Fair Work Act 2009
s.394—Unfair dismissal

Milena Molina
v
Brett Galloway
(U2020/4351)

Raymond Zhai
v
Brett Galloway
(U2020/4410)

Application for an unfair dismissal remedy – serious misconduct – valid reason – insubordination and intimidation – stale allegations previously dealt with by the employer – unauthorised cash payments – Briginshaw v Briginshaw standard – deficient financial controls – contaminated investigation – lack of procedural fairness – absence of dedicated human resources management specialists – misconduct not proven – remedy – compensation.

[1] Ms Molina and Mr Zhai made unfair dismissal applications against Mr Galloway in early 2020. Both applications were allocated to Deputy President Dean. In March 2021 Deputy President Dean found in favour of Ms Molina and Mr Zhai and ordered Mr Galloway to pay compensation to each applicant. 1

[2] Mr Galloway appealed and on 1 September 2021 a Full Bench upheld Mr Galloway’s appeals and quashed the decisions of Deputy President Dean. 2 Both matters were eventually remitted to me to determine.

[3] I do not need to record in detail the dreadful history of these matters. 3 I am grateful however for Ms Barry’s patient and consistent representation of Ms Molina and Mr Zhai, as well as Mr Galloway’s fourth legal representative, Mr Moorhouse of Counsel, who appeared in the final hearing and whose professionalism and organisation were a welcome change.

[4] Ms Molina and Mr Zhai gave evidence before Deputy President Dean and were cross-examined at length by Mr Galloway’s second legal representative. Two witnesses gave brief evidence before Deputy President Dean for Mr Galloway. None of those witnesses gave evidence again before me, and instead I have reviewed their filed material and the transcripts of proceedings.

[5] Mr Galloway gave evidence for the first time at a further hearing on 9 December 2021 as did Ms Chantal Lawson, one of Mr Galloway’s clients.

[6] In the proceedings before Deputy President Dean there was a contest about the identity of the employer. Mr Galloway claimed that both Ms Molina and Mr Zhai were employed by a service company, APT Corporation Pty Ltd T/A Brett Galloway Solicitors Barristers & Attorneys. Deputy President Dean found that Mr Galloway was in fact the employer of both Applicants when they were dismissed. In his final closing submissions Mr Galloway conceded that he was the employer.

[7] For the reasons that follow I find that both Ms Molina and Mr Zhai were unfairly dismissed and I have decided to order Mr Galloway to pay compensation to each.

The Evidence

Ms Molina’s work history and payment arrangements

[8] Ms Molina commenced employment with Mr Galloway in 2011 as a casual bookkeeper and receptionist.

[9] Ms Molina says that Mr Galloway was often paid in cash by clients, and often at his home. She gave evidence about having security safes in the office and at Mr Galloway’s home, and says that at one stage there was up to $80,000 in cash kept in a safe at the one of the offices. Ms Molina says that for as long as she was employed, Mr Galloway had a substantial Australian Taxation Office (ATO) debt. By January 2020 the debt was around $500,000.

[10] In July 2012 Mr Galloway was reprimanded for a second time by the Legal Services Commission. In 2012 the [then] Administrative Decision Tribunal of New South Wales found that Mr Galloway had engaged in ‘professional misconduct’, summarised as follows:

1. Breaches of section 262 of the Legal Profession Act 2004 (NSW) – deficiency in trust account

2. Failure to report Trust irregularities to the Society contrary to section 263(i) of the Legal Profession Act 2004

3. Causing unidentified transactions to be posted to a miscellaneous Trust ledger

4. Unauthorised payment from the Trust account to the office account

5. Failure to implement a compliant trust account record

6. Failure to deposit transit money received in cash into its trust account

7. Failure to lodge an External Examiners Report within the required period

8. Failure to report Austrac significant cash transactions

9. Failure to supervise staff

10. Failure to pay superannuation entitlements and annual leave entitlements and provide a Group Certificate to an employee. 4

[11] In 2012 Ms Molina became bankrupt on Mr Galloways’ advice because of a failed business venture. When she was a bankrupt, she says, Mr Galloway told her that she could not be “on the books” until the bankruptcy was discharged. For three years Mr Galloway paid her a “cash cheque” instead of a wage.

[12] After an ATO audit in 2017 Ms Molina became a full-time employee on a salary of $115,800 per annum.

[13] Ms Molina says that in 2017 Mr Galloway suggested to her that her salary be split into a cash payment of $650 per week ($33,800 annually) and the remaining $82,100 annually be paid by electronic funds transfer (EFT). Ms Molina agreed to this arrangement. The cash payments were not declared by Ms Molina to the ATO, although she subsequently took steps to rectify matters.

[14] The cash payments were paid by cash cheques. Ms Molina says that from 14 April 2017 Mr Galloway authorised cheques to be drawn every Friday afternoon for Mr Galloway ($1,500) and for her ($650). Ms Molina said she would cash the cheques the same day, take her cash for herself and leave Mr Galloway’s cash in ‘a safe place’ or ‘the usual spot’ referencing a specific place in the office or at his home. This arrangement continued until Ms Molina’s dismissal.

[15] Ms Molina recorded all cash receipts and payments. She says the ATO audited Mr Galloway’s financial records in March 2017. She says that Mr Galloway ’would lose track of the cash’, and so in 2017 she and Mr Galloway agreed that she would keep a cash journal at her home “so other staff did not see it”. The cash journal recorded cash deposits made to Mr Galloway as well as cash disbursements and payments. The records kept by Ms Molina noted the date, payer and/or receiver, the amount of money and the reason for the transaction/payment.

