ByLawyers News and Updates

Income contributions and accumulated savings in bankruptcy

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By O’Brien Palmer

INSOLVENCY AND BUSINESS ADVISORY

First published on the website, www.obp.com.au

Introduction

Debtors facing bankruptcy often ask questions about the amount of income they can earn as a bankrupt and whether they can retain surplus income that might be accumulated during the period of their bankruptcy. The purpose of this newsletter is to explain the operation of the income contribution assessment regime and the manner in which a trustee is required to deal with any accumulated savings.

Income

Pursuant to sub-section 139W(1) of the Bankruptcy Act 1966 (“the Act”), a trustee is required to make an assessment of the income of a bankrupt that is likely to be derived or which was derived during the bankruptcy period. In practice, at the commencement of the bankruptcy and then every year thereafter, a trustee will issue an income questionnaire to be completed by the bankrupt. Based on the information provided, a trustee will assess whether the bankrupt is liable to make contributions from their income. If the bankrupt is found to be liable, then the bankrupt will normally arrange to make regular installment payments.

Pursuant to sub-sections 139W(2) and 139WA(1) of the Act a trustee can issue a fresh assessment if they are satisfied that the actual income derived by the bankrupt varies from the amount originally estimated. This may occur at any time during or after the end of a contribution period or even after the bankrupt is discharged.

What is income

Section 139L of the Act defines income very broadly and includes:

  1. Wages and salary.
  2. Taxable fringe benefits.
  3. Superannuation receipts, annuities and pensions.
  4. Loans from associated entities.
  5. Income earned overseas.
  6. Business profits of a sole trader.
  7. Super contributions in excess of 9.5%.

Importantly, pursuant to section 139M(1), income is taken as being derived by the bankrupt even though it isn’t actually received by the bankrupt. For example, income which is reinvested or income which is dealt with on behalf of the bankrupt or as the bankrupt directs.

How is the assessment calculated

Section 139S of the Act provides that the amount of the contribution required to be paid by a bankrupt is 50% of the after tax income which exceeds the ‘actual income threshold amount’.

What is the actual income threshold amount

The actual income threshold amount is the amount of income a bankrupt may earn upon which no contribution is payable. In accordance with section 139K of the Act, the threshold amount is determined by reference to the number of dependants for whom the bankrupt is responsible. The current amounts, which are updated twice yearly, are set out in the table below.

Number of Dependants Threshold Amount
0 $53,653.60
1 $63,311.25
2 $68,140.07
3 $70,822.75
4 $71,895.82
Over 4 $72,968.90

It is worth noting that if a bankrupt disagrees with the assessment of their income contributions, then pursuant to section 139Z, they are able to seek a review of the assessment by the Official Trustee.

What happens if a bankrupt earns less than expected

In order to prevent a bankrupt from circumventing the income contribution provisions by earning less money than they would otherwise, a trustee may, pursuant to section 139Y of the Act, make a determination that the bankrupt receives or has received what is called ‘reasonable remuneration’ and increase his or her income for assessment purposes accordingly. This prevents the bankrupt from channelling income into other entities or coming to an arrangement with their employer, especially if related, to reduce their reportable income.

What happens in the case of hardship

If a bankrupt considers that the requirement to pay contributions will cause hardship, then pursuant to sub-section 139T(1) of the Act, they may apply to their trustee for the assessment to be varied. Sub-section 139T(2) sets out the specific grounds upon which such an application can be made. Such an application is required to be in writing and to include evidence of the bankrupt’s income and expenses. The grounds for a hardship application are as follows:

  1. Ongoing medical expenses.
  2. Costs of child day care essential for work.
  3. Particularly high rent when there are no alternatives available.
  4. Substantial expenses of travelling to and from work.
  5. Loss of financial contribution.
What happens if a bankrupt does not comply

Failing to provide information relating to income or expected income as required by the Act constitutes grounds for an objection to automatic discharge pursuant to sub-section 149D(1)(e). In addition, if a contribution amount is owed and remains outstanding prior to discharge, then a trustee may object to the discharge, pursuant to subsection 149D(1)(f). Any such objection may extend the period of the bankruptcy by a further 5 years.

If the bankrupt does not provide particulars of their income or advises that they did not derive any income, however there are reasonable grounds for believing that the bankrupt is likely to derive income then, pursuant to section 139Z, the trustee may determine the income of a bankrupt and prepare an assessment accordingly.

Trustees have a number of other powers available to them to compel the compliance of the bankrupt with their obligations in relation to contribution assessments. These include instructing the bankrupt pursuant to section 139ZIF to pay income into an account supervised by a trustee. A trustee is then required to supervise withdrawals from that account. Furthermore, if an amount remains due and payable after the date of automatic discharge, then a trustee may enforce the debt against the bankrupt in the ordinary course in accordance with sub-sections 139ZG(3) and (4) including making the debtor bankrupt again.

Accumulated savings

Sub-section 58(1)(b) of the Act states that property that is acquired by or devolves upon a bankrupt during the period of their bankruptcy vests in their trustee. Property of this nature is referred to as after-acquired property, one of the best examples being the receipt of an inheritance whilst bankrupt. Another such example might be accumulated savings. These funds would ordinarily be surplus income that may or may not have been assessed for contribution purposes. Until recently there was an assumption based on case law that accumulated savings derived from income do not vest in a trustee. However, a recent decision of the Full Bench of the Federal Court of Australia in the matter of Di Cioccio v Official Trustee in Bankruptcy (as Trustee of the Bankrupt Estate of Di Cioccio)[2015] FCAFC 30, has authoritatively examined the interaction between the income contribution regime and after-acquired property.

The facts of the case are relatively simple. An undischarged bankrupt used money that was held in a bank account to acquire shares, the money was derived from income earned within the period of the bankruptcy that did not exceed the actual income threshold amount. The bankrupt informed the Official Trustee of his intention to acquire a motor vehicle that was to be funded from the sale of the shares. The bankrupt was informed that the shares vested in the Official Trustee pursuant to sub-section 58(1). The bankrupt sought a review of the stance taken by the Official Trustee.

In essence, the court found that the shares vested in the Official Trustee in accordance with subsection 58(1)(b). The court went on to say that accumulated savings derived from income during the period of the bankruptcy would also constitute after-acquired property. In considering this, the court was conscious of sub-section 134(1)(ma) which gives a trustee the power to:

‘make such allowance out of an estate as they think just to the bankrupt, the spouse or de facto partner of the bankrupt or the family of the bankrupt’.

