Federal Court of Australia

SBP Employment Solutions Pty Ltd v Smith [2021] FCA 601

ORDERS

THE COURT ORDERS THAT:

1.    The parties agree upon and provide to the Court draft orders reflecting the reasons for judgment by 4.30 pm on 15 June 2021.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

RANGIAH J:

1    The appellants appeal against judgments of the Federal Circuit Court of Australia in Smith v SBP Employment Solutions Pty Ltd (No 2) [2019] FCCA 3318 (the Liability and Penalty Decision) and Smith v SBP Employment Solutions Pty Ltd (No 3) [2019] FCCA 3516 (the Compensation Decision). The appellants also seek an extension of time and leave to appeal against the judgment in Smith v SBP Employment Solutions Pty Ltd (No 4) [2020] FCCA 61 (the Costs Decision).

2    The proceeding before the Federal Circuit Court was concerned with the termination of the employment of the present respondent, Nicholas Smith, and non-payment of his annual leave entitlements.

3    In the Liability and Penalty Decision, the primary judge found in favour of Mr Smith, making declaratory orders that the appellants had contravened ss 44 and 340 of the Fair Work Act 2009 (Cth) (the FWA). His Honour imposed pecuniary penalties upon each of the appellants. In the appeal, the appellants challenge the findings of contravention and also challenge the quantum of the penalties.

4    In the Compensation Decision, the primary judge ordered that the appellants pay Mr Smith the sum of $589,439.43 as compensation for loss of earnings and superannuation, and $13,925.16 for interest upon that loss. The appellants challenge the quantum of the compensation ordered.

5    In the Costs Decision, the primary judge ordered that the appellants pay 60% of Mr Smith’s costs. The appellants contend that there should have been no order as to costs.

6    I will commence by describing the roles of the various parties, the evidence, the reasons of the primary judge and the relevant legislation, before considering the grounds of appeal.

The Parties

7    Mr Smith was employed by the first respondent, SBP Employment Solutions Pty Ltd (Employment Solutions) from 1 June 2015 until his employment was terminated on 20 November 2017.

8    Employment Solutions employs the employees who work in the businesses of SBP Australia Pty Ltd (SBP Australia) and other related companies (collectively, the SBP Group). SBP Australia operates a design and construction business.

9    Mr Smith was responsible for the day-to-day management of a business operated by SBP Food Facility Services Pty Ltd (Food Facility Services), which designed and manufactured machinery for making food (the food-equipment business). In about late 2016, the food-equipment business was taken over by SBP Material Handling Pty Ltd (Material Handling).

10    The third to sixth appellants, respectively Max Burns, Tony Aisthorpe, Dan Mahony and Neville Hombsch (collectively “the Directors”), are directors of Employment Solutions, SBP Australia and Material Handling.

11    Mr Smith alleged that Employment Solutions terminated his employment in contravention of s 340 of the FWA because he had exercised his workplace right to make complaints or inquiries in relation to his employment. He alleged that SBP Australia and the Directors were each accessorily liable for Employment Solutions’ contraventions. The primary judge’s findings of such contraventions and the quantum of penalties and compensation are the principal focus of the appeal.

12    Mr Smith also alleged that Employment Solutions contravened s 44 of the FWA by failing to pay his annual leave entitlements, and he succeeded in respect of that allegation. That finding of contravention by Employment Solutions is not challenged in the appeal, but the quantum of the penalties is challenged, as are the findings of accessorial liability.

13    Mr Smith also alleged contraventions of ss 343 and 351 of the FWA. Those allegations were rejected by the primary judge. The primary judge found that Employment Solutions breached the contract of employment, but decided not to award damages. These findings are not the subject of the appeals.

The Evidence

14    On 1 June 2015, Mr Smith commenced his employment with Employment Solutions in the role of engineering and operations manager for SBP Australia. In 2016, Mr Smith’s position was changed so that he also became responsible for the day-to-day management of the food-equipment business operated by Food Facility Services. Material Handling took over the operation of the food-equipment business in about late 2016.

15    Mr Smith’s new position involved substantially greater responsibilities and workload, a matter about which he later began to complain to the Directors. He performed work for both SBP Australia and Food Facility Services (and later Material Handling). It appears that the former paid 60% of his salary and the latter paid 40%, although some evidence suggests that it may have been the other way around.

16    On 21 October 2016, Mr Smith was involved in a car accident and suffered a whiplash-type injury and a head injury. He initially made a workers’ compensation claim, but decided not to proceed with the claim, apparently because he felt pressured by the Directors not to proceed and because he thought he could manage his symptoms. However, his symptoms gradually worsened.

17    In around late November or early December 2016, the Directors offered Mr Smith a directorship of Material Handling. Mr Smith deposed that he frequently asked Mr Aisthorpe about the progress of arrangements for the directorship, but the directorship did not eventuate. Mr Smith’s evidence at trial was that he had accepted the offer, but the primary judge rejected that evidence. He deposed that he was frequently complimented about his performance by the Directors.

18    In January 2017, Mr Smith decided to reopen his workers’ compensation claim. In June 2017, Mr Smith’s doctor provided him with a medical certificate stating that he was only fit to work from Monday to Friday and from 9 am to 3 pm. On 5 June 2017, Mr Smith met with Mr Aisthorpe, gave him a copy of the medical certificate and informed him of his doctor’s advice to restrict his hours of work.

19    Mr Aisthorpe deposed that at the meeting on 5 June 2017, he asked Mr Smith to provide timesheets to demonstrate compliance with the medical certificate, and made repeated requests for the timesheets up until the time when Mr Smith’s employment was terminated. The timesheets were never provided.

20    Mr Smith subsequently raised a number of issues of concern to him in the course of meetings with Mr Burns, or Mr Aisthorpe, or both. In his Amended Statement of Claim, Mr Smith alleged that he made “complaints or inquiries” within s 341(1)(c) (ii) of the FWA on 8 June, 12 June, 10 July, 14 September (or 19 September), 17 October, 17 November and 20 November 2017. Mr Smith alleged that Employment Solutions terminated his employment because he made such complaints or inquiries. Subject to some limited admissions, these allegations were generally denied in the Defence.

21    The primary judge ultimately accepted that the “complaints or inquiries” alleged were made by Mr Smith, and that they fell within s 341(1)(c) (ii) of the FWA. His Honour also found that Mr Smith’s employment was terminated because he had made these complaints or inquiries.

22    It is relevant to describe Mr Smith’s versions of the meetings at which he made the alleged complaints and inquiries.

23    Mr Smith deposed that at a meeting with Mr Burns on 8 June 2017, he complained of working excessive hours, feeling stressed and not being well. He said he needed urgent additional assistance with the food-equipment business, including another draftsperson, a maintenance person and more employees, and also needed to outsource some jobs. He said he could not see how he was going to get all his work completed. The context of these complaints was that Mr Smith had earlier provided the medical certificate saying he was only able to perform his normal duties between 9 am to 3 pm, Monday to Friday.

24    Mr Smith deposed that on 12 June 2017, he told Mr Burns that he wanted the Directors to further consider his need to attend hospital and medical appointments. He said he wanted further discussion with the Directors about attending such appointments during business hours. He said he wanted the Directors to consider outsourcing some of the work in the food-equipment business. He said there was a danger that he would end up working excessive hours due to his excessive and unrelenting workload, and that he did not want Employment Solutions or him to get into trouble with WorkCover Queensland.

25    Mr Smith deposed that on 10 July 2017 he told Mr Burns and Mr Aisthorpe that he was still undergoing medical treatment and needed assistance with his workload, including training in the use of certain software and the appointment of a contracts administrator and additional staff. Mr Smith deposed that Mr Aisthorpe said they were recruiting a person to perform a new administration support role (which did not eventuate), and there would be changes to the template used for business forecasting and relevant training would be provided.

26    On 12 September 2017, Mr Aisthorpe handed Mr Smith a letter from Employment Solutions dated 7 September 2017 saying that the Directors were grateful for his efforts and contributions and offering him an increase in annual salary of $20,000 and a 10% profit share in the food-equipment business. The terms of the offer also required Mr Smith to provide timesheets, monthly business forecasts and capital expenditure requests.

27    In response to the offer, Mr Smith prepared a letter which he delivered to the offices of Mr Burns and Mr Aisthorpe on 14 September 2017 and again handed to Mr Aisthorpe at a meeting on 19 September 2017. Mr Smith’s letter complained of the offer made to him in comparison to offers made to other employees, including the extent of the proposed salary increase and the additional tasks that would be required of him. He complained that he had continually requested accounting and financial details for management and financial planning purposes, as well as additional staff. He complained that the offer to make him a director had been withdrawn.

28    Mr Smith deposed that on 17 October 2017, he attended a meeting with Mr Aisthorpe. He requested a salary increase of $30,000 per annum or, alternatively, $20,000 per annum with an additional $10,000 to be retained to assist with costs associated with his appointment as a director of Material Handling. Mr Aisthorpe said the cost of insurance, because of Mr Smith’s age and ill health, was too prohibitive to allow Mr Smith to be appointed as a director, and that the directorship was no longer on the table. Mr Aisthorpe also told Mr Smith that if the WorkCover claim could be closed, the directorship would be back on the table once he had proven that he was “medically okay”.

29    On 14 November 2017, Mr Aisthorpe asked Mr Smith to prepare a report which included information about current and prospective jobs and projects and Mr Smith’s estimate of the value of upcoming jobs and projects. Mr Smith prepared a report and sent it to Mr Aisthorpe on 16 November 2017. Mr Smith estimated that there was approximately $7.4 million of “secured or potential work in the foreseeable future” for the food-equipment business.

30    The primary judge found that a decision to terminate Mr Smith’s employment was made at a meeting of the board of SBP Australia held on 17 November 2017. The Directors who were present at the meeting were Mr Burns, Mr Aisthorpe and Mr Mahony. The Chief Financial Officer for the SBP Group, Mr Pie, was also present. Although Mr Hombsch was absent from the meeting on 17 November 2017, his Honour was satisfied that Mr Hombsch had been consulted and that the decision was made by all the Directors.

31    Mr Smith deposed that he met with Mr Burns, Mr Aisthorpe and Mr Mahony and Mr Pie on 17 November 2017. Mr Burns said that the food-equipment business was losing $10,000 per week, current losses were in excess of $200,000 and there was still a debt of $180,000 from the previous business. Mr Smith deposed that he did not agree those figures were correct, especially taking into account the projected end-of-financial year results. Mr Burns responded that the business may have to be restructured and its future was unknown. Mr Burns said that Mr Smith’s employment was terminated effective immediately. Mr Burns said that it was in Mr Smith’s best interest to resign, and he was given until 20 November 2017 to consider doing so. Mr Smith asked whether he could be transferred to another area, but was told a transfer would not be possible and there were no other positions available.

32    Mr Smith deposed that he met with Mr Burns and Mr Aisthorpe again on 20 November 2017 and told them he had done nothing wrong. He provided them with a letter of the same date which stated that he had not resigned and sought confirmation as to why his employment had been terminated. The letter demanded payment of all salary and leave entitlements, and made other demands. Mr Smith deposed that Mr Burns and Mr Aisthorpe appeared to be, “shocked and visibly disappointed and irate”. Mr Burns said that Mr Smith would regret this, and that they could make things very difficult for him. His Honour held that Mr Smith’s employment was subsequently terminated on 20 November 2017.

33    On 23 November 2017, Mr Burns emailed Mr Smith a letter from Employment Solutions stating that allegations had been made that Mr Smith had removed property from SBP Australia’s premises, that these allegations were substantiated by an investigation, and that his employment was summarily terminated for gross misconduct without notice. There was no reference to the reasons that had been given on 17 November 2017.

34    In his affidavit, Mr Burns did not dispute Mr Smith’s versions of the meetings on 8 June, 12 June, 10 July, 10 October and 20 November 2017. Further, he did not dispute Mr Smith’s version of the meeting on 17 November 2017, although he deposed that Mr Smith admitted that he was responsible for losses in respect of a particular job.