[16] At the time of her dismissal Ms Molina was employed as the Practice Manager. Ms Molina’s evidence was that her responsibilities included:

a. Diary management and client liaison for Mr Galloway;

b. Negotiating fees with clients and invoicing;

c. Chasing payment of fees from clients;

d. Payment of business expenses including phones, internet, rent, wages, superannuation, insurance premiums, stationery, staff travel expenses, and barristers’ fees.

e. Payment of Mr Galloway’s personal expenses such as his mortgage, car, car repairs, medical bills, optometrist fees, partners’ TAFE fees and vet bills;

f. Interviewing, hiring staff and training new staff;

g. Supervising practical legal training student’s, clerks, and junior solicitors;

h. Social media management;

i. Facilities management;

j. IT and Technology management; and

k. Team events and birthdays.

[17] Mr Galloway says that he trusted Ms Molina and relied on her “to do the financial side of the business”.

Mr Zhai’s work history and payment arrangements

[18] Mr Zhai was employed by Mr Galloway on 7 July 2017 as a Law Clerk. He was admitted to practice on 16 February 2018 and was thereafter employed as a solicitor. Mr Galloway supervised Mr Zhai’s work as a solicitor. Mr Zhai became eligible to apply for an unrestricted practicing certificate in February 2020.

[19] Mr Zhai says that he was eligible to earn commissions in addition to his salary. His commission rate was 15% from around August 2018. He said his commission was paid either in cash or by EFT and in his evidence he set out each of the commission payments he received.

[20] He says that in early 2019 he asked Ms Molina for an increase in his commission rate to 20%. He understood that Ms Molina took the request to Mr Galloway and the request was approved. He then received 20% commission from February 2019.

[21] Mr Zhai gave evidence that on one occasion in early September 2019 he spoke to Mr Galloway about paying him a commission for one of Mr Galloway’s clients, as Mr Zhai was responsible for the client retaining Mr Galloway’s services. Mr Galloway agreed to pay him a commission in acknowledgement for the work he had done.

Incident on 17 March 2020

[22] On the day before Ms Molina and Mr Zhai were summarily dismissed there was an incident in the office involving Mr Galloway, Ms Molina and Mr Zhai. Each person’s version is different.

[23] Ms Molina says that in the lead up to 17 March 2020, Mr Galloway took exclusive control over the bank accounts and had not been paying staff wages on time, nor had he been paying other business expenses such as barristers fees. Ms Molina said there was concern that Mr Galloway was spending his clients’ money on his own wedding. Mr Galloway was married on 13 March 2020. The COVID-19 pandemic was unfolding in a very public way at this time and jury trials had been vacated at short notice. The cancellation of a significant amount of work was obviously detrimental to the business. Ms Molina says she discussed the financial state of the business with Mr Galloway and Ms Tohi, a solicitor. Mr Galloway then indicated he would go home to check the accounts and make some plans. Ms Molina asked him to speak with the staff, indicating “they are not OK, they are worried and stressed”. She also asked him to speak with Mr Zhai, as he was owed a lot of commissions and was growing frustrated.

[24] Ms Molina says she was then called into a conversation between Mr Galloway and Mr Zhai where Mr Galloway told Mr Zhai that he was leaving to look at the books and would “sort out his commissions tonight.” Mr Zhai told Mr Galloway that “I’m not just worried about my commissions, I’m concerned about the whole office and whether you have the ability to manage the accounts. Why don’t you let [Ms Molina] do her job?” to which Mr Galloway replied “I won’t be threatened.”

[25] Ms Molina said Mr Galloway then walked away and she followed him to his office where a conversation to the following effect took place:

“Mr Galloway: I won’t be threatened by my junior solicitor

Ms Molina: He didn’t threaten you, he’s just worried about the business and the staff. They are all very good friends and he’s worried about the girls. Ray could leave tomorrow and get a job with any one of his mates, he has plenty of colleagues and clients but he’s staying here because he’s loyal to our team. Why do you have such a problem with Ray?

Mr Galloway: He’s a spoilt kid and he can leave if he wants to, I don’t care.

Ms Molina: Brett please don’t’ let your ego get in the way, Ray is just being assertive, and we all need transparency. Tell me honestly how long can we realistically keep paying the staff without any other money coming in for the next 2 months?

Mr Galloway: I don’t know, I’m going home to look at the accounts.

Ms Molina: Ok, that’s not a problem, we can work this out, we’re going to be ok we just all need to work together and stay strong.

Mr Galloway: That’s fine, I said, I will come back tomorrow. We’ll have a meeting at 9am, you, Jess and I, to discuss the financials. You better tell Ray to pull his head in.

Ms Molina: Ok, I will speak to him for you.”

[26] Mr Zhai says that on 17 March 2020 Mr Galloway approached him in the office and said words to the effect of “I know there’s an issue with your commissions, I’ll fix you up tomorrow”. Mr Zhai called out to Ms Molina as he was of the view that she should be included in the conversation to the extent it related to the management of Mr Galloway’s financial accounts. Mr Zhai says he insisted to Mr Galloway that the conversation take place in the open office area. In the conversation that followed, Mr Zhai expressed his concern about the future of the firm and Mr Galloway’s ability to continue to pay the staff. Mr Galloway said that he would look over the accounts that evening. Ms Molina and Mr Galloway then walked away. Ms Molina returned a short time later and said that Mr Galloway had called Mr Zhai “greedy” and said that he wouldn’t be blackmailed. Ms Molina told Mr Zhai that she had explained to Mr Galloway he wasn’t being blackmailed. She also told him that Mr Galloway would hold a staff meeting the following day.

[27] Mr Galloway’s version of the same incident, contained in a signed statement filed in July 2020, is difficult to follow. He agrees that Ms Molina told him that Mr Zhai was owed some money, but he “was only half listening” and thought it was for expenses. His account of what happens next is as follows:

“As I walked past [Mr Zhai] and said what I said, he said “you don’t give the books back to [Ms Molina] by the end of business today, that’s it.” He said it in a threatening way and loud enough for all to hear. I said “what’s “it”, Ray?” Would you like to come down to my office and discuss “it”. He said “no I am happy here.” I said “ok”. I looked around and could feel everyone focused on me. I decided to leave and left, On my way home I decided that I had had enough. I then put a plan together to terminate them both immediately the next day. I felt I did not have to work in what had become a very unhappy environment for me any longer.”

