. Specifically clause 13.5 requires the Company not to terminate your client's employment without bringing to your client's notice the "alleged breach or misconduct" which would entitle our client to terminate your client without notice.

As our client is not terminated your client pursuant to clause 13.3, our client is not obliged to comply with clause 13.5 of the Agreement. Consequently our client will not be providing the undertaking sought by you in your letter dated 13 February 2009.

We are instructed our client is not prepared to negotiate on the offer set out in the Deed.

30 On 20 February 2009 Gillis Delaney wrote to Harmers in the following terms:

We refer to previous correspondence.

We are instructed the offer contained in the Deed of Release forwarded to your client will remain open for acceptance by your client until 5pm 23 February 2009.

Unless we received (sic) an executed copy of the Deed of Release by 5pm 23 February 2009, the offer contained in the Deed of Release will be withdrawn. In those circumstances we are instructed our client will provide your client with a notice of the alleged breach of the Executive Service Agreement ("Agreement") and misconduct of your client by 5pm 24 February 2009. Your client will be provided with a reasonable time to respond.

In accordance with our client's obligations pursuant to Section 13.5 of the Agreement, our client will review your client's response and provide a decision as to whether your client will be terminated without notice for any of the reasons set out in Clause 13.3.

We await your client's response.

31 On 23 February 2009 Harmers responded to Gillis Delaney's letter of 20 February 2009 in the following terms:

We refer to your facsimile dated 20 February 2009. We note that you have asked our client to state whether he accepts or declines the offer in the deed that was provided to him by Bibby Financial Services Australia Limited by 5 pm today ("Deed").

We note that clause 2.1(b) of the Deed states that the bonus will be calculated on a "pro-rata basis", but does not provide any further detail as to what that pro rata proportion is. As you will appreciate, clause 2.1(b) is too uncertain in the circumstances, so we require you to confirm the pro rata proportion and the method used for determining that pro rata proportion.

This request clarification should not be interpreted, in any way, as an indication that our client will accept the offer. However, it is important that our client has sufficient information regarding the offer in the Deed, in order to provide his instructions to us regarding that offer and your letter of 20 February 2009.

32 On 23 February 2009 Gillis Delaney responded to Harmers' letter of that date as follows:

We refer to your letter dated 23 February 2009.

We confirm clause 2.1(b) of the Deed means your client is entitled to receive the percentage of the Special Bonus, if any, calculated in accordance with Schedule 2 of his Executive Service Agreement for the period of employment of your client's employment as compared with the total period used to calculate the Special Bonus had your client's employment not been terminated prior to the last day of the bonus calculator year.

33 On 25 February 2009 Gillis Delaney wrote to Harmers in the following terms:

We refer to our letter dated 16 February 2009 and note that your client has not returned the Deed of Release. We are instructed that our client formally withdraws the offer contained in the Deed of Release.

Pursuant to Clause 13.5 of the Executive Service Agreement dated 3 June 2002 (the "Agreement") our client will provide your client, through your firm, notice of the breach of the Agreement on 26 February 2009 (the "Notice").

Your client will be given a reasonable time to respond to the allegations contained in the Notice before any final decision is made by our client as to whether your client is to be dismissed pursuant to Clause 13.3 of the Agreement.

34 On 26 February 2009 Harmers wrote to Gillis Delaney in the following terms:

This letter serves as formal notice to your client that our client, Ashley Sharma, elects to become entitled to the Special Bonus referred to in Schedule to of his Executive Service Agreement dated 3 June 2002.

35 On 4 March 2009 Gillis Delaney wrote to Harmers in terms that included the following:

We advise our client has now completed its investigations into your client's performance and obligations under the Executive Service Agreement dated 3 June 2002 (the "Agreement"). The investigations included obtaining information from current and former employees, clients and referrers.

...

Our client now wishes to bring to the attention of your client allegations of breaches of the Agreement and serious misconduct allegations. Our client giving your client notice of the alleged breaches and serious misconduct pursuant to its obligations under Clause 13.5 of the Agreement.

36 That letter included a number of "misconduct" allegations. However the only "misconduct" allegations pursued with relevance to these proceedings were as follows:

1.Misconduct

...

1.9Harassment and bullying of David Wright Head of NSW Sales which caused him to leave the company specifically sighting (sic) the bullying and harassment by your client as this reason for leaving.

37 The letter also included the following:

2.Breaches of the Agreement

2.1Failing to follow the reasonable directions of the Managing Director in relation to:

(a)supporting the decisions of the Operations Director.

(b)supporting the decisions of the Head of Operations NSW

(c)ceasing to be aggressive towards the Operations Director.

(d)the structure of the state management bonus scheme.

(e)utilising the Company Secretary for human resources issues.

(f)ceasing to be derogatory to staff members regarding their weight.

(g)ceasing to be intoxicated and abusive to staff, clients and referrers at external functions.

2.2Not acting in the best interest of the Company as set out in the reasons provided under the heading of Misconduct.

Your client should respond to the allegations set out in this letter. Your client will be provided with a reasonable time to respond to the allegations. Our client will consider your client's response and will advise you of its final decision which may include disciplinary action and/or termination of the Agreement.

38 On 9 March 2009 Gillis Delaney wrote again to Harmers asking whether the plaintiff intended to provide a response to the allegations set out in their letter of 4 March 2009. That letter included the following:

Our client is required to provide your client with a reasonable time to respond to the allegations. We consider 7 days is reasonable time to respond.

Consequently, if your client does (sic) make any submissions or respond to the allegations by 5.00 pm, 11 March 2009, our client will proceed to make its final decision based on the factual material before the company without your client's response.

39 On 10 March 2009 Harmers wrote to Gillis Delaney in response:

In your letter dated 4 March 2009, you have sought to make a number of serious allegations against our client. We are obtaining instructions from our client on those allegations in circumstances where many of the allegations are, at best, vague.

In the spirit of cooperation, to the extent feasible, we will provide our client's response to the allegations on the information provided. However, where further clarification and details are required in order for our client to respond, we will seek that clarification from you.

We anticipate responding to the allegations, on the above basis, by 5:00pm on Friday, 13 March 2009.

40 On 13 March 2009 Harmers responded to each of the allegations contained in Gillis Delaney's letter of 4 March 2009. However it is only necessary to refer to the response to the allegations made in respect of Mr Wright. In this regard the letter was as follows:

9.Harassment and bullying of David Wright Head of NSW Sales which caused him to leave the Company specifically sighting (sic) bullying and harassment by Sharma as his reason for leaving

9.1While insufficient details are provided to enable our client to respond adequately to this allegation, our client surmises that it relates to exchanges made between Mr Sharma and Mr Wright during Mr Wright's short period of employment with Bibby in late 2008, in particular as to periods of annual leave taken by Mr Wright.

9.2We are instructed that in the period of less than two months, Mr Wright had a number of days' annual leave. Certain of these leave days were taken by Mr Wright at short notice and in circumstances where the leave had an adverse impact on Mr Wright's ability to meet deadlines, and so adversely affected the business.

9.3An example of this was when Mr Wright asked for one day of annual leave to take his family to the Zoo within three weeks of being employed. Mr Wright's annual leave day coincided with a settlement date that he had been responsible for. On the day of settlement, and whilst Mr Wright was on annual leave, Mr Sharma noticed that Mr Wright had not completed some of the work that he had been instructed to do.

9.4As a result of this, the settlement deal was not made on that day. In accordance with Mr Sharma's managerial responsibilities, Mr Sharma raised concerns with Mr Wright regarding the timing of these annual leave days. In late November 2008, Mr Wright's wife was diagnosed with a life threatening illness. Mr Sharma did not raise any objections to Mr Wright taking leave periods connected with that illness. Further in or about December 2008 Mr Wright indicated to Mr Sharma that he needed some time off, and did not wish to be contacted. Mr Wright did not indicate how much time he intended to take off.

9.5In late November 2008, Mr Wright's wife was diagnosed with a life-threatening illness. Mr Sharma did not raise any objections to Mr Wright taking leave periods connected with that illness. Further, in or about December 2008 Mr Wright indicated to Mr Sharma that he needed some time off, and did not wish to be contacted. Mr Wright did not indicate how much time he intended to take off.

9.6After a period of about nine days, Mr Wright did not return to work nor contact Mr Sharma to provide an update on his absence. Mr Sharma became concerned about Mr Wright's wellbeing, given the emotional impact that Mr Sharma had observed Mr Wright had suffered due to his wife's illness. Due to this concern, Mr Sharma tried to contact Mr Wright. Mr Sharma was also contacted by a close friend of Mr Wright's who asked Mr Sharma if he knew where Mr Wright was. This concerned Mr Sharma further, as even Mr Wright's friend did not know where he was.

9.7Due to this concern about Mr Wright's well-being, Mr Sharma again attempted to contact Mr Wright. Mr Sharma never heard from Mr Wright again, but was advised by Bibby that he had returned to the United Kingdom with his wife.

9.8To classify the above as "harassment" and "bullying" is unfounded and offensive. Rather, Mr Sharma's conduct was consistent with what would be expected of a manager at his level, and reflected a concern by Mr Sharma for Mr Wright's well-being.

9.9Therefore, if your client wishes to maintain this allegation against our client, we require the following information so our client can adequately respond to the allegation:

(a)when each of the alleged incidents occurred;

(b)what occurred on each occasion; and

(c)details as to who was involved, whether there were any witnesses, and where the incidents occurred.

9.10We also ask that you identify the specific breach of Mr Sharma's employment contract you say this goes to.

Your client should now seriously consider its position and put to our client only those material allegations it can support with "facts", and for those allegations that your client cannot put forward "facts" in support, they should be abandoned.

We also request that, given the nature of the allegations, your client provide us with any statements or notes of interviews it has obtained in relation to the above.

We request that these matters be attended to at your client's earliest convenience.

41 On Friday 20 March 2009 Gillis Delaney responded to Harmers letter of 13 March 2009 noting the plaintiff's denials in respect of the allegations and advising that they would be "considered" by the defendant "in light of the investigations carried out" by the defendant. The letter also advised that whilst the defendant did not consider it was under any further obligation to provide any further details certain "specifics" were provided. This was the first time the defendant provided to the plaintiff the detail of the actual allegations of sexual harassment that Mr Wright had communicated to Ms Koller on 8 January 2009. The defendant gave the plaintiff only 24 hours to respond to these most serious allegations.

42 On Monday 23 March 2009 Harmers sought an extension of time to 24 March 2009 to respond to the new allegations. On the same day Gillis Delaney advised that the plaintiff was required to respond by 5.00 pm on 23 March 2009.

43 On 24 March 2009 Harmers wrote to Gillis Delaney seeking further particulars of the allegations so that the plaintiff could respond appropriately. That letter included the following:

Given the seriousness of those allegations, were they to be true (which we emphasise again our client denies), one would have expected your client to have specifically drawn them to our client's attention from the outset. Further, the fact that your client did not do so, in and of itself, calls into question the veracity of those allegations.