Interestingly, the court also put the proposition that if the money was being accumulated to acquire tools of trade for income earning purposes then the bankrupt may be able to retain the money on the basis that such tools of trade, if acquired, constitute property that is not available to creditors pursuant to sub-section 116(2)(c).

Conclusion

This case makes it abundantly clear that it is in the best interests of all bankrupts to be open and transparent with their trustee in relation to their income and to manage any contributions for which they are liable. In circumstances where a bankrupt saves their surplus income and does not pay regular instalments to their trustee, then a trustee may take possession of the accumulated savings and the bankrupt could remain liable to pay assessed contributions. This may become a situation where a trustee can exercise their discretion pursuant to sub-section 134(1)(ma) of the Act, taking into account the circumstances of the bankrupt.

Directors beware – Piercing the corporate veil – The ATO and DPNs

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By O’Brien Palmer

INSOLVENCY AND BUSINESS ADVISORY

First published on the website, www.obp.com.au

Directors beware

The Director Penalty Regime (‘the Regime’) was introduced to give the Australian Taxation Office (‘ATO’) power to make company directors personally liable for certain unpaid company taxation debts. It is imperative that company directors and their advisors understand the Regime and its operation, in order that they can take steps to avoid personal liability.

In this newsletter, we discuss the operation of the Regime, and most importantly, how director penalties are enforced. We also discuss changes to the Regime introduced on 1 July 2012, which allow the ATO to hold a director personally liable even after an Administrator or Liquidator has been appointed to the company.

Imposition of director penalties

A director penalty is imposed on a director where certain company taxation debts remain unpaid at the end of the day on which they become due. A full listing of the taxation debts covered by the Regime can be found in division 269-10 of Schedule 1 to the Taxation Administration Act 1953 (Cth), but the most common taxation debts to which the Regime applies are PAYG Withholding (‘PAYG’) and Superannuation Guarantee Charge (‘SGC’). The Regime also applies to estimates issued by the ATO in respect of these types of taxation debts.

For example, if a company withholds amounts from employee wages in respect of PAYG, the amounts withheld will become payable at a future date, known as the ‘Due Day’. If the withheld amounts are not paid to the ATO before the end of the Due Day, then a director penalty, equal to the amount of the unpaid PAYG is imposed on all directors of the company at the time the debt was incurred. The regime also applies to newly appointed or recently retired directors.

The Due Day for PAYG is usually the day on which a company’s BAS or IAS lodgment is due, and for SGC it is one month and 28 days after the end of each financial quarter. Whilst a director penalty is imposed at this time, the ATO is prohibited from enforcing a director penalty until it has issued a Director Penalty Notice.

The director penalty and the corresponding company taxation debt are concurrent liabilities. If a company pays its taxation debt after a director penalty has been imposed under the Regime, then the director penalty is also discharged to the same extent, and vice versa. (N.B. Discharging of a director penalty is different to remittance of a director penalty, which is discussed below.)

Enforcement and remittance of director penalties

The ATO must issue a Director Penalty Notice to a director and allow a period of 21 days before it can bring court proceedings against a director for the recovery of a director penalty. The ATO is only required to send a notice to the address of a director noted in the records maintained by the Australian Securities and Investments Commission, whether or not that address is current. The ATO may alternatively send notice to a director at his or hers registered tax agent’s address.

Once a director penalty has been imposed by the ATO, there are three ways in which a director can have that penalty remitted, namely;

  1. Causing the company to comply with its obligations to pay amounts to the ATO; or
  2. Appointing a Voluntary Administrator to the company; or
  3. Having a Liquidator appointed to the company.

Directors should note that these remittance provisions are available prior to the issuance of a Director Penalty Notice by the ATO. It is appropriate for directors to consider exercising these options as soon as they become aware of taxation debts remaining unpaid after the Due Day.

If a valid Director Penalty Notice has been issued, and 21 days has passed since it was issued, the remittance provisions are no longer available to a company director, and either the company or the director must pay the amount due to the ATO.

Lock-down director penalty notices – the importance of reporting

If PAYG or SGC remains unreported and unpaid for more than three months after the Due Day, a director is unable to have a director penalty remitted by the appointment of an Administrator or Liquidator. In these circumstances, the ATO must still issue a Director Penalty Notice, known as a ‘Lock-Down Director Penalty Notice’, and wait the required 21 days. Once the 21 days have passed, a director who receives a ‘Lock-Down Director Penalty Notice’ must pay the director penalty, or cause the company to pay the corresponding company taxation debt.

It is important to note that the ATO is able to issue a Lock-Down Director Penalty Notice, even after an Administrator or Liquidator has been appointed to a Company, if applicable taxation debts that were not reported to the ATO within three months of the Due Day remain unpaid. The only way to avoid a Lock-Down Director Penalty Notice is to ensure that all company taxation debts are reported to the ATO within three months of the Due Day.

Defences to director penalties

In the event that proceedings are commenced against a director, there are only limited defenses available to company directors. Those defenses are:

  1. Illness or Incapacity (A director was unable to take part in the management of a company.)
  2. All Reasonable Steps (All reasonable steps were taken by a director to comply with his or her obligations, or no such steps were available.)
  3. Superannuation Guarantee Charge – Reasonably Arguable Position (A director adopted a reasonably arguable interpretation of Superannuation Guarantee Charge legislation.)

Right of indemnity and contribution

A director that has paid a director penalty to the ATO, is entitled to recover that amount from the relevant company, in the same manner that a person can recover amounts paid under a guarantee of a company debt. A director that has paid a director penalty is also entitled to recover amounts from anyone that was also a director at the time the corresponding company taxation debt was incurred, as if all those directors were joint & several guarantors.

PAYG withholding non-compliance tax

Whilst not technically part of the Regime, the PAYG Withholding NonCompliance tax was introduced with Lock-Down Director Penalty Notices. This new tax allows the ATO to deny a director, or their close associates, tax credits in their personal tax returns, where the PAYG Withholding amounts have not been paid to the ATO. If a director has been issued a Director Penalty Notice, then he or she can also be denied credits on their personal tax return, for the same underlying principle company PAYG debt, in effect causing a director to pay twice at the same time. Of course if such a director does pay both amounts, it would be expected that he or she would obtain the benefit of the denied credits in the following period.

Garnishee on directors’ bank accounts

Garnishees allow the ATO to compel payment from a third party that holds amounts due to, or on behalf of, a taxpayer that is indebted to the ATO. Once a Director Penalty Notice has been issued, and the 21 day period has expired, the ATO is entitled to seek a garnishee order against any third party that owes money to, or holds money on behalf of, the relevant director, including a director’s personal bank accounts.