[28] I shall return to Mr Galloway’s evidence.

Summary dismissal on 18 March 2002

[29] Ms Molina was summarily dismissed on 18 March 2020. Mr Galloway attended the office and handed Ms Molina a letter he had apparently prepared overnight. The letter was in the following terms:

“At the date and time you receive this letter, which will be between 10.30 am and 11.00 am on Wednesday 18th March, 2020, you are Summarily Dismissed from your employment forthwith for what I consider to be serious misconduct ⁓

1 serious continuing insubordination;

2 attempted intimidation;

3 sabotage;

4 making agreements with others without my knowledge and or consent;

5 any further or other grounds as may be advised.

In the circumstances as I see them, I consider no other course of action would be reasonable nor do I consider it reasonable to continue to work with you at all.

The relevant history goes like this –

1 in May 2019 you demonstrated serious insubordination when a discussion came up concerning my personal choice to act for a homeless person with no money or assets in circumstances where you actively encouraging the staff to work for another client who was refusing to pay some trial fees and who was refusing to pay for fees on sentence on the basis you might be able to recover the fees later.

2 you made the debate one of the rest of the firm versus me and said you and Ray would leave and take the staff with you. This was said in the presence of all staff. You were actively challenging my authority.

3 in my office, shortly thereafter you subjected me to name calling and you elbowed me in the side as you went to slap me. I was dumfounded by your behaviour. I suggested you either go to anger management or get another job. I could not believe your behaviour toward me, after all I had done for you.

4 over the last 10 months, you have continued to endeavour to alienate me from the staff by gossiping about me behind my back about personal matters in relation to which you could have no personal knowledge. This has been positively noticeable with one member of staff.

5 you and another employee told a client in a highly public court case that the other side had a better lawyer than me. It was suggested that he get someone better and sack me. You denied your conduct when I confronted you at the time, later last year. You knew or ought to have known that I regarded your actions as trying to sabotage my business as the [client] is well known in both Sydney and Melbourne. Had he gone to another law firm and or sacked me, your statement/actions have caused serious harm to the business. In my view, your actions could only be considered as an attempt to sabotage my business.

6 after the client told me about your conduct, I spoke to the other employee. I then spoke to you. Your versions of events were vastly different and irreconcilable. I preferred the other employee’s version where he admitted the client’s assertions to me as truthful.

7 after I spoke with you, you contacted the client and threatened him before telling him that the ‘incident’ was a figment if [sic] his imagination.

8 more recently you purported to do a financial deal with one or more employees which you knew you were not authorised to do, which was not discussed with me nor signed by me and for which you had no authority whatsoever and for which there is a small prospect I may become liable.

9 In my view, your actions clearly fall in to the categories set forth above and in to other categories which I shall include, if the matter goes in to litigation.

You are immediately ⁓

1 leave your work phone on the desk with any relevant passcode;

2 leave your work keys and any Carpark entry / exit key on the desk;

3 leave the keys to the car owned by me that you drive.

You have 14 days from to [sic] to buy it or have the lease assigned to you otherwise I will return it to the leasing company. If you buy it or take over the lease, you can have the keys on execution of the relevant documents;

4 leave the premises;

5 you are not permitted to remove any of my intellectual property, any client file, any client list or anything else relevant to the clients and or the business. If you have any of my information at your home, it is to be returned to the office by 4.00pm today.”

[30] Mr Zhai was dismissed at the same time and received a letter in similar terms:

“Ray,

Your employment

At the date and time you receive this letter, which will be between 10.30 am and 11.00 am on Wednesday 18th March, 2020, you are Summarily Dismissed from your employment forthwith for what I consider to be serious misconduct –

1 serious insubordination;

2 attempted intimidation;

3 attempted bullying in your attempt to either or both bully me and or intimidate me;

4 sabotage;

5 any further or other grounds as may be advised.

In the circumstances as I see them, I consider no other course of action would be reasonable nor do I consider it reasonable to continue to work with you at all.

History

The relevant history goes like this ~

1 you were quite rude to me during the [client] trial. This conduct has continued to the present.

2 this conduct took place in circumstances where the judge and I clearly weren't seeing eye to eye and your uncalled for and continuing rudeness caused me unnecessary distress and anxiety.

3 despite the fact that the jury acquitted the client on the two serious counts and the judge discharged the client without conviction on the count where he misdirected the jury, you were aggressive and rude, saying I did not know much or do much anymore. You changed my draft submissions in relation to the aggravating and mitigating factors on the sentence proceedings such that you put in matters I had asked you not to and which were legally unhelpful to the point where I received unnecessary criticism from the judge. It must have been apparent to you that I considered your tone, language and words insubordinate.

4 between then and now little has been said between us due to the fact that you have continued to exhibit an openly hostile attitude toward me in the office except when you got in to difficulty with a client last week and I had to intervene to help you out the day before my wedding when I had other obligations.

5 prior to heading off on two weeks leave in late January this year, I delegated the matter of [TJ] to you to ready for his appeals which I considered may bring about a judicial Inquiry because of related events. I explained to you what needed to be done by when it needed to be done in consultation with the client. It was not outside your experience to do the work nor did you say you were too busy to do it. You made poor attempts to justify your failure to undertake the work by text when challenged.

6 you did not do anything requested of you at all nor did you seek any guidance in relation to it nor did you seek to have someone else do the work. The excuses you gave me included that you were busy; something that was not mentioned by you when you were delegated the work.

7 You caused me both personal embarrassment with the client and professional embarrassment with the court and your inaction resulted in the loss of the case from the firm. You only declared your failure the Friday before the Monday that the matter was listed before the court and then only when I asked you about the work i had delegated to you.