35    Similarly, Mr Aisthorpe’s affidavit did not dispute Mr Smith’s allegations as to what was said at the meetings on 10 July, 19 September, 17 October and 20 November 2017. As to the meeting on 17 November 2017, Mr Aisthorpe deposed that Mr Smith accepted he had made mistakes on some projects that had lost money, but blamed the accounts package and lack of support. Mr Aisthorpe also deposed that Mr Smith was continuing to refuse to provide timesheets, was not bringing in new business and was not answering phone calls, and that clients and workers were disgruntled because of this.

36    I observe that Mr Burns and Mr Aisthorpe would generally make notes of the meetings, which were in evidence before the primary judge, but that not all the notes have been provided to the Court for the appeal. In addition, the full transcripts of the cross-examinations have not been provided. I proceed upon the assumption that the notes and parts of the transcript have not been provided because they would not have assisted either party.

The Liability and Penalty Decision

37    Mr Smith’s case in respect of s 340 of the FWA was that Employment Solutions terminated his employment because he had made complaints or inquiries in relation to his employment. He asserted that his complaints and inquiries were a substantial and operative reason for his dismissal.

38    The present appellants denied that Mr Smith had been dismissed because he made complaints or inquiries. Mr Burns deposed that, “We terminated the Applicant’s employment on account of these [financial] losses, general poor performance, his inability to manage the business and the poor future forecast of the business”. Mr Aisthorpe gave evidence that at the meeting on 17 November 2017, “I stated that due to his poor performance and his inability to manage the business to ensure it was profitable, we had no other option than to terminate his employment, with immediate effect”. The other Directors who participated in the decision, Mr Mahony and Mr Hombsch, did not give evidence.

39    The primary judge rejected the evidence of Mr Burns and Mr Aisthorpe as to their reasons for terminating Mr Smith’s employment. His Honour observed that Mr Pie, the Chief Financial Officer, had not been called to give evidence, and held that “an adverse inference should be drawn against the respondents for such failure”. His Honour went on to hold that such inference, “adversely impacts upon the credibility of those witnesses called on behalf of the respondents who relied upon the alleged unprofitability of SBP Material Handling as a reason for termination”. His Honour also found that the allegation that Mr Smith had performed poorly in his work was irreconcilable with a letter from Mr Aisthorpe dated 7 September 2017, on the letterhead of Employment Solutions, which expressed the Board’s gratitude for Mr Smith’s efforts and contributions and the Board’s view that the business had a strong future under his guidance and offered Mr Smith an annual salary increase of $20,000 and a 10% profit share of the Material Handling business.

40    The primary judge held:

34.     The respondents’ stated reasons for termination are implausible. The Court prefers the evidence of the applicant to that of the witnesses called on behalf of the respondents on each of the complaint and inquiry issues. The Court finds that the first and second respondents, by their directors, had become increasingly frustrated by the applicant’s pleaded complaints and inquiries, and had decided to be rid of him for that proscribed reason. Their motive in doing so was not for the expressed reasons as set out by Burns in his affidavit material. The directors were fed up with the applicant - he being someone who just wouldn’t toe the line - and they opted to be rid of him. The termination of the applicant’s employment was not for any lawful reason.

35.     The first respondent’s termination of the applicant’s employment was adverse action in contravention of the provisions of s. 340 of the FWA. The respondents have failed to discharge their onus of proving that the presumption as provided for under s. 361 of the FWA did not apply.

41    The primary judge held that, pursuant to s 550 of the FWA, each of the Directors were individually liable as an accessory for Employment Solutions’ contravention of s 340.

42    The primary judge went on to reject Mr Smith’s allegation that by withdrawing an arrangement for Mr Smith to become a director of Material Handling, the present appellants had discriminated against him on the basis of his age and physical disability under s 351 of the FWA. His Honour preferred the evidence of Mr Burns and Mr Aisthorpe that Mr Smith had not accepted the offer of a directorship at a meeting in around late November, but had instead made a counter-offer, which was subsequently rejected.

43    The primary judge held that the breach of contract claim had been established as there was no lawful cause to terminate Mr Smith’s employment. His Honour rejected the appellants’ argument that the employment had been lawfully terminated on the basis that Mr Smith had engaged in serious misconduct. His Honour described the appellants’ assertion that Mr Smith had unlawfully removed company property as “heavy-handed”, and found Mr Smith’s evidence on this issue to be honest and credible. However, his Honour declined to award damages for breach of contract.

44    The appellants had claimed that Mr Smith’s unused annual leave entitlements were not able to be calculated as he had failed to provide timesheets demonstrating his hours of work. However, on 15 May 2019, after proceedings had been commenced, Employment Solutions paid Mr Smith an amount for his untaken annual leave, plus interest, as if he had worked full-time and had taken no paid leave between June 2017 and November 2017. The primary judge held that the appellants had contravened ss 44 and 90(2) of the FWA by failing to pay Mr Smith his untaken annual leave entitlements.

45    Having held that the appellants had contravened ss 44 and 340 of the FWA, the primary judge went on to consider the issue of compensation. His Honour rejected a submission that Mr Smith’s employment would not have continued beyond 28 February 2018 because the business operated by Material Handling had ceased at that date, finding that Mr Smith would have been redeployed elsewhere within the SBP Group. His Honour also rejected a submission that, as Mr Smith was certified as totally unfit for work from 23 November 2017, he would not have worked beyond that date in any event.

46    The primary judge accepted the evidence of a psychiatrist, Dr Chau, called to give evidence on behalf of Mr Smith. Dr Chau diagnosed Mr Smith with generalised anxiety disorder, social phobia and aggravation of an adjustment disorder. She said that Mr Smith was predisposed to developing psychiatric injury, and had in fact developed an adjustment disorder as a result of the motor vehicle accident. Dr Chau indicated that Mr Smith’s medical records supported his report of significant mental state decline since his termination. Dr Chau considered that Mr Smith had a 19% whole person impairment due to his psychiatric state.

47    The primary judge rejected the appellants’ submission that Mr Smith was a malingerer who had intentionally withheld information from Dr Chau. His Honour preferred the opinions of Dr Chau to those of another psychiatrist, Dr Kar, who had suggested that Mr Smith had not suffered any psychiatric or psychological injury.

48    The primary judge found that Mr Smith was vulnerable to the onset of psychiatric symptoms and stressors, and that the termination of his employment caused an exacerbation of his underlying vulnerability. His Honour found that the termination of employment was a major stressor which was responsible for about 50% of Mr Smith’s ongoing impairment, namely a whole person impairment of about 9.5%.

49    The primary judge found that Mr Smith would not have been able to continue to carry out his employment with Employment Solutions in the same position and at the same level of capability for more than three years after the date of his termination. His Honour noted that Mr Smith had been unemployed since the termination of his employment.

50    The primary judge observed that Mr Smith was over 60 years of age and was earning $150,000 per annum when his employment was terminated. His Honour found that Mr Smith’s loss should be calculated on the basis that if his employment had not been terminated, he could have continued in his employment for three years after 20 January 2018. His Honour found that Mr Smith had a residual earning capacity and was required to mitigate his loss by seeking other employment to which he is suited. His Honour indicated that further submissions should be made as to the total amount of compensation payable and as to interest, as well as any superannuation loss.

51    The primary judge then went on to consider the question of what pecuniary penalties ought to be imposed for the contraventions. His Honour noted that the Directors had shown no remorse for their unlawful conduct and, indeed, had sought to portray Mr Smith as a “lying malingerer”, which was unwarranted.

52    His Honour stated that Mr Smith’s termination was calculated, and that the allegation that he had stolen property was, “unjustified and crudely vindictive”.

53    The primary judge held that there was no justification for the 18 month delay in the payment of Mr Smith’s annual leave entitlements. His Honour noted that when payment was made, it was made “to the last cent”, and held that the present appellants’ argument that payment of the entitlement had been unable to be made earlier because Mr Smith had failed to provide timesheets was unmeritorious. His Honour considered the contravention to be serious.

54    The maximum penalty for the contraventions was $63,000 for a corporation and $12,600 for an individual. For their contraventions of s 340 of the FWA, his Honour imposed penalties of $47,250 (75% of the maximum) upon each of Employment Solutions and SBP Australia, and $10,080 (80% of the maximum) upon each of the Directors.

55    For their contraventions of s 44 of the FWA, his Honour imposed penalties of $50,400 (80% of the maximum) upon each of Employment Solutions and SBP Australia, and $10,080 (80% of the maximum) upon each of the Directors.

56    The total of the penalties imposed upon each of Employment Solutions and SBP Australia was $97,650, and upon each of the Directors was $20,160. The penalties were ordered to be paid to Mr Smith.

The Compensation Decision

57    The Compensation Decision was delivered following the provision of further submissions by the parties concerning the total compensation to be awarded.

58    His Honour accepted Mr Smith’s submission that the net amount of compensation must be “grossed up” to take into account tax payable upon the award of compensation. Allowing Mr Smith his lost income for the three years between 20 January 2018 and 20 January 2021, as well as lost superannuation, his Honour awarded Mr Smith compensation of $589,439.43. His Honour also ordered that the appellants pay interest of $13,925.16.

59    His Honour’s method of calculation is not disputed in the appeal. The controversy is confined to the finding that Mr Smith would have continued in his employment for three years, and the failure to consider reductions for vicissitudes and the present value of future earnings.

The Costs Decision

60    Mr Smith sought an order that the appellants pay his costs on a party-and-party basis until 8 January 2019 and then on an indemnity basis. On 18 December 2018, Mr Smith’s lawyers had offered to compromise the claim upon terms including that Employment Solutions pay the sum of $300,000. The appellants did not respond to the offer and it expired on 7 January 2019.

61    The primary judge held that there was unreasonable conduct on the part of the appellants in failing to accept the offer of settlement. However, his Honour considered that this was not an appropriate case for the making of an indemnity costs’ order. His Honour held that costs should be reduced by 40% having regard to Mr Smith’s lack of success in respect of some aspects of his claim.

62    The primary judge ordered that the appellants were jointly and severally liable to pay Mr Smith 60% of his costs on a party-and-party basis from 8 January 2019.

The Legislation

63    Part 3–1 of Ch 3 of the FWA is entitled “General protections”. Division 3 of Part 3–1 is entitled “Workplace rights”.

64    Section 340 is within Div 3 and provides, relevantly:

(1)    A person must not take adverse action against another person:

(a)    because the other person:

    (i)    has a workplace right; or

    (ii)    has, or has not, exercised a workplace right; or

(iii)    proposes or proposes not to, or has at any time proposed or proposed not to, exercise a workplace right; or

(b)    to prevent the exercise of a workplace right by the other person.

Note:    This subsection is a civil remedy provision (see Part 4–1).

…

65    Section 341 of the FWA defines “workplace right” as follows:

Meaning of workplace right

(1)    A person has a workplace right if the person:

(a)    is entitled to the benefit of, or has a role or responsibility under, a workplace law, workplace instrument or order made by an industrial body; or

(b)    is able to initiate, or participate in, a process or proceedings under a workplace law or workplace instrument; or

(c)    is able to make a complaint or inquiry:

(i)    to a person or body having the capacity under a workplace law to seek compliance with that law or a workplace instrument; or

(ii)    if the person is an employee—in relation to his or her employment.

66    Section 342(1) of the FWA sets out a table that describes when a person takes “adverse action” against another person. Under Item 1, adverse action is taken by an employer against an employee if the employer:

(a)    dismisses the employee; or

(b)    injures the employee in his or her employment; or

(c)    alters the position of the employee to the employee’s prejudice; or

(d)    discriminates between the employee and other employees of the employer.

67    Section 360 of the FWA provides:

360    Multiple reasons for action

For the purposes of this Part, a person takes action for a particular reason if the reasons for the action include that reason.