Conclusion

The ATO will not hesitate to use the Regime, and in particular Lock-Down Director Penalty Notices as it is the only legislative method by which the ATO can hold a director personally liable for company debts. Directors and their advisors should ensure that timely and accurate financial information is available to facilitate prompt action when a company begins to have difficulty meeting its taxation obligations, or a director risks becoming personally liable.

The introduction of Lock-Down Director Penalty Notices to the Regime means that reporting of taxation debts to the ATO is more important than ever. The looming spectre of a LockDown Director Penalty Notice should motivate all company directors to ensure that taxation debts are reported to the ATO on time, regardless of whether they are able to pay the debts being reported. Once the hard deadline of three months past the Due Day has expired, there is nothing a company director can do to avoid personal liability.

Personal Property Securities Act

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Conveyancing is concerned with the transfer of land and improvements from one owner to another. The doctrine of fixtures means that the improvements on the land are considered by the law to be part of the land and therefore a contract for the sale of real estate simpliciter does not involve the sale of personal property and the Personal Property Securities Act 2009 (PPSA) has no application to such a contract.

Vacant land

Subject to what is said below in relation to corporate vendors, a vendor’s response to an inquiry from a purchaser about the PPSA in the sale of vacant land is to simply confirm that the contract does not relate to personal property and the PPSA is not relevant.

Residential sales

However it is traditional for land contracts to include a provision for the sale, in addition to the land, of chattels – or now, goods – that pass with the land. In the residential context this includes such things as carpets, blinds, light fittings and the like which add no real value to the land but which vendors generally leave upon departure and purchasers, often vehemently, expect will remain with the property. It is estate agents who traditionally complete this part of the contract and, in a rush to make a commission, little care is likely to be taken to distinguish between chattels and fixtures. It is therefore not unusual to find ‘stove, hot water service and swimming pool pump’ listed as goods, whereas they are truly fixtures and not subject to the PPSA.

Items that are in fact goods will almost invariably fall within the exemption in s 47 PPSA that excludes personal or domestic items valued at less than $5000. Therefore the vendor’s response to a request for release in such circumstances should again be that there is no personal property sold pursuant to the transaction that is subject to the PPSA.

The PPSA may be applicable in contracts for the sale of land that also include the sale of a substantial item of personal property. Generally this will be in the context of a substantial commercial or industrial property and the parties will be alive to the possible application of the PPSA. In that case the quite complex provisions of general condition 7 of the contract of sale guide the release procedure.

Company charges

Prior to the introduction of the PPSA a charge against an asset of a company could be registered at ASIC (Australian Securities and Investments Commission). These charges were ‘migrated’ to the PPSA. Registration was not limited to personal property owned by the company and could in fact extend to a fixed and floating charge over all of the assets of the company, including real estate. The significance of registration of such interests, and the need for their release, was recognised in Naval and Military Club v Southraw P/L & Anor [2008] VSC 593 and it is best to conclude that the safest course of action is to search the Personal Property Securities Register and insist upon release of such charges.

The purpose of release is to prevent a claim after settlement by a third party claiming an interest under the charge, however once the purchaser is registered as proprietor of the land the principle of indefeasibility will mean that the purchaser takes the property free of any such interest. Therefore the only concern relates to the period between settlement and registration, during which time the dispute would be between two unregistered interests, the first of which (the charge) would have priority in time. However the purchaser would be entitled to argue that the chargee was entitled, indeed obliged, to register the charge on the title by way of caveat and failure to do so constitutes postponing conduct.

The chargee might argue that a caveat would only have achieved notice and that the purchaser had notice (or constructive notice) from registration on the PPSA. However s 300 PPSA specifically provides that registration on the Personal Property Securities Register is not to be deemed constructive notice so a purchaser who does not search may be in a better position than one who does.

Release

The predecessor to general condition 7 acknowledged the possibility of a letter of comfort in relation to such charges but general condition 7 now only envisages a formal release of PPSA charges. The purpose of release in this context is to overcome ‘notice’ and it would appear reasonable that, should the purchaser search the Personal Property Securities Register and thereby gain notice of a charge, then obtaining a letter of comfort (as distinct from a formal release) should mean that the secured party would be unable to argue that the purchaser should be subject to the secured party’s interest when comfort has been given by that secured party in respect of that interest.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Consent orders in property settlement

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By Keleigh Robinson

As family practitioners we are regularly advising clients that property settlement reached between separated husbands and wives or de facto spouses as the case may be must be documented in the appropriate legal manner. This is usually done via an Application for Consent Orders or, depending on the particular circumstances, via Financial Agreement pursuant to ss 90UC, 90UD, 90C or 90D of the Family Law Act.

It is safe to assume and is certainly the writer’s experience that the majority of property settlements formalised with the assistance of solicitors are effected via an Application for Consent Orders and Minute of Consent Orders filed in the Family Court.

There are the fundamental requirements associated with such an application with which we are all familiar, including:

  • filing the original and two copies of the documents with the court;
  • ensuring the consent orders and application are signed by both parties including completion of the statements of truth, including ticking the relevant boxes, which if not attended to can be the subject of an embarrassing requisition;
  • provision of the relevant sections of the legislation as set out in the statement of truth to the client;
  • according procedural fairness to the superannuation fund and providing a copy of the letter to and from the superannuation fund to the court, as well as the superannuation information form if it is a defined benefit interest; and
  • provision of the correct filing fee, unless the parties are eligible for the exemption or fee reduction.

The regularity with which we prepare and file such documents can result in practitioners taking a somewhat laissez faire attitude to the completion of the application form and the drafting of orders. However, it is vital that practitioners remember that the filing of consent orders is not a ‘rubber stamping’ exercise and the orders will not simply be made by the court because the parties have signed the documents and agreed that the orders ought to be made.

Serious consideration needs to be given to the question of justice and equity of the adjustment of property provided for in the proposed orders. This is important in every case but perhaps even more important in those matters where the other party is self–represented. Sometimes in those cases the party who is receiving the greatest benefit from the settlement is eager to have documents drafted, signed and filed as quickly as possible and the other party does not wish to engage a lawyer for cost related or other reasons.

