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[2019] NSWSC 1594
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Rema Tip Top Asia Pacific Pty Ltd v Grüterich [2019] NSWSC 1594 (18 November 2019)
Last Updated: 18 November 2019
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Supreme Court
New South Wales
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Case Name:
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Rema Tip Top Asia Pacific Pty Ltd v Grüterich
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Medium Neutral Citation:
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Hearing Date(s):
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6-8, 10, 13-15, 17 May 2019
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Date of Orders:
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18 November 2019
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Decision Date:
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18 November 2019
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Jurisdiction:
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Equity
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Before:
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Ward CJ in Eq
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Decision:
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1. Declare that the plaintiff would have been justified in
terminating the contract of employment between itself and the defendant
on 16
March 2018 for serious misconduct by the
defendant. 2. Declare that moneys in respect of the car
allowance, the double salary payments and the expenses said to be incurred under
the
claimed private business class travel budget (as opposed to the claimed
business travel expenses on Mr Grüterich’s company
credit card)
totalling $187,037.67 were wilfully and dishonestly misappropriated by the
defendant and that those moneys were impressed
with a presumed or resulting
trust and are held on trust by the defendant for the benefit of the
plaintiff. 3. Declare that those moneys, together with the
moneys in respect of the bonus payment of $103,210.88 and the unauthorised
credit
card expenses (including the Poliform furniture deposit) totalling
$21,413.75, that the defendant caused to be paid to himself or
for his benefit
in breach of his fiduciary duty not to make an unauthorised profit from his
position, are held by the defendant subject
to a constructive trust in the
plaintiff’s favour. 4. Order that, subject to the
set-off ordered below, funds held in the HSBC bank account to the amount of
$311,662.30 (being the
total of the amounts the subject of the trust
declarations in Orders 2 and 3 above) be released to the
plaintiff. 5. Order that the defendant pay the following
sums to the plaintiff (totalling $336,413.69) as damages (for breach of
contract,
in equity or under s 1317H of the Corporations Act 2001 (Cth) for
breach of fiduciary or statutory duties owed by the defendant as managing
director of the plaintiff) and/or by way of
restitution: (a) Car allowance:
$22,750. (b) Double salary:
$69,999.99. (c) Bonus payment:
$103,210.88. (d) Poliform furniture:
$9,616.40. (e) Travel expenses:
$94,287.68. (f) Annual leave overpayment:
$24,751.39. (g) Other miscellaneous credit card expenses:
$11,797.35. 6. Order the payment of interest up to judgment
on the above amounts. 7. Order that the plaintiff pay to the
defendant accrued long service leave calculated taking into account his
employment within
the Rema Group of companies from 25 October 2012 to the date
of termination of his employment on 16 March 2018, with interest calculated
up
to judgment on that amount, but otherwise dismiss the defendant’s
cross-claim. 8. Order that the amounts payable pursuant to
the plaintiff under Orders 4 and 5 be set-off against the amount ordered to be
paid
to the defendant under Order 7; with the remaining balance of the amounts
so ordered to be paid to the plaintiff or the defendant,
as the case may be,
within 28 days. 9. Reserve the question of costs to be dealt
with on the papers following any further brief written submissions on that
issue. 10. Liberty to apply on three days’ notice for
any variation necessary to correct any error in the calculation of the above
amounts or otherwise in relation to the working out of the above orders. |
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Catchwords:
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EMPLOYMENT AND INDUSTRIAL LAW — Contract — Termination —
Termination on notice – whether the plaintiff was
justified in terminating
the employment contract of the defendant (its former managing director) –
whether the plaintiff would
have been justified in terminating summarily the
defendant’s employment contract on the ground of serious misconduct
–
where information regarding unauthorised directions and payments made by
the defendant were discovered after the termination –
whether the contract
was for a fixed term – held that the contract was not for a fixed term and
the plaintiff was justified
in terminating the employment contract and would
have been justified in terminating summarily the defendant. EQUITY
— Equitable remedies — Restitution – Unjust enrichment –
whether the plaintiff could recover the notice
payment paid to the defendant
– whether there was a factor rendering retention of the notice payment
unjust – held that
the payment was made voluntarily in circumstances where
the plaintiff chose not to investigate further but to bring the employment
to an
end immediately. CONTRACTS — Misleading conduct under statute
— Misleading or deceptive conduct — Silence – whether
necessary
to establish reasonable expectation of disclosure, EQUITY
—Trusts and trustees — Resulting trusts –moneys
misappropriated by the defendant held on presumed or resulting
trust by the
defendant for the benefit of the plaintiff – unauthorised profits in
breach of the defendant’s fiduciary
duties held by the defendant subject
to a constructive trust in the plaintiff’s favour. EMPLOYMENT
AND INDUSTRIAL LAW — Leave — Long service leave – s
4(2)(a)(ii) of the Long Service Leave Act 1955 (NSW) – whether the
defendant had been wrongly denied long service leave accruals on termination of
his employment –
held that the defendant was entitled to long service
leave on the basis that his employment was terminated in lieu of notice and
not
for misconduct. |
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Legislation Cited:
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Competition and Consumer Act 2010 (Cth), Sch 2 – Australian
Consumer Law, ss 18, 31, 236 Corporations Act 2001 (Cth), ss 182(1), 183,
1317Long Service Leave Act 1955 (NSW), ss 4, 5, 7Trade Practices Act
1974 (Cth), s 52
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Cases Cited:
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Texts Cited:
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C Mitchell, P Mitchell and S Watterson , Goff & Jones The Law of Unjust
Enrichment (9th ed, 2016, Thomson Reuters)
G D Pont et al, Halsbury’s
Laws of Australia (Lexis Nexis)
J D Heydon, M J Leeming and PG Turner,
Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2014,
LexisNexis)
K Mason, J W Carter, G J Tolhurst, Mason and Carter’s
Restitution Law in Australia (3rd ed, 2016, LexisNexis)
M Pittard and R
Naughton, Australian Labour and Employment Law (1st ed, 2015, LexisNexis)
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Category:
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Principal judgment
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Parties:
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Rema Tip Top Asia Pacific Pty Ltd (Plaintiff)
Christian Grüterich
(Defendant)
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Representation:
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Counsel:
N Furlan and JC Lee (Plaintiff)
J Knackstredt and M Connor
(Defendant)
Solicitors:
Gilbert + Tobin (Plaintiff)
Clyde
& Co (Defendant)
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File Number(s):
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2018/00117085
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Publication Restriction:
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Nil
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INDEX
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JUDGMENT – WARD CJ in Eq
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[1]
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Background
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[14]
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The parties
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[14]
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Relevant persons
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[21]
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Stahlgruber AG
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[22]
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Rema Tip Top AG
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[23]
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DBS
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[27]
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Rema Tip Top
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[30]
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Rema Tip Top Australia
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[38]
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Rema Tip Top SA
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[41]
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Mr Grüterich’s employment history within the Rema Group
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[42]
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DBS contract 25 October 2012
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[42]
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First SA Contract commencing 1 June 2013
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[50]
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Second SA Contract dated 30 May 2014
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[54]
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Education Support Letter dated 8 September 2014
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[57]
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Mr Grüterich’s deployment to Australia
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[59]
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25 November 2015 email from Mr Wach and the document attached to Mr
Wach’s letter of offer (dated 24 November 2015)
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[62]
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DBS Posting Agreement dated 8 December 2015
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[67]
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January 2016 – discussions re Australian employment contract
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[75]
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Mr Grüterich’s appointment as Chief Financial Officer of Rema
Tip Top
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[82]
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Appointment of Mr Grüterich as managing director of Rema Tip Top
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[84]
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Discussions as to Mr Grüterich’s contractual arrangements in the
period from August 2016 through to February 2017
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[85]
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15 November 2016 draft employment contract prepared by Mr Taylor for Mr
Grüterich
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[87]
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11 December 2016
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[91]
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22 January 2017 €50,000 Bonus Letter
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[106]
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Early February 2017 communications re Australian employment contract
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[113]
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13 February 2017 emails
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[117]
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14 February 2017
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[121]
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14 February 2017 Employment Contract
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[139]
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Termination of DBS contract
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[145]
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17 February 2017 – Car Allowance direction
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[148]
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18 February 2017 email
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[150]
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2017 Education Support letter
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[151]
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Communications re bonus
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[153]
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Payment of €30,000 bonus
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[157]
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June 2017 – “outstanding bonus agreement”
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[158]
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Position as at August 2017
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[159]
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22 September 2017 email to Mr Zimmer
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[163]
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12 December 2017 regional meeting
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[165]
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12 December 2017 Double Salary Direction
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[178]
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Late December 2017 query by Mr Grüterich as to confirmation of his
“private topic”
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[187]
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Salary Progress Document
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[190]
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Termination of the employment contract
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[206]
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Events after termination notice
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[219]
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These proceedings
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[223]
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Issues
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[225]
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Evidence
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[237]
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Mr Grüterich
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[242]
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Mr Kopp
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[259]
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Mr Zimmer
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[262]
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Mr Labbé
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[264]
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Mr Slattery
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[267]
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Jones v Dunkel inferences
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[270]
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Issues for Determination
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[288]
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Mr Grüterich’s employment arrangements
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[289]
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Express terms of the 14 February 2017 Employment Contract
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[290]
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Implied term
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[291]
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Oral variation
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[293]
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Was there a fixed term?
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[297]
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Rema Tip Top’s submissions
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[300]
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Mr Grüterich’s submissions
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[309]
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Determination
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[311]
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Alleged unauthorised payments/appropriations
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[339]
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Car allowance
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[341]
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Rema Tip Top’s submissions regarding the car allowance
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[352]
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Mr Grüterich’s submissions regarding the car allowance
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[361]
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Evidence as to authority matrices
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[365]
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• Mr Grüterich’s submissions as to
matrices
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[372]
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• Determination as to admissibility of the evidence
of the delegations of authority
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[378]
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Determination as to car allowance having regard to the above
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[382]
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Double salary payments
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[391]
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Rema Tip Top’s submissions regarding the double salary payments
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[394]
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Mr Grüterich’s submissions regarding the double salary
payments
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[412]
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Determination as to the double salary payments
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[413]
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Bonus payment ($103,210.88)
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[417]
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Rema Tip Top’s submissions regarding the bonus payment
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[423]
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Mr Grüterich’s submissions regarding the bonus payment
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[449]
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Determination
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[457]
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• The March 2018 spreadsheet
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[457]
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• Conclusion on this issue
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[471]
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Furniture purchase
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[475]
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Rema Tip Top’s submissions regarding the furniture purchase
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[476]
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Mr Grüterich’s submissions regarding furniture purchase
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[489]
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Determination
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[492]
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Travel expenses
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[493]
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Mr Grüterich’s submissions regarding travel expenses
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[494]
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Rema Tip Top’s submissions regarding travel expenses
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[503]
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Determination
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[517]
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Credit card expenses
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[520]
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Emirates flights costs (Annexure B)
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[536]
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Boston and New York travel (Annexure C)
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[537]
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Mew Zealand travel (Annexure D)
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[540]
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Miscellaneous expenses (Annexure G)
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[543]
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Rema Tip Top’s submissions regarding the credit card expenses
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[544]
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Mr Grüterich’s submissions regarding the credit card
expenses
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[546]
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Determination
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[547]
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Was Rema Tip Top entitled to terminate as at 16 March 2018 for serious
misconduct?
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[553]
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Rema Tip Top’s submissions
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[554]
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Determination
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[563]
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Restitutionary claim for recovery of notice payment
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[579]
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Mr Grüterich’s submissions
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[600]
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Determination
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[615]
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Misleading or deceptive conduct claim
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[644]
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Rema Tip Top’s submissions
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[645]
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Mr Grüterich’s submissions
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[655]
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Determination
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[659]
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Trust claim
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[668]
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Determination
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[673]
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Overpayment of annual leave on termination
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[674]
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Cross-claim
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[675]
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Determination
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[682]
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Costs
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[689]
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Orders
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[690]
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JUDGMENT
- HER
HONOUR: This matter involves a dispute between Rema Tip Top Asia Pacific Pty
Ltd (Rema Tip Top) and its former managing director, Mr Christian
Grüterich, relating to Mr Grüterich’s employment with Rema Tip
Top and the circumstances in which that employment
came to an end.
- There
is an issue as to whether Mr Grüterich’s contract of employment was
validly terminated by Rema Tip Top by notice
on 16 March 2018 or whether it was
terminated on 23 April 2018 when Mr Grüterich’s then solicitors
advised Rema Tip Top’s
solicitors that Mr Grüterich accepted what was
contended to be Rema Tip Top’s repudiation of his contract of employment.
However, on either case, it is accepted that the employment relationship between
Mr Grüterich and Rema Tip Top came to an end
on 16 March 2018. Shortly
thereafter, Rema Tip Top paid Mr Grüterich a termination payment, which was
based on Mr Grüterich’s
calculation of his entitlements, and included
a component of $213,655 (the Notice Payment) for six month’s salary in
lieu of
notice. Mr Grüterich contends that his employment contract was for
a fixed term and not terminable (other than for cause) before
31 December 2019
– hence his claim that Rema Tip Top repudiated his contract of employment
by giving him notice on 16 March
2018.
- Rema
Tip Top denies that the contract of employment was for a fixed term but says
that, in any event, it was entitled summarily to
terminate Mr
Grüterich’s contract for serious misconduct by Mr Grüterich
during the course of his employment. Rema
Tip Top alleges that Mr
Grüterich: wilfully and dishonestly misappropriated moneys from Rema Tip
Top; purchased personal property
without its authorisation; and breached his
fiduciary duty to Rema Tip Top while in its employment. Apart from some
relatively minor
purchases of personal items on his company credit card, Mr
Grüterich broadly denies the allegations of misconduct that have
been made
against him and asserts that particular payments to him (for items such as an
annual car allowance, private travel and
home furniture) were within the scope
of his authority as managing director or otherwise authorised.
- Rema
Tip Top seeks: a declaration that it was justified in terminating
Mr Grüterich’s contract of employment in March 2018
for serious
misconduct by Mr Grüterich (prayer 1); declarations that moneys wilfully
and dishonestly misappropriated by Mr Grüterich
from Rema Tip Top
(totalling $195,960.87 prior to tax) and personal property purchased by Mr
Grüterich using Rema Tip Top’s
moneys without its authorisation, were
impressed with a presumed or resulting trust, and are held on trust by Mr
Grüterich for
the benefit of Rema Tip Top (prayers 2A-2B); and, in the
alternative, a declaration that Mr Grüterich caused to be paid to
himself
the sum of $195,960.87 (prior to tax) and property purchased by Mr
Grüterich using Rema Tip Top’s moneys, in breach of
his fiduciary
duty not to make an unauthorised profit from his position, and that such moneys
and property are held by Mr Grüterich
subject to a constructive trust in
Rema Tip Top’s favour (prayer 2C).
- Rema
Tip Top also seeks damages (prayer 2); equitable compensation generally and/or
under s 1317 of the Corporations Act 2001 (Cth) (Corporations Act)
(prayers 3-4); restitution (prayer 5); in the alternative, damages under s 236
of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian
Consumer Law (Australian Consumer Law) (prayer 5A); interest up to
judgment (prayer 6); and costs and interest on costs (prayers 7-8).
- Although
Mr Grüterich disputes that this is a case of fraud, arguing that instead it
is about technical questions surrounding
the nature and scope of [his]
employment contract, including the effect of an entire agreement clause, given
that serious allegations
involving dishonesty are here made against
Mr Grüterich, it is accepted by Rema Tip Top that it bears the onus of
proof to the
Briginshaw standard (Briginshaw v Briginshaw (1938)
60 CLR 336; [1938] HCA 34 – Briginshaw v Briginshaw) of those
allegations.
- Mr
Grüterich filed an amended cross-claim on 15 April 2019 (the cross-claim)
(pursuant to leave to amend granted by Kunc J on
12 April 2019) seeking: damages
for breach of contract (prayer 1); judgment for a contractual debt of
$1,432,722.85 (plus the payment
of PAYG and fringe benefits taxes as required)
(prayer 2); declarations that Rema Tip Top engaged in misleading conduct in
relation
to Mr Grüterich’s employment, contrary to ss 18 and 31 of
the Australian Consumer Law (prayers 3-4); damages pursuant to s 236 of the
Australian Consumer Law (prayer 5); payment of accrued
long service leave
pursuant to s 4 (though I note that the cross-claim says s 5 which I assume is
an incorrect reference) of the Long Service Leave Act 1955 (NSW) (Long
Service Leave Act) (prayer 6); and costs and interest on costs (prayers
8-9).
- For
the reasons that follow, I have concluded that Mr Grüterich’s
contract of employment was not (as he contends) for a
fixed term; rather, that
it was terminable on six months’ notice without cause; and that it was
validly terminated by Rema
Tip Top on 16 March 2018. In that regard, I am not
persuaded that Mr Grüterich’s misleading or deceptive conduct claim
as to representations alleged to have been made to him in the course of his
employment (in relation to a fixed term or otherwise)
has been made good.
- I
further find that Rema Tip Top would have been justified in summarily
terminating Mr Grüterich’s contract of employment
on 16 March 2018
for serious misconduct; that misconduct being comprised of: Mr
Grüterich’s unauthorised directions for
payment to himself of an
annual car allowance, double salary payments and amounts said to be referable to
a private business class
travel budget (which I cannot find were honestly made)
together with the overall history of unauthorised use of his company credit
card
for personal expenditure (some of which non-work-related expenses is now not
disputed by him); those amounts in Mr Grüterich’s
hands being
impressed with a resulting or presumed trust. I find that the direction for a
payment of a sum being the equivalent of
a €50,000 bonus for the 2017 year
(the bonus payment) was also not authorised but I am not satisfied that
Mr Grüterich’s
conduct in relation to that payment was
dishonest; this sum being recoverable by way of restitution, having been paid by
Rema Tip
Top under the mistaken belief that it was obliged to make that payment
and in circumstances where the retention of that benefit by
Mr Grüterich
would be unjust. (Pausing here, I note that Mr Grüterich’s change of
position defence related to the
Notice Payment claim not the bonus payment
claim.)
- The
consequences of those findings, in terms of the relief here sought by Rema Top,
are dealt with in due course.
- I
accept that, at the time of its termination of Mr Grüterich’s
employment, Rema Tip Top was under the mistaken belief
that it was entitled so
to do only on the provision of notice (with payment of six months’ salary
in lieu of a notice period
if it so chose), rather than (as I have found it was)
summarily for cause. However, I am not persuaded that Rema Tip Top’s
claim
for restitution or misleading or deceptive conduct in relation to the Notice
Payment is made good.
- Finally,
as to Mr Grüterich’s cross-claim to payment of long service leave, I
find that this claim is made good because,
although Rema Tip Top was entitled
summarily to terminate his employment for serious misconduct in March 2018, in
fact it did not
do so.
- For
the sake of clarity, I note here at the outset that any reference to an amount
in dollars in this judgment (as opposed to euros)
is a reference to Australian
dollars (unless otherwise stated).
Background
The parties
- Rema
Tip Top is a company incorporated in New South Wales under the Corporations
Act. It is a subsidiary of Rema Tip Top AG, which is based in Germany. Rema
Tip Top AG is the Asia-Pacific holding company for a large
number of
subsidiaries that operate in Australia and the Asia-Pacific region as part of
the Rema Group of companies, including Rema
Tip Top (see T 60). The ultimate
holding company of the Rema Group is a German company, Stahlgruber Otto Gruber
AG (Stahlgruber AG).
An entity referred to in the course of cross-examination of
Mr Udo Zimmer (the current chief executive officer and chief financial
officer
of Rema Tip Top AG) as OWGAG is (to Mr Zimmer’s understanding) the
sole shareholder of Stahlgruber AG (see T 61.46).
- Rema
Tip Top has, as noted, a number of subsidiaries. Those subsidiaries relevantly
include: Rema Tip Top Australia Pty Ltd (Rema
Tip Top Australia), Rema Tip Top
South Africa Pty Ltd (Rema Tip Top SA), and ConvaTech Holdings Pty Ltd
(ConvaTech) (the last being
a company that was acquired by Rema Tip Top in about
2016).
- Another
company in the Rema Group, dbs Delta Business Services GmbH (DBS), a company
also based in Germany, is a shared service company
which provides services to
companies in the Rema Group, including human resources services. It is a wholly
owned subsidiary of either
Stahlgruber AG or OWGAG (see T 62).
- Rema
Tip Top is part of a global manufacturing business headquartered in Poing,
Germany, that produces a range of goods with industrial
(and other) applications
including tyres, conveyor systems, valves and weights.
- In
terms of its internal corporate structure, Rema Tip Top’s parent company
(Rema Tip Top AG) has both a Board of Directors
and a separate Supervisory Board
that oversees the Board of Directors (the latter being a feature, as I
understand it, of German
corporate governance). There is also reference in some
of the documents to an Advisory Board. There was some exploration during the
course of cross-examination of some of Rema Tip Top’s witnesses as to the
precise role played by the Supervisory Board of Rema
Tip Top AG and the Board of
Directors of Rema Tip Top AG (or, for that matter, the Local Board of Directors
of Rema Tip Top) (see,
for example T 88 and T 199). Suffice it here to note that
the relevant distinction in terms of the corporate governance of companies
within the Rema Group (whether as a function of German law or not) seems to be
that certain decisions are required to be approved
at the Supervisory Board
level (including the setting of the local company’s investment (or capital
expenditure) budgets from
time to time).
- So,
for example, Mr Slattery (a director of Rema Tip Top from 2016 to 2019), gave
evidence that the Local Board obtained its instructions
from the German parent
company (Rema Tip Top AG); that matters such as executive salaries and other
employment benefits were set
by the German parent; and that (as a director) he
had no role in approving or not approving company expenses (or, for that matter,
any expenditure by Mr Grüterich, who was his superior) (T 200).
- Within
the Rema Group, the understanding of various of those involved in the management
of one or more of the companies seems to have
been that the ultimate decision
maker is a Mr Heinz Reiff (about whom I will say more below). Nevertheless, it
is apparent (if nothing
else than by reference to Mr Grüterich’s
own conduct), that directions made by Mr Reiff will not necessarily always be
followed.
Relevant persons
- Before
turning to Mr Grüterich’s employment history within the Rema Group,
it is convenient briefly to set out (albeit
without purporting to be exhaustive)
a description of the dramatis personnae, namely the relevant directors and
employees of the
respective Rema Group entities involved in the events the
subject of these proceedings (not all of whom gave evidence in the proceedings
– a matter about which there was no little complaint by
Mr Grüterich, to which I will return in due
course).
Stahlgruber AG
- Mr
Heinz Reiff, to whom I have referred above, is the Chief Executive Officer of
Stahlgruber AG, the ultimate holding company of the
Rema Group, and the Chairman
of the Supervisory Board of Rema Tip Top AG.
Rema Tip Top
AG
- Mr
Thorsten Wach was a director of Rema Tip Top at the time Mr Grüterich
commenced employment in Australia in early 2016 and
until 13 October 2017. He
became the Chairman of the Board of Rema Tip Top AG and its Chief Executive
Officer in around August 2016
and held that position until late August 2017. The
evidence that emerged in cross-examination of Mr Michael Labbé was that
Mr Wach’s employment was suspended in about August 2017 and that there is
an ongoing dispute (not resolved or disposed of at
least at the time of the
hearing before me) between Mr Wach and Rema Tip Top AG as to the termination of
his employment.
- Mr
Patric Scheungraber was a member of the Board of Rema Tip Top AG (at least as at
December 2016).
- Mr
Michael Labbé is a member of the Board of Rema Tip Top AG and its Chief
Business Development Officer.
- Mr
Udo Zimmer was a director and member of the Board of Rema Tip Top AG as at
December 2016, and its Chief Financial Officer from
March 2016 until January
2018, when he replaced Mr Wach as Global Chief Executive Officer of Rema Tip Top
AG.
DBS
- Mr
Werner Heumüller is the Managing Director of DBS, who signed the
25 October 2012 “side-letter” for DBS in relation
to Mr
Grüterich’s initial deployment by DBS to South Africa (see further
below).
- Mr
Thorsten Kopp is employed by DBS in its Human Resources department as the Head
of Human Resources.
- Mr
Michael Ubelacker is the Legal Counsel of Stahlgruber AG and the Managing
Director of DBS.
Rema Tip Top
- Mr
Peter Wieczorkowski was the Chief Financial Officer, and the person to whom Mr
Grüterich reported in Rema Tip Top when Mr
Grüterich commenced work in
Australia in 2016. In June 2016, Mr Grüterich took over the position of
Chief Financial Officer
from Mr Wieczorkowski. (In cross-examination,
Mr Grüterich was taken to documents that reveal that, in the period
leading up
to Mr Wieczorkowski ceasing to hold the position of Chief Financial
Officer, Mr Grüterich had sought any evidence of misconduct
by Mr
Wieczorkowski; which suggests that Mr Wieczorkowski’s cessation in the
role of Chief Financial Officer may not have been
wholly amicable.)
- Mr
Alan Malsem (formerly with ConvaTech) became a director of Rema Tip Top,
reporting to Mr Grüterich, in June 2016 after Rema
Tip Top’s
acquisition of ConvaTech. In August 2016, when Mr Grüterich became the
Chief Executive Officer of Rema Tip Top,
Mr Malsem became its Chief Financial
Officer. Mr Malsem left employment with Rema Tip Top on about 17 February 2017,
the year before
Mr Grüterich (and apparently, as emerged in
Mr Grüterich’s cross-examination, he also left not on good terms
with
Rema Tip Top).
- Mr
Peter Slattery (formerly with ConvaTech) was, from 12 May 2016 up until
approximately two months before the hearing, a director
of Rema Tip Top (and a
member of the Advisory Board of the company).
- Mr
Lee van der Burgt is Rema Tip Top’s People & Culture Manager –
Asia Pacific.
- Mr
Lauren Davison is the Group Financial Controller and Company Secretary of Rema
Tip Top.
- Ms
Jacqueline Fairclough is the Payroll Manager for Rema Tip Top and has held this
position since 29 January 2017.
- Ms
Sherry Lin was employed as a financial accountant with Rema Tip Top for a 13
months period ending in November 2017.
- Ms
Natasha Thompson is employed by Rema Tip Top as an executive assistant and, from
about late August 2017, she was appointed as executive
assistant to Mr
Grüterich.
Rema Tip Top Australia
- Mr
Craig Philpotts was a managing director from November 2017 of Rema Tip Top
Australia.
- Mr
Robert William Cross is the State Manager (NSW) of Rema Tip Top Australia.
- Mr
Mike Taylor is the Group Manager, People, Culture & Safety of Rema Tip Top
Australia.
Rema Tip Top SA
- Mr
Stefan Flohr was at the relevant time the Managing Director of Rema Tip Top
SA.
Mr Grüterich’s employment history within the Rema
Group
DBS contract 25 October 2012
- Mr
Grüterich began his employment within the Rema Group when he entered into
an employment contract with DBS on 25 October 2012
(the DBS employment
contract). The contract was in German (a translation of it, and of other German
language documents, was in evidence
and there was no real dispute as to the
accuracy of the translations although, in some instances, there were competing
translations).
- Clause
1 of the DBS employment contract provided that:
(1) The employee is recruited as a project manager in the area
of International CO/Revision. A detailed job description will be
provided
later.
(2) The work relationship begins on the 01/12/2012.
...
(5) Place of work: project-related; initially at least 12
months in South Africa.
- Under
the terms of the DBS employment contract, Mr Grüterich was deployed for
“project-related work” (in effect,
seconded) to South Africa
commencing on 1 December 2012.
- Pursuant
to cl 4 of the DBS employment contract, Mr Grüterich’s remuneration
was specified as the gross amount of €5,835.00
per month. Clause 5
provided that any payment of bonuses by the company was voluntary, revocable at
any time, and “does not
establish any future legal claims”. Clause
11, headed “[e]nding of the work relationship”, provided
that:
Legal provisions apply. After the familiarization period in Warstein or Poing
and with the beginning of the deployment overseas in
South Africa a resignation
notice of 3 months up to the month’s end is required.
- Clause
13, headed ‘[f]inal clause’, provided that:
Oral ancillary agreements do not exist. Additions and alternations [sic;
presumably an error in transcription; scil alterations]
as well as the
cancellation of this contract are required to be in written form. This applies
also to alteration of the written form
requirement.
- The
DBS employment contract was prefaced by a “[p]reliminary note”
stating that “[t]he Side-Letter included in the
attachment is a component
of this employment contract”.
- That
“Side-letter”, also dated 25 October 2012, contained (relevantly)
the following:
From the 01/12/2012 you are employed with dbs as a project manager in the area
of International Controlling/Revision. After a familiarization
period (dbs
Warstein/CP Poing) you will initially be employed in South Africa.
As intimated already in the conversations conducted, an agreed-upon employment
contract with OWG Management AG, Zurich supersedes
as quickly as possible the
employment contact existing with dbs. In relation to this there are still some
legal framework conditions
that must be clarified.
In the case of sojourns in foreign countries we arrange for you and your
life-partner a full foreign country health insurance. Further,
at the foreign
place you are assigned to, a typical local company car (Polo Class) is placed at
your disposal. [I note, here, the use of the singular - “a”
company car]
The company supports you in the search for accommodation in the country of
employment. You will receive monthly a supplement for
monthly rent to the amount
of €750.00 gross. Further, you receive a removal costs allowance to the
amount of €2,000.00.
For the period of the project in South Africa the company reimburses the costs
of at least two flights home to the FRG per year (Economy
Class).
After the conclusion of the project in South Africa and return to Germany or
Switzerland, the remuneration incorporated in the employment
contract is
adjusted in accordance with the future site of work. The remuneration currently
agreed to in the contract refers to assignment
in South Africa and the
associated cost of living.
- What
this seems to have contemplated was that there would be an employment contract
entered into with another entity (OWG Management
AG, Zurich) that would
supersede the DBS employment contract but that, until that time, the DBS
employment contract governed Mr Grüterich’s
“project-related” deployment to South Africa.
First
SA Contract commencing 1 June 2013
- Mr
Grüterich subsequently entered into a “Fixed Term Contract of
Employment” with Rema Tip Top SA (the First SA Contract)
(presumably, this
being the contract that had been contemplated in the side-letter referred to
above). That contract, the date of
which is hard to discern from the copy of the
document in evidence, specifies the period of employment as commencing on 1 June
2013
and describes Mr Grüterich’s position as that of
“Controller”.
- The
First SA Contract provided that Mr Grüterich was to report directly to the
Head of Treasury and Financial Controller (cl
1.4); that he was to be allocated
a “Company vehicle” (cl 4.1) (note, again, the use of the singular);
that bonuses paid
by the company “are a privilege and not a right”
(cl 6.1); that the “Management reserves the right to set the bonus
criteria and evaluate the qualification” (cl 6.1) and that all commissions
are forfeited on resignation and termination of
employment ( cl 6.2). Although
headed a “fixed term” contract, and although the termination of
employment clause contained
therein makes reference to the contract being a
fixed term (see cl 19.1), it is difficult to see any fixed term specified in the
First SA Contract. The First SA Contract also contained a clause providing, in
effect, that no changes to the agreement would be
effective unless reduced to
writing and signed by both parties (see cl 26.1).
- Clause
18 dealt with the company’s policies, noting that the company “has
an extensive set of policies and procedures
which are available on
request” and that Mr Grüterich was “expected to familiarise
[himself] with those policies
and procedures that may affect [him]” (cl
18.1); and requiring Mr Grüterich to comply with the policies and
procedures
while in the employment of the company (cl 18.2)
- Appendix
1 to the First SA Contract, signed by Mr Wach as “CEO”, specified an
agreed remuneration package: a fixed salary
of R23,500.00 per month;
“company car”; and that the company “will pay for reasonable
rented accommodation”.
Second SA Contract dated 30 May
2014
- A
second contract of employment, dated 30 May 2014, was entered into by Mr
Grüterich with Rema Tip Top SA (the Second SA Contract).
In this contract,
Mr Grüterich’s position is identified as “Head of Business
Analysis”; the starting date
of employment is 1 June 2014; there were
similar provisions for allocation of a company vehicle and for bonuses; the
termination
provision is the same; and there is the same cl 26.1 relating to
changes to the agreement.
- Appendix
1 to the Second SA Contract, again signed by Mr Wach as “CEO”,
specified an agreed remuneration package: a fixed
salary of R48,600.00 per
month; “company car”; and that the company “will pay for
reasonable rented accommodation”.
- While
the Second SA Contract is accepted as having superseded the First SA Contract,
it is not clear what the status of the initial
DBS employment contract was after
the entry into and during the subsistence of the respective SA Contracts. It
seems to have been
understood that the DBS contractual arrangement continued in
operation at the same time as each of the respective SA Contracts. That
this is
the case seems to be consistent with the correspondence from DBS to Mr
Grüterich in September 2014 (see below) in which
DBS notified, among other
things, an increase in salary (at a time when Mr Grüterich was working in
South Africa under the Second
SA Contract).
Education Support
Letter dated 8 September 2014
- By
letter dated 8 September 2014, headed “Salary/Further Education”,
DBS advised Mr Grüterich that:
We are happy to inform you that we are raising your agreed-upon, annual, gross
salary with effect from the 01/09/2014 to an amount
of €95,000.00
gross.
Further, we would like to financially support you in your further education
(Doctor of Business Administration) and pledge to you
here an amount of
€10,000.00 per year for the period of three years.
- Relevantly,
the pledge of support for Mr Grüterich’s further education was not,
in terms, framed as some kind of discretionary
payment “at large”.
It was expressed as financial support “in your further education”
and referred to a particular
degree course. It can only reasonably have been
understood as being limited for use for those stated purposes.
Mr
Grüterich’s deployment to Australia
- Towards
the end of 2015, it was proposed that Mr Grüterich be deployed to work in
Australia. By email sent on 23 November 2015,
with the email subject heading
“Contract documents”, Mr Kopp (Head of Human Resources at DBS)
informed Mr Grüterich
that:
I have coordinated with Thorsten [presumably, Mr Wach] your deployment and have
attached the relevant deployment contract created
as a draft. Additionally, I
have recorded the adjustment of the income in a corresponding
letter.
- It
is not clear what was attached to that 23 November 2015 email. There was,
however, in evidence a letter dated 24 November 2015
signed by Mr Wach as CEO of
Rema Tip Top Australia, offering Mr Grüterich employment with Rema Tip Top
Australia and attaching
a contract. The attachment to the 23 November 2015
email may therefore have been a draft version of that document.
- By
email sent on 24 November 2015 to Mr Wach, Mr Grüterich forwarded to Mr
Wach the “contract documents” email he
had received from Mr Kopp and
requested confirmation from “Mr Wach’s side” as
follows:
As discussed, I do not need the inclusion of points in the contract, just want
you to be aware of this.
- Payment of journey home/container costs
- 4 flights home for Denise [Mr Grüterich’s then
partner] and I per annum
- Long haul business flights in Business Class
- € 120,000.00 as agreed instead of €115,000
according to attachment (not crucial, can be added in Australia)
- $150,000 AUD gross/per annum in Australia (€64,000.000
[sic] net as discussed)
- Duration of contract 5 years?
- Job description in Australian and reporting to whom?
- Payment of housing and company car
- Bonus.
25 November 2015 email from Mr Wach
and the document attached to Mr Wach’s letter of offer (dated 24
November 2015)
- Mr
Wach’s response to the above request, by email on 25 November 2015 at
11.23am, (on which, among other things, Mr Grüterich
relies in support of
his defence of Rema Tip Top’s present claim relating to the car allowance
payments ) was, relevantly:
It’s all still a bit confusing. I don’t like any net agreements; we
also didn’t discuss anything net.
The private travel expenses are very high.
Income Germany €120,000.00 Euro Gross
[As I understand it this is the DBS component of his
salary]
Income Australia €60,000.00 Euro Gross
(Remark: Exchange rate fluctuations versus AUD $$ cannot be retrospectively
implemented 2 x each year)
Private travel budget $10,000 AUD
Remark: (Booking is available via company)
Removal expenses to/from Sydney are covered by the company.
Business travel (without attachment) for 9 hours in Business ok.
Company car according to local standard ok
No extra housing (is included in the AUS package)
No additional bonus agreements in the contract
Duration of contract minimum 3 to 5 years, but can also be open ended
Location: Sydney, Reporting to the Group Financial Director
Arrangements for a transition period can vary.
Job description and Australian contract are done locally.
Additional non-monetary contributions that are currently still running via DBS
will not be changed.
Hope that this clarifies everything. I will also inform Thorsten Kopp
accordingly.
- Pausing
here, it is apparent from this communication that, among other things, Mr Wach
was not agreeing to a “net” agreement
in respect of
Mr Grüterich’s salary; that he considered the private travel
expenses “very high” and instead
was putting forward a
“private travel budget” of $10,000; and that he was indicating his
agreement (although not being
specific as to the relevant time period) to the
duration of the contract being a “minimum” of three to five years
(and
the statement “can also be open ended” leaves open the prospect
that the employment contract would not be fixed).
- The
document attached to Mr Wach’s letter of offer (dated 24 November 2015)
described Mr Grüterich’s position with
Rema Tip Top Australia as
“Group Financial Controller/Business Intelligence” and his location
at the Chullora office.
The document stated that Mr Grüterich was reporting
to Mr Peter Wieczorkowski; that his employment was permanent full time,
with a base salary of $100,000.00 per annum (plus statutory superannuation
payments); and that in this role he would be entitled
to “a fully
maintained vehicle governed by the company’s motor vehicle policy”.
The commencement date was stated
to be “TBA” (presumably, “to
be advised”).
- The
general conditions of employment in that document included a statement as to Mr
Grüterich’s obligations as employee;
and stated that his base salary
would be reviewed on an annual basis in June each year; and that salary
increases were at Rema Tip
Top Australia’s discretion. The provisions
dealing with termination included (cl 18.1) dismissal immediately and without
notice
“in the event of serious misconduct or wilful breach of employment
conditions” and (cl 18.2), for termination on notice.
Clause 21.1
contained a “whole agreement” clause and cl 21.2 provided that the
agreement may only be varied by written
agreement. There was nothing in the
document specifying a fixed contractual term (or any defined period of
employment, in contrast
with the December 2015 DBS arrangements).
- Although
not signed, it does not seem to be disputed that this document sets out the
parties’ understanding of what were the
then proposed arrangements vis
a vis Mr Grüterich’s employment with Rema Tip Top Australia
(though I note that Mr Grüterich also places weight on the
25 November 2015
email in this regard).
DBS Posting Agreement dated 8 December
2015
- By
letter dated 8 December 2015, Mr Heumüller wrote to Mr Grüterich (on
DBS letterhead) informing him that “we will
increase the annual gross
salary agreed on with you as from 01/01/2016 to an amount of €120,000.00
gross”.
- A
“Posting Agreement” of that date between DBS and Mr Grüterich
then provided an agreed “supplement to the
employment contract”. The
preamble to that document stated:
Agreement exists between the parties that the employee will for the time being
be assigned as a project manager from the 01/01/2016,
or earlier, in
Sydney.
- The
Posting Agreement provided that the employee (i.e., Mr Grüterich) is posted
to Sydney for a fixed time (cl 2.1) and that
the Posting Agreement ends with the
expiry of the time limit (31/12/2020), without requiring any further explanation
by the employer
(but also contemplated that, in case it is necessary, the
posting may be extended for a further limited period). Clause 2.2 reserved
the
employer’s right to end the assignment abroad at any time “for
objective reasons with a period of notice of 4 weeks,
ending prematurely on the
fifteenth or the end of a calendar month”.
- Clause
2.6 provided that after the conclusion to the posting “the present posting
agreement lapses, so that the previous work
conditions according to the
employment contract as well as their additions again become active”.
(Presumably, this was a reference
to the initial DBS employment contract and it
was contemplated that this would then in some fashion revive at that
stage.)
- Clause
7 dealt with expenses and allowances, providing that allowances and necessary
expenses of the employee “are reimbursed
during the posting abroad on the
basis of the current valid travel costs guidelines” and that the employer
was entitled to
alter the firm’s travel costs guidelines for objective
reasons “in particular where changes and legal conditions occur”.
Clause 8 provided that the employee will pay taxes on his payments in accordance
with the relevant national and international regulations
“as his own
responsibility and independently”.
- The
Posting Agreement provided that the work relationship, its conclusion and the
post-contractual obligations of both parties are
determined by German law and
that the parties agreed on the exclusive jurisdiction of the relevant labour
court for the location
of the employer (cl 11).
- Clause
12 again contained a requirement that alterations and the like were required to
be in written form for their legal efficacy
and excluding oral ancillary
agreements.
- The
Posting Agreement appears to have been signed by Mr Grüterich on
8 December 2015.
January 2016 – discussions re
Australian employment contract
- On
7 January 2016, Mr Grüterich sent an email to Mr Wach, referring to a
discussion on the telephone in November (presumably,
2015) and
saying:
As already discussed on the phone in November, please forward to me the
Australian employment contract. At the time you intended
to find out what would
be possible in Australia.
I have now researched and discussed with Peter [presumably,
Wieczorkowski] the local housing expenses which are approx. $50,000.00
AUD/annually for a decent, unfurnished two-room apartment outside of Sydney.
As discussed, this would almost use up the entire abroad budget. [It is not
clear to what “entire abroad budget” Mr Grüterich is here
referring.]
Therefore, please make a favourable adjustment/provide a favourable
solution.
Peter was of the opinion this morning that I do not have a contract and/or
details.
- Mr
Wach responded on 8 January 2016 “[y]es, I will also sponsor you
something, as discussed” and stated that he was under
the impression
“that you have already received a contract about the visa
application” and would look into it. Mr Grüterich’s
response
was that something had been forwarded to him about the visa application
“but not what he had discussed, some important
things” and that
“her” (Taniya) and Peter were of the opinion that he, Mr
Grüterich, should sign it this time
“but only for the purpose of the
visa application and the rest would come after our discussions”. Mr Wach
responded to
that on 10 January 2016 “[t]hat is correct. The numbers will
need to be adjusted as per the recent conversations.” “We’ll
do it”.
- The
reference to a “contract about the visa application” in Mr
Wach’s 8 January 2016 email presumably related to
the need to sign
some kind of contractual document in connection with a visa application for Mr
Grüterich to work in Australia,
but nothing turns on this. What is,
however, clear from this correspondence is that Mr Grüterich understood at
that stage (i.e.,
7 January 2016) that there was not yet any concluded
employment contract in relation to his employment in Australia.
- Mr
Grüterich has deposed in his 25 July 2018 affidavit (at [89]) that on
11 January 2016 he commenced his employment with Rema
Tip Top Australia.
Presumably, that is the date he says marked the actual commencement of his
employment in Australia (though the
Posting Agreement provided for a 1 January
2016 commencement). At that stage, there does not yet appear to have been any
signed employment
agreement with Rema Tip Top Australia.
- As
noted above, cl 2 of the Posting Agreement provided for a fixed term of
employment ending on 31 December 2020. However, there was
no fixed term
specified in the document sent to Mr Grüterich in relation to his Rema Tip
Top Australia employment contract.
- It
is not disputed that Mr Grüterich’s remuneration under the respective
employment arrangements included both an amount
in euros paid to him in Germany
by DBS and an amount in Australian dollars paid to him in Australia.
- Further,
from about February 2016, Mr Grüterich had the use of a company credit card
(HSBC Credit Card) issued in Mr Grüterich’s
name. (Mr Grüterich
claims that in August 2016, Mr Wach told him that Mr Wach did not need to review
Mr Grüterich’s
company credit card statements. Rema Tip Top argues
that that is implausible. In any event, from August 2016 until Mr
Grüterich’s
employment was terminated on 16 March 2018, Mr
Grüterich did not at any time submit his HSBC Credit Card statements for
approval
by Mr Wach or any other superior (moreover, on his own evidence he gave
only a cursory review of those statements when authorising
reimbursement of
credit and expenses and it appears that he gave his assistant, Ms Thompson,
carte blanche to be “creative”
when reconciling expenses on his
corporate credit card statements – see below).)
Mr
Grüterich’s appointment as Chief Financial Officer of Rema Tip
Top
- On
24 June 2016, Mr Grüterich (as Chief Financial Officer of Rema Tip Top)
issued a company announcement to all staff that, following
the successful merger
between Rema Tip Top and ConvaTech in May, effective from 1 July 2016 he (Mr
Grüterich) and Mr Malsem
would take over directorship from Mr Wach and
Mr Wieczorkowski. The announcement referred to Mr Wach having
“previously”
become the new Chairman of the Board of Rema Tip Top AG
in Germany and “therewith responsible for all of the Rema businesses
worldwide”. The announcement stated that Mr Grüterich had been
appointed as the new Chief Financial Officer for Rema Tip
Top taking on the
responsibilities from Mr Wieczorkowski and that Mr Wieczorkowski would provide
support to Mr Grüterich to
ensure a smooth transition and would report to
Mr Grüterich during this period. (Inconsistently with this, in
cross-examination
Mr Grüterich’s evidence seemed to be that he was
still reporting to Mr Wieczorkowski at this time – the relevance
of this
being as to the reliance that Mr Grüterich could place on any authority
allegedly obtained from Mr Wieczorkowski as
to his entitlements (see T
254).)