68    Section 361 of the FWA provides, relevantly:

361    Reason for action to be presumed unless proved otherwise

(1)    If:

(a)    in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and

(b)    taking that action for that reason or with that intent would constitute a contravention of this Part;

it is presumed that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise.

    …

69    Section 550 of the FWA provides, relevantly:

550    Involvement in contravention treated in same way as actual contravention

(1)    A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.

…

(2)    A person is involved in a contravention of a civil remedy provision if, and only if, the person:

(a)    has aided, abetted, counselled or procured the contravention; or

(b)    has induced the contravention, whether by threats or promises or otherwise; or

(c)    has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

(d)    has conspired with others to effect the contravention.

Ground 1: Appeal against findings of contravention of s 340 of the FWA

Ground 1(a): Whether the primary judge erred in the application of Jones v Dunkel

70    Ground 1(a) of the Amended Notice of Appeal alleges that the primary judge ought not to have applied the principle in Jones v Dunkel in respect of the failure of the appellants to call Mr Pie to give evidence or, alternatively, that his Honour wrongly applied the principle by drawing impermissible inferences against the credibility of Mr Burns and Mr Aisthorpe.

71    Mr Burns’ evidence was that Mr Smith’s employment was terminated, “on account of these [financial] losses, general poor performance, his inability to manage the business and the poor future forecast of the business”. The reasons given by Mr Aisthorpe were Mr Smith’s, “poor performance and his inability to manage the business to ensure it was profitable”. The business that they were referring to was Material Handling’s food-equipment business. Neither Mr Mahony nor Mr Hombsch were called to give evidence as to their reasons for deciding that Mr Smith’s employment should be terminated.

72    The primary judge described the series of meetings at which Mr Smith made “complaints or inquiries”, which demonstrated a deteriorating relationship between Mr Smith and the Directors. His Honour then rejected the evidence of Mr Burns and Mr Aisthorpe as to the reasons for the termination, making the following findings:

30.     The Court finds that by 17 October 2017, Burns and Aisthorpe, in particular, had become frustrated by the applicant’s demands for increases in pay, and his expressed dissatisfaction with his not having been offered either a directorship, as previously offered to him, or profit-share. Burns and Aisthorpe were also frustrated by the fact that because of a motor vehicle accident which had occurred in 2016, the applicant had had issued to him, on 5 June 2017, a medical certificate which restricted his duties to between 9 am – 3 pm daily, and which provided for him to not undertake weekend work.

31.     Though one of the expressed reasons for the applicant’s termination of employment was said by the respondents to be related to the lack of profitability of SBP Material Handling, no evidence was sought to be adduced by the respondents from Mr Pie, who was relevantly the CFO for the SBP Group at the time of termination. That was so, notwithstanding that in cross-examination, Burns conceded that Pie had ceased working for the SBP group on good terms, and that Burns had last spoken to him some two days before Burns gave evidence. Pie had telephoned Burns on that occasion. Pie was therefore available to give evidence as to the alleged lack of profitability of SBP Material Handling as constituting a basis for the termination of the applicant’s employment, but the Respondents chose not to call him to enable him to do so. In circumstances where Pie was not called when he was the most appropriate person for the respondents to call to give evidence which went to a central part of the respondents’ case as to the issue of the motive for the termination of the applicant’s employment, the Court adopts the applicant’s submissions that an adverse inference should be drawn against the respondents for such failure. Such adverse inference adversely impacts upon the credibility of those witnesses called on behalf of the respondents who relied upon the alleged unprofitability of SBP Material Handling as a reason for termination.

…

33.     As to the allegation that the applicant performed poorly in his work, the Court is not satisfied that the applicant was either below par in his work performance, or was otherwise unable to manage the SBP Material Handling business. Indeed, the respondents’ claims to that effect are irreconcilable with the contents of a letter sent by Aisthorpe on the first respondent’s letterhead (presumably with the authority of the third, fifth and sixth respondents) to the applicant on 7 September 2017 – only some two months prior to his termination, in part, for alleged poor work performance. That letter, in part, read as follows:

“The Board wishes you to know that it is very grateful for the efforts and contributions you have made to SBP Food Processing Systems Australia since you have become involved with the business. In recent times, you have been successful in navigating some difficult business and market conditions. The Board remains of the view that the business has a strong future under your guidance.”

The letter went on to offer the applicant a $20,000 increase in annual salary and a 10% profit share of the SBP Material Handling business.

34.     The respondents’ stated reasons for termination are implausible. The Court prefers the evidence of the applicant to that of the witnesses called on behalf of the respondents on each of the complaint and inquiry issues. The Court finds that the first and second respondents, by their directors, had become increasingly frustrated by the applicant’s pleaded complaints and inquiries, and had decided to be rid of him for that proscribed reason. Their motive in doing so was not for the expressed reasons as set out by Burns in his affidavit material. The directors were fed up with the applicant - he being someone who just wouldn’t toe the line - and they opted to be rid of him. The termination of the applicant’s employment was not for any lawful reason.

(Underlining added.)

73    The appellants submit that a Jones v Dunkel inference ought not to have been drawn because there was no evidence or issue upon which Mr Pie ought to have been called to give evidence, since Mr Smith did not plead, depose or argue that Material Handling was in fact financially viable. They also submit that the principle in Jones v Dunkel does not extend to drawing an adverse inference against the credibility of the witnesses who were called.

74    The reasons given by Mr Burns and Mr Aisthorpe for the termination can broadly be categorised as Mr Smith’s poor performance in managing Material Handling’s food-equipment business and the lack of profitability of that business.

75    Mr Aisthorpe deposed that he became concerned that Material Handling’s business was losing significant amounts of money. Mr Aisthorpe said that Mr Pie had prepared a report which indicated that Material Handling was showing a net loss of $313,000, which was $565,000 out from Mr Smith’s projection. That report was annexed to Mr Aisthorpe’s affidavit. The report showed Material Handling’s losses for each month from July 2017 to October 2017. It also showed an anticipated loss of about $130,000 for one particular project.

76    Mr Aisthorpe deposed that at the meeting with Mr Smith on 17 November 2017, there was discussion about a number of jobs managed and overseen by Mr Smith which were expected to lose money. Mr Aisthorpe said that Mr Smith accepted that he had made mistakes on the projects that had lost money and Mr Smith blamed the accounts package and a lack of support for not being able to manage budgets. Mr Aisthorpe deposed that Mr Smith was not bringing in new business, and was not answering phone calls, and that clients and workers were disgruntled. Mr Aisthorpe also said that as Mr Smith was refusing to provide timesheets, there was no way to calculate the hours he was working. Mr Aisthorpe deposed that he told Mr Smith that, “due to his poor performance and his inability to manage the business to ensure it was profitable”, they had no option other than to terminate his employment with immediate effect. Mr Burns’ evidence was broadly similar, although less detailed.

77    Mr Smith’s version of the discussion on 17 November 2017 was that it was led by Mr Burns, who indicated that Material Handling’s business was losing $10,000 per week and that the current loss was in excess of $200,000. Mr Smith deposed that he said he did not agree that those figures were correct when the projected end-of-financial year results were considered, as the business had a strong portfolio of work, $7.4 million in quoted work with 30% profit margins and money outstanding from debtors, and said that the future of the business was good. Mr Burns then said that Mr Smith’s employment was terminated, but offered him the option to resign.

78    Mr Smith did not assert in his pleadings or his affidavit evidence that the financial data provided by Mr Pie to the Directors was inaccurate or that it was unreasonable to rely upon that information. What was asserted by Mr Smith was that factors such as anticipated income should have also been taken into account by the Directors when assessing profitability of the business, and that their failure to do so was an indication that non-profitability was not a genuine reason for the termination.

79    The primary judge found that the appellants had chosen not to call Mr Pie to give evidence as to, “the alleged lack of profitability of SBP Material Handling as constituting a basis for the termination of the applicant’s employment”. His Honour held that in circumstances where Mr Pie was an appropriate person, “to give evidence which went to a central part of the [present appellants’] case as to the issue of the motive for the termination”, an adverse inference should be drawn against the the present appellants.

80    The evidence concerning the involvement of Mr Pie showed, first, that he was present at the meeting on 17 November 2017 when Mr Smith was informed that his employment was to be terminated; and, second, that he had prepared a financial report relied upon by the Directors which indicated that Material Handling was then showing a net loss of $313,000. It is not alleged that he actively participated in the meeting. His Honour did not directly explain what evidence Mr Pie could have been called to give or contradict. It is quite unlikely that Mr Pie could have given any direct evidence as to the Directors’ motivations in dismissing Mr Smith, so the evidence his Honour must have been referring to could only have concerned either the accuracy of the financial data prepared by Mr Pie or the issue of whether Material Handling was expected to become profitable by the end of the financial year.

81    Mr Smith’s lawyers submit that it should be inferred that Mr Pie gave advice and recommendations to the Directors as to “the financial health” of Material Handling. They point to evidence given by Mr Aisthorpe to the effect that, as Chief Financial Officer, it was Mr Pie’s job to provide advice to the Directors and that the Directors would seek Mr Pie’s advice from time to time about the financial affairs of the SBP Group. The primary judge’s reasons focused upon the evidence that Mr Pie could have been expected to give, “as to the alleged lack of profitability” of Material Handling. I infer that the reference to “lack of profitability” was a reference, not just to the losses made until 17 November 2017, but the anticipated financial position by the end of the financial year, having regard to expected income.

82    I interpret the primary judge’s reasons as indicating that Mr Pie could have given evidence as to whether Material Handling was destined to be a loss-making business, or whether it could have been, or was expected to be, profitable when anticipated income was taken into account. I also interpret the primary judge’s reasons as accepting that these were matters upon which Mr Pie is likely to have advised the Directors.

83    I consider that Mr Pie’s evidence may have been capable of having some bearing upon whether the Directors’ assertion of non-viability of the food-equipment business as a reason for termination was genuine. In my opinion, the genuineness of the non-profitability reason was sufficiently raised by Mr Smith’s pleadings and his evidence to allow the primary judge to draw an inference that the appellants’ unexplained failure to call Mr Pie indicated that his evidence would not have assisted the appellants upon the issue of whether that reason was genuine. I therefore reject the appellants’ submission that there was no evidence or issue for Mr Pie to give evidence about, and that no Jones v Dunkel inference was capable of being drawn.

84    However, the primary judge went further than merely drawing an inference that Mr Pie’s evidence upon the issue of non-profitability would not have assisted the appellants. His Honour held that the failure to call Mr Pie, “adversely impacts upon the credibility of those witnesses called on behalf of the respondents who relied upon the alleged unprofitability of SBP Material Handling as a reason for termination”. In order to reach that conclusion, His Honour must have reasoned that Mr Pie, if called, was likely to have given evidence that was contrary to the evidence of Mr Burns and Mr Aisthorpe. In other words, his Honour must have inferred that Mr Pie’s evidence would have indicated, inconsistently with the evidence of Mr Burns and Mr Aisthorpe, that the Directors knew or believed that Material Handling was profitable, in the sense that it was likely to make up its losses through income it would receive in the future.

85    In Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361, the High Court explained the rule in Jones v Dunkel as follows:

63.    The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party’s case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn…

64.    The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party… There is a reason why failure to call a witness or failure to ask a particular question of a witness supports the possible inference that the witness’s evidence would not have assisted the party, while failure of a party-witness to tell the whole truth may support an inference that the party suppressed evidence which would have been damaging to the party-witness. A litigant has no duty to call particular witnesses or to procure that any witnesses called by that litigant are asked particular questions. A litigant who enters the witness box, on the other hand, is under a positive duty to tell the whole truth in answer to the questions asked.

(Underlining added.)

86    It was made clear in Kuhl at [64] that the rule in Jones v Dunkel does not permit an inference that the uncalled evidence would have been adverse or damaging to the case of the party which failed to call the evidence.