The recent case of Hale & Harrison [2014] FamCA 165 where consent orders were ostensibly consented to by the parties but were not made by the court is one such example. The facts of the case were:

  • Ms Hale and Mr Harrison cohabited from 1998 to April 2009 and were in a de facto relationship. A separate issue was the date of separation and the jurisdiction of the court, however that is not relevant for the purposes of this article.
  • There were four children of the relationship, aged 10, 10, 13 and 15. The children were living with Ms Hale and spending time with Mr Harrison pursuant to a parenting plan.
  • Ms Hale was 36 years of age and Mr Harrison was in his fifties. Both were in receipt of government pensions and neither of them were engaged in paid employment.
  • Ms Hale received a small sum of child support per month.
  • There was a small asset pool:
    • Property in New South Wales which was expected to sell for $80,000. However its municipal value was $60,000 and it appeared that Justice Cronin took the view the property would sell for between $60,000 and $70,000.
    • Ms Hale’s mother loaned the parties $10,000 towards the purchase of the property, which remained outstanding.
    • There was also a mortgage of $17,000.00 secured against the real property.
  • Mr Harrison received an inheritance at some stage after 2009 which he asserted was in the vicinity of $150,000. However Ms Hale had not seen any evidence of this inheritance. Mr Hale said he had $12,000 remaining from that inheritance.
  • Ms Hale and Mr Harrison filed an Application for Consent Orders on 8 October 2013 which provided:
    • The real property would be sold.
    • After repayment of the mortgage of $17,000, the proceeds of sale would be divided equally between the parties.
    • From the wife’s share of the proceeds of sale, she would repay her mother the $10,000.
    • Mr Harrison would also retain the $12,000 which remained from his alleged inheritance.
  • Based on His Honour’s comments in relation to the possible sale price of the property and depending on the sale price of the property, Ms Hale would be left with somewhere between $11,500 and $24,000, and Mr Harrison with between $33,500– and $46,000.
  • His Honour found that the loan repayment to Ms Hale’s mother in circumstances where Mr Hale had more property and more money was not just and equitable. It is apparent from the judgment that Mr Harrison’s solicitor argued before His Honour that the settlement was just and equitable because the parties had reached agreement. However when asked by His Honour, Ms Hale, who was unrepresented said she did not think the outcome was fair.

His Honour concluded that the parties having reached agreement was not a basis upon which the court should ‘waive away what is in reality its subjective judgement about what is fair’ and ultimately dismissed the Application for Consent Orders.

Justice Cronin’s decision in Hale & Harrison serves as a reminder of the essential and indeed overriding need for practitioners to consider what is just and equitable. Preparing consent orders must be a considered process and practitioners must focus on the justice and equity of the orders before filing them with the court to ensure there are not difficulties with the making of the orders which serve only to increase client costs and can be a professional embarrassment for practitioners.

To accept or not accept instructions in urgent will matters

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By Rosslyn F. Curnow Nolch, Principal

Rosslyn Nolch Solicitors

Publisher’s Note: The outcome in Howe v Fischer [2013] NSWSC 462, discussed in this article, was overturned on appeal in Howe v Fischer [2014] NSWCA 286. Following the decision on the appeal, unless the instructions for the will are concluded and unless there is reason to think the testator is at imminent risk of death, then it appears a solicitor is unlikely to be held negligent for failing to advise about, or to procure, an interim will. However each case will turn on its facts and solicitors should take utmost care.

Every case of course turns on its own facts, but two recent cases, and an ageing population, highlight the need for consideration of a number of issues when agreeing to take on a new wills matter.

  1. Fischer v Howe [2013] NSWSC 462

The lawyer was asked to act for a new client in relation to her will. The willmaker (W) had made a number of formal wills between 1982 and 2009 and wished to change certain dispositions in her then latest will made in 2009. In particular, W wished to leave the plaintiff in this matter a 50% share of her estate in lieu of the 25% left to him in the 2009 will.

W had lost faith in her previous lawyer and asked her doctor if she could recommend a lawyer. The doctor knew the defendant lawyer and contacted him, and in the course of the conversation noted that she believed W had testamentary capacity as she was of sound mind, although physically frail. Subsequently the lawyer spoke directly with W and then attended her home, where she resided with the assistance of a carer, two days later (25 March 2010).

At the time of the attendance, the lawyer took instructions during a lengthy conference. He was not provided with details of the 2009 will.

It is pertinent to note that during that conference, as well as stating her wishes in respect to the change in disposition to the plaintiff, W:

  1. did not reveal her age (94), other than by reference to the ages of her children;
  2. wanted her previous lawyer and accountant removed as executors and, when asked who she wanted as executor, ‘suggested that the defendant could be appointed. He (the defendant) advised her to think about whom she wanted and to let him know when he presented her with a draft of the will.’;
  3. did not appear to be suffering from ill-health or appear to be exhausted from the lengthy conference.

This conference was shortly prior to the 2010 Easter holiday. At the conclusion of the conference the lawyer told W that he would be away on leave over the Easter break and would not return to work until after Easter. It was proposed that the lawyer would prepare a draft will and attend W during the week after Easter, with which W agreed, also stating that she would like the plaintiff to be present at that meeting. The lawyer left with instructions, and was to contact W upon his return from leave.

Later that day W spoke to the plaintiff over the telephone and told him that she had seen a lawyer and wanted to ‘schedule’ him to attend after Easter when the plaintiff could be present.

Subsequently, over a very short period of time during which W refused to be admitted to hospital, W became ill. On 31 March 2010 the lawyer commenced leave (Good Friday was 2 April 2010). W died on 6 April 2010, without executing a new will, and her doctor was ‘shocked’ that she had passed away at that time.

Following objections on the basis of a lack of testamentary capacity by a family member left out of the 2009 will, that will was finally admitted to probate with some modifications (which did not affect the plaintiff’s entitlement of 25% under that will). Subsequently the plaintiff brought an action against the lawyer for his ‘lost’ 25%, being the difference between what he received under the 2009 will (25%) and what he would have received under the ‘new’ will had it been made (50%).

What appears to have told against the lawyer was that he was very experienced, had a short time previously attended a seminar on informal wills, and that ‘The defendant accepted that there was no practical impediment to his making an informal will at the conclusion of the conference since it would not have taken long and there was no indication that the deceased’s attention or energy was flagging. He admitted that he did not give any consideration to an informal will which the deceased could have signed that day or shortly thereafter’.