44 On 24 March 2009 the defendant wrote to Harmers noting that they had not received any response to their letter of 20 March 2009 and enclosing a letter from the defendant to the plaintiff in terms that included the following:

RE:YOUR EMPLOYMENT BY THE COMPANY

This letter serves to formally advise you that your Executive Service Agreement dated 3 June 2002 between you and Bibby Group of Factors Limited (the "Agreement") will be terminated effective from close of business on 24 March 2009. Your employment has been terminated pursuant to clause 13.3 of the Agreement as:

1.you have disobeyed a lawful direction of the Company; and

2.are guilty of serious misconduct.

As a result of your employment being terminated pursuant to clause 13.3 of the Agreement:

(i)you are not entitled to any notice of your termination or any payment in lieu of notice; and

(ii)you will forfeit any and all rights to the special bonus as detailed in Schedule 2 of the Agreement.

45 That letter went on to advise that the defendant had determined that the plaintiff was not entitled to any annual bonus in accordance with clause 1 of Schedule 2 of the Contract and reminded the plaintiff of the provisions of clause 15 of the Contract in which he had agreed to a restraint period of six months during which he would not engage in any business or activity the same or similar to, or in competition with, the defendant.

Proceedings

46 The plaintiff commenced the proceedings by the filing of a Statement of Claim on 5 November 2009. The pleadings on which the trial proceeded were the Amended Statement of Claim filed on 23 February 2011 and the Amended Defence filed on 19 April 2012.

47 The proceedings were heard on 25, 26 and 27 July 2012 and 21, 22, 23 and 24 August 2012. The plaintiff had objected to Mr Wright giving evidence by video link and the hearing was adjourned from July to August (over the plaintiff's opposition) to allow the defendant to bring Mr Wright to Australia from the UK to give evidence in the proceedings.

48 Mr GP McNally SC, leading Mr D Stewart, of counsel, appeared for the plaintiff. Mr IM Neil SC, leading Mr LP Menzies, of counsel, appeared for the defendant.

Issues for determination

49 The first issue for determination is whether the defendant terminated the plaintiff's employment pursuant to clause 13.2 of the Contract in February 2009 (Clause 13.2 Issue). If the defendant did so, the parties agree that the plaintiff is entitled to a payment equivalent to six months salary in lieu of notice and a Special Bonus of $1.4 million plus interest (tr 420).

50 If the Contract was not terminated under clause 13.2, the issue for determination is whether the defendant's purported termination of the plaintiff's Contract pursuant to clause 13.3 on 24 March 2009 was valid (Clause 13.3 Issue).

51 There is an issue as to whether the defendant would be otherwise justified in terminating the plaintiff's Contract for alleged misconduct it discovered after the events of February and March 2009: Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 (Justification Issue).

Clause 13.2 Issue

52 The plaintiff contends that he was terminated lawfully in February 2009 under clause 13.2 of the Contract and that he was then entitled to six months pay in lieu of notice and to elect to receive the Special Bonus. It is contended that the defendant made an election to terminate the plaintiff's employment under clause 13.2 rather than under clauses 13.3 for cause. Although this is clearly the plaintiff's case now, things had become rather murky when he first consulted his then solicitors after he received the draft Deed. Rather than suggesting that the plaintiff had been lawfully terminated without cause, those solicitors claimed that there had been no "valid termination" and it was suggested that the defendant was obliged to proceed under clause 13.5 of the Contract.

53 Termination without cause under clause 13.2 required the defendant to provide the plaintiff with either six months notice or payment in lieu. Such a termination would not affect the plaintiff's entitlement to his Special Bonus. Whereas on termination for cause there is an argument that the plaintiff would forfeit any rights to his Special Bonus (Sch 2 cl 2.8), albeit that there is also an argument that if the plaintiff's entitlement to the Special Bonus was an "accrued right" as referred to in clause 13.4 of the Contract, his entitlement to the Special Bonus would not be lost. However it is not necessary to address these arguments further having regard to the conclusions I have reached.

54 As earlier mentioned, although Ms Koller's version of what was said at the meeting on 4 February 2009 differed from the plaintiff's version, the defendant accepted the plaintiff's account of the meeting of 4 February 2009 (tr 184). The clear and unequivocal statements by the defendant to the plaintiff in the meeting on 4 February 2009 were that: his employer, the defendant, had "decided to terminate" his Contract; if he did not resign, the defendant "will" terminate his Contract; the discussion or "process" was not a negotiation; the defendant did not have to tell him anything; the defendant had lost trust and confidence in him; the defendant "will pay" him 75% of the Special Bonus and 6 months payment in lieu of notice; and the termination letter would be delivered to him by Friday 6 February 2009.

55 I am satisfied that the defendant's clear intention as conveyed to the plaintiff in this meeting was that the plaintiff's employment was terminated with immediate effect with the option for the plaintiff to resign before Friday 6 February 2009 when a letter of termination would be delivered.

56 The provision of the option for the plaintiff to resign did not change the termination of his employment. It provided a mechanism to characterise it as a resignation by the plaintiff rather than as a termination by the defendant. The option provided to the plaintiff was conditional on him tendering his resignation by Friday 6 February 2009, in default of which such opportunity would be lost. If the option was not taken up then the plaintiff's employment would be characterised as having been terminated by the defendant and the defendant "would have" the termination letter to him by Friday 6 February 2009.

57 Although Ms Koller claimed in the meeting on 4 February 2009 that the payment of both the 6 months in lieu and the 75% of the Special Bonus was "on moral grounds", the defendant was contractually obliged to pay the plaintiff 6 months in lieu (unless the plaintiff resigned), irrespective of what it thought was the morality of the situation. The Special Bonus was not the defendant's gift. It was the plaintiff's entitlement, subject to the provisions of Schedule 2 of the Contract. I am satisfied that the defendant's offer to pay the plaintiff 75% of the Special Bonus was a 'sweetener' to persuade the plaintiff to accept the defendant's decision without complaint and to go quietly.

58 However 6 February 2009 passed without the plaintiff tendering his resignation to the defendant or the defendant delivering the letter of termination to the plaintiff. The question is whether this conduct amounted to the withdrawal of the termination of the plaintiff's employment. I am satisfied that it did not. The draft Deed received by the plaintiff on 9 February 2009 included the statement in the Recital that termination had occurred on 4 February 2009 and, notwithstanding urging from the plaintiff's then solicitors to accept the contrary position, the Gillis Delaney letter of 16 February 2009 stated categorically that the defendant had terminated the plaintiff's employment on 4 February 2009 pursuant to clause 13.2 of the Contract.

59 There are other factors upon which the plaintiff and the defendant relied in support of their respective positions. In support of the contention that termination of the plaintiff's Contract occurred on 4 February 2009, the plaintiff relied on the following factors: (1) that he was directed not to return to the office; (2) that he was directed not to speak to any staff: (3) that he was directed not to speak to any clients; and (4) that his salary was stopped. It is true that some time after Harmers wrote to Gillis Delaney on 13 February 2009, the defendant reinstated payment of the plaintiff's salary (tr 15). However the plaintiff submitted that this did not affect the termination.

60 The defendant relied on the following factors: (1) the reinstatement of the plaintiff's salary after it was stopped for a period; (2) that between 4 February 2009 and 24 March 2009 the plaintiff retained the motor vehicle that had been provided to him by the defendant for use in his employment; (3) that between 4 February 2009 and 24 March 2009 the plaintiff retained the computer that had been provided to him by the defendant for use in his employment; and (4) that between 4 February 2009 and 24 March 2009 the plaintiff retained a "means of access" to the defendant's premises (albeit that there appears to be no suggestion that he visited the offices after he was directed not to do so on 4 February 2009).

61 The plaintiff gave evidence that there was a novation of the lease on the motor vehicle from the defendant to him, although the timing of this novation was not clear from the evidence (tr 12-14). In any event the position is that the plaintiff was not asked or directed on 4 February 2009 to hand back the computer or the motor vehicle, nor was he asked to hand over the "means of access" to the defendant's premises. However that is understandable having regard to the fact that the plaintiff was offered the option of tendering his resignation. I am not satisfied that the factors relied upon by the defendant are determinative of whether there was a termination on 4 February 2009. They are factors that I have taken into account. However I am satisfied that they do not outweigh the other matters referred to above that convince me that termination of the plaintiff's employment occurred on 4 February 2009.

62 Ms Koller advised the plaintiff "we do not have to tell you anything". I am satisfied that this statement was made by Ms Koller on the basis that because the defendant was terminating the plaintiff's employment pursuant to clause 13.2, there was no requirement on the defendant to justify its decision to terminate the Contract.

63 After the Gillis Delaney letter of 16 February 2009 confirming termination of the plaintiff's employment on 4 February 2009 under clause 13.2 of the Contract, nothing further occurred until 20 February 2009 when Gillis Delaney wrote to Harmers advising that "the offer" in the draft Deed remained "open for acceptance" until 5.00 pm on 23 February 2009 and that unless the offer was accepted the offer would be "withdrawn". The defendant's solicitors also advised that if the offer were not to be accepted by that time the defendant would proceed to provide the plaintiff with a notice of alleged breach and alleged misconduct in accordance with clause 13.3 of the Contract.

64 The "offer" that was made in the draft Deed was different from the 'sweetener' that had been proffered at the meeting on 4 February 2009. At the meeting the plaintiff was informed that the defendant would pay him 75% of his Special Bonus. The so-called "offer" in the draft Deed was that the defendant would pay the plaintiff his "entitlement (if any) to a bonus on a pro rata basis" within 21 days from the date the audited accounts for the year ending 30 December 2010 were published.

65 The plaintiff's solicitors sought to engage the defendant's solicitors further by letter of 23 February 2009 by requesting clarification of how the pro rata bonus was to be calculated. The defendant's solicitors responded the same day. However the plaintiff's solicitors did not further respond before the deadline that had been imposed. On 25 February 2009 the defendant formally withdrew the "offer" contained in the draft Deed. The question is whether this withdrawal was a withdrawal of the termination of the plaintiff's employment on 4 February 2009. I am not satisfied that it was. It is clear that by 4 February 2009 the investigation in relation to the plaintiff's conduct had been fully investigated (tr 175). Mr Charlwood's evidence was that he considered the options of terminating the plaintiff's employment under clause 13.2 or alternatively under clauses 13.3/13.5 and decided to proceed under clause 13.2 to save some "unpleasantness" (rather than proceeding under clause 13.3) (tr 131-133).

66 The defendant had decided to terminate the plaintiff in full knowledge of the allegations of serious misconduct. It decided not to rely upon those matters or proceed towards termination under clause 13.3 of the Contract. The defendant decided to terminate the plaintiff without cause by termination under clause 13.2 of the Contract with payment of six months in lieu of notice. The fact that the parties were pursuing negotiations about whether the defendant would pay the plaintiff either 75% of the Special Bonus or a Special Bonus (if so entitled) after the 2010 accounts were published, does not affect the termination of the plaintiff's employment on 4 February 2009.