8 late last year you and another employee suggested to a client that the lawyer on the other side of a very public case was better than me. It was suggested that he get someone better and sack me. You admitted your conduct at the time. You knew I regarded your actions as an endeavour to sabotage my business as he was well known in Sydney and Melbourne. Had he gone to another law firm and sacked me and said that two of my staff had told him to sack me, it would have caused serious harm to the business.

9 On Tuesday 17th March between 4.00 pm and 4.30 pm, I indicated to Milena, who was at the entrance to the boardroom that I would speak to the staff the following day about our futures, having regard to the closure of many courts and the restricted basis courts would operate for some time, all as a consequence of action being taken around the globe due the spread of a serious virus and it effects on humans to date.

10 as I moved toward you, you said in a threatening tone that I was to return the books of the business to Milena, or else. You both sought to bully and intimidate me.

10 I invited you to come to my office to discuss any work issues you were concerned about but you refused as you had an audience. The entire staff were working within metres of you and were definitely within earshot of your raised voice. You told me I would comply today, being yesterday. I indicated that it wouldn't happen and I left. Before i left, I asked you what difference it made and you said you didn't trust me. I had not taken the opportunity to tell you that you have no say in how I run the business.

You have been well paid, treated with kindness and respect throughout your time with me. I do not have to tolerate your behaviour.

I have given the relevant issues and considerations as much thought as I was able in the time available to me.

In my view, your actions clearly fall in to the categories set forth above and in to other categories which I shall include, if the matter goes in to litigation.

You are to immediately ~

1 leave your work phone on the desk with any relevant passcode;

2 leave your work keys and any Carpark entry /exit key on the desk.

3 leave the office

4 you are not permitted to remove any of my intellectual property, any client file, any client list or anything else relevant to the clients and or the business. If you have any of my information at your home, it is to be returned to the office by 4.00pm today.

Yours Faithfully,
Galloways,
Solicitors, Barristers & Attorneys”

[31] According to Ms Molina, Mr Galloway was accompanied by security guards, and called the police to escort her from the premises in the presence of her colleagues.

Mr Galloway’s evidence regarding payment arrangements

[32] Mr Galloway said that he did not make the decision to terminate the Applicants lightly. He said “it came after almost a year what [he] considered to be disrespectful behaviour by both of them toward [him] and with the knowledge that they would be leaving [his] firm imminently”.

[33] Mr Galloway says that he did not authorise any commission payments for Mr Zhai and did not know that Ms Molina had paid any previous commission payments to Mr Zhai. I note that Mr Galloway’s version of the conversation on 17 March 2020 makes no reference to commission payments. Mr Galloway also denies authorising payment of $25,000 to Ms Molina in early 2019.

[34] In cross examination Mr Galloway did indicate that he knew about the commission payments to Mr Zhai before 17 March 2020 because he had found a document on Ms Molina’s desk “some time prior to the termination of both of them”. He said that the document recorded payments made to Mr Zhai. He said:

“I found a spreadsheet, or part of it, I think, showing some payments to him from early 2019 to a date in late 19/early 20 and I had a look at that and I checked the accounts to see where the money was coming from or where the money was going into the accounts and the majority of the transactions, nothing went into the accounts. I couldn't find a receipt book to see if the money was receipted. It looked like she was keeping the money and she was paying him cash on a number of occasions in, I think, around August and then some towards the end of the year and some more and, yes, so I was a bit concerned about that”

[35] Mr Galloway’s belief at the time of the dismissal, and the grounds for that belief, are crucial elements of his reliance on the Small Business Fair Dismissal Code. Mr Galloway made no reference to alleged unauthorised commission payments in the dismissal letter to Mr Zhai, and only a vague passing reference in the dismissal letter to Ms Molina.

[36] In his statement made four months after the dismissals in July 2020 he does not record at all what investigations he undertook or what information he had available to him when he dismissed the Applicants. In oral evidence in late 2021 he refers to finding a single document on Ms Molina’s desk on 17 March 2020, but in his written evidence filed in July 2020 he makes no reference to finding this document prior to dismissal. He does attach a version of the document to his written statement and refers to it as “a document prepared by [Ms Molina] in respect of [Mr Zhai’s] clients”.

[37] By contrast, in his written statement in July 2020 Mr Galloway quite clearly states that he decided to dismissal both applications on his way home shortly after talking to them on 17 March 2020:

“… On my way home I decided that I had had enough. I then put a plan together to terminate them both immediately the next day. I felt I did not have to work in what had become a very unhappy environment for me any longer.”

[38] Mr Galloway’s oral evidence and his recollection of the sequence of events on 17 and 18 March 2020 are disjointed, vague and inconsistent. He perhaps knew something about commission payments on 18 March 2020 when he dismissed both Applicants - because he perhaps referred to a matter of that kind in his letter to Ms Molina. However, it is impossible to discern precisely what Mr Galloway had investigated, let alone understood, of these matters on the day he dismissed the Applicants.

[39] The following evidence given in cross-examination illustrates my concern:

“[PN315] Mr Galloway, you agree that you dismissed Mr Zhai for serious misconduct; that's correct, isn't it?---Yes.

[PN316] And you formed that view on 17 March; is that correct? I'd say I probably formed a view about it, but I formed a sufficient view about it that I sacked him on the 18th, yes. So, but on the 17th, my (indistinct) put to you, I had more concerns when he started raising issues that weren't his business, they were my business, about books and who should be managing them and whether I was capable and whether I had money to pay him, but that's my business, not his business, and it's obvious where he got that information from, and the fact that he's raising it in front of my other staff and he's trying to basically challenge my authority and point out I was an idiot in front of the other staff members that were present, and that's just not what you do.