- The
June 2016 announcement stated that Mr Malsem was previously the General Manager
for Support Services at ConvaTech and had been
appointed as the new Chief
Financial Officer for “Rema Tip Top Industry Holding Australia” and
would also report to Mr
Grüterich. The announcement stated that, following
those changes, the ConvaTech Shared Services “will transition into
the
Rema Tip Top Asia Pacific business”.
Appointment of Mr
Grüterich as managing director of Rema Tip Top
- Subsequently,
Mr Wach, as Chairman of the Board of Rema Tip Top AG, issued an announcement on
8 August 2016 that Mr Grüterich
would take on the position as Managing
Director, and Mr Malsem would take on the position as Finance Director, of Rema
Tip Top.
Discussions as to Mr Grüterich’s contractual
arrangements in the period from August 2016 through to February 2017
- One
feature of this case is that many of the discussions relied upon by
Mr Grüterich as establishing (or amounting to representations
as to)
his contractual entitlements took place at what were referred to as
“holding meetings” or “regional holding
meetings” held
at the Raffles Hotel in Singapore. It appears that these were regular meetings
of the Rema Group executives
across the Asia-Pacific region attended by
executives from the headquarters of the Rema Group based in Germany. Another
feature of
the case is that Mr Grüterich was clearly pressing, from at
least August 2016, for a new Australian employment contract to reflect
his new
role as Managing Director (and pressing subsequently for variations thereto).
(That is relevant insofar as it belies the
existence of any concluded agreement
at the times when Mr Grüterich was agitating for just such an
agreement.)
- The
first of those regional meetings on which Mr Grüterich here relies, was a
discussion on 23 August 2016, at a regional “holding
meeting” at the
Raffles Hotel in Singapore, when Mr Grüterich says he requested that Mr
Wach provide him with a contract
for his new role as Managing Director. What
then followed were various email communications in relation to the preparation
of a new
employment contract for Mr Grüterich.
15 November
2016 draft employment contract prepared by Mr Taylor for Mr
Grüterich
- It
appears that Mr Grüterich asked Mr Taylor to prepare a draft contract for
him (see the email sent on 15 November 2016 by Mr
Taylor to Mr Grüterich
apologising that he “did not meet [his] timeframe of completing this by
yesterday” and stating
that he had almost completed the draft contract and
PD, but asking for details of his address “and who you report into [sic;
to]”, as well as noting that other details had not been completed in
relation to remuneration and whether or not he received
a performance bonus).
Mr Taylor apparently contemplated that the details not completed by him in
the draft contract he had prepared
for Mr Grüterich would be “filled
in” by someone in Germany or else that he would be provided with this
information
to include it in the draft. Mr Taylor said in this email that once
he had this information he could send Mr Grüterich back “the
first
draft of your contract”. In that email of 15 November 2016, sent at 5.25
pm, Mr Taylor said:
...I am wondering if you could confirm for me your address and who you report
into [sic]? The other details that are not filled in
relate to remuneration and
whether or not you receive a Performance Bonus and if so the details relating to
that, I am happy to leave
this information blank to allow someone from Germany
to complete or alternatively if someone provides this to me I can include
it.
- Mr
Grüterich replied at 5.51 pm that day, “[j]ust send it through, I am
going to get the rest filled”.
- Mr
Taylor then sent the draft contract to Mr Grüterich at 9.03 pm on
15 November 2016, saying:
... I have highlighted in yellow all of the parts that someone will need to
complete.
- Mr
Grüterich’s evidence is that he had this draft prepared “so
that I had a draft ready and available in December
should Mr Wach not have his
own draft contract available for review and signing”.
11
December 2016
- Mr
Grüterich says that in December 2016, at another regional holding meeting
at the Raffles Hotel in Singapore, Mr Wach informed
Mr Grüterich that
Mr Michael Ubelacker (the Stahlgruber AG Legal Counsel and Managing
Director of DBS), wanted Mr Grüterich
to “transition” to an
Australian employment contract only (i.e., presumably, for the existing DBS
contract to be terminated
– as ultimately occurred).
- Mr
Grüterich’s evidence is that on 12 December 2016 Mr Wach had told him
that Mr Ubelacker would not be involved in the
process of finalising his
contract. However, Rema Tip Top points out that it is clear from the email
correspondence that Mr Ubelacker
was consulted about the terms of the Employment
Contract and that Mr Kopp copied him (and Mr Wach) on emails to Mr
Grüterich
about the draft Employment Contract.
- On
16 December 2016, Mr Grüterich sent the draft contract to Mr Kopp and Mr
Wach. In his email to them (in German), Mr Grüterich
said:
Hallo Thorsten,
I hope you are well. Haven’t heard any further for a long time.
As agreed with Thorsten Wach, I am attaching the draft employment agreement
incl. position description,
With the request for coordination with Thorsten Wach and filling in the fields
highlighted in yellow, for completion of the contract
offer.
- Pausing
here, the significance of Mr Grüterich sending the draft to Mr Kopp at DBS
is that DBS appears to have had the function
(within the Rema Group) of
attending to the preparation of relevant employment documentation not simply for
DBS employees of other
group companies.
- The
attached draft document (i.e., Mr Grüterich’s draft version as
prepared by Mr Taylor) was styled as an “Executive
Employment
Agreement” bearing the date 24 June 2016 (the date of the announcement of
Mr Grüterich as Chief Financial Officer
of Rema Tip Top). The draft
agreement recited that the company had decided to appoint a Chief Executive
Officer to oversee the overall
management of all the business within the Rema
Tip Top Group within the Asia Pacific Region and had decided to offer to Mr
Grüterich
the position of Chief Executive Officer Asia Pacific.
- The
draft agreement provided for a permanent appointment commencing on 24 June 2016
and continuing until 31 June 2019 (i.e., a three
year term) unless terminated by
either party in accordance with cl 14 (see cl 2.1). The draft agreement also
provided for automatic
extension for another twelve months “starting the
1st July 2017” if none of the parties had “noticed” to
the
other party in writing that the relevant party is not willing to extend the
employment. The draft agreement provided for the
position to be a salaried
position and that no other remuneration benefit overtime or allowances other
than those to which the executive
may be entitled under the agreement would be
paid during the term of the agreement (cl 4.1).
- Clause
14.1 of the draft agreement provided that, subject to cll 2 and 14.3, the
executive’s employment had a fixed period of
three years starting with the
commencement date and terminating automatically on 31 June 2019. Clause 14.2
made provision for immediate
termination without notice by the Chief Executive
Officer of Rema Tip Top AG in certain events (including commission of any act of
serious misconduct “which includes a material breach of the policies of
the Rema Tip Top Asia Pacific Group”). The draft
agreement contained an
entire agreement clause (cl 17) and a written variation clause (cl 16). Its
governing law was stated to be
“the laws of the State of New South Wales
and the Commonwealth of Australia”.
- The
remuneration package did not specify a salary amount or performance bonus but
made provision for both to be inserted. It included
as additional benefits,
among other benefits, “[a]ccess to company car” and “use of
corporate credit card”.
- The
draft agreement contains no provisions which purport to confer on
Mr Grüterich a private travel allowance (or “budget”)
of
any kind. (Rema Tip Top submits that it is inconceivable that, having the
opportunity to put this alleged entitlement into a written
contract, Mr
Grüterich would have failed to do so, had this been an agreed term having
regard to its alleged value ($50,000
per annum).)
- It
is not apparent, from the documentary evidence, that Mr Wach had requested Mr
Grüterich to arrange for the drafting of his
own employment contract. In
any event, as will be seen shortly, this draft was not accepted by Rema Tip
Top.
- Mr
Kopp’s recollection is that he worked on Mr Grüterich’s
employment contract in late January and early February
2017. Mr Kopp’s
evidence is that he noticed that the draft contract was different to the
“standard form” contract
typically used for senior management
employees, and that he did not look through it in detail because it was not a
standard form
contract. He says he mentioned this in a brief conversation with
Mr Wach after he received the draft contract and that he discussed
Mr
Grüterich’s employment contract with Mr Ubelacker.
- Mr
Kopp’s evidence is that Mr Ubelacker was the person ultimately responsible
for approving the legal framework and contractual
clauses of
Mr Grüterich’s employment contract, and that Mr Wach was
responsible for providing him with instructions about
the salary information and
entitlements to be inserted into the contract.
- Mr
Kopp says that Mr Ubelacker instructed him that the employment contract was to
be a “standard group contract, and no more”,
prepared in the most up
to date contract form. He says that he then prepared a revised version of the
contract in standard form.
Mr Kopp also deposes that he prepared a separate
agreement between Mr Grüterich and DBS for the purpose of terminating
“all
existing agreements between DBS and Mr Grüterich. Mr Kopp says
that he had a conversation with Mr Ubelacker regarding this agreement
(and this
was read as evidence of the conversation taking place but not for the truth of
its contents (at [35])). At [57] of the
affidavit, Mr Kopp also deposes that
“Mr Grüterich was paid a bonus of €30,000 in 2016”
(which I read as an
assertion).
- Mr
Kopp also made reference to the Rema Group Human Resources Guideline policy,
deposing that “[a]ll Managing Directors and
Chief Executive Officers of
Group companies have access to this policy (which I read as a statement of the
witness’ understanding
or belief) and that the policy had been distributed
to “all Managing Directors of the different entities in the Group since
the time it was introduced” (see at [80]-[81]). (The basis on which Mr
Kopp said that the Human Resources Guideline was distributed
was not explored
further in his evidence in chief.)
- On
20 January 2017, Mr Wach emailed Mr Kopp instructing him to send to
Mr Grüterich the draft contract “we had
prepared”.
22 January 2017 €50,000 Bonus
Letter
- Meanwhile,
Mr Grüterich claims that, on 16 January 2017, Mr Wach said to him (inter
alia):
I’ll pay you €30,000 for your 2016 performance, in addition to the
€30,000 you got from Mr [Heinz] Reiff already
for the Convatech
acquisition, and I give you €50,000 for 2017 performance.
- By
email sent to Mr Grüterich on 23 January 2017, copied to Mr Wach, with the
subject header “Contract matters”,
Mr Kopp
said:
I am sending you the draft information on the lump-sum payment in 2017.
There is an example in existence – GF Contract for the Australian
companies in the Group. As soon as this is available to me,
I will provide it to
you with the relevant information and have the draft sent to
you.
- Attached
to Mr Kopp’s email was an unsigned letter dated 22 January 2017 from DBS
to Mr Grüterich. It appears that Mr Kopp
prepared this letter at the
request of Mr Wach (certainly, as noted above, it was copied to Mr Wach). It is
also clear that Mr Grüterich
understood this was no more than a draft,
since in an email to Mr Wach sent on 23 January 2017 (see below) Mr
Grüterich expressly
refers to this letter as a ‘draft’.
- The
unsigned 22 January 2017 letter (on DBS letterhead) stated that in the year 2017
DBS would pay to Mr Grüterich a “special
bonus to the amount of
€50,000 gross”. It was said that this special payment was for the
achievement of the following
goals: Integration Convatech; Realization of the
plans of the Australian companies; Growth goals; and Transition (the
€50,000
Bonus Letter). (The reference to “Convatech” is
accepted to be a reference to ConvaTech, the company that operates a
conveyor
belt manufacturing business in Australia which was acquired by Rema Tip Top in
2016.) The letter stated:
We will write to you further in relation to the pay-out modalities.
Please note that this concerns a one-off payment from which no future legal
claim can be inferred.
- The
letter is consistent with Mr Grüterich’s account of the 16 January
2017 conversation with Mr Wach (and the wording
of the letter – in
particular the reference to “no future claim can be inferred”
– is consistent with the
language appearing in various of the earlier
contract documents to which I have referred above).
- Mr
Grüterich’s response, by email to Mr Wach at 11pm on 23 January 2017,
which, as I have said, makes clear that he understood
that this was a draft
document and related only to a bonus payment; not his overall employment
arrangements, was:
Thanks for the sending of the draft Side-Letter concerning Bonus Payment
2017.
From my point of view this should be prompt if it doesn’t come to a
percentage of royalties offer for the Asia Pacific Holding.
Further, goals and pay-out modalities are not or not clearly specified.
Thorsten Kopp refers to the Standard Manager’s Contract for Australia.
The duration of the drafting of the contract is no longer comprehensible for me,
with reference to the time that has already been
spent on it.
We are dealing here principally also with security aspects like, for example,
the fixed length of contract.
In this context I must once again refer to the visa regulations over here.
We had further discussed that we would calculate the Bonus year 2016 among
gentlemen. Please give your opinion on this.
I would also like to ask for a sympathetic suggestion of yours for the purpose
of Basic Remuneration adjustment. Since the Australia
start on 01/01/2016 I took
over within the year the positions of Financial Controller, CFO, CEO a
constantly growing scope of functions
and more responsibility.
I would also like to talk to you about the scope of functions of my position, in
particular of the non-Australian Asia-Pacific subsidiaries.
- There
is a competing translation of the above but the differences do not seem to be
material for present purposes. What is clear from
the above is that
Mr Grüterich clearly understood, at this stage, that no new employment
contract to reflect his new position
as Managing Director had yet been concluded
(a delay in drafting that he found incomprehensible); nor had the
“security aspects”
of his employment (i.e., the fixed term, if any)
been agreed.
Early February 2017 communications re Australian
employment contract
- What
next occurred was that, on 4 February 2017, Mr Wach emailed Mr Kopp, in
relation to Mr Grüterich, saying:
All good for contract in Australia. Will just have to calculate the amounts.
For 2016 there’s again a further special payment out of 30K Euros that we
will make out of D [Germany], please.
Then for 2017 we will make an award arrangement for 100,000 Australian dollars
for achievement – KPI plan achievement scaled
according to:
- Turnover/EBIT
- Transition/Merger
- Security for ongoing service contracts (accident rates etc.)
etc.
- Mr
Grüterich claims that, on 5 February 2017, Mr Wach said to him (inter
alia):
... We will pay you a fixed minimum bonus, so €30,000 for 2016, then
€50,000 for 2017, then maybe around €70,000
to €80,000, or
€100,000 to €150,000, until you get the EBIT Share agreement ...
.
- In
particular, Mr Grüterich’s evidence is that, on 5 February 2017, he
had a conversation with Mr Wach, after he had driven
him to the airport in
Newcastle, informing Mr Wach that the draft contract failed to include all of
Mr Grüterich’s current
entitlements, including a fixed term. He
says that Mr Wach assured him that he would receive those benefits,
including the fixed
term. That evidence is disputed by Rema Tip Top (though it
must be noted that there was no evidence from Mr Wach – see below).
In
particular, in cross-examination it was put to Mr Grüterich that this
conversation could not have happened as Mr Grüterich
deposes because Mr
Grüterich was not sent the draft Australian employment contract until 13
February 2017 (see below).
- I
deal with the credit issues raised in relation to this and other aspects of
Mr Grüterich’s evidence in due course. What
is, however, clear
is that there is no documentary evidence to suggest that as at 5 February 2017
Mr Grüterich was in possession
of a draft contract from Mr Kopp (or Mr Wach
for that matter) and any such proposition would be inconsistent with the email
communication
from Mr Kopp of 5 February 2017. Hence, Mr Grüterich’s
(quite detailed) affidavit account of this 5 February 2017 conversation
simply
cannot be an accurate recollection.
13 February 2017
emails
- The
email evidence suggests that draft contract documents were sent by email from Mr
Kopp to Mr Grüterich, copied to Mr Wach
and Mr Ubelacker, on 13 February
2017 at around 6am. Mr Kopp’s email stated “I am sending you as
attachments the Australian
contract as well as the agreement to terminate the
contract from dbs” and that “Thorsten Wach will talk you through
things
personally”. (On 13 February 2017, Mr Grüterich flew to
Singapore for the regional holding meeting. Whether he saw the
draft employment
contract when it was received by email early that morning is not clear. Rema Tip
Top points to an email communication
from Mr Grüterich that morning to a
real estate agent in Australia in relation to his Bathurst Street apartment as
demonstrating
that Mr Grüterich was using his emails that morning but
Mr Grüterich does not give evidence that he read this email before
he
arrived in Singapore.)
- Mr
Kopp’s evidence is that he had discussed the revised draft contract with
Mr Wach before sending it to Mr Grüterich;
that Mr Wach instructed Mr
Kopp to send the document to Mr Grüterich; and that Mr Wach did not tell
him that it should be changed.
- Mr
Kopp also prepared, at Mr Ubelacker’s request, a release agreement between
Mr Grüterich and DBS, the purpose of which
was evidently to terminate Mr
Grüterich’s agreements with that company. Mr Kopp explains that this
was standard practice
for executives who had concluded a secondment and taken up
a permanent position at a destination country. Mr Kopp says he discussed
the release agreement with Mr Wach before sending it to Mr Grüterich; and
that Mr Wach instructed Mr Kopp to send this document
to Mr Grüterich as
well.
- The
draft employment agreement sent to Mr Grüterich by email on
13 February 2017 was for Mr Grüterich’s position as
Managing
Director of Rema Tip Top; it specified a commencement date of 1 March 2017; it
did not have a completion date; and it specified
the remuneration as $268,479
gross per annum including superannuation.
14 February
2017
- The
reference in Mr Kopp’s email to Mr Wach talking “through things
personally” with Mr Grüterich is consistent
with the fact that, on 14
February 2017, Mr Grüterich attended a regional holding meeting at the
Raffles Hotel in Singapore.
The sequence of events on 14 February 2017 is not
wholly clear.
- Mr
Grüterich says that at the meeting on 14 February 2017 Mr Wach handed him
an employment contract in the same terms as “the
draft contract” of
23 January 2017 (as noted, there is no draft contract of 23 January 2017 in
evidence – the only 23
January communication is one that relates to the
draft lump sum bonus letter).
- Mr
Grüterich says that he “again” (i.e., this being after he says
he had already done so in the 5 February 2017 conversation
to which he deposed
but which I have concluded cannot have happened in these terms for the reasons
set out above) pointed out that
the draft contract failed to include all of his
current entitlements, including the fixed term to December 2019, and that Mr
Wach
assured Mr Grüterich that he would continue to receive those benefits
under the proposed contract.
- According
to Mr Grüterich, those benefits included: a fixed term until December 2019;
four business class flights per year up
to the value of $50,000, which could be
used to fly to any destination without specific prior approval; all medical
expenses paid
under a health insurance policy; education allowance; the use of
two motor vehicles; accommodation for the duration of employment;
and all
repatriation expenses (the alleged February 2017 Benefits). (Nowhere in the
previous contract documents is there reference
to four business class flights
per year – the only correspondence on this issue from Mr Wach being Mr
Wach’s comment
that the request for private travel allowance of the land
seemed “very high”. Nor is there anything in the contemporaneous
documents to support the assertion that Mr Grüterich’s
entitlement at that stage was to include the use of two motor vehicles.)
- Mr
Kopp’s account of the conversation he had over the telephone with
Mr Grüterich and Mr Wach on 14 February 2017 (Mr Kopp
not being at the
Singapore meeting) is different from Mr Grüterich’s account (at [202]
of Mr Grüterich’s first
affidavit). Mr Kopp denies that there
was any mention of a “business class travel budget”. He says he did
not ask Mr
Grüterich what he needed for his contract (and he says that it
was not his (Mr Kopp’s) role to grant benefits to executives
or to decide
what to include in a contract). Mr Kopp says he prepared contracts as
instructed by the relevant officer of the employing
company (in this instance,
Mr Wach and ultimately Mr Ubelacker). Mr Kopp deposes that he did not
assure Mr Grüterich that he
would receive ‘side letters’
conferring additional benefits not in his Employment Contract.
- Mr
Kopp’s evidence is that Mr Wach did not tell Mr Grüterich that he was
authorised to “continue using the benefits
that were given to you
previously” and that he did not tell Mr
Grüterich:
I told you, you have the private business class trips. Don’t bother me for
approval please, we discussed this multiple times
now.
- Mr
Kopp says that the only change to the revised draft contract discussed in this
conversation on 14 December 2017 was an increase
in the annual salary from
$260,000 to $280,000. He says that Mr Ubelacker approved this change. Mr Kopp
says he then sent a further
revised version of the contract to Mr Grüterich
on 14 February 2017, with the new salary amount added and copied Mr Wach to
that
email.
- There
is in evidence an email from Mr Kopp to Mr Grüterich, copied to
Mr Wach, on 14 February 2017 at around 9.46pm attaching
“the modified
contract”. The modification appears to be the specification of the
remuneration at $280,000 gross per annum
including superannuation. That is
consistent with Mr Kopp’s recollection of events.
- Mr
Grüterich then says that, on the same day (14 February 2017) at the Raffles
Hotel Bar, in front of Mr Reiff and other senior
Stahlgruber AG executives, Mr
Wach handed Mr Grüterich the employment contract and a release agreement
with DBS and asked him
to sign them. Mr Grüterich’s evidence is that,
without reviewing the documents, he signed the contract (the Employment
Contract) and the release agreement with DBS (DBS Release Agreement) on the
understanding that the alleged February 2017 Benefits
were terms of the
Employment Contract or would otherwise be extended to him by Rema Tip Top. Mr
Grüterich says that he trusted
Mr Wach subsequently to put in writing the
terms of the agreed verbal entitlements as discussed up to and including 14
February 2017.
- Mr
Grüterich says that, upon review of the Employment Contract later that
evening, he discovered that the alleged February 2017
Benefits were not
expressly provided for in the Employment Contract and that the agreed salary of
$280,000 was incorrectly stated
as $260,000. Mr Grüterich says he
immediately discussed this with Mr Wach.
- In
particular, Mr Grüterich says that when he reviewed his Employment Contract
he noted that the “Business Class Private
Travel Budget” had not
been “incorporated into the document”. He says that he understood
this had been agreed orally
and would later be put into writing. Mr
Grüterich says he was “unhappy” because the Employment Contract
did not
incorporate terms “I had repeatedly requested and had been orally
agreed to”; and that he considered it a “formality”
to have
his “benefits” put in writing, but that:
... I increasingly considered it to be an important one, given that by this time
there had been significant delays in documenting
my employment arrangements
properly.
- Mr
Grüterich’s evidence is that he then complained to Mr Wach (at the
Singapore holding meeting) and insisted that Mr Wach
“get the contract
variations” for him. He claims that Mr Wach agreed to do this.
- Rema
Tip Top points to a number of logical inconsistencies between the account given
by Mr Grüterich of the events on 14 February
2017 and the contemporaneous
documents.
- First,
that Mr Grüterich says that Mr Wach handed him documents in the same terms
as the 23 January 2017 document (when the only
23 January 2017 document, as
discussed above, was the draft side letter from DBS relating to a bonus (albeit
that reference was there
also made to a standard form general manager’s
contract)).
- Second,
that by the time of the meeting Mr Kopp had forwarded by email the draft
Australian contract. Mr Grüterich says that
if he received it he did not
see it because he was travelling at the time. It may well be the case that
Mr Grüterich did not
receive or open the email until after the fight
to Singapore; however, that does not explain a conversation on 14 February 2017
relating
to an earlier version of the document that does not then seem to have
existed.
- Third,
that it seems clear that the “modified” contract sent by Mr Kopp at
around 9.46am on 14 February 2017 was a modification
to the draft sent on 13
February 2017 and that the only modification was to the salary amount.
- Fourth,
that the document as signed by Mr Grüterich is in the form of that sent by
email that night (which specifies the salary
at $280,000). Rema Tip Top notes
that this is inconsistent with Mr Grüterich having first signed a contract
(at the bar) specifying
an amount of $260,000, which was then corrected by the
modified contract. The explanation for that seemingly inconsistent evidence
is
not apparent. It was suggested in closing submissions that this might have been
the product of some manipulation of the documents
(see T 432) but the logic
of such a course is not apparent to me. Ultimately, however, Mr Grüterich
accepts that he did sign
a contract in the terms of the “modified”
contract specifying a remuneration of $280,000 (and Rema Tip Top does not
dispute
this); this being the contract that Rema Tip Top says governs their
contractual arrangements.
- What
is also noteworthy, as Rema Tip Top points out, is that Mr Grüterich
expressed himself to be satisfied with the modified
document (T 267) even though
it made no reference to a fixed term or any reference to private travel benefits
or the use of two company
cars.
14 February 2017 Employment
Contract
- The
14 February 2017 Employment Contract includes a clause setting out the
executive’s obligations (cl 3); it provides that
the executive must obtain
the express approval of the Board for all transactions and measures which go
beyond the normal course of
business of the employer (see cl 3.4), including
investments to the extent that they exceed in a specific case the parameters set
by the shareholders’ meeting (investment plan). The contract requires the
employer to reimburse the executive for all reasonable
expenses properly
incurred by the executive in the performance of the executive’s duties
(see cl 9.1) with a substantiation
provision at cl
9.2:
9.1 Reimbursement
The Employer must reimburse the Executive for all reasonable expenses properly
incurred by the Executive in the performance of the
Executive’s
duties.
9.2 Substantiation
The Executive must
(a) provide receipts or other evidence of payment and the
purpose of each expense in a form reasonably required by the Employer
to support
each claim for reimbursement; and
(b) keep those records of expenses reasonably required by the
Employer to meet income tax, fringe benefits tax and other statutory
requirements.
- The
termination clause (cl 15) provides as follows:
15.1 Termination without notice
Subject to clause 15.2, the Executive’s employment may be terminated by
the Executive or by the Employer at any time by either
of them giving the other
six months written notice.
15.2 Termination by Employer without notice
The Employer may immediately terminate the employment of the Executive without
notice if the Executive:
(a) engages in serious misconduct, which has its ordinary
meaning at law and includes:
(i) theft, dishonesty and fraud;
(ii) misrepresentation of qualifications or
employment history; and
(iii) attending work under the influence of
drugs or alcohol;
(b) wilfully disobeys a lawful and reasonable direction;
(c) becomes bankrupt or compounds with any of the
Executive’s creditors or assigns the Executive’s estate for the
benefit
of any of the Executive’s creditors;
(d) is charged with any offence that, in the shareholders
meeting reasonable opinion, affects the Executive’s suitability
for the
Position or is likely to reflect adversely on the Employer;
(e) demonstrates gross neglect of duty or incompetence; or
(f) engages in conduct that causes, or may cause, imminent and
serious risk to:
(i) the health or safety of a person; or
(ii) the reputation, viability or
profitability of the Employer.
15.3 Employer’s election on termination
If either the Employer or the Executive gives notice of termination to the other
under this document, without limiting the Employer’s
rights, the Employer
may do all or any of the following:
(a) pay the Executive in lieu of notice, by reference to the
Executive’s Salary;
(b) terminate the Executive’s employment immediately or
at any time during the notice period and pay the Executive a lump
sum
representing the value of the Executive’s Salary for the remainder of the
notice period;
(c) direct the Executive not to attend the Executive’s
workplace and other places at any time during the notice period;
(d) direct the Executive not to perform all or some of the
Executive’s duties during the notice period;
(e) direct the Executive to perform duties other than the
duties that the Executive usually performs, provided that the Executive
has the
necessary skills to perform the duties;
(f) direct the Executive not to access the Employer’s
computer systems;
(g) direct the Executive not to have any contact with the
Employer’s customers, employees, agents and suppliers;
(h) direct the Executive to return all property belonging to
the Employer;
(i) direct the Executive to take the Executive’s accrued
leave.
15.4 Set off
If the Executive resigns without giving the Employer the notice required by this
clause, the Executive irrevocably authorises and
directs the Employer to
withhold from, or set off against, any Salary and other payments that are
payable to the Executive, the value
of the notice not given.
- Clause
16, headed ‘[c]onsequences of termination’,
provides:
16.1 Entitlements to annual leave and long service leave on
termination
If the Executive’s employment is terminated for any reason, the
Employer will pay the Executive’s:
(a) accrued and untaken annual leave; and
(b) any accrued and untaken long service leave, if the
Executive is entitled to payment of that
leave in accordance with
relevant
legislation,
(c) calculated at the last day of the Executive’s
employment.
16.2 Executive must report
On or before the Termination Date, the Executive must report to the Employer
promptly and fully with the information that it requires
relating to the
Executive’s responsibilities and the performance of the Executive’s
duties, including:
(a) reporting on the Executive’s progress in relation to
particular projects and matters on which the Executive has
been
working; and
(b) providing the names and contact details of persons and
entities with whom the Executive has been dealing in relation
to
the Employer’s business.
16.3 Return of property
On or before the Termination Date, the Executive must:
(a) deliver to the Employer all Confidential Information,
including contact records, in the Executive’s possession, care
or control
which are physically capable of delivery;
(b) permanently erase all records of Confidential Information
from the Executive’s electronic organiser and all other electronic
storage
devices owned by the Executive;
(c) if a car owned or leased by the Employer is being used by
the Executive, return the car, its keys and any accessories to the
Employer at a
place nominated by the Employer unless the car is then purchased or leased by
the Executive;
(d) deliver to the Employer all property belonging to the
Employer [#or the Group] [#or a Related Body Corporate], including business
cards, credit and charge cards, keys and access cards issued to the Executive;
and
(e) vacate any accommodation provided to the Executive by the
Employer.
16.4 Deleted material
The Employer is not liable for any loss of personal data stored in a personal
organiser or other electronic storage device which
occurs in any way during the
permanent erasure of Confidential Information.
16.5 Representations
After the Termination Date, the Executive must not represent
themselves as being currently employed by or connected with
the
Employer or a Related Body Corporate.
- Clause
20 (‘[f]airness of terms’) states:
The Executive acknowledges that:
(a) having regard to the Executive’s qualifications,
skills and experience, the remuneration, termination and all other provisions
of
this document are fair and reasonable in the circumstances; and
(b) the Executive has had the opportunity to seek independent
advice concerning this document prior to entering into this
document.
- In
the general provisions of the 14 February 2017 Employment Contract there is a
written amendment clause (cl 21.1) and an entire
agreement clause
(cl 21.2). The agreement is governed by New South Wales law and there is an
irrevocable submission to the exclusive
jurisdiction of New South Wales
(cl 21.4).
- As
I will address further in due course, it is accepted by Rema Tip Top that at all
times during his employment by Rema Tip Top Mr
Grüterich was granted the
personal use (at its cost) of a car; but Rema Tip Top maintains that this was a
discretionary benefit,
and not an entitlement granted by his Employment
Contract. Mr Grüterich, on the other hand, contends (and Rema Tip Top
disputes)
that he was entitled to the use of two company cars (one for himself
and one for his partner) and he says that, as a result of returning
one of these
two cars to Rema Tip Top in February 2017, he decided that he should receive a
car allowance (see below).
Termination of DBS contract
- At
or about the same time as he signed the 14 February 2017 Employment Contract, Mr
Grüterich signed a Termination Agreement
in relation to the work
relationship between Mr Grüterich and DBS, that taking effect on 28
February 2017. (This is consistent
with the evidence that Mr Ubelacker wanted
Mr Grüterich to “transition” to an Australian contract.)
The Termination
Agreement contained the following provision (cl
2):
The employer is obliged to continue paying the gross remuneration agreed to in
the employment contract until the end of the work
relationship. Claims that go
beyond this do not exist, in particular with reference to bonuses or similar
items. Agreement exists
that eventual still outstanding, remaining leave claims
were granted and taken before the ending of the work
relationship.
- Clause
4 (‘Settlement of all claims’) provided that:
With the fulfilment of the claims from this agreement all claims of the employee
with respect to the employer arising from the employment
relationship and its
conclusion are settled, in so far as this is legally permissible or these claims
only become known or arise
after the ending of the employment relationship.
Excepted from this are claims from an existing company pension.
- Clause
6 (‘Final provisions’) provided, relevantly,
that:
Alterations and additions of this agreement require for their validity notice in
writing. The form-requirement cannot be cancelled
or rescinded, either orally or
silently. ...
17 February 2017 – Car allowance
direction
- On
17 February 2017, Mr Grüterich sent an email to Mr Taylor attaching his
contract (the executed 14 February 2017 document)
and stating
that:
Ill [sic] get provided another side letter, with other benefits as per my Expat
agreement soon from Germany and will provide to you.
In the meantime please change my pay, with the next pay run and add 21k car
allowance per annum. [my emphasis]
- Rema
Tip Top maintains that there was no entitlement to any car allowance in the 14
February 2017 Employment Contract and that this
direction was unauthorised.
(Significantly, for the purposes of the serious misconduct claims, it is
abundantly clear from the evidence
that Mr Grüterich continued from
February 2017 to have access to (and use of) a second car (a Skoda), albeit from
time to time
(not all the time). Indeed, over the period in which he was
Managing Director, Mr Grüterich said he had had the use of up to
four
different company vehicles (and appears to have been garaging two at his
apartment in Sydney). Therefore, if the justification
for taking a car allowance
was that it was in lieu of a second car – even assuming an entitlement of
some kind to the use of
a second car – Mr Grüterich’s
explanation is not consistent with the contemporaneous documents to which I
refer
in more detail below.
18 February 2017 email
- On
18 February 2017, Mr Grüterich sent an email to Mr Kopp asking him by what
date he thought he would be sending “the
side letter regarding consent to
doctoral studies and bonus arrangements”. This is not insignificant in
that it suggests that
Mr Grüterich was aware that, as at that date, he had
no authorisation (or at least no written authorisation) for those
matters.
2017 Education Support letter
- On
8 March 2017, Mr Grüterich received a letter from Mr Wach, on the
letterhead of Rema Tip Top AG, in relation to the 2014 grant
of “financial
support regarding further education “Doctor of Business
Administration” by dbs - Delta Business Service
GmbH for the amount of
€10,000 gross per year for a period of three years” (clearly being a
reference to the 2014 DBS
education support letter) (2017 Education Support
Letter). The letter confirmed that “we will also grant you this support in
the context of your new area of responsibility (REMA TIP TOP Asia Pacific Pty
Ltd)”. The letter went on to state that:
The agreed sum of €30,000.00 gross is reduced by the payments already made
by dbs - Delta Business Service GmbH (€7,966.00
gross) to the company Acad
International Research AG to the amount of €22,034.00
gross.
- Relevantly,
it is clear from this letter that Mr Wach was treating part of the €30,000
gross as already having been paid; and
that, at least as at that date, the
payment for education support had been paid directly to the named educational
research institution,
not to Mr Grüterich personally for use at his
discretion.
Communications re bonus
- Mr
Grüterich claims that on 3 May 2017 he asked Mr Wach:
Thorsten, did you get my €30,000 bonus organised, and the €50,000
bonus agreement?
- This
seems to be a reference to the €30,000 2016 bonus that Mr Grüterich
says was agreed on 26 January 2017 and to the
€50,000 2017 bonus that
Mr Grüterich says was also agreed at that date.
- On
7 May 2017, Mr Grüterich sent Mr Kopp an email in which he
said:
...do you already know when the Bonus for 2016 is going to be transferred? I
still have not received the Bonus Agreement 2017.
- That
demonstrates that Mr Grüterich knew there at that stage at least no written
agreement for a 2017 bonus.
Payment of €30,000
bonus
- On
9 May 2017, Mr Grüterich was paid a bonus of €30,000 by DBS into
Mr Grüterich’s German bank account. The
process followed in this
regard was that: DBS had generated an invoice dated 19 April 2017 to Rema Tip
Top, that invoice referring
to “Auxiliary services relating to the support
for and implementation of the project ‘ConvaTech’” the invoice
was initially dated and signed by Mr Wach (who also wrote “OK”)
seemingly as confirmation that the bonus was to be paid;
DBS then made the
payment into Mr Grüterich’s bank account on 9 May 2017; and, Rema Tip
Top repaid the bonus amount to
DBS.
June 2017 –
“outstanding bonus agreement”
- Mr
Grüterich claims that he pressed Mr Wach again, on 26 June 2017, for
“the outstanding bonus agreement”. That presumably
can only have
related to what he says was the promised €50,000 2017 bonus (since, by
then, the €30,000 2016 bonus had
been paid).
Position as at
August 2017
- To
summarise, the position as at August 2017 (on Rema Tip Top’s case) is
that, from 1 March 2017, Mr Grüterich was employed
by it as its Managing
Director under the written contract dated 14 February 2017 (see [4] of the
further amended statement of claim)
for remuneration, inclusive of
superannuation, of $280,000 per annum (see [7] of the further amended statement
of claim); and his
employment was terminable on six months’ written notice
or by payment of six months’ base salary in lieu of notice (see
[9] of the
further amended statement of claim).
- Mr
Grüterich, on the other hand, alleges that he signed the 14 February 2017
documents (the Australian employment contract and
the release agreement with
DBS), at the request of Mr Wach, on the understanding that the February 2017
Benefits had been provided
for in the contract or “would otherwise be
extended to him by Rema Tip Top”.
- In
late August 2017, Mr Wach ceased to be the Chief Executive Officer of Rema Tip
Top AG (replaced by Mr Zimmer). Mr Zimmer also replaced
Mr Wach as a
director of Rema Tip Top. Mr Grüterich reported to Mr Zimmer from September
2017.
- In
that context, not surprisingly perhaps, Mr Grüterich seems to have sought
to inform Mr Zimmer of the history (or perhaps status)
of his contractual
arrangements and in that context, tellingly, he referred to the “current
points” of his discussions
with Mr Wach.
22 September 2017
email to Mr Zimmer
- On
22 September 2017, Mr Grüterich sent an email to Mr Zimmer attaching
“the history about my contract”. Mr Grüterich
attached various
documents and then stated:
The current points of discussion with T Wach:
- Bonus – Draft of the DBS but never with the RTT
AG/AP.
- Loss of social security benefits in Germany incl. Barmenia
overseas health insurances.
- New employment contract with 20 annual leave days.
- The €120,000.00 Euro gross = net, plus $100,000.00 AUD
gross for the Project Manager/Group Financial Controller Rolle [sic]
was
calculated 1 to 1 as $280,000.00 AUD gross for the MD position.
- I still have to take an after tax salary loss of approx..
€120,000.00 *35% htnnehmen muessen, since the total income is
taxed in
Australia.
- There was no adjustment intended for Director risk and the
new responsibilities.
- Other discussion points were:
- Fix Period Contract, with review 12 months
before the expiration of the contract.
- % EBIT share for RTT AG.
- It
is clear on the face of this email that Mr Grüterich well understood that
his contractual arrangements did not include the
matters that were there
referred to as the “current points of discussion” with Mr Wach,
including relevantly that there
was a draft bonus letter from DBS but no such
arrangement with Rema Tip Top AG or Rema Tip Top; and that the fixed term was
still
the subject of discussion (as was any bonus based on a percentage EBIT
share). Also apparent from this email is that Mr Grüterich
was maintaining
that his overall salary position was worse because the whole of his salary was
taxable in Australia but would not
be in Germany (the tax status of his salary
payments in Germany being the subject of some cross-examination but ultimately
left unclear).
12 December 2017 regional meeting
- On
12 December 2017, Mr Grüterich attended a further regional holding meeting
of the Rema Group in Singapore. Mr Zimmer attended,
as did Mr Reiff and Mr
Slattery.
- At
some point on 12 December 2017, Mr Grüterich and Mr Zimmer had a discussion
about possible adjustments to Mr Grüterich’s
remuneration. Their
respective accounts of what was said differ.
- Mr
Zimmer says that Mr Grüterich told him he had “received” a
€50,000 bonus in 2017. Mr Zimmer says that he
told Mr Grüterich that
he did not support a further bonus that was not linked to performance, but would
support an incentive
payment based on company EBIT. Mr Zimmer denies telling
Mr Grüterich that: he would receive a €50,000 bonus; he would
be
granted a bonus with a minimum amount or he would be paid a bonus of any kind in
early 2018. Mr Zimmer also gives evidence that
he told Mr Grüterich that,
whilst he supported the salary increase, it would need to be approved by
Mr Reiff and the supervisory
board.
- Mr
Grüterich’s version of the discussion was set out in an email sent to
Mr Zimmer (in English) the following day.
Good morning Udo,
thanks for your time last night
In order to process the below timely, If you could kindly confirm our
conversation and agreement of:
1. Base salary adjustment back dated to 1.1.2017 to 430k AUD gross
2. Annual Bonus share on Australian EBIT, 2% for up to 3.5m AUD and 4% of all
above 3.5m AUD, with a minimum of 50k Euro agreed.
Thank you very much and I’ll be at your disposal for any future
negotiation.
If need be, the above can be done in proper format at your time convenient.
I’m ok with this email and your email approval
in return.
...
- Mr
Grüterich says the email was a “summary of the agreed terms”
during their discussion on 12 December 2017.
- There
was no response to this email by Mr Zimmer. In cross-examination he said that
this did not reflect their agreement. He reiterated
his evidence that there was
no agreement to a €50,000 bonus and that he had told Mr Grüterich
that he needed the approval
of the Supervisory Board in Germany before he could
grant this.
- Mr
Grüterich also gives evidence that he had a discussion with Mr Reiff at the
bar of the Raffles Hotel during the evening of
12 December 2017.
Mr Grüterich claims (and Rema Tip Top disputes) that this discussion
brought about the variation of his Employment
Contract to include the Fixed Term
(i.e., a minimum term of employment to 31 December 2019).
- Mr
Grüterich’s account of the conversation with Mr Reiff (see [339] of
his first affidavit), relevantly, is that Mr Reiff
asked him what he wanted, to
which he (Mr Grüterich) said “I’d like the fixed term period as
agreed earlier in the
year” and Mr Reiff then said:
You have the 6 months’ notice right now. But let me tell you that my
handshake is better than a written confirmation. I’m
prepared to give you
a fixed two years handshake. But then your 6 months ceases. Do you want
this?
- Mr
Grüterich says that he then said “I agree, OK” and that the
pair then shook hands; in the presence of Mr Zimmer
and Mr Labbé.
- Mr
Zimmer recalls joining Mr Reiff and others in the bar area of the Raffles Hotel.
He does not recall hearing anything specific that
Mr Grüterich and
Mr Reiff said to one another, but describes the occasion as social and
informal.
- Mr
Labbé says that he was not part of the conversation and that he only
heard part of it. He says that other conversations
were taking place at the same
time in the bar area of the hotel. Mr Labbé does, however, recall that
the pair shook hands.
He says that he heard Mr Grüterich say that he wanted
a contract of two to three years but that he only heard Mr Reiff say in
response:
Okay. Let’s discuss how a new contract should look. We can work on a draft
and consider your request.
- Mr
Grüterich claims that it was agreed at this 12 December 2017 meeting: that
the alleged February 2017 Benefits continued; that
Mr Zimmer would action the
variations to the contract; and that the following would subsequently be
confirmed in writing: that Mr
Grüterich would have a fixed term of
employment of two to three years; that Mr Grüterich would receive a salary
increase
from $280,000 to its former level of $430,000 (backdated to
1 January 2017 – i.e., back pay of $147,000), and a bonus calculated
on the EBIT performance of Rema Tip Top of €50,000 for 2017 (net of tax);
and that he would be entitled to future annual bonuses
of at least €50,000
(net of tax) based on the EBIT performance of Rema Tip Top Australia.
- Rema
Tip Top disputes that Mr Grüterich’s calculation of his salary as
equal to $430,000 was correct (saying it miscalculates
the effect of tax) but
does not dispute that it was agreed that there be a back pay adjustment of
$147,000. The real issue in contention
is as to a payment of the amount of
$103,000 paid at the same time as the agreed back pay
adjustment.
12 December 2017 “Double Salary”
direction
- On
12 December 2017, Mr Grüterich sent an email (from Singapore) to
Ms Fairclough (the National Payroll Manager of Rema Tip Top),
directing
Ms Fairclough to:
Please pay me double my normal salary for the next three pay
runs.
- This
is referred to in submissions as the “Double Salary” direction. Ms
Fairclough responded by email to Mr Grüterich:
I sure can but do I need to get this approved by anyone else, sorry to question
you but Im [sic] just covering myself
(an understandable request
as Ms Fairclough was Mr Grüterich’s subordinate).
- Mr
Grüterich sent an email to Ms Fairclough in response,
saying:
Haha no you don’t need to.
I’ve have [sic] a letter from our global CEO, but it’s in
German.
Can you show me our executive payroll, please.
- Mr
Grüterich then sent a separate email to Ms Fairclough on 12 December 2017,
to which he attached the 2017 Education Support
Letter (in German),
stating:
For you to cover yourself.
Put the attached letter to your files.
- The
English translation of the 2017 Education Support Letter (referred to earlier)
is as follows:
In September 2014, you were granted financial support regarding further
education “Doctor of Business Administration”
by dbs - Delta
Business Service GmbH for the amount of €10,000 00 gross per year for a
period of 3 years.