87    Similarly, in HML v The Queen (2008) 235 CLR 334, Heydon J held at [303]:

…In civil cases the unexplained failure of a party to give evidence, call witnesses or tender material is not treated as evidence of fear that it would expose an unfavourable fact, nor as an assertion of the non-existence of the fact not proved: the only consequence is that the failure can cause an inference arising from the evidence of the opposing party to be more confidently drawn…

88    The position was reiterated in ASIC v Hellicar (2012) 247 CLR 345, where Heydon J held at [232]:

…[T]wo consequences can flow from the unexplained failure of a party to call a witness whom that party would be expected to call. One is that the trier of fact may infer that the evidence of the absent witness would not assist the case of that party. The other is that the trier of fact may draw an inference unfavourable to that party with greater confidence. But Jones v Dunkel does not enable the trier of fact to infer that the evidence of the absent witness would have been positively adverse to that party…

89    I accept the appellants’ submission that the primary judge erred in drawing an inference that Mr Pie’s evidence would have been adverse to the appellants’ case and in concluding that the credibility of Mr Burns and Mr Aisthorpe was damaged because of that supposed uncalled adverse evidence.

Whether the error should result in a retrial

90    While the appellants have established that the primary judge erred in the application of Jones v Dunkel, that does not necessarily determine the outcome of the appeal. It is also necessary to consider whether or not it is appropriate to allow the appeal and order a retrial.

91    Section 28(1) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) provides, relevantly:

28    Form of judgment on appeal

(1)    Subject to any other Act, the Court may, in the exercise of its appellate jurisdiction:

(a)    affirm, reverse or vary the judgment appealed from;

(b)    give such judgment, or make such order, as, in all the circumstances, it thinks fit, or refuse to make an order;

(c)    set aside the judgment appealed from, in whole or in part, and remit the proceeding to the court from which the appeal was brought for further hearing and determination, subject to such directions as the Court thinks fit;

…

(f)    grant a new trial in any case in which there has been a trial, either with or without a jury, on any ground upon which it is appropriate to grant a new trial; or

…

In Conway v The Queen (2002) 209 CLR 203 at [6] and [36]–[38], the High Court held that s 28(1)(f) of the FCA Act authorised the dismissal of an appeal in a criminal case on the basis that no substantial miscarriage of justice had occurred. In Windoval Pty Ltd v Donnelly (2014) 226 FCR 89 at [95]-[96], the Full Federal Court confirmed that the “no substantial miscarriage of justice” exception also applies to an appeal where a civil trial has been heard by a judge without a jury.

92    It must be considered how an appellate court is to determine whether an error by a trial judge has led to a substantial miscarriage of justice. In Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union (2016) 248 FCR 18 at [418], based upon the principles from Weiss v The Queen (2005) 224 CLR 300 at [39]-[44], I concluded that the appellate court must decide for itself whether there has been a substantial miscarriage of justice upon its independent assessment of the evidence before the trial judge. After making due allowance for the “natural limitations” that exist in the case of an appellate court proceeding wholly or substantially on the record, it is necessary to determine whether or not the case of the person bringing the proceeding was proved. Section 140(1) of the Evidence Act 1995 (Cth) prescribes that the standard of proof is the balance of probabilities, but it is necessary to take into account the matters in s 140(2), which reflect Dixon J’s judgment in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-363. It is also necessary to bear in mind that under s 361 of the FWA, the person alleged to have taken adverse action because of a prohibited reason carries an onus of proving that the adverse action was not taken for that reason.

93    An appellate court is not, however, required to completely ignore the approach and findings of the trial judge. In this case, the purported Jones v Dunkel inference was not the only reason for his Honour’s finding that the evidence of Mr Burns and Mr Aisthorpe as to the Directors’ reasons for the termination of Mr Smith’s employment should be rejected. First, his Honour did not accept that the Directors genuinely thought Mr Smith’s work performance was poor or that he was otherwise unable to manage the food-equipment business. Second, his Honour accepted Mr Smith’s evidence “on each of the complaint and inquiry issues”, and made a positive finding that the Directors’ motivation for the termination was that they were “fed up” with Mr Smith’s complaints.

94    As to the first issue, I concur with the analysis of the primary judge that the letter addressed to Mr Smith by Mr Aisthorpe on behalf of the Directors dated 7 September 2017, only some two months before the termination, was inconsistent with the claim that “general poor performance” and “inability to manage the business” were reasons for the termination of Mr Smith’s employment. The letter read, in part:

The Board wishes you to know that it is very grateful for the efforts and contributions you have made to SBP Food Processing Systems Australia since you have become involved with the business. In recent times, you have been successful in navigating some difficult business and market conditions. The Board remains of the view that the business has a strong future under your guidance.

The letter went on to offer Mr Smith a $20,000 increase in annual salary and a 10% profit share of Material Handling’s business.

95    The letter of 7 September 2017 was written at a time when Mr Smith had been offered a directorship in Material Handling, demonstrating the Directors’ confidence in his abilities. The only reason given as to why the directorship was later taken “off the table” was that the insurance premiums that would be payable for Mr Smith had become prohibitive given his age and health.

96    The letter of 7 September 2017 was consistent with Mr Aisthorpe having said at a meeting on 10 July 2017 (confirmed in an email), that Mr Smith had put a lot of effort into the food-equipment business and, without him, the business would not be able to do the work that it did. The letter was also consistent with Mr Smith’s unchallenged evidence that between June 2016 and June 2017, Mr Burns and Mr Aisthorpe would regularly compliment him upon the quality of his performance in running the food-equipment business.

97    Mr Burns and Mr Aisthorpe provided no clear explanation as to the way in which Mr Smith’s performance had deteriorated over the period from 7 September 2017 to 17 November 2017.

98    The evidence does demonstrate that the Directors had been concerned about the profitability of the food-equipment business since even before the time that Mr Smith took over its management. Emails and notes in evidence show that although the Directors initially believed that Mr Smith had turned around the performance of the food-equipment business, at the time of the decision to terminate Mr Smith’s employment on 17 November 2017, the business was continuing to experience significant ongoing monthly losses. There was a difference of opinion between the Directors and Mr Smith as to whether the business would be profitable by the end of the financial year. Mr Smith was of the view that there would be substantial income coming into the business, while the Directors considered that Mr Smith had overestimated the extent of the projected income.

99    I consider the evidence demonstrates that when Mr Smith’s employment was terminated, the Directors genuinely believed that the food-equipment business was unprofitable, in the sense that it was making substantial losses and those losses would not be made up by anticipated income. I disagree with the primary judge’s view, influenced by his Honour’s misapplication of the rule in Jones v Dunkel, to the contrary. The most telling indication of the Directors’ belief that the food-equipment business was unprofitable was that it was shut down only two months later in February 2018.

100    The reasons for the termination deposed to by Mr Burns and Mr Aisthorpe were essentially the lack of profitability of the food-equipment business and Mr Smith’s poor performance and inability to manage the business which was asserted to have caused that unprofitability. While the first of those reasons may be accepted as genuine, I do not accept that the second reason was genuine. The second reason is inconsistent with the letter of 7 September 2017 and the praise that had been given to Mr Smith by the Directors in respect of his efforts to turn around the food-equipment business, which had been making losses since before Mr Smith took over its management. While I accept that the Directors believed that some part of the losses had been contributed to by underestimates of costs by Mr Smith, it is implausible that the Directors would believe that the lack of profitability was so substantially due to the poor performance of Mr Smith that his employment should be terminated for that reason.

101    The conduct of Mr Burns and Mr Aisthorpe after the termination contributes to my opinion that their evidence concerning the second reason is implausible. On 23 November 2017, Mr Burns, presumably upon the authority of the other Directors, wrote to Mr Smith asserting that he had unlawfully removed company property and saying that he was summarily dismissed for gross misconduct. That letter made no reference to termination for any other reasons. The evidence failed to establish that Mr Smith had stolen or unlawfully removed any property. I concur with the view of the primary judge that there was no merit to that claim and that the stealing allegation was, “unjustified and crudely vindictive”. The Directors could not reasonably have believed the stealing allegation to be true, or to justify summary dismissal. The lack of genuineness of the stealing allegation as a reason for termination tells against the credibility of evidence that poor performance and inability to manage the business was a reason for termination.

102    The primary judge held that the decision to terminate Mr Smith’s employment was made by all four of the Directors, and that finding has not been challenged by any ground of appeal. That finding should be accepted. Two of the Directors, Mr Mahony and Mr Hombsch, did not give evidence that they were not motivated by Mr Smith’s making of the complaints and inquiries. Since there was a presumption under s 361 of the FWA that Mr Smith’s employment was terminated because he had made the complaints or inquiries, it is necessary to examine the consequences of the appellants’ failure to call those witnesses.

103    In Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500, French CJ and Crennan J held:

44.    ... The imposition of the statutory presumption in s 361, and the correlative onus on employers, naturally and ordinarily mean that direct evidence of a decision-maker as to state of mind, intent or purpose will bear upon the question of why adverse action was taken, although the central question remains “why was the adverse action taken?”.

45.    This question is one of fact, which must be answered in the light of all the facts established in the proceeding. Generally, it will be extremely difficult to displace the statutory presumption in s 361 if no direct testimony is given by the decision-maker acting on behalf of the employer. Direct evidence of the reason why a decision-maker took adverse action, which may include positive evidence that the action was not taken for a prohibited reason, may be unreliable because of other contradictory evidence given by the decision-maker or because other objective facts are proven which contradict the decision-maker’s evidence. However, direct testimony from the decision-maker which is accepted as reliable is capable of discharging the burden upon an employer even though an employee may be an officer or member of an industrial association and engage in industrial activity.

(Underlining added.)

104    In National Tertiary Education Union v Royal Melbourne Institute of Technology (2013) 234 IR 139; [2013] FCA 451, Gray J observed:

25.    Barclay was a case in which there was a single decision-maker, who made the decision to take adverse action against the employee concerned. It is necessary to read what was said in Barclay with the understanding that the Court was not faced with any issue of the possible involvement of more than one person in the making of the decision. Earlier authorities have dealt with that question, in circumstances where a decision is made by a committee or other deliberative body, but also in circumstances in which there is collaboration between officers of an employer at various levels in the employer’s hierarchy, leading to an ultimate decision....

26.    It is often the task of a court to make a finding as to the minds of which natural person or persons constitute the directing mind and will of a corporate body, for the purpose of determining the state of mind of that corporate body. Sometimes, the question is as to the knowledge of the corporate body. As Brennan, Deane, Gaudron and McHugh JJ said in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 583:

A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them.

The same can be said of states of mind other than knowledge, such as reason or intent. In Voigtsberger v Council of the Shire of Pine Rivers (No 2) (1981)(1981) 1 IR 198, the question was whether an employee in local government had been dismissed from her employment for a proscribed reason. Although the local council itself had made the ultimate decision to dismiss, Evatt J found that it was an earlier decision of the finance committee that was the critical decision. The council had merely “rubber-stamped” the recommendation of the finance committee later on the same evening. The finance committee consisted of eight councillors, six of whom had not been called as witnesses. His Honour held that the decision to dismiss the employee had not been proved not to be actuated by the proscribed reason alleged.

…

28.    In Gibbs v Palmerston Town Council [1987] FCA 732 (unreported, Federal Court of Australia, Gray J, 21 December 1987), I referred to both Wood and Voigtsberger. At 84–85, I said:

there is still a difficult question of the extent to which the improper purpose of one person may be a substantial operative factor in the decision of another. Clearly, if the actual decision maker simply “rubber stamps” a decision in fact made by another, the purpose of that other will be a substantial operative factor. At the other extreme, if the actual decision maker truly believes the false and innocent reasons advanced by the other person, the mind of the decision maker will not be tainted by the improper purpose of the other person. The problem assumes greater complexity when the decision is made by more than one person, as might be the case with the board of directors of a company, and as is often the case when the decision is made by a local government authority.