…

[PN369] In relation to the books, are you looking with hindsight now about those books, and was there sufficient information in the books that you were holding on 17, 18 March to establish that Mr Zhai was complicit in this arrangement with Ms Molina?---Well, in some respects yes.  Can I put it this way to you, that by books - I mean he would use that phrase to me, books, right, and then he'd push it back to her - I had changed the (indistinct) bank accounts, so that's all I had.  I had - the night before and the night before that, I went into the office.  I couldn't find a receipt book.  I couldn't find anything to do with my books at all, and there weren't I suppose that many records around, but (indistinct) there are receipt books around sort of thing, like cheque books and that.  Again, I went to the bank statements to find that most of this money had not been receipted.  Out of the three FTs they talk about, two had been, (indistinct) amounts had come up with paid in by (indistinct), $1000 amount.  It was never paid out.  There's no reference to it in the bank statements.  I found that the amounts totalled around, I think all up around $158,000 or something, or thereabouts, if you go right back to the beginning when it started apparently, but the period I had it was about $120,000 then, and when you divide it up 80/20, you know, like, it's a lot of money to use to pay off debts and (indistinct), you know, for the staff.  So - - -

…

[PN371] But to the extent that you had the books and that Mr Zhai was asking you to return them to Ms Molina, is the information that you're now talking about, is that information that was there at your fingertips in the books?---No.  I couldn't find any books in the office.  What he meant by 'give her back the books' was (indistinct) bank accounts.

…

[PN377] Am I correct that you just said that you had seen, upon review of those bank accounts, the EFT commissions made from the blank canvas account? What I saw was - I can't really say I saw those that day, but what I can say insofar as I was looking for references to cash money (indistinct) since. I think I assumed straightaway that (indistinct) in the account, or that's some advice to us, not us to Ray, and that trust won't be right, (indistinct) to us, and all our money was cash money. None of that was in the accounts at all. Probably on one occasion there was, but 99 per cent of it was not accounted for. Couldn't find a receipt book. He said here's your money, no receipt at all.

[PN378] But did you see an EFT transaction from your blank canvas account to Mr Zhai prior to 17 March? I can't say I did. I can't say I saw either of those two transactions on 21 and 24 October prior to that for $200.

[PN379] I'd put it to you that that's not true, Mr Galloway, because you said as such five minutes ago, that you had seen those transactions? Yes. So I put it to you this way, that when I - I got shocked when I saw this sheet, so I went through everything as best I could. I got the receipt books up and (indistinct). So I went to the bank account statements. I went to the 814 account, my general account. I couldn't find the information; the majority maybe one cash receipt I found, and I went to the 462, the blank canvas account, nothing there either. That caused me concern. The EFT amounts were coming into the business. I could see that to start with, and they were all there, okay. I don't believe I saw those other ones at that point as to Ray. I may have, I may not - this was quite some time ago now, but the one on 25 September, there's no EFT (indistinct) that day, and I'd never seen anything on my bank statements - (indistinct) on it before. I think I would have, because there's small amounts (indistinct). (Indistinct) statements, (indistinct) means necessarily.

[PN380] Did you put any of your suspicions about Mr Zhai's complicity with Ms Molina to Ray prior to the 18th - - -?---No.

[PN381] - - - of March?---No.

[PN382] But you had those suspicions prior to 18 March?---I sought those on the 17th when he was talking to me and he's basically having me on in the office; he challenged me (indistinct).

[PN383] So you formed the view that he was being complicit in the scheme on 17 March, yet you had - - -?---Sorry.  I formed the view she put him up to this.”

Other alleged insubordination and intimidation

[40] In the letters given to Ms Molina and Mr Zhai on termination Mr Galloway refers to alleged insubordination, intimidation and sabotage. The instances cited occurred in 2019 and in January 2020. As will become apparent, I do not regard any of these events to form a valid reason to dismiss either employee in March 2020. Regardless of how satisfactory or unsatisfactory the Applicants’ conduct was in these events, the behaviour was dealt with at the time by Mr Galloway and did not result in any form of disciplinary action. Further, in cross-examination Mr Galloway conceded that these peripheral matters do not constitute serious misconduct. 5 Accordingly, I shall only briefly describe the evidence about these events.

[41] Mr Galloway says that in 2019 Ms Molina criticised him in the open plan office for his ‘bleeding heart’, and was rude towards him. He says the discussion culminated in Ms Molina saying something about leaving and taking other staff and/or clients with her. Ms Molina gives a different account of this conversation in which she said the following to Mr Galloway in the presence of Mr Zhai:

“We are all here fighting for the business because we love our team and our jobs, so you need to decide if you want to be in this or not. If not, just tell us so we can have some time to prepare and move on if we have to. We all have our own financial commitments – I am supporting an elderly parent, so we need to know what’s happening.”

[42] Of the allegation that Ms Molina called Mr Galloway a name and elbowed him in the side, and went to slap him in such a manner that prompted Mr Galloway to suggest she go to anger management or get another job, Ms Molina’s evidence was as follow:

“During the conversation on 12 July, Mr Galloway ended the conversation abruptly when he pushed past me so that he could leave the office. I recall that as he pushed past me, we connected shoulders.

I am 5 feet 3 inches tall, petite in stature and Mr Galloway has a solid build. It did not hurt me so I cannot imagine that he felt anything at all, or any pain.

Mr Galloway did not suggest that I seek anger management classes.

My account of what happened on 12 July is as follows: Mr Galloway left the office in such as a manner because I had said words to the effect:

“I can’t believe you are using drugs again. You need help once and for all Brett - you’re an addict. I have seen your bank records, and personal expenses – I do the books remember. Let’s go outside to talk, we need to hash this out.”

Mr Galloway told me to fuck off, and then he pushed past me and left the office.

When I saw Mr Galloway on Monday 15 July, he acted as if the conversation on 12 July never took place.”

[43] Of the allegation that for 10 months Ms Molina had continued to endeavour to alienate Mr Galloway from the staff, Ms Molina says:

“Mr Galloway failed to raise his concerns that allegedly lasted 10 months about me during that 10-month period. Complaints made by other staff about Mr Galloway are not a result of my conduct and therefore this allegation does not constitute serious misconduct.