The court stated (at 97):

I consider that the defendant was negligent in failing to procure an informal will at the conference on 25 March 2010. He could have done so. His failure to do so was a breach of his duty to exercise reasonable care. Although the deceased may not have been at risk of imminent death as [the doctor] understood the term, being at risk of dying within hours or within a day, she was, by reason of her age, lack of mobility, need for care and infirmity, susceptible to a not insignificant risk of losing her testamentary capacity in the period of about a fortnight between the initial conference and the proposed conference. There was no reason for her, or her intended beneficiaries, to be subjected to that risk in light of her settled testamentary intentions, both as to dispositions and as to her desire to change her executors, and the circumstance that it was the solicitor who was responsible for the delay.

And (at 102):

The only thing that would have relieved the defendant of the obligation to procure an informal will would have been the deceased’s express instructions that she did not wish to take that course. No such instructions were forthcoming nor could they have been because the defendant did not raise the option with her. I do not accept that the preparation of an informal will was in any way inconsistent with the later execution of the formal will at the conference in April. To the contrary, the purpose of the making of an informal will was to safeguard the implementation of her testamentary intentions against the possibility that the deceased would lose her testamentary capacity either through death or stroke or other event to which her advancing age and frailty made her increasingly susceptible.

The plaintiff was awarded the difference between 25% and 50% of the estate against the lawyer.

  1. Maestrale v Aspite [2012] NSWSC 1420

On 8 July 2002 the lawyer met with the deceased, who was on a day release from hospital, and took instructions for a will – this had been arranged by the plaintiff. Subsequently, on 15 July 2002, the lawyer attended the hospital with the original will for the purposes of having it executed, but unfortunately the deceased died 10 minutes before he arrived.

The plaintiff’s contentions, many of which the court accepted, included that:

  • he had asked the lawyer on several occasions in the three weeks leading up to 8 July 2002 to attend his father for the purposes of making a new will (under which the plaintiff was to receive a greater share than provided in an earlier will);
  • the lawyer negligently failed to have the deceased sign his instructions at the meeting 8 July 2002 (as an informal will);
  • he had contacted the lawyer on 12 July 2002 and 13 July 2002 to say that his father’s health was deteriorating.

In response, the lawyer said that:

  • it was not until the morning of 8 July 2002 that any arrangement was made for him to meet with the deceased;
  • while he understood that the deceased had been diagnosed with cancer, the plaintiff had told him the doctors believed he had six months to live, and that the deceased gave him the same information on 8 July 2002, at which time the deceased appeared to be in a reasonably stable condition;
  • had the plaintiff informed him of the urgency, he would have attended the deceased without delay, but denied having been so informed;
  • he was aware of the applicable informal will provisions (section 18A Probate and Administration Act 1898 (NSW)) 2, but did not advise the deceased of the option of making an informal will because of his assessment of the deceased’s general state of health on 8 July 2002 together with the information the deceased gave him at that time that his doctors had given him some months to live.

The court considered the evidence of various experts and inter alia quoted from Hill v Van Erp [1997] HCA 9 where the solicitor was held liable to the intended beneficiary, the disposition being ineffective because the husband of the intended beneficiary was asked to attest the will:

Thus, when a solicitor accepts responsibility for carrying out a client’s testamentary intentions, he or she cannot, in my view, be regarded as being devoid of any responsibility to an intended beneficiary. The responsibility is not contractual but arises from the solicitor’s undertaking the duty of ensuring that the testator’s intention of conferring a benefit upon a beneficiary is realised. In a factual, if not a legal sense, that may be seen as assuming a responsibility not only to the testatrix but also to the intended beneficiary.

The court also quoted from Queensland Art Gallery Board of Trustees v Henderson Trout (a firm) [2000] QCA 93 where a ‘disappointed beneficiary’ was unsuccessful:

It may be accepted that whenever a solicitor takes instructions to make a will, there is a potential for a duty to arise in favour of third parties who may be damaged if the solicitor fails to discharge the retainer with due care. Whether a duty actually arises in favour of a particular third party depends upon a variety of circumstances, and these have not by any means been clearly identified by the cases. … Hill v Van Erp, suggests a variety of potential matters including foreseeability of loss to the third party, control of the situation by the solicitor, proximity between the solicitor and the third party, general public reliance on satisfactory performance by solicitors, assumption of responsibility to discharge the retainer properly, the powerlessness of the third party to do anything to protect himself or herself, whether or not there is any conflict between the duty owed to the client and the alleged duty to the third party and perhaps other matters also.

There is as yet no consensus as to which matters are dominant or any formula which will guide a trial judge in formulating tests that will determine whether or not such a duty is owed. However … (i)t is up to the client to indicate when he or she is ready to make a particular will. Attempts by a solicitor to hurry up an undecided client or to seek to benefit particular beneficiaries are fraught with danger. Recognising this, Courts should be slow to inflict busybody functions or duties of this kind upon solicitors or other professional advisers.

In the circumstances of the present case, particularly in the absence of indication from the testatrix that she wanted to finalise the matter at least to the extent of executing a will that would secure a particular benefit to the art gallery, I do not consider that the stage was reached at which any duty of care arose on the solicitor’s part in favour of the art gallery.

The court then noted (at 106) that the situation in this case was distinguishable from the latter case, and that the deceased ‘had given clear and unambiguous instructions to (the lawyer) to prepare a will under which he intended that the plaintiff would benefit, to a material degree, differently from his other children. There is nothing to indicate that (the deceased) was uncertain as to his testamentary intentions at the conclusion of the (8/7/2002) meeting and everything to support the inference that he was thereafter awaiting the attendance of (the lawyer) to render those intentions final and enforceable.’

And (at 107):

By accepting those instructions, and in pursuance of carrying them out, … (the lawyer) had a coexistent duty to the plaintiff to ensure that in the event of any change in his father’s health or capacity he would make prompt arrangements to attend with a formal will or, if time did not permit, to attend with the file notes so that they might be signed and an informal will created. The breach of duty did not reside in an unduly dilatory approach to preparation of the will by allowing the passage of seven days before the will was prepared but in his failure to respond to the plaintiff’s urgent calls for advice and attention in the interim.

The court awarded damages against the lawyer based on the difference between what the plaintiff received under the ‘old’ will, and what he would have received under the ‘new’ will (with some adjustment for other factors pertaining to the deceased’s expressed wishes).