29.    In the present case, part of the task of the Court is to determine in whose mind or minds was to be found the operative mind of RMIT in making the decision to dismiss Professor Bessant. It is necessary to look at the whole of the evidence to determine whether the presumption established by s 361(1) of the Fair Work Act, that the reasons alleged in the statement of claim are among the reasons for that decision, has been rebutted.

105    In Elliott v Kodak Australasia Pty Ltd (2001) 129 IR 251; [2001] FCA 1804, the Full Court was concerned with a situation where an employee had been assessed for redundancy by two supervisors, but the general manager made the ultimate decision to terminate the employee’s employment. The Court held at [37] that if the assessment of either of the supervisors was affected by an undisclosed prohibited reason, then the general manager would have, in effect, inadvertently adopted that reason so that the decision of the general manager would have also been for a prohibited reason.

106    In Construction, Forestry, Mining and Energy Union v Clermont Coal Pty Ltd (2015) 253 IR 166; [2015] FCA 1014, Reeves J, having reviewed the authorities, concluded:

120.    These authorities therefore place the focus on the reasoning process that led to the ultimate decision. Where the decision was made by one person and her or his reasoning for the decision was based on one incident involving the employee, the task is relatively straightforward. The judgments in Barclay and BHP Coal require a focus on the reasoning process employed by that person to determine whether the employer has discharged its onus under s 361(1) of the FWA to show that the reasoning process did not include, as a substantial and operative reason, the alleged prohibited reason or reasons. However, the employer is only required to show that none of those reasons was a “substantial and operative reason”. It does not need to negate every reason, however immaterial it was to the reasoning process underpinning the decision to dismiss the employee concerned: see Barclay at [104] and [127] per Gummow and Hayne JJ, and [140] per Heydon J.

121.    On the other hand, where the reasoning process is dispersed through an assessment process involving a number of persons, the task is much more complicated. In that situation, I consider the judgment in Kodak requires me to examine the reasoning process employed by each person whose involvement had a material effect on the ultimate decision…Instead, it focuses on the conscious reasoning processes of those who had a material effect on the ultimate outcome to determine whether their reasoning processes were free of the alleged prohibited reason or reasons. If one or more of the reasons employed by one or more of them was a prohibited reason, that will impugn the ultimate decision. This is what I consider the Full Court meant by “inadvertently” adopting an “undisclosed prohibited reason” in Kodak (see at [117] above).

122.    I therefore consider the focus and scope of the inquiry in this matter should proceed in two parts. First, an inquiry to ascertain whose reasons had a material effect on the reasoning process that preceded Mr Pretorius’ ultimate decision to dismiss Mr Scott. And, secondly, an inquiry to examine the reasoning employed by those persons to ascertain whether it was affected by a prohibited reason or, to put it in the terms of s 360 of the FWA, whether Clermont Coal has established to the requisite standard that none of the alleged “particular reasons” was a substantial and operative reason for the decision to dismiss Mr Scott…

107    Applying the approach taken by Reeves J, it is necessary, first, to ascertain whose reasons had a material effect upon the decision to terminate Mr Smith’s employment; and second, to examine the reasoning employed by those persons to ascertain whether it was affected by a prohibited reason (whether the appellants established that none of the alleged prohibited reasons was a substantial and operative reason for the decision to dismiss Mr Smith).

108    As to the first issue, the decision to terminate Mr Smith’s employment was made jointly by all the Directors, and it should be inferred that the reasons of each of them had a material effect upon the decision. As to the second issue, there was an absence of direct evidence from Mr Mahony and Mr Hombsch that their reasons did not include the fact of Mr Smith making the complaints and inquiries found to have been made. Mr Burns gave evidence that, “We terminated the Applicant’s employment on account of these losses, general poor performance, his inability to manage the business and the poor future forecast of the business”. Mr Aisthorpe gave evidence that, “I stated that due to his poor performance and his inability to manage the business to ensure it was profitable, we had no other option that to terminate his employment, with immediate effect”. The references to “we” were presumably to the reasons of all the Directors. However, the statements of Mr Burns and Mr Aisthorpe as to the reasons of Mr Mahony and Mr Hombsch should be given little weight in the absence of direct evidence from Mr Mahony and Mr Hombsch. There is a presumption under s 361 of the FWA that Mr Smith’s employment was terminated because he made the complaints or inquiries. The absence of direct evidence of the reasons of two of the four decision-makers for the termination refuting that presumption is not of itself fatal, but is a substantial factor to be weighed in deciding whether Employment Solutions has overcome the presumption.

109    The primary judge held that by 17 October 2017, Mr Burns and Mr Aisthorpe, in particular, had become frustrated by Mr Smith’s demands for increases in pay and his dissatisfaction with not having been offered a directorship or profit share. His Honour held that they were also frustrated by the fact that Mr Smith had provided a medical certificate which restricted his duties to between 9 am and 3 pm and provided for him not to undertake weekend work. His Honour went on to find that the Directors had become increasingly frustrated by Mr Smith’s pleaded complaints and inquiries, and had decided to get rid of him for that reason.

110    The appellants’ criticism of the primary judge’s findings, and the reasons generally, as lacking precision and thoroughness may be accepted. However, it is apparent from the uncontested evidence that Mr Smith had repeatedly made complaints to Mr Burns and Mr Aisthorpe between June 2017 and November 2017 about issues including:

    his excessive workload and the fact that he was working excessive hours in light of his health problems;

    his need for more assistance and better software;

    the additional tasks required of him such as completing timesheets; and

    the withdrawal of the offer of a directorship.

It is also clear that Mr Burns and Mr Aisthorpe had become frustrated with Mr Smith’s complaints, in part because they considered that some were unfounded. For example, Mr Smith gave uncontradicted evidence that Mr Burns made comments to the effect that he could not understand how Mr Smith’s health problems could have arisen from the motor vehicle accident, and stated that it was “unusual” and “coincidental” that Mr Smith’s wife had also been injured in a motor vehicle accident around the same time. On 4 October 2017, there was a heated telephone conversation between Mr Smith and Mr Aisthorpe which ended when Mr Smith hung up. Mr Aisthorpe subsequently apologised for his part in the argument. Mr Aisthorpe deposed that at the meeting on 17 November 2017, he complained of Mr Smith’s unavailability during the working week, Mr Smith’s failure to answer phone calls and difficulty in calculating what hours Mr Smith was working each day as a result of his refusal to provide timesheets.

111    The Directors terminated Mr Smith’s employment for a number of reasons. These reasons included the lack of profitability of the food-equipment business and Mr Smith’s inability to make it profitable. That is not to say, however, that the Directors considered Mr Smith to be a poor manager whose employment should be terminated for that reason—the letter of 7 September 2017 is evidence to the contrary and the Directors were aware that the food-equipment business was making losses before Mr Smith took over its management.

112    The evidence demonstrates that Mr Burns and Mr Aisthorpe became frustrated with Mr Smith’s frequent complaints, principally stemming from the limitations resulting from his health. They became frustrated by Mr Smith’s complaints about excessive working hours, his complaints that he was not being provided with assistance that would allow him to reduce his working hours, his complaints about salary and a directorship, and his complaints about having to complete timesheets. It is probable that this frustration substantially contributed to the termination of Mr Smith’s employment.

113    This is not a matter in which the demeanour of Mr Burns and Mr Aisthorpe could reasonably be thought to affect the credibility of their evidence, given the documentary evidence such as the letter of 7 September 2017, their failure to contradict significant parts of Mr Smith’s evidence, their conduct after 20 November 2017, and Mr Aisthorpe’s own evidence as to his concerns with Mr Smith’s unavailability due to his reduced working hours.

114    In my opinion, the appellants have failed to prove that the complaints made by Mr Smith were not a substantial and operative factor in the decision by Employment Solutions to terminate Mr Smith’s employment. In fact, I am positively satisfied that Mr Burns and Mr Aisthorpe decided that Mr Smith’s employment should be terminated for reasons that included, as a substantial and operative factor, Mr Smith’s complaints.

115    Notwithstanding the error of the primary judge in misapplying the rule in Jones v Dunkel, it must be concluded (subject to Ground 1(b)) that Employment Solutions contravened s 340 of the FWA. The error did not result in any substantial miscarriage of justice.

Ground 1(b): Whether the primary judge erred in finding that “complaints or inquiries” had been made

116    Ground 1(b) of the Amended Notice of Appeal alleges that the primary judge erred in law in finding that Mr Smith made “complaints or inquiries” within the meaning of s 341(1)(c)(ii) of the FWA.

117    In paragraph 29 of his Amended Statement of Claim, Mr Smith alleged that he said words or provided letters to Mr Burns and Mr Aisthorpe that amounted to “complaints or inquiries” within s 341(1)(c)(ii) of the FWA. This allegation required that findings be made as to whether the words were said, and whether they were “complaints or inquiries”.

118    The appellants submit that the primary judge erred in finding that Mr Smith said the words he claimed to have said on 8 June, 10 July and 17 October 2017. However, the evidence of Mr Burns and Mr Aisthorpe did not contradict Mr Smith’s evidence as to what he said on these occasions. As these aspects of Mr Smith’s evidence were uncontradicted, there was no error made by the primary judge in accepting his evidence.

119    On 12 June 2017, Mr Smith told Mr Burns that he wanted the Directors to consider his need to attend hospital and medical appointments and to consider having some work outsourced. Mr Smith said there was a danger that he would end up working hours in excess of those stipulated in the medical certificate due to his excessive workload.

120    The appellants submit that the language used by Mr Smith on 12 June 2017 was of mere requests for further discussion and consideration of particular matters, and was not a “complaint or inquiry”. The appellants rely upon Shea v TRUenergy Services Pty Ltd (No 6) (2014) 242 IR 1; [2014] FCA 271, where Dodds-Streeton J held at [581] that a “complaint” is more than a mere request for assistance and must state a particular grievance or finding of fault.

121    In my opinion, Mr Smith made a “complaint” on 12 June 2017. The words used by Mr Smith must be understood in the context of:

    his provision of a medical certificate on 5 June 2017;

    his statement to Mr Aisthorpe on 5 June 2017 that due to his medical condition he needed more resources to assist him to do his job;

    his request on 5 June 2017 for a follow-up meeting to discuss these matters; and

    his evidence that following receipt of an email from Mr Burns dated 7 June 2017, he was under pressure to work hours in excess of those indicated in the medical certificate.

122    In addition, at an earlier meeting on 8 June 2017, Mr Smith had told Mr Burns that he was working excessive hours, feeling stressed and was not well due to his medical condition and that he needed urgent additional assistance. Mr Smith had also said that in view of his need to work reduced hours, he could not see how he was going to get all of his work completed because his role was so busy and that it was necessary to out-source some jobs to assist with his workload. Mr Smith deposed that his request for the purchase of another computer and to employ an additional draftsperson was denied.

123    Seen in this context, Mr Smith’s statements at the meeting on 12 June 2017 cannot be considered to be merely a request for assistance, but a grievance that his requests had not so far been acceded to. In my opinion, the primary judge was correct to hold that Mr Smith had made a “complaint” within s 341(1)(c)(ii) of the FWA on 12 June 2017.

124    The appellants also submit that his Honour erred in holding that words that were said by Mr Smith on 12 June 2017 and those contained in his letter dated 14 September 2017 were “complaints or inquiries” within s 341(1)(c)(ii) of the FWA.

125    Mr Smith wrote a letter, which he delivered to the offices of Mr Burns and Mr Aisthorpe on 14 September 2017, and again handed to Mr Aisthorpe at a meeting on 19 September 2017. Mr Smith’s letter complained of the offer of a $20,000 annual salary increase and 10% profit share. The letter complained of the additional duties, such as completing timesheets, that would be required of him. It complained that he had continually requested accounting and financial details for management and financial planning purposes and additional staff, but that these had not been provided. It complained that the offer made on 29 November 2016 to make him a Director with a 10% profit share had been withdrawn.