I commonly received one complaint per week about Mr Galloway from either clients or employees. Since May 2019, the complaints varied. For example, that Mr Galloway gave poor or wrong advice, failed to create, and cultivate relationships with clients, overbilled and was unreliable and that he regularly forgot key aspects of key legislation in and out of court.

…

From October 2018, I encouraged individuals to raise their grievances directly with Mr Galloway.”

[44] Mr Galloway alleges that Mr Zhai failed to prepare documents a client, TJ, in January- February 2020. Mr Galloway apparently took two weeks leave and delegated task to Mr Zhai and the task was not done. The consequences for Mr Galloway, he says, were personal embarrassment with the client, professional embarrassment with the court, and the loss of the case from the firm.

[45] Mr Zhai says that at the time he was asked to do this work he was preparing for another trial and that he delegated the work, with Mr Galloway’s approval, to another person in the firm. Mr Zhai also says that the client was angry because he was given improper advice by Mr Galloway before the appeal and was given different advice on the morning of the appeal.

[46] Mr Galloway spoke to Mr Zhai at the time because, he says, he was considering terminating Mr Zhai. Mr Zhai apologised to Mr Galloway and Mr Galloway told him that the comments were very disloyal, that they could be hurtful to the business and to Mr Galloway. Mr Galloway says:

“He apologised again. I made it clear that it was only because he was honest and I value honesty I would keep him on. I said “but there is a penalty. You are off the case… I won’t appear with you when you have no confidence in me. If you think you will lose, you will, I have a good case.”

[47] Finally Mr Galloway alleges that Mr Zhai and/or Ms Molina told a client that counsel for the other side was a better lawyer than Mr Galloway. The counsel in question was former Supreme Court Justice Greg James QC. Ms Molina gave evidence of a conversation between the client and Mr Zhai that included the following:

“[Client]: Don’t you think they (the Complainants legal team) look stupid? I’ll win cos of the lack of dress of sense. Brett has promised me that once we win, we are suing [xx] for costs and defamation.

Mr Zhai: [Client], you must take this seriously. Costs are not automatically awarded even if you do win. The solicitors may be inexperienced, but their counsel is not – he is very experienced and highly reputable former Supreme Court Judge (GJ).

[Client]: Is GJ better than Brett?

Ms Molina: What is important, is the strength of the case and you have a strong case.”

[48] It seems to me that Ms Molina politely avoided directly answering the question, which is understandable in the circumstances. Ms Molina says she raised the conversation directly with Mr Galloway after later being misquoted by the client. Ms Molina forwarded to Mr Galloway an email exchange between herself and the client where she said to the client “And no, you do not need another barrister. Brett believes in your case and he’s not scared of anyone so he is the right man for the job!” and where she said directly to Mr Galloway “Of course no one told him that Greg is better than you.”

Evidence from other witnesses

[49] Mr Vu and Mr Silvestre gave evidence of communications with Mr Zhai in May and June 2020 in relation to criminal proceedings. Mr Galloway relied on their evidence is proof of sabotage. None of the events in May or June 2020 could form the basis of a valid reason to dismiss Mr Zhai in March 2020.

[50] Ms Lawson gave evidence that Ms Molina had criticised Mr Galloway during 2018 when Mr Galloway represented her in criminal proceedings. Ms Molina’s evidence was that, in short, the conversation was the other way around. It seems that Mr Galloway went “of his head” at a Magistrate a Burwood Local Court during the hearing of charges against Ms Lawson. On Ms Molina’s version Ms Lawson was worried prior to sentencing that she was “going to get a whack if [Mr Galloway] does my sentence”. Ms Lawson’s evidence is that Ms Molina had told her “during the first hearing” that Mr Galloway had lost the plot, that he was off his head on drugs and had been caught driving of his head and that Ms Lawson could get a better lawyer. Ms Lawson’s evidence is that she told Mr Galloway of these things “during the conversation” via text messages.

[51] Ms Lawson statement also refers to conversations she had with Mr Galloway directly, including conversations about Mr Galloway’s conduct during her criminal proceedings. In the Fair Work Commission proceedings Ms Lawson gave evidence that Mr Galloway typed her Statutory Declaration for her. Her name is spelt wrong on one occasion in the document, which she explained was because “he was typing, it was through the phone”. Ms Lawson statement is vague, disjointed and is as poorly drafted as Mr Galloway’s own statement. There are several reasons for discarding Ms Lawson’s evidence: the events relate to Court proceedings in 2018 and alleged comments by Ms Molina in 2018 that were directly conveyed to Mr Galloway at the time, which means that by March 2020 the allegations were completely stale. More importantly, the fact that Mr Galloway participated in the drafting of her statement, including parts of the statement where Mr Galloway “explained himself” to Ms Lawson about his conduct, means that her evidence, even if it were relevant, is so contaminated by the drafting process that it cannot be relied upon.

Consideration - Small Business Fair Dismissal Code

[52] At the time of the two dismissals Mr Galloway was a small business employer. Mr Galloway calls in aid the Small Business Fair Dismissal Code in relation to the dismissal of Ms Molina.

[53] Ms Molina’s dismissal was a summary dismissal for the purposes of code, insofar as she did not receive any warning prior to the dismissal. As the Full Bench decision in Pinawin v Domingo 6 explained:

“There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, there needs to be a consideration whether, at the time of dismissal, the employer held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.”

[54] Mr Galloway submits that Ms Molina’s conduct of paying Mr Zhai commission payments without authorisation was conduct sufficiently serious to justify immediate dismissal. There is no doubt that Ms Molina paid commission payments to Mr Zhai using Mr Galloway’s funds. Two key questions arise: firstly, whether the payments were authorised and secondly, whether Mr Galloway could have had a reasonable belief prior to dismissal that monies were paid without authorisation.