67 It is also necessary to consider the parties' conduct in engaging in the correspondence in which the defendant purported to adopt a process akin to that found in clause 13.5 of the Contract. Although the defendant relied generally on this conduct to submit that it supports a finding that there was no termination of the plaintiff's employment on 4 February 2009, I am not satisfied that it has that effect. It appears to me that the defendant became impatient with the plaintiff's failure to accept its "offer contained in the Deed of Release", as it was described in the Gillis Delaney letter of 20 February 2009. The threat in that letter to withdraw the "offer" did not include a condition or a suggestion that the plaintiff would be reinstated whilst the defendant went through a good faith process to decide whether the plaintiff should be terminated for cause. These communications were focused on what amounts the defendant would pay the plaintiff premised upon the fact that his employment had already been terminated. The defendant's withdrawal of "the offer contained in the Deed of Release" by the Gillis Delaney letter of 25 February 2009 did not affect the termination of the plaintiff's employment, notwithstanding that the parties then engaged in the subsequent correspondence. If the plaintiff's employment was to be reinstated it would have been necessary for an express statement of offer of reinstatement and acceptance of that offer. What the defendant engaged in was an attempt to disqualify the plaintiff from an entitlement to the Special Bonus. The purported adoption of a process under clause 13 was of no effect because the plaintiff's employment had already been terminated. However I consider this process separately below on the premise that this was not so.

68 I am satisfied that the plaintiff's employment was terminated pursuant to clause 13.2 of the Contract on 4 February 2009.

69 The plaintiff contended that the defendant elected between two inconsistent rights and chose to proceed under clause 13.2 rather than clause 13.3. It was also contended that this election prevented the defendant from later proceeding under clause 13.3 for cause because once the election was made it could not be retracted: Sargent v ASL Development Limited (1974) 131 CLR 634 at 655-656; Hodgson v Amcor Ltd [2012] VSC 94 at [386]-[475]. There is an issue as to whether the so-called "rights" that the defendant had under clause 13 of the Contract were inconsistent in the sense referred to in Sargent v ASL Developments Limited at 656; Hodgson v Amcor Ltd at [386]-[475]. Both were "rights" to terminate the Contract. It does not matter in this case because I have found that the defendant terminated the plaintiff's Contract under clause 13.2. However for the purpose of dealing with the balance of the claims made I am going to assume that the termination did not occur under that clause.

70 The plaintiff also submitted that an assertion by an employer that termination had been effected, even if factually incorrect, is sufficient to amount to a notice of termination. In this regard the plaintiff relied upon the following passage of Rothman J's decision in Gillies v Downer EDI Limited [2011] NSWSC 1055:

150.Mr Gillies submits that the letter of 9 August 2007 is not a written notice of termination with immediate effect. The letter of 9 August 2007 was an assertion that termination had been effected on 1 August 2007. I have found that assertion was factually incorrect. Nevertheless, the assertion of prior termination by the employer, together with the provision of what purported to be three months' pay in lieu of notice, was effective as notice of termination on 9 August 2007. An assertion that termination had been effected by the employer, even though factually incorrect, would be sufficient to amount to a notice of termination as at the time of the assertion. Any other construction or analysis would not be commercially sensible or realistic.

71 The plaintiff further contended that with full knowledge of the allegations of misconduct (and in fact accepting them to have been proven), the defendant acknowledged the plaintiff's entitlement to six months in lieu of notice of termination. Accordingly it was submitted it was not open to the defendant to later rely upon the same acts of the plaintiff to deny the plaintiff his six months notice and right to elect to receive the Special Bonus: Tullett Prebon (Australia) Pty Limited v Purcell [2009] NSWSC 1079 at [32]. Alternatively it was submitted that having full knowledge of the plaintiff's alleged serious misconduct when notice of termination was given in February 2009, the defendant waived any entitlement it may have had to summarily dismiss the plaintiff from his employment by reason of his conduct: Hodgson v Amcor Ltd at [472]-[474]. The plaintiff also submitted that the non-payment of the six months in lieu of notice within a reasonable time does not affect the lawfulness of the termination. It was submitted that there may be a breach because of the non-payment or under-payment but the termination had nevertheless been effected: Gillies v Downer EDI Limited at [151]. Finally it was contended that by giving notice of termination at the very latest by 17 February 2009 and by electing to pay six months in lieu of notice, it should be inferred that the termination was intended to take effect immediately: Siagian v Sanel Pty Ltd (1994) 122 ALR 333 at 355. It is not necessary to deal with these arguments because of the findings I have made.

72 Although I have concluded that the Contract was terminated under clause 13.2, I should deal with the other issues that were raised by the parties. That involves the consideration of the purported termination under clause 13.3 of the Contract on 24 March 2009, including the determination of the allegations of sexual harassment that were made by Mr Wright.

73 I had some misgivings about the necessity for this latter determination, expressed at both the beginning and at the conclusion of the trial (tr 3-4; 437-438). The evidence was relevant originally because issue had been joined on the pleadings as to whether there were proper grounds upon which to terminate the plaintiff's employment under clause 13.3. The defendant submitted that in circumstances where it is found to have failed to comply with its obligations under clause 13.5 in purporting to terminate the plaintiff's Contract under clause 13.3, it is necessary for a decision to be made about the allegations. In particular, it was submitted that if the allegations are proved to be true in this litigation, then, irrespective of the defendant's failure to comply with clause 13.5 of the Contract, there would have been no different outcome had the defendant complied with its obligations under clause 13.5 of the Contract (tr 438-439). In any event, notwithstanding my expressed misgivings both parties pressed for a determination of the allegations. That will be done.

74 It will also be necessary to consider the justification issue in respect of the conduct that the defendant claimed it discovered post 24 March 2009.

Clause 13.3 Issue

75 The defendant purported to engage in the process identified in clause 13.5 of the Contract. On 4 March 2009 it provided particulars of misconduct and breach to the plaintiff and on 13 March 2009 the plaintiff responded to those allegations. As referred to above, it was only on 20 March 2009 that the very serious allegations made by Mr Wright to Ms Koller in his email on 8 January 2009 were provided to the plaintiff. The plaintiff was given only 24 hours to respond to those allegations and when the plaintiff's solicitors sought an extension of a mere 24 hours to obtain instructions, the defendant refused such an extension. On 24 March 2009 the defendant purported to terminate the plaintiff's Contract under clause 13.3.

76 The plaintiff contended that the purported termination of 24 March 2009 was in breach of clause 13.5, was not made in good faith and is of no effect. It was contended that the Contract was initially with the UK company and therefore contained the various Grievance and Harassment Policies of the defendant. It is not necessary to decide this issue because I have concluded that the defendant's conduct was in breach of the clause by reason of a lack of good faith in the process that it adopted.

77 Clause 13.5 required the defendant to take submissions (if any) from the plaintiff into account before any final decision was made and to make a final decision in good faith. Ms Koller had already made up her mind that there was nothing that the plaintiff could say that would change her mind as at 4 February 2009. By 4 February 2009 Mr Charlwood had decided without speaking to the plaintiff or to Mr Wright that what Mr Wright was saying must have been true and that there was nothing that the plaintiff could say that could in any way change his mind.

78 The plaintiff submitted that Mr Lea was the only independent witness who might corroborate Mr Wright yet no one within the defendant bothered to speak to him. Mr Charlwood agreed that it was not fair to the plaintiff that the one person named as an eyewitness was not interviewed (tr 106). Ms Koller agreed that the plaintiff was treated in an unfair manner (tr 160; 178).

79 Under the relevant Policy (if it did apply) it was mandatory that a chairperson should be appointed for the disciplinary hearing who was not the person who conducted the investigation. This allowed for objectivity and to ensure fairness to the employee. There is no issue that the division of the role of the investigator and the decision maker was something that the disciplinary policy provided for in order to provide objectivity and "also in order that there be good faith in the process" (tr 196). The plaintiff contended that, in the present case, Ms Koller was effectively the investigator and the decision maker (tr 196). It was submitted that the final decision made by the defendant (on Ms Koller's recommendation) to dismiss the plaintiff under clause 13.3 was made in circumstances where those making the decision had a closed mind; were investigators as well as decision makers; and where there had been improper conduct during the investigation with Mr Charlwood suggesting to prospective witnesses what they should put in their statements.

80 The defendant's failure to provide the true particulars of misconduct to the plaintiff until 20 March 2009 is both extraordinary and inexplicable. The first letter of particulars of misconduct purporting to provide the detail in respect of which the plaintiff was asked to provide a response made no mention of any of the serious allegations made by Mr Wright. The conduct was merely described as "harassment and bullying". After the defendant led the plaintiff to believe that he was required to respond to these very vague complaints, the defendant then provided the "specifics" of the alleged misconduct as it related to Mr Wright. The defendant's requirement for a response within 24 hours was manifestly unreasonable. The refusal to allow a further 24 hours after having withheld the true particulars from the plaintiff is conduct that I regard as evidencing a lack of good faith. The defendant failed to comply with clause 13.5 of the Contract. I am satisfied that the purported termination under clause 13.3 of the Contract is of no effect.

Sexual Harassment

81 I will now turn to the allegations of sexual harassment. The defendant relied upon the publication Effectively preventing and responding to sexual harassment: A Code of Practice for Employers, Australian Human Rights Commission (2008 edition) and the reference to the "legal test" in the Sex Discrimination Act 1984 (Cth) as having three essential elements: (1) the behaviour must be unwelcome; (2) it must be of a sexual nature; and (3) it must be such that a reasonable person would anticipate in the circumstances that the person who was harassed would be offended, humiliated and/or intimidated (at 5).

82 Mr Wright did not swear an affidavit prior to being called to give evidence. However it is apparent that an "Outline of Evidence" that the defendant anticipated Mr Wright would give was provided to the plaintiff in February 2012. That document is not in evidence, although parts of it were referred to in some of the affidavit evidence. As I have said earlier, the trial was adjourned to accommodate Mr Wright's commitments in the UK and to allow the defendant to arrange for him to travel to Australia to give evidence in light of the fact that the plaintiff objected (reasonably) to Mr Wright giving evidence by video link.

83 In considering the evidence of Mr Wright and the plaintiff in respect of the allegations of sexual harassment it is appropriate to keep in mind the following passage of Dixon J's judgment in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362:

The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences.

84 Section 140(2)(c) of the Evidence Act 1995 requires the Court to take into account "the gravity of the matters alleged".

85 On 8 January 2009 Mr Wright (who was then back in the UK) wrote an email to Ms Koller, referring to their "recent meeting" and "subsequent e-mails". Mr Wright outlined the events surrounding what he described as his "discrimination/sexual harassment complaint" against the plaintiff. That email included the following:

The first incident occurred on a night out with Ashley. During the night Ashley got very drunk and as is usually the case with him his temperament became more aggressive and abusive but equally he started to become more personal. This culminated in a period of time in "cargo Bar", Sydney where Ashley continually kept touching my legs and despite my shrinking away from him he kept getting closer. He then put his arms around me, kissed me on the cheek and said I was his "soul mate" and that he felt we would be "perfect together".