126    The appellants submit that, in respect of the letter of 14 September 2017, no workplace right existed because Mr Smith did not have an entitlement to have his salary increased and his Honour found that no agreement had been made about any wage or incentive package or the directorship. They also submit that his Honour erred in taking into account the concession of Mr Aisthorpe that the letter constituted a “complaint” concerning aspects of Mr Smith’s employment.

127    Section 340(1)(a)(ii) of the FWA provides, relevantly, that, “a person must not take adverse action against another person…because the other person…has…exercised a workplace right”. Section 341 defines the expression “workplace right”. Under s 341(1)(c)(ii), a person, “has a workplace right if the person…is able to make a complaint or inquiry…if the person is an employee—in relation to his or her employment.”

128    In Shea v TRUenergy Services Pty Ltd, Dodds-Streeton J held:

625.    In my opinion, the requirement that the complaint be one that the employee ‘is able to make’ in relation to his or her employment suggests that there are complaints which the employee is not able to make in relation to his or her employment. The ability to make a complaint does not arise simply because the complainant is an employee of the employer. Rather, it must be underpinned by an entitlement or right. The source of such entitlement would include, even if it is not limited to, an instrument, such as a contract of employment, award or legislation.

129    In PIA Mortgage Services Pty Ltd v King (2020) 274 FCR 225, Charlesworth J and I held:

12.    We respectfully agree with Dodds–Streeton J that s 341(1)(c)(ii) of the FW Act contemplates that not every complaint that an employee makes in relation to his or her employment is one the employee is “able to make” (for present purposes, it is unnecessary to address the ability to make an inquiry). The question then arises as to how the provision distinguishes complaints that come within its reach from those that do not.

13.    Justice Dodds–Streeton considered that the word “able” refers to an entitlement or a right. We respectfully agree…

14.    On the understanding that s 341(1)(c)(ii) requires an entitlement or right to make a complaint in relation to the employee’s employment, there must be an identifiable source of that entitlement or right. In Shea, Dodds–Streeton J did not suggest that the entitlement or right is limited to one arising under an instrument such as legislation, an industrial instrument, or a contract of employment. In fact, her Honour was careful not to attempt any exhaustive description of the source of the right to make a complaint or inquiry. Nor did her Honour suggest that the entitlement or right must be conferred expressly or directly by the source.

…

19.    Under the general law, an employee has a right to sue his or her employer for an alleged breach of the contract of employment. A suit may be regarded as the ultimate form of complaint. Accordingly, in our opinion, an employee is “able to make a complaint” about his or her employer’s alleged breach of the contract of employment. That ability is “underpinned by” (to use Dodds-Streeton J’s expression in Shea) the right to sue, and extends to making a verbal or written complaint to the employer about an alleged breach of the contract.

20.    Further, an employee who alleges that his or her employer has contravened a statutory provision relating to the employment is “able to make a complaint” within s 341(1)(c)(ii) of the FW Act. That right or entitlement derives from the statutory provision alleged to have been contravened. The ability encompasses making a complaint to the employer or an appropriate authority about the alleged contravention, whether or not the statute directly provides a right to sue or make a complaint.

…

26.    An employee is “able to complain” to his or her employer within s 341(1)(c)(ii) of the FW Act concerning the employer’s alleged breach of the contract of employment. The source of that ability is the general law governing contracts of employment. Further, an employee is “able to complain” to the employer or to a relevant authority of their employer’s alleged contravention of a statutory provision relating to the employment. That ability derives from at least the statutory provision alleged to have been contravened. The statute need not expressly or directly confer a right to bring proceedings or to complain to an authority. As Dodds-Streeton J held in Shea at [29], the complaint must be made genuinely, in good faith and for a proper purpose.

130    In PIA Mortgage Services, the majority held that the words “is able to make” in s 341(1)(c)(ii) are, impliedly, words of limitation, and not every complaint made by an employee in relation to his or her employment is one that the employee is “able to make”. The majority held that s 341(1)(c)(ii) requires that an employee have an entitlement or right to make a complaint in relation to his or her employment. The sources of such an entitlement may include a statute, a contract of employment, or the general law.

131    In dissent, Snaden J preferred a narrower construction, deciding at [167]–[169] that complaints made in aid of asserting rights allegedly conferred by statute or by the general law are not complaints an employee is “able to make” for the purposes of s 341(1)(c)(ii) of the FWA.

132    In Cummins South Pacific Pty Ltd v Keenan (2020) 302 IR 400; [2020] FCAFC 204, Bromberg J (with whom Mortimer J agreed) adopted a wide view to what constitutes a complaint or inquiry that an employee is “able to make” within s 341(1)(c)(ii). His Honour disagreed with the approach taken in Shea and PIA Mortgage Services, concluding at [19]-[20] that the text, context and purpose of the provision indicate that a complaint need not be sourced in a right or entitlement of the employee to make the complaint, or be about a right or entitlement held by the employee. His Honour said:

34.    …There is nothing in the text and in particular the words “is able to”, which suggests that any inquiry is required as to the provenance of the ability held, that is, how the ability was acquired or whether or not there is some underlying foundation for its existence. All that matters, on the plain words of the provision and in the context of its function, is whether or not the circumstance exists that the protected person has or holds the specified ability.

133    Justice Bromberg continued:

45.    For many of the reasons already canvassed, there is no textual basis for the other way in which the observations in Shea have been understood – that the ability to complain or inquire referred to in s 341(1)(c) must be underpinned by a right or entitlement. It is the fact that the protected person has the particular ability described that is the actuating circumstance serving the function which I have explained. As earlier stated, how the person acquired that ability, or the source or provenance of that ability is not addressed by the text of s 341(1). It may be accepted that the text contemplates that not all persons will necessarily have the particular ability in question, but, contrary to the approach taken by Dodds-Streeton J, it does not follow that the intended beneficiaries of the protective reach of the provision are only those persons who have that ability because of some right or entitlement. The actuating circumstance is the fact that the protected person has the ability and not a right or entitlement which has enabled that ability to be held. Read in context with its operative prohibition (s 340(1)(a)(i)), if an ability specified by s 341(1) held by the protected person actuates the adverse action taken, the prohibition will have been engaged.

46.     The position may have been different if a person’s ability to initiate or participate in a process or proceeding under a workplace law or workplace instrument or the ability to make a complaint or inquiry were necessarily acts only able to be done as of right or by virtue of some legal entitlement. But that is not the case. In particular, a complaint or an inquiry are both simple acts constituted by a communication. It is difficult to think of a circumstance in which the ability of a person to make an inquiry depends upon a legal right to do so. People are ordinarily free to make an inquiry of others without some legal right or entitlement to do so. So too in relation to the making of a complaint. These are activities which are not ordinarily enabled by some legal right or entitlement. There is nothing in the inherent features of those activities which suggests that the draftsperson sought to limit the protective reach of s 340(1) so that only adverse action taken because of a right or entitlement to inquire or complain is prohibited. Nor is there any discernible basis for thinking that, in providing the protection of s 340(1), the framers of the legislation sought to distinguish between an ability to complain or inquire as of right and an ability to complain or inquire absent some legal right or entitlement to do so. What policy or purpose can be discerned to justify that distinction? If the purpose of the provision is to facilitate the making of complaints or inquiries without fear of retribution, as I consider it is, why would it matter whether the complaint or inquiry is sourced in a particular right or entitlement? It is the protected person’s ability or capacity to inquire or complain, not some legal right or entitlement to do so, which is the subject of the protective intent of the scheme. To my mind, when s 341(1)(b) and (c) are construed by reference to their text and purpose, with a proper appreciation of their function undistracted by the “workplace right” label which has been assigned to the actuating circumstances described in s 341(1), that conclusion is crystal clear.

(Underlining added.)

134    Although Bromberg J did not directly explain how the phrase “is able to” in s 341(1)(c)(ii) of the FWA was to be interpreted, I understand his Honour to have construed the phrase as meaning “is capable of”. Under that construction, as long as an employee is able to make, in the sense of being capable of communicating, a complaint or inquiry in relation to his or her employment, the employee has a “workplace right”. It would follow that in any circumstance where an employee makes a complaint or inquiry in relation to his or her employment, the employee exercises a workplace right.

135    I accept that the true construction of s 341(1)(c)(ii) of the FWA is uncertain. At least three different views have been expressed, and each is fairly arguable. While I appreciate the force of Bromberg J’s carefully reasoned judgment, I adhere to the opinion expressed by Charlesworth J and myself in PIA Mortgage Services that the expression “is able to” in s 341(1)(c)(ii) of the FWA implies that an employee must have an entitlement or right to make a complaint in relation to his or her employment.

136    The word “able” and the phrase “is able to” are ambiguous. One meaning ascribed by the Macquarie Dictionary is, “to have the capability or capacity to”. That is the meaning that I understand Bromberg J to have adopted. However, that is not the only possible meaning. Another is, “is qualified to”. It is in that sense that the phrase was interpreted in Shea and PIA Mortgage Services. An employee “is able to” make a complaint or inquiry if he or she qualified to do so. The qualification that is required is an entitlement or right to make a complaint or inquiry.

137    Which meaning is to be ascribed must depend upon the context in which the words are used. An important aspect of context is, as Dodds-Streeton J pointed out in Shea at [625], that the phrase “is able to” suggests that that there are complaints which an employee is not able to make in relation to his or her employment. In that sense, “is able to” are words of limitation, and imply that there must be an entitlement or right to make a complaint. It is true, as Bromberg J observed in Cummins at [46], that people are ordinarily free to make an “inquiry” of others without some right or entitlement to do so, but the construction of the phrase as requiring an entitlement or right has work to do in respect of “complaints”.

138    This construction of “is able to” in s 341(1)(c)(ii) of the FWA is consistent with the way the same phrase is used in s 341(1)(b) and in s 341(1)(c)(i). Under s 341(1)(b), a person has a “workplace right” if, “the person…is able to initiate, or participate in, a process or proceedings under a workplace law or workplace instrument”. It may be noted that this provision applies, not merely to an employee, but to “a person”. The provision seems most unlikely to be intended to apply to any person who is merely physically and mentally capable of initiating or participating in a relevant process or proceeding. The provision envisages that the person has a qualification – a right or entitlement – to initiate or participate in a relevant process or proceeding. In other words, the provision implies that the person must have the standing, or at least arguably have the standing, to do so. Section 341(1)(c)(i) of the FWA provides that person has a “workplace right” if, “the person…is able to make a complaint or inquiry…to a person or body having the capacity under a workplace law to seek compliance with that law or a workplace instrument”. That provision also envisages that the person has a right or entitlement to make a complaint to the relevant body. A construction of the same phrase in s 341(1)(c)(ii) as imposing no similar qualification would be discordant.

139    The construction preferred by the majority in Cummins would have the consequence that ss 340(1)(a) and 341(1)(c)(ii) of the FWA prohibit an employer from taking any adverse action against an employee because the employee has made or proposes to make any complaint in relation to his or her employment. The phrase “in relation to” is one of considerable width. The construction in Cummins is consistent with s 340 having the purpose of protection of employees. But, it must also be recognised that such protection is provided within limits. Section 340(1) prohibits adverse action taken because a person has, exercises or does not exercise, or proposes to exercise or not exercise, “workplace rights”; or to prevent a person from exercising such rights. Section 341 then limits the width of protection by defining what “workplace rights” are. The scope of the protection is also limited by the definition of “adverse action” in s 342. That there are inbuilt limits to the scope of the protection is unsurprising, given that the object of the FWA is, under s 3, “to provide a balanced framework for cooperative and productive workplace relations”.