We hereby confirm that we will also grant you this support in the context of
your new area of responsibility (REMA TIP TOP Asia Pacific
Pty Ltd).
The agreed sum of €30,000 00 gross altogether is reduced by the payments
already made by dbs - Delta Business Service GmbH
(€ 7,966 00 gross) to
the company Acad International Research AG to the amount of €22,034.00
gross.
- (I
note that there were two translations of the 2017 Education Support Letter in
the Court Book with minor differences in the English
translation, though nothing
turns on this.)
- The
reference in the 2017 Education Support Letter to a grant in September 2014
obviously relates to the letter dated 8 September
2014 received by
Mr Grüterich from DBS. The English translation of the relevant part of
that letter as noted earlier is as follows:
Further, we would like to financially support you in your further education
(Doctor of Business Administration) and pledge to you
here an amount of
€10,000 00 per year for the period of three years
- There
is nothing in the 2017 Education Support Letter to suggest that the education
support was to be provided by way of a double
salary payment (and Rema Tip Top
says that even if Mr Grüterich thought it was an amount that could be
applied at his discretion
– i.e., not linked to educational assistance
– it is not clear why he would have structured it as three double salary
payments rather than as a lump sum).
- For
completeness, I note that Ms Fairclough, by email on 12 January 2018, sought
confirmation from Mr Grüterich that the double
pay was to be on top of the
increased base salary for the next three months and asked if the car allowance
was to continue on top
of the increase. Mr Grüterich confirmed that it
was.
Late December 2017 query by Mr Grüterich as to
confirmation of his “private topic”
- Mr
Grüterich went on leave to Tahiti on 21 December 2017. On 23 December 2017,
Mr Grüterich sent an email to Mr Zimmer (in
German), the English
translation of the relevant parts of which is:
Hello Mr Zimmer,
Was my private topic confirmed or how is process planned?
- The
“private topic” presumably was that about which Mr Zimmer had
commented on 13 December 2017 i.e., the base salary
adjustment and minimum
€50,000 bonus. This suggests that Mr Grüterich well understood that
(as Mr Zimmer says he had told
him on 12 December 2017) approval was needed from
Germany for the proposals that had been discussed on 12 December 2017.
- Mr
Zimmer replied on 24 December 2017 (in German), the English translation of which
is:
Hello Mr Grüterich,
I did not have the opportunity to speak finally to Mr. Reiff and on the phone is
just one of those things. However, it is clear that
the changes require an AR
approval - I apologies [sic] for the inconvenience. We will do it in the second
week of January.
...
Salary Progress Document
- Mr
Zimmer then prepared an excel spreadsheet (in German) in which he set out his
workings in relation to Mr Grüterich’s
remuneration changes (which is
referred to in submissions as the Salary Progress Document). (Mr Zimmer explains
this document at
[80]-[85] of his first affidavit.)
- Mr
Zimmer sent Mr Grüterich an email attaching the Salary Progress Document on
9 January 2018 at 5:37 pm. The message simply
said “Will contact you
shortly about this”. The excel spreadsheet (Spreadsheet) was entitled
“Gehaltsentwicklung
Christian Mr Grüterich”. It set out details
of Mr Grüterich’s remuneration, including the calculation of the
back pay, Mr Grüterich’s future salary, reference to payment of
a €50,000 bonus for 2017; and a formula for the
calculation of future
bonuses.
- Mr
Grüterich emailed, in response to Mr Zimmer’s calculation of salary
adjustment, that it represented what was agreed.
(The interpretation of parts of
the Salary Progress Document is an issue in the proceedings, specifically the
reference in that document
to a “bonus” of €50,000.)
- Mr
Grüterich says that the same day, i.e., 9 January 2018, Mr Zimmer called Mr
Grüterich and instructed him to “book”
the back pay and the
€50,000 bonus. (Pausing here – there is no documentary evidence or
an instruction to “book”
the bonus.) Mr Grüterich says that he
followed that direction and directed the payroll department of Rema Tip Top to
process
the payments.
- On
9 January 2018, at 8.42 pm, Mr Grüterich sent an email to Ms Fairclough
(copied to Mr Davison) in which he said:
This is strictly confidential between you, Lauren and I only. The email below
from Udo and the attachment suffices as proof.
Please pay an extraordinary amount of 147310.59 + 103210.88 = 250521.47 AUD into
my bank account at your earliest convenience and
confirm transfer.
Moreover please adjust my annual salary from 280000 to 427310.59 from
1.1.2018.
...
- The
amount of $103,210.88 is referred to by Rema Tip Top as the “Bonus
Payment”. It is not in dispute that the amount
of $147,310.59 represents
the difference between Mr Grüterich’s salary (as per the 14 February
2017 signed Employment
Contract) of $280,000 and the new salary figure proposed
by Mr Zimmer (in his excel spreadsheet) of $427,310.59. What is in dispute
is the additional “Bonus Payment” of $103,210.88. Mr
Grüterich’s position is that this reflects the line item
on the excel
spreadsheet “Bonus to compensate income before new appointment”
(€50,000).
- Mr
Zimmer gave evidence as to what his understanding of that document was. His
position is that it proposed that Mr Grüterich’s
salary be increased
from $280,000 per annum to $427,310.59 and that this increase take effect from 1
January 2017 (so that Mr Grüterich
would receive back pay calculated from
that date).
- Also,
on 9 January 2018, Mr Grüterich forwarded Mr Zimmer’s 9 January 2018
email, and the Salary Progress Document, to Mr van der Burgt (Rema Tip
Top’s People & Culture Manager - Asia
Pacific); asking Mr van der
Burgt to amend the Employment Contract:
...
Please amend to base salary 427,310.59 annual base salary from 1.1.2017
backdated.
Plus extra bonus payment of 50k euro net for 2017.
More over [sic] an extraordinary EBIT share from 1.1.2018 of 2% up until 3.5m
AUD EBIT and 4% from 3.5m AUD upwards.
...
- Mr
van der Burgt then prepared an agreement to vary the Employment Contract which
he emailed to Mr Grüterich on 11 January 2018
(Contract Variation).
- Mr
Grüterich was paid the amount of $250,521.47 on 12 January 2018.
- On
15 January 2018, Mr Zimmer emailed Mr Grüterich (in German) and said to
him.
I am happy to inform you that the discussed salary adjustment can be
implemented.
Please forward to me after the salary adjustment (retrospective for 2017) the
last salary statement from December 2017 and at the
end of January 2018 the
statement from January 2018.
- (Rema
Tip Top notes that there is no reference to payment of a €50,000 bonus in
this email.)
- On
15 January 2018, at 9.53 pm, Mr Grüterich sent an email to Mr Zimmer, in
German, to which he attached a payslip for 1 December
to 31 December 2017 (pay
date: 6 December 2017) and said that “the differential amounts are lawful
fringe benefits in Australia”.
- On
15 January 2018 at 9.59 pm, Mr Grüterich replied to Mr Zimmer’s
email, in German, again noting that the “differences
are lawful fringe
benefits”. Attached to that email was a payslip for the period 11 January
2018 (pay date: 12 January 2018).
It showed an amount of $250,521.47 next to the
words “ADD EARNINGS”. In his email Mr Grüterich said to Mr
Zimmer
(among other things):
In order to include this for December 2017, I already forwarded your email with
the calculation to our pay and HR Department.
I hope that this is according to your wishes.
The differences are lawful fringe benefits.
I would have preferred to get this amount paid net in Germany, however,
I’m already very happy that you were able to get this
pushed through for
me.
Thank you very much.
The remaining amount to get to the 181 Euro net, I will pay at the beginning of
February and I will also forward the statement to
you.
I have also already requested from the HR Manager to prepare a contract
adjustment for you to review and sign.
Will forward to you separately.
- Mr
Zimmer’s evidence is that this additional bonus payment was not part of
the approved changes to Mr Grüterich’s
remuneration.
- On
15 January 2018, Mr Grüterich sent Mr Zimmer the Contract Variation which
he asked Mr Zimmer to “sign and return”,
saying that he had
“already ordered this so that the auditors don’t play up”.
(The document was never signed.)
Termination of the employment
contract
- On
16 March 2018, Rema Tip Top issued a notice terminating Mr
Grüterich’s employment with immediate effect (the Termination
Notice). It paid to him, among other amounts, $213,655 (as the equivalent of six
months’ salary) (the Notice Payment). The
chronology of events,
relevantly, is as follows.
- On
13 March 2018, Mr Labbé emailed Mr Philpotts and Mr Slattery, referring
to an earlier discussion and confirming that he
would be coming to Newcastle (by
then Rema Tip Top Australia’s head office) on 14 March 2018 late evening
and would be in the
office on 15 March 2018. The email (Exhibit 5) stated that a
colleague from Stahlgruber AG OWG, “our internal audit and financial
division, Mr Mike Tucesku”, would arrive on the Thursday afternoon (15
March) and would “support us on the financial
analyses of our projects and
costing procedures”.
- Mr
Labbé accepted in cross-examination that he had flown out from Germany on
14 March 2018 specifically for the purpose of
terminating Mr
Grüterich’s employment (and in cross-examination he also accepted
that he had received this instruction
from Mr Reiff and that nothing that Mr
Grüterich could have then said would have changed the position as to the
termination
of his employment contract – see T 140-141). While the auditor
from Germany (Mr Tucesku) had flown out to Australia around
that time, Mr
Labbé says he did not travel with him (see T 147.46.
- Mr
Slattery forwarded Mr Labbé’s email to Mr Grüterich on 14
March 2018. Mr Slattery’s recollection in the
witness box was that Mr
Labbé and the auditor were coming to Newcastle in relation to the company
losses (T 213).
- On
15 March 2018, Mr Grüterich met with Mr Slattery. Mr Slattery informed Mr
Grüterich that his employment was to be terminated.
Mr Labbé then
met with Mr Grüterich in Mr Slattery’s presence and informed Mr
Grüterich that the reason for
the termination was that the Board had lost
confidence in him.
- Mr
Slattery agreed that he had had a discussion with Mr Labbé on 15 March
2018 about there being a mutual separation agreement.
Mr Grüterich says
that Mr Slattery then requested that Mr Grüterich send a list of his
entitlements to him and Mr Labbé.
- On
the afternoon of 15 March 2018, Mr Grüterich sent a series of emails to
Mr Labbé attaching various documents (commencing
with an email sent
at 3.14pm and concluding with an email to Mr Labbé at 4.12pm). Mr
Grüterich then emailed an excel
spreadsheet to Mr Slattery at 5.53pm on 15
March 2018, stating that:
As discussed I have prepared a list of entitlements,
that I believe are legitimate based on supporting documents I received from
superiors, directors and Ex-directors. All of them are
available.
- The
excel spreadsheet listing his “entitlements” prepared on 15 March
2018 (Exhibit 7) contains the following line items:
G notice period 6 months $225,000.00
...
K Bonus 2017 50k Euro net Remainder $113,825.00
- It
also contained an item relating to a doctoral allowance (see Item J –
‘Doctorate agreement’ – 22k Euro
net – Remainder –
$51,464.60).
- The
spreadsheet was revised by Mr Grüterich on 16 March 2018 (Exhibit T). (He
contends that this was in order more accurately
to reflect the fixed term agreed
to by Mr Reiff on 12 December 2017.) Mr Grüterich sent it to
Mr Slattery and Mr Labbé
(16 March 2018 Spreadsheet). The
“Bonus 2017” entitlement, the notice period and the claim for a
doctoral allowance remained
in this updated version.
- Mr
Slattery said that he did not remember discussing the entry in the 16 March
2018 Spreadsheet for 21 months’ rent and he did
not remember
Mr Grüterich saying that that reflected the remaining period of the
“two year handshake” with Mr Reiff
(T 219). (Mr Slattery denied that
he had asked Mr Grüterich to prepare the second version of the
spreadsheet (though he accepted
he had asked him to prepare the first
version).)
- Mr
Grüterich gave evidence in cross-examination that he prepared the
spreadsheet at a time when he was “much in shock about
the news from Rema
Tip Top and, and under a lot of emotional pain” and that he was mistaken
about his entitlement to certain
of the items that were included in the
spreadsheet (and about which he was cross-examined) as those items had already
been paid (namely,
the doctoral allowance and 2017 bonus) (T 411). In
cross-examination, Mr Grüterich also gave evidence that the spreadsheet was
a “rough calculation estimate” prepared over the space of about ten
minutes; that he had prepared it quickly because
Mr Slattery wanted to go out to
dinner and (somewhat tellingly perhaps) that it was a “negotiation basis
for ... mutual separation”
(T 410).
- For
Mr Grüterich it is said that the 16 March 2018 Spreadsheet is consistent
with Mr Grüterich’s evidence regarding
his entitlements (although,
Mr Grüterich conceded that it contained an error as to his 2017 bonus
and doctoral allowance –
which items on Mr Grüterich’s present
case had by then already been paid). It is further submitted for Mr
Grüterich
that it is significant that the 16 March 2018 Spreadsheet was
prepared prior to the allegations of misconduct by Rema Tip Top; and
that it
should be found that it “reflected reality or at the very least, Mr
Grüterich’s honest belief”.
Events after
termination notice
- Mr
Grüterich maintains that the issue of the termination notice amounted to a
repudiation of his Employment Contract. He notes
that “no specific reasons
were provided” by Rema Tip Top for the (purported) termination. It is said
that an initial
assertion by Rema Tip Top that it was a result of poor financial
results reported by the Australian group of entities “was
exposed as
contrived, and subsequently disavowed”; and that, at best, Rema Tip Top
was only able to say that the Board had
lost “trust” in Mr
Grüterich to lead the Asia-Pacific organisation. (Mr Grüterich also
complains that he was
only paid out a portion of his entitlements, in the sum of
$291,209.33, shortly after 16 March 2018.)
- In
evidence was a copy of a letter of advice dated 16 March 2018 that Rema Tip Top
had obtained from solicitors (O’Hearn Lawyers)
advising as to whether Mr
Grüterich had available to him any causes of action as a consequence of the
termination of his employment.
That letter noted the author’s instructions
that:
... the performance of Mr Grüterich has overall been reasonable and there
is not a specific ground which of itself could be
put as a reason for the
termination of his employment. I understand that there have been an overall loss
of trust by the company
in the performance by Mr Grüterich of his
duties.
- On
6 April 2018, Mr Grüterich’s former solicitors, Schwezier Kobras,
wrote a letter of demand to Rema Tip Top, seeking
payment of the unpaid portion
of his entitlements.
- On
23 April 2018, Mr Grüterich’s former solicitors sent a letter to the
solicitors for Rema Tip Top, accepting the repudiation
of the Employment
Contract, thereby bringing the Employment Contract to an end. That letter
asserted Mr Grüterich’s total
entitlement (in addition to the
amount already received and assuming that Mr Grüterich retained possession
of the apartment
and the company car until 30 April 2018) in a total amount of
$601,863.21 gross plus an amount of $460,041.77. That calculation claimed
$601,863.21 being long service leave to 31 December 2019 of $50,457.51 and base
salary to 31 December 2019 of $551,405.51; as well
as an amount totalling
$460,041.77 (which comprised an amount for private travel budget of $75,000;
bonus at an agreed minimum of
€50,000 for each of 2018 and 2019; and
amounts referable to his accommodation and use of the company car to 31 December
2019
as well as repatriation costs of $25,000).
These
proceedings
- These
proceedings were commenced by summons on 13 April 2018. An ex parte
application was made by Rema Tip Top before the duty judge, Rema Tip Top seeking
(and obtaining) a freezing order in the sum of $500,000.
(Mr Grüterich
notes that the freezing order was obtained on the basis of evidence alleging
that Rema Tip Top had previously
been unaware of certain payments made to Mr
Grüterich, including an amount of $103,210.88 paid to Mr Grüterich in
January
2018. He maintains that this was “misleading at best” and
that Rema Tip Top failed to explain this “lapse”
during the
subsequent contested application for a variation of the freezing order
(referring to the decision of Rema Tip Top Asia Pacific Pty Ltd v Gruterich
[2018] NSWSC 591 (the Freezing Order Variation Judgment) at [76]). (Rema Tip
Top disputes that it has engaged in any misleading conduct.)
- On
4 May 2018, Robb J varied the amount of the Freezing Order to $250,000. Robb J
did not accept (at that interlocutory stage) that
Mr Grüterich had acted
dishonestly (see the Freezing Order Variation Judgment at [101]-[106])
but maintained the freezing order on the basis of: Mr Grüterich’s
status as a foreign national without
permanent residency in Australia and the
possibility, based on the limited evidence before the court, that a subset of
the payments
may not have been objectively authorised (see the Freezing Order
Variation Judgment at [106]-[110], [116]).
Issues
- The
primary issue that arises in the present case is as to the terms of
Mr Grüterich’s employment contract with Rema Tip
Top (noting
that any contractual arrangement with DBS was terminated with effect from
28 February 2017 and, in any event, no claim
is made by or against DBS,
which is not a party to these proceedings).
- Rema
Tip Top relies on the express terms of the 14 February 2017 Employment Contract
and implied terms of honesty good faith and fidelity,
as well as relying on Mr
Grüterich’s statutory obligations as a director and employee; and his
fiduciary obligations as
a director.
- Relevant
to the validity of Rema Tip Top’s termination of Mr Grüterich’s
employment on 16 March 2018 and, correspondingly
to Mr Grüterich’s
cross-claim for damages for wrongful repudiation, is the question whether his
Employment Contract was
orally varied to include a fixed term of employment (as
he contends) or whether his employment was terminable on notice without cause
(as Rema Tip Top contends).
- That
raises also the claims made by Mr Grüterich as to other oral variations
arising out of the alleged representations in February
2017 as to other
benefits. Mr Grüterich, in the alternative, claims relief under the
Australian Consumer Law for misleading
or deceptive conduct as a result of
representations allegedly made by Rema Tip Top, on which he says he relied when
entering into
the Employment Contract.
- Apart
from the question of the fixed term, there arise for determination the issues as
to Mr Grüterich’s entitlements under
his contractual arrangements as
to matters such as his use of one or more company cars and whether even if not
provided for under
his Employment Contract, such expenditure was authorised as a
discretionary benefit or otherwise.
- Mr
Grüterich disputes each of Rema Tip Top’s claims as to unauthorised
appropriation of funds. He maintains that the benefits
paid to him were proper
and were authorised by the appropriate officers of Rema Tip Top (who in some
cases he says were officers
and/or directors of its parent companies) but, in
the alternative, he denies that he knew that, by taking these benefits, he was
doing something wrong. It is submitted that, in many cases, the benefits formed
part of a “long-standing course of conduct”
by Rema Tip Top and its
related companies.
- That
said, for “commercial reasons, and without admissions”, Mr
Grüterich does not dispute that: 15 days of annual
leave were taken
(leading to a concomitant overpayment by Rema Tip Top in the amount of
$24,751.39); and he concedes “various
minutiae” of the credit card
claim, in the aggregate amount of $1,547.52.
- I
deal with each of the categories of funds said wrongly to have been received by
Mr Grüterich in turn in due course.
- Rema
Tip Top makes allegations of wilful and dishonest misappropriation of company
funds in relation to three particular categories
of payments: the car allowance,
the bonus payment (of $103,000) and the double salary payments (see [47A],
[54A], [67A]) and that
those payments were impressed with a presumed or
resulting trust in favour of Rema Tip Top on their receipt by
Mr Grüterich.
The allegations of dishonesty there made are necessary
elements to support its restitution and trust claims. However, Rema Tip Top
makes clear that it does not plead dishonesty in every instance and it does not
accept that dishonesty is a necessary element to
support its claim for breach of
contract, breach of fiduciary duty or breach of s 183 of the
Corporations Act (see T 510). It is expressly pleaded at [67B] that
if the bonus payment was made under a mistake, Rema Tip Top is entitled to
restitution
of that amount.
- There
then arises the question as to whether, to the extent that any of the payments
or benefits made to Mr Grüterich on his
direction were (as Rema Tip Top
contends) unauthorised, this amounts to serious misconduct entitling Rema Tip
Top to terminate his
employment summarily and, if so, what follows from that in
circumstances where Rema Tip Top paid Mr Grüterich a lump sum payment
on
termination. Further, depending on any finding of misconduct, there is Mr
Grüterich’s claim to long service leave.
- As
to the restitutionary claim in relation to the Notice Payment, Rema Tip Top
contends: that when it made the Notice Payment it was
unaware of the alleged
misconduct by Mr Grüterich while he was its Managing Director that Mr
Grüterich had caused himself
to be paid the car allowance, double salary
and bonus payment (as defined in the pleadings); had used Rema Tip Top’s
money
to pay the deposit on the Poliform furniture (to which I will refer to in
more detail below); had incurred private travel expenses
at Rema Tip Top’s
cost in the sum of $138,063.54; and had made private and unauthorised purchases
with the HSBC Credit Card;
that the misconduct was serious and would have
justified Mr Grüterich’s dismissal without notice; and that, had it
known
of the misconduct by 16 March 2018, it would not have made the Notice
Payment. Rema Tip Top seeks the recovery of the Notice Payment
by way of a claim
in restitution, or alternatively (on its misleading or deceptive conduct claim)
as damages for breach of s 18 of Schedule 2 of the Australian Consumer Law.
- In
closing submissions it was said that the only prospective aspects of
Mr Grüterich’s cross-claim for loss and damage
that were pressed
were the salary claim and the long service leave (T 489). Mr Grüterich
did not press the loss particularised
in his cross-claim at [98(b)] (for
prospective long service leave from the termination date up to 31 December
2019); [98(c)] (the
car entitlement claim to 31 December 2019); [98(d)] (the net
car allowance up to 31 December 2019); [98(e)] (the private business
class
travel budget up to 31 December 2019); [98(f)] (the bonus up to 31 December
2019); and [98(g)] (the net accommodation benefits
up to 31 December 2019). The
claim at [98(h)] was pressed – the underpayment said to be a
miscalculation of grossing up of
amounts referable to the relevant tax rates
(see T 489.50).
Evidence
- Before
turning to the respective issues, it is convenient here to address issues of
credit and the like arising from the evidence
adduced by the respective parties
in support of the claims made by that party and resisting the opposing
party’s claims.
- Mr
Grüterich argues that it is of critical importance that Rema Tip Top did
not call any of the “key” witnesses in
this case (including Messrs
Reiff, Wach, Ubelacker, Malsem – who Mr Grüterich ultimately
subpoenaed to give evidence in
his own case – and Mr Flohr,
notwithstanding the serious allegations here made); and, in this regard, Mr
Grüterich submits
that adverse inferences should be drawn against Rema Tip
Top that their evidence would not have assisted its case.
- Rema
Tip Top called evidence from the following key players: Mr Zimmer, Mr Kopp,
Mr Slattery and Mr Labbé (each of whom was
cross-examined) and from what
might be referred to (with no disrespect intended) as lesser players in the
scheme of things: Ms Fairclough,
Ms Thompson, Mr Davison and Mr Cross (none
of whom was cross-examined).
- Mr
Grüterich gave evidence (and was cross-examined at some length on his
affidavits). He also adduced evidence during the course
of the hearing, as
adverted to above, from Mr Malsem (who was not then cross-examined by Rema Tip
Top).
- As
to the principal witnesses who were called and cross-examined
(Mr Grüterich on the one hand and Messrs Kopp, Slattery, Zimmer
and
Labbé on the other) submissions were made as to their credit or
reliability by the respective parties. I deal with each
in
turn.
Mr Grüterich
- As
a general observation, Rema Tip Top notes that Mr Grüterich’s
principal affidavit (affirmed 25 July 2018) contains his
account of a number of
conversations Mr Grüterich claims to have had with other people, especially
in relation to his alleged
employment entitlements; and that the majority of the
conversations occurred long before he affirmed his affidavit (in particular,
reference being made to the key conversations between Mr Grüterich and
Mr Wach relating to the negotiation of the Employment
Contract that are
said to have occurred from about August 2016).
- Rema
Tip Top points to the well-known recognition that, as a matter of ordinary human
experience, the reliability of memory fades
over time and is affected
(consciously or otherwise) where a person stands to benefit from acceptance of a
particular version of
events (see Watson v Foxman (1995) 49 NSWLR 315).
Rema Tip Top refers in particular to the discussion of this topic by Davies J in
Coote v Kelly; Northam v Kelly [2016] NSWSC 1447 (at [100]-[102]);
Evans v Braddock [2015] NSWSC 249 (at [70]-[77]); and to Gestmin SGPS
SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) per Leggatt J (at
[15]-[21]; [22]).
- Although
Mr Grüterich has deposed that his “memory of the precise words spoken
in many of those conversations is still
clear” and that even “where
some of the conversations took place some time ago, I still remember those
conversations
and the effect of what was said in them”, Rema Tip Top notes
he did not make or keep any diary note or contemporaneous written
record of the
relevant conversations (other than to the extent that some conversations were
followed up with an email to the other
person). More pertinently,
Mr Grüterich’s recollection of events was in a number of
instances inconsistent with contemporaneous
documents (for example, his
recollection of a conversation with Mr Wach on 5 February 2017 in relation to
his contractual entitlements).
Therefore, not surprisingly, I place greater
weight on the contemporaneous documents than on his (or others’)
recollection
of events some years after they occurred.
- Rema
Tip Top submits that significant aspects of Mr Grüterich’s oral
testimony were unsatisfactory and that these reflected
adversely upon his
credit. In this regard, Rema Tip Top points to Mr Grüterich’s
evidence on the following topics: the
5 February 2017 conversation Mr
Grüterich says he had with Mr Wach about his draft contract (since that
contract was not sent
until 13 February 2017) and similarly, the later
conversation deposed to at [201] of Mr Grüterich’s first affidavit
insofar
as it refers to a contract having been supplied to Mr Grüterich on
23 January 2017; Mr Grüterich’s claim that he
told Mr Wach (and
others) he suffered a 30-40% reduction in his net salary by signing the
Employment Contract; Mr Grüterich’s
claim to have been entitled to
the use of two cars and to have handed back a second company car in early 2017;
Mr Grüterich’s
explanation as to the Wolgan Valley resort stay and
the “potential client” excuses used to justify personal use of the
company credit card in various instances.
- Rema
Tip Top further contends that the following evidence of Mr Grüterich was
implausible: Mr Grüterich’s claim during
cross-examination to have
kept a record of what he was spending against his “private travel
budget” in his mind; Mr Grüterich’s
evidence that he
“must have missed” the fact that the draft contract which Mr Taylor
had prepared for him and which he
reviewed and sent to Mr Wach and Mr Kopp on 16
December 2016 made no reference to an entitlement to two company cars (noting
that
Mr Grüterich agreed it was of the utmost importance to him to ensure
that its terms reflected what he wanted); Mr Grüterich’s
evidence
that the compilation of the first version of the spreadsheet of his entitlements
prepared by him on 15 March 2018 was a
ten minute exercise while he was in
“shock” and under “a lot of emotional pain” and only
“a rough calculation
estimate” of his entitlements or a “rough
figure” (when the evidence is that he sent numerous emails attaching
documents over the afternoon of 15 March 2018); and Mr Grüterich’s
evidence that the references in his spreadsheets to
the €50,000 2017 bonus
and education support allowance were a mistake (it being said that the documents
show that he did not
believe he had been paid the €50,000 2017 bonus
– despite claiming he paid it to himself out of Rema Tip Top’s
funds
on 9 January 2018; and that he believed the balance of his education support was
the same as it had been in March 2017 –
despite claiming that he had made
a payment out of Rema Tip Top’s funds to himself on 12 December 2017
thereby exhausting the
balance of the support then remaining).
- As
to the last of those matters, Rema Tip Top notes that Mr Grüterich accepted
in cross-examination: that it had been important
for him accurately to
communicate to Rema Tip Top on 15 March 2018 what he believed his entitlements
to be; that the 15 March 2018
Spreadsheet (Exhibit 7) reflected his
understanding of his entitlements at the date he prepared it; that he understood
and intended
the spreadsheet to be “credible and accurate”; and that
this was his record of what he considered his entitlements to
be at the time he
sent his email.
- It
is noted that Mr Grüterich denied that the €50,000 2017 bonus and the
“doctoral support” entries were included
in the spreadsheets in
order to mislead Rema Tip Top, or as a negotiating tactic. Rema Tip Top attaches
significance to the fact
that Mr Grüterich referred twice to the first
spreadsheet in his affidavits (at [429] of his 25 July 2018 affidavit and
[5]-[9]
of his affidavit of 10 May 2019), explaining in detail aspects of the
spreadsheet; yet said nothing about any mistakes. It is submitted
that the
obvious inference to be drawn is that Mr Grüterich was hoping they would
never be noticed. It is further noted that
even when Mr Grüterich was
examined orally in chief on day five of the hearing, and asked to look at the 15
March 2018 Spreadsheet
and to indicate whether there was “an error in that
document”, he did not say anything about a mistaken inclusion of
the
€50,000 2017 bonus and the “doctoral support” entries; rather
he identified his “error” as being
the omission of the
“alternate calculation” (a section that appears in the 16 March 2018
Spreadsheet) from the 15 March
2018 version. It is submitted that
Mr Grüterich’s further oral evidence in chief was “a
belated attempt to lay the
groundwork for Mr Grüterich’s mistake
excuse, in case he needed to deploy it in cross-examination”.
- Rema
Tip Top submits that the way Mr Grüterich gave his oral evidence on this
topic was consistent with him having come to court
with a rehearsed answer to
questions about the inclusion of the €50,000 2017 bonus and the
“doctoral support” entries
in the spreadsheets. It is said that Mr
Grüterich was quick to offer in support of his “mistake” claim
that he had
been in shock and suffering emotional pain on learning his
employment was to be terminated and therefore must have made many mistakes.
Rema
Tip Top argues that Mr Grüterich may well have been upset by the news
that he had lost his position but says that on Mr
Grüterich’s own
“very detailed and comprehensive account” of his actions on 14-16
March 2018 those actions
are not consistent with him having so little presence
of mind as to have made the many “mistakes” he claims he made in
the
preparation of these very important spreadsheets, which were to support claims
in relation to “entitlements” he valued
at in excess of $1.7
million. It is submitted that Mr Grüterich’s
“mistake” evidence was not credible and
it should not be
accepted.
- Rema
Tip Top also argues that Mr Grüterich’s evidence displays an
idiosyncratic reading of documents, pointing to the following:
Mr
Grüterich’s denial that he was hiding cars in his garage despite his
email of 18 August 2016 (sent at 3.36 pm) clearly
stating that he was going to
do precisely that; Mr Grüterich’s denial that he was only driving an
(Audi) A5 at that point
in time, despite saying so in the same email and his
denial that he was not driving the [BMW] X6, or the Mini (in his garage) despite
saying so in that email (noting that he then accepted that he had in fact been
driving four company cars at that point in time);
Mr Grüterich’s
denial that his words “this stinks and seems very sneaky” in his
email of 2 March 2017 (sent
at 12:23am) to Mr Slattery and Mr Philpotts were a
reference to conduct he was attributing to Mr Malsem; and his suggestion that
what he meant to convey by words (translated from German) he used in the email
he sent to Mr Zimmer on 22 September 2017 (in relation
to the
“history about my contract”) (namely: “the current points of
discussion with T Wach”; and “Bonus
- Draft of the DBS, but never
with the Rema Tip Top AG/AP”) was that he actually had an agreement with
Mr Wach to be paid the
€50,000 2017 bonus by Rema Tip Top or Rema Tip Top
AG.
- Next,
Rema Tip Top points to evidence of Mr Grüterich that it says is
inconsistent with contemporaneous documents: Mr Grüterich’s
evidence
that the Poliform furniture was the best value for money (cf his email
exchanges with Poliform in which Mr Grüterich claimed to have a quote for
furniture that he described as “alternative
very similar products from
similar manufacturers or the same” for 15-20% cheaper); Mr
Grüterich’s affidavit evidence
that he had no cause to rush the
approval of the payment of the deposit for this furniture (said to be
inconsistent with his email
to Poliform of 26 February 2018 (at 3.45 pm) in
which he said that he had the impending price increase in mind and could pay the
deposit ASAP); Mr Grüterich’s attempt in his 25 July 2018
affidavit at [607] to blame Ms Thompson for not picking up certain
personal
charges when reviewing his credit card statements (when at least one – the
Shaver Shop purchase – had occurred
prior to Ms Thompson commencing that
review and checking function); Mr Grüterich’s denial in
cross-examination that all
office functions had moved from Chullora to Newcastle
by October 2016 (cf [169] of Mr Grüterich’s first affidavit);
Mr Grüterich’s denial at first in cross-examination that the 22
January
2017 draft letter from DBS about the €50,000 2017 bonus was
related to his involvement in the integration of the ConvaTech
business with
Rema Tip Top’s business (cf [191] of Mr Grüterich’s
first affidavit) which he then corrected in the witness box.
- Rema
Tip Top also points to the oral evidence given by Mr Grüterich in chief to
the effect that the ConvaTech delegation of authority
matrices (produced by Mr
Malsem under subpoena issued by Mr Grüterich during the course of the
hearing) meant that he could
act alone as a director in approving items of
expenditure referred to in those matrices. Rema Tip Top says that
Mr Davison’s
evidence in his 15 May 2019 affidavit (read in reply)
established that these ConvaTech matrices were replaced by a later matrix that
Mr Grüterich had signed and which was approved for use by Rema Tip Top
(and that that matrix required dual director sign off
where a purchase was to be
made above the expenditure limit set out in the matrix). It is noted that
Mr Grüterich did not mention
the later (operative) matrix in his
affidavit evidence and did not take up the opportunity to give further evidence
on the topic.
- Rema
Tip Top submits that Mr Grüterich’s recollection of many key matters
was quite poor (noting that Mr Grüterich
said in the witness box that he
did not know if his recollection of conversations referred to in his evidence
was entirely good;
and that on Monday, 13 May 2019, Mr Grüterich could not
recall his own Counsel asking Mr Labbé in cross-examination (on
Tuesday 7
May 2019) whether it had been important to confirm Mr Grüterich’s
entitlements in the period 14-16 March 2018).
(As to the latter, I do not know
that I can place much weight on Mr Grüterich’s attention or otherwise
to the detail of
what was occurring in the courtroom during the course of the
hearing – since it is not always clear how much parties in the
well of the
court can see, hear or follow the proceedings.)
- By
reference to the above matters, Rema Tip Top submits that there is cause to
treat Mr Grüterich’s evidence with caution
if it is not corroborated
by any other independent and reliable evidence (unless it goes against his
interests).
- It
is submitted for Mr Grüterich that he performed well as a witness; that his
answers were clear and direct; and that he made
concessions where appropriate.
It is noted, by way of example, that he was willing readily to concede that he
had made mistakes in
relation to dates in his affidavit; and that documents he
had prepared contained errors. It is said that, rather than make up explanations
in the witness box, he was willing to admit when he was unable to recall why he
had done something; and it is noted that he gave
his evidence without the
benefit of an interpreter (though English is his second language). It is
submitted that the cross-examination
did not demonstrate that he lacked
credibility as a witness, and that there ought be no hesitation in accepting his
evidence as honest
and to the best of his recollection.
- I
make no adverse credit finding in respect of Mr Grüterich. He did, to my
observation, attempt to answer the questions put to
him and he did concede
matters (where his evidence was clearly inconsistent with the contemporaneous
documents such as the errors
in the March 2018 spreadsheet items). And I accept
that there was scope for some imprecision or misunderstanding in the course of
his cross-examination (as is often the case for a person whose first language is
not English and who is being cross-examined in English),
though I should make
clear that it was not my impression (as perhaps implicit in Mr
Grüterich’s submission on this) that
any of the Rema Tip Top
witnesses who gave oral evidence with the assistance of an interpreter were in
doing so using the interpreter
as a shield).
- That
said, the inconsistencies in his evidence (in particular as to the
5 February 2017 conversation with Mr Wach) mean that I am
by no means able
confidently to accept that his account of events is a reliable account; and the
implausibility of certain of his
evidence (particularly, the explanations
proffered at least at some stages for expenses incurred on his company credit
card –
such as the Wolgan Valley stay and the Shaver Shop purchase)
suggests a tendency on his part to provide a retrospective justification
for
events, or to explain away events, for which he has no real justification. That
does not mean that his conduct in claiming and
retaining funds referable to
personal expenses was intentionally dishonest at the time. However, it is
consistent with a cavalier
attitude (or, to adopt the language used elsewhere in
the authorities, “morally obtuse”) to the expenditure of, and
accountability
for, company funds (exemplified by his suggestion to Ms Thompson,
however jocular or jesting that may have been, that she should
feel free to be
“creative” in reconciling his credit card expenses).
- That
means that I must approach Mr Grüterich’s account of other events
(particularly his account of conversations with
Mr Wach and Mr Reiff as to his
contract entitlements) with caution (even accepting that some comment may fairly
be levelled at the
fact that Rema Tip Top chose not to call evidence from the
latter – as to which see further below).
Mr Kopp
- Mr
Kopp gave his evidence with the assistance as required from time to time of an
interpreter. On occasion during his cross-examination
it seemed to me that he
and the cross-examiner were genuinely at cross-purposes (such as the questioning
as to whether he had removed
something from Mr Grüterich’s draft
contract, when Mr Kopp’s evidence as I understood it was that he had put
Mr
Grüterich’s draft to one side and simply prepared a standard form
contract (in accordance with Mr Ubelacker’s instructions)).
It is fair to
say that there were a number of questions in relation to the process of drafting
Mr Grüterich’s contract
to which the response was that Mr Kopp
could not remember but it seemed to me that this was not inconsistent with the
fact that this
was one contract out of no doubt a number that were prepared
worldwide for employees in the Rema Group and this was some time ago.
It is not
surprising that Mr Kopp would not remember what it was that Mr Wach was asking
him to do in relation to particular aspects
of the drafting of the contract. For
example, Mr Kopp could not remember what issue Mr Wach wanted to clear up about
the €30,000
2016 bonus; his affidavit deposing to his understanding that
when he received the 4 February 2017 email there were some issues regarding
the
bonus but that this was a matter for Mr Wach (see also T 176.26 –
“[y]es, but I don’t know in detail what they
were. I didn’t
want to clarify those. That was up to Mr Wach”).
- There
was also some apparent (and understandable given the documents in question)
confusion on the part of the witness as to questions
in relation to the bonus
payments – there being an agreed 2016 bonus that Mr Kopp confirmed had
been paid (T 178.30; 37); but
also a second bonus for 2016 that was paid after
2016 (T 178.40); and then some debate as to the discussion of the bonus that was
going to be paid for 2017 and whether that was to be reduced or not (see T
178-180). Ultimately, what I took from Mr Kopp’s
evidence in this regard
was that there were two bonuses that had been paid in respect of the 2016 year
(one paid in 2016 and one
paid in May 2017), each in the amount of €30,000
(see T 182.10); and that the draft letter sent in 2017 related to the 2017
bonus
and Mr Kopp did not know whether that 2017 bonus was paid (see T 183.18).
- I
formed the view that Mr Kopp was not being obstructive and (without any
criticism of the cross-examiner) that any difficulties in
the giving of his
evidence related to confusion on Mr Kopp’s part as to what precisely he
was being asked.
Mr Zimmer
- As
to Mr Zimmer, Mr Grüterich says that Mr Zimmer was an unimpressive witness
in general. It is said that, despite being CEO
of Stahlgruber AG, Mr Zimmer
professed not to know key information in relation to the operations of the
company, including its legal
function; and that he was also less than
forthcoming in his responses to questions. By way of example, Mr Grüterich
points to
the exchange in cross-examination where Mr Zimmer was asked who the
shareholders of Stahlgruber OWG AG were – Mr Zimmer initially
answering
“[f]rom my best knowledge, there are a couple of shareholders in there.
But I don’t know them personally”;
when pressed as to their names,
saying “[n]ot really”; and then finally saying, amongst other
things, “another
shareholder is Mr Reiff” (T 63).
- My
impression of Mr Zimmer in the witness box was that he displayed a concern to
understand precisely what he was being asked (see
for example his request for
clarification of what was meant by “ultimately” at T 61.28) and that
he adopted what might
be labelled as a technical somewhat dogmatic approach to
answering questions put to him (his answer that he did not know the shareholders
personally being an example of that approach). I certainly formed the view that
Mr Zimmer was not being particularly keen to assist
the cross-examiner; but I
did not consider him to be obstructive in that regard; nor did he strike me as
acting as an advocate for
Rema Tip Top’s case.
Mr
Labbé
- Mr
Labbé gave his evidence in a matter of fact manner. He responded directly
to questions. There is no basis for criticism
of his evidence. Relevantly, he
confirmed that (at the time of the hearing before me) there was a legal
proceeding on foot in relation
to Mr Wach and “it’s with our
lawyers” (T 142.43); and said that he was not privileged to have
information in relation
to Mr Wach (see T 142.47).
- Mr
Labbé said he had a professional relationship with Mr Wach but that he
stopped being in contact with him when Mr Wach resigned
(T 142). He accepted
that it was important to get to the bottom precisely of what
Mr Grüterich’s employment arrangements
were; and that Mr
Grüterich had claimed to have verbal agreements with Mr Wach; but said that
Mr Wach was not employed by Rema
Tip Top anymore and was in a legal proceeding
so he was not able to contact him (T 145). He agreed that he could not be
certain what
Mr Grüterich’s entitlements were as at 15 March 2018 (T
146), given that he did not call or contact Mr Wach in any way;
and he accepted
that it was possible that he did not know what written or oral contracts Mr Wach
entered into on behalf of the Rema
companies with Mr Grüterich (T
147).
- Mr
Labbé impressed me as a straightforward and courteous witness.
Relevantly, he gave evidence that he had queried with Mr
Grüterich aspects
of the spreadsheet items (particularly the doctorate
allowance).
Mr Slattery
- Mr
Slattery seemed to me to be a matter of fact and co-operative witness. So, for
example, while he was adamant that he disputed that
Mr Grüterich had an
entitlement to the use of two cars (“absolutely not”); he readily
conceded that without reference
to the documents he would not be able to say who
was entitled to a car allowance. Rather, that view was on the basis that he was
not aware of any staff being entitled to two cars and the (perhaps not
surprising) notion that he was not sure why anyone would need
two vehicles.
- Similarly,
Mr Slattery’s evidence as to payments of business expenses seemed to me to
be based on a common sense approach. Mr
Slattery readily accepted that the
reason he did not authorise Mr Grüterich’s expenses was because he
had no role in authorising
those expenses. Rather, his evidence in essence was
that, had he been asked, he would not have approved certain expenditure to which
he referred in his affidavit. His common sense attitude was evident in his
response to a question as to whether he remembered asking
Mr Philpotts to review
Mr Grüterich’s credit card statements – he said “[w]hy
would I ask Mr Philpotts to
review a statement from his obvious superior?”
(T 214.2).
- It
was not suggested that Mr Slattery was other than a credible witness; and I
certainly found him to be such.
Jones v Dunkel inferences
- As
already adverted to, Mr Grüterich emphasises that Rema Tip Top did not call
evidence from the ex-Group CEO, Mr Wach, or from
Mr Reiff, the ultimate
decision-maker within the Corporate Group; that it also “decided not to
make available” Mr Ubelacker
(the Group head of legal who prepared all of
the relevant contractual documentation); and says that other key witnesses (such
as
Mr Flohr and Mr Heumüller) did not provide affidavits. It is also noted
that Mr Malsem did not give evidence in Rema Tip Top’s
case and it is said
that he ultimately gave supportive evidence in Mr Grüterich’s case,
and Rema Tip Top elected not to
cross-examine him. For Mr Grüterich, it is
submitted that if Rema Tip Top thought that the allegations made against Mr
Grüterich
were strong, these forensic decisions would be “truly
bizarre”.
- Complaint
is made that Rema Tip Top has not provided any proper explanation as to why any
of these witnesses have not been called.
In relation to the overseas witnesses,
as a member of the Rema Group, and in circumstances where the instructions being
given in
these proceedings are coming directly from the headquarters in Germany,
it is submitted that Rema Tip Top was in the unique position
of being able to
procure their attendance (or, at the very least, is able to take steps in an
attempt to do so); and that there is
no evidence that it has done this.
- Mr
Grüterich argues that the fact that Rema Tip Top has elected not to produce
these people as witnesses ought result in an adverse
inference being drawn
against it (relying on Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
(Jones v Dunkel); Bradley Mark Lum v MV Developments (Lane Cove) Pty
Ltd (in liquidation) [2018] NSWSC 247 at [48]- [53] (Emmett AJA); Ta Lee
Investment Pty Ltd v Antonios [2019] NSWCA 24 at [136]- [140] (Bathurst CJ,
Beazley P, as Her Excellency then was, and Macfarlan JA)).