[55] The first thing to say is that if Mr Galloway had not authorised the commission payments and had discovered their existence prior to 17 March 2020, it is incredible that he concealed this knowledge from Ms Molina and Mr Zhai during their difficult discussions on 17 March 2020. Mr Galloway suggests that Mr Zhai spoke to him in a threatening way, demanding that Mr Galloway give Ms Molina access once again to the books of the business. If Mr Galloway thought that Mr Zhai had improperly received thousands of dollars from him, and felt threatened by Mr Zhai about money, it is highly likely that he would have confronted Mr Zhai about the payments.

[56] Secondly, it is incongruous for Mr Galloway to regard the payments made by Ms Molina as misconduct but not regard the receiving of unauthorised monies by Mr Zhai as misconduct. Either the payments were authorised or they were not.

[57] On Ms Molina’s evidence the payments were authorised, the payments were recorded by her in Mr Galloway’s accounting system, as unsophisticated as it was, and the documents recording these arrangements were continually available to Mr Galloway. Mr Galloway had ‘taken control of the financial accounts’ almost one month earlier on 20 February 2020 but he did not, on his oral evidence in cross-examination, say that he noticed any anomalies or difficulties prior to the incident on 17 March 2020.

[58] Further, I am not satisfied that the second element identified in Pinawin is made out. There is no evidence of any actual investigation undertaken by Mr Galloway prior to dismissing Ms Molina, let alone a reasonable investigation for the purposes of the code. Mr Galloway relies on documents discovered after dismissal following sporadic searches of the computer used by Ms Molina.

[59] In the circumstances, and on the state of Mr Galloway’s evidence, I am not satisfied that on 18 March 2020 he had reasonable grounds upon which to believe that Ms Molina had engaged in conduct sufficiently serious to justify immediate dismissal. Her application, therefore, falls to be determined by reference to the criteria in s.387 of the Act.

Consideration - Unfair dismissal

[60] Section 387 of the FW Act requires me to take into account the following matters in determining whether The Applicant’s dismissal was harsh, unjust or unreasonable:

“(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the FWC considers relevant.”

[61] I am required to consider each of these criteria, to the extent they are relevant to the factual circumstances before me. 7 I set out my consideration of each below.

Was there a valid reason for the dismissal related to the Applicant’s capacity or conduct?

[62] To be a valid reason, the reason for the dismissal should be “sound, defensible or well founded” 8 and should not be “capricious, fanciful, spiteful or prejudiced.”9 However, the Commission will not stand in the shoes of the employer and determine what the Commission would do if it was in the position of the employer.10

[63] I doubt that Mr Galloway collected much information at all when he decided to dismiss Ms Molina and Mr Zhai. After the dismissal Mr Galloway moved to secure a copy the information contained on the computer used by Ms Molina. In the course of interlocutory proceedings before me it became apparent that Mr Galloway, or his wife, reviewed this material only spasmodically. As referred to above, Mr Galloway was not clear in his evidence about the information he had considered before dismissing the employees.

[64] There is no barrier for the Commission to receive and consider evidence of facts not known to the employer at the time of the dismissal 11 as long as the facts existed at the time of dismissal.12 The way in which such evidence might be considered will depend on the circumstances of the case. As von Doussa J reasoned in Lane v Arrowcrest Group Ltd (1990) 27 FCR 427 at 45613:

“… In my opinion it is still open to an employer to justify a dismissal by reference to facts not known to the employer at the time of the dismissal, but discovered subsequently, so long as those facts concern circumstances in existence when the decision was made. Whether the decision can be so justified will depend on all the circumstances. A circumstance, likely to favour the decision to dismiss, would be that fraud or dishonesty of the employee had caused or contributed to the employer's state of ignorance. A circumstance likely to weigh against the decision would be that the employer had failed to make reasonable inquiries which would have brought existing facts to its knowledge before the dismissal occurred…”

[Emphasis added].

[65] It may be that after-acquired knowledge/evidence improves an employer’s case in relation to establishing a valid reason for dismissal but, as the Full Bench in APS Group (Placements) Pty Ltd v Stephen O’Loughlin (2011) 209 IR 351; [2011] FWAFB 5230 found, such evidence might weaken the employer’s case in relation to procedural fairness:

“[51] Section 387(a) of the FW Act requires FWA to consider “whether there was a valid reason for the dismissal”. This language directs attention to whatever reason or reasons for dismissal emerge from the evidence and are relied upon by the employer. The tribunal is not confined to a consideration only of the reason or reasons given by the employer at the time of the dismissal. An employer is entitled at the hearing of an application for an unfair dismissal remedy to rely upon whatever reason(s) the employer wishes to rely upon at that time, albeit that in relation to any reason not relied upon at the time of dismissal the employer will have to contend with the consequences of not giving the employee an opportunity to respond to such reason (see s.387(b) and (c) of the FW Act).”

[66] Both applicants were summarily dismissed. In Sydney Trains v Gary Hilder [2020] FWCFB 1373 (“Hilder”) the Full Bench summarised the well-established principles for determining such matters at [26] 14:

“The principles applicable to the consideration required under s 387(a) are well established, but they require reiteration here:

(1) A valid reason is one which is sound, defensible and well-founded, and not capricious, fanciful, spiteful or prejudiced.

(2) When the reason for termination is based on the misconduct of the employee the Commission must, if it is in issue in the proceedings, determine whether the conduct occurred and what it involved.

(3) A reason would be valid because the conduct occurred and it justified termination. There would not be a valid reason for termination because the conduct did not occur or it did occur but did not justify termination (because, for example, it involved a trivial misdemeanour).

(4) For the purposes of s 387(a) it is not necessary to demonstrate misconduct sufficiently serious to justify summary dismissal on the part of the employee in order to demonstrate that there was a valid reason for the employee’s dismissal (although established misconduct of this nature would undoubtedly be sufficient to constitute a valid reason).

(5) Whether an employee’s conduct amounted to misconduct serious enough to give rise to the right to summary dismissal under the terms of the employee’s contract of employment is not relevant to the determination of whether there was a valid reason for dismissal pursuant to s 387(a).