140    As the object of the FWA is to provide balance, it would be surprising if the scales were tipped in favour of employees to the extent that would occur under the construction of s 341(1)(c)(ii) of the FWA given by the majority in Cummins without that intention being made clear. If there is any such intention, it can only be gleaned through one possible interpretation of the ambiguous phrase “is able to”. Under that construction, just as there is no room for the implication of a requirement of an entitlement or right to complain or inquire, there would be no room for the implication of any other limitation. There could be no implication of the requirement by Dodds-Streeton J identified in Shea at [29] that a complaint must be in good faith and for a proper purpose. There could be no implication of any limitation where a complaint in relation to employment is made, not to the employer or some statutory body, but, for example, to the media or to the public via social media. Just as there are some vexatious litigants, there may be vexatious employees who repeatedly make genuinely believed, but objectively unjustified, complaints against fellow employees or an employer. Yet the protection for an employee who makes a complaint in relation to his or her employment would, under the interpretation in Cummins, be so broad that the employer could not threaten or take any disciplinary or legal action, amounting to adverse action, against such an employee, even to protect other employees or the employer’s business. Even though the same outcome might occur in some situations under the interpretation given in Shea and in PIA Mortgage Services, that interpretation may potentially provide some measure of protection for an employer against contravening a civil penalty provision. In my opinion, that measure of protection explains the legislative intention in requiring that an employee must have an entitlement or right in order for the employee to “be able to” make a complaint.

141    The thorough analysis of the legislative history undertaken by Bromberg J in Cummins is instructive, but I do not consider that it supports the construction of s 341(1)(c)(ii) of the FWA favoured by his Honour. That history shows that there has been a progressive widening of the circumstances in which employers are prohibited from taking adverse action against employees. However, the width of the protection afforded would be expanded to the extent that there is absolute protection against adverse action for an employee who makes a complaint in relation to his or her employment. The history does not support an inference that a broadening to such an extent was intended.

142    I accept that the Explanatory Memorandum for the Fair Work Bill provides support for the construction adopted by the majority in Cummins. It states that cl 341(1)(c)(ii), “specifically protects an employee who makes any inquiry or complaint in relation to his or her employment”. However, the section itself does not refer to “any” inquiry or complaint. The implication of limitation given by the expression, “is able to make a complaint or inquiry”, cannot be ignored. The Explanatory Memorandum cannot displace the countervailing considerations.

143    The opinion expressed by Charlesworth J and myself in PIA Mortgage Services that the expression “is able to” in s 341(1)(c)(ii) of the FWA requires that an employee have an entitlement or right to make a complaint in relation to his or her employment does not, it must be acknowledged, result in perfect consonance of all the textual and contextual factors. In particular, it may be that such a limitation applies, in practical terms, only to a complaint, and not to an inquiry. However, the alternative constructions are less satisfactory. This is the preferable construction.

144    The appellants submit that Mr Smith’s complaints on 12 June 2017 were not complaints that he was “able to make” within s 341(1)(c)(ii) of the FWA. In PIA Mortgage Services, the majority held that the sources of an employee’s entitlement or right to make a complaint may include a statute, a contract of employment, or the general law. I consider that Mr Smith’s complaints that his workload was excessive and potentially damaging to his health found a source in at least s 19 of the Work Health and Safety Act 2011 (Qld), which requires a person conducting a business to ensure, so far as is reasonably practicable, the health and safety of workers engaged by the person.

145    The appellants submit that Mr Smith’s complaints in his letter of 14 September 2017 were not complaints that he was “able to make” within s 341(1)(c)(ii) of the FWA. I accept that Mr Smith did not have any contractual entitlement to have his salary increased, so that his complaint about the salary increase offered to him was not a complaint about any alleged breach of contract. No other source of any entitlement or right to make that complaint has been identified.

146    However, the salary increase was not the only topic of the letter of 14 September 2017. Mr Smith also complained that the Directors had “dishonoured the original offer” of a directorship and a 10% profit share. In the proceeding before the Federal Circuit Court, Mr Smith alleged that he had accepted the offer, and that there was a concluded and binding agreement. Understood in this context, Mr Smith was complaining of a breach of contract by his employer in relation to his employment in his letter of 14 September 2017. It is not to the point that the primary judge ultimately concluded that there was no binding agreement. It has not been suggested that the complaint was not made in good faith. The source of Mr Smith’s entitlement to make that complaint was the general law. Accordingly, his letter of 14 September 2017 did contain a complaint that he was “able to make” within s 341(1)(c)(ii) of the FWA.

147    As the primary judge accepted that Mr Smith had made a complaint that he was “able to make” about his employer’s failure to adequately increase his remuneration, that was an error. However, in view of all the other complaints that were established as fully within s 341(1)(c)(ii), and the substantial and operative role they played in the decision to terminate Mr Smith’s employment, the error did not affect, and could not have affected, the outcome. The error did not cause any substantial injustice.

148    The appellants assert that the concession by Mr Aisthorpe in his evidence that the letter of 14 September 2017 was a complaint was irrelevant and should not have been considered by the primary judge. However, an issue required to be determined by the primary judge was whether the letter contained a “complaint” in the sense of a grievance, rather than, for example, a mere request. Mr Aisthorpe’s understanding of the letter as a complaint was relevant to that issue and to the reasons for the termination of Mr Smith’s employment and was able to be taken into account by the primary judge.

149    Mr Smith relies upon a Notice of Contention which goes to issues substantially wider than those raised by the appellants. In view of the conclusions I have reached, it is unnecessary to address the Notice of Contention.

150    For the reasons I have given, Ground 1(b) must be rejected.

Grounds 1(c) and (d): Whether the primary judge erred in determining reasons for the dismissal

151    Ground 1(c) of the Amended Notice of Appeal alleges that the primary judge made an error of fact in determining the reasons of Employment Solutions for dismissing Mr Smith. Ground 1(d) alleges an error of law in determining that the motivations of Employment Solutions amounted to a contravention of s 340 of the FWA.

152    The appellants observe that the primary judge found:

The directors were fed up with the applicant—he being someone who just wouldn’t toe the line—and they opted to be rid of him. The termination of the applicant’s employment was not for any lawful reason.

153    The appellants submit that the finding that the motivation for the termination was that Mr Smith “wouldn’t toe the line” does not amount to a contravention of s 340 of the FWA. They submit that what is required is a finding that a substantial and operative reason for the dismissal was the established complaint or inquiry, but that no such finding was made by the Court.

154    In BHP Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (2013) 219 FCR 245, it was held at [93]-[95] and [110], in the context of s 346 of the FWA, that a contravention does not arise merely because there is a connection between a workplace right and the adverse action. In Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500, Gummow and Hayne JJ held at [104] that that a prohibited reason must be a “substantial and operative” reason for the adverse action.

155    Although the primary judge did not directly make a finding in such terms, I consider that this was the effect of the reasons. His Honour referred to the relevant statutory provisions including ss 340, 341, 360 and 361 of the FWA and to the relevant extracts from Barclay. His Honour then specifically found that Mr Smith had made the complaints and inquiries he alleged and rejected the evidence of Mr Burns and Mr Aisthorpe as to the reasons for the termination. The primary judge found that the Directors, “had become increasingly frustrated by the applicant’s pleaded complaints and inquiries, and had decided to be rid of him for that proscribed reason”.

156    While it may be accepted that the reasons lacked precision, it is tolerably clear that his Honour determined that Mr Smith’s making of the pleaded complaints or inquiries was a substantial and operative reason for the termination of his employment.

157    Accordingly, Grounds 1(c) and (d) must be rejected.

Grounds 2 and 3(e): Appeal against penalties

Whether Employment Solutions’ penalty for contravention of s 44 of the FWA was manifestly excessive

158    Ground 2 of the Amended Notice of Appeal alleges that the primary judge erred in imposing a penalty of $50,400 upon Employment Solutions for its contravention of s 44 of the FWA. The appellants submit that the primary judge’s findings involved errors of fact and, in addition, that the penalty is manifestly excessive.

159    Section 44(1) of the FWA provides that an employer, “must not contravene a provision of the National Employment Standards”. This section is a civil penalty provision within Part 4.1 of the FWA.

160    The National Employment Standards include s 90 of the FWA, which provides:

(1)    If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.

(2)    If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

161    The primary judge declared that each of the appellants had contravened s 44 of the FWA and imposed penalties upon each of them for those contraventions. The declarations were based upon contraventions of s 90(2) of the FWA.

162    Employment Solutions paid Mr Smith $14,662.41 for his annual leave entitlements and interest on 15 May 2019, some 18 months after his employment was terminated. Employment Solutions conceded that it contravened s 90(2) of the FWA on the basis that it was required to pay the untaken annual leave entitlements within a reasonable time of the employment ending, but had failed to do so.

163    The penalty of $50,400 imposed upon Employment Solutions was 80% of the maximum penalty of $63,000.

164    The primary judge described the amount that was eventually paid to Mr Smith as a “not insubstantial sum”. His Honour rejected the appellants’ argument that the fault for the late payment lay with Mr Smith because he had failed to follow direction to provide timesheets, which would have recorded the exact hours he had worked. His Honour stated that Employment Solutions had ultimately been able to calculate the amount that was properly payable and concluded that payment should have been made in a timely fashion shortly after Mr Smith’s employment was terminated. His Honour also found that it was not a term of Mr Smith’s employment that he provide timesheets. His Honour considered that Mr Smith had a statutory entitlement to accrue annual leave even when in receipt of workers’ compensation payments pursuant to s 130(2) of the FWA and s 119A(2) of the Workers Compensation and Rehabilitation Act 2003 (Qld) (the WCRA).

165    His Honour’s reasons for assessing the penalty at $50,400 were very briefly stated:

135.    As to the leave entitlement allegation, there was no justification for the 18 month delay in the payment to the applicant of what was due to him. When payment was made, it was made to the last cent. The case advanced by the respondents that payment of such entitlement was unable to be made earlier because the applicant had failed to provide time sheets of his work hours was unmeritorious. That failure was a serious breach of its obligations under s. 90(2) of the FWA, and constituted a contravention of the provisions of s. 44 of the FWA. The second – sixth respondents are accessorily liable for the first respondent’s contravention, as each were complicit in such conduct. The Court finds the contravention to be serious and unwarranted.

166    The appellants submit that the primary judge was in error in making these findings. They submit that Employment Solutions simply paid to Mr Smith the maximum possible amount of leave that he could be owed, rather than being in a position to precisely calculate what he was entitled to. They submit that his Honour’s finding that it was not a term of Mr Smith’s employment that he fill out and provide timesheets ignored the power of an employer to issue an employee with reasonable directions: see R v Darling Island Stevedoring and Lighterage Co Ltd; Ex parte Halliday and Sullivan (1938) 60 CLR 601 at 621–622. They also argue that s 119A(2) of the WCRA has no application because it only applies to an employee who is absent on compensation payments, whereas Mr Smith received no compensation payments for any absences until after his employment ceased.

167    Even if these were errors made by the primary judge, they are immaterial. The medical certificate provided by Mr Smith allowed him to work between 9 am to 3 pm, Monday to Friday. The parties did not explain precisely what Mr Smith’s “ordinary hours of work” were, or how Mr Smith’s entitlement under s 90(2) of the FWA may have been reduced by his new hours. The appellants did not dispute Mr Smith’s evidence that he generally worked 9 am to 3 pm, Monday to Friday. Employment Solutions could have at least calculated Mr Smith’s entitlement on the basis that he worked the reduced hours, and paid his untaken annual leave entitlements accordingly. Instead, Employment Solutions decided to pay Mr Smith nothing for these entitlements until he was eventually paid 18 months later. That was a grossly unreasonable position to take. The primary judge was correct to reject the submission that it was Mr Smith’s fault that the entitlements were not paid, and to find that the contravention of s 44 of the FWA was a serious one.

168    However, I accept Employment Solutions’ submission that the penalty for the contravention of s 44 of the FW Act was manifestly excessive. The primary judge does not appear to have taken into account that Employment Solutions had admitted the contravention and paid the outstanding entitlements and interest. There was ultimately no loss to Mr Smith and no evidence that he was caused any substantial financial hardship by the delayed payment. His Honour failed to take into account that this was Employment Solutions’ first offence. Under these circumstances, to set the penalty at 80% of the maximum penalty was manifestly excessive.