- It
is submitted that there is nothing in the evidence that would establish that
former officers and employees of Rema Tip Top and
its related companies fall
within Mr Grüterich’s “camp”; and that it is much more
likely that the converse
is true; and that Mr Grüterich, unlike Rema Tip
Top, could not take informal steps successfully to procure their attendance,
and
was unable to request the court to issue a subpoena compelling any of them to
attend (referring to Yabsley v MLC Limited [2017] NSWSC 832 at [36]- [37]
(Parker J); Caswell v Sony/ATV Music Publishing (Australia) Pty Ltd
[2012] NSWSC 986 (Caswell v Sony/ATV Music) at [81], [85] (Hallen AsJ, as
his Honour then was); Gloucester (Sub-Holdings 1) Pty Ltd v Chief
Commissioner of State Revenue [2013] NSWSC 1419 at [14]- [16], [29]-[30],
[37], [54] (White J, as his Honour then was); Schneider v Caesarstone
Australia Pty Ltd [2012] VSC 126 at [9] (Davies J)).
- Complaint
is also made that Rema Tip Top’s discovery was deficient (referring to an
affidavit of Ms McConochie dated 6 May 2019).
The background to this complaint
is that a discovery application was advanced in the expedition list but was
“in suspension”
between September 2018 and February 2019. It is said
that it was made plain in Mr Grüterich’s submissions filed and served
in support of the discovery application that production was also sought from
Rema Tip Top’s related bodies corporate, and that
Sabre orders
would be sought in that regard (see Sabre Corporation Pty Ltd v Russ
Kalvin’s Hair Care Company [1993] FCA 557; (1993) 46 FCR 428 at 431-432 (Lockhart J);
Caswell v Sony/ATV Music; Arhill Pty Ltd v General Terminal Co Pty
Ltd (1990) 23 NSWLR 545; Ceramic Fuel Cells Ltd (in liq) v McGraw-Hill
Financial Inc (2016) 245 FCR 340; [2016] FCA 401).
- A
notice of motion was filed on 6 May 2019 for a strike out, either in whole or in
part, of the further amended statement of claim
filed 29 April 2019 on the basis
that Rema Tip Top had failed to comply with orders made for discovery by Kunc J
on 5 April 2019.
That motion was deferred at the commencement of the trial so
that Rema Tip Top could prepare for that argument; ultimately it was
not pressed
but the complaints made as to discovery were raised in the context of the
complaint that Rema Tip Top had chosen not
to make available material in
relation to the contractual arrangements. (Rema Tip Top’s position on the
motion for discovery
was that there was no basis for the criticisms made of its
discovery and that Mr Grüterich’s position was a direct result
of his
own delay in the conduct of this matter and, it would appear, deliberate
decisions by him (for reasons not apparent) not to
make applications to court in
relation to documents that might exist but which are not held by Rema Tip Top in
Australia, but may
be in the possession of related entities overseas.)
- Mr
Grüterich says that there was no forensic decision not to pursue
Sabre orders (as Rema Tip Top suggested in its strike-out submissions
dated 6 May 2019 at [44]); and that, in circumstances where Rema
Tip Top and its
related companies held “almost all of the cards in relation to
documents”, it was incumbent upon it to
take all reasonable steps to
procure the production of all documents answering the categories and that it has
failed to do so.
- It
is submitted that an adverse inference ought be drawn that the content of such
documentation, had it been produced, would not have
assisted Rema Tip
Top’s case (reference being made to Katsilis v Broken Hill Pty Co
Ltd (1977) 18 ALR 181 at 196-198 (Barwick CJ); Moody Kiddell &
Partners Pty Ltd v Arkell [2013] FCA 1066 at [26]; Mirus Australia Pty
Ltd v Gage [2017] NSWSC 1046 at [236]- [237], [257]-[265]) and hence that
less weight should be placed on the “unsubstantiated assertions” of
Rema Tip Top’s
witnesses in relation to matters where there ought to have
been such disclosure (and it should be concluded that Rema Tip Top has
failed to
discharge the onus of proving its case).
- With
one exception (that being in relation to Mr Reiff), I do not consider that any
Jones v Dunkel inferences should be drawn.
- As
to Mr Wach, the evidence clearly establishes that he cannot be said to be in
Rema Tip Top’s “camp”. There is,
or was at the time of the
hearing, a dispute between Mr Wach and Rema Tip Top or its parent company, which
was the subject of some
kind of legal proceeding. It was clear from the evidence
of Mr Ubelacker and Mr Slattery that there is no ongoing contact with Mr
Wach
within the company. The suggestion that he would have been amenable to give
evidence in this proceeding or that Rema Tip Top
should have compelled him to
give evidence in this proceeding is not plausible. (Nor however, would I draw
any adverse inference
against Mr Grüterich for him not calling Mr Wach
– as I understand it, Mr Wach resides in Germany. The difficulty for
Mr
Grüterich compelling a foreign resident to give evidence here is
obvious.)
- As
to Mr Flohr, the relevance of any evidence he might have been able to give to
any issue in the proceeding is by no means clear.
Mr Grüterich deposes in
his first affidavit to various conversations with Mr Flohr as to the
arrangements he had in South Africa.
That is not relevant ultimately to his
entitlements in Australia under the separate agreement entered into in February
2017. Even
assuming that there was an expectation that discretionary
arrangements would continue (which is problematic) or that there was some
general practice within the Rema Group which governed the position (which is
also problematic given the level of generality of Mr
Grüterich’s
evidence in this regard), it is difficult to see how the evidence of Mr Flohr
would have shed light on the
arrangements post February 2017.
- Similarly,
as to Mr Heumüller, it was not explained how his evidence would have been
relevant to explain some issue in the proceeding
such that the failure to call
him would give rise to an adverse inference.
- As
to Mr Ubelacker, his evidence might have been expected to shed some light on the
drafting of the contract itself if that were in
issue but the real issue goes
not to the drafting of the Employment Contract in 2017 but to the discussions in
relation to the later
variation thereof and to matters such as the bonus
arrangements. It was Mr Grüterich’s own case that Mr Ubelacker played
no role in the negotiation of the Employment Contract (albeit that the
documentary evidence makes clear that he was copied into the
communications). I
do not consider that an adverse inference should be drawn from the fact that he
was not called, particularly in
circumstances where others involved in the
discussions (Mr Kopp and Mr Zimmer) did give evidence in relation to the
drafting of the
Employment Contract or subsequent proposals to vary it. It was
not necessary for Rema Tip Top to produce every individual who had
some role in
the contract preparation. Rema Tip Top argues (with I consider has some force)
that there was not the necessary identification
of the specific issue to which
each of the witness about whom a Jones v Dunkel inference is sought to be
drawn would have been expected to give.
- As
to Mr Reiff, the position is somewhat different. True it is that Mr Reiff is not
an executive of Rema Tip Top. However, he was
present and participated in the
various discussions on which Mr Grüterich relies for his claims in relation
to the alleged oral
variation of the Employment Contract and, in particular, as
to the alleged fixed term arrangement (with the so-called “two
year
handshake”). He is also someone whom others in the Rema Group understood
was in a position to give directions in relation
to matters within the
subsidiary companies and whose directions it is said would generally (if not
always) be followed. (It is not,
however, alleged that he is in the position of
a shadow director of Rema Tip Top.) I am told that there was an affidavit
prepared
by Mr Reiff and served in the proceedings. It was not ultimately read
by Rema Tip Top. There had been an application (opposed by
Mr Grüterich) for his evidence (and that of Mr Ubelacker) to be taken
by audio visual link. That application was opposed and
was not then
pressed.
- It
was, perhaps somewhat faintly, acknowledged by Counsel for Rema Tip Top that one
might understand why Mr Reiff would have something
to say about evidence such as
the alleged “two year handshake” conversation. I agree. In
circumstances where it might
be expected that Mr Reiff would be in Rema Tip
Top’s camp, and where there would be unlikely to be a difficulty in
calling
him to give evidence (or at least any such difficulty was not
explained), I consider that an inference should be drawn in favour
of Mr
Grüterich that any evidence Mr Reiff might have given on that particular
issue would not have assisted Rema Tip Top’s
case.
- That
said, it is important to bear in mind the nature of a Jones v Dunkel
inference. In In the matter of MSU Management Pty Ltd - Urusoglu v MSU
Management Pty Ltd [2011] NSWSC 54 (at [248]-[250], I summarised the general
rule in Jones v Dunkel and it is convenient here to reproduce that
summary:
A Jones v Dunkel inference is open to be drawn in relation to an
unexplained failure to call evidence as to a matter that calls for explanation.
The
rule in such a case permits evidence in relation to that matter to be given
greater weight, and an inference or inferences to be
more readily drawn, when
the party who might have called evidence to the contrary has chosen not to do
so. In Commonwealth of Australia v McLean (NSWCA, 31 December 1996,
unreported), Handley JA and Beazley JA said: "... The rule typically applies to
strengthen or weaken an
inference otherwise available on the evidence for the
benefit of the party not in default."
If such an inference does arise, it would do no more than permit the court to
infer that the uncalled evidence or missing material
would not have assisted the
case of the party against whom the inference is drawn; it would not permit the
court to infer that that
the uncalled evidence was in fact damaging to that
case.
What the principle allows is the more ready acceptance of evidence which might
have been contradicted (but which was not). Thus,
where an inference is open
from facts proved by direct evidence and the question is whether it should be
drawn, the circumstance
that the party disputing it might have proved the
contrary, had it chosen to give evidence, is properly to be taken into account
as a circumstance in favour of drawing the inference (per Davies AJA in Ho v
Powell [2001] NSWCA 168; (2001) 51 NSWLR 572, at [76]; HML v R [2008] HCA 16; (2008) 235 CLR 334; 245
ALR 204 at [302] [303; [2008] HCA 16; Brandi v Mingot (1976) 12 ALR 551
at 559-60; Cf Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 at 320-321; [1959] HCA 8;
Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181 at 197; 52 ALJR 189
at 197; and Menzies J in Jones v Dunkel (at 312)).
- The
drawing of a Jones v Dunkel inference does not permit one to infer that
the evidence Mr Reiff would have given, if called, would have been positively
damaging
to Rema Tip Top’s case. It would simply permit an inference more
comfortably to be drawn that Mr Grüterich’s account
of the
conversation was correct. That must be assessed in the light of the evidence of
the other persons present (albeit not directly
participating in the
conversation, namely Mr Labbé and Mr Zimmer) and in light of the events
that followed that conversation,
including, relevantly, Mr
Grüterich’s conduct in calculating his entitlements on termination
initially on the basis of
an entitlement to a six month period of leave which is
inconsistent with the “two year handshake” arrangement to which
he
has deposed.
- Ultimately,
I have concluded that even if a statement to the effect of the “two year
handshake” was made by Mr Reiff at
the relevant meeting it was not
something that Mr Grüterich understood would have binding force in the
absence of a written
document (which is why he pressed for a contract variation
at the time) and it was not relied upon by him so as to give rise to any
entitlement to relief on his part.
Issues for
Determination
- With
the above (admittedly lengthy) introduction and survey of the principal
witnesses, I turn to the issues for determination.
Mr
Grüterich’s employment arrangements
- I
propose first to deal with the issue as to Mr Grüterich’s employment
arrangements as at the time of termination of his
employment relationship with
Rema Tip Top, since this is relevant both to Rema Tip Top’s claim for
declaratory relief as to
the validity of its termination notice on 16 March 2018
and to Mr Grüterich’s claim for damages on the basis that Rema
Tip
Top wrongly repudiated his employment contract.
Express terms of
the 14 February 2017 Employment Contract
- There
is no dispute that the express terms of Mr Grüterich’s employment, as
set out in the signed 14 February 2017 Employment
Contract (and before
considering for the moment whether the evidence establishes that there was any
variation in or about December
2017 of the kind alleged by Mr Grüterich),
included that: Mr Grüterich would use his best endeavours to promote the
financial
position, profits, prospects, welfare and reputation of Rema Tip Top
and not intentionally or recklessly do anything which is, or
may be, harmful to
those interests (cl 3.1(e)); Mr Grüterich’s remuneration was
inclusive of all payments required for
all hours Mr Grüterich may work (cl
4.2(b)); Rema Tip Top would pay Mr Grüterich the Remuneration, being
$280,000 per annum
inclusive of superannuation (cl 6.1 and Schedule 1); Rema Tip
Top must reimburse Mr Grüterich for all reasonable out of pocket
expenses
properly incurred by him in the performance of his duties (cl 9.1); Rema Tip Top
could terminate Mr Grüterich’s
employment at any time by giving six
months’ written notice, or by paying Mr Grüterich six months’
base salary in
lieu of notice (cll 15.1 and 15.3(a)); Rema Tip Top could
terminate the employment of Mr Grüterich without notice if Mr
Grüterich
engaged in serious misconduct (cl 15.2(a)); on or before the
Termination Date, Mr Grüterich must vacate any accommodation provided
to Mr
Grüterich by Rema Tip Top (cl 16.3(e)); the Employment Contract could only
be amended by written agreement between all
parties (cl 21.1); and the
Employment Contract superseded all previous agreements about its subject matter
and embodied the entire
agreement between the parties (cl
21.2(a)).
Implied term
- Rema
Tip Top contends that the Employment Contract also contained an implied term
that Mr Grüterich owed a duty of honesty, good
faith and fidelity to his
employer (referring to Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66 at
81; [1933] HCA 8 (Blyth Chemicals), Commonwealth Bank of Australia v
Barker (2014) 253 CLR 169; [2014] HCA 32 (CBA v Barker) at [30] (per
French CJ, Bell and Keane JJ), [63]-[66] and [100] (per Kiefel J, as her Honour
then was) and [116] (per Gageler J)).
Mr Grüterich does not concede an
implied duty of good faith and submits that the High Court left open whether an
obligation
of good faith was implied into employment contracts in CBA v
Barker. (Rema Tip Top says that what was left open was whether the employer
owes a duty of good faith.)
- In
any event, Mr Grüterich accepts that, by reason of his position,
Mr Grüterich owed fiduciary and statutory duties to
Rema Tip Top; and
that if, as a matter of substance, there was a misappropriation of funds that
would be wrongful (see Hospital Products Ltd v United States Surgical
Corporation [1984] HCA 64; (1984) 156 CLR 41 at 96-97; [1984] HCA 64 (per Mason J)
(Hospital Products)). Rema Tip Top says that Mr Grüterich’s
fiduciary duties precluded him making an unauthorised benefit from his position
(citing Breen v Williams (1996) 186 CLR 71 at 113, 137-138; [1996] HCA
57, Pilmer v Duke Group Ltd (In Liq) (2001) 207 CLR 165; [2001] HCA 31 at
[74]). It also relies on the statutory obligation owed by Mr Grüterich as
an employee (and as a director) of Rema Tip Top pursuant
to, s 182(1) of the
Corporations Act noting that, for the purposes of s 182(1) impropriety
does not depend on an alleged offender’s consciousness of impropriety and
that impropriety consists of a breach
of the standards of conduct that would be
expected of a person in the position of the alleged offender by reasonable
persons with
knowledge of the duties, powers and authority of the position and
the circumstances of the case.
Oral variation
- By
his cross-claim, Mr Grüterich contends that the Employment Contract was
varied orally on 12 December 2017 to include a provision
fixing his term of
employment until 31 December 2019 (Fixed Term). Mr Grüterich contends that
Rema Tip Top breached this provision
when it terminated his employment on 16
March 2018 and that he is entitled to damages referable to lost income up to the
expiry of
the Fixed Term.
- Insofar
as Mr Grüterich contends that his employment was governed by additional
oral terms along the lines of the representation
said to have been made in 2017
February, Rema Tip Top says that, whatever the position may have been as regards
Mr Grüterich’s
employment prior to 14 February 2017 (including by
other companies within the Rema Group), there were no oral terms of his
employment
once the Employment Contract was made; that it was an entire
agreement and that the Employment Contract was not varied orally at
any time
after that. Rema Tip Top relies on the entire agreement clause of the Employment
Contract (cl 21.2(a)) and the no oral modification
clause of the Employment
Contract (cl 21.1).
- Further,
Rema Tip Top disputes the key factual allegations made by Mr Grüterich
as the foundation for his contention that the
Employment Contract contained oral
terms. Rema Tip Top notes that much of Mr Grüterich’s case in this
regard depends upon
his uncorroborated testimony as to conversations he claims
to have had with other executives in the Rema Group; and Rema Tip Top
submits
that this evidence should not be accepted.
- Mr
Grüterich argues that it is illogical that he would sign the Employment
Contract and DBS Release Agreement, making him significantly
worse off, at the
same time as taking a promotion to Chief Executive Officer and Managing Director
of Rema Tip Top with increased
responsibility. It is said that
Mr Grüterich was also taking on significantly greater risk, being
appointed as a director to
the 16 Rema Tip Top Australia subsidiaries. Mr
Grüterich in effect argues for the inference to be drawn from this that
either
there was a side deal with Mr Wach that was later to be reduced to
writing or Mr Wach lied to him to get him to sign the contracts
(and says that
in either case, Rema Tip Top ought not be permitted to escape liability). (I do
not consider that either such inference
should here be drawn. There may well
have been other reasons for Mr Grüterich to have been prepared to sign the
14 February
2017 Employment Contract at the time (not least being an expectation
that salary or benefits issues would later be resolved) just
as he was prepared
to come to Australia without a final signed employment contract in the first
place; and the emphasis seemingly
placed by on his greater responsibilities as
Managing Director might well be thought to be balanced by the greater status
thereby
conferred on him. What is clear is that Mr Grüterich was regarding
the formalisation of his contractual terms of employment,
and any variation
thereof, as a process of negotiation – as is apparent from his emails to
Mr Zimmer to which reference has
been made above).
Was there
a fixed term?
- As
noted already, Rema Tip Top’s position is that Mr Grüterich’s
employment contract was constituted by the 14 February
2017 Employment Contract,
which provided for termination on six months’ notice (cl 15.1), and that
it validly terminated the
contract on 16 March 2018; whereas Mr Grüterich
maintains that the 14 February 2017 Employment Contract was varied at the
meeting
on 12 December 2017 (see [45]-[46] of the cross-claim) to provide for a
fixed minimum term of employment for two years ending in
December 2019 (and
hence Rema Tip Top was unable to terminate Mr Grüterich’s employment
without cause until after 31 December
2019).
- Mr
Grüterich accepts that the Employment Contract contains an entire agreement
clause and a clause requiring amendments to be
in writing but says that does not
prevent an oral variation (referring to GEC Marconi Systems Pty Ltd v BHP
Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 (GEC
Marconi) at [214]-[217] (Finn J)). In addition, he submits that an entire
agreement clause does not prevent the application of the law pertaining
to
misleading or deceptive conduct (referring to Campbell v Backoffice
Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [130]).
- Mr
Grüterich maintains that he was initially promised a fixed term of two to
three years and says that Mr Reiff subsequently
confirmed it to be two years
(i.e., ending in December 2019). He argues that the purported termination of the
Employment Contract
by Rema Tip Top was in breach of this agreement;
alternatively, that the promises made to him were actionable misrepresentations
under the Australian Consumer Law. In circumstances where he was dismissed from
his employment on a no fault basis (and where he
denies that there was any
relevant misconduct) it is submitted that Rema Tip Top is in breach of the
agreement for a fixed term of
employment and ought to pay damages accordingly.
In the course of closing submissions it was made clear that Mr Grüterich
only
claims damages for retrospective loss (other than insofar as he presses his
claim for salary to the end of the alleged fixed term
of his contract). He did
not press his claim to long service leave entitlements beyond the date of
termination of his employment
– see T 490).
Rema Tip
Top’s submissions
- Rema
Tip Top submits that the oral (Fixed Term) variation contended for by Mr
Grüterich should be rejected for the following
reasons.
- First,
that there was no consideration given by Mr Grüterich (as promisee) to
support this alleged variation. (In his cross-claim,
Mr Grüterich alleges
that the “December 2019 Representation” as to the fixed term was
supported by consideration
by his “agreeing to continue his
employment” with Rema Tip Top on the terms agreed (namely, the Employment
Contract varied
to include, inter alia, the said representation – see at
[46])). In this respect, Rema Tip Top points to the lack of any evidence
from Mr
Grüterich that he would have left employment with Rema Tip Top if the
alleged December 2019 Representation as to a fixed
term had not been made to him
and it is submitted that there is no evidence from which such an intention on
his part could reasonably
be inferred. Rema Tip Top points to the fact that, on
Mr Grüterich’s version of events, Mr Grüterich had just
been
granted a pay increase of $147,000 per annum (backdated to 1 January 2017)
and it argues that he therefore had a significant financial
incentive to remain
employed by Rema Tip Top.
- Second,
that Mr Grüterich’s evidence as to what was said in conversations
relating to his alleged employment entitlements
should not be accepted unless it
is corroborated (having regard to the submissions made as to his credit).
- Third,
that Mr Grüterich’s subsequent conduct is not consistent with his
version of the 12 December 2017 conversation with
Mr Reiff. In this regard, Rema
Tip Top points to: Mr Grüterich’s email of 13 December 2017 to
Mr Zimmer which purports
to summarise agreed changes to his remuneration
and says nothing about an agreement to grant Mr Grüterich a fixed term of
employment;
to the fact that, on Mr Grüterich’s own account of what
he said and did between first learning that his employment was
to be terminated
and that termination being carried out, Mr Grüterich did not say to anyone
that he had a fixed term of employment
which could only be brought to an end for
cause (noting that on Mr Grüterich’s account of the conversation with
Mr Slattery
to the effect that he might need to count on him for the
“two year handshake”, which is denied by Mr Slattery, this occurred
only after Mr Grüterich’s employment had come to an end on 16
March 2018); and to the fact that the excel spreadsheets
of Mr
Grüterich’s “entitlements” prepared by him on 15 and 16
March 2018 included, as a line item, the sum
of $225,000 as the “Notice
Period 6 months”. Rema Tip Top submits that Mr Grüterich clearly
believed that he had
an entitlement to six months’ notice as at
16 March 2018 and that this is wholly inconsistent with the conversation he
claims
to have had with Mr Reiff on 12 December 2017 (and, in particular, the
exchange of that notice period for a fixed term of employment).
- Fourth,
Rema Tip Top argues that, even assuming Mr Grüterich’s account of
that conversation to be correct, it could not
give rise to a variation to
Mr Grüterich’s contract having regard to cl 21.1 of the
Employment Contract which provided
that it could only be amended by written
agreement between all parties.
- Rema
Tip Top points to the decision of the Supreme Court of the United Kingdom in
MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24;
[2018] 2 WLR 1603 (Rock Advertising), in which Lord Sumption (Lady Hale,
Lord Wilson, Lord Lloyd-Jones agreeing) concluded that the law should and does
give effect to
a no oral modification clause (at [10]) and said (at
[15]):
If, as I conclude, there is no conceptual inconsistency between a general rule
allowing contracts to be made informally and a specific
rule that effect will be
given to a contract requiring writing for a variation, then what of the theory
that parties who agree an
oral variation in spite of a No Oral Modification
clause must have intended to dispense with the clause? This does not seem to me
to follow. What the parties to such a clause have agreed is not that oral
variations are forbidden, but that they will be invalid.
The mere fact of
agreeing to an oral variation is not therefore a contravention of the clause. It
is simply the situation to which
the clause applies. It is not difficult to
record a variation in writing, except perhaps in cases where the variation is so
complex
that no sensible businessman would do anything else. The natural
inference from the parties’ failure to observe the formal
requirements of
a No Oral Modification clause is not that they intended to dispense with it but
that they overlooked it. If, on the
other hand, they had it in mind, then they
were courting invalidity with their eyes open.
- While
Rema Tip Top accepts that Rock Advertising does not reflect the current
state of the law of Australia (referring to Hawcroft General Trading Co Pty
Ltd v Hawcroft [2017] NSWCA 91; KD Kanopy Australasia Pty Ltd v Insta
Image Pty Ltd [2007] FCA 481, GEC Marconi, Cenric Group v TWT
Property Group [2018] NSWSC 1570), it says that such clauses can
nevertheless have considerable evidentiary importance; noting that in GEC
Marconi, Finn J said (at [221]):
Though lacking legal effect in the face of a subsequent oral or implied
agreement, it seems to be accepted that a no oral modification
clause can have
significant evidentiary effect. As Holmes J commented in Bartlett v
Stanchfield, above ‘The [clause] is a fact to be taken into account in
interpreting the subsequent conduct of the plaintiff and defendant’
...
- Rema
Tip Top submits that the existence of cl 21.1 in the Employment Contract
supports an inference that, even if Mr Grüterich’s
version of the
12 December 2017 conversation were to be accepted, neither he nor Mr Reiff
intended to create a binding variation
to the Employment Contract. Further
support for such an inference is said to be drawn from the circumstances in
which the conversation
took place (during the evening, at an informal and social
gathering at a hotel bar). Further, it is noted that Mr Reiff was not an
employee or a director of Rema Tip Top and it is contended that the evidence
does not establish that he had authority (actual or
ostensible) to bind Rema Tip
Top to a variation to the Employment Contract.
- Thus,
Rema Tip Top submits that the Employment Contract was not varied orally on 12
December 2017 as Mr Grüterich contends.
Mr
Grüterich’s submissions
- Mr
Grüterich maintains that his contractual terms of employment were varied as
a result of the conversation he had with Mr Reiff
at the Raffles Hotel Bar in
Singapore during the 18 September 2017 holding meeting, in which he says Mr
Reiff agreed that Mr Grüterich’s
benefits the subject of the alleged
February 2017 representations continued and would subsequently be confirmed in
writing; that
Mr Reiff told him that Mr Zimmer would take care of the variations
to the Employment Contract; that those terms were confirmed by
Mr Zimmer at the
12 December 2017 further regional holding meeting at the Raffles Hotel in
Singapore; and that Mr Reiff confirmed
on 12 December 2017 that the minimum
(fixed) term of Mr Grüterich’s employment would be two years, ending
on 31 December
2019.
- Mr
Grüterich points to the lack of any response from Mr Zimmer to the
communications by Mr Grüterich as to the history of
his contractual
entitlements and in particular to the lack of response from Mr Zimmer when he
(Mr Grüterich) sent Mr Zimmer
a copy of his payslips for December 2017 and
January 2018 and informed Mr Zimmer that he had forwarded the Spreadsheet to
payroll
to action the payments. Mr Grüterich also relies upon his
“two year handshake” conversation with Mr Slattery (as
I understand
it, as contemporaneous corroboration that it was Mr Grüterich’s
understanding at the time that he had a fixed
term employment
contract).
Determination
- A
number of observations can be made at the outset.
- First,
that the practice within the Rema Group appears to have been that there could be
separate employment contracts with different
entities in the group subsisting at
the same time – at least when an employee was posted or deployed
overseas.
- Second,
that there was at least some evidence of a practice whereby written side-letters
were incorporated into the contractual arrangements
(and that seems to explain
Mr Kopp’s evidence in the witness box as to how the standard from
contracts were ordinarily prepared).
Hence, the expectation by Mr Grüterich
in 2017 that certain aspects of his remuneration would be the subject of a side
letter
or an “expat” letter is not inconsistent with the practice in
the Rema Group at that time.
- Third,
that, at least in relation to Mr Grüterich’s arrangements, there
seems to have been a large element of trust or
good faith reposed by him in the
later documentation of the contractual arrangements that he was discussing
(since on at least two
occasions his email communications suggested it was not
critical that matters be put into his contract at that stage).
- Fourth,
and in my opinion significantly, what written agreements there were in existence
all contained the equivalent of entire agreement
clauses and no oral variation
clauses. It must have been intended that they have effect and the very fact of
side letters documenting
particular arrangements outside the written terms of
the contract is consistent with that (i.e., that they were not to be left to
be
the subject of oral arrangements but that they were to be recorded in writing in
some fashion). True it is that such clauses may
not be fatal to there being a
conclusion of contract variation in some cases but in the present case I am not
persuaded that this
was objectively the parties’ intent. While oral
conversations or “agreements” might have given rise to a claim
based
on estoppel or the like in circumstances (where the oral agreement could be
established on the balance of probabilities and
there was detrimental reliance
thereon) I do not consider this to be a case where that arises (as to which see
further below).
- As
at January 2016 (on the documents referred to above), it appears that
Mr Grüterich’s initial employment in Australia
was governed by:
his October 2012 employment contract with DBS (the First DBS Contract) (to the
extent that this was not superseded
by the DBS Posting Agreement) and the 8
December 2015 DBS Posting Agreement (together with any side-letter(s) in respect
of the First
DBS Contract that remained applicable). It is not clear whether the
24 November 2015 employment contract forwarded by Mr Wach was
ever formally
concluded between Mr Grüterich and Rema Tip Top Australia (although the
parties’ conduct suggests that it
may have been understood to govern the
local employment arrangements); since (apart from the 7-8 January 2015 email
correspondence)
nothing further seems to have been done at the initial stage to
document the arrangements between Rema Tip Top Australia and Mr
Grüterich.
- There
is no doubt that the 14 February 2017 Employment Contract was signed and (with
the DBS Contract) governed the employment relationship
from that time.
- The
signed Employment Contract is clearly not a fixed term contract. The DBS
Secondment Contract does not assist Mr Grüterich
in that regard – it
does not apply to his separate Australian employment contract. Nor does the 24
November 2015 email assist
him. It is clear that Mr Grüterich did not
understand the “draft” contract attached to the 24 November 2016
email
to be a concluded agreement – and he queried a number of points
about the proposed arrangements, including relevantly “duration
of
contract 5 years?” (and interestingly seems not to have considered this
crucial enough to be included in his contract in
any event). Mr Wach’s
response makes clear that he was not agreeing to a “net” salary;
that he was not agreeing
to the business class travel Mr Grüterich had
proposed (indicating that this seemed very high); that the proposed duration of
the contract was uncertain (a minimum of three to five years but could also be
open ended) and that this was to be an Australian
contract done locally. That
said, it seems clear that the parties understood the terms of the draft contract
to be at least generally
applicable until the conclusion of the local contract
(which did not occur until the February 2017 negotiations).
- Significantly,
when Mr Grüterich procured the draft employment contract from Mr Taylor, he
did not include in that contract many
of the “entitlements” that he
says were agreed with Mr Wach and that he says it was agreed, in his discussions
in February
2017, would continue (such as the two company cars and the private
business travel) nor did that contract specify a fixed term.
- As
to the discussions in relation to the Employment Contract, I cannot accept Mr
Grüterich’s account of the conversation
with Mr Wach on 5 February
2017. That is because it logically cannot have occurred at that time, at least
in the terms that Mr Grüterich
deposes it did, because at that stage Mr
Kopp had not yet sent him the draft contract documents. Nor does it make sense
that Mr Grüterich
was simply mistaken as to the date of a discussion
to that effect (leaving aside the detail with which he has recorded that
conversation)
because by the time that the draft contract documents were sent to
Mr Grüterich (by email on 13 February 2017), Mr Grüterich
was en
route to Singapore for the 14 February 2017 holding meeting.
- I
place weight on the contemporaneous documents in this regard when determining
the likely timeline of events. It is consistent with
the chronology of Mr
Grüterich being handed a document to sign at the Raffles Hotel (which is
what he says happened) that this
was the first time he had seen the document.
The only other possibility is that when he arrived in Singapore he accessed the
email
and had reviewed the draft contract attached before the meeting in the
Hotel but he does not give evidence to that effect.
- Mr
Grüterich says that he signed the draft contract without reviewing it and
trusting that his entitlements would continue, but
nothing points to any
discussion to that effect and the November 2015 email from Mr Wach is
inconsistent with there being such an
agreement.
- What
might perhaps explain the somewhat inconsistent evidence of the events of 14
February 2017 is that Mr Grüterich signed the
document without realising
that it was not the draft contract that Mr Taylor had prepared for him (although
the two are very different
documents and that would seem implausible) but, if
so, it is curious that the only modification that was made was as to the
remuneration
and, in any event, Mr Taylor’s draft did not include the
entitlements that Mr Grüterich now contends he had. (Moreover,
this is not
what Mr Grüterich contends.)
- Clearly,
there was a modification by Mr Kopp of some version of the document that Mr Kopp
had earlier forwarded to Mr Grüterich
– a revised version was sent
around 9.47pm that night. The only amendment that Rema Tip Top accepts was made
to the document
was to the remuneration (from $260,000 to $280,000). There is no
copy of a document with the $260,000 figure on it – possibly
no such copy
was kept. In any event, there as certainly no modification to include other
terms. The sending of a modified document
is consistent with Mr
Grüterich’s evidence that he signed a document with a lesser
remuneration and this then being revised
to the higher remuneration; but that
does not support the assertion by Mr Grüterich as to the February
representations nor of
his version of events on 14 February 2017.
- Mr
Grüterich may well have complained to Mr Wach on that occasion about the
additional benefits he sought, and may well have
asked Mr Wach to get
contractual variations for him, but what seems abundantly clear is that this did
not occur and Mr Grüterich
did not put in writing any assertion of any
agreement to do so. Significantly, by the time Mr Grüterich was explaining
to Mr
Zimmer the “history” of his (Mr Grüterich’s)
contract, Mr Grüterich conveyed to Mr Zimmer that these
were
“discussion points” with Mr Wach. That, to my mind, is telling
evidence against the proposition that there was a
concluded agreement (or
representation on which he could reasonably have relied) as to those benefits
during the February 2017 discussions.
- As
to the bonus, about which Mr Grüterich was still pressing by the time of
his correspondence with Mr Zimmer, the email communications
between Mr Wach
and Mr Kopp indicate that at least from the Rema Tip Top side what was
contemplated in 2017 in relation to the bonus
was a €30,000 payment for
2016 and an award arrangement based on KPI’s linked to the company EBIT of
$100,000.
- As
to Mr Grüterich‘s undertstanding of the September/December 2017
conversations, the 22 September 2017 email to Mr Zimmer
makes clear that Mr
Grüterich understood that his contractual arrangements were the subject of
“discussion”; that
the bonus arrangement represented by the
“draft” letter was an arrangement with DBS and there was no
concluded arrangement
with Rema Tip Top AG; and that the question of a
“fix period contract” was another topic of discussion.
- In
the present case, I am not persuaded that it was objectively intended that any
oral variation to the signed written contract would
be enforceable as between Mr
Grüterich and Rema Tip Top. Even Mr Reiff’s “two year
handshake” conversation
(if it occurred as Mr Grüterich deposes) does
not persuade me that there was the necessary common intention on the part of
Rema
Tip Top and Mr Grüterich immediately to be bound to a variation to
that effect. Indeed, Mr Grüterich’s understandable
wish to have a
written agreement (or even an email confirmation) to govern his new position as
Managing Director and then any contract
variation or side letter addendum to its
terms (and his consistent communications with Mr Wach and Mr Zimmer pressing for
a contract
and for written confirmation suggest to the contrary). It seems to me
abundantly clear that Mr Grüterich’s frustration
was as to the lack
of written confirmation as to Rema Tip Top’s position. It is clear that,
as at 22 September 2017, Mr Grüterich
understood that matters such as his
wish for a fixed term of employment were the subject only of discussion. Any
suggestion that
a binding arrangement had been made on 12 December 2017 flies in
the face of his request for confirmation on 23 December 2017 (albeit
as to the
salary adjustment and bonus issues). Mr Zimmer’s response which made it
clear that approval was required and Mr Grüterich
clearly was seeking such
confirmation.
- Mr
Grüterich and Mr Zimmer then had their conversation on 12 December 2017 as
to which they give different accounts. The only
contemporaneous document is Mr
Grüterich’s email of 13 December 2017 seeking confirmation of
“our conversation and
agreement” and asking for email approval in
return. That email (even if it might be said to have been a self-serving or
misconceived
account of the said conversation/agreement) is a contemporaneous
record of Mr Grüterich’s then position and, significantly,
there was
no response from Mr Zimmer disputing that account. Equally, however, neither
does Mr Zimmer respond to confirm Mr Grüterich’s
account.
- While
Mr Zimmer’s explanation in the witness box (in effect that he simply did
not respond because Mr Grüterich’s
account was incorrect) seems
surprising in that it might have been expected that Mr Zimmer would wish to
correct Mr Grüterich
as soon as possible if his account were wrong, it
is at least on one view consistent with a need for Mr Zimmer to obtain approval
as to any such arrangement (which is what ultimately was his response when
Mr Grüterich pressed for confirmation that his “private
topic” was confirmed (see the email of 23 December 2017) and Mr Zimmer
then made clear that he had to seek approval from Mr
Reiff).
- Furthermore,
there is nothing in Mr Grüterich’s 13 December 2017 email to
Mr Zimmer about other entitlements (such as two company cars or as to the
private travel business class budget).
Rather, Mr Grüterich’s email
focusses on the base salary adjustment and to the proposed arrangement for his
annual bonus
share (with a minimum of €50,000). It seems clear from other
communications around this time that what is being pressed by
Mr Grüterich
is the confirmation as to those salary/bonus components (and that
Mr Grüterich was content with an email approval
at that stage though
contemplating that the arrangements be “done in proper format” at a
time convenient to Mr Zimmer).
- Pausing
here, as to the alleged conversation with Mr Reiff, although I have concluded
that a Jones v Dunkel inference should be drawn from his absence from the
witness box, as adverted to above such an inference does not extend to an
inference
that the evidence that Mr Reiff would have given would have been
positively damaging to Rema Tip Top’s case; just that it would
not have
assisted it.
- As
it is, there are doubts as to the reliability of Mr Grüterich’s
recollection of events in general. Mr Labbé’s
evidence supports the
conclusion that Mr Grüterich told Mr Reiff that he wanted a two to
three year contract. Mr Labbé,
however, gives a different account as
to Mr Reiff’s response (though conceding that he did not hear the whole of
the conversation).
- Mr
Reiff is not a director of Rema Tip Top (see T 463; 476) as Rema Tip Top points
out, albeit that the evidence was that his directions
were usually (if not
invariably – as for example his direction for Mr Grüterich to
relocate to Newcastle, which seems
to have been honoured in the breach) followed
by others in the subsidiary companies; hence at best this would be a
representation
that he would cause such a variation to the contract.
- Even
if (and I am left in considerable doubt as to this) Mr Grüterich’s
evidence were to be accepted that Mr Reiff made
the “two year
handshake” statement, it still does not gainsay that it was clearly
expected that any agreed variation
to the contractual arrangements would be in
writing (though I accept that it squarely raises the misleading or deceptive
conduct
issue, which I address in due course). I consider that it is clear that
the parties understood that contractual terms were to be
in writing (see the
terms of the Employment Contract itself). The very fact that Mr Grüterich
was pressing throughout the period
from his appointment as managing director up
to the end of 2017 for the new employment agreement to be documented and then
for there
to be other terms or variations of that agreement also documented,
suggests that he was well aware of this.
- It
is significant in this regard that the December 2017 email exchange makes clear
that Mr Grüterich well understood the need
to have something confirmed by
Mr Zimmer and Mr Zimmer’s response made it clear that changes needed
approval from Rema Tip
Top AG (or Mr Reiff).
- In
light of the above, I find that the issue by Rema Tip Top of the notice of
termination, coupled with payment of six months’
salary in lieu, did not
amount to a wrongful repudiation of the Employment Contract; and operated
validly to bring that contract
to an end.
- I
consider in due course Mr Grüterich’s cross-claim for misleading or
deceptive conduct and to the claims for restitution
and misleading or deceptive
conduct made by Rema Tip Top in relation to the termination payment (and to Mr
Grüterich’s
claims as to his long service leave entitlements), after
considering the various payments received by Mr Grüterich during the
course of his employment with Rema Tip Top that Rema Tip Top alleges were
unauthorised.
Alleged unauthorised
payments/appropriations
- Rema
Tip Top contends that Mr Grüterich’s conduct causing the payment to
himself of various monetary amounts (which it
alleges were without authorisation
and to which he was not contractually entitled) was in breach of his Employment
Contract, in breach
of his fiduciary duty as Managing Director; and in breach of
his statutory obligations under s 182(1) of the Corporations Act. Rema
Tip Top further contends that Mr Grüterich’s conduct in relation to
the receipt of these funds amounted to serious
misconduct entitling it summarily
to terminate his employment without notice (and providing an answer to Mr
Grüterich’s
claim for long service leave).
- I
consider the various categories of expenses/payments below.
Car
allowance
- It
is not disputed that, following a direction given by Mr Grüterich to Mr
Taylor on 17 February 2017, Mr Grüterich received
a payment of $1,750
(gross) each month (totalling in all $22,750 (gross) per annum) as a “car
allowance”.
- Rema
Tip Top maintains that the Employment Contract did not confer on
Mr Grüterich any entitlement to a car allowance; that while
Mr
Grüterich had access to a company car (at the cost of Rema Tip Top) at all
times during his employment this was as a discretionary
benefit (not as a
contractual entitlement); and that it did not authorise the payment to Mr
Grüterich of a car allowance. Even
if Mr Grüterich had (which Rema Tip
Top disputes) a contractual entitlement to the use of a second car or was
otherwise permitted
to use a second company car, Rema Tip Top says that Mr
Grüterich was not justified in paying himself a car allowance without
Rema
Tip Top’s approval (regardless of whether he thought the return of the
second car to Rema Tip Top was a basis for the
payment of such an
allowance).
- Mr
Grüterich’s contention is that: from about August 2016, he was
entitled to the use of two company cars (one for him
and one for his then
partner, Ms Denise Dropova, who had migrated with him to Australia); he
returned the second car (the one his
partner was using) to Rema Tip Top in early
2017; and, following a conversation with Mr Malsem (then the Chief Financial
Officer
of Rema Tip Top) in February 2017, he (Mr Grüterich) understood
that he was entitled to a car allowance because he no longer
had access to a
second car. This is alleged by Mr Grüterich to have given rise to an oral
variation to the Employment Contract
or, in the alternative, is relied upon by
him as one of the representations made in February 2017 on which he makes a
claim of misleading
or deceptive conduct contrary to s 18 of the Australian
Consumer Law.
- Mr
Grüterich’s affidavit evidence of the circumstances in which he gave
the direction to Mr Taylor was that: prior to receiving
a car allowance, he was
entitled to the use of two company cars (one for him and one for his then
partner); that he no longer had
access to a second company car in or around
mid-February 2017; and (at [195] of his first affidavit)
that:
... I decided that it was an appropriate time to request that a car allowance be
put in place instead, in place of one of the two
vehicles guaranteed to me under
the DBS Secondment Agreement ... and the email of 25 November 2015 from Mr Wach
...
- In
the conversation that Mr Grüterich claims to have had with Mr Malsem (see
[197] of Mr Grüterich’s first affidavit)
in early to mid-February
2017 (said to be “as a result of handing back the VW Passat”), Mr
Grüterich says that he
asked Mr Malsem “what is the usual car
allowance” and that Mr Malsem replied “[t]here are two, but for
executives
its $21,000 annually” (after which Mr Grüterich gave
the 17 February 2017 direction to Mr Taylor), Mr Grüterich deposes
(at
[199] of his first affidavit) that, based on this conversation with
Mr Malsem, and his direction to Mr Taylor, he received a
monthly car
allowance “in place of having access to a second vehicle”.
- In
his affidavit affirmed 15 May 2019, that was produced in the course of the
hearing after a subpoena had been issued at Mr Grüterich’s
request
and on which Mr Malsem was not cross-examined, Mr Malsem recalls that, when he
worked for Rema Tip Top, Mr Grüterich
had two company cars (that evidence
was read as evidence of the deponent’s understanding). Mr Malsem also
deposes to a conversation
that occurred in June 2016 with Mr Grüterich and
Mr Wieczorkowski at Rema Tip Top’s Chullora office, in which Mr Malsem
says he questioned why Mr Grüterich’s partner had a company vehicle
and Mr Grüterich replied “[i]t is part
of my arrangement that
was transferred from South Africa as approved by Thorsten Wach”.
- Mr
Malsem says that, when he left Rema Tip Top in February 2017,
Mr Grüterich had two company cars (an Audi Q7 and a Volkswagen
Passat). Mr Malsem says that Rema Tip Top also provided Mr Grüterich with
other cars at various times, including a BMW X6, Audi
A5, and Skoda Octavia
RS.
- In
relation to the issue of the car allowance, Mr Malsem deposes that (and this was
read as evidence of his understanding) that “there
was a general company
policy that a person could substitute a company car that they were entitled to
for a car allowance instead”.
He continues:
... The car allowance was set at $21,000. This allowance was calculated based on
an estimate of the annual running costs of a company
vehicle as calculated by
the Convatech Group Finance Team.
The provision of a car allowance was covered in the general company policy of
the Convatech Group, and to the best of my knowledge
it was available to anyone
who had an entitlement to the provision of a company car. [this was read as
evidence of the witness’
understanding]
- Mr
Malsem says that, in late 2016, he spoke with Mr Grüterich about the car
allowances (in light of the fact that there was a
general review being
undertaken regarding ConvaTech Group’s company car policy) and
Mr Grüterich said that they should
implement the ConvaTech car
allowance across the group. Mr Malsem says (and this evidence was read as his
understanding only) that
ConvaTech’s car policy was then “rolled
out” at Rema Tip Top.