Despite this is assumed alcohol had got the better of Ashley. That night again as usual he drove home despite being extremely drunk. This is an event that occurred on a very regular basis during my time in Australia much to the disgust of many team members.

Following this Ashley continued to treat me very differently to any other team member. My position became a regular joke to team members such as Marc Hassan, Dan Verdon, Carla Blundell and Andrew Olmos & Andrew Briggs who whilst continuously joking about his apparent attraction to me were glad that I had "taken the heat off of others".

During visits to clients whilst in his car he would try to touch my legs whilst driving leaving me sitting almost on the edge and with my side to him in order to move away.

Whilst talking to me in the office Ashley would simply stand and stare at my crotch. He would always ask me to join him for lunch and would become angry if I declined his offer. When out of the office he would tell me the following morning that he had missed me. he became aggressive if I would not answer his calls or drink with him.

Not long afterwards I had cause to request help from Ashley on a deal. Ashley became aggressive and told me that "i was a disappointment to him", that "i failed to grasp basic tasks" and that he had "obviously picked me wrong". I commented that he had been rude to me following which he went home early claiming i had hurt his feelings. He did not return to work that day. the following day he told me I had given him a headache and he had gone to stay at a male friends house.

The following day he called me into his office and asked me about our "relationship". I explained that I did not know what he was referring to. He said that he wanted to know were our relationship was going and what his "boundaries" were. He explained that he felt he was getting too "attached to me".

I explained again that I had no idea what he was talking about and he responded by saying I was his "possession and his investment", he would therefore have to "control me more to get what he wanted". Following this event Ashley ignored me for a several days. At this stage i had discussed the situation with Carla and Dan who both had been very supportive in trying to encourage me to ignore him. Comments were made by staff as to how they wish he could be got rid of and that nobody liked him.

Mark Hassan informed me of Ashley's sexuality at this stage (although it was obvious) and told me of his physical run in with Ashley.

Events continued with Ashley trying to get get close to me, comments regarding my sexuality and my relationship with him also continued.

I began to avoid introducer events with Ashley to avoid his approaches and drunken aggression. We did however both attend a lunch with Tim Lea a broker. During the lunch Ashley became increasingly drunk and abusive to me because I would not drink (and drive home later). Ashley continually asked the broker what he thought of me and did he think I was a "complete f***ing asshole". the broker commented that Ashley was trying to forge a strange relationship with me.

Ashley asked me to stay at his house that night and commented that "he was sure that I have stayed at another mans house before". I asked him why on earth I would do this having a wife and children. Ashley became aggressive with the introducer when they began to discuss religion. A joke was made by Tim Lea about Ashley drinking out of his glass. Ashley commented that he should give the glass to me because I will pass the germs back to "his mouth" later that night.

The day continued with Ashley saying I was rude and a waste of space and that I would never fit in his team or Australia if I would not drink. I made a decision to part the meeting at which point Ashley swore at me and refused to shake my hand as a goodbye gesture.

Staff continued to comment on how embarrassing he was acting towards me. Shortly afterwards Rebecca fell ill. Ashley phoned me, text me and emailed me constantly and asked contuously if he could come down and see me because I was alone. he became angry when I declined as I had my children to care for.

When i returned to work he discussed events with me and said he was not my boss and wanted a relationship more than this and therefore I could go to his house anytime and spend time with him.

The xmas party then arrived and I declined an invitation. Carla and Dan and Andrew (briggs and olmos) all said that they would keep an eye on me if I went and would "rescue me" if Ashley started. I avoided Ashley most of the day although everyone was laughing at how many time he tried to sit next to me and how much he was staring at me.

I disappeared early that day with Ashley ordering Dan Verdon to find me as he wanted to see me. Dan was commenting on how Ashley was acting in looking for me.

86 Mr Wright's email also included a claim that the "whole episode" had cost around £50,000 and had left him "broke with credit cards full". It also included a claim that after having worked so many years to secure his children's life he was "devastated having to live the consequence of this for many years to come". Mr Wright also claimed that he had learned so much about the plaintiff from others that he was angry that he was not "forewarned" about him. He also claimed that the emotional impact on his family had been "immeasurable" and that he felt justified both personally and legally to "take this matter forward to conclusion".

87 Ms Koller met with Mr Wright on 13 January 2009. A file note of that meeting includes the following:

The first incident took place at a networking event, followed by DW and AS ending up at the Cargo Bar, 1 month into DW employment with BFSA.

During the night AS got very drunk, became more aggressive and more personal as time went by. At the cargo Bar, AS continually kept touching DW legs and despite DW shrinking away from him he kept getting closer. He then put his arms around DW, kissed him on the cheek and said DW was his "soul mate" and that he felt that they would be "perfect together".

...

Following the first incident mentioned above; AS started to treat DW very differently from anyone else, like a "Teachers Pet." AS constantly called DW into his room. The issue became a joke amongst the Sales team - DW teachers pet! AS was always asking DW to go out for lunch with him, according to DW, AS treated him like his "son".

...

AS behaviour became more disturbing.

During visits to clients whilst in his car, AS would try to touch DW legs whilst driving, he would lean on the middle, edging over to him, leaving DW sitting almost on the edge and with his side to AS in order to move away.

Whilst talking to DW in the office AS would simply stand and stare at his crotch. AS would also ask DW to join him for lunch and would become angry if DW declined his offer. When out of the office AS would tell DW the following morning that he had missed him. AS became aggressive if DW would not answer his calls or drink with him.

...

As DW ignored AS, AS would get upset, ask him why he had not called AS, said he missed him and that DW was his project. This was in the office, very open and in front of everyone.

...

Another incident was a lunch with Tim Lea a broker which DW attended with AS. DW had done a deal and Tim Lea wanted to take DW out, AS also attended. During the lunch AS became increasingly drunk and abusive to DW because he would not drink. AS continually asked the broker what he thought of DW. The broker commented that AS was trying to forge a strange relationship with DW.

In the company of Tim Lea, AS asked DW to stay at his house that night and commented that "he was sure that he had stayed at another mans house before". DW asked him why on earth he would do this having a wife and children. AS became aggressive with the introducer when they began to discuss religion. A joke was made by Tim Lea about AS drinking out of his glass. AS commented that he should give the glass to DW because he will pass the germs back to "his mouth" later that night.

The day continued with AS saying DW was rude and a waste of space and that DW would never fit in his team or Australia if he would not drink. DW made a decision to depart at which part AS swore at him and refused to shake his hand as a goodbye gesture.

88 The file note referred to Mr Wright not having spoken to Mr Lea since the incident. It also records that just after this alleged incident Mr Wright's wife fell ill and he could not attend the office. It records that during this time the plaintiff "bombarded" Mr Wright with calls and text messages asking to see him and inviting him to stay at his house. The note continues:

At first DW declined to attend the Christmas party. The sales team encouraged him to attend and promised that although they were worried about AS behaviour; would look after DW and so moved the seating plan to keep AS away from DW. AS was enquiring about DW whereabouts. As soon as DW got up from his table AS moved into his seat. AS also made a comment to the sales team - "in a minute DW will be calling me gay".

...

Once the decision of DW to return to the UK DW kept his distance from AS.

...

Two weeks prior to DW UK departure DW did not attend the office. AS was emailing, calling, texting DW.

89 The file note refers to Mr Wright's complaint that there had been a financial impact of about £50,000 including personal costs and relocation costs. It also records a series of questions and answers between Ms Koller and Mr Wright as follows:

1.Why did you not accept any financial assistance from Bibby to return?

DW - I did not want to return for AS to say I had made everything up - I decided to deal with this situation myself.

2.What do you want to achieve from this Grievance?

DW - Two things. Financial compensation that is fair after what AS has put a family with two kids through. Secondly, for the company to deal with AS so he does not affect other people.

3.Do you think you were hasty to leave Australia?

DW - when you are that far from home you are unsure of a job elsewhere. AS is not going anywhere. The choice was work with him or not. I think I made the right decision but I regret having to make the decision.

4.Would you go back to Australia?

DW - Personally yes - but I would need to convince my wife.

5.Did you consider confiding in GC?

DW - CB suggested I spoke to GC; she said he is a reasonable man and would listen. However, GC and AS have worked together a long time and that is why everyone puts up with AS, no-one is going to do anything about him. I am now taking on what no-one else would.

6.How much in your opinion is GC aware of how AS behaves and his sexuality?

DW - any man would have to be ignorant or blind not to see.

90 The file note also records that Ms Koller advised Mr Wright that she would visit Australia on 1 February 2009 to investigate his comments and allegations after which she would respond to him.

91 Ms Koller's evidence in cross-examination included the following (tr 163):

Q:It wouldn't be true at all to suggest that David Wright had contacted you whilst he was still in Australia and you told him to return to England, that's just not true, is it?

A:No, that's incorrect.

Q:If Mr Wright had said that, that would be fanciful on his part, wouldn't it?

A:Yes.

...

Q:If Mr Wright had ever said that he was in contact with you and you told him to return to the UK in relation to this incident?

A:Yes.

Q:That would be untrue?

A:I did not tell him to return to the UK.

Q:If Mr Wright says that he wouldn't be telling the truth would he?

A:No.

92 After this cross-examination Ms Koller's attention was drawn to the email written by Mr Wright to her dated 13 February 2009 which included the following:

I would like to refer you to previous emails whilst I was still in Australia where you wanted to keep my complaint quiet until I was safely out of the country "to save me from any fallout". Your priority you said was to "get me out of the country".

93 Ms Koller said that she did not remember receiving the email of 13 February 2009 but that she did remember that Mr Wright was extremely concerned about being able to leave the country and not have any questions from anybody (tr 164). She then gave the following further evidence (tr 164-165):

Q.But you hadn't spoken to him in relation to any incident involving Mr Sharma until after he arrived in England?

A.I can't remember.

Q.But you gave evidence approximately 5 to 10 minutes ago that if Mr Wright had said that you had wanted to keep the complaint quiet until he was safely out of the country that would not be true, remember saying that?

A.No, I don't remember saying that.

...

Q.And you see Mr Wright is there saying that you had said that you wanted to keep the complaint quiet until he was safely out of the country, do you see that?

A.Yes.

Q.So that is not true, is it?

A.I can't remember the time but I know there was concern about Mr Wright's welfare.

94 Ms Koller agreed that there was no mention of this in her affidavit and that she could not recall whether she said to Mr Wright that his complaint was the "icing on the cake" (tr 165). This was a reference to the content of an email from Mr Wright to Ms Koller on 12 February 2009 in which he claimed that Ms Koller had said that the plaintiff had a "history" and that Mr Wright's complaint was the "icing on the cake".