169    It is necessary to reassess the penalty that should be imposed upon Employment Solutions for its contravention of s 44 of the FWA. Taking into account the deliberateness and seriousness of the contravention together with the mitigating factors, I consider that the appropriate penalty is $20,000, which is about 33% of the maximum. That is a substantial penalty, which is substantially greater than the amount of untaken annual leave entitlements that were delayed. The amount is adequate to serve the purpose of general and specific deterrence.

170    The pecuniary penalty of $50,400 that Employment Solutions was required to pay to Mr Smith for contravention of s 44 of the FWA should be replaced with an amount of $20,000.

Whether the remainder of the penalties were manifestly excessive

171    At the hearing, the appellants sought leave to amend the Notice of Appeal to add Ground 3(e). Under that ground, the appellants contend that the penalties imposed upon SBP Australia and each of the Directors for contraventions of ss 44 and 340 of the FWA were manifestly excessive. They also contend that the penalty imposed upon Employment Solutions for its contravention of s 340 was manifestly excessive.

172    As will be seen later in these reasons, I conclude that the primary judge erred in holding that SBP Australia, Mr Mahony and Mr Hombsch were accessorily liable for Employment Solutions’ contraventions. I also conclude that his Honour erred in finding Mr Burns accessorily liable for Employment Solutions’ contravention of s 44 of the FWA. As the corresponding penalties must be set aside, it is unnecessary to decide whether they were manifestly excessive. I will proceed to consider the penalties imposed upon Employment Solutions, Mr Burns and Mr Aisthorpe for their contraventions of s 340 of the FWA and upon Mr Aisthorpe for his contravention of s 44.

173    A penalty of $10,080 was imposed upon Mr Aisthorpe for his contravention of s 44 of the FWA. The penalty was 80% of the maximum. The only reason expressed by the primary judge for assessing the penalty at that level was that the contravention was “serious and unwarranted”. In my opinion, for the reasons given in respect of Employment Solutions’ penalty for its contravention of s 44 of the FWA, the penalty was manifestly excessive. The appropriate penalty for Mr Aisthorpe’s contravention is $4,000, or about 33% of the maximum.

174    The primary judge’s reasons for imposing the penalties for contraventions of s 340 were sparse. His Honour held:

133.    …The third – sixth respondents have shown no remorse for their unlawful conduct. Indeed, throughout the trial, the applicant was sought to be portrayed as a lying malingerer, a course which the Court finds was unwarranted.

134.     The applicant’s termination was calculated. The stealing allegations made against the applicant were unjustified and crudely vindictive. Though Burns and Aisthorpe were largely responsible for the applicant’s actual termination, and the manner of such termination, the remaining directors were just as culpable by reason of their unquestioning acceptance of the unlawful conduct of their fellow directors. The Court considers the contravention of the provisions of s. 340 of the FWA to be serious.

175    The primary judge imposed a penalty of $47,250 (75% of the maximum penalty) upon Employment Solutions, and $10,080 upon each of Mr Burns and Mr Aisthorpe (80% of the maximum penalty), for their respective contraventions of s 340 of the FWA. The primary judge’s assessment of the contraventions as calculated and serious should be accepted. His Honour’s assessment of the stealing allegations as crudely vindictive, and of the appellants as showing no remorse, should also be accepted. However, these were first offences and cannot be regarded as being near the top end of the scale of seriousness. In my opinion, the penalties were manifestly excessive.

176    The orders imposing penalties upon Employment Solutions, Mr Burns and Mr Aisthorpe for their contraventions of s 340 of the FWA should be set aside. They should be replaced with orders that Employment Solutions pay a penalty of $32,000 and that Mr Burns and Mr Aisthorpe each pay a penalty of $6,000. These penalties are about 50% of the maximum.

Ground 3: Appeal against orders based on findings of accessorial liability

177    Grounds 3 (a) to (d) of the Amended Notice of Appeal allege, relevantly, that the primary judge erred in finding that SBP Australia and the four Directors were accessories to Employment Solutions’ contraventions of ss 44 and 340 of the FWA. The ground alleges, in the alternative, that his Honour erred in failing to provide adequate reasons for the findings of accessorial liability.

178    Under s 550(1) of the FWA, a person who is “involved in” a contravention of a civil remedy provision is taken to have contravened that provision. The circumstances in which a person is taken to be “involved in” a contravention are identified in s 550(2). Those circumstances include where a person is “knowingly concerned” in a contravention.

179    The primary judge held that SBP Australia and the four Directors were knowingly concerned in Employment Solutions’ contraventions and were, accordingly, taken to have also committed those contraventions.

180    In Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 at [227]–[235], White J summarised a number of principles relevant to the question of whether a party has been “knowingly concerned” in a contravention. For present purposes, it is sufficient to observe that to be “knowingly concerned”, the alleged accessory:

(a)    must have intentionally participated in the contravening conduct, with actual knowledge of the essential facts which constituted the contravention; and

(b)    must have engaged in conduct which implicates or involves them in the contravention, such that there is a practical connection between them and the contravention.

181    The presumption arising under s 361 of the FWA does not usually apply to an allegation of accessorial liability: see Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50 at [59]. Accordingly, it was necessary for Mr Smith to prove not only that SBP Australia and the Directors were involved in the making of the decision to terminate his employment, but that a substantial and operative reason for their decision was that Mr Smith had made the complaints or inquiries.

182    The reasoning of the primary judge for the findings of accessorial liability in respect of Employment Solutions’ contravention of s 340 of the FWA was, once again, sparse. His Honour held:

23.     The Court is further satisfied that there was a direct causal relationship between the passing of the resolution by the board of directors of the second respondent on 17 November 2017 to terminate the applicant’s employment, and the subsequent termination of such employment by SBP Employment. Each of the second, third, fourth, fifth and sixth respondents were thereby directly and knowingly concerned in, and party to, the applicant’s termination of employment.

183    As to accessorial liability in respect of the contravention of s 44, the primary judge held:

84.     The first respondent failed to fulfil its relevant statutory obligation in contravention of the provisions of s. 90(2) of the FWA. The second respondent was the company which controlled the actions of the first respondent, as was evident by its board of directors having resolved to terminate the applicant’s employment with the first respondent at the outset. The second respondent governed the actions of the first respondent, as dictated by each of the (sic) Burns, Aisthorpe, Mahony and Hombsch. The Court infers, therefore, that it was the second respondent which caused the first respondent to omit to duly fulfil its statutory obligation to pay the applicant his leave entitlements in a timely manner. The third, fourth, fifth and sixth respondents, as directors of each of the first and second respondents, have thereby each contravened the provisions of s. 90(2) of the FWA. They were relevantly directly or indirectly knowingly concerned in, or a party to, the said contravention, for the same reasons as were found by the Court in respect of the complaint and inquiry allegation claim. Also, for the same reasons as set out in this judgment in respect of such claim, the seventh respondent was not so involved. He was merely acting on instructions, as a formal agent, at all relevant times.

184    There are a number of difficulties with this reasoning. For the finding that SBP Australia was knowingly involved in Employment Solutions’ contravention of s 340 of the FWA, his Honour proceeded on the basis that it was enough that there was a direct causal relationship between the resolution to terminate Mr Smith’s employment made by the directors of SBP Australia and the subsequent termination by Employment Solutions. The primary judge failed to identify any conduct of SBP Australia which implicated or involved it in the termination.

185    Mr Smith’s employer was Employment Solutions, not SBP Australia. The Directors were directors of both SBP Australia and Employment Solutions. The evidence went no further than indicating that the Directors made the decision to terminate Mr Smith’s employment in the course of a board meeting for SBP Australia. Since SBP Australia and Employment Solutions had common directors and the companies were part of a group with interrelated businesses, it is unsurprising that decisions in relation to one company might be made when the business of another company was being considered. However, there is no evidence that the Directors purported to act on behalf of SBP Australia in deciding to terminate Mr Smith’s employment. There was no evidence that any resolution was made by SBP Australia itself that purported to terminate Mr Smith’s employment with Employment Solutions. There is no evidence of any conduct by SBP Australia itself that involved or implicated it in the contravention of s 340 of the FWA.

186    As to the finding that SBP Australia was knowingly involved in Employment Solutions’ contravention of s 44 of the FWA, his Honour found that SBP Australia “governed the actions of” Employment Solutions and inferred that it was SBP Australia which caused Employment Solutions to omit to pay Mr Smith his annual leave entitlements. His Honour relied only upon the fact that the companies had common directors. However, there is a distinction between a company and its directors. It was the Directors, and not SBP Australia, which governed the actions of Employment Solutions. There is no evidence that SBP Australia itself engaged in conduct that involved or implicated it in Employment Solutions’ failure to pay Mr Smith’s annual leave entitlements. There was simply no basis for the finding by the primary judge that SBP Australia was liable for Employment Solutions’ contravention of s 44 of the FWA.

187    In respect of s 340 of the FWA, it was necessary for Mr Smith to demonstrate that a substantial and operative reason for the Directors’ decision to terminate Mr Smith’s employment was that he had made the complaints or inquiries. Mr Smith did not allege that he had made his complaints to Mr Mahony or Mr Hombsch, the complaints having been made only to Mr Burns and Mr Aisthorpe. Mr Mahony and Mr Hombsch did not give evidence. The evidence did not positively establish that Mr Mahony and Mr Hombsch were frustrated or unhappy with Mr Smith’s complaints and decided that his employment should be terminated for reasons that included such complaints (noting that the onus lay differently in respect of Employment Solutions’ contravention of s 340 of the FWA). Further, the evidence did not establish that they were involved or implicated in Employment Solutions’ failure to pay Mr Smith’s unused annual leave entitlements. There was no basis for the findings of accessorial liability against Mr Mahony and Mr Hombsch.

188    However, the primary judge did not err in finding that Mr Burns and Mr Aisthorpe were accessorily liable for Employment Solutions’ contravention of s 340 of the FWA. As I have held, the evidence positively establishes that that Mr Burns and Mr Aisthorpe decided that Mr Smith’s employment should be terminated for substantial and operative reasons that included the making of the complaints in relation to his employment. Mr Burns and Mr Aisthorpe intentionally directed and participated in the contravening conduct and were knowingly concerned in Employment Solutions’ contravention of s 340 of the FWA.

189    As to the allegations of contravention of s 44 of the FWA, it was Mr Aisthorpe who made the decision that Mr Smith’s unused annual leave entitlements would not be paid. Peter Chadwick, the business operations manager for SBP Australia, gave evidence that Mr Aisthorpe instructed him that Mr Smith’s annual leave entitlements could not be paid until Mr Smith provided his outstanding timesheets, as his entitlements could not be calculated. Mr Aisthorpe was evidently aware that Mr Smith was entitled to be paid something, but directed that he was to be paid nothing. Mr Aisthorpe intentionally directed and participated in the contravening conduct and was knowingly concerned in Employment Solutions’ contravention of s 44 of the FWA.

190    However, the evidence did not establish that Mr Burns was knowingly concerned in Employment Solutions’ contravention of s 44 of the FWA.

191    The declarations that SBP Australia, Mr Mahony and Mr Hombsch contravened ss 44 and 340 of the FWA Act must be set aside. So too must the orders that they pay pecuniary penalties and the order that they pay costs.

192    The declaration that Mr Burns contravened s 44 of the FWA and the order that he pay a penalty for that contravention must also be set aside.

Grounds 5 and 6: Appeal against the Compensation Decision

193    The primary judge ordered that the appellants pay Mr Smith compensation of $589,439.43 for the contraventions of s 340 of the FWA, together with interest of $13,925.16.

194    Ground 5(b) of the Amended Notice of Appeal alleges that the assessment of economic loss on the basis of three further years of employment was in error because the evidence showed that Mr Smith would have been dismissed or made redundant after three months. Grounds 5(c) and (d) allege that the primary judge erred by failing to make any deductions in respect of the vicissitudes of life or the present value of future earnings in respect of economic loss.