- Further,
Mr Malsem deposes (and this evidence was also read as his understanding only)
that “[i]t was not uncommon for [Rema
Tip Top] to make verbal arrangements
with employees which were not documented”. He says that, in around June
2016, he said
to Mr Grüterich that “[y]ou should really document
everything you are entitled to with a contract or written confirmation”
and Mr Grüterich responded “[i]t’s fine. I have [a] hand-shake
arrangement with Thorsten Wach & Heinz Reiner
Reiff. Their word is good
enough for me as that is how Rema Tip Top operates”.
- Last,
Mr Malsem also deposes that it was his understanding, during his time at Rema
Tip Top, that “directors had unlimited delegation
on expenditure and that
directors could authorise any expenditure”.
Rema Tip
Top’s submissions regarding the car allowance
- Rema
Tip Top argues that Mr Grüterich’s defence of the car allowance claim
should be rejected for a number of reasons.
- First,
as to the alleged conversation with Mr Malsem, Rema Tip Top notes that Mr Malsem
(in his position as Chief Financial Officer)
reported to Mr Grüterich
and could not authorise the payment of a car allowance for a superior (and, it
says, Mr Grüterich
could not reasonably have expected Mr Malsem to do
so). Further, it says that there is nothing in Mr Grüterich’s account
of the alleged conversation with Mr Malsem that indicates that Mr Malsem
was purporting to authorise the car allowance. Moreover,
it is noted that Mr
Malsem gave notice of termination of his employment (via Mr Grüterich)
on 17 January 2017; and that on 20
February 2017, Mr Malsem agreed with Mr
Grüterich that Mr Malsem’s last day would be 24 February 2017. Rema
Tip Top argues
that it does not make any sense for Mr Grüterich to have
asked Mr Malsem in early to mid-February 2017 (i.e., at about the time
that Mr
Malsem was to leave the company) whether he (Mr Malsem) was “still happy
with your Skoda” and for Mr Malsem to
have replied “[y]eah its
perfect for me”.
- Second,
it is noted that the Employment Contract (signed just three days earlier than
the direction) not only conferred no entitlement
to a car allowance (or use of a
car) but contained both an entire agreement clause (cl 21.2(a)) and a no oral
modification clause
(cl 21.1); and that neither the DBS Secondment Agreement not
Mr Wach’s 25 November 2015 email (referred to by Mr Grüterich
at
[195] of his first affidavit) conferred an entitlement to a car allowance on Mr
Grüterich (the latter referring only to “a
company car to be provided
in accordance with local standards”). Further, Rema Tip Top says that Mr
Grüterich was aware
that when Mr Wieczorkowski had received a car allowance
in lieu of access to a company car, this was pursuant to a formal written
variation to his contract.
- Third,
Rema Tip Top argues that Mr Grüterich’s evidence that he believed he
had an entitlement to the use of two cars should
not be accepted. It is noted
that the draft contract prepared by Mr Taylor and emailed by Mr Grüterich
to Mr Kopp on 16 December
2016 proposed that Mr Grüterich be granted as an
additional benefit “access to company car” (in the singular), not
two company cars; and it is submitted that this is a more reliable reflection of
Mr Grüterich’s understanding of what
his entitlements were in late
2016 and early 2017, than the evidence he gives in his affidavit. Insofar as Mr
Grüterich’s
evidence that he believed he had an entitlement to the
use of two cars on the basis of an alleged conversation with Mr Wieczorkowski
in
March 2016 (in which he says Mr Wieczorkowski told him that he should consider
the Skoda part of his package), it is noted that
on 27 August 2017 Mr
Grüterich (in the context of preparation of a proposal for Mr
Wieczorkowski’s exit) had emailed Mr
Taylor (copying Mr Malsem) and asked
for a summary of:
... where Peter [Wieczorkowski] is not performing
Or even allegedly acting against Director duties
in response to
which Mr Taylor the following day listed (apparently as an instance of Mr
Wieczorkowski not performing or even allegedly
acting against director duties),
Mr Wieczorkowski giving employees “additional entitlements above the
requirements stipulated
in their contracts of employment ... employees being
given fully maintained motor vehicles (Dorothy Persic)”, which Mr Taylor
then clarified as follows:
My apologies Christian I meant she was given a fully maintained car and fuel
card whilst she worked for us even though she was not
entitled to one in her
contract.
- It
is submitted by Rema Tip Top that, in the light of Mr Taylor’s emails,
Mr Grüterich could not reasonably have relied
on Mr
Wieczorkowski’s email of 18 August 2016 or the alleged conversation with
Mr Wieczorkowski in March 2016 as supporting
an entitlement to the use of two
company cars.
- Rema
Tip Top also points to evidence that contradicts the suggestion by
Mr Grüterich that after mid-February 2017 Mr Grüterich
only had
the use of one company car: noting that there is considerable evidence that Mr
Grüterich continued to use the Skoda
after Mr Malsem left the company
(including communications that disclose that Mr Grüterich had the keys or
one set of keys to
the Skoda and that he had incurred a traffic infringement in
relation to the vehicle); that the company vehicle register which showed
Mr
Grüterich as a “Regular Driver” of one vehicle (Audi Q7) and
his partner as a “Regular Driver” of
the Skoda as at 16 June 2016;
and the evidence in cross-examination that Mr Grüterich had access to
and/or the use of up to
four company cars over the period of his
employment.
- Rema
Tip Top submits that Mr Grüterich’s assertion (at [199] of Mr
Grüterich’s first affidavit) that he paid
himself a car allowance
“in place of having access to a second vehicle” should be rejected.
As to the conversation with
Mr Malsem, Rema Tip Top contends that the
allegation at [41(b)] of the defence to the further amended statement of claim
that this
conversation resulted in a variation to Mr Grüterich’s
Employment Contract should be rejected. Rema Tip Top points out
that Mr Malsem
had not had anything to do with the negotiation of the terms of the Employment
Contract between 16 December 2016 and
14 February 2017 (and maintains that
the conversation is implausible as Mr Malsem was about to leave the
company).
- Finally,
as noted above, Rema Tip Top emphasises that even if Mr Grüterich believed
that he had an entitlement to the use of
two company cars he was not justified
in “exchanging” one of those cars for a substantial ongoing cash
allowance without
the approval of Rema Tip Top; and points to the evidence of Mr
Slattery that the company’s board of directors did not approve
the payment
of a car allowance to Mr Grüterich at any time.
- It
is submitted that by giving the direction as to a car allowance to Mr Taylor,
and retaining those payments, Mr Grüterich engaged
in serious and wilful
misconduct. It is submitted that Mr Grüterich must have known that he was
not entitled to this car allowance;
and that it was dishonest of him to retain
it. (In this regard, I note that on 12 January 2018, Ms Fairclough emailed
Mr Grüterich
to confirm that the car allowance was still to be paid,
in circumstances where Mr Grüterich had issued the double salary direction
– see below – and he confirmed that it was to
remain.)
Mr Grüterich’s submissions regarding the car
allowance
- In
his submissions, Mr Grüterich says that, throughout his employment with
Rema Tip Top and its related entities, he was given
the use of various company
vehicles, including a vehicle for use by his partner; and that when the use of
those vehicles was no longer
required by his partner, Mr Grüterich enquired
with Mr Malsem as to what the appropriate vehicle allowance was in lieu of using
a company vehicle and was informed that it was $21,000 per annum. Mr
Grüterich says that, relying upon this conversation, he
was paid the car
allowance in lieu of use of a company vehicle and there is no reason to conclude
that this involved any misconduct.
- It
is submitted that the payment of the car allowance to Mr Grüterich was
consistent with the payment of a car allowance to other
staff, including
Mr Wieczorkowski (Mr Grüterich pointing to an email that was sent by
Mr Wieczorkowski to Mr Grüterich
on 18 August 2016 (Exhibit 1) in
which Mr Wieczorkowski (responding to a request from Mr Grüterich to
send a “quick overview”
on who in Chullora “has got what
company car and values and whether it is asset or lease”) included the
following: “Christian
[Mr Grüterich] – BMW X6 / Mini
cabriolet, salary-packaged”; and that Mr Wieczorkowski also stated in
that email
that he (Mr Wieczorkowski) was entitled to a car allowance of $1,750
per month (i.e., $21,000 per annum)).
- Mr
Grüterich points to this documentary evidence as corroborating
Mr Grüterich’s and Mr Malsem’s evidence. It
is submitted
that there is no reason to conclude that the payment of a $21,000 per annum car
allowance to Mr Grüterich involved
any misconduct. In this regard, Mr
Grüterich also attaches significance to the fact that Mr Malsem was not
called as a witness
by Rema Tip Top and that, when Mr Grüterich himself
adduced evidence from Mr Malsem, Rema Tip Top chose not to cross-examine
him.
- Further,
it is submitted that the position of Rema Tip Top that this was a discretionary
entitlement is inconsistent with a finding
that there was any dishonesty
attached to Mr Grüterich’s receipt of the car allowance (even if it
was unauthorised).
Evidence as to authority matrices
- At
this point it is relevant to note the affidavit evidence in reply of Mr Davison
(an affidavit affirmed 15 May 2019) to which objection
was taken by
Mr Grüterich and which I provisionally admitted indicating that I
would rule on its admissibility in final reasons
(to which I now turn) as to
certain authority matrices. In his affidavit, Mr Davison refers to the document
tendered by Mr Grüterich
as Exhibit 8 in the proceedings –
namely, the two excel spreadsheet documents headed ‘Expenditure Authority
Matrix –
Convatech’, which he describes as “a draft of the
“Delegations of Authority Matrix” that he and Mr Malsem
created in
or about September 2016, following the merger of [Rema Tip Top] and ConvaTech.
Mr Davison says that these were “never
approved for use by the directors
of [Rema Tip Top]”.
- Mr
Davison deposes that Mr Malsem (who was then the Chief Financial Officer of Rema
Tip Top) sent an email to Mr Grüterich that
was copied to him, in which Mr
Malsem stated “here is the draft DOAG” (a copy of that email and its
attachment is marked
as Annexure A to the affidavit).
- Mr
Davison then summarises briefly the separate divisions of Rema Tip Top (being
the material processing division; the automotive
division; and a shared services
division). He deposes that between July and November 2016 he and Mr Malsem
“developed delegations
of authority matrices for the three
divisions” of Rema Tip Top. According to Mr Davison (and this was read
subject to weight),
“[s]everal iterations of the matrices were developed;
those iterations were refined”; and, on about 1 November 2016,
Mr
Grüterich “signed” the delegations of authority matrices in
respect of the shared services and automotive divisions
of Rema Tip Top. Mr
Davison’s understanding was that the approved form incorporated a dual
sign-off requirement.
- Mr
Davison deposes that, on or about 2 November 2016, Mr Malsem sent an email to
the senior managers of Rema Tip Top (which was copied
to, among others, Mr
Grüterich) stating:
Please find attached the approved delegations of authority for the Automotive
& Shared Services Divisions.
Can you please cascade to the relevant people in your teams.
Additionally, can you please review and amend any associated expenditure forms,
systems or templates accordingly.
...
- Mr
Davison says that attached to that email was an excel format document entitled
“Delegations of Authority – SS & Auto”, which
incorporated the ratified versions of the Shared Services and Automotive
matrices as was “scanned versions of those
spreadsheets bearing Mr
Grüterich’s signature (indicating that the matrices had been approved
by Mr Grüterich) and
dated 1 November 2016”. (A copy of the email and
its attachments are Annexure B to this affidavit.) Mr Davison deposes (and
again
this was read subject to weight as going to his knowledge and
understanding):
From at least 2 November 2016 until 31 March 2018, the Approved Delegations of
Authority Matrices for the Share Services and Automotive
divisions of [Rema Tip
Top] were substantially in this form. It is the document that was used by [Rema
Tip Top] in that period, and
not Exhibit 8. To my knowledge, the dual signoff
requirement and expenditure limits relating to the line items in the Approved
Delegations
of Authority remained the same during this time.
- Mr
Davison’s understanding of the Approved Delegations of Authority Matrices
was that: his authorisation to incur any expense
on behalf of the company during
the period between 1 November 2016 and 31 March 2018 was subject to the terms of
the Approved Delegations
of Authority Matrices; if he were to purchase
equipment, such as office furniture, on behalf of the company (referring to row
fifteen,
column “E”) his authorisation to incur capital expenditure
in respect of furniture would be $9,999.99; if he were to
purchase a motor
vehicle on behalf of the company (referring to row seventeen, column
“E”) the limit of his authorisation
in respect of motor vehicles
would be $49,999.99; and if he were to organise entertainment on behalf of the
company (referring to
row 25, column “E”) the limit of his
authorisation in respect of entertainment expenses would be $1,999.99.
- Finally,
Mr Davison deposes to his understanding that if he “needed to purchase
item/s above the limits specified in the above
examples, the Approved
Delegations of Authority required [him] to seek the approval of two
directors”.
- Mr
Grüterich’s submissions as to matrices
- Mr
Grüterich emphasises that Rema Tip Top did not adduce evidence of any
written policies specifically for: the use of company
credit cards; travel
expenditure; rental accommodation; purchasing furniture for rental
accommodation; education allowances and expenses;
or bonus payments.
- As
to the series of spreadsheets entitled “Delegations of Authority
Matrix”, Mr Grüterich contends that the proper
interpretation of
the document is far from clear. It is said that if the expenditure was
business-related and Rema Tip Top wishes
to prove it was unauthorised, the onus
is on Rema Tip Top to prove first that it exceeded the threshold in the fourth
column and
then that the particular expenditure in question was in fact not
approved by two directors; and that it has failed to do this.
- Mr
Grüterich submits that if the Delegations of Authority Matrix applies:
first, the motor vehicle allowance paid to Mr Grüterich
was expenditure by
the business in lieu of the use of a motor vehicle (which falls within the
category ‘Motor vehicle’
in the first column) and that a $21,000 per
annum motor vehicle allowance does not exceed the $50,000 threshold in the
fourth column
and therefore did not require the approval of two directors;
second, in relation to Rema Tip Top’s allegations regarding travel
budgets, there is no limit specified in the fourth column (and therefore Mr
Grüterich’s authority was unlimited in relation
to his expenditure on
travel, which is said to be consistent with Mr Grüterich’s evidence)
and in any event, his expenditure
on travel was co-approved as a budget by Mr
Wach, one of the named directors in the Matrix; third, that the education
allowance (referred
to in the Statement of Claim as the ‘Double
Salary’) may fall within one of the two ‘Training’ categories
in the first column (and if so, Rema Tip Top has failed to prove that the
education allowance was not approved by two directors)
but in any event, the
amount was authorised in the March 2017 letter. As to the furniture claim, an
item for furniture appears in
the first column and the threshold specified in
the fourth column is $10,000 but it is said that Rema Tip Top failed to adduce
evidence
from any of Mr Reiff, Mr Wach or Mr Malsem (or even ask any questions
of Mr Malsem in cross-examination) that they did not approve
the attempted
purchase of the Poliform furniture. It is submitted that it is not enough that
one director (Mr Slattery) says that
he would not have authorised it if he had
been asked to. Accordingly, it is said that Rema Tip Top has failed to prove
that the attempted
purchase of the Poliform furniture was unauthorised.
- Mr
Grüterich points to Mr Slattery’s evidence that in his role as
advisory director he did not have authority to approve
any expenditure by Rema
Tip Top and says that that is inconsistent with the Delegations of Authority
Matrix and Mr Davison’s
evidence about its operation.
- Further,
it is noted that Rema Tip Top seeks to rely on the Delegations of Authority
Matrix, yet does not make any claim in relation
to Mr Grüterich’s
purchase of multiple vehicles, including the BMW X6, the Audi Q7 and the Tesla
Model S, which, if Rema
Tip Top is correct, would have required the approval of
two directors under the Delegations of Authority Matrix.
- Finally,
Mr Grüterich points to the fact that Rema Tip Top failed to cross-examine
Mr Grüterich on the Delegations of Authority
Matrix at all, let alone as to
whether he complied with it in relation to particular expenditure and payments
made to him. Accordingly,
it is submitted that the Delegations of Authority
Matrix (the first version of which was adduced before Mr Grüterich’s
cross-examination: Exhibit 8) cannot fairly now be deployed against him in
closing argument (referring to the rule in Browne v Dunn (1893) 6R
67).
- Determination as
to admissibility of the evidence of the delegations of authority
- I
accept that the circumstances in which evidence as to the authority matrices
emerged was less than satisfactory, in the sense that
if these were policies
that applied during Mr Grüterich’s employment and were relevant to
the allegation that certain
expenditure or payments to him was or were
unauthorised, then it would be expected that this evidence would have been
disclosed at
a far earlier time. However, it must be borne in mind that Rema Tip
Top disputes that these authority matrices applied at all; and
Mr Grüterich
did not rely on them in his affidavit evidence. The first delegation of
authority document (Exhibit 8) was produced
as a result of a call for production
of such a document and was tendered in the course of cross-examination of
Mr Grüterich.
The documents ultimately relied upon by Mr
Grüterich (and referred to by Mr Malsem in his evidence) were not available
at the
time that Mr Grüterich was being cross-examined.
- To
the extent that Mr Grüterich had adduced evidence from Mr Malsem as to the
matrices documents, I considered that procedural
fairness required that Rema Tip
Top have an opportunity to adduce evidence to explain its understanding of those
documents. I made
it clear to Mr Grüterich that I would permit him to give
further evidence in chief to response to the evidence from Mr Davison
as to the
matrices and he chose not to take up that opportunity.
- The
upshot of all of that was that the whole issue of the matrices of authority
documents proved to be a furphy – it is tolerably
clear that in terms they
did not apply to Mr Grüterich (and, even if they did, it would not assist
him insofar as the level
of expenditure would have required two director
approval). It is clear that Mr Grüterich sought no approval for the bulk if
not all of the expenditure disputed.
- Accordingly,
given the relevance of the evidence of Mr Davison to the questions arising from
Mr Malsem’s late adduced evidence,
and given that I had permitted Mr
Grüterich an opportunity to meet that evidence if he so wished by further
evidence of his
own, I consider that the evidence should be admitted without
qualification (other than as to its weight).
Determination as to
car allowances having regard to the above
- In
terms of the chronology of events, it is not insignificant that the direction
that Mr Grüterich issued to Mr Taylor to change
his pay and add the annual
car allowance occurred after the terms of the Employment Contract had been
negotiated (in communications
involving Mr Wach, Mr Kopp and Mr Ubelacker)
between December 2016 and 14 February; just three days after Mr Grüterich
had executed
the 14 February 2017 Employment Contract.
- The
Employment Contract made no provision for a car allowance (cf the Rema
Tip Top SA contracts and the DBS Side letter), let alone provision for the use
of two company cars. Mr Grüterich said
in his email to Mr Taylor that he
would “get provided another side letter” but there is no evidence of
any side letter
concerning a car allowance being provided to Mr Taylor at any
time.
- To
the extent that Mr Grüterich there placed reliance on the DBS contractual
arrangements, this does not assist him in establishing
that he had a contractual
entitlement vis a vis Rema Tip Top. Not only are they different corporate
entities, it is clear from the various contracts that Mr Grüterich signed
in relation to his South African (and then Australia) deployments that there was
a clear demarcation between his DBS entitlements
and those under his Australian
contract. The suggestion that he could continue to rely on his “ex
pat” benefits, at least
after he became Managing Director, is inconsistent
with his recognition that a side letter of some kind might be required (in that
he indicated to Mr Taylor that one would be provided).
- The
conversation with Mr Malsem cannot possibly have amounted to authorisation to
claim a car allowance – in its terms it did
no more than establish a basis
for how such an allowance would be calculated; and Mr Malsem was not in the
position on his own to
give such authorisation even leaving aside the fact that
he was about to leave the company at that time which makes it implausible
that
he would have felt it appropriate to grant any such authorisation.
- As
to whether there was a company policy in relation to a car allowance,
Ms Fairclough has deposed “[d]uring my 2 years at [Rema
Tip Top] and
my 14 years at Convatech prior to that, I cannot recall ever paying a car
allowance to any employee who was also provided
with a company car at the cost
of [Rema Tip Top]”. Mr Slattery’s evidence was that he was not aware
of any company policy
in the Rema Group as to car allowances (though, as the
evidence makes clear, there was such an allowance in the case of
Mr Wieczorkowski
– though there that was documented as part of a
contract variation).
- Mr
Malsem’s evidence is obviously to the contrary. However, Mr Malsem’s
evidence largely depends on the ConvaTech delegations
of authority being
“rolled out” generally and there is no contemporaneous documentary
evidence to support this. (And
Mr Malsem’s understanding that directors
had unlimited delegation on expenditure beggars belief.)
- I
consider that Mr Grüterich must have known that he was not entitled (under
his written contractual arrangements) to the payment
of an annual car allowance
and that, even if he genuinely believed that he was entitled to the use of two
cars and that he could
substitute one of those cars for a car allowance, it is
clear that Mr Grüterich continued to have access to and at least occasional
use of more than one car during the time that he was receiving the annual car
allowance. In those circumstances, it is incomprehensible
that Mr Grüterich
could have understood that he was entitled to a separate car allowance on top of
the use of at least one and
from time to time more than one company car.
- I
do not accept that the evidence establishes that the use of more than one
company car was authorised but, even if this was a discretionary
benefit, I do
not see any basis for concluding that receipt of the car allowance was
authorised (and particularly where the factual
premise for this – that
Mr Grüterich no longer had use of a second company car – was
clearly false). In those circumstances,
I am satisfied that this was an
unauthorised expenditure of company funds. Moreover, while I accept that Mr
Grüterich might
mistakenly have believed that he was entitled to a
discretionary benefit in the use of more than one company car (and even where
I
am prepared to accept that he might have considered that there was a precedent
for the taking of a car allowance in lieu), the
suggestion that he could do so
without a contract variation is inconsistent with communications in relation to
potential misconduct
by Mr Wieczorkowski in authorising just such an allowance
outside an employee’s contractual arrangements. More pertinently,
it does
not explain how any such entitlement could honestly be claimed when
Mr Grüterich still clearly had the use (albeit from
time to time) of
more than one company car.
- I
consider that Rema Tip Top’s claims in relation to the car allowance are
made good and that Mr Grüterich’s conduct
in relation to this
allowance was not honest.
Double salary payments
- There
is no dispute that Mr Grüterich received the three “double
salary” payments of $23,333 following his 12 December
2017 direction to
Ms Fairclough. Rema Tip Top maintains that he was not entitled to these
moneys under the Employment Contract, noting
(as is self-evident from the
English translation) that the 2017 Education Support Letter (which
Mr Grüterich told Ms Fairclough
to put on the file to cover herself in
that regard) provides no justification for these payments.
- In
relation to the double salary, Ms Fairclough deposes: that on 12 December 2017
she received an email from Mr Grüterich directing
her to pay him double his
normal salary for the next three pay runs; that, prior to this, Mr
Grüterich had not given her a direction
to cause Rema Tip Top to pay money
to him; that she assumed this request was “private, and possibly of a
sensitive nature”
and that was the reason Mr Grüterich had approached
her directly; that she requested further information from Mr Grüterich
to
cover herself; and that Mr Grüterich provided via email a letter written in
German for her files “to cover” herself.
Ms Fairclough says that she
cannot read German but “understood by his email that the letter attached
to the email authorised
the payment of Mr Grüterich’s double
salary”.
- Ms
Fairclough says she then spoke to Mr Davison who said there was “nothing
more” to do and she subsequently sent an email
on 12 January 2018 to Mr
Grüterich confirming that the extra salary payment had been made.
Ms Fairclough deposes that:
On my reading of it, I understand that the document [i.e., the 2017 Education
Support Letter] does not authorise Mr Grüterich
to receive a double salary
from January 2018 to March 2018 but rather concerns an educational allowance.
For that reason, had I been
shown this letter by Mr Grüterich in 12 January
2018, I would have requested more information about the authorisation for that
salary payment.
(I note that the first sentence was read as
evidence of the deponent’s understanding only and the second sentence was
read as
going to her state of mind.)
Rema Tip Top’s submissions regarding the double salary
payments
- It
is submitted that even if Mr Grüterich genuinely believed that the 2017
Education Support Letter gave him an entitlement to
the double salary payments,
that belief could not have been reasonable having regard (amongst other things)
to the terms of the letter
and the very nature of the benefit to which it
referred. Rema Tip Top also notes that Mr Grüterich did not seek the
approval
of Rema Tip Top before determining that he could convert an education
allowance into straight cash payments.
- Rema
Tip Top notes that the 2017 Education Support Letter is dated 8 March 2017; it
is not from Rema Tip Top (rather, it is from Rema
Tip Top AG, and signed by Mr
Wach, the then Chief Executive Officer of Rema Tip Top AG). Rema Tip Top further
notes that by 12 December
2017 (when the 2017 Education Support Letter was
provided to Ms Fairclough to be filed in relation to the double salary
direction)
Mr Wach had been suspended by Rema Tip Top AG (this occurred in late
August 2017) and had not been performing his role from that
date; and that Mr
Grüterich was aware of this.
- Rema
Tip Top emphasises that Ms Fairclough cannot read German and that Mr
Grüterich had no reason to expect that she could read
German when he sent
the letter to her.
- Mr
Grüterich’s evidence is that the education grant had an expiration
date of December 2017 and that he understood it to
be a “fixed
grant” and that payment “could be made either before or after I
undertook any study, and without the
need to provide invoices or receipts prior
to obtaining reimbursement”. Mr Grüterich says that during his
employment with
Rema Tip Top, he attempted to enrol in a number of subjects in
respect of his doctoral studies, but, due to his work load and work
commitments,
he was unable to finalise any of his enrolments and placed his higher education
“on hold”. Mr Grüterich’s
evidence is that he instructed
Ms Fairclough to make the payment “of the remaining educational allowance
in three equal and
consecutive payments of $23,333.00 totalling the amount of
$69,999.33” which he calculated by taking €30,000 00 multiplying
it
by an exchange rate of 1.5873 and grossing that up by 47%, which gave a total
figure of $69,999.93.
- Rema
Tip Top submits that this evidence should be rejected. It contends to findings:
that Mr Grüterich had no entitlement to
be paid the three amounts of
$23,333 over and above his usual monthly salary amounts; that Mr Grüterich
knew this when he gave
his direction to Ms Fairclough to make those payments to
him; and that his actions were dishonest. In that regard, Rema Tip Top relies
on
the following matters.
- First,
that there is nothing in either letter that supports Mr Grüterich’s
“understanding” that he was able
to take this allowance before or
after he undertook any study; to the contrary, it is said that the financial
support was to be used
on a designated course of study, Doctor of Business
Administration, to be undertaken between 2014 and 2017. Rema Tip Top says that
it is also clear that the financial support was not to be paid to Mr
Grüterich, but to a third party (or third parties) in connection
with his
studies, noting that the 8 March 2017 letter states that part of the
allowance had already been paid to Acad International
Research AG (and that Mr
Grüterich had no connection with that organisation).
- Second,
that the financial support was promised to Mr Grüterich from DBS (initially
in 2014) and then Rema Tip Top AG (in March
2017), not Rema Tip Top. It is
submitted that there was no justification for Mr Grüterich taking Rema Tip
Top’s money
purportedly as part of a benefit granted to him by two
different entities. It is also noted that the financial support was promised
in
a foreign currency, which it is said indicates it was to come from an entity
other than Rema Tip Top (an Australian company).
- Third,
Rema Tip Top submits that Mr Grüterich’s calculations are not
consistent with him having a genuine belief that the
2017 Education Support
Letter justified his direction to Ms Fairclough. It is noted that that letter
indicates that the balance remaining
was “€ 22,034 00 gross”.
Rema Tip Top says that, applying the exchange rate Mr Grüterich says he
used in his
calculations (1.5873) gives an amount of $34,974.57. It is said that
Mr Grüterich’s evidence that he “grossed”
up the
Australian dollar figure does not make any sense, noting that the 8 March 2017
letter indicates clearly (in three places)
that the payments are to be gross
(and not net) amounts.
- Fourth,
Rema Tip Top points to Mr Grüterich’s acceptance in cross-examination
that the balance of the education support
stated in the 2017 Education Support
Letter should have been reduced by €2,950 on 14 March 2017 and by a
further €6,450
on 19 May 2017. It is noted that had those two amounts been
deducted, the balance outstanding would have been reduced to €12,634
and
that, applying the 1.5873 exchange rate, this amounts to an amount of $20,053
95. It is noted that Mr Grüterich did not
explain why he failed to take
those two payments into account when he gave his 12 December 2017 direction
to Ms Fairclough. Rema
Tip Top submits that the fact that the amounts Mr
Grüterich directed Ms Fairclough to pay to him bore no relationship to the
balance of the education support allowance remaining at that time
(€12,634), clearly indicates that his payment direction had
nothing to do
with the 2017 Education Support Letter.
- Fifth,
that when Mr Grüterich was told that his employment was to be terminated
(three months later), on 15 March 2018 he calculated
his “list of
entitlements” and sent an email to Mr Slattery “regarding my
entitlements as calculated by me”,
stating in that email that he had
prepared a list of his entitlements that he believed were
“legitimate” based on supporting
documents “received from
superiors, directors and Ex-directors”.
- Attached
to the email was an excel spreadsheet titled calculation and there was a line
item in the spreadsheet (Item J – ‘Doctorate
agreement’
– 22k Euro net – Remainder – $51,464.60), which line item was
also contained in the further version
of this spreadsheet sent by Mr
Grüterich to Mr Slattery and Mr Labbé at 9.16am on 16 March
2018.
- Rema
Tip Top notes that earlier, at 3.35 pm on 15 March 2018, Mr Grüterich had
sent the 2014 Education Support Letter to Mr Labbé
in an email in which
he said:
Attached is the Dr confirmation from DBS.
Are you still making progress or do you need anything else from me. I am still
finding the takeover confirmation of [Rema Tip Top
AG/ Rema Tip
Top].
- Mr
Labbé’s evidence is that he spoke with Mr Grüterich after
receiving this email and questioned how Mr Grüterich
could still have such
an entitlement; and that Mr Grüterich said to Mr Labbé that he still
had the entitlement and he
would show Mr Labbé another letter proving
this. Then, at 4.12 pm on 15 March 2018, Mr Grüterich sent Mr
Labbé
an email to which he attached the 2017 Education Support Letter
from Rema Tip Top AG, which said “Attached as discussed”.
- Rema
Tip Top says that, on Mr Grüterich’s evidence, his understanding was
that the entitlement to which these letters relate
expired in December 2017,
noting that he says that he read the 2017 Education Support Letter when he
received it. The effect of his
evidence, Rema Tip Top contends, is that he had
exhausted the entitlement by requesting and being paid the three amounts of
$23,333.33.
It says that Mr Grüterich’s attempt to explain this
evidence away as a mistake in cross-examination should be rejected.
- Rema
Tip Top contends that it is plain that Mr Grüterich used the German letters
regarding educational support twice to obtain
money from Rema Tip Top: first, in
December 2017 and then in March 2018 to support his claim for termination
entitlements. It is
submitted that this is a clear indication that
Mr Grüterich knew that he was not justified in doing so in December
2017; and
that Mr Grüterich’s actions were dishonest, both in
December 2017 and in March 2018.
- It
is submitted by Rema Tip Top that, on any reasonable view, if Mr Grüterich
genuinely believed (in December 2017) that he was
entitled to claim a cash
payment from Rema Tip Top in satisfaction of the benefit promised to him in the
German letters by different
corporate group companies, he would have sought
approval from a superior before directing a subordinate to make that payment to
him
(noting that at the time he gave the payment direction to
Ms Fairclough, Mr Grüterich was in Singapore and meeting with Mr
Zimmer
(his direct superior and Mr Wach’s successor) to discuss his
employment entitlements and that Mr Grüterich could easily
have raised this
with Mr Zimmer (or with any of Mr Reiff, Mr Slattery or Mr Labbé,
each of whom was present at the holding
meeting in Singapore)).
- Rema
Tip Top also points to the fact that Mr Grüterich gave his direction to Ms
Fairclough without any explanation in the first
instance and without any
supporting information or documents; that it was only after she questioned him
that Mr Grüterich provided
the 2017 Education Support Letter (in a language
he had no reason to believe she could understand and without any explanation of
how that letter supported his entitlement to the double salary payments as
opposed to a single lump sum payout of an allowance);
and that, in
cross-examination, Mr Grüterich said there was no reason why he chose not
to explain the payments to Ms Fairclough.
- Rema
Tip Top submits that the German letters clearly did not justify the
“Double Salary” direction (as, I interpose to
note, is apparent from
the documents themselves) and contends for a finding that this was apparent to
Mr Grüterich when he gave
his direction to Ms Fairclough.
Mr
Grüterich’s submissions regarding the double salary payments
- Mr
Grüterich says that Rema Tip Top’s claim that he was not entitled to
be paid an education allowance is inconsistent
with the objective evidence,
pointing to the 2017 Education Support Letter which Mr Grüterich says
confirmed that entitlement
continued after his employment with Rema Tip Top
commenced. It is said that the letter did not include any restriction on how, or
on the method by which, that allowance was to be paid; and hence that it cannot
be asserted that anything untoward occurred when
Rema Tip Top paid the allowance
to Mr Grüterich.
Determination as to the double salary
payments
- The
difficulty I have with Mr Grüterich’s position in relation to the
education allowance is that it is wholly implausible
that he considered that the
2017 Education Support Letter authorised the payment of “double
salary” in any particular
amount; and his sending of the letter to Ms
Fairclough (without any translation of it) as some form of authorisation for
those payments
(leaving aside the jocular tone in which the communication was
sent) is redolent of a concealment of the fact that it related to
a wholly
different topic or at least a consciousness of the fact that this was the
case.
- Mr
Grüterich’s conduct in this and other aspects of the case (in
particular his evidence as to the car allowance and the
private travel budget)
suggests that he may have adopted some form of quid pro quo philosophy in
his treatment of company funds (i.e., that if he was entitled to some form of
benefit – here the education support
allowance; elsewhere the use of one
or more company cars – it was open to him to take it upon himself to
obtain a monetary
payment in lieu). However, that said, there is no explanation
for the manner in which the equivalent amount of this allowance was
structured
by way of three double salary payments and, even if it was permissible to make
payment directly to himself (when the allowance
was for educational purposes),
the evidence shows that the amount claimed exceeded his then entitlements.
- Moreover,
as noted above, the circumstances in which he proffered a letter in German in
relation to the education allowance as support
for the payment of additional
salary is suggestive of a consciousness that he was not entitled to these
amounts. Mr Grüterich’s
later reliance on the 2017 Education Support
Letter (now conceded to be incorrect albeit said to be in error) when his
termination
entitlements were being calculated also is suggestive of a contrived
claim for additional moneys but it is not necessary to explore
that
further.
- I
find that Mr Grüterich was not entitled to the double salary payments the
subject of the direction he gave to Ms Fairclough
in December 2017/January 2018
and that the manner in which he sought to justify those payments is not
consistent with an honest belief
that he was entitled thereto at the time.
Accordingly, I find that his conduct was not honest in that
regard.
Bonus payment ($103,210.88)
- This
claim relates to a payment that Mr Grüterich directed Ms Fairclough to make
to him of $103,210.88 on 9 January 2018.
- Ms
Fairclough deposes that, on 9 January 2018, she received a “strictly
confidential” email (according to Mr Grüterich)
from Mr
Grüterich (copied to Mr Davison) stating that he should be paid an
extraordinary amount of $250,521.47 and that his
annual salary should be
adjusted from $280,000 to $427,310.59 from 1 January 2018 and that the email
forwarded an email from Mr Zimmer
with an attachment which were both in German.
Ms Fairclough describes this as “only the second time that [she] had
received
a direct request from Mr Grüterich regarding his pay”.
- Ms
Fairclough deposes that, upon reading the email on 10 January 2018; she spoke
with Mr Davison who told her “[y]ou should
investigate it, go and ask
Christian”. According to Ms Fairclough, she and Mr Davison then spoke to
Mr Grüterich who was
working at the Newcastle office at the time and
he explained that this payment was to be on top of the double salary and car
allowance
and that it had been authorised by Mr Zimmer. Ms Fairclough deposes
that she made the bonus payment on 12 January 2018.
- The
competing contentions on this aspect of the claim revolve around the
construction to be placed on the communications between Mr
Grüterich and Mr
Zimmer in January 2018 as to certain remuneration adjustments that Rema Tip Top
accepts were agreed with (or
at least granted to) Mr Grüterich in January
2018.
- It
is not disputed that, on 15 January 2018, Rema Tip Top agreed to increase Mr
Grüterich’s salary to $427,310.59, and
to make that increase
effective from 1 January 2017. Rema Tip Top accepts that this meant that Mr
Grüterich was entitled to
back-pay in the amount of $147,310.59. However,
Rema Tip Top says that Mr Grüterich was not entitled to the additional
amount
referred to in his email to Ms Fairclough (of 9 January 2018) of
$103,210.88.
- Mr
Grüterich’s contention is that this amount was payment of the sum of
€50,000 referred to in the €50,000
Bonus Letter.
Rema
Tip Top’s submissions regarding the bonus payment
- Rema
Tip Top disputes the contention that this amount was payment of the sum referred
to in the €50,000 Bonus Letter on the
following bases: first, that the
letter was an unsigned draft from DBS (not Rema Tip Top); and, second, that the
best evidence of
the terms of the remuneration adjustments agreed between Mr
Zimmer and Mr Grüterich is the Salary Progress Document which Rema
Tip Top
contends clearly does not indicate that Mr Grüterich would receive a bonus
of €50,000 in early 2018.
- It
is noted by Rema Tip Top that previous bonuses granted to Mr Grüterich by
DBS whilst he was working in Australia were paid
into a German bank account of
Mr Grüterich directly by DBS. The 28 February 2017 Termination Agreement
between DBS and Mr Grüterich
was made after the €50,000 Bonus Letter
was issued. It is noted that the provisions of that document make clear that any
claim
to a bonus would cease to exist following its execution (in particular,
reference here being made to cll 2 and 4).
- Rema
Tip Top contends that Mr Grüterich had no authority to cause it to make the
payment of $103,210.88 to himself. It is further
submitted that, even if
Mr Grüterich genuinely (but mistakenly) believed he was entitled to be
paid this amount, the evidence
of Mr Zimmer is that he did not at any time
intend Mr Grüterich to be paid a bonus of €50,000 and for that
reason, Rema
Tip Top contends, in the alternative, that it is entitled to
restitution of the $103,210.87 payment on the grounds that it was paid
under a
mistake.
- Insofar
as Mr Grüterich’s answer to this claim is, in substance, that the
$103,210.88 amount was the Australian dollar
equivalent of a €50,000 net
bonus that he was paid “for the successful integration of Convatech with
Rema Tip Top AP”.
Rema Tip Top places weight on the process that was
followed in relation to the payment of this bonus, to which I have referred
above.
- Rema
Tip Top notes that both Mr Zimmer and Mr Grüterich gave evidence that they
discussed a salary increase and back pay (from
1 January 2017) for Mr
Grüterich; both say that a performance bonus related to EBIT was discussed;
and both say that a bonus
of €50,000 was discussed.
- It
is submitted that the following is clear from the face of the Salary Progress
Document: first, that in the top half of the page,
Mr Zimmer was comparing what
he understood Mr Grüterich’s remuneration to be before and after he
signed the Employment
Contract; second that Mr Zimmer calculates
Mr Grüterich’s total remuneration before that appointment to be
€162,451.50,
comprising €120,000 as salary under his
“Deployment Contract” paid in Germany and “Local income”
of
$100,000 (€42,451.50) and calculates Mr Grüterich’s
total remuneration after the appointment to be €168,864.20,
comprising
$280,000 (€118,864) and €50,000 “Bonus to compensate income
before new appointment”; third, that
in the line commencing
“summary” Mr Zimmer observes that without the €50,000
which is not contractually agreed,
Mr Grüterich’s income is less
after taking his appointment by an amount of €44,000; fourth, that Mr
Grüterich
is to receive a salary adjustment “to the previous level
before the new appointment GR RTT AP and a performance based remuneration
arrangement based on the location in Australia retrospective to the 1st January
2017 is to be implemented (inclusive of a 10% adjustment)”.
- Rema
Tip Top says that the end result is that Mr Grüterich’s gross salary
from 1 January 2017 was to be $427,310.59 per
annum; and that there is no
indication at all that Mr Grüterich was to receive a further amount of
€50,000. It is submitted
that in the part of the document that deals with
the €50,000 amount, Mr Zimmer is “plainly not speaking
prospectively”.
- Rema
Tip Top says that the Salary Progress Document assumes that
Mr Grüterich has been paid the €50,000 that was the subject
of
the 22 January 2017 letter from DBS, noting that Mr Zimmer’s evidence
is that he recalls Mr Grüterich telling him that
he had received this
amount, and that is why it is recorded in the document.
- Mr
Zimmer’s evidence is that he did not know that Mr Grüterich received
a bonus of €30,000 from DBS in May 2017,
and that is why this amount is
not referred to in the Salary Progress Document. Mr Zimmer says that he would
have used this amount
and not €50,000 in his spreadsheet had he been told
that Mr Grüterich was paid €30,000 and not €50,000 by
DBS in
2017.
- Rema
Tip Top says that the effect of Mr Grüterich’s evidence is that
Mr Zimmer’s Salary Progress Document justified
his (9 January 2018)
direction that Ms Fairclough process a payment of $103,210.87 to
Mr Grüterich.
- Rema
Tip Top says that it is common ground that the back pay to which
Mr Grüterich was entitled was $147,310.59, being the difference
between his salary ($280,000 per annum) and his new salary approved by the
supervisory board ($427,310.59 per annum). Mr Zimmer’s
evidence is that he
did not appreciate at the time that the amount of $250,251.47 in the payslip was
more than the agreed back pay.
- Mr
Zimmer’s evidence is that he did not sign the Contract Variation because
it did not reflect the approved adjustments to Mr
Grüterich’s
remuneration; specifically, the Contract Variation made provision
for.
... a payment of 50,000 € (euros), after applicable taxes, as a
discretionary bonus for the 2017 calendar year
- Rema
Tip Top’s claims in respect of the $103,210.88 are dealt with at
[55]-[67B] and [122A] of the further amended statement
of claim. Mr
Grüterich’s response to those claims is at [55]-[67B] and [122A] of
the defence to the further amended statement
of claim; and at [33(c)], [34],
[35], [36], [42], [43], [48], [49], [50] and [51] of the cross-claim.
- Rema
Tip Top points out that the key allegation Mr Grüterich makes in this
regard is in [51] of the cross-claim, where he alleges
that he instructed
Ms Fairclough to pay the $103,210.88 amount to him in reliance on: a
conversation with Mr Zimmer on 9 January
2018 (pleaded at [48] of the
cross-claim), the Salary Progress Document, the “9 January and 15 January
2018 email correspondence”,
and the Bonus Representation.
- Rema
Tip Top submits that Mr Grüterich’s claim should be rejected for the
following reasons.
- First,
that the evidence does not support the allegation pleaded at [48] of the
cross-claim (where Mr Grüterich alleges that
during the 9 January 2018
conversation he had with Mr Zimmer, Mr Zimmer “confirmed [Rema Tip Top]
would pay the Net EUR 50,000
Bonus” – see [362] of Mr
Grüterich’s affidavit). Rema Tip Top points out (and I accept the
force of this)
that nowhere in his own account of this conversation does Mr
Grüterich say that Mr Zimmer told him Rema Tip Top would pay Mr
Grüterich a net €50,000 bonus. (Mr Zimmer was adamant that no such
thing was said during this conversation or at any time
by him.)
- Second,
that the Salary Progress Document does not contain any statement or indication
that Mr Grüterich would be paid a net
€50,000 bonus by Rema Tip Top;
rather, the document refers to a €50,000 amount as having been paid to Mr
Grüterich
in 2017 in the context of analysing and comparing
Mr Grüterich’s remuneration before and after he was appointed to
the
role of Managing Director of Rema Tip Top. Rema Tip Top says that Mr
Zimmer’s subjective belief that Mr Grüterich was
entitled to be paid
a €50,000 bonus is not relevant to the proper construction of the Salary
Progress Document (which is the
instrument in which the terms of the agreement
to vary Mr Grüterich’s salary was recorded), noting that Mr
Zimmer’s
belief was based on a draft letter to Mr Grüterich from DBS
and not Rema Tip Top. (I consider below the difficulties that arise
in relation
to the construction of this document.)
- Third,
that the 9 January 2018 “email correspondence” does not contain any
representation by Mr Zimmer that a net €50,000
bonus would be paid to
Mr Grüterich.
- Fourth,
that the 15 January 2018 “email correspondence” came after
Mr Grüterich directed Ms Fairclough to make the
$103,210.88 payment.
It is submitted that it is therefore irrelevant to his allegation of reliance
but that, in any event, there
is nothing in that correspondence that constitutes
a representation that a net €50,000 bonus would be paid to Mr
Grüterich.