95 It is apparent that by 12 February 2009 Ms Koller was dealing with Mr Wright's complaint against the defendant and had suggested to him that his reason for returning to the UK was that he had "family issues". It is also apparent that Ms Koller raised with Mr Wright the prospect that he may have to repay "relocation money". The email of 12 February 2009 also included a claim by Mr Wright that the defendant was driving "a grown man to tears". In an earlier communication on 9 February 2009 Mr Wright said that he was "disappointed and upset" with the defendant's offer of £5,000 compensation. He claimed that the defendant had "left me broke with large debts with a broken marriage following the stress of this whole period". Mr Wright also advised Ms Koller that he felt that her comment regarding his wife's illness being another reason for why they returned to the UK was not "relevant" to the matter "in any way". He went on to complain that the "overall impact on us financially is endless" but that all he wanted was out of pocket expenses directly related to the move. He quantified that at £18,250 and suggested that this amount did not "even touch the edges of the true impact".

96 In a further email of 13 February 2009 Mr Wright advised Ms Koller that he had received a couple of emails in the past few days indicating that "the whole office" was relieved at the plaintiff's departure. That email included a claim that Mr Wright had "lost all savings" and had run up debts as a result of what had happened.

97 The "specifics" of the allegations of misconduct as they related to Mr Wright that were provided to the plaintiff's solicitors on 20 March 2009 were as follows:

2. David Wright

David has complained to our client:-

(i)at the Cargo Bar in Sydney your client continually kept touching David's leg and kept getting closer despite David's objection. Your client on the same night put his arms around David, kissed him on the cheek and told him he was his "soul mate" and that they would be "perfect together".

(ii)during visits to clients your client would, in his car, try to touch David's legs while he was driving.

(iii)your client would refer to his "relationship" with David and requested David to inform him what the "boundaries" were for that relationship knowing David was married with two children.

(iv)your client would comment in front of our other staff regarding David's sexuality and your client's relationship with him.

(v)at a lunch with Tim Lea your client asked Mr Lea whether he considered David a "complete f***ing arsehole".

(vi)your client asked David to spend the night at his home.

(vii)your client stated to Mr Lea that it was okay for David to drink from his glass (your client's glass) as David would be "passing the germs back to his mouth later that night".

(viii)your client would call his home and when his wife answered he would hang up.

(vix)your client stated to other staff members that he had a "relationship with David".

Despite your client's denial of any serious misconduct or breach of his obligations under the Agreement we are instructed to provide you with a further 24 hours to respond to the allegations contained in this letter.

98 The complaints as distilled from Mr Wright's communications with Ms Koller commence with what was referred to as the "first incident" in the Cargo Bar. The other complaints relate to the incidents in the car; the lunch with Mr Lea; the plaintiff inappropriately staring at Mr Wright's crotch; and the plaintiff pursuing Mr Wright for a "relationship".

Cargo Bar incident

99 The plaintiff was cross-examined about his attendance at the Cargo Bar, a bar in Sydney, with Mr Wright. He said that he remembered the occasion "quite clearly" and that it was during the third week of March 2008 or thereabouts (tr 70). This was when Mr Wright had come out to Australia for an interview in relation to employment with the defendant. The plaintiff gave evidence that he had taken Mr Wright to lunch at a restaurant with client managers from the defendant who then returned to work. He claimed that as Mr Wright was returning to the UK they then went to the Cargo Bar at about 3.30pm or 4.00pm. The plaintiff said that they stayed at the bar until approximately 6.00pm. When it was suggested to him that whilst at the bar he was continually touching Mr Wright's legs, the plaintiff said that it was "complete and utter nonsense" (tr 71). He was cross-examined as follows (tr 71):

Q.You're aware that he has said that you put your arms around him, that you kissed him on the cheek and told him you were his soul mate and you felt that you and he would be perfect together?

A.Completely deny it, fanciful thinking.

100 Mr Wright evidence included the following (tr 245):

Ashley on several occasions put his arm around me for on different occasions, and at one point Ashley sort of grabbed my cheek and back of my head and kissed me on the cheek.

101 Mr Wright also claimed in his evidence-in-chief that at the point at which the plaintiff kissed him he said that he was his soul mate and that he thought that they were "great together" (tr 247).

102 In his examination-in-chief, Mr Wright gave evidence that when the plaintiff kissed him he did not say anything to him because he was shocked and did not know how to react (tr 247). He gave the following further evidence:

Q.When you say shock, would you describe what you mean, please?

A.Yeah. It's just I would describe the way it happened in that it's almost, I would say, like a football player celebrating giving his mate a kiss. So it was just sort of a, oh, shock at what happened. It wasn't something that I would have reacted to in any other way, apart from thinking, oh, okay, that sort of surprised me.

Q.Was it a surprise?

A.Yes.

103 This was the complaint that featured in Mr Wright's communications with Ms Koller as the "first incident". It was an incident that gave flavour to the nature of the harassment being sexual. A reading of the email and the notes taken by Ms Koller at her meeting with Mr Wright would suggest that the approaches made by the plaintiff to Mr Wright were indeed of a sexual nature, unwanted and amounting to alleged sexual harassment. However the description given to this incident by Mr Wright in his examination-in-chief in which he described it like a "football player celebrating giving his mate a kiss" was most extraordinary in the light of the history of this complaint. Had this characterisation been given to this incident in the first place it would have been impossible for the defendant to have considered this as a matter of sexual harassment.

104 On the assumption that this incident occurred and having regard to the way in which Mr Wright has described it in his evidence-in-chief, I am not satisfied that a reasonable person would anticipate in the circumstances that the plaintiff would be offended, humiliated or intimidated. I am not satisfied it amounts to misconduct and certainly not serious misconduct that would warrant the plaintiff's employment being terminated.

Incidents in the car

105 Mr Wright's oral evidence of the events that took place in the car differed from the allegations that he made in his email to Ms Koller dated 8 January 2009. In that email he claimed that whilst in the plaintiff's car, the plaintiff would "try to touch my legs whilst driving leaving me sitting almost on the edge and with my side to him in order to move away". In his evidence-in-chief he claimed that the plaintiff's driving position was such that his hand was completely across the centre console "and brushed against the side of my leg" and that this caused him to "shuffle along the seat out of the way" (tr 241).

106 Mr Wright was cross-examined about the distinction between his claim that the plaintiff had attempted to touch his legs in the car and the claim that the plaintiff had in fact brushed his leg in the car on "at least three occasions" (tr 241). He was cross-examined as follows (tr 291-292):

Q.One of the matters you put forward is the touching of the leg in the car?

A.Mm.

Q.You see, do you say Mr Sharma actually touched your leg?

A.Yes, he did, yes.

Q.It wouldn't be true to say he was trying to touch your leg?

A.I don't see the difference.

Q.I want you to think about it. If someone touches your leg that means they have actually physically touched your leg, do you agree with that?

A.Yes.

Q.And if that's what had happened --

A.Mm.

Q.-- that's the complaint you would have made, I take it, that is, if Mr Sharma touched your leg you would complain that he touched your leg?

A.I would say it's the same thing to me.

...

Q.So, if in fact Mr Sharma had touched your leg?

A.Yes.

Q.And any complaint you made you would say he touched my leg?

A.Potentially, yes.

Q.What do you mean potentially?

A.It's just a matter of wording to me.

Q.Well, no, sir, you are alleging that Mr Sharma inappropriately touched your leg?

A.Correct.

Q.It's not just a matter of wording?

A.Correct.

Q.If Mr Sharma had touched your leg you would have put in any complaint that you made that he touched your leg, would you not?

A.I don't know at the time.

Q.What do you mean you don't know?

A.I don't know at the time how far I would have explained it. I know what happened.

Q.What happened, sir, was that you gave evidence yesterday?

A.Mm.

Q.And said he touched your leg?

A.Correct.

Q.No doubt about it in your mind, he touched your leg?

A.No doubt about it.

Q.There was physical contact?

A.Correct.

Q.That was what was inappropriate?

A.Correct.

Q.So, if in fact he had touched your leg would you not have in the complaint that you made said that he touched your leg?

A.Yes, I would say that.

Q.But you did not say that in your email to Ms Koller, did you?

A.I don't know.

107 Mr Wright's attention was then drawn to the content of the email in which he claimed that the plaintiff "would try to touch" his leg (tr 294). He was cross-examined as follows (tr 294):

Q.You see you didn't say there he actually touched your leg, did you?

A.No.

Q.And you do appreciate there is a distinction, don't you.

A.I do, yes.

Q.And you appreciate in cases where there is an allegation of sexual harassment it is an important distinction?

A.Yes.

Q.And at the time your memory was on 8 January, was it, that he hadn't touched your leg in the car but had just tried to.

A.That's what I have written down.

Q.So that was your memory then, was it?

A.No, it wouldn't have been my memory but I accept what I have written down.

Q.Now you say he actually did touch your leg?

A.Yes.

108 The elevation of this complaint from the plaintiff trying to touch Mr Wright's legs to "brushing" his legs was most unimpressive. The written material in which Mr Wright made his complaint in 2008 had him cowering on the edge of his seat in the car to avoid the plaintiff touching his legs. As a result of the cross-examination of Mr Wright, it is clear that the journey during which these alleged events occurred was no longer than five minutes and the best that Mr Wright could do to assess how many occasions it occurred was "at least three".

109 Mr Wright's evidence in relation to the distinction between the physical touching of his leg and the claim of an attempt to touch his leg was most unimpressive. Even assuming that there was some contact between the plaintiff's hand and Mr Wright's leg (a brushing of the outside of the leg), I am not satisfied that a reasonable person would anticipate in the circumstances that the plaintiff would be offended, humiliated or intimidated I am not satisfied this conduct could amount to serious misconduct within the meaning of that expression in clause 13.3 of the Contract.

Lunch with Mr Lea

110 The plaintiff was cross-examined in relation to a lunch that took place with Mr Tim Lea in celebration of a deal that had been recently settled. Mr Lea had introduced the deal to the plaintiff and the plaintiff had introduced it to Mr Wright by way of introducing him to the defendant and getting him to learn the defendant's systems. The lunch was at a small restaurant in Sydney attended by the plaintiff, Mr Lea and Mr Wright. The plaintiff was cross-examined as follows (tr 78-79):

Q.As the banter over lunch continued, you asked Mr Lea what he thought of Mr Wright. Do you remember that?

A.No, I didn't ask Mr Lea that.

Q.Indeed, you asked Mr Lea whether he thought that Mr Wright was, as you put it, "a complete fucking arsehole". Do you remember that?

A.I don't remember that because I didn't say it.

Q.And Mr Lea replied with the comment that you were "trying to forge a strange relationship with Mr Wright", do you agree?

A.I completely disagree.

Q.During the course of the lunch you asked Mr Wright to stay with you at your house that night. Do you accept that?

A.I completely disagree. I am not sure my wife would have appreciated that.

Q.You told him that you were sure that he had stayed at another man's house before.

A.I didn't say that to him. I knew he was heterosexual. Why would I say that to him?

...

Q.Mr Lea during the course of the lunch, made a joke about you drinking out of his, that is, Mr Lea's, glass?

A.Completely untrue.

Q.You replied by making the comment that Mr Lea should give the glass to Mr Wright because Mr Wright would pass the germs back to your mouth later that night?