Other relevant points

Our professional rules, in respect to which the Australian Solicitors’ Conduct Rules (yet to be implemented) are very similar, highlight some areas where an ‘urgent’ will situation can put the lawyer in peril, for example (in addition to rule 10):

  • Agreeing to Act for a Client (Rule 2): consider what might be deemed diligently attending to the work required with ‘reasonable promptness’ in the circumstances;
  • Maintaining confidentiality (Rule 3): consider how to best effect ‘deathbed’ instructions when co-ordination with family members is required (particularly where they are existing clients, as is often the case);
  • Avoiding conflicts of interest between clients and between the client’s and the practitioner’s own interest (Rules 8 and 9) 3: consider how one ceases to act if a material conflict arises when the willmaker’s health is failing.

We also should consider one of the suggestions contained in the 2012 Victorian Law Reform Commission’s Review of Succession Laws that willmakers be obliged to obtain a medical certificate before giving instructions for making a will 4, and also the suggestion that a person authorised to take affidavits or a medical practitioner act as a witness5.

So the questions we might need to consider before accepting instructions for wills include:

  • Is it urgent, not only in time but in terms of the willmaker’s health?
  • Is it urgent from the willmaker’s point of view, or are there really issues of capacity with the urgency being from the point of view of the intended beneficiary?
  • Can one attend to the matter promptly (as in immediately, foregoing holidays, other emergencies etc.)?
  • Is one able to assess competency immediately, as opposed to a slightly longer but more considered approach; and/or is there a legislative requirement for a medical certificate before instructions can be taken, in which case whose responsibility is it to pursue this?
  • Is one prepared to write up an informal will ‘on the spot’ if the need arises, including adequate consideration of potentially difficult areas such as excluding immediate family members who would ordinarily expect to benefit?
  • Is an informal will recognised in the lawyer’s particular jurisdiction, at present 6, or in the future if additional legislative requirements are imposed?
  • What are the risks in errors being made in a hasty informal will, as opposed to one prepared in the serenity of one’s office with precedents and all necessary information to hand?

We also need to consider potential risks, some being obvious and some perhaps not, including:

  • The willmaker may not really want a (new) will, but in the perceived immediacy of the matter the lawyer is given little time in which to give this considered attention, particularly if s/he is being pressured by such statements as ‘If mum dies before this will is signed …’ (we all know how this goes).
  • If the (new) will is made, disappointed beneficiaries may allege all sorts of improprieties against the lawyer.
  • If the (new) will is not made, disappointed beneficiaries may allege their ‘disappointment loss’ is in direct proportion to the alleged negligence of the lawyer.
  • Indicators of diminished competency may be missed in the immediacy of the matter, particularly if the lawyer has not acted for that willmaker previously.
  • An informal will prepared in haste may not meet applicable jurisdictional requirements (see point 3).
  • Drafting errors may be made in the haste to prepare a will.
  • If the willmaker indicates they want the lawyer to act as executor the lawyer may be caught between refusing or asking the willmaker to consider further, leaving him/herself open to accusations of delay; or agreeing, and being accused later of coercing the willmaker to make the appointment and failure to comply with the professional rules.
  • There may be a higher risk of conflict between the interests of the willmaker, the interests of family members if they are existing clients, and also the interests of the lawyer in ensuring that all ethical duties are met as well as a personal interest in not being taken to task afterwards.

So whilst every person should be able to access legal assistance when and where required, there are evolving difficulties in regard to this area of law, and it may well be that in the future only specialist firms are willing to accept this type of work.

Note: Contributed by Rosslyn Nolch, Solicitors, for educational purposes only, and originally prepared for Wills, Powers of Attorney & Enduring Power of Guardianship (VIC) – Step-by-Step Legal Practice Guide and Precedents By Lawyers For Lawyers.

The interpretation is that of the author, and the reader should research all of the materials referred to for him or herself. Primary source of case information unless otherwise noted:

https://www.austlii.edu.au/.

This article does not constitute legal advice.

NOTE:

  1. See also In Check Issue No. 59 www.lplc.com.au.
  2. Section 18A Probate and Administration Act 1898 (NSW).
  3. See also the 2012 Victorian Law Reform Commission’s Review of Succession Laws, referred to below, Point 2.43 and Question W5.
  4. Point 2.43 and Question W4.
  5. Point 2.17 and Question W1.
  6. See for example: Fast v Rockman [2013] VSC 18 where an unexecuted Will was admitted to Probate as a document the deceased intended to be his Will, notwithstanding that he had not actually seen it (but had seen an earlier unexecuted Will to which he wanted minor changes); Re Will and Estate of Brian Bateman [2011] VSC 277 where an informal (draft) Will was admitted to Probate, and Estate of Peter Geoffrey Brock; Chambers v Dowker & Anor; Dowker & Anor v Chambers & Ors [2007] VSC 415; and Estate of Baier [2013] NZHC 504 where a Will approved by telephone by the deceased was admitted pursuant to section 14 Wills Act 2007 (details courtesy Envoy June 2013, NZILE); contrasted with the result in Prucha v Standing [2011] VSC 90 where the Court found the deceased had not intended the document to be his last Will.

Tip Box

Whilst written for Victoria practitioners this article has interest and relevance for practitioners in all states.

The risks of asking an employee to a little chat

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

The background

At the time of her dismissal, the employee (Ms Ward) had worked as an Advertising Sales Coordinator in her employer’s Agency Division. Each sales coordinator had a client list to sell advertising to and service.

The employer had an account management system on its computer network which provided a complete billing history of the advertising relationship with clients. Sales coordinators entered ‘notes’ about client-related matters into the account management system.

The employer decided to restructure. Clients previously serviced by the agency sales team (including by the employee) were internally allocated to other teams.

The employee didn’t take kindly to the restructure. ‘In a fit of pique’ she deleted notes that she had made about clients on the account management system to make it difficult for anyone who took over the employee’s client accounts.

Whilst voicing her unhappiness about the reallocation decision with her manager, the employee informed him of the deletion of her client notes from the account management system.

The investigation

The employer initiated a workplace investigation following the employee’s disclosure. An examination of the employer’s computer system confirmed that notes had been deleted by the employee.

Some three days after the employee’s disclosure, an 8 am meeting was held by management. The employer’s Sales Director, who had initiated the investigation, directed a human resources officer to arrange a meeting with the employee. At the time, the matter was considered ‘serious’ and the Sales Director was considering the employee’s dismissal.

Within two hours, the employee was summoned to a meeting with the human resources officer and management representatives.

Following the misconduct meeting, the employer decided to summarily dismiss the employee with four weeks pay in lieu of notice (due to her near 20 years of service) the next day.

The employee subsequently filed an unfair dismissal claim Sandra Ward v West Australian Newspaper Limited [2010] FWA 1785 (8 March 2010).