- Fifth,
that Mr Grüterich had Mr van der Burgt prepare the Contract Variation on or
before 11 January 2018. It is submitted that
that fact, and the terms of the
Contract Variation, indicate that when Mr Grüterich directed Ms Fairclough
to make the payment
to him on 9 January 2018, he did not understand there to be
a binding agreement between him and Rema Tip Top for his salary increase
and
back pay, payment of a €50,000 bonus for 2017 or a further performance
incentive payment linked to EBIT.
- Sixth,
that Mr Grüterich was not informed by Mr Zimmer that his salary increase
and back pay were approved until 15 January 2018.
It is said that the taking of
any action to direct payments to himself before that date was not justified; and
that when Mr Zimmer
provided confirmation of this approval on 15 January 2018,
it is clear he was referring to the approval of the salary adjustment
only. It
is noted that there is no mention in his 15 January 2018 email of approval for a
further payment of €50,000.
- Seventh,
that the payment of $103,210.88 could not have been justified even if Mr
Grüterich did have approval to pay the €50,000
bonus under the terms
of the draft DBS letter to himself, noting that the 22 January 2017 letter
clearly indicates that the bonus
was to be “gross” and not net.
Assuming an exchange rate of 1.52905 (which was the rate that appeared in the
Salary Progress
Document), the amount of the €50,000 in Australian dollars
would have been $76,452.50.
- Eighth,
that the 22 January 2017 letter was from DBS and not from Rema Tip Top. On Mr
Grüterich’s evidence Mr Zimmer referred
to Mr Grüterich having
the €50,000 in writing “from DBS” (see Mr
Grüterich’s first affidavit at
[336]). It is said that when Mr
Grüterich was paid a €30,000 bonus by DBS in May 2017, he was not
simply paid that money
by Rema Tip Top. It was paid directly into a German bank
account by DBS and then that company invoiced Rema Tip Top for the same
amount.
It is noted that Mr Grüterich was aware of this; and that he sent several
follow up emails to Mr Kopp (at DBS) seeking
payment of the €30,000 bonus.
It is noted that Mr Grüterich did not just direct a subordinate employee of
Rema Tip Top
to pay him this amount. It is said that this is a clear indication
that he knew he was not justified in taking Rema Tip Top’s
money to
satisfy a payment offered to him by DBS.
- Finally,
that it is clear from the spreadsheets Mr Grüterich prepared as to his
“entitlements” on 15 and 16 March
2018 that, in his mind, he had not
received the €50,000 2017 bonus. It is said that the $103,210.88 payment
that he directed
Ms Fairclough to make on 9 January 2018 could not possibly have
been a payment of a €50,000 2017 bonus.
- Rema
Tip Top seeks a finding that Mr Grüterich had no justification for giving
that direction, and that he knew this at the time;
and that his actions were
dishonest. It is submitted that Rema Tip Top’s primary claims in relation
to this payment should
succeed, and the cross-claim should fail.
- It
is said that, if that submission is accepted, it is not necessary to decide
whether the alternate claim (that the $103,210.88 was
paid by mistake) is made
out but that, if there were to be a finding that, although Mr Grüterich was
not entitled to the $103,210.88,
Mr Grüterich was not aware of this when he
gave the payment direction to Ms Fairclough, it is clear that the payment was
made
under a mistake and that it should be repaid by Mr Grüterich in
accordance with restitutionary principles (as considered
below).
Mr Grüterich’s submissions regarding the bonus
payment
- In
the cross-claim, Mr Grüterich alleges that on 12 December 2017,
Mr Zimmer represented to him that he would “receive
the bonus
previously promised by DBS of EUR50,000, net of tax, for [Mr
Grüterich’s] satisfactory performance in 2017 (the
“Net
EUR50,000 Bonus”)” (see at [42(b)]). This representation is said to
be one of three representations which
are collectively described as the
“Bonus Representations” (at [42]).
- Mr
Grüterich alleges that: this representation “constituted a variation
to the terms of the Employment Contract”
( at [43(c)]), was relied on by
him to his detriment by his (Mr Grüterich’s) agreement “to
continue his employment
with [Rema Tip Top] on the terms agreed (namely the
Employment Contract, varied to include, inter alia, the Bonus
Representation)”;
and were “liable to be misleading as to the
nature, terms and conditions of [Mr Grüterich’s] employment”
([44]).
- Mr
Grüterich says that the overpayment of $103,000 was a bonus of
€50,000 to which he was entitled to in the previous year
but had not yet
received. He argues that the fact that (after making that payment as well as an
additional payment for back pay to
increase his salary over the previous year),
he forwarded a copy of his payslip directly to Mr Zimmer, speaks to his
subjective understanding
of what he was entitled to do and is “also highly
likely to reflect the objective rights and liabilities of the
parties”.
- It
is noted that Mr Zimmer said nothing about this payslip until many months later
(after Rema Tip Top purported to terminate Mr Grüterich’s
employment
and after these proceedings were commenced). It is said that Mr Zimmer’s
evidence implies that Mr Grüterich
was entitled to this bonus for 2017; and
that Rema Tip Top has not disputed that Mr Grüterich had not, in fact,
received the
bonus up to that point. It is submitted that it must follow that
the payment was authorised and Mr Grüterich urges a finding
that the bonus
payment was not only made by Mr Grüterich in good faith, but was
objectively authorised.
- Mr
Grüterich notes that there is a dispute as to the meaning of the Salary
Progress. Mr Grüterich submits that in circumstances
where it is apparently
common ground that the €50,000 2017 bonus had not yet been paid at this
time but was owing, it ought
be concluded that the document was signifying, at
the very least, an intention that it be paid. It is noted that the 2017 bonus is
the largest component of Rema Tip Top’s alleged misconduct claim. (Rema
Tip Top disputes that this is common ground. It says
that there was no
entitlement to the €50,000 bonus – there being only a draft letter
from Rema Tip Top AG; and that on
the proper construction of the relevant
document and the correspondence there was no such agreement.)
- Mr
Grüterich further says that Rema Tip Top has not adduced any documents
showing payment at a prior point in time. It is noted
that there was no response
from Mr Zimmer to the 15 January email enclosing payslips for December 2017 and
January 2018 and no explanation
in cross-examination for why he did not respond.
It is submitted that basic arithmetic “or even a superficial review of the
payslip”, which is what Mr Zimmer undertook, would have revealed the bonus
payment.
- As
to the bonus, it is said that in cross-examination, Mr Zimmer conceded this was
owing to Mr Grüterich; he also conceded: that
he did not know of any
document showing that the €50,000 2017 bonus was actually paid; that he
did not know whether it had
been paid; and that he had not investigated or
bothered to find out whether it was actually paid. It is submitted that the
serious
allegations made against Mr Grüterich about the bonus should not be
accepted in these circumstances and it must follow that
the payment was
authorised.
- It
is said that there is no proof from Rema Tip Top that Mr Grüterich’s
“discretionary benefits”, which it
concedes were previously granted,
were ever withdrawn.
Determination
- The March 2018
spreadsheets
- Much
significance is placed by Rema Tip Top on the March 2018 spreadsheets, in which
Mr Grüterich set out his claimed entitlements
in the context of the
termination of his employment.
- The
meaning to be attributed to the successive versions of the March 2018
entitlements spreadsheet is by no means clear. However,
the significance of
those successive versions lies in the assumptions that must logically underlie
the entries in those spreadsheets
and the apparent inconsistency between those
factual assumptions and the evidence now given by Mr Grüterich.
- The
first version of the March 2018 entitlements spreadsheet is that which was
prepared and sent to Mr Labbé and Mr Slattery
in the afternoon of
15 March 2018 (Exhibit 7). The second version (Exhibit T) was sent at
9.17am on 16 March 2018.
- Mr
Slattery accepts that he requested that Mr Grüterich prepare a list of his
entitlements (which led to the production of the
first version). He denies that
he suggested that Mr Grüterich provide a second revised version (as
Mr Grüterich has contended).
- Oddly,
there is a third version of the spreadsheet (that being the version that was
annexed to Mr Grüterich’s 10 May 2019 affidavit and which he says was
the incorrect version). That appears to be an amalgamation of the first and
second versions
(and perhaps was a draft prepared at some stage but not sent by
Mr Grüterich). There was no explanation as to how this document
came into
existence but it is accepted that it was not sent or provided to Rema Tip
Top.
- One
of the issues to which submissions were addressed in relation to the
entitlements spreadsheets was as to whether they demonstrated
that
Mr Grüterich considered at the time (in March 2018) that the
€50,000 2017 bonus had already been paid to him in January
2018 (by the
$103,000 bonus payment). If that was Mr Grüterich’s belief or
understanding at the time, then obviously it
would have been incorrect (and Rema
Tip Top says, fraudulent) for him to represent in the entitlements spreadsheets
that this amount
was still owing to him (even assuming for the purposes of this
analysis that there was an entitlement to the €50,000 2017 bonus
at all
– something that Rema Tip Top denies).
- Rema
Tip Top says that what Mr Grüterich was trying to do in his first affidavit
was to justify the payment of around $103,000
made to him in January 2018 by
reference to an agreed minimum €50,000 bonus for 2017 – i.e., that
he was entitled to
the bonus; and that it was inconsistent with such a claim for
Mr Grüterich to have included that amount in the 15 and 16 March
2018
spreadsheets as part of his entitlements on termination of his employment as if
the €50,000 bonus had not been paid. (Mr
Grüterich’s defence
similarly pleads that the $103,000 “Bonus Payment” was an amount to
which he was entitled
by way of the Australian dollar equivalent of the
€50,000 bonus.)
- It
is said (see T 456) that Item K in the schedules relates to the €50,000
2017 bonus (the subject of the draft letter from
Rema Tip Top AG and the
conversations with Messrs Wach, Kopp and Zimmer on which Mr Grüterich
relies) (including the communication
from Mr Grüterich to Mr Zimmer that if
it was too much trouble he would get it (the bonus payment) done himself).
- Rema
Tip Top argues that it is not credible for Mr Grüterich to say (as he did)
in cross-examination that in March 2018 he simply
forgot about the $103,000
payment that he had received a couple of months earlier.
- Rema
Tip Top accepts that, on one view of things, Mr Grüterich may have had in
his mind when he gave the Bonus Direction that
this represented the
€50,000 bonus to which he claimed to be entitled but, if so, Rema Tip Top
says it is not credible that
Mr Grüterich then forgot about that when he
included it in the March 2018 spreadsheets.
- Thus,
Rema Tip Top argues (see T 457) that there are two alternatives – that the
spreadsheet itself was an act of fraud; or
alternatively (and it says this is
the natural inference) that when Mr Grüterich arranged for the payment to
himself of the
$103,000 he knew that this had nothing to do with the
€50,000 bonus “draft” letter. (A similar submission is made
in
relation to the doctorate allowance.)
- The
second spreadsheet contains an alternate calculation number 2. There is no entry
on the right hand side of the spreadsheet for
the €50,000 bonus but that
entry remains on the left hand side.
- Insofar
as Mr Grüterich’s explanation for the second spreadsheet is that he
realised by then (from reference to other documents)
that that amount had been
paid, Rema Tip Top says that this evidence is not credible and does not explain
why the amount remained
included on the left hand side of the document (and says
that it would have been open to Mr Grüterich to have said at that stage
that he had made a mistake and that amount had been paid – which he did
not). It is submitted that the most likely explanation
for the alternate
calculation 2 in the second spreadsheet is that this was something that Mr
Grüterich had in mind to use as
a negotiating tool (perhaps in the way that
he seems to have approached the Poliform furniture negotiation or as he adverted
to in
the witness box).
- Mr
Grüterich’s position in relation to the spreadsheets (see T 470.20)
is that they set out in a transparent way the entitlements
to which he
considered he had the benefit (see T 485-486).
- The
interpretation of the relevant spreadsheets is problematic. I find that
Mr Grüterich was not entitled to the €50,000
bonus. The letter
on which he relies was a draft letter and it was not from Rema Tip Top. The
correspondence from Mr Zimmer in terms
related to the salary adjustment (and did
not mention the bonus) and I did not understand Mr Zimmer in cross-examination
to be conceding
that the bonus was owing as such; rather that he was proceeding
on the basis that the bonus had been paid (as he said Mr Grüterich
had
said to him) and accepting that, if the bonus was payable and had not been paid,
then Mr Grüterich would have been entitled
to it as at the time of the
March entitlement spreadsheets.
- That
said, I consider that there was room for Mr Grüterich honestly to have
understood Mr Zimmer’s communication as to
the adjustment to his salary to
have encompassed agreement to the claimed €50,000 bonus (which was an
issue that had been the
subject of discussion) and that Mr
Grüterich’s email communication in which he appears to offer
heartfelt thanks to Mr
Zimmer for pushing this through (even while pointing out
that his preference would have been for it to be paid in Germany) supports
the
conclusion that this was indeed how Mr Grüterich had understood the email
from Mr Zimmer.
- I
accept that the fact that the direction was given before the email from
Mr Zimmer is of some concern – since at the very least
it appears
that Mr Grüterich was “jumping the gun” in relation to the
booking of the back pay adjustment and bonus.
However, on balance, I do not find
that there was dishonesty involved in Mr Grüterich so acting.
- I
accept that it was a mistaken payment on Mr Zimmer’s part and I consider
that the alternative claim for restitution of that
amount is made out (applying
the principles that I consider shortly in relation to the claim for restitution
in relation to the Notice
Payment).
Furniture purchase
- This
claim relates to an order placed by Mr Grüterich on 28 February 2018 with
Poliform furniture for furniture at a total cost
of $96,164. The furniture was
for the apartment occupied by Mr Grüterich in Bathurst Street, Sydney. At
all times, Rema Tip
Top paid Mr Grüterich’s rent for that apartment.
At Mr Grüterich’s direction, Rema Tip Top paid a 50% deposit
for
the Poliform furniture. After Mr Grüterich’s employment was
terminated, the deposit was refunded save for an amount
of
$9,616.40.
Rema Tip Top’s submissions regarding the
furniture purchase
- Rema
Tip Top says that Mr Grüterich had no entitlement under his Employment
Contract to any kind of furniture allowance. It is
not disputed that Mr
Grüterich directed a subordinate staff member of Rema Tip Top to pay to
Poliform furniture a 50% deposit
for his order; nor that the deposit was in fact
paid by Rema Tip Top. It is noted that Mr Grüterich had previously acquired
furniture at the expense of Rema Tip Top but on those occasions it was
specifically authorised and the sums involved were much smaller.
- Mr
Grüterich’s answer to this claim is: first, that the purchase was
approved by Mr Slattery and Mr Craig Philpotts during
a conversation that took
place in February 2018; second, that the expense was an “incident”
of Rema Tip Top’s obligation
to pay for his “accommodation
expenses”; third, that the furniture was purchased for “business
purposes”
because he used one of the bedrooms in the apartment as a
“home office” and another bedroom was “kept for international
company staff to stay from time to time”; and, fourth, that he did not
need specific approval for this purchase because he
had been granted a budget of
$1.55 million to “acquire furnishing for business premises”.
- Rema
Tip Top says that those explanations do not justify his actions, and his defence
of this claim should be rejected.
- First,
Rema Tip Top points out that (although Rema Tip Top kept any furniture in the
Bathurst Street apartment upon cessation of Mr
Grüterich’s
employment, as well as the residence occupied by Mr Grüterich in Newcastle
(see [385] of Mr Grüterich’s
first affidavit)), Mr Grüterich did
not order the Poliform furniture on Rema Tip Top’s behalf; rather, he
ordered it in
his own name. The quote is addressed to Mr Grüterich; he is
identified as the “client” on the quote; the space next
to the word
“company” is blank; and his personal email address appears on the
quote (though he provided his work mobile
phone number). It is noted that when
he signed the quote he did not indicate that he was signing on behalf of Rema
Tip Top. Similarly,
the invoice issued for the Poliform furniture contains Mr
Grüterich’s name, address and personal mobile phone numbers.
Rema Tip
Top says that there is no indication that the order is for anyone other than
him; and no indication that the furniture will
belong to Rema Tip Top.
- Rema
Tip Top says that it is also clear from the email chain between
Mr Grüterich and Mr Chase of Poliform furniture that Mr
Grüterich
was shopping with his own tastes in mind and not for the benefit of Rema Tip
Top. It is submitted that all of Mr Grüterich’s
email communications
with Mr Chase are consistent with him purchasing that furniture for
himself.
- It
is noted that once the order was cancelled by Rema Tip Top, Poliform furniture
resisted repayment of the deposit. In an email from
Ms Ivanka Andrews (Financial
Controller - Australia) to Mr Davison dated 26 March 2018, Ms Andrews
said:
The reason he [representative of Poliform Furniture] was calling was to valid
[sic] the refund request as the order was placed with
an individual and an
organisation was requesting the money back
- It
is submitted that there is no doubt that the order was made by Mr Grüterich
personally; and that it is to be inferred that
he intended to keep the
furniture, and was not purchasing it on the basis that it would be the property
of Rema Tip Top.
- Second,
Rema Tip Top disputes that there was any authorisation of this purchase by Mr
Slattery and Mr Philpotts. In particular, it
is said that the conversation at
[389] of Mr Grüterich’s first affidavit (which is the sole basis for
this part of Mr
Grüterich’s defence of the claim) does not amount to
approval to use company money (much less $100,000 of company money)
to buy
furniture for Mr Grüterich. Further, it is said that, even on Mr
Grüterich’s account of this alleged conversation,
Mr Grüterich
did not tell Mr Slattery that he proposed to use Rema Tip Top’s money to
pay for the furniture, that the
furniture would cost just under $100,000 or that
he intended to acquire the furniture in his own name (or, as Rema Tip Top says
should
be inferred, that he intended to keep the furniture for himself).
- Third,
it is submitted that Rema Tip Top had no obligation to pay for
Mr Grüterich’s accommodation expenses. Rema Tip Top
denies that
this was an incident of the company’s payment of Mr Grüterich’s
rent, noting that the cost of the Poliform
furniture ($96,164.00) exceeded the
annual rent on the apartment that was to house it ($88,642.80). Rema Tip Top
says that it was
not contractually obliged to provide accommodation for Mr
Grüterich at its cost but chose to do so in its discretion.
- Fourth,
it is submitted that the assertion that the furniture was for
“business” purposes is contrary to the evidence
of what was actually
purchased (a dining table ($9,876), dining chairs ($6,340), arm chair ($6,741),
sofa ($19,571), coffee tables
($3,519 and $4,311), chest of drawers ($12,722),
bedside tables ($9,330), a bed ($11,520), TV cabinets ($3,742 and $3,938), a
bookshelf
($6,115) and a mirror ($1,904)). It is submitted that none of the
items related to any “home office” that Mr Grüterich
might have
been operating out of the apartment and that the assertion that such a lavish
expense was justified by the prospect that
“international” visitors
from related companies might stay with him when they visited from overseas is
absurd.
- Finally,
it is submitted that the attempt to justify this purchase ex post facto
by reference to an alleged budget of $1.55 million for furnishing for
business premises is equally unmeritorious. Rema Tip Top points
to Mr
Grüterich’s evidence that he understood this budget to exist because
he saw a letter dated 22 December 2016 from
Rema Tip Top AG and a further letter
dated 22 December 2017 from Rema Tip Top AG. Rema Tip Top submits that
neither letter says anything
that could reasonably be interpreted as authoring
an expense of (almost) $100,000 on furniture for the residence of Rema Tip
Top’s
Managing Director. Rema Tip Top argues that if Mr
Grüterich’s understanding were to be correct it would mean that he
believed
he had authority to spend $1.55 million on furniture for his private
accommodation as an “investment” expense (and that
this is not a
proposition that any honest person could seriously have believed to be
correct).
- It
is submitted that there is no justification for what Mr Grüterich did and
that it was highly improper, pointing to Mr Grüterich’s
own evidence
that he was in Sydney only one to two days a week by February 2018 (when the
furniture was ordered); and to the evidence
that Mr Reiff had directed him to
move to Newcastle permanently in September 2017, where he had a fully paid
apartment available
to him in Newcastle (provided by Rema Tip Top); and all
office functions of Rema Tip Top had been moved from Chullora to Newcastle
by
October 2016 (although noting that Mr Grüterich suggested otherwise in the
witness box).
- Rema
Tip Top cancelled the furniture order. It claims the amount not refunded out of
the deposit ($9,616.40) as damages.
Mr Grüterich’s
submissions regarding the furniture purchase
- As
to Rema Tip Top’s claim that he was not entitled to purchase furniture for
the rental accommodation provided and paid for
by Rema Tip Top,
Mr Grüterich says that Rema Tip Top provides no evidence that specific
authorisation was required. He says
that authorisation was not required under
the 2018 budget if the value of items was less than 10% of the budget; and that
any furniture
and household items purchased for the rental accommodation used by
Mr Grüterich were retained by Rema Tip Top at the end of
his employment and
vacation of the accommodation. It is submitted that this conduct by Rema Tip Top
is inconsistent with any suggestion
that the furniture was an unauthorised
personal expense incurred by Mr Grüterich.
- As
to the furniture and household goods, it is said that Rema Tip Top provides no
evidence that items of furniture purchased for rental
accommodation paid for by
Rema Tip Top would be accounted for as anything other than a capital investment;
and that authorisation
was therefore not required under the 2018 budget if the
value of items was less than 10% of the budget. In cross-examination, Mr
Zimmer
accepted that the 10% limit applied in 2018. It is said to be common ground that
the value of the Poliform furniture was comfortably
under this limit.
- It
is noted that on 23 April 2018, Mr Grüterich’s former solicitors sent
a letter to Rema Tip Top’s solicitors setting
out an offer to purchase the
remaining furniture from Rema Tip Top for $500; and that the offer was not
accepted by Rema Tip Top.
It is submitted that this conduct by Rema Tip Top is
inconsistent with any suggestion that the furniture belonged to Mr
Grüterich
and that replacements were an unauthorised personal expense
incurred by Mr Grüterich; and that, in any event, most of this expense
has
been refunded.
Determination
- The
evidence on this issue was implausible. The suggestion that the investment
authorisation budget would support an expenditure of
this kind on personal
furniture is not credible and it defies belief that Mr Grüterich could
seriously have considered that
he was entitled to authorise this as part of the
company investment budget or that it was appropriate expenditure for his
personal
use. However, I am not persuaded that there should be a finding that Mr
Grüterich purchased this furniture with every intention
of keeping it for
himself; nor am I persuaded that Mr Grüterich purchased the furniture
knowing that he had no authority to
make this purchase, and thus I make no
finding of dishonesty in this regard. While I consider that Mr
Grüterich’s explanations
as to the furniture were contrived (and
self-serving) I do not find that there was a conscious misuse of company funds
in this respect.
Travel expenses
- This
claim relates to payments from February 2017 to February 2018, that
Mr Grüterich caused Rema Tip Top to make being the costs
of and
associated with his and his partners’ private travel totalling
$138,063.54. Of that amount, $38,930.40 (which related
to trips scheduled to
take place after 16 March 2018), was refunded to Rema Tip Top by a booking
agent, after Mr Grüterich’s
employment ended.
Mr
Grüterich’s submissions regarding the travel expenses
- Mr
Grüterich claims that he incurred these costs as part of what he has says
was a “Business Class Private Travel Budget”
of $50,000 per annum.
Rema Tip Top says that the Employment Contract did not grant Mr Grüterich
any form of private travel allowance.
- Mr
Grüterich claims that he had a company funded private travel budget of
$50,000 per annum; allegedly arising from conversations
with Mr Wach.
Mr Grüterich claims that he was granted an “economy class”
private travel budget (as a result of this
email chain) of $10,000 per annum,
and that at his request in August 2016 Mr Wach “upgraded” that
budget to “business
class” and told Mr Grüterich that he did
not need approval to use this benefit because he (Mr Wach) did not have time
for
the “peanuts anymore”. Mr Grüterich deposes in his first
affidavit that he understood that the “upgrade”
meant that
“the budget increased from $10,000 to $50,000 which was derived from an
average cost of 4 business class flights
to Germany” (at [165]).
- Mr
Grüterich’s evidence is that he incurred $92,178.89 in private travel
expenses that he caused Rema Tip Top to pay for
in the period 14 February 2017
to 16 March 2018. These expenses are itemised in the table that appears at [526]
of Mr Grüterich’s
first affidavit. Those expenses comprise flights,
accommodation, meals and other costs. In addition to the above, in February 2018
Mr Grüterich caused a further travel booking to be made for the benefit of
himself and his partner. These bookings concerned
a trip he planned to take in
August 2018 to Germany and the Maldives. The cost of the flights booked for Mr
Grüterich and his
partner was $21,464.56. The cost of the accommodation
booked was USD $14,067.20 that was, at that time, equivalent to $17,464.84.
Mr
Grüterich claimed in cross-examination that part of this trip related to
business.
- Mr
Grüterich’s evidence is that he had a conversation with Mr Wach in
Singapore (at the regional meeting) on 23 August
2016 to the
effect:
Grüterich: Can we also upgrade my economy class travel
budget to business class?
Wach: Yes, I agree, we can.
Grüterich: Thorsten, thanks for that. Do I need to ask
for approval for specific trips? Or can I still use it to other destinations
other than home, as per usual?
Wach: Christian, I’ve told you, you don’t need me
to approve those anymore. You are now the Managing Director and had
this
entitlement for a long time, and I don’t have time for the peanuts
anymore.
- At
[165] of Mr Grüterich’s first affidavit (as adverted to above), Mr
Grüterich deposes that:
From August 2016, the Economy Class Private Travel Budget therefore changed to a
business class budget (“Business Class Travel
Budget”). I understood
this to mean the budget increased from $10,000 to $50,000, which was derived
from an average cost of
4 business class flights to Germany, each to the value
of $12,500 (using the same methodology as that total budget of the Economy
Class
Private Travel Budget). Once again, Mr Wach never discussed with me as to how
the Business Class Private Travel Budget was
to be used or applied to my travel,
and I understood this would be up to me.
- Mr
Grüterich claims that he had a conversation with Mr Wach on 5 February 2017
(this being the conversation in which Mr Grüterich
also deposes to a
discussion about a draft contract that he had not yet then been sent – see
above) during which the following
exchange took place:
Grüterich: What about my flights and private travel
budget? Can I get this into writing as well?
Wach: Don’t even go there. I told you before that you are
in charge. Use them as per normal. No need to get back to me with
these
peanuts.
- On
14 February 2017, Mr Grüterich and Mr Wach (in Singapore) spoke to Mr Kopp
(in Germany) over the telephone. Mr Grüterich
claims that the following
exchange occurred:
Kopp: Christian what else do you need for
your contract?
Grüterich: Thorsten [Kopp], everything! The medical
insurance is gone, my German social security payments are gone, the business
class travel budget is not stated in the contract, the bonus payments
aren’t stated in the contract. The contract is empty
of all my promised
and previously received benefits and entitlements.
Kopp: Oh yeah, ok do not worry, we will sort
that out. Trust me with
this, as per normal, we will provide you with variations and side letters from
[Rema Tip Top], the same way you got them from DBS.
You will not be worse off.
I’ll handle all the medical insurance and social security issues with you.
I will also get the 2016
€30,000 and the 2017 €50,000 letters as
Thorsten [Wach] as I agreed to. I’ll get the medical agreement onto a Rema
letterhead for you. No problem.
...
Wach: Don’t worry, about all the little bits and pieces.
You are the director now, and I authorise you to continue using
the benefits
that were given to you previously ... .
- The
conversations alleged at [193] and [202] of Mr Grüterich’s affidavit
are said to have occurred in the context of the
negotiation and preparation of
his Employment Contract. Mr Kopp also gives evidence about those matters (and
the 14 February 2017
conversation) in his affidavit.
- Mr
Grüterich places emphasis on the fact that Rema Tip Top’s witnesses
all conceded that Mr Wach had the authority to confer
benefits on Mr
Grüterich, and that Mr Zimmer conceded that he was aware that Mr Wach had
granted benefits to Mr Grüterich
and the other witnesses had no idea
whether Mr Wach had done so. It is noted that Rema Tip Top only complains
about travel taken
in the period covering 2017-2018, without any explanation as
to why no complaint is made about the prior period. It is said that
Mr
Grüterich took private travel previously and no-one ever told him that this
benefit was withdrawn when he became Managing
Director; it is said that in fact
he was told the opposite. In the circumstances, it is submitted that it ought be
accepted that
the private travel taken by Mr Grüterich was authorised under
the Business Class Private Travel Budget.
Rema Tip Top’s
submissions regarding the travel expenses
- Rema
Tip Top notes that the total amount that Mr Grüterich concedes he spent on
private travel in 2017 and 2018 is $131,109.29
that he claims he incurred as
part of his private travel budget. (As noted above, the Germany/Maldives travel
bookings were cancelled
by Rema Tip Top after Mr Grüterich’s
employment was terminated.)
- Rema
Tip Top submits that Mr Grüterich’s evidence (at [162], [165], [189],
[193], [202], [211], [215] and [216] of Mr Grüterich’s
first
affidavit) in relation to the alleged “business class private travel
budget” should not be accepted.
- First,
it is said that important aspects of Mr Grüterich’s evidence are
“demonstrably wrong”: that the conversation
he claims to have had
with Mr Wach on 5 February 2017 (as Mr Grüterich drove Mr Wach to
Newcastle airport) (which is the subject
of [193] of his affidavit) could not
have occurred, having regard to the chronology to which I have referred already;
and that Mr
Grüterich claims he was told by both Mr Wach and Mr Kopp
that they planned to get his contract finalised without Mr Ubelacker’s
involvement as he was “hindering the process and holding [Mr
Grüterich’s] contract back”, yet when Mr Kopp
sent the Revised
Draft Contract to Mr Grüterich he copied Mr Ubelacker to his email
(and both Mr Kopp and Mr Ubelacker gave
evidence that Mr Ubelacker supervised
the preparation of Mr Grüterich’s employment contract); and that, to
the extent
that Mr Grüterich’s evidence (at [201] of his affidavit)
appears to be that he had not seen the release agreement before
it was presented
to him by Mr Wach and he was asked to sign it, this is implausible when both
documents had been emailed to him by
Mr Kopp on 13 February 2017 at 6.07am, and
there was evidence that Mr Grüterich was using his email account that
day; for example,
he communicated with the agent for his Bathurst Street
apartment on that same date about a second parking spot.
- Second,
Rema Tip Top says that there is no evidence of any document ever being created
that records or refers to any business class
private travel budget for Mr
Grüterich.
- Third,
Rema Tip Top notes that none of the executives who gave evidence in the case had
heard of a business class private travel budget
being granted to Mr
Grüterich; and that they gave evidence that it is the usual practice within
their companies to document
executive entitlements, especially one as
significant as a $50,000 annual allowance that was not recorded in an employment
contract.
(See, for example, Mr Kopp’s evidence that he did not discuss a
“business class travel budget” with Mr Grüterich
or Mr Wach,
and that he had never heard of such a thing; cf Mr Wach’s email of
25 November 2015 which refers to a private travel budget albeit in a lesser
amount.)
- Fourth,
it is said that, despite his evidence that he expected the business class
private travel budget would be put into writing,
and his anxiety as to the
absence of any terms in the Employment Contract about this, there is no evidence
of Mr Grüterich ever
following up Mr Kopp or Mr Wach for a “side
letter” or any other written confirmation of this alleged benefit (in
contrast
to his persistence in relation to other alleged entitlements such as:
the 2017 bonus agreement, payment of the 2016 bonus, medical
insurance and a
fixed term of employment).
- Fifth,
Rema Tip Top notes that, when learning that Mr Wach had lost his position, Mr
Grüterich did not raise the private travel
budget with his new supervisor,
Mr Zimmer. It is said that even if his evidence that Mr Wach told Mr
Grüterich he did not need
to seek approval (from Mr Wach) before purchasing
expensive flights and accommodation unrelated to his employment with the
company’s
money was true (which Rema Tip Top does not accept), Mr
Grüterich did not know whether Mr Zimmer’s policy on such matters
was
different to that of Mr Wach. It is noted that there is no evidence that Mr
Grüterich ever tried to find this out and it
is submitted that it is
relevant that, despite having discussions with Mr Zimmer specifically about his
employment entitlements in
September and December 2017, Mr Grüterich did
not once mention the alleged business class private travel budget (even on his
own evidence).
- It
is submitted that, as a matter of common sense and prudence, if
Mr Grüterich really did have the oral arrangement regarding
private
travel he claims to have had with Mr Wach, he would have told Mr Zimmer this
upon Mr Zimmer taking over Mr Wach’s role
and before he spent more of
the company’s money on his, and his partners’, holidays. It is said
that the fact that Mr
Grüterich did not at any time discuss his alleged
private travel budget with Mr Zimmer is “powerful evidence that it simply
did not exist”.
- Sixth,
Rema Tip Top argues that Mr Grüterich’s evidence that Mr Wach
authorised him to spend as much as $50,000 per annum
of Rema Tip Top’s
money on private travel is implausible. It is noted that in his 25 November 2015
email to Mr Grüterich,
Mr Wach rejects Mr Grüterich’s request to
be granted “4 flights home for Denise and I per annum”, and says
the
“private travel expenses are very high” and was prepared to allow an
amount of $10,000 per annum only. It is submitted
that it is unlikely that he
would then, a mere nine months after sending this email, tell Mr Grüterich
that he could “upgrade”
this travel budget to “business
class” (without either of them actually specifying what that meant, much
less agreeing
on it) and that Mr Grüterich need not seek approval when
using this alleged benefit because Mr Wach did not have time to be
bothered with
these “peanuts”. It is said that private travel expenses of $10,000
were clearly not “peanuts”
to Mr Wach in late November 2015; and
that it is highly unlikely that a travel allowance of $50,000 would have been
“peanuts”
to Mr Wach in August 2016.
- Seventh,
Rema Tip Top says that the effect of Mr Grüterich’s evidence is that
he was left to work out the actual dollar
amount of his own travel budget on the
basis that it was “upgraded” from economy to business class. It is
submitted that
this is highly implausible, especially when viewed in the context
of Mr Wach’s 25 November 2015 email, and the evidence other
executives
gave about Mr Wach’s practices with respect to the proper documentation of
executive benefits. Further, it is noted
that on his own evidence, Mr
Grüterich could not point to any conversation or document that he put
forward as granting him a
private travel budget for a specific dollar amount, or
a basis for him to purchase anything other than flights under the “private
travel budget”.
- Eighth,
Rema Tip Top says that Mr Grüterich’s subsequent conduct was not
consistent with him believing that he had a fixed
annual travel budget in the
amount of $50,000. It is noted that there is no evidence that Mr Grüterich
kept any log or record
of how much of the company’s funds he was spending
on private travel and accommodation, and what the current balance of that
budget
was at any point in time. In Mr Grüterich’s oral evidence, he claimed
that the only place he kept a record of his
expenditure in relation to the
“Business Class Private Travel Budget” was in his mind (and it is
noted that on his own
evidence Mr Grüterich spent more much more than
$50,000 on private travel in 2017 – i.e., that by 31 December 2017, Mr
Grüterich had spent $75,192.09 and he then spent a further $55,917.20 by 15
February 2018).
- It
is further said that, even on his own evidence, there is nothing to indicate
that Mr Grüterich believed he was entitled to
“borrow” against
his entitlement in future years but that this is in effect what he seems to be
saying that he did (see
[526]). It is said that Mr Grüterich did not at any
time seek approval from anyone to exceed his alleged annual travel budget;
and
that the above conduct is inconsistent with Mr Grüterich having, or
believing that he had, an entitlement to spend a fixed
amount of $50,000 on
private travel annually. Rather, it is submitted that Mr Grüterich’s
conduct is consistent with him
“simply spending whatever amounts he wished
when he wished to do so without any regard, or even awareness, of how much he
had
already spent in a particular year”.
- It
is noted that in his spreadsheet of ‘entitlements’ prepared on 15
March 2018, there is no mention of any private business
class travel budget of
$50,000 (nor, I note, is there any reference in the updated spreadsheet prepared
on 16 March 2018). Instead,
in that document Mr Grüterich asserts an
entitlement to “2 home flights per person as agreed” and attributes
an
amount of $41,720.00 to this item (but it is said he seems to assume a cost
of $7,000 per flight). It is submitted that if Mr Grüterich
believed he had
a business class private travel budget, as distinct from
“homeflights” it is inconceivable that he would
have omitted to
record it in this document.
- Rema
Tip Top contends for findings that Mr Grüterich had no entitlement to use
its money to pay for his private travel and accommodation
expenses, and nor did
he understand himself to have any such entitlement; that there was no
justification for Mr Grüterich’s
actions; and that those actions were
dishonest.
Determination
- The
difficulty I have in accepting the suggestion that Mr Grüterich genuinely
believed that he had an entitlement to a private
travel budget of the amount
that he claimed he had is that it is inconsistent with the only documents in
which the issue of a private
travel budget was addressed (the email from
Mr Wach making it clear that he considered the proposed private travel
budget was very
high and proposing a much reduced figure). I consider that the
evidence is more consistent with Mr Grüterich simply assuming
an
entitlement to unrestricted travel for business purposes and adopting an ad
hoc process of claiming private travel against an assumed entitlement to a
private travel budget. I see no basis for the assumption that
amounts unused in
one year could be carried forward to another – and certainly there was no
evidence that Mr Grüterich
was told this.
- I
cannot accept Mr Grüterich’s account of the conversations with Mr
Wach in the absence of corroboration (given the unreliability
of other aspects
of his account of such conversations) and I do not draw an inference adverse to
Rema Tip Top by reference to its
failure to call Mr Wach in circumstances where
the evidence is that there is ongoing litigation between them.
- In
these circumstances, I find that the expenditure was unauthorised and that the
failure to obtain approval for the travel was not
consistent with
Mr Grüterich’s obligations as a Managing Director. In my
opinion, the expenditure was also dishonest in
the sense that there was a
knowing misuse of company funds. In particular, I find force in Rema Tip
Top’s submission that,
in relation to other alleged entitlements, Mr
Grüterich had been persistent in seeking written confirmation, whereas,
with the
travel allowances, Mr Grüterich had not sought for the
entitlement to be put in writing. The fact that Mr Grüterich chose
not to
attempt to have this entitlement noted in writing is consistent with Mr
Grüterich having made a deliberate choice not
to press for such an
entitlement. Further, the fact that Mr Grüterich kept no log or record of
how much of the company’s
funds he was spending on private travel and
accommodation is not consistent with a belief that he was entitled to much such
expenditure
on the company expense (since otherwise it might be expected that he
would appreciate he might need to reconcile or account for such
expenditure). I
find it implausible that someone with Mr Grüterich’s professional
experience would honestly believe that
it was satisfactory for him to make use
of the company funds without a record or some form of oversight in this
regard.
Credit card expenses
- Rema
Tip Top says it is common ground that Mr Grüterich was only permitted to
use company credit cards for business purposes
(though noting that
Mr Grüterich seems to claim that he could use his company credit card
to make purchases referable to his
“private travel budget”).
- Mr
Grüterich was issued with a HSBC Credit Card (in his name) by Rema Tip Top
on 5 February 2016. He was able to direct employees
of Rema Tip Top to book
travel and accommodation through the agency Corporate Traveller, and to pay for
those bookings using Rema
Tip Top’s American Express credit card (in the
name of ‘Peter Slattery’). The real issue in dispute is the scope
of
the authority granted to Mr Grüterich by Rema Tip Top to cause charges to
be made to each credit card.
- Mr
Grüterich’s evidence is that he understood the HSBC Credit
Card:
... would be used for company related purchases. In particular, I believed I was
entitled to use the HSBC Credit Card for all purchases
related to reasonable out
of pocket expenses incurred in the performance of my duties.
and
that:
... I continued to treat the HSBC Credit Card as a business card, and always
intended to pay for personal items on my own credit
cards ... .
- Rema
Tip Top says that this evidence is not contentious but takes issue with Mr
Grüterich’s statement that:
My understanding was that this included the promotion of the financial position,
prospects, welfare and reputation of [Rema Tip Top]
through the attendance at
and participation in client conferences, meetings and events, which might assist
in promoting [the Plaintiff]
and its goods and services.
- Mr
Grüterich claims that, on 23 August 2016, Mr Wach told him that he did not
need Mr Grüterich to send his credit card
statements to Mr Wach, but that
he did not understand Mr Wach as authorising him to spend Rema Tip Top’s
money on anything
he wanted. From that point on, Mr Grüterich claims to
have approved his own expense claims.
- On
20 April 2017, Mr Grüterich asked Rema Tip Top’s Financial Accountant
(Ms Sherry Lin) to “explain the process
now around credit card
checks”. He says that, in response, Ms Lin said (amongst other things)
that: “there is no approval
or checking from superior”; “there
is no control as its not [Accounts Payable] officer’s position to decide
which
transaction is eligible”; “if it’s not work related
expenses, there’s little we can do”; “[w]e
could deduct
personal expenses from card holder’s next payroll however it never
happened in the past”; and that he (Mr
Grüterich) replied
“[l]et’s get this enforced then”.
- It
is noted that later on 20 April 2017, Mr Grüterich sent an email (to
Mr Slattery, Ms Fairclough, Mr Davison and others) in
which he said
“one of our measurements to gain control back over our cost is going to be
the monthly credit card statement
check and approval process”; and he
asked to “receive the monthly statements with attached receipts and sign
them off”.
Mr Grüterich asked the recipients of his email to
sign off any of their team members’ credit card statements as well and
said “[f]ailing to provide evidence is going to result in pay
reduction”.
- It
is noted that Mr Grüterich says that he continued to review his own expense
claims and that his review was cursory because
he “did not have time as
Managing Director to go through and reconcile them in detail” and he
“expected that accounts
staff would do this”. It is noted that his
credit card statements had tens of dozens of entries and that he says that at no
time did he receive a “response or feedback” from Ms Lin.
- However,
Rema Tip Top notes that Ms Lin had told him on 20 April 2017 that it was not the
role of Accounts Payable to determine whether
or not his credit card charges
were eligible for reimbursement by the company.
- Rema
Tip Top says that in between demanding stricter controls in relation to
reimbursement of company credit card charges on 20 April
2017 and September
2017, Mr Grüterich nevertheless continued with his own company credit card
usage with no oversight whatsoever;
and that, despite Mr Wach’s departure
in late August 2017, Mr Grüterich did not enquire of Mr Wach’s
successor (Mr
Zimmer), nor of any other executive as to whether his alleged
arrangement with Mr Wach (whereby Mr Grüterich did not need to
submit his
credit card statements for approval by a supervisor) was to continue.
- In
early September 2017, Mr Grüterich claims that he asked his executive
assistance (Ms Thompson) to “review my credit
card statements”. He
says that from time to time she questioned him about specific charges but that
he trusted her to reconcile
his statements and “code specific items if
they were found to be personal in nature”. As a result of this, Mr
Grüterich
says, “I did not consider that I needed to review my own
statements from this point onward”.
- Ms
Thompson’s evidence is that Mr Grüterich took her to a cafe when she
commenced working with him and told her that he
was “close to
management” and had been “set up with everything”; and that he
told her the company paid all
of his living expenses.
- Ms
Thompson reconciled Mr Grüterich’s HSBC Credit Card statement for the
first time on 15 September 2017. She queried medical
expenses, Myer and bookshop
charges to the credit card. Mr Grüterich instructed her that: the company
paid his medical expenses;
the Myer charges were referable to “travelling,
repatriation according to employment agreements”; and that the books
were
“company property as part of training”. He suggested that she
categorise expenses as “Accessories, customer
gifts Entertaining”
and told her to “[f]eel free to be creative”.
- Ms
Thompson reviewed Mr Grüterich’s HSBC Credit Card statements from
then on and provided her reconciliations to him for
approval. Rema Tip Top
points out that at no stage did Mr Grüterich tell Ms Thompson that she had
categorised anything incorrectly,
or that an expense she had treated as
work-related was in fact private.
- Rema
Tip Top notes that Mr Grüterich acknowledged that his behaviour with the
HSBC Credit Card exposed the company to a financial
risk (T 353). Rema Tip Top
says that despite his professional qualifications and significant vocational
experience in corporate finance
roles (including very senior positions such as
Chief Financial Officer), and despite insisting others follow proper procedure
and
threatening disciplinary action if this was not done, on his evidence Mr
Grüterich nevertheless thought it was satisfactory
from Rema Tip
Top’s perspective that he used his HSBC Credit Card in the way he did with
no oversight.
- Rema
Tip Top says that the expenses itemised in the Annexures to the further amended
statement of claim were not work-related. The
expenses fall (broadly) into a
number of categories.
Emirates flights costs (Annexure B)
- These
are flights to Prague purchased for Mr Grüterich’s partner
(Ms Dropova). Insofar as Mr Grüterich claims that
he was entitled to
charge the company for these flights because repatriation costs were among the
benefits provided to him by his
employer, it is noted that the Employment
Contract contained no such benefits. The total cost of these flights was
$7,392.15.