(6) The existence of a valid reason to dismiss is not assessed by reference to a legal right to terminate a contract of employment.

(7) The criterion for a valid reason is not whether serious misconduct as defined in reg 1.07 has occurred, since reg 1.07 has no application to s 387(a).

(8) An assessment of the degree of seriousness of misconduct which is found to constitute a valid reason for dismissal for the purposes of s 387(a) will be a relevant matter under s 387(h). In that context the issue is whether dismissal was a proportionate response to the conduct in question.

(9) Matters raised in mitigation of misconduct which has been found to have occurred are not to be brought into account in relation to the specific consideration of valid reason under s 387(a) but rather under s 387(h) as part of the overall consideration of whether the dismissal is harsh, unjust or unreasonable.”

[67] Where a dismissal relates to an employee’s conduct, the Commission must be satisfied that the conduct occurred and justified termination.¹⁵ “The question of whether the alleged conduct took place and what it involved is to be determined by the Commission on the basis of the evidence in the proceedings before it. The test is not whether the employer believed, on reasonable grounds after sufficient enquiry, that the employee was guilty of the conduct which resulted in termination.” 16

[68] Mr Galloway relied on the stated reasons in the respective letters given to each applicant upon their dismissal. The first thing to say about the allegations in the termination letters is that almost none of the events referred to occurred in 2020, let alone in close proximity to the dismissal. There is no suggestion, nor could there be a suggestion, that the incidents in 2019 and earlier were concealed from Mr Galloway or otherwise did not come to his attention until March 2020. In my view none of the events in 2019, or even in January 2020, could form a valid reason for summary dismissal in March 2020. Each incident was known by Mr Galloway at the time and was dealt with by Mr Galloway long before the dismissal. On each occasion Mr Galloway chose to allow Ms Molina and/or Mr Zhai to remain in employment.

[69] I accept that in general terms a valid reason for dismissal could include a course of behaviour over time, and seemingly separate events, viewed together, could constitute a valid reason or reasons for dismissal if they are a pattern of behaviour that is incompatible with the continuation of the contract or otherwise unsatisfactory.

[70] The letters Mr Galloway delivered to Ms Molina and Mr Zhai amount to no more than a list of incidents that Mr Galloway found unsatisfactory over a period of almost 12 months. Crucially, Mr Galloway dealt with each issue at the time and did not squarely advise either employee that the continuation of such behaviour could result in dismissal. It is not open for an employer to resurrect old incidents as a basis for dismissal if those incidents already have been dealt with. Employers cannot accumulate reasons for dismissal to deploy at their convenience.

[71] In his closing submissions Mr Galloway relies upon several matters that, he says, separately or taken together constitute a valid reason for dismissal of Ms Molina from her employment, viz:

(a) that Ms Molina agreed with Mr Zhai to pay him commissions, and paid him commissions, without Mr Galloway’s knowledge or consent;

(b) Ms Molina paid herself $25,000 in February 2018 as an alleged commission payment in connection with fees received from a particular client;

(c) Ms Molina paid herself $650 per week, using cash cheques, in addition to her full salary paid by EFT (which was in fact a little above the $75,000 salary that Mr Galloway agreed to);

(d) what is referred to in Ms Molina’s termination letter as ‘insubordination’, being behaviour in 2019 towards Mr Galloway when he chose to represent a homeless person; and

(e) what is referred to in the termination letter as ‘sabotage’, being apparent ‘badmouthing’ of Mr Galloway to clients in 2019.

[72] Mr Galloway relies upon the following reasons for dismissing Mr Zhai:

(a) the fact that Mr Zhai was paid commissions, and that that occurred (if Mr Galloway’s evidence is accepted) without Mr Galloway’s knowledge or consent;

(b) ‘serious insubordination’ as described in his termination letter, being rude and disrespectful behaviour in 2019 towards Mr Galloway in relation to the two particular criminal trials; and

(c) Mr Zhai’s failure in January 2020 to undertake a task that he had been asked to perform for a client, TJ, referred to in the termination letter.

[73] I find that the following of the above matters were not valid reasons to summarily dismiss in March 2020:

(a) the alleged insubordination by Ms Molina in 2019;

(b) the alleged ‘sabotage’ by Ms Molina in 2019;

(c) the ‘serious insubordination’ by Mr Zhai; and

(d) Mr Zhai’s failure in January 2020 to undertake a task for a client.

[74] I readily accept that insubordination and sabotage ordinarily constitute valid reasons for dismissal, and accept that some of the behaviour referred to by Mr Galloway could amount to insubordination or sabotage. However, in the present case and on the evidence before the Commission, the conduct in question does not constitute a valid reason for dismissal in March 2020 because it had been previously dealt with.

[75] The remaining claimed valid reasons for dismissal, being the allegedly unauthorised payment of cash/commissions to Mr Zhai and Ms Molina, and the payment of $25,000 to Ms Molina in 2018, require further consideration. There is no disagreement that payments were made to Ms Molina and Mr Zhai. The allegations stand or fall on whether or not Mr Galloway authorised the payments.

[76] If the payments were not authorised then quite obviously Ms Molina and Mr Zhai misconducted themselves in their employment and there were valid reasons to dismiss each of them. The allegations against Ms Molina and Mr Zhai are very serious and the Briginshaw v Briginshaw 17 standard applies18:

“The standard of proof remains the balance of probabilities but 'the nature of the issue necessarily affects the process by which reasonable satisfaction is attained' and such satisfaction 'should not be produced by inexact proofs, indefinite testimony, or indirect inferences' or 'by slender and exiguous proofs or circumstances pointing with a wavering finger to an affirmative conclusion.”

[77] Ms Molina was required to manage the finances for Mr Galloway’s firm which, it seems to me, was a difficult responsibility. By 2019 and 2020 the ATO was closely scrutinising Mr Galloway’s business, and Mr Galloway had been twice found to have engaged in unsatisfactory conduct in relation to cash transactions