Unfair dismissal hearing – the important points

Fair Work Australia was critical of the employer’s workplace investigation.

FWA rejected the employer’s attempted characterisation of what was in reality a serious meeting about alleged misconduct as a merely a ‘conversation’ or ‘discussion’.

FWA observed that:

  • the employee’s ongoing employment was in jeopardy prior to her attending the meeting;
  • the employee was called to the meeting without any notice or knowledge of its purpose;
  • the employee had no idea of the meeting’s seriousness;
  • the meeting, whether deliberate or not, was set in the employer’s boardroom, which one of the manager’s present described as making him uncomfortable;
  • Ms Ward was interviewed by two senior members of management and the HR Officer;
  • the interview was not conducted with clarity, mainly due to the HR Officer leading the interview with less than 48 hours knowledge of the account management system; and
  • this lack of clarity and lack of notice led to the employee being confused, hesitant in her answers and the employer (incorrectly) forming the view that the employee lacked openness and she was untruthful.

FWA held that:

  • the employee was not treated fairly nor was there was a valid reason for her dismissal;
  • at the misconduct meeting, the particulars of the allegations and surrounding circumstances were not put to the employee in a fair and straightforward way enabling her to respond appropriately;
  • the meeting was arranged in such a way – in terms of location, timing and lack of knowledge of its purpose – that the employee could not access a support person;
  • the employee was not untruthful in her answers; and
  • the dismissal was unfair.

FWA overturned the dismissal and reinstated the employee to her original position.

Lessons for employers

When conducting a workplace investigation into workplace misconduct, employers need to be able to demonstrate a fair procedure was adopted. In particular:

  • avoid any actions which could be perceived as trickery;
  • be clear with an alleged wrongdoer about the purpose of a meeting – including the nature and seriousness of the allegations being investigated.
  • avoid using vague statements or descriptions which play down the seriousness of the meeting (e.g. ‘having a chat about something’);
  • provide sufficient notice of the meeting to enable the alleged wrongdoer to seek advice and/or arrange a support person; and
  • not have made any predetermination about the outcome of the investigation.

Disastrous work Christmas parties – Hopefully these don’t ring a bell…

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

The work Christmas party season is in full swing by now. If your organisation has already had its Christmas party, hopefully everything went well and from a workplace law standpoint there were no issues that arose.

If your organisation is yet to have its annual gathering, hopefully all the risk management HR ‘boxes have been ticked’.

  • All reasonable steps have been taken to prevent unacceptable behaviours from occurring at the work Christmas party;
  • Managers are aware of their responsibility to monitor and supervise at the function;
  • Employees have been reminded of applicable policies and behavioural standards (for example; sexual harassment, bullying and OHS);
  • Light alcohol and no alcohol options are available;
  • In keeping with the lighthearted spirit of the festive season let’s visit three work Christmas party disasters.

Top 3 Work Christmas Party Disasters

Number 1

Coming in at number one would have to be the 2007 “party to end all parties” involving employees of a Sydney Telstra retail store. What started out as a work dinner function later that evening went awry at a nearby motel with a store employee having sexual intercourse with another employee within the view and/or earshot of the three other employees. The employee responsible was ultimately dismissed but in order for Telstra to successfully defend its actions, the ensuing litigation went as far as the Full Bench of the then Australian Industrial Relations Commission: Telstra v Streeter [2008] AIRCFB 15 (24 February 2008)

Number 2

In the “what were they thinking” category is a 2002 work Christmas party at which a waitress served food and drinks to clients and other employees at a party held on work premises – while topless and in lingerie. A female employee was not invited to the party and was told, “It’s a party for the boys…you don’t need to worry about it.” Upon finding out about the presence of the topless waitress, the employee resigned from her employment and ultimately sought counselling in relation to the distress she felt at the time. Although the woman gave evidence that she would not have wanted to attend the party if she had known a topless waitress was going to be there, her complaint of sex discrimination against her former employer was successful on the basis of her not being made to feel welcome to attend the Christmas party because of her gender: Carter v Linuki Pty Ltd trading as Aussie Hire & Fitzgerald (EOD) [2005] NSWADTAP 40 (22 August 2005).

Number 3

Perhaps in the “why bother” category is the 1999 case in which a male employee was dismissed after he exposed himself twice before approximately 50 company employees plus partners at a Christmas function, when performing what he considered to be a ‘party trick’ called the “Pelican”. Not surprisingly the Australian Industrial Relations Commission did not see any humour in the employee’s actions and dismissed his legal claim: S. Mason v Boyne Smelters Limited – 880/99 B Print R7701 [1999] AIRC 934 (20 August 1999).

Warning, warning – Taking account of past workplace sins when disciplining employees – Part 2

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

In brief

In Part 2 of our discussion about the recent Patrick Stevedores case (Tony Carrick v Patrick Stevedores Holdings Pty Limited [2012] FWA 4480), we consider whether the actions of an employer over a prior disciplinary warning can be called into question in a later dismissal case by Fair Work Australia (FWA).

Your latest ‘HR headache’

Picture this situation…You’re a senior HR (human resources) practitioner within a large company. One of your subordinates, ‘Melanie’, dutifully reports the outcome of a recent HR investigation into alleged employee misconduct. You note that the severity of the misconduct would have justified dismissal if the allegation were substantiated. Melanie reports that she ‘believed’ the employee had committed misconduct but due to some unfortunate circumstances there was not sufficient evidence. Melanie took the ‘safe route’ and, rather than dismissing the employee, she issued the employee with a formal warning.

You feel relieved that Melanie did not dismiss the employee because of the evidentiary issues but are nevertheless troubled by the outcome. You remember ‘someone’ telling you once that an incorrectly issued warning is never capable of external review. You are wondering whether that view is correct.

Warning misconceptions

Misconceptions about when a disciplinary warning may be issued are not uncommon. Some employers consider that if there is not sufficient evidence to substantiate misconduct (which would have justified dismissal) as an alternative, they may issue a formal warning. Some also believe that a flawed disciplinary warning can somehow be ‘swept under the carpet’ and is never capable of review. The Patrick Stevedores case shows both beliefs to be incorrect.

Patrick Stevedores case

In this case, the employee was dismissed for a serious safety breach which caused a collision between forklifts at the Fishermans Island Brisbane terminal. Some months prior to that incident, the employee had received a final warning for another safety breach. The employee had other instances of unsatisfactory performance or conduct on his disciplinary record.