Boston and New York travel (Annexure C)
- These
are costs incurred by Mr Grüterich whilst he was in Boston and New York in
October and November 2017. He arrived in Boston
on 28 October 2017 and flew back
to Sydney from New York on 16 November 2017. Mr Grüterich’s then
partner (Ms Zhang) was
with him for the duration of this trip, and Rema Tip Top
was charged for her flights also. The expenses include flights, accommodation,
meals and many miscellaneous charges.
- Mr
Grüterich’s justification for these expenses between 28 October 2017
and 3 November 2017 was his attendance at a seminar
in Boston over the period 29
October to 3 November 2017. Mr Grüterich flew to New York on
3 November 2017. Mr Grüterich
attended the holding meeting in New York
from 12 to 16 November 2017. Mr Grüterich’s justification for using
his company
credit card to pay for accommodation, meals and other items in the
period 3 to 11 November 2017 was that he had worked during business
hours.
- The
total of these expenses was $17,089.74. Rema Tip Top maintains that these were
not work-related expenses and they fell outside
the scope of
Mr Grüterich’s authority to charge items to his company credit
card.
New Zealand travel (Annexure D)
- These
expenses relate to a trip Mr Grüterich had planned with his partner to New
Zealand for the period 22 to 31 August 2017.
He claims that prior to taking this
trip he was directed to attend an American Express exhibition in Sydney from 29
to 31 August
2017. He went to New Zealand, but flew back to Sydney on 28 August
2017 to attend the exhibition. Mr Grüterich says that he
worked during his
trip to New Zealand, and for that reason he was justified in charging flights,
accommodation and other expenses
to Rema Tip Top.
- The
total of these expenses was $8,139.63. Mr Grüterich has claimed $5,740.52
as business expenses; the remainder he has apportioned
to his “private
travel budget”.
- Rema
Tip Top’s position is that Mr Grüterich was not justified in paying
for the New Zealand trip with his company credit
card merely because he worked
during that trip. It accepts that it may have been reasonable of Mr
Grüterich to seek to re-credit
his annual leave balance for the period of
this trip but says it was not reasonable for him to use his company credit card
to pay
for it (and certainly not without approval).
Miscellaneous
expenses (Annexure G)
- These
expenses include the following:
- (a) an expense
of $1,569.38 relating to accommodation at the Emirates One&Only resort at
Wolgan Valley, NSW purchased on 27 April
2017 (which Mr Grüterich claims
was work related);
- (b) purchases
totalling $5,540 from the Apple Store in Sydney (which Mr Grüterich claims
were purchases relating to his work
from home);
- (c) purchases
totalling $2,090.68 from JB Hi-Fi stores in the Sydney CBD (which Mr
Grüterich claims were purchases relating to
his work from home);
- (d) a purchase
of cycling shoes from the Giant store in the Sydney CBD in the amount of $619.75
(which Mr Grüterich does not
now dispute);
- (e) a purchase
of cycling shoes from Cycleworld in the amount of $131.73 (which Mr
Grüterich does not now dispute);
- (f) three
traffic infringement notices issued to Mr Grüterich totalling $999.98 (it
is noted that Mr Grüterich claims his
previous employer in South Africa
paid traffic fines for its executives (including him); Rema Tip Top says that
there is no evidence
to support this (other than Mr Grüterich’s oral
testimony). Insofar as Mr Grüterich says he believed that Rema Tip
Top had
a similar policy, Rema Tip Top says that there is no basis for this claimed
belief, and it was improper of Mr Grüterich
to pay these fines with his
company credit card);
- (g) a charge of
$619.00 for accommodation in Melbourne at the Hilton Doubletree Hotel (Mr
Grüterich claims he visited Melbourne
to watch the Formula One Grand Prix
at the invitation of an IT supplier to “discuss a potential partnership in
the Asia Pacific
Region” and that he decided that his presence in
Melbourne was in the best interests of the company and so he charged Rema
Tip
Top for his accommodation);
- (h) a charge of
$514.95 from the Shaver Shop (which Mr Grüterich does not now
dispute);
- (i) monthly
charges for a Foxtel subscription totalling $429 (Mr Grüterich claims
that he previously had a pay TV subscription
that paid for by his previous
employer in South Africa. Rema Tip Top says that there was no basis for
Mr Grüterich to charge
Rema Tip Top for his personal Foxtel
subscription without approval);
- (j) a charge of
$222.00 from Ugg Australia (which Mr Grüterich does not now dispute);
- (k) a charge of
$60.86 for a cookbook (which Mr Grüterich does not now
dispute).
Rema Tip Top’s submissions regarding
the credit card expenses
- Rema
Tip Top submits that Mr Grüterich adopted a cavalier attitude to expense
claims; and says that his actions were “dishonest/culpably
careless”. Rema Tip Top complains that Mr Grüterich allowed a
situation to exist from August 2016 to 16 March 2018 whereby
there was no
oversight of his spending on the HSBC Credit Card; noting that his credit card
statements were never submitted to a
supervisor for approval during this
period.
- Rema
Tip Top notes, in particular, that in cross-examination, Mr Grüterich
accepted that no one had said to him after his arrival
in Australia that it was
permissible to use the company credit card to pay traffic infringement notices;
points to his evidence as
to the May 2017 stay at the Wolgan Valley resort, his
evidence as to the trip to Melbourne to watch the Formula 1 Grand Prix with
Mr
Nehru Eljiz, the Shaver Shop expense, the JB Hi Fi multiple purchases of various
headphones and earphones; and the Apple Store
purchases (which it is said were
not authorised goods legitimately needed for work purposes or ought to have been
obtained from Rema
Tip Top).
Mr Grüterich’s
submissions regarding the credit card expenses
- In
essence, Mr Grüterich maintains that there was justification of certain of
the expenses and concedes (albeit on the basis
that these were minor amounts and
for the efficient conduct of the litigation) various of the other expenses. Mr
Grüterich also
maintains that Rema Tip Top has failed to establish that the
disputed expenses were unauthorised. Mr Grüterich deposes to a
conversation
with Mr Reiff as to expenditure on various client expenses (see T
477).
Determination
- As
to the disputed expenses, I am not persuaded that it has been established that
the Prague flights were unauthorised (or, if they
were, that Mr Grüterich
acted dishonestly in claiming these expenses), having regard to the discretion
that appears to have
been allowed in relation to partner travel during the
course of Mr Grüterich’s employment in South Africa and the
communications
that suggested a continuation of those benefits on his deployment
to Australia. Rema Tip Top’s claim to this amount has not
been made
good.
- As
to the Boston and New York travel expenses, Mr Slattery was cross-examined as to
his sponsorship of Mr Grüterich to attend
a Harvard leadership program
(which was at or about the same time as a New York holding meeting and in
circumstances where Mr Grüterich
had claimed his expenses of the trip to
Boston as a business expense). Mr Slattery’s evidence made clear that had
signed the
sponsorship form at Mr Grüterich’s request and that he had
not reviewed it (on the assumption apparently that it was a
“relatively
benign document”). This was in the context of comments in his affidavit as
to the expenditure of money by
Mr Grüterich on travel to Boston. The nub of
Mr Slattery’s evidence was that he considered that Mr Grüterich
had
simply “tacked on” the Boston trip and carried out his own
private activities at the time that he went to a New York
holding meeting; and
Mr Slattery said that he did not consider that the travel to Harvard was related
to business.
- I
consider that there is sufficient doubt as to this item that I cannot make a
finding that the expenses were either unauthorised
or, if they were
unauthorised, that this was knowingly the case. Rema Tip Top’s claim to
this amount has not been made good.
- In
relation to the New Zealand travel, again I am not satisfied that Rema Tip
Top’s claim to this amount has been made good.
There is room for doubt as
to this item in my opinion. This is because it is not disputed that Mr
Grüterich had to attend an
American Express exhibition which required him
to fly home from New Zealand earlier than anticipated and which, it can be
safely
assumed, would have required him to do some work as preparation in the
lead up to it.
- In
relation to the miscellaneous expenses, I consider that Rema Tip Top’s
claim has been made good in relation to the amounts
that are there claimed (most
of which are now not disputed by Mr Grüterich) with the exception of the
traffic infringement notices
(on the basis that there is sufficient doubt as to
the practice within the company in this regard). I should add that the evidence
in relation to items such as the Wolgan Valley accommodation and the Shaver Shop
purchase was in my opinion contrived – the
former is inconsistent with the
facts that emerged in cross-examination and the latter is inherently
implausible. I also consider
that Mr Grüterich’s explanation of his
visit to Melbourne with Mr Eljiz of Virtuelle Technologies (which Rema Tip Top
says was a supplier of IT services to Rema Tip Top, and not a “potential
client” as Mr Grüterich had claimed in
his affidavit) was
contrived.
- In
this regard, while one or two examples of improper use of the company credit
card might be explicable as an honest mistake, this
is a situation of
expenditure consistently claimed by the Managing Director without any attempt to
review the claims (delegating
that task to an assistant and encouraging her to
be creative) and in the context of a situation where he was clearly conscious of
the need for staff to be held to account for company expenses. I consider that
the cavalier attitude he adopted is analogous with
the situation considered in
BGC (Australia) Pty Ltd v Phippard [2002] WASCA 191 (Phippard) to
which I refer below and that it is inconsistent with an honest or diligent
approach to his duties. Taken as a whole, I find that
Mr Grüterich’s
use of the HSBC Credit Card to make the personal purchases was in breach of his
Employment Contract, his
fiduciary duty and s 182(1) of the Corporations Act
2001 (Cth).
Was Rema Tip Top entitled to terminate as at 16
March 2018 for serious misconduct?
- Rema
Tip Top seeks a finding that Mr Grüterich engaged in serious misconduct in
his employment such as to justify its summary
dismissal of him. Such a finding
would have defeated Mr Grüterich’s claim to damages for repudiation
of the Employment
Contract (had it been found that the contract was a fixed term
contract of employment). It remains relevant (notwithstanding my finding
on that
issue) as it is an element in Rema Tip Top’s claim for restitution of the
Notice Payment; and, to Rema Tip Top’s
contention that a finding of
serious misconduct defeats Mr Grüterich’s claim for long service
leave accruals (though for
the reasons I explain later I am not persuaded that
it does so).
Rema Tip Top’s submissions
- Rema
Tip Top refers in this regard to BIyth Chemicals where Dixon and
McTiernan JJ said (at 81):
Conduct which in respect of important matters is incompatible with the
fulfilment of an employee’s duty, or involves an opposition,
or conflict
between his interest and his duty to his employer, or impedes the faithful
performance of his obligations, or is destructive
of the necessary confidence
between employer and employee, is a ground of dismissal.
- Rema
Tip Top also refers to Concut Pty Ltd v Worrell [2000] HCA 64; (2005) 75
ALJR 312 (Concut) where Kirby J said (at [51(4)]):
It is, however, only in exceptional circumstances that an ordinary employer is
entitled at common law to dismiss an employee summarily.
Whatever the position
may be in relation to isolated acts of negligence, incompetence or
unsuitability, it cannot be disputed (statute
or express contractual provision
aside) that acts of dishonesty or similar conduct destructive of the mutual
trust between the employer
and employee, once discovered, ordinarily fall within
the class of conduct which, without more, authorises summary dismissal.
Exceptions
to this general position may exist for trivial breaches of the
express or implied terms of the contract of employment. Other exceptions
may
arise where the breaches are ancient in time and where they may have been waived
in the past, although known to the employer.
Some breaches may be judged
irrelevant to the duties of the particular employee and an ongoing relationship
with the employer. But
these exceptional cases apart, the establishment of
important, relevant instances of misconduct, such as dishonesty on the part of
an employee like Mr Wells, will normally afford legal justification for summary
dismissal. Such a case will be classified as amounting
to a relevant repudiation
or renunciation by the employee of the employment contract, thus warranting
summary dismissal. [footnotes
omitted]
- In
Phippard, the Industrial Court of Appeal said (at
[22]):
The reasoning of Kirby J in Concut Pty Ltd v Worrell makes it clear that
acts of dishonesty which are destructive of mutual trust ordinarily fall within
the class of conduct which, without
more, authorises summary dismissal. He
allowed that an exception to this general position may exist for trivial
breaches. In the
present case, however, where the respondent occupied a senior
managerial position, and could reasonably be expected to set an impeccable
example in regard to such claims, I am of the view that the outcome of the
present case must be decided by reference to the rule
rather than to the
exception.”
- Rema
Tip Top submits that the factual situation in Phippard bears a close
similarity to this matter: there, Mr Phippard was the General Manager of the
appellant; he had the authority to incur
and authorise his own business
expenditure, and in the absence of specific guidelines in that regard, such
expenditure was a matter
of judgment and a discretionary decision; it was
alleged that he had misuse of the expense system and had abused his position of
trust as General Manager; it was held that there were no fixed rules in regards
to the claiming of expenses and that a high degree
of trust was part of the
arrangement between the parties; and it was accepted that Mr Phippard did
not deliberately set out to deceive
his employer but he did have “a
cavalier attitude to expenses claims”. In considering whether the conduct
of Mr Phippard
constituted such a deliberate flouting of his contract of
employment to warrant summary dismissal, Hasluck J said (at
[14]):
... Put shortly, the respondent conducted a system of claims for expenditure in
his own case which allowed mistaken, unverifiable
claims and several dishonest
claims. His inability to explain why he misclaimed was proof of how obviously
and fundamentally flawed
the system was. It constituted a breach of the
respondent’s fiduciary duty to allow and claim on such a system, in some
cases
dishonestly.
- Rema
Tip Top submits that it would be no answer to the case against him even if it
were to be found that Mr Grüterich did not
subjectively appreciate that his
misconduct was dishonest; arguing that Mr Grüterich’s subjective
beliefs as to whether
or not his actions were legitimate have limited relevance
in this matter. Reference is made to Downer EDI Limited v Gillies [2012]
NSWCA 333 (Downer EDI), where Allsop P, as his Honour then was, said (at
[84]):
The dispute between the parties was as to the weight to be given to the
subjective honesty of Mr Gillies. Some of Mr Gillies’
submissions appeared
to place it as a determinative factor. To the extent that the submissions went
that far they should not be accepted.
Subjective honesty and motive may, no
doubt, be relevant. ... The relevance of subjective belief and motivation
will depend, however, upon the nature and character of the acts in question.
If, for instance, as in BIyth Chemicals, conduct was capable of an
innocent construction compatible with the relationship, as well as being capable
of a construction that
was incompatible with the relationship, the
“motives and intentions” of the employee may become
“all-important”:
BIyth Chemicals at 82. On the other hand,
where the conduct is not capable of an innocent construction, such as an
employee taking a secret commission,
the Court may be of the view that evidence
of the belief of the employee that he saw nothing wrong with this would not be
taken as
relevant: Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39
Ch D 339 at 369. As in the assessment of impropriety for the purposes of ss 181
and 182, the standard of conduct is imposed by the courts as that which would be
reasonably expected in the relationship in all the circumstances.
The place of
subjective honesty will depend upon the nature of the conduct and all the
circumstances. But there is no haven for the morally obtuse: Doyle
at 29 [37]. [my emphasis]
- Objective
factors to which Rema Tip Top points as being relevant to the assessment of Mr
Grüterich’s claimed belief that
he was acting honestly include that:
he was the Managing Director of the company; his professional and educational
background was
in company finance; he had a high level of qualifications that
were relevant to the proper governance of a corporation; he demanded
high
standards of probity from others in relation to the use of company funds (such
as his insistence on proper procedure and scrutiny
in relation to use of company
credit cards); and he had personally had an involvement in instances of
disciplinary action or investigation
of potential employee misbehaviour with
respect to entitlements, company funds or other property (such as in the case of
Mr Wieczorkowski
and Mr Malsem).
- Rema
Tip Top submits that the conduct of Mr Grüterich in: paying himself the car
allowance; paying himself the double salary;
paying himself the bonus payment;
using company money to pay for his private travel expenses; causing Rema Tip Top
to pay the 50%
deposit on the Poliform furniture; and using his HSBC Credit Card
to pay for personal expenses, both individually and collectively,
amounts to
serious misconduct that justified his instant dismissal (under the express terms
of his contract, or at common law as
a matter of orthodox contractual
principles).
- Thus,
it is submitted that, by 16 March 2018, Mr Grüterich had engaged in serious
misconduct such as to justify the company’s
summary termination of his
employment and Rema Tip Top was therefore entitled to terminate the Employment
Contract by giving Mr Grüterich
six months’ notice or payment in lieu
of notice (and hence did not repudiate the Employment Contract when it
terminated his
employment on 16 March 2018 even if that contract was for a fixed
term). It is further submitted that, even if the Employment Contract
had the
alleged Fixed Term, Mr Grüterich did not enjoy a right to terminate the
Employment Contract himself for alleged repudiation
by Rema Tip Top; and that,
by 16 March 2018, Mr Grüterich was in material breach of the Employment
Contract himself by reason
of his serious misconduct, which also amounted to a
repudiation of the Employment Contract (referring to Koompahtoo Local
Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; [2007] HCA
61 at [44]; and Concut at [51]); and hence Rema Tip Top was also entitled
to terminate the Employment Contract for those reasons.
- It
is said that it is no answer to this contention that Rema Tip Top did not know
about Mr Grüterich’s misconduct when
it terminated his employment
(see Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359;
[1931] HCA 21).
Determination
- As
outlined earlier, Rema Tip Top makes allegations of serious misconduct by Mr
Grüterich during the course of his employment,
namely, that Mr
Grüterich: wilfully and dishonestly misappropriated moneys from Rema Tip
Top; purchased personal property without
its authorisation; and breached his
fiduciary duty to Rema Tip Top while in its employment. Rema Tip Top seeks: a
declaration that
it was justified in terminating Mr Grüterich’s
contract of employment in March 2018 for serious misconduct by Mr
Grüterich.
- In
North v Television Corp Ltd [1976] CthArbRp 1465; (1976) 11 ALR 599 (North v Television
Corp), Smithers and Evatt JJ interpreted the expression
“misconduct” as “referring to conduct so seriously in breach
of
the contract that by standards of fairness and justice the employer should
not be bound to continue the employment” (see at
608 and 609). Their
Honours continued (at 609):
This situation would arise if there were conduct inconsistent with the
fulfilment of the express or implied conditions of service.
- I
have already noted the passages from Blyth Chemicals on which Rema Tip
Top relies. In that case, Starke and Evatt JJ noted that “[t]he degree of
misconduct that will justify dismissal
is usually a question of fact” (see
also Clouston & Co Ltd v Corry [1906] AC 122 (Clouston v
Corry); and Willis Australia Group Services Pty Ltd v Mitchell-Innes
[2015] NSWCA 381 (Willis v Mitchell-Innes)).
- In
Clouston v Corry, their Lordships (at [129]) said (as cited in Willis
v Mitchell-Innes at [89]):
... There is no fixed rule of law defining the degree of misconduct which will
justify dismissal. Of course there may be misconduct
in a servant which will not
justify the determination of a contract of service by one of the parties to it
against the will of the
other. On the other hand, misconduct inconsistent with
the fulfilment of the express or implied conditions of service will justify
dismissal. Certainly when the alleged misconduct consists of drunkenness there
must be considerable difficulty in determining the
extent or conditions of
intoxication which will establish a justification for dismissal. The
intoxication may be habitual and gross,
and directly interfere with the business
of the employer or with the ability of the servant to render due service. But it
may be
an isolated act committed under the circumstances of festivity and in no
way connected with or affecting the employer’s business.
In such a case
the question whether the misconduct proved establishes the right to dismiss the
servant must depend upon facts –
and is a question of fact.
...
- In
Willis v Mitchell-Innes after considering (at [90]) the relevant passages
in Blyth Chemicals (per Dixon and McTiernan JJ), Macfarlan JA (myself and
Leeming JA agreeing) also (at [92]) referred to the judgment of Gillard J
in
Rankin v Marine Power International Pty Ltd [2001] VSC 150; (2001) 107 IR
117 at [250]:
The authorities do establish that the employee's breach of contract of
employment must be of a serious nature, involving a repudiation
of the essential
obligations under the contract or actual conduct which is repugnant to the
relationship of employer-employee, before
an employer may terminate the contract
summarily. Isolated conduct usually would not suffice. Each case must be
considered in the
light of its particular circumstances, but nevertheless, the
seriousness of the act of termination and the effect of summary dismissal
are
factors which place a heavy burden on the employer to justify dismissal without
notice. The circumstances do not have to be exceptional,
but nevertheless, must
establish that the breach was of a serious nature.
- In
North v Television Corp, it was also said that “[i]t is of
assistance to consider the expression “misconduct” by reference to
subject matter
to which it is related and the context in which it appears”
(at 608 per Smithers and Evatt JJ).
- In
Blyth Chemicals, Starke and Evatt JJ (at 74) made clear that “[t]he
mere apprehension that an employee will act in a manner incompatible with
the
due and faithful performance of his duty affords no ground for dismissing him;
he must be guilty of some conduct in itself incompatible
with his duty and the
confidential relation between himself and his employer”.
- In
Matter Technology Ltd v Mrakas; Mrakas v Matter Technology Ltd [2018]
NSWSC 507, Stevenson J found that Mr Mrakas had engaged in serious misconduct
and breached his contractual and statutory duties as director
and Chief
Executive Officer of Matter Technology Ltd and, thus, that the plaintiff was
justified in terminating Mr Mrakas’
employment, explaining at [148]
that:
In order that conduct be “serious misconduct” it must “be of a
serious nature”, involve “a repudiation
of the essential obligations
under the contract” or be “repugnant to the relationship of employee
and employer”:
see Rankin v Marine Power International Pty
Ltd [2001] VSC 150 at [250] (Gillard J) and see generally Coope
v LCM Litigation Fund Pty Ltd [2016] NSWCA 37 at
[139]- [140].
- To
establish serious misconduct, knowledge on the part of the person who has
committed the misconduct is not required. (What may be
a relevant consideration,
however, may be the knowledge of the employer or a superior in the employment
context.) In comparison,
to establish dishonesty as a ground for dismissal, it
would be necessary that the person was aware that his or her actions were
dishonest.
- In
Australian Labour and Employment Law (M Pittard and R Naughton (1st ed,
2015, LexisNexis)), dishonesty is included as a separate ground for summary
dismissal; it being
said (at [7.55]) that:
Dishonesty per se may not be sufficient to warrant summary dismissal. The
dishonesty must be sufficiently serious and relate to,
or affect, the
employment.
- In
Miller v Sunland Park Pty Ltd [2014] FCCA 89, allegations were made of
dishonesty (including, the unauthorised use of the company credit card).
Relevantly, in concluding that
the grounds for summary dismissal had not been
made out, Simpson J made the following concluding remarks at
[204]ff:
The primary question to be decided in this case is whether or not Sunland was
entitled to summarily dismiss Mr Miller for serious
misconduct. For the
following reasons I am not satisfied on the balance of probabilities that
Sunland had any proper basis to summarily
dismiss.
A close examination of the evidence in relation to Mr Hutchens’ dealing
with Mr and Mrs Miller and Ms Schutz convinces me that
Mr Hutchens far too
readily makes allegations of dishonesty without first having the evidence to
support such conclusions. ...
His allegations about the dishonesty of Mr Miller and, to a lesser extent, Mrs
Miller, are not supported by the evidence or by the
use of common sense. The
evidence of Ms Schutz does not support Mr Hutchens’ evidence. Mr Miller
used the Mastercard for numerous
private purchases. It does not accord with
common sense that he was doing so dishonestly as he knew that very soon
afterwards Mr
Hutchens would be able to see the entries on the Mastercard
statement.
There was no element of subterfuge in Mr Miller’s actions. He was at all
times transparent in his dealings with Mr Hutchens.
Notwithstanding the evidence
given during this lengthy trial, Mr Hutchens has continued to maintain that Mr
Miller was acting dishonestly.
- In
Cunningham v Australian Bureau of Statistics (2005) 148 IR 20, a senior
employee had changed the results of a work social football tipping competition.
The Australian Industrial Relations Commissions,
reversing the primary
decision-maker’s decision, held that given the senior position of the
employee, the fact the position
carried a high degree of trust and the nature of
his role, changing the results of the work social tipping competition
constituted
grounds to terminate the employment contract, as it “erode[d]
the trust and honesty” between the employee and his colleagues,
which
could affect the work environment. The Commissioners also held
that:
The test determining the validity of the termination is an objective one. The
respondent was employed at a senior level and had system
administrator
privileges, which carried a high degree of trust. Anything that erodes the trust
and honesty between work colleagues
is destructive and has the potential to
affect the work environment significantly. Viewed objectively, there was a
legitimate basis
for the appellant to conclude that the requisite level of trust
no longer existed.
- Relevantly,
the Commissioners appeared to place weight on the fact that the employee used
the privileges associated with his position
“for personal gain”,
stating at [27]:
... We are influenced by two things in particular. The first is that the other
participants in the tipping competitions for the most
part were, it is to be
inferred, the respondent’s co-workers. The second is that the respondent
was an assistant director of
the appellant and used his system administrator
privileges for personal gain. These matters give the conduct a relationship to
work
which is direct and significant.
- In
my opinion, taken as a whole, the conduct of which Rema Tip Top complains and in
respect of which I have made the findings above
did amount to misconduct on Mr
Grüterich’s part and, in circumstances where some of that conduct
cannot in my opinion
be said to have been made with an honest and reasonable
belief as to the existence of the relevant entitlement (in particular, the
claimed car allowance at a time when Mr Grüterich still had the use of a
number of cars, the claimed double salary payments
sought to be supported by the
2017 Education Support Letter which was wholly unrelated to those payments and
the purported entitlement
to a private travel budget of $50,000), I can only
conclude that the conduct had an element of dishonesty.
- Rema
Tip Top notes that dishonesty is sufficient to permit summary termination under
the terms of the Employment Contract. Mr Grüterich
points out that what is
alleged in the pleaded claim is wilful and dishonest misappropriation. It is not
apparent to me that there
is any real difference between those concepts. Suffice
it to note that I find Mr Grüterich’s conduct in relation to the
car
allowance, double salary payments and provision to himself of a private travel
budget of $50,000 to have been wilful and dishonest
misappropriations of company
moneys.
- Moreover,
I consider that the overall conduct of Mr Grüterich in relation to the
failure properly to reconcile his company credit
card expenses to amount to
serious misconduct (albeit that I do not make an express finding of dishonesty
in that regard). Thus,
I have concluded that it was open to Rema Tip Top
summarily to terminate Mr Grüterich’s employment as at 16 March 2018
and that it did so validly in accordance with the
contract.
Restitutionary claim for recovery of notice
payment
- Rema
Tip Top seeks restitution of the Notice Payment on the grounds that it was paid
as a result of an operative mistake. It says
that the mistake that caused the
Notice Payment to be made was its lack of knowledge of the misconduct (of which
it now complains)
at the time that it made the payment; alternatively, or in
addition, it says that it was its belief that it was obliged to make the
Notice
Payment.
- In
this regard, Rema Tip Top points to the fact that the concept of mistake has
been found to include a lack of awareness of something,
not just a positive but
incorrect belief, referring to David Securities Pty Ltd v Commonwealth Bank
of Australia (1992) 175 CLR 353; [1992] HCA 48 (David Securities) (at
369 and 374).
- It
is submitted that the making of the Notice Payment ostensibly in accordance with
cl 15.3(a) of the Employment Contract did not
preclude Rema Tip Top from
summarily terminating Mr Grüterich’s employment once it became aware
of his serious misconduct
(referring to Downer EDI (per Allsop P (as his
Honour then was), Macfarlan and Meagher JJA agreeing); Bibby Financial
Services Australia Pty Ltd v Sharma [2014] NSWCA 37; cf Melbourne
Stadiums Ltd v Sautner (2015) 229 FCR 221; [2015] FCAFC 20)
(Sautner). It is said that, as in Downer EDI, the language of the
termination provisions of the Employment Contract (i.e., cll 15.1, 15.2 and
15.3) supports such a conclusion.
- At
the time of Mr Grüterich’s dismissal, the three directors of Rema Tip
Top were Mr Grüterich, Mr Zimmer and Mr Slattery.
Mr Zimmer and Mr Slattery
each gave evidence that he had participated in the decision to terminate
Mr Grüterich’s employment;
and that the Board of Rema Tip Top
had resolved to terminate Mr Grüterich’s employment because the
“Head Office”
(i.e., Rema Tip Top AG) had lost trust in Mr
Grüterich’s performance of his role.
- Mr
Zimmer and Mr Slattery each gave evidence that he did not know that
Mr Grüterich had used company money to fund private expenses
and had
directed employees of the company to make payments out of Rema Tip Top’s
funds to which he was not entitled; and each
say that if he had known of these
things he would have recommended that Mr Grüterich be dismissed
summarily.
- Mr
Slattery’s evidence was that it was his intention to pay Mr Grüterich
only what he was legally entitled to be paid;
and for that reason, he asked the
payroll officer (Ms Fairclough) to consult Rema Tip Top’s records to
ascertain what, if any,
amounts were due to Mr Grüterich on
termination.
- Rema
Tip Top says that the evidence of Mr Slattery and Mr Zimmer as to their lack of
knowledge of Mr Grüterich’s misconduct
is supported by Mr
Grüterich’s account of the discussions he had with Mr Slattery and Mr
Labbé on 15 and 16 March
2018 in relation to the termination of his
employment (in particular, as to the list of his “entitlements”
prepared by
Mr Grüterich at Mr Slattery’s request (which included
payment in lieu of six months’ notice of termination)); and
by the letter
of advice it received from O’Hearn Lawyers (which records their
instructions as to Mr Grüterich’s
overall performance).
- Rema
Tip Top submits that it is clear from this evidence that Rema Tip Top was
unaware of Mr Grüterich’s misconduct when
it chose to make a payment
in lieu of notice to him. It is submitted that the Notice Payment was therefore
made under a mistake (noting
that the concept of mistake includes a lack of
awareness of something, not just a positive but incorrect belief – see
David Securities at 369 and 374, Mason & Carter’s
Restitution Law in Australia (K Mason, J W Carter, G J Tolhurst) (3rd ed,
2016, LexisNexis)) (Mason & Carter) at [430]).
- Rema
Tip Top argues in this regard: first, that it was unaware of facts that would
have justified it in the conclusion that Mr Grüterich
had engaged in
serious misconduct and, second, that it was unaware of its legal right summarily
to dismiss Mr Grüterich. It
is said that each of those matters supports a
finding that Rema Tip Top made the payment in lieu of notice to
Mr Grüterich under
a mistake.
- Accordingly,
Rema Tip Top contends that it made the payment under a mistake of fact, or,
alternatively, a mistake of law. It is noted
that the mistake need not be
‘fundamental’, but that it must be shown to have been operative, in
the sense that it caused
Rema Tip Top to make the Notice Payment (referring to
Australia & New Zealand Banking Group Ltd v Westpac Banking
Corporation (1988) 164 CLR 662 at 673; [1988] HCA 17 (ANZ v
Westpac)); and that negligence will not preclude recovery by a plaintiff
whose mistake led to the payment (referring to Mason & Carter at
[424]).
- It
is submitted that the Notice Payment could not be said to have been a voluntary
payment such as to defeat any restitution claim
(referring to David
Securities at 69; and Salib v Gakas; Newport Pacific Pty Ltd v Salib
[2010] NSWSC 505 (Salib v Gakas) at [315]).
- It
is noted that, in David Securities, Mason CJ, Deane, Toohey, Gaudron and
McHugh JJ, said (at 373-374):
The payment is voluntary or there is an election if the plaintiff chooses to
make the payment even though he or she believes a particular
law or contractual
provision requiring the payment is, or may be, invalid, or is not concerned to
query whether payment is legally
required; he or she is prepared to assume the
validity of the obligation, or is prepared to make the payment irrespective of
the
validity or invalidity of the obligation, rather than contest the claim for
payment. We use the term “voluntary” therefore
to refer to a payment
made in satisfaction of an honest claim, rather than a payment not made under
any form of compulsion or undue
influence.
- Rema
Tip Top says that it is no answer to this claim that its agents (its employees)
were aware of facts that would have alerted Rema
Tip Top to
Mr Grüterich’s misconduct, noting that those employees did not
include Mr Zimmer and Mr Slattery who were,
for the purposes of the
decision to terminate Mr Grüterich’s employment the collective mind
of Rema Tip Top (referring
to Mason & Carter at [425] and [440]).
Nor, it is submitted, is it an answer that Rema Tip Top made a binding election
between inconsistent rights
at the point of paying Mr Grüterich in lieu of
notice instead of dismissing him summarily. Reference is made in this context
to
Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570;
[2008] HCA 57 at [56]- [67] per Gummow, Hayne and Kiefel JJ; and to Sargent v
ASL Developments Ltd (1974) 131 CLR 634; [1974] HCA 40, where Stephen J said
(at 648-649):
Election as between inconsistent contractual rights does not call for any
conscious choice as between two sets of rights, it being
enough that there
should be intentional and unequivocal conduct together with knowledge of the
facts giving rise to the legal rights
- Having
regard to the evidence of Mr Zimmer and Mr Slattery as to a lack of knowledge of
the facts that gave rise to the right of Rema
Tip Top summarily to dismiss Mr
Grüterich, it is said that there was no binding election by Rema Tip Top
between inconsistent
contractual rights when it made a payment to Mr
Grüterich in ignorance of circumstances that would have permitted it to
dismiss
him summarily (referring to Downer EDI at [141] (per Allsop P (as
his Honour then was), Macfarlan and Meagher JJA agreeing), see also Heugh v
Central Petroleum Ltd [No 5] [2014] WASC 311 at [94]). (It is noted that no
defence of election was pleaded by Mr Grüterich in answer to Rema Tip
Top’s claim, as it would
have to have been in order for Mr Grüterich
to rely upon it, referring to Mason & Carter at [2316]-[2317].)
- Finally,
it is submitted that the decision of the Full Federal Court in Sautner
(to which Mr Grüterich has referred) does not preclude an order for
restitution of the Notice Payment in this matter, for the
following
reasons.
- First,
it is said that, insofar as the Full Court disagreed with the reasoning of
Allsop P, as his Honour then was, (Macfarlan and
Meagher JJA agreeing) in
Downer EDI (at [144]) as to the extended operation of the principle in
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931]
HCA 21 (Shepherd), it is said that this was obiter dicta as it was
not necessary for the court to consider the application of the Shepherd
principle in Sautner (see at [91]). It is noted that the Full Court
characterised Allsop P’s reasoning in Downer EDI (at [144]) as
permitting, following a (lawful) termination of an agreement, an entitlement to
rely upon a different type of termination
based upon a serious misconduct
provision to sustain that very termination (Sautner at [113]).
- Second,
it is said that the terms of the Employment Contract in the present matter
support a conclusion that the making of a payment
in lieu of notice (ostensibly
in compliance with cl 15.3(a)) did not foreclose the exercise by Rema Tip Top of
its right summarily
to terminate the contract pursuant to cl 15.2 of the
Employment Contract. It is noted that, in Downer EDI, Allsop P said at
[143]:
Clause 4.3 should be construed both in the context of the common law, including
the principle in Shepherd v Felt and Textiles, and in accordance with
honest commercial common sense. One aspect of common sense would be the obvious
fact that serious misconduct
of an employee is sometimes not discovered for some
time. A business contract, otherwise tolerably straightforwardly drafted, to
be
understood as permitting an employee to obtain contractual benefits on
termination on the basis of no misconduct when, unknown
to the employer, serious
misconduct has occurred, which if appreciated, would have denied the contractual
benefits, might give pause
for thought. If the words are reasonably capable of
conforming to a regime consistent with the parties’ rights being resolved
by reference to the true position, they should be given that sensible meaning.
Here, cl 4 as a whole and the text of cl 4.3 support
a meaning to the word
‘effected’ in cl 4.3 broader than the historical fact of what
happened.
- Rema
Tip Top emphasises that, in the present case, the employer’s right to
terminate by giving six months’ notice (in
cl 15.1) was expressed to be
“subject to” cl 15.2; and that the employer’s right to make a
payment in lieu of notice
(under cl 15.3(a)) was available “without
limiting the Employer’s rights”. It is submitted that those words
should
be construed in a way that makes commercial sense and avoids unreasonable
or unintended results of the kind referred to by Allsop
P in Downer
EDI.
- Rema
Tip Top thus submits that the preferable construction of cll 15.1, 15.2 and
15.3(b), in these circumstances, is that the right
of termination on payment in
lieu of notice in cll 15.1 and 15.3(a) did not operate severally from the right
to terminate summarily
in cl 15.2 (see Downer EDI at [136]); and that the
right to terminate under cl 15.1 (by paying Mr Grüterich in lieu of notice
under cl 15.3(a)) arose concurrently
with its right to terminate his employment
summarily for serious misconduct under cl 15.2. It is said that, in contrast
with Bibby, the right to terminate Mr Grüterich’s employment
summarily under cl 15.2 did not arise later in time than its right to
terminate
his employment under cll 15.1 and 15.2(a)). Further, in this context, Rema Tip
Top repeats its submission that there was
no binding election between
inconsistent rights at the point of Rema Tip Top making the Notice Payment
because it did not know of
the facts that gave rise to the right to dismiss Mr
Grüterich’s employment summarily.
- As
to Mr Grüterich’s change of position defence (see below), Rema Tip
Top says that, insofar as Mr Grüterich claims
that he did the things
particularised at [134AA] of the defence to the further amended statement of
claim “as a result of the
termination notice and the Notice
Payment”, this erroneously treats the termination and the Notice Payment
as the same thing.
Rema Tip Top argues that Mr Grüterich’s acceptance
of Rema Tip Top’s alleged repudiation of the Employment Contract
did not
occur because Mr Grüterich was paid the Notice Payment (but in any event
says that it did not repudiate the Employment
Contract). It submits that the
“sub-class 457 visa status” was unaffected by the making of the
Notice Payment (on the
basis that the cancellation of Mr Grüterich’s
visa did not occur as a result of the Notice Payment); and it is said that
Mr
Grüterich’s return to Germany and the costs of doing so were not
caused by the making of the Notice Payment.
- Thus,
it is submitted that the restitution claim in respect of the Notice Payment
should be upheld.
Mr Grüterich’s submissions
- Insofar
as Rema Tip Top claims restitution of the $213,655 payment made to Mr
Grüterich in lieu of notice, on the basis of an
alleged unilateral mistake
of fact, Mr Grüterich says that the facts do not support that claim.
- It
is noted that cl 15.2 of the Employment Contract allowed (so far as relevant)
for summary termination if Mr Grüterich “engage[d]
in serious
misconduct”, which under the contract has its ordinary meaning at law and
includes “theft, dishonesty and
fraud”.
- It
is noted that although these proceedings are civil in nature, Briginshaw v
Briginshaw has the consequence that the seriousness of the allegation and
the gravity of the consequences mean that the evidence required to
reach a level
of satisfaction “should not be produced by inexact proofs, indefinite
testimony, or indirect inferences”.
Mr Grüterich quarrels with Rema
Tip Top’s reliance on “indirect and hearsay-ridden evidence”
in this regard,
noting that where the Briginshaw principle applies, while
the burden of proof remains unchanged, the evidence needed to satisfy the burden
must be more coherent and
comprehensive.
- Mr
Grüterich says that his evidence is supported by contemporaneous
documentation, including the Spreadsheet, Mr Zimmer’s
instruction for the
payments to be paid as soon as possible, the submission of the payslip by
Mr Grüterich to Mr Zimmer upon
the making of the bonus payment, and an
email exchange between Mr Grüterich and Mr Wach setting out various other
benefits to
be provided. He notes that he himself queried the lack of oversight
of company credit cards and directed a credit card policy to
be put in place and
enforced. It is submitted that those are not the actions of a person who
intended to charge expenses to company
credit cards for which he knew he was not
entitled.
- Mr
Grüterich submits that, for a case of unilateral mistake to succeed, Rema
Tip Top must first establish a prima facie case of unjust enrichment on
the basis that the payment was made as a result of a mistake or law or fact and
then prove receipt.
It is noted that receipt is not in issue but it is said that
Rema Tip Top must prove the misconduct alleged was sufficient to give
rise to a
right of termination under cl 15.2 for serious misconduct for theft, dishonesty
or fraud. It is noted that fraud and theft
have not been pleaded, and it is said
that the evidence establishes that at all relevant times, Mr Grüterich held
an honest
belief that he was entitled to the benefits he received.
- It
is said that from at least 14 March 2018, Rema Tip Top had involved its in-house
auditor; that by the same date Mr Slattery had
Mr Grüterich’s credit
card statements and had given them to Mr Philpotts (another witness not called
by Rema Tip Top;
Mr Grüterich here again invoking Jones v Dunkel),
and Rema Tip Top obtained an advice from its solicitors on 16 March 2018
regarding its rights of termination under the Employment
Contract. It is said
that in light of those circumstances, the mistake case must fail and Rema Tip
Top relied upon its own investigations
and inquiries in deciding to make the
termination payment.
- However,
if mistake and receipt are proved then Mr Grüterich argues that any unjust
enrichment must be balanced against any unjustness
that will be suffered by him
(the recipient) if restitution were to be ordered.
- Mr
Grüterich submits that he has changed his position in the most fundamental
way by causing his solicitors to send a letter
on 23 April 2018 to the
solicitors for Rema Tip Top accepting the repudiation of the Employment Contract
and bringing the Employment
Contract and his employment with Rema Tip Top to an
end (citing David Securities (Mason CJ, Deane, Toohey, Gaudron and McHugh
JJ)). It is said that Mr Grüterich’s “subclass 457 visa”
was dependent
on his employment at Rema Tip Top and, as a result of his
Employment Contract coming to an end, his visa was cancelled and he was
required
to leave his life in Australia and return to Germany. It is submitted that, in
the circumstances of that fundamental change
of position, as a result of the
alleged mistake and the payment, it would be unjust for Mr Grüterich to be
required to make
restitution for the alleged mistaken payment.
- Further
or in the alternative, it is submitted that even if the elements of mistake can
be established, Rema Tip Top cannot recover
the payment because a contract, once
terminated on one ground, cannot be revived so as to be able to be terminated
again (citing
Salib v Gakas at [315]-[336]; Sautner at
[112]-[116]).
- Mr
Grüterich notes that at [131] of the further amended statement of claim,
Rema Tip Top asserts that under cl 15.2 of the Employment
Contract, it was
entitled summarily to terminate his employment and the Employment Contract by
reason of the “Conduct”,
or any of it. It is said that on Rema Tip
Top’s interpretation of the operation of cl 15.2, if it had knowledge of
any of the
alleged instances of misconduct before 16 March 2018, it could have
terminated the Employment Contract; conversely, it follows that,
if Rema Tip Top
was aware of any of the alleged misconduct before 16 March 2018, it cannot have
been mistaken as to its rights of
termination of the Employment Contract and is
therefore not entitled to restitution.
- Mr
Grüterich says that Rema Tip Top was aware of the following: the
€50,000 2017 bonus (pointing to the 15 January 2018
correspondence to Mr
Zimmer informing him that Mr Grüterich had instructed staff to pay him the
€50,000 2017 bonus and
confirming that it had been paid); by 16 March 2018
at the latest (before Mr Grüterich’s employment was brought to an
end), Mr Slattery and Mr Philpotts (another key witness not called by Rema Tip
Top: Jones v Dunkel), were aware of at least some of the transactions on
the credit card statements which are now the subject of Rema Tip Top’s
claims of misconduct; from at least 14 March 2018, Rema Tip Top had involved an
in-house auditor to investigate its accounts, and
had obtained an advice from
its solicitors regarding its rights of termination under the Employment
Contract: and fourth, in cross-examination,
Mr Labbé conceded that he did
not contact the one person who could have confirmed or disproved Mr
Grüterich’s claimed
entitlements (Mr Wach). It is noted that Mr
Labbé accepted that there was nothing stopping him from calling Mr Wach
or sending
him an email; and that Mr Labbé’s explanation for not
contacting Mr Wach was that “[i]t is irrelevant” because
“we
have terminated Mr Grüterich to the terms of his management contract, for
his Australian contract [sic]”.
- It
is noted that Mr Labbé conceded that because he did not contact Mr Wach,
he did not know what Mr Grüterich’s
entitlements were and, as a
result, the Board of Rema Tip Top did not know either. Likewise, Mr Zimmer, Mr
Slattery and Mr Kopp made
no inquiry with Mr Wach.
- It
is submitted that there is no evidence as to how, in the absence of contacting
Mr Wach, the legal department of Stahlgruber AG
(which is giving instructions on
behalf of Rema Tip Top) has knowledge of Mr Grüterich’s entitlements.
It is noted that
Rema Tip Top has failed to call the head of the legal
department of Stahlgruber AG, Mr Ubelacker. It is submitted that an adverse
inference ought to be drawn against Rema Tip Top in this regard.