A.Absolutely nonsense.

Q.I want to suggest to you that during the course of the lunch you said that a glass should be given to Mr Wright for Mr Wright to drink out of because he, Mr Wright, would pass the germs back to your mouth later that night?

A.I completely disagree. We all had our glasses of wine.

Q.The lunch, or at least Mr Wright's part in it, came to an end soon after you told him that he was a waste of space and that he would never fit in your team or in Australia if he would not drink?

A.Completely disagree.

Q.When Mr Wright left the lunch you refused to shake his hand?

A.Completely disagree.

111 Mr Wright gave evidence that the lunch with Mr Lea continued "a good few hours of the afternoon until mid to late afternoon" (tr 252). Mr Wright said that the plaintiff and Mr Lea consumed several bottles of wine and inferred that he was not drinking because he was driving. He said that during the course of the luncheon the plaintiff became "louder", his language contained far more profanities and his speech was slightly slurred (tr 253). He claimed that the plaintiff called him a "complete fucking arsehole" and that Mr Lea asked the plaintiff to "calm down" (tr 253). He gave the following evidence-in-chief (tr 253):

Ashley picked up Tim Lea's drink and Tim made a joke about Ashley's germs being on the glass. And Ashley then made a comment to tell Tim to give me the glass because I would be having the germs from his mouth, I would be exchanging germs with his mouth that night anyway.

112 In cross-examination Mr Wright agreed that he went to a bar with the plaintiff and Mr Lea after lunch. It was suggested to him that if he had been shocked by the conversation that occurred at the luncheon, he would not have gone to the bar, but would have made an excuse to go home. His response to that was that he did make an excuse later on but that he went to the bar because of Mr Lea's presence (tr 302).

113 Mr Lea gave affidavit evidence that the "atmosphere at the lunch was celebratory" but that "there was something" that made him feel "there was tension between" the plaintiff and Mr Wright (par 13). There was no cross-examination of Mr Lea in relation to this evidence. His affidavit evidence dealt with the claims that Mr Wright had made about the conversations that occurred during the lunch. Mr Lea said that he "did not hear" the plaintiff saying the words as alleged in relation to drinking from the glass conversation, nor did he hear the plaintiff being rude to Mr Wright or referring to him as "a complete fucking arsehole" or inviting him to stay at his house. Mr Lea also gave affidavit evidence that he "absolutely did not have a conversation" in which he said that the plaintiff was "trying to forge a strange relationship" with Mr Wright.

114 Mr Lea accepted in cross-examination that the effect of his affidavit evidence was that he remembered nothing about what was said during a lunch other than it included "friendly banter of intoxicated people" (tr 389). Mr Lea could not remember how many bottles of wine were consumed at the lunch. However he recalled Mr Wright was drinking but he could not recollect the extent of it (tr 390). There was no cross-examination of Mr Lea to suggest that the conversations as alleged by Mr Wright occurred. Rather the cross-examiner seems to have relied on the fact that Mr Lea's affidavit evidence was no higher than that he "did not hear" such conversations.

115 The evidence in relation to the size of the restaurant and the seating arrangements at the luncheon make it very difficult to conclude that if such conversations occurred Mr Lea would not have heard them. It was not suggested to Mr Lea that the effect of the alcohol he consumed would have prevented him from remembering such conversations. Whatever occurred at the luncheon led Mr Lea to "feel" that there was tension between the plaintiff and Mr Wright. However that is a very different matter from being an eyewitness to a form of sexual harassment.

116 It is obvious that quite a deal of alcohol was consumed at this luncheon. It is also obvious that Mr Lea's recollection of the detail of it was not clear. Mr Lea gave affidavit evidence that he did not hear the plaintiff say the words alleged by Mr Wright. Although Mr Lea made a concession as to the effect of his affidavit, he was not tested as to his role in the conversation alleged by Mr Wright, that is, that he alerted the plaintiff to the fact that he was drinking from the wrong glass. Nor was he tested as to his strong denial ("I absolutely did not have a conversation") that he said to Mr Wright "Ashley is trying to forge a strange relationship with you" (par 17). Although it is understandable that a forensic decision was made to rely on the concession made by Mr Lea, I am of the view that in the circumstances of these serious allegations it was necessary to challenge Mr Lea's strong denial of the conversation alleged by Mr Wright. If Mr Lea had made that statement it would have given some support to Mr Wright's complaint about the plaintiff's conduct. The plaintiff denied the alleged conversation and Mr Lea's denial was not tested.

117 I am not satisfied that the defendant has proved that this incident occurred as claimed. I accept Mr Lea's characterisation of the communications at the celebratory luncheon as "friendly banter of intoxicated people" and I am not satisfied that a reasonable person would anticipate in the circumstances that the plaintiff would be offended, humiliated or intimidated. I am not satisfied that such conduct amounts to serious misconduct that would warrant termination under clause 13.3 of the Contract.

Inappropriate staring

118 Mr Wright gave the following evidence-in-chief (tr 243):

QOkay. So what did you notice about the way in which Mr Sharma looked at you during this early period of your employment at Bibby Australia?

A.I understand. He continually stared at my crotch.

Q.Would you describe what you mean, please?

A.When I was sat in the office, he wouldn't be looking at my face, in my eyes, or around in the manner that I would normally expect someone to do so, and continually moved his eyes towards my crotch.

Q.Now, did you speak with him about that --

A.No.

Q.-- At this time? Why was that?

A.Again, very new. I didn't know what to say. I didn't know how to approach it. And I hoped it would stop.

119 Mr Wright's evidence in relation to this aspect of the matter included the following (tr 268; 326-327):

Q.Mr Wright, yesterday you told her Honour about your observations on the first few weeks of your employment at Bibby in Australia of Mr Sharma staring at your crotch?

A.Yes.

Q.How long during your employment at Bibby Australia did you make observations of that kind?

A.That was a continuous observation.

...

Q.I want to ask you some questions about Ashley standing and staring at your crotch. Your office was, you say, close to Mr Charlwood's office?

A.It was outside of Ashley's office and diagonal to Mr Charlwood's.

...

Q.Did you have a cubicle?

A.No, they were just normal screen dividers between the desks.

Q.And tell the court precisely what you say Mr Sharma did?A.He would stand or when I was in his office he would sit and

stare at my crotch.

Q.What, just sit there with his eyes fixed on your crotch?

A.Yes, while he was talking to me, yes.

Q.You never complained once about that to him?

A.No.

Q.You see, you are just making that up, aren't you?

A.No, I am not, no.

Q.You don't know whether you wrote that in your diary or not?

A.I have said on previous occasions I don't remember.

Q.Now then, so do you say he just - Mr Sharma on those occasions would just come, and as soon as he commenced talking to you, he would stare at your crotch for the whole of the conversation?

A.No, I didn't say the whole of the conversation, no.

Q.Do you say he occasionally stared at your crotch?

A.Yes.

Q.And for how long was it, five seconds, two seconds?

A.It's not something I recorded mentally as how long it took place.

Q.May have been a momentary glance?

A.It's not something I recorded. It was certainly longer than a momentary glance.

Q.That you don't know whether it was more than a second or two?

A.I didn't record the time of it, no.

Q.It could have been a second or two, you don't know?

A.I didn't record that.

Q.He was looking all around the place while he was talking to you, wasn't he?

A.A normal person would.

Q.Yes. And Mr Sharma did do that, didn't he?

A.I don't know recall where he looked, apart from where he was making me feel uncomfortable when he was looking at me.

Q.You say you don't remember so how long he did it, but occasionally whilst he was looking around elsewhere talking to you, he would look at your crotch?

A.I didn't record the length of time he was looking at it, no.

120 The evidence-in-chief of Mr Wright was that the plaintiff "continually stared at my crotch". His evidence in cross-examination was that he "occasionally stared" at his crotch. Even assuming that the plaintiff may have had a penchant for focusing on Mr Wright's crotch, nothing else occurred. It was not suggested that at the time the plaintiff was conducting himself in this manner that he said anything inappropriate to Mr Wright or that he was leering or smiling as he apparently stared at his crotch. These events (although denied by the plaintiff) were said to have occurred whilst Mr Wright and the plaintiff were engaged in everyday conversation. If these events occurred and they were of concern to the plaintiff it is difficult to accept that in the work setting Mr Wright was able to bring himself to say to the plaintiff that he was being "rude" to him (referred to below tr 250) and yet would not have the presence of mind or capacity to suggest to him that he did not like the way that he was staring at him or at his crotch. The fact that he did not say anything to the plaintiff or for that matter to anyone else, is a factor to be taken into account in considering not only whether the incidents occurred but also, importantly, whether a reasonable person would anticipate in the circumstances that the plaintiff was offended, humiliated or intimidated. I am not satisfied that such anticipation would be justified in the circumstances.

121 I am not satisfied that even if the conduct occurred on the occasional basis as described in Mr Wright's cross-examination, it would amount to serious misconduct that would justify dismissal under clause 13.3 of the plaintiff's Contract.

Pursuit for a relationship

122 The plaintiff was cross-examined as follows (tr 66; 68-69; 73-74; 79; and 81):

Q. At some point after Mr Wright joined Bibby in Australia from the United Kingdom you found yourself attracted to him, did you not?

A. Not at all.

Q. And by attracted I mean sexually or emotionally, do you agree?

A. Disagree.

...

Q. Would you agree that from a period soon after Mr Wright came to work at Bibby here in Australia you began to exhibit favouritism towards him?

A. It depends what you mean by favouritism.

Q. That you treated him more favourably than other people with whom you worked at Bibby?

A. Not really, no.

...

Q. You recall that I put to you that at an earlier point in time you had been attracted to Mr Wright sexually or emotionally?

 

A. I know you put that to me, Mr Neil, but I said no to you at the time.

Q. What I want to suggest to you is that at a later point in time you gave indications to Mr Wright, many indications to Mr Wright of that attraction. Do you accept that?

A. Completely disagree. I never gave him any such indication.

Q. And you came to appreciate that he rejected those indications, do you agree?

A. Completely disagree.

Q. At that point in time when you came to appreciate that, you felt a degree of resentment towards Mr Wright. Do you accept that?

A. Completely untrue.

Q. You became disappointed with him?

A. I was disappointed with him because he wasn't performing in a work sense.

Q. Your response to Mr Wright's lack of enthusiasm for personal involvement with you was to become aggressive and abusive. Do you accept that?

A. Completely untrue.

Q. Do you recall an occasion when you told Mr Wright that he was a disappointment to you because he had failed to grasp basic tasks?

A. No.

Q. There was an occasion when you told him in terms that you had picked him wrong?

A. I never said that to him.

Q. There was an occasion when you told Mr Wright that he had hurt your feelings?

A. Never. He had never hurt my feelings.

Q. He resisted that proposition and told you that you had been rude to him, do you agree?

A. Disagree.

Q. On that occasion you went home early. Do you remember that?

A. Which occasion is that?

Q. You stayed away from work for the rest of that day and on the whole of the following day?

A. Which day would that be, sir?

Q. Do you remember an occasion when you went home early, stayed away from work on the day on which you went home and then for the whole of the following day?