The employee argued that the final warning was not justified, and should not have been taken into account for the ultimate dismissal. Importantly, this caused Fair Work Australia to look into the circumstances of the issue of the formal warning.

Ultimately, FWA found that the final warning was justified, as was its use in the subsequent dismissal of the employee.

The point to note here is that the employer was put into a situation where it was forced to substantiate:

  1. its issue of the prior warning; and
  2. its use of the warning (with other disciplinary sanctions) as justification for the ultimate dismissal.

Lessons for employers

  1. The circumstances behind a prior disciplinary warning can be questioned at a later dismissal hearing.
  2. There are a number of disciplinary options open to employers, but whatever action is taken, the same standards of proof apply.
  3. A formal warning should be approached in the same way that a dismissal would be approached – that is, where sufficient evidence does not exist for a dismissal, a formal warning is not an alternative.
  4. If a disciplinary warning is wrongly issued, it should be withdrawn.

Honestly! Let’s talk about employee dishonesty

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By Brad Petley

ACUMEN LAWYERS WORKPLACE RELATIONS AND SAFETY LAW SPECIALISTS

In brief

An employee owes a duty to their employer to be honest in their dealings with it. This is no more apparent than when the employee is the subject of an investigation into alleged misconduct.

A recent dismissal case before Fair Work Australia (FWA), Gunning v Cetnaj Queensland Pty Ltd [2012] FWA 6627 (3 August 2012), provides useful guidance for employers about the effect of an employee’s dishonesty during an HR (human resources) investigation.

The Gunning case

The dismissed employee, Gunning, had worked as a sales representative at the Burleigh Heads branch of the employer’s lighting products business. A customer’s attempt to return a product for a refund uncovered an apparently fraudulent scheme by Mr Gunning’s flatmate, who had formerly worked as a sales representative for the employer, involving a diversion of refund money to a joint bank account of Mr Gunning and his flatmate.

The employer conducted an investigation and subsequently dismissed Mr Gunning for ‘theft and misconduct’ over his alleged involvement in the fraud.

At the unfair dismissal hearing, FWA found that the evidence did not support a finding that Mr Gunning was involved in the fraud originally investigated. However, FWA went on to find that Mr Gunning was not honest with his employer when he was interviewed about his knowledge of the fraud concerns and that of itself formed a valid reason for his dismissal. Accordingly, the employee was found to have been validly dismissed.

FWA made the following important points about an employee’s duty during an HR investigation:
  1. An employee owes a duty to his employer to be honest in his dealings with it.
  2. To do otherwise is to compromise the necessary trust and confidence that is an integral part of the employment relationship.
  3. This does not mean that an employee must answer any and all questions posed to him or her by his employer in an investigation or interview.
  4. But it does mean that an employee must respond honestly to any genuine enquiry made of the employee that is relevant to the conduct or other issues in question or under investigation.

Points to take away

  1. The existence of the relationship of trust and confidence is vital to an employment relationship.
  2. During an investigation into employee misconduct, employers may uncover or be faced with misconduct outside of that which is being investigated.
  3. A dishonest response to a genuine and relevant enquiry is destructive of the relationship of trust and confidence.
  4. A failure to respond to questions honestly can form a stand-alone (valid) reason for an employee’s dismissal.
  5. If in doubt, employers should seek advice.

Warning, warning – Taking account of past workplace sins when disciplining employees – Part 1

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

In brief

A recent dismissal case before Fair Work Australia (FWA) serves as a useful illustration of the issues facing employers when weighing up an employee’s poor disciplinary record and whether a dismissal would be justified.

Warning confusion

Picture this situation. You have an employee who has committed a breach of discipline in the workplace. For present purposes, we will refer to the employee as ‘Jim’. Let’s say that Jim is one hour late for work. You have interviewed him. He was unable to offer a reasonable excuse. You are wondering what to do with him. Jim is not the easiest of employees. He has received a number of warnings previously over conduct and/or performance issues. You are a tad fed up and are considering whether you can terminate Jim’s employment. You remember ‘someone’ telling you once that employers can only take account of ‘like for like’ past disciplinary issues when deciding if a justification exists for a termination of employment. None of Jim’s previous warnings have related to lateness for work. Jim is sitting outside your office. You are wondering what to do.

What does the Fair Work Act say?

Confusion over the prior warnings that may be taken into account is not uncommon amongst some employers.

In determining whether a dismissal was harsh, unjust or unreasonable, Fair Work Australia is required to take into account a number of factors. If the dismissal related to the unsatisfactory performance of an employee, FWA is required to take into account whether the person had been warned about that unsatisfactory performance before the dismissal.

In a previous edition of Workplace Acumen, we pointed out that the unfair dismissal laws in the Fair Work Act do not set out a minimum threshold (e.g. three warnings) before an employer is entitled to dismiss a misbehaving and/or underperforming employee. Depending on the circumstances of a matter there may be no necessity for a warning to have been issued before an employer is entitled to dismiss the employee. Much will depend on the facts and circumstances of the case.

Recent case

The recent Patrick Stevedores case (Tony Carrick v Patrick Stevedores Holdings Pty Limited [2012] FWA 4480) is a useful example of a dismissal involving an employee who had been issued with a number of prior warnings before he was ultimately dismissed.

In this case, the employee was dismissed in November 2011 for a serious safety breach causing a collision between forklifts at the Fishermans Island Brisbane terminal. Prior to that incident, the employee had received a final warning (in April 2011) for another safety breach. Both acts were serious breaches of Patrick’s Safety Cardinal Rules workplace safety policy.

The employee’s prior disciplinary record also included warnings for:

  • sleeping during a shift sometime during late August 2010;
  • failing to attend work on 23 December 2009;
  • using his Maritime Security Identification Card to admit another employee to the Patrick site on 14 April 2009.

FWA took into account that the employee’s overall disciplinary record was poor and that he was the subject of a final warning at the time of the most recent breach. Not surprisingly, FWA ruled the employee’s dismissal was justified.

The point to note here is the combination of diverse disciplinary infractions that the employer took account of before deciding to dismiss.

Lessons for employers

Employers should:
  1. Employers are not required to only take into account prior warnings for the same type of performance or conduct issue (i.e. ‘like-for-like’ issues).
  2. The Patrick Stevedores case is an example of a situation where an employer justifiably took account of a series of prior warnings for a variety of workplace issues (i.e. breaches of workplace procedures, unsatisfactory performance and misconduct).
  3. If an employer is in doubt about whether it is able to dismiss an employee based on the employee’s prior disciplinary record, always seek advice.

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