- It
is submitted that it follows that the legal department of Stahlgruber AG does
not in fact know whether or not there is a proper
basis for the allegations Rema
Tip Top makes in these proceedings; and that any assertions by Rema Tip Top that
it was mistaken,
misled or deceived are unreliable at best.
- Mr
Grüterich submits that it is remarkable, given the seriousness of the
allegations made against him by Rema Tip Top that Rema
Tip Top’s
witnesses, including the current CEO of the group, do not know who is actually
giving instructions to its lawyers,
or whether the claims made by Rema Tip Top
have any veracity.
Determination
- As
to Rema Tip Top’s claim for restitution of the Notice Payment on the
grounds that it was paid as a result of an operative
mistake (being lack of
knowledge of the misconduct of which it now complains at the time that it made
the payment; alternatively,
or in addition, that it was its belief that it was
obliged to make the Notice Payment), I note that in Meagher, Gummow and
Lehane’s Equity Doctrines and Remedies (J D Heydon, M J Leeming and PG
Turner (5th ed, 2014, LexisNexis)) (at [25-035]) it is observed that “a
more liberal view is
taken by equity than common law of what is required for
restitution, which may be effected by equity’s ancillary remedies of
account and delivery up and by granting relief on terms”.
- The
elements of a claim in restitution are generally described as mirroring the
components of the unjust enrichment concept; namely,
(1) the identifiable
enrichment; (2) that the enrichment was obtained at the plaintiff’s
expense; and (3) that the enrichment
(or its retention) is unjust (see G D Pont
et al, Halsbury’s Laws of Australia (Lexis Nexis) at [370-5]).
- Money
paid by mistake was outlined by Lord Mansfield in Moses v Macferlan
[1760] EngR 713; (1760) 2 Burr 1005 at 1012; [1760] EngR 713; 97 ER 676 at 681 (as cited in Lampson (Australia)
Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162 at [54] per
Edelman J (sitting in the Supreme Court of Western Australia as his Honour then
was)) as a judicially recognised example of an
unjust factor.
- In
Goff & Jones The Law of Unjust Enrichment (C Mitchell, P Mitchell and
S Watterson (9th ed, 2016, Thomson Reuters) (Goff & Jones)), the
authors put forward an appropriate way to establishing restitution, in the
context of mistake, as being (see [9-40]):
An appropriate way forward may be the following. First, the concept of a
“mistake” requires, as a threshold matter, that
a claimant believed
that it was more likely than not that the true facts or true state of the law
were otherwise than they actually
were. Secondly, this belief must cause the
claimant to confer the benefit on the defendant, in the required sense. Thirdly,
even
if a causative mistake can be shown, a claimant may sometimes be denied
relief on the basis that he responded unreasonably to his
doubts, and so
unreasonably ran the risk of error. Fourthly, beyond this, a claimant who had
doubts may be denied relief on the distinct
grounds that he has compromised or
settled with the defendant, or on the basis that he is estopped from pleading
his mistake. There
is no need for any independent “assumption of
risk” bar in this context, and the language of assumption of risk is a
redundant way of expressing the conclusion that a claimant’s claim must
fail on one or more of the foregoing grounds.
- In
Mason & Carter, mistakes giving rise to legal liability to make the
payment is described as “the commonest category of mistake of fact”
(at [411]). Reference is made to Norwich Union Fire Insurance Society Ltd v
William H Price Ltd [1934] AC 455, where liability was believed to arise
under an existing contract between the parties. Similarly, another common
example is the recovery
of money provided pursuant to a supposed contractual
obligation “that did not in truth exist or that had already been
discharged”.
- As
I noted in Salib v Gakas (at [322]):
That restitution, on the basis of unjust enrichment, will be available only
where a recognised ‘unjust’ factor has been
established, was again
affirmed by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd
[2007] HCA 22; (2007) 230 CLR 89; (2007) 236 ALR 209, where Gleeson CJ,
Gummow, Callinan, Heydon and Crennan JJ stated at [150]-[151]:
First, whether enrichment is unjust is not
determined by reference to a subjective evaluation of what is unfair or
unconscionable:
recovery rather depends on the existence of a qualifying or
vitiating factor falling into some particular category; Australia and New
Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17;
(1988) 164 CLR 662 at 673 per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ;
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992)
175 CLR 353 at 379 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. In
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48;
(1992) 175 CLR 353 at 379, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ gave
as instances of a qualifying or vitiating factor mistake, duress or
illegality.
- The
mere fact of the conferral of a benefit does not suffice to establish an
entitlement to recovery (see Lumbers v W Cook Builders Pty Ltd (In Liq)
(2008) 232 CLR 635; [2008] HCA 27 (per Gummow, Hayne, Crennan and Kiefel JJ at
[80])).
- In
Wasada Pty Limited v State Rail Authority of New South Wales (No.2)
[2003] NSWSC 987, Campbell JA (at [16]) approved the following passage from an
earlier edition of Mason, Carter and Tolhurst, in Mason & Carter’s
Restitution Law in Australia at [166]:
‘Unjust’ is the ‘generalisation of all the factors which the
law recognises as calling for restitution’.
Because we need to search for
recognised factors, examination of which involves an analysis of case law, the
reference to ‘injustice’
as an element of unjust enrichment, is not
a reference to judicial discretion. Normal judicial processes are involved and
it is only
in cases where there is no recognised basis for saying that injustice
has arisen that problems can arise.
- Receipt
of a payment which has been made under an operative mistake has been recognised
as giving rise to a prima facie obligation to make restitution (see
ANZ v Westpac at 673 (per Mason CJ, Wilson, Deane, Toohey and Gaudron
JJ)); and, as noted above, in David Securities, the High Court
unanimously rejected the notion that such a mistake need be fundamental,
emphasising (at 43) the requirement that
the mistake be causative. Thus, in
Salib v Gakas, I said (at [326]):
... to establish a right to restitution on the basis of a mistake the plaintiff
must not only have held the relevant mistaken belief
(whether that be a mistake
of fact or law) but also the mistake must be causative of the payment or
conferral of the benefit (David Securities, per Mason CJ, Deane, Toohey,
Gaudron, at 378-379 and per McHugh JJ, at [43] making it clear that the prima
facie entitlement to
recover moneys paid under a mistake depends upon the
appearance that the moneys were paid by the payer “in the mistaken belief
that he or she was under a legal obligation to pay the moneys or that the payee
was legally entitled to payment of the moneys”).
- Further,
as noted (at [327]) a party may be relevantly mistaken, and entitled to
restitution, even where the mistaken belief is his
or her own fault, provided
that payment was made as a result of the mistake (see Commercial Bank of
Australia Ltd v Younis [1979] 1 NSWLR 444 at 450; David Securities;
Kelly v Solari [1841] EngR 1091; (1841) 9 M & W 53 at 59; [1841] EngR 1087; 152 ER 24 at 26 per Parke
B).
- In
David Securities (at 373-374), the plurality (Mason CJ, Deane, Toohey,
Gaudron and McHugh JJ) addressed the question of the voluntariness of the
payment
or election by the payer:
The payment is voluntary or there is an election if the plaintiff chooses to
make the payment even though he or she believes a particular
law or contractual
provision requiring the payment is, or may be, invalid, or is not concerned to
query whether payment is legally
required; he or she is prepared to assume the
validity of the obligation, or is prepared to make the payment irrespective of
the
validity or invalidity of the obligation, rather than contest the claim for
payment. We use the term “voluntary” therefore
to refer to a payment
made in satisfaction of an honest claim, rather than a payment not made under
any form of compulsion or undue
influence.
- As
was also recognised in David Securities by the plurality (at
379):
... it is not legitimate to determine whether an enrichment is unjust by
reference to some subjective evaluation of what is fair
or unconscionable.
Instead, recovery depends upon the existence of a qualifying or vitiating factor
such as mistake, duress or illegality.
- The
absence of a factor rendering retention of the benefit (or the relevant
enrichment) “unjust” for the purposes of a
claim in restitution was
determinative of the claimant’s inability to establish an entitlement to
interest upon moneys paid
over in State Bank of New South Wales v
Commissioner of Taxation [1995] FCA 1652; (1995) 62 FCR 371; (1995) 132 ALR 653. Similarly,
in Lahoud v Lahoud [2010] NSWSC 1297 (Lahoud) no causative
mistake was identified so as to warrant the conclusion that what had occurred on
the facts was inequitable or unconscionable.
Such case law indicates that,
instead of pleading in general and abstract terms, the facts material to the
case must be pleaded clearly
and with particularity (see Lahoud at
[151]ff).
- That
restitution, on the basis of unjust enrichment, will be available only where a
recognised ‘unjust’ factor has been
established, was again affirmed
by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007)
230 CLR 89; [2007] HCA 22 where the plurality (Gleeson CJ, Gummow, Callinan,
Heydon and Crennan JJ) stated (at [150]):
First, whether enrichment is unjust is not determined by reference to a
subjective evaluation of what is unfair or unconscionable:
recovery rather
depends on the existence of a qualifying or vitiating factor falling into some
particular category; Australia and New Zealand Banking Group Ltd v Westpac
Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at 673 per Mason CJ,
Wilson, Deane, Toohey and Gaudron JJ; David Securities Pty Ltd v Commonwealth
Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 379 per Mason CJ,
Deane, Toohey, Gaudron and McHugh JJ. In David Securities Pty Ltd v
Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 379,
Mason CJ, Deane, Toohey, Gaudron and McHugh JJ gave as instances of a qualifying
or vitiating factor mistake, duress or illegality.
... Further, principles
respecting fiduciary duty have been said to be foreign to unjust enrichment
notions because the unjust factors
are commonly concerned with vitiation or
qualification of the intention of a claimant: Edelman, "A Principled Approach to
Unauthorised
Receipt of Trust Property", (2006) 122 Law Quarterly Review 174 at
177-178.
- In
the present case, the relevant payments made by Rema Tip Top in respect of which
restitution is claimed include not only the Notice
Payment but also the payments
of other claimed entitlements to which I have earlier referred. In relation to
those other payments,
in particular, the bonus payment, I consider that the
relevant vitiating factor giving rise to a prima facie entitlement to
restitution
has been established; the relevant vitiating factor being the
mistake that there was an obligation to pay that amount and the lack
of an
entitlement on the part of Mr Grüterich to those payments.
- However,
in the case of the Notice Payment, there is an issue to my mind as to the
voluntary nature of that payment (and this leads
me to conclude that the
retention of the benefit is not in all the circumstances unjust).
- Before
turning to that issue, I note the debate in relation to the ability summarily to
terminate in the present case where the contract
was terminated by notice. As
noted above, in Sautner there was discussion regarding the scope of
Shepherd.
- At
first instance, Mr Sautner had sued (and succeeded) on the basis that the
following conduct (as extracted from the Full Court’s
decision) did not
justify his summary dismissal:
• the bartering misconduct, by which Mr Sautner
used tickets to the Medallion Club area of the stadium as a form of cash to
obtain goods and services for his
personal benefit (grounds 1 to 3 of the
amended notice of appeal);
• the ARU (Australian Rugby Union) misconduct, by
which Mr Sautner used his superior position as Director, Commercial Business of
MSL to suborn another employee to issue to him
tickets to a rugby match to be
played at the stadium in breach of the ARU’s requirements (grounds 4 and 5
of the amended notice
of appeal);
• the disparagement misconduct, by which Mr
Sautner communicated to the same employee and to a person who was both his
friend and a senior employee of the main
sponsor of the stadium disparaging,
disrespectful and derogatory comments about the Chief Executive Officer
(“the CEO”)
of MSL and showed to his fellow employee photographs of
the CEO taken without the CEO’s knowledge or consent which Mr Sautner
used
to support his comments (grounds 6 and 7 of the amended notice of appeal);
and
• the breach of the CEO’s direction, by
which Mr Sautner was directed by the CEO not to be involved with the Perth
stadium project and thereafter arranged two tours
of the stadium by the
Brookfield consortium, a tenderer for the Perth stadium project, which Mr
Sautner and the stadium’s facilities
manager conducted (grounds 8 and 9 of
the amended notice of appeal).
- Shepherd
came up for consideration in Sautner because, as their Honours in the
majority in the Full Court of the Federal Court of Australia (Tracey, Gilmore,
Jagot and Beach JJ)
had found that Mr Sautner’s dismissal was justified,
the issue arose as to whether the Shepherd principle applied in the case
to permit a termination for cause (i.e. a summary dismissal), rather than the
termination with notice
that had been previously been asserted and required the
company to pay Mr Sautner six months’ remuneration in lieu of notice.
- Their
Honours summarised Shepherd in Sautner (at [92]) as involving a
contract of agency, extrapolating that:
... Shepherd’s agency was terminated by the respondent because it was
dissatisfied with his services although at that time
it was not aware of certain
conduct of Shepherd. It was held that an agent’s dismissal may be
justified upon grounds upon which
his principal did not act or of which the
principal was unaware when the purported termination occurred.
- Dixon
J in Shepherd said that, “[i]t is a long established rule of
law that a contracting party, who, after he has become entitled to refuse
performance of
his contractual obligations, gives a wrong reason for his
refusal, does not thereby deprive himself of a justification which in fact
existed, whether he was aware of it or not”.
- Mr
Sautner argued that neither Shepherd properly understood nor any later
authorities (including Downer EDI) “extend the Shepherd
principle to a circumstance whereby a party lawfully terminates a contract in
accordance with its terms on proper notice (or payment
in lieu of notice) and a
debt thereby accrues, and after this the terminating party discovers conduct
which would have justified
the summary termination of the contract of employment
for cause” (see at [95]).
- The
majority in Sautner differentiated that case from Shepherd (at
[97]) on the basis that:
... here there has been an actual contractual termination, not a mere purported
termination upon inadequate grounds but nonetheless
later justified on grounds
not known or not relied upon at the time of purported termination. Moreover, the
actual termination was
not based upon breach.
- As
adverted to above, the Shepherd principle was considered by the New South
Wales Court of Appeal in Downer EDI. Allsop P (as his Honour then was)
(Macfarlan and Meagher JJA agreeing) stated (at [132])
that:
[t]he principle enunciated in Shepherd v Felt and Textiles often operates
when a contractual act sought to be justified cannot be so justified on the
ground contemporaneously relied upon,
but can be so justified on a ground then
existing but not known about: see for example British and Beningtons Ltd v
North Western Cachar Tea Co Ltd [1923] AC 48 at 70-71; and see the
discussion of principle by Devlin J in Universal Cargo Carriers Corporation v
Citati [1957] 2 QB 401 at 443-446 approved by Mason CJ in Sunbird
Plaza at 262.
- In
Downer EDI, Allsop P ultimately found that the Shepherd principle
should not be limited to “supporting as justifiable acts done under
contract which are not valid without further justification
from the facts not
previously known” (at [136]). His Honour continued:
... In principle, it should equally extend to adding a further basis for
justification of the act if that further basis has separate
relevance. So to
approach the matter accords with the approach to the availability of damages for
loss of bargain even if the contract
be terminated in the exercise of a
contractual power: Progressive Mailing House Pty Ltd v
Tabali Pty Ltd [1985] HCA 14; 157 CLR 17 at 31;
and Sunbird Plaza at 260-262. Of course, whether or not the two
contractual bases can operate concurrently or severally will
be affected by the
terms of the contract.
- In
reaching this conclusion, Allsop P followed Mason CJ’s statement in
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262;
[1988] HCA 11 (Sunbird Plaza) that:
Shepherd v Felt & Textiles of Australia Ltd stands as authority for
the general proposition that a termination of a contract may be justified by
reference to any ground that
was valid at the time of termination, even though
it was not relied on at the time and even though the ground actually relied on
is found to be without substance
and reasoned that the Court was
bound by the wider expression of the Shepherd principle in Sunbird
Plaza (at [138]).
- In
Sautner at [109], the majority disagreed with Allsop P’s broad
reading of Mason CJ’s decision in Sunbird Plaza. Their Honours
suggested that the better view was that “Mason CJ was merely describing
the principle in terms of the facts found
in Shepherd”. Their
Honours stated (at [112]) that they did not consider that Shepherd
supported the contention that “a lawfully terminated agreement, in effect,
may be resuscitated and then re-terminated upon
some ground not known at the
time of the termination”, and noted (at [113]) that, to the extent
Downer EDI suggested otherwise (particularly what was said by Allsop P at
[136], [138] and [144]) they would disagree:
... Allsop P construed the termination clause in Downer in a way which
enabled the Shepherd principle to be invoked in its wider expression as
articulated by his Honour. We do not need for present purposes to explore that
textual construction in detail. However, we would depart from his Honour’s
reasons at [144] which would permit, following a
(lawful) termination of an
agreement, an entitlement to rely upon a different type of termination based
upon a serious misconduct
provision to sustain that very
termination.
- In
my opinion, the situation at hand is not one where Rema Tip Top is maintaining a
right to terminate the contract afresh (having
validly terminated it without
cause on 16 March 2018). Rather, Rema Tip Top is asserting that it would have
been entitled summarily
to dismiss Mr Grüterich on that date (as I have
found it was) and therefore that the Notice Payment was made under a mistake
that Mr Grüterich was entitled to receive that amount if his employment
were to be terminated without a six month notice period.
- Although
Rema Tip Top relies on the fact that it obtained legal advice in effect as to
its ability to terminate Mr Grüterich
for cause (the advice sought strictly
being addressed to the question whether Mr Grüterich would have a cause of
action if Rema
Tip Top were to terminate his employment) as indicating that, but
for its mistake, it would have terminated summarily; to my mind
what this
indicates is that Rema Tip Top was making an election not to investigate further
the circumstances of Mr Grüterich’s
conduct (or any alleged
misconduct) but to bring his employment to an end immediately on the payment of
that Notice Payment. I consider
that this has the necessary quality of a
voluntary payment so as to lead to the conclusion that there should not be
restitution of
the Notice Payment. It is not therefore necessary to consider the
change of position defence. (Suffice it to note that had it been
necessary to
determine this I would have held, for the reasons put forward by Rema Tip Top in
its submissions, that there was no
relevant change of position referable to the
manner in which the contract was terminated (as opposed to the fact of
termination).)
Misleading or deceptive conduct claim
- In
the alternative to the restitution claim in relation to the Notice Payment, Rema
Tip Top contends that Mr Grüterich contravened
s 18 of the Australian
Consumer Law by failing to disclose his misconduct before the Notice Payment was
made. Section 18(1) of the Australian Consumer Law of course provides that
“[a] person must not, in trade or commerce, engage in conduct that is
misleading or deceptive or is likely to mislead or
deceive”.
Rema Tip Top’s submissions
- It
is submitted that Mr Grüterich’s silence was misleading or deceptive
in the context of the discussions and negotiations
that took place from about 14
March 2018 to 16 March 2018 in relation to his departure from Rema Tip Top and
his entitlements upon
termination.
- Rema
Tip Top submits that Mr Grüterich’s claims that he did nothing wrong,
that there was no reason to terminate his contract
and that he was entitled to
six months’ notice, gave rise to a representation which was falsified by
undisclosed facts (i.e.,
his misconduct). It is alleged that the misleading or
deceptive conduct of Mr Grüterich was his silence in the context of these
positive representations to Rema Tip Top and that it is no answer to this claim
that Mr Grüterich cannot reasonably have been
expected to confess to his
own wrongdoing if he genuinely believed that he had in fact done nothing
wrong.
- Rema
Tip Top notes that liability for misleading and deceptive conduct by silence
does not depend on the subjective state of mind
of the defendant (referring to
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 467); and says that what
is called for is an objective assessment of all of the relevant circumstances to
determine whether the
conduct was misleading or deceptive (referring to ACN
074 971 109 (as trustee for the Argo Unit Trust) and Pegela Pty Ltd v National
Mutual Life Association of Australasia Ltd [2006] VSC 507 at [741];
Addenbrooke Pty Limited v Duncan (No 2) [2017] FCAFC 76 at [482]; and
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193;
[2011] WASCA 76 per McLure P at [41]-[67]).
- It
is submitted that any reasonable person in Mr Grüterich’s position
ought to have known that his conduct was wrongful
and therefore any requirement
that Rema Tip Top have a reasonable expectation that Mr Grüterich would
reveal his own misconduct
to it (having regard to the context in which he
remained silent) is here satisfied.
- Further,
Rema Tip Top says that Mr Grüterich’s contention that Rema Tip Top
was relying on its own investigations and inquiries
in making the payment,
including the assistance of an in-house auditor and external solicitors, should
not be accepted on the basis
that it is against all of the evidence and
illogical. It is noted that there is direct evidence from Mr Slattery and Mr
Zimmer that
Mr Grüterich would not have received a payment in lieu of
notice when he was dismissed on 16 March 2018 had they known of his
misconduct.
- It
is submitted that the fact that Rema Tip Top quickly commenced proceedings
against Mr Grüterich for recovery of that Notice
Payment once it had become
aware of his misconduct is conclusive proof that it would not have paid this
amount to him in the first
place had it been aware of this misconduct prior to
making the payment.
- Rema
Tip Top submits that it is not necessary to plead, or prove, that
Mr Grüterich consciously concealed his misconduct in the
period 14 to
16 March 2018. It is noted that liability for breach of s 18 of the
Australian Consumer Law does not depend on an intent to mislead or deceive; and
that Mr Grüterich’s state of mind
is irrelevant to the question of
liability.
- Rema
Tip Top submits that the critical question is whether the circumstances were
such as to make Mr Grüterich’s silence
misleading. It is said that
this does not depend on any reasonable expectation of the plaintiff. Reference
in this regard is made
to Miller & Associates Insurance Broking Pty Ltd v
BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 (Miller v
BMW Australia) where French CJ and Kiefel J, as her Honour then was,
pointed out (at [19]) that the language of reasonable expectation is not
statutory,
but indicates an approach which can be taken to the characterisation
for the purpose of s 52 of the Trade Practices Act 1974 (Cth) (and
equally s 18 of the Australian Consumer Law) of conduct of or including
nondisclosure of information; and went on to say (at
[23]):
Reasonable expectation analysis is unnecessary in the case of a false
representation where the undisclosed fact is the falsity of
the representation.
A party to precontractual negotiations who provides to another party a document
containing a false representation
which is not disclaimed will, in all
probability, have engaged in misleading or deceptive conduct.
- In
the present case, it is said that Mr Grüterich’s failure to disclose
the falsity of the various assertions he made as
to the non-existence of any
reason for his dismissal and his entitlement to the Notice Payment was
misleading or deceptive. Rema
Tip Top says that it would not have made the
Notice Payment had it been aware of Mr Grüterich’s conduct and that
Mr Grüterich’s
silence (in the context of the matters identified
above) was causative of Rema Tip Top’s loss.
- Thus,
it is submitted that this claim should succeed, in the alternative to the
restitution claim and Rema Tip Top should be awarded
damages under s 236 of the
Australian Consumer Law in the amount of the Notice Payment.
Mr
Grüterich’s submissions
- As
to Rema Tip Top’s misleading or deceptive conduct claim, Mr Grüterich
submits that it should fail for the same reasons
as the restitution claim:
namely, that Rema Tip Top was relying upon its own investigations and inquiries
in making the payment,
including the assistance of an in-house auditor and
external solicitors; and it stated that it was terminating
Mr Grüterich
because it had “lost trust” in him. It is
submitted that, having lost trust in him, it is incongruous that Rema Tip Top
would have relied upon anything he did, or did not, say.
- Mr
Grüterich submits that the reasonable expectation analysis advanced by Rema
Tip Top should be rejected as being a mischaracterisation
of the law. It is
submitted that cases of misleading conduct by omission do require the
application of that analysis (see Miller v BMW Australia at [5],
[19]-[21]; Traderight (NSW) Pty Ltd v Bank of Queensland Ltd
[2015] NSWCA 94 at [189] (Barrett JA, Bathurst CJ and Beazley P agreeing);
OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at
[178]- [179] (Gleeson JA, Macfarlan and Leeming JJA agreeing)). It is said that
where a positive ‘false representation’ case is advanced,
it is
unnecessary to consider the inverse implied omission by silence as to the
falsity of the representation; and that in that context
doing so would not
require a ‘reasonable expectation’ analysis (Miller v BMW
Australia at [23]) but that here a positive false representation case is not
advanced by Rema Tip Top.
- Further,
it is submitted that for the purposes of misleading or deceptive conduct, a
party to commercial negotiations is not required
to volunteer information which
will be of assistance to the decision-making of the other party, noting that in
Miller v BMW Australia, French CJ and Kiefel J (as her Honour then was)
said (at [22]):
[A]s a general proposition, s 52 does not require a party to commercial
negotiations to volunteer information which will be of assistance to the
decision-making of
the other party. A fortiori it does not impose on a party an
obligation to volunteer information in order to avoid the consequences
of the
careless disregard, for its own interests, of another party of equal bargaining
power and competence. ...
- It
is submitted that, in the present case, any inequality of bargaining power was
firmly in favour of Rema Tip Top. Mr Grüterich
submits that there was no
relevant misconduct; and that even if (contrary to his position) the payments
were not objectively authorised,
this is insufficient to establish misconduct of
the kind required for termination on that basis (i.e., misconduct involving
intention
or knowledge). Further, it is submitted that it is not clear that
conduct by an employee, in their capacity as an employee, is “in
trade or
commerce”.
Determination
- As
to the misleading or deceptive conduct claim, the decision to terminate
Mr Grüterich’s employment was made prior to
the discussions held
on 15 and 16 March 2018 and was not in reliance on anything that Mr
Grüterich did or did not say at the
meeting at that time. Mr Labbé
accepted that he was directed by Mr Reiff to travel to Australia and terminate
Mr Grüterich’s
employment before 14 March 2018. Further, Mr
Labbé gave evidence that there was nothing Mr Grüterich could have
said
or done between 14 and 16 March 2018 to change the decision to terminate
his employment. Mr Labbé also conceded that nothing
Mr Grüterich in
fact did (or did not do) between 14 and 16 March 2018 affected the decision
to terminate his employment.
- Although
Mr Grüterich submits that Rema Tip Top’s misleading or deceptive
conduct case ought to be dismissed on that basis
alone, it seems to me that
there is a distinction between the decision to terminate Mr
Grüterich’s employment and the
basis on which that employment was
terminated (i.e., whether with notice or summarily). The decision to terminate
with a notice payment
was one that seems to have been made at the time of
termination (having regard to Mr Slattery’s evidence as to his discussion
with Mr Labbé about a mutual separation agreement and the way that these
things would be done in Australia) and, relevantly,
with the benefit of legal
advice. As adverted to above, Mr Grüterich says, in that regard, that the
misleading or deceptive
conduct claim should fail for the same reasons as the
mistake claim, namely that Rema Tip Top was relying upon its own investigations
and inquiries in making the payment, including the assistance of an in-house
auditor and external solicitors. It is in this context
that the question as to
whether it would need to be shown that Rema Tip Top had a reasonable expectation
of disclosure by Mr Grüterich,
at the time it terminated his contract, of
the matters giving rise to the alleged misconduct, is raised.
- In
Semrani v Manoun; Williams v Manoun [2001] NSWCA 337 (per Beazley JA, as
Her Excellency then was, Mason P and Ipp AJA agreeing), it was said (at
[58]-[62]) that:
It is well established that a party can engage in misleading and deceptive
conduct through silence: see for example Kimberley NZI Finance Ltd v Torero
Pty Ltd [1989] FCA 400; (1989) ATPR 46-054; Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39
FCR 31; Winterton Constructions Pty Ltd v Hambros Australia [1992] FCA 582; (1992) 39 FCR
97; Warner v Elders Rural Finance [1993] FCA 117; (1993) 41 FCR 399.
In Kimberley NZI Finance Ltd v Torero Pty Limited (approved by the Full
Federal Court in Demagogue Pty Limited v Ramensky), French J said at
53,195:
“The cases in which silence may be ... characterised [as conduct in
contravention of s 52] are no doubt many and various and it would be dangerous
to essay any principle by which they might be exhaustively defined. However,
unless the circumstances are such as to give rise to the reasonable expectation
that if some relevant fact exists it would be disclosed,
it is difficult to see
how mere silence could support the inference that that fact does not
exist.”
Silence may more readily lead to a finding of breach of s 52 or s 42 [of the
Trade Practices Act 1974 (Cth)] where there is a duty of disclosure: see
Winterton Construction Pty Limited v Hambros Australia Ltd per Hill J at
114; Warner v Elders Rural Finance at 404-405.
Although an intention to deceive is not necessary for the purposes of s 42: see
Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661, Puxu Pty Ltd v Parkdale Custom Built
Furniture Pty Ltd [1982] HCA 44; (1982) 149 CLR 191, a person cannot engage in conduct in
contravention of the section unless the person has actual knowledge of the
matter said to be
misleading or deceptive: see Gurr & Gurr v Forbes
(1996) 80 ATPR 41-491.
The combined effect of the Act and the authorities therefore, is that for
Williams’ silence to be actionable, he must have
had actual knowledge of a
matter which he intentionally refrained from telling Manoun in circumstances
where there was either a duty
to disclose or where Manoun had a reasonable
expectation that such information would be disclosed to him.
- In
Metalcorp Recyclers Pty Limited v Metal Manufactures Limited [2003] NSWCA
213; (2004) ATPR (Digest) 46-243 (Handley JA with Hodgson JA and Gzell J
agreeing) said (at [14]-[15]):
A finding of misleading or deceptive conduct is open where that conduct, by word
or deed, conveyed a misrepresentation (Wardley Australia Ltd v Western
Australia [1992] HCA 55; (1992) 175 CLR 514). In this case the misrepresentation is said to
have been conveyed by silence, but that is an inadequate and incomplete
description.
The relevant principles were felicitously summarised by Black CJ in
Demagogue Pty Limited v Ramensky [1992] FCA 557; (1992) 39 FCR 31, 32:
“Silence is to be assessed as a circumstance like any other. To say this
is certainly not to impose any general duty of disclosure;
the question is
simply whether, having regard to all the relevant circumstances, there has been
conduct that is misleading or deceptive
... to speak of ‘mere
silence’ or a duty of disclosure can divert attention from that primary
question. Although ‘mere
silence’ is a convenient way of describing
some fact situations, there is in truth no such thing as ‘mere
silence’
because the significance of silence always falls to be considered
in the context in which it occurs. That context may or may not
include facts
giving rise to a reasonable expectation, in the circumstances of the case, that
if particular matters exist they will
be disclosed”.
The misleading and deceptive conduct relied upon was that of Mr Cook during the
critical conversation. As Black CJ said, silence
that is capable of being
misleading or deceptive never stands alone. In the absence of some positive duty
to speak, silence can only
be misleading or deceptive against a background of
other facts known to both parties which make what is actually said so incomplete
that it conveys a misrepresentation.
- Were
it necessary here to determine the 'reasonable expectation' issue raised in the
parties’ competing submissions in this
case, I would have concluded that
silence is misleading and deceptive only in circumstances where there is a duty
to disclose (which
ultimately is a factual question). In this sense, I agree
with what was said by French J, as his Honour then was, in Kimberley NZI
Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53,193 that “unless
the circumstances are such as to give rise to the reasonable expectation that if
some
relevant fact exists it would be disclosed, it is difficult to see how mere
silence could support the inference that that fact does
not exist”.
- There
is also some force to the proposition that there would not be a reasonable
expectation on the part of an employee being summarily
dismissed for misconduct
in effect to confess his or her sins over the period of the employment there
being terminated (especially
in circumstances where I have concluded that some
of Mr Grüterich’s conduct was not knowingly dishonest). Here, of
course,
Mr Grüterich was not just silent as to the conduct of which Rema
Tip Top now complains but he actually prepared the list of
entitlements (which
was at the least misleading) and, though he may have done so in haste, he did
review it at least once and provided
an updated spreadsheet with updated
calculations.
- In
any event, whether or not the ‘reasonable expectation’ analysis is
required, I am not satisfied that the conduct of
Mr Grüterich in putting
forward the “entitlements spreadsheets” was misleading or deceptive.
I accept that it reflected
his view at the time of his entitlements (albeit that
he now concedes he was mistaken as to aspects of the spreadsheet schedules)
and
notwithstanding that at least the second of the versions seems to have built
into it scope for “negotiation” as to
his claimed entitlements.
- Furthermore,
I consider that it is clear that Rema Tip Top chose not to explore further the
circumstances surrounding Mr Grüterich’s
claimed entitlements and to
that extent did not rely on any representation arising from
Mr Grüterich’s “silence”
or failure to disclose his
misconduct when terminating the contract.
- I
have therefore concluded that Rema Tip Top’s claim for restitution of the
Notice Payment and for damages for misleading or
deceptive conduct in relation
thereto have not been made good.
Trust claim
- Rema
Tip Top contends that the receipt of the car allowance payments, the double
salary payments and the bonus payment were all instances
of dishonest
misappropriation of Rema Tip Top’s moneys by Mr Grüterich.
- It
says that the moneys were impressed with a trust in the hands of Mr
Grüterich (citing Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 at
110; [1910] HCA 58; Robb Evans of Robb Evans & Associates v European Bank
Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82; Wambo Coal Pty Ltd v Ariff
[2007] NSWSC 589 at [40] (Wambo Coal) (per White J), as his Honour then
was)); alternatively, that the moneys were received in breach of fiduciary duty
and are held by
Mr Grüterich on constructive trust for Rema Tip Top (citing
Hospital Products at 107-108; [1984] HCA 64 (per Mason J)).
- Rema
Tip Top seeks a declaration that these moneys are held on trust by
Mr Grüterich for its benefit and an order that they be
repaid to
it.
- It
is noted that in Wambo Coal White J (as His Honour then was) said at
[40]:
... Where property is stolen, the property is trust property in the hands of the
thief and can be traced into the hands of a third
party who receives the
property otherwise than as a bona fide purchaser of the legal estate for value
without notice. The property
is trust property in the hands of the thief because
the thief is bound in conscience to hold the property on behalf of its true
owner.
Whether the trust is characterised as a resulting trust, or as a
constructive trust, the trust is of an institutional rather than
a remedial
character. It arises because the conscience of the thief is bound. [citations
omitted]
- Rema
Tip Top seeks to trace those trust moneys into Mr Grüterich’s bank
accounts (referring to Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 at 127) and
seeks an order that funds held in the HSBC bank account be released to it in the
amount of $195,960.87 (gross).
Determination
- I
have concluded (aware as I am of the degree of satisfaction necessary for such a
finding) that the directions for payment of the
car allowance, the double salary
payments and the business class private travel expenses (as opposed to the
travel expenses claimed
as being for business purposes and dealt with separately
in these reasons) were not honestly made and accordingly the declarations
of
trust and tracing remedies as sought should be granted. As for the bonus
payment, I have concluded that it was mistakenly made
(but not that there was
dishonesty in relation to its receipt) but that there should be a repayment of
that amount by way of restitution
as the retention of that benefit by Mr
Grüterich would be unjust. As to the balance of the unauthorised expenses I
am satisfied
that they were obtained (and have been retained) in breach of
fiduciary duty such that a declaration of constructive trust should
be
made.
Overpayment of annual leave on termination
- Mr
Grüterich concedes that he was overpaid his annual leave by an amount
equivalent to 15 days. (His evidence is that, from his
experience of the
companies in the Rema Group in which he worked, he did not appreciate that he
had to record annual leave. That
is not necessary here to explore since the
relief sought is simply as to its repayment.) An order should be made for
repayment of
the amount conceded to have been overpaid (which I understand to be
$24,751.39).
Cross-claim
- The
principal claim by Mr Grüterich on his cross-claim (based on a variation of
the Employment Contract to include the Fixed
Term) or for misleading or
deceptive conduct in that regard, in respect of the loss of salary to 31
December 2019 has failed for
the reasons already set out. Mr Grüterich,
“for commercial reasons and on a without admissions basis”, did not
press
the smaller heads of claim in his cross-claim in respect of Rema Tip
Top’s claim.
- That
leaves Mr Grüterich’s claim to have been wrongly denied long service
leave accruals on termination of his employment.
Rema Tip Top submits that Mr
Grüterich’s misconduct deprived him of a right to any payment in
respect of long service
leave upon termination of his employment (relying on s
4(2)(a)(iii) of the Long Service Leave Act) and argues that this claim
should be dismissed
- Section
4 of the Long Service Leave Act sets out the statutory calculation for
long service leave and the circumstances in which the leave can be taken or paid
out. Long
service leave is accrued during time spent with an
“employer”, which is defined in s 3 as “any person employing
any worker or workers and includes the Crown”.
- Section
4(13)(c) of the Long Service Leave Act provides:
Where before or after the commencement of the Long Service Leave (Amendment)
Act 1967 a worker has transferred from the service of an employer (in this
paragraph called the first employer) being a corporation to the
service of
another employer being a corporation related to the first employer at the time
of that transfer, then for the purposes
of this section:
(i) the continuity of the period of service of the worker
shall be deemed not to have been broken by reason of the transfer, and
(ii) the period of service which the worker has had with the
first employer before the commencement of the service of the worker
with that
other employer (including any service which by reason of a prior transfer or
prior transfers or for any other reason the
worker is deemed by this section or,
for the purposes of long service leave for such service, the worker is deemed by
any Act or
award to have had with the first employer) shall be deemed to be
service of the worker with that other employer.
- Mr
Grüterich says that his employment prior to the Employment Contract is
counted because his former employers were corporations
related to Rema Tip
Top.
- Mr
Grüterich accepts that by s 4(2)(a)(iii) of the Long Service Leave
Act “serious and wilful misconduct” may disentitle an employee
to accrued long service leave but he notes that he was not
dismissed for
misconduct and argues that the facts do not establish this. Further, it is noted
that cl 16.1 of the Employment Contract
provided:
If the Executive’s employment is terminated for any reason, the Employer
will pay the Executive the Executive’s’
accrued and untaken annual
leave and long service leave.
- Mr
Grüterich says that cl 16.1 is inconsistent with Rema Tip Top’s
defence to the Long Service Leave Act claim and says that this claim
should not be disallowed.
Determination
- Section
4(1) of the Long Service Leave Act states that:
Except as otherwise provided in this Act, every worker shall be entitled to long
service leave on ordinary pay in respect of the
service of the worker with an
employer ... .
- Pursuant
to s 4(2)(a)(iii), the amount of long service leave to which a worker shall be
so entitled shall:
in the case of a worker who has completed with an
employer at least five years service, and whose services are terminated by the
employer
for any reason other than the worker’s serious and wilful
misconduct, or by the worker on account of illness, incapacity or
domestic or
other pressing necessity, or by reason of the death of the worker, be a
proportionate amount on the basis of 2 months
for 10 years
service.
- The
phrase “serious and wilful misconduct” is not defined in the Long
Service Leave Act but the case law indicates (particularly see McDonald v
Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903 (McDonald v Parnell
Laboratories)) that it is understood as having the same meaning attributed
to serious and wilful misconduct in the case law (including cases such
as
Blyth Chemicals).
- The
following extract from McDonald v Parnell Laboratories (per Buchanan J)
(at [48]) has been cited on numerous occasions:
The terms ‘misconduct’, ‘serious misconduct’ and
‘serious and wilful misconduct’ are often the
subject of judicial
and administrative attention as applied to the facts of particular cases but
there is relatively little judicial
discussion about their content and meaning.
Naturally enough, when the term ‘serious misconduct’ is under
consideration
an evaluation of what conduct represents ‘serious’
misconduct is influenced by the (usually statutory) setting in which
the phrase
must be given meaning and applied. Frequently, for example, the question at
issue is whether an employee is disentitled
by reason of his or her conduct to a
statutory entitlement (eg. in New South Wales, where Ms McDonald was employed,
see Long Service Leave Act 1955 (NSW) s 4(2)(a)(iii); Workers Compensation Act
1987 (NSW) s 14(2)[)].
- In
Portelli v Polar Fresh Cold Chain Services Pty Ltd (t/as Polar Fresh)
[2016] FWC 3519, the applicant argued that his dismissal from a refrigerated
goods storage and distribution business on the basis of absences from
work that
did not comply with the circumstances when leave might be taken according to the
relevant contract, was unfair. Amongst
other things, in holding that the
dismissal was not unfair, Hatcher VP of the Fair Work Commission took into
consideration that (see
at [45(5)]):
It is well arguable that Polar Fresh would have been entitled to summarily
dismiss Mr Portelli, and deny him his long service leave
on the basis that he
had committed serious and wilful misconduct [citing s 4(2)(a)(iii) of the
Long Service Leave Act 1955 (NSW)]. However they treated him generously
by dismissing him with a payment in lieu of notice and paying out his long
service leave,
which provided him with about eleven weeks’ income on
termination.
- In
my opinion, the proper construction of s 4(2)(a)(iii) is to focus on the
actual basis or reason for termination (i.e., whether the employee’s
services “are terminated by the
employer for any reason other than the
worker’s serious and wilful misconduct”) not whether some other
basis for termination
would have been available under which an entitlement to
long service leave would not have arisen. Apart from the text of the section,
which focusses on the reason for the termination (not whether some other basis
for termination may have been available), I have in
mind the fact that
contracting out of the legislation is prohibited (see s 7 of the Long Service
Leave Act), which reinforces the emphasis placed by the legislature on such
statutory entitlements and suggests that such entitlements are
not lightly to be
taken as having been lost. I was not taken to any authorities in which the
present situation has arisen (of a valid
termination without cause but where the
employment could validly have been terminated for serious misconduct) in the
context of disputed
long service leave entitlements (nor have I been able to
find any). I consider that a literal interpretation should be given to the
legislation as most consistent with the evident purpose of the legislation.
- Therefore
I have concluded that the fact that Mr Grüterich’s employment was
terminated with a payment in lieu of notice,
and not for misconduct, means that
he is entitled to accrued long service leave up to the date of termination of
his employment.
Such a conclusion is consistent with cl 16.1 of his
Employment Contract and therefore it is not necessary to consider the arguments
raised as to the operation of cl 16.1 independently or otherwise of the relevant
provisions of the legislation. Accordingly, an order
should be made for the
payment of the long service leave accrued from the time of
Mr Grüterich’s employment with DBS,
a related
corporation.
Costs
- As
to costs, in light of the mixed outcome on the respective claims, I will make
directions for written submissions to be provided
within seven days with a view
to determining this on the papers and I will give liberty to apply in case there
is any difficulty
in the implementation of these
orders.
Orders
- For
the reasons set out above, I make the following orders and
declarations:
- (1) Declare
that the plaintiff would have been justified in terminating the contract of
employment between itself and the defendant
on 16 March 2018 for serious
misconduct by the defendant.
- (2) Declare
that moneys in respect of the car allowance, the double salary payments and the
expenses said to be incurred under the
claimed private business class travel
budget (as opposed to the claimed business travel expenses on Mr
Grüterich’s company
credit card) totalling $187,037.67 were wilfully
and dishonestly misappropriated by the defendant and that those moneys were
impressed
with a presumed or resulting trust and are held on trust by the
defendant for the benefit of the plaintiff.
- (3) Declare
that those moneys, together with the moneys in respect of the bonus payment of
$103,210.88 and the unauthorised credit
card expenses (including the Poliform
furniture deposit) totalling $21,413.75, that the defendant caused to be paid to
himself or
for his benefit in breach of his fiduciary duty not to make an
unauthorised profit from his position, are held by the defendant subject
to a
constructive trust in the plaintiff’s favour.
- (4) Order that,
subject to the set-off ordered below, funds held in the HSBC bank account to the
amount of $311,662.30 (being the
total of the amounts the subject of the trust
declarations in Orders 2 and 3 above) be released to the plaintiff.
- (5) Order that
the defendant pay the following sums to the plaintiff (totalling $336,413.69) as
damages (for breach of contract, in
equity or under s 1317H of the
Corporations Act 2001 (Cth) for breach of fiduciary or statutory duties
owed by the defendant as managing director of the plaintiff) and/or by way of
restitution:
- (a) Car
allowance: $22,750.
- (b) Double
salary: $69,999.99.
- (c) Bonus
payment: $103,210.88.
- (d) Poliform
furniture: $9,616.40.
- (e) Travel
expenses: $94,287.68.
- (f) Annual
leave overpayment: $24,751.39.
- (g) Other
miscellaneous credit card expenses: $11,797.35.
- (6) Order the
payment of interest up to judgment on the above amounts.
- (7) Order that
the plaintiff pay to the defendant accrued long service leave calculated taking
into account his employment within
the Rema Group of companies from 25 October
2012 to the date of termination of his employment on 16 March 2018, with
interest calculated
up to judgment on that amount, but otherwise dismiss the
defendant’s cross-claim.
- (8) Order that
the amounts payable pursuant to the plaintiff under Orders 4 and 5 be set-off
against the amount ordered to be paid
to the defendant under Order 7; with the
remaining balance of the amounts so ordered to be paid to the plaintiff or the
defendant,
as the case may be, within 28 days.
- (9) Reserve the
question of costs to be dealt with on the papers following any further brief
written submissions on that issue.
- (10) Liberty to
apply on three days’ notice for any variation necessary to correct any
error in the calculation of the above
amounts or otherwise in relation to the
working out of the above orders.
**********
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