A. I don't remember any such day.

Q. And when you came back you told Mr Wright that he had given you a headache and that you had gone to stay at a male friend's house?

A. I never said any such words to Mr Wright or stayed at a male friend's house.

Q. You appreciate that I am suggesting to you that that event occurred and that on the next day you called Mr Wright into your office for a private discussion with him, do you agree?

A. Disagree.

Q. And on that occasion you initiated a conversation with Mr Wright about what you called the relationship between you. Is that correct?

A. Completely incorrect.

Q. You told him that you wanted to know where that relationship was going, do you agree?

A. Disagree.

Q. He resisted the notion that there was any relationship between you. Do you accept that?

A. There was no relationship between us.

Q. You told Mr Wright--

A. So we couldn't have talked about it.

Q. So you told Mr Wright that you wanted to know where the boundaries of that relationship were?

A. There was no relationship so there can't be any boundaries.

Q. You told Mr Wright that you felt that you were getting too attached to him?

A. Completely disagree.

Q. Mr Wright told you that he had no idea what you were talking about and you replied by telling him that he was your possession and your investment. Do you accept that?

A. Completely disagree.

Q. That you would have to control him more to get what you wanted. Do you accept that?

A. Completely disagree.

Q. After the event about which I have been asking you, that is, the meeting in your office, you ignored Mr Wright for several days, did you not?

A. Completely disagree.

Q. You gave him the cold shoulder; do you accept that?

A. No.

Q. And you did so out of resentment and disappointment at the way in which your conversation with him in your private meeting in your office had concluded?

A.Completely disagree.

...

Q. On one occasion when you did speak with Mr Wright you told him that you want a relationship with him?

A. I might have told him I wanted a good working relationship with him but that's probably all I would have ever said.

Q. The relationship you spoke to him about was one in which he would go to your house and spend time with him?

A. In what regard would that be?

Q.Do you remember saying words to that effect?

A.No.

...

Q. During the period when Mr Wright was at Bibby here in Australia you repeatedly sought to convey to him the attraction that you felt for him, do you agree?

A. I completely disagree.

Q. You repeatedly spoke to him about a relationship between the two of you?

A. Completely disagree.

Q. You did so for the purpose of persuading him to reciprocate your attraction and to begin such a relationship?

A. Utter nonsense, I have no attraction to David Wright.

Q. You made a number of suggestions to him for meetings, private meetings at your home?

A. Never once.

Q. And for you to join him in social occasions for the purpose of pursuing your attraction to him and soliciting a relationship with him?

A. Completely disagree. I did ask him out to networking functions, cocktail parties and things, with a view to networking him.

123 Mr Wright gave evidence-in-chief that on one occasion he asked the plaintiff for some assistance with how a particular matter should proceed. His evidence included the following (tr 250-52):

Q. What did he say in response?

A. I don't recall Ashley's exact words initially. As the conversation continued he said to me that I was a disappointment to him and that I was failing in my job, failing with the basic tasks of my job.

Q. What did you say in response to those discussions?

A. I said to him I felt he was being rude to me.

Q. What did Mr Sharma say in response to that statement?

A. I don't recall Ashley's immediate response.

Q. What did he do thereafter?

A. I went back to my desk and Ashley left his office very shortly after that.

Q. Did he say anything to you at that time?

A. He said I had given him a headache and he was going home.

Q. Did you see him again during the rest of that day?

A. No, he didn't return to work that day.

Q. Did you see him on the following day?

A. Yes.

Q. When you saw him on the following day did you speak with him?

A. Yes.

Q. What was the effect of your conversation on that occasion?

A. Ashley just told me that I had hurt his feelings, presumably by saying that he had been rude to me, and he wanted to discuss where our relationship stood and what his boundaries were with me.

Q. Did he say anything else in that regard?

A. I don't remember.

Q. Do you remember anything else of that conversation?

A. Ashley mentioned to me about along the lines of my role there and me being a disappointment to him, that he had - I was, in effect, his investment and his possession in him bringing me to Australia. And I don't remember anything else, no.

124 Mr Wright was also cross-examined about his failure to remember in his evidence that the plaintiff had asked him to go to his house as follows (tr 306-308):

Q. How was it that yesterday you had forgotten that Mr Sharma had asked you to come and stay with him at his house?

A. Because it was events of four years ago and I couldn't recall those points yesterday.

Q. How often has someone asked you, a male, asked you to come and stay at their house for the night?

A. It depends on what context.

Q. Well, the context that you are putting forward is that Mr Sharma was asking you back to his house to stay to have a relationship with you?

A. Mm-hm.

Q. A homosexual relationship?

A. I didn't infer that, no.

Q. You didn't infer that?

A. No.

...

Q. So I take it, putting everything together that had happened up to the time he asked you to come and stay at his house, in your mind what he was asking you therefore was to have sexual relations with him?

A. I don't really know how to answer that. I was just reporting on what happened.

Q. So you didn't think he was asking you there for an inappropriate reason?

A. Yes, I did, yes.

Q. You did?

A. Yes.

Q. Well, you thought he was asking you there because in your mind he wanted to have sexual relations with you?

A. I don't know.

Q. You don't know?

A. No.

Q. But I am asking you what your mind was at the time?

A. I don't know what my mind would have thought at the time, no.

Q. You see, I want to suggest to you that the reason you forgot yesterday to give evidence about Mr Sharma asking you to come and stay the night at his house was because it's not true?

A. That is because I didn't recollect it yesterday.

Q. And that's because it wasn't true?

A. That's incorrect.

Q. How could you forget such a significant incident?

A. Because it was four years ago.

125 The plaintiff admitted that he might have had a conversation with Mr Wright regarding a "working relationship". However he very firmly denied the alleged misconduct of seeking to pursue Mr Wright for a sexual relationship. Mr Wright's evidence in cross-examination that he did not know whether the plaintiff was pursuing him because he wanted to have sexual relations with him was, I thought, most peculiar. On the one hand Mr Wright was suggesting that his life was in turmoil by reason of the conduct of the plaintiff. The turmoil was allegedly caused by sexual misconduct, indeed sexual harassment of a man who was vulnerable because he was in an inferior position of employment to the plaintiff. His evidence that he did not infer that the plaintiff was asking him back to his house to have a homosexual relationship with him was most curious. If Mr Wright did not believe that the plaintiff was pursing him sexually, that is to have sexual relations with him, then it is difficult to understand the true nature of the allegation against the plaintiff.

126 There is no doubt that the plaintiff and Mr Wright have quite different personalities. However one thing they have in common is that they are both extremely successful senior salesmen. The plaintiff appears to have behaved rather garrulously in the workplace whereas Mr Wright appears to have been rather more reserved. I am satisfied that Mr Wright did not appreciate the plaintiff's personality and he certainly regarded him as rather "rude".

127 It is clear that Mr Wright felt comfortable in speaking to Ms Koller. Indeed it was Ms Koller who smoothed the way for Mr Wright to be employed with the defendant in October 2008 after he had declined employment earlier in the year (after having initially accepted it). Ms Koller gave affidavit evidence of her visit to Australia in mid-November 2008 during which she had a conversation with Mr Wright in which he said, "I am really pleased to be here. It's going well". Mr Wright gave evidence that he could not remember this conversation with Ms Koller but accepted that Ms Koller was "potentially" the perfect person to whom he could complain (tr 290). However he said it was "not necessarily something he would have raised". He suggested that he "just wanted to get on with things" and that he was "hoping things would go away" (tr 290). That there was no complaint of any nature raised with a person with whom Mr Wright had a good relationship is rather curious.

128 Although Mr Wright complained to Ms Koller that his life had effectively been ruined during the employment with the defendant in Australia with adverse financial consequences, he admitted in cross-examination that he had secured employment in England (or was awaiting final confirmation of that employment) prior to leaving Australia (tr 318-319). It is clear that he commenced that employment almost immediately on his return to the UK. This admission in cross-examination cast a very different light on Mr Wright's departure from Australia. Prior to that admission it may have appeared that Mr Wright had left Australia as a bewildered and devastated individual. However the fact that he was in negotiation for employment in the UK and feeling "strongly confident" that he would secure it (tr 319) suggests that he had made the positive choice to leave Australia and return to the UK with secure employment awaiting him.

129 In Mr Wright's meeting with Ms Koller soon after his return to the UK on 13 January 2009 he was asked whether he "would go back to Australia". He said "personally yes - but I would need to convince my wife". This tends to support the suggestions made both by Ms Koller to Mr Wright in February 2009 and indeed by the plaintiff in these proceedings, that the real imperative for Mr Wright's departure was that his wife (and mother-in-law) wanted to return to the UK. I am satisfied that the departure of Mr Wright's mother-in-law with the consequential loss of assistance for the care of the infant twins, exacerbated by Mr Wright's wife's serious illness and hospitalisation and his wife's clear preference to leave Australia (an inference from the answer he gave Ms Koller) played a most significant role in Mr Wright's departure.

130 In considering all these matters I have had in mind the possible cumulative effect of the alleged incidents. I am not satisfied that a reasonable person would anticipate in the circumstances that the plaintiff would be offended, humiliated or intimidated. In any event I am far from comfortably satisfied that these allegations regarding the pursuit of a "relationship" are made out. The defendant has failed to prove these allegations.

131 I am not satisfied that the defendant has proved that the plaintiff was guilty of serious misconduct that would warrant dismissal under clause 13.3 of the Contract.

Justification

132 The defendant relied upon Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 in support of its claim that it is justified in terminating the plaintiff's employment by reason of two matters that it discovered after the events of February and March 2009. The defendant claimed that the plaintiff's misconduct was a fundamental breach of his express obligations under clause 3.2(a) of the Contract and paragraphs 1(c), 1(d) and 1(e) of Schedule 1 to the Contract. It is also alleged that he breached his implied contractual duty of good faith and fidelity and his fiduciary obligations to the defendant. It is necessary to decide whether the conduct relied upon strikes at the root of the Contract or justifies a loss of trust and confidence in the relationship: Zhu v Sydney Organising Committee for the Olympic Games & Ors [2001] NSWSC 989 at [222]-[229].

The emails

133 The first matter is described as serious misconduct in sending and publishing two emails, one to addresses at Ord Minnett and the other to the Commonwealth Bank of Australia (CBA). There is no issue that the content of the emails explicitly disclosed the identity of the plaintiff and in one email, the CBA email, the plaintiff's connection with the defendant. There is also no issue that the content of the emails included explicit references to the plaintiff taking more than one "e" (ecstacy tablet) on an evening in 2003 and on an evening in 2004; that on one of these occasions he was substantially effected by or under the influence of the drug; and that he reported for work late the following morning (Ex PX1 186; 233).

134 It is claimed that the plaintiff knew, or ought to have known, that he had no capacity to prevent or otherwise control the subsequent publication of the emails or to prevent the discovery of them and their contents by Ord Minnett or the CBA. The defendant alleges that the contents of the emails had a "real and sensible capacity to damage the defendant's reputation and standing as a finance house, or create or contribute to an adverse reputation and standing in that regard".

135 There is no evidence of any adverse consequence of the plaintiff's communication to the two persons named in which he referred to the taking of an "e". There is no evidence that the plaintiff engaged in such communications on any other occasion and there was no cross-examination of him in this regard.

136 These emails were sent in the early years (2003-2004) after the defendant's business commenced operation in Australia. The evidence establishes that there was a degree of tolerance for heavy drinking in the defendant's work environment with an expectation that clients would be taken to lunches at which alcohol (sometimes in large volumes) was consumed. There was also documentary evidence that around this time (in 2005) the defendant was paying for "escort and dating services" although it was suggested by Mr Charlwood that the entries in the document in fact related to what was described as "lap dancing" venues (tr 109). The evidence also establishes that there was a tolerance for attendances (by Mr Charlwood) at what was described as "strip clubs" with clients (tr 205).

137 It appears that the environment in the defendant's offices was such that in those years it is questionable as to whether the plaintiff's conduct on the two occasions in 2003 and/or 2004 would bring the defendant's reputation into any further disrepute than would the Managing Director's conduct in attending lap dancing venues and/or strip clubs with clients and/or suppliers. In any event I am not satisfied that the defendant's conduct in sending the emails strikes at the root of the Contract or would cause a loss of confidence or trust in the relationship. As to the underlying conduct referred to in the emails, the defendant had a drug and alcohol policy that recognised that addiction to drugs and/or alcohol could be adverse to the health of an employee. It envisaged that the defendant would "intervene" in order to offer "assistance" to the employee (tr 188-189). I am satisfied that the plaintiff's conduct may warrant initial intervention and assistance rather than summary dismissal.

The Stonewarehouse Group

138 The second matter relied upon by the defendant as serious misconduct is that the plaintiff put himself in and acted in a position of actual or real conflict between his duty to the defendant in relation to a factoring facility provided to The Stonewarehouse Group Pty Ltd (Stonewarehouse) and his personal interests in relation to personal loans made to Mr Dupagunta (the principal of Stonewarehouse) in August 2003 and October 2004 without having disclosed the material facts pertaining to that conflict to the defendant.

139 The plaintiff developed a friendship with Chandramouli Dupagunta with whom he had worked at Orix. In August 2003 the plaintiff loaned Mr Dupagunta $100,000 for ten weeks repayable on 14 October 2003. On 14 October 2003 the plaintiff agreed to "roll over" the loan to make it repayable on 15 January 2004. Mr Dupagunta did not repay the loan by the due date in January 2004 and the plaintiff then agreed that he could repay the loan in "smaller amounts". However the plaintiff had some difficulty in recovering the debt and by March 2004 Mr Dupagunta had repaid only $65,000. By 29 June 2004 the plaintiff complained to Mr Dupagunta that "again no funds were received" into his account. In cross-examination the plaintiff said that by this time there was only a "small part of the moneys" still outstanding (tr 52).

140 Mr Dupagunta was a shareholder and director of Stonewarehouse. The other directors were three brothers, Lachhman, Chandru and Jaikishen Tolani. On 1 June 2004 Stonewarehouse made application (proposed by the plaintiff) to the defendant for an invoice discounting facility. Mr Davies approved the facility on 2 June 2004 and Mr Charlwood approved it on 7 June 2004. The plaintiff did not disclose to either Mr Charlwood or Mr Davies that at the time he proposed the facility for Stonewarehouse, Mr Dupagunta still owed him some moneys pursuant to the loan agreement of October 2003.

141 In October 2004 Mr Dupagunta advised the plaintiff that his other company, Onix Pty Ltd (Onix), was looking for someone to fund export stock in which arrangement funding would only be needed at the time the stock reached the customer. Mr Dupagunta inquired whether the defendant could provide this funding. The plaintiff advised Mr Dupagunta that the defendant would not be funding it and Mr Dupagunta then suggested that the plaintiff might fund it personally and that they could "do a deal". The plaintiff informed Mr Dupagunta that because Stonewarehouse was then a current client of the defendant, he did not feel comfortable lending to him personally and he would need to "run it past" Mr Charlwood.

142 The plaintiff's affidavit evidence was that he spoke with Mr Charlwood and advised him that Mr Dupagunta had asked him to fund export stock and he was going to see if he could secure an equity loan. He claimed that Mr Charlwood said that the defendant did not fund stock and "if Bibby can't do it and you can, I don't care". Mr Charlwood did not accept that this conversation occurred (tr 145). Mr Davies agreed that in 2004 the defendant was not involved in financing stock and that if there had been an application for funding to purchase stock, the defendant would have refused it (tr 209).

143 On 5 October 2004 the plaintiff entered into an agreement with Mr Dupagunta pursuant to which he loaned him $115,000. The loan was to be repaid by 5 October 2005 unless there had been an event of default prior to that time. The loan period could be extended by agreement, to an "indefinite period" (cl 1.1; 5.2). The purpose of the loan was solely for business purposes and for Mr Dupagunta to lend the Principal Sum to Onix to apply it for the purpose of funding the acquisition and export of container loads of natural stone material (cl 6.1). There was a requirement for Mr Dupagunta to pay to the plaintiff a "minimum guaranteed yield" in two equal instalments of the Australian dollar equivalent of USD16,200 six months after the Draw Down Date and on the first anniversary of the Draw Down Date. Onix guaranteed the loan.

144 On 15 April 2005 the plaintiff wrote to Mr Dupagunta asking whether they could "sit down sometime soon" to resolve the reporting as to how the "investment" was working. The plaintiff complained that since entering into the agreement in October 2004 he had "neither received a dividend nor any reporting". On 21 April 2005 the plaintiff wrote to Mr Dupagunta stating that he found him "totally unreliable" and that he no longer felt comfortable in dealing with him. He also advised him that he intended to give him notice of termination of their agreement and would require repayment of the loan.

145 On 22 April 2005 the plaintiff wrote to Mr Dupagunta confirming that he had received US$8,100 into his account and withdrawing what he had said in his 21 April 2005 email in relation to terminating their arrangement. In cross-examination the plaintiff said that his email of 21 April 2005 was an "emotional overreaction" and not "an on-going thing" (tr 66). He did not advise either Mr Charlwood or Mr Davies of the fact that he had regarded Mr Dupagunta as "totally unreliable".

146 The plaintiff was aware that by April 2005 Mr Davies had become concerned about the state of the account between Stonewarehouse and the defendant (tr 55-56). Mr Davies suggested to the plaintiff that the account should be converted from an invoice discounting arrangement to a full service factoring arrangement. The plaintiff suggested to Mr Davies that Stonewarehouse be given two months to regularise the account, before any steps were taken to convert the account (tr 56). The plaintiff's evidence in cross-examination on this topic included the following (tr 57):

It was one of Bibby's best creditworthy clients at the time, so in terms of financial pressure, no, there was a certain cyclicity in the payment of the debtors, which is what is referred to in the email, so it's important to understand this difference. The debtors were paying slowly so Steve was concerned that the debt turn was blowing out, which is the average outstanding days that the debtors take to pay, and by converting it to full service factoring it doesn't mean that the money will come in any faster or slower, the money still comes in. It doesn't change the financial position of the company itself. The company doesn't suddenly become profitable because Bibby starts collecting the debts. I think that's an important point.

147 The plaintiff was also cross-examined as follows (tr 64):

Q. The disappointment that you speak about in the penultimate paragraph I want to suggest to you was in part informed by your appreciation that if Mr Davies took the step he was contemplating it might have an effect on Mr Dupagunta's capacity to meet his personal obligations to you, do you agree?

A. I completely disagree. His converting into an FSF would still mean that Bibby carried on funding the client so would have no difference, except in the nature in which the facility would be run.

148 Mr Charlwood agreed that the defendant entered into the Stonewarehouse facility after an audit of its accounts. He also agreed that the defendant had fixed and floating charges over the assets of both Stonewarehouse and Onix. In an exquisitely crafted cross-examination, Mr Charlwood was led to agree that the defendant's financial position "could be" improved by the transaction in which the plaintiff loaned Stonewarehouse $115,000 in that the stock purchased by Stonewarehouse would be covered by the defendant's fixed and floating charge (tr 146).

149 There is a conflict between the plaintiff and Mr Charlwood as to whether the plaintiff disclosed the loan to Stonewarehouse to him in October 2004. The plaintiff claimed that he did disclose Mr Dupagunta's approach to him and that Mr Charlwood said that he did not "care" whether the plaintiff funded it because the defendant did not fund stock. Mr Charlwood denied that this conversation occurred. Mr Davies also denied that he was aware of the transaction although he did agree that he visited the Stonewarehouse premises with the plaintiff. This alleged conversation was said to have occurred eight years before the trial of this matter. On balance I prefer the plaintiff's evidence on this aspect of the matter to that of Mr Charlwood. However I will proceed on the basis that the conversation did not occur.

150 In those circumstances the defendant claims that the plaintiff breached his Contract by entering into this transaction with Stonewarehouse. I am not satisfied that the plaintiff's conduct amounted to a breach of clause 3.2(a) of the Contract nor am I satisfied that the plaintiff's conduct amounted to him failing to perform his duties to the best of his ability and knowledge (during or outside business times) (Sch 1; 1(b)); or failing to serve the defendant faithfully and diligently (Sch 1(c)); or failing to promote the interests of the defendant (Sch 1; 1(d)); or failing to act in the defendant's best interests (Sch 1; 1(e)).

151 The defendant was not disadvantaged by the transaction and it was accepted by Mr Charlwood that its position "could be" improved by it. The defendant's best interests were not compromised nor did the plaintiff prefer his own interests over that of the defendant. There was nothing in his conduct that did not promote the best interests of the defendant. The plaintiff referred to the "concerns" that Messrs Charlwood and Davies raised with the plaintiff in 2003. It was suggested that the conduct that was the subject of those "concerns" (that were ultimately dealt with amicably) was far more serious than this conduct in failing to disclose this loan. I agree.

152 I am not satisfied that the failure to inform Messrs Charlwood and Davies of this loan amounts to conduct that strikes at the root of the Contract. Nor am I satisfied that it amounts to conduct that would justify a loss of trust and confidence in the relationship. It would be appropriately characterised as a lapse of judgment. It would not justify dismissal for serious misconduct.

Conclusion

153 The plaintiff's employment was terminated on 4 February 2009 pursuant to clause 13.2 of the Contract. In those circumstances, as explicitly acknowledged by the defendant during the trial (tr 423), the plaintiff is entitled to payment of the equivalent of six months salary in lieu of notice and a Special Bonus of $1.4 million plus interest.

154 The parties are to prepare Short Minutes of Order finalising the proceedings including an agreed costs order. If the parties are unable to agree on a costs order I will hear argument on 12 October 2012 (or such other date convenient to the parties and the Court) when the matter is listed for the filing of the Short Minutes.

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Decision last updated: 26 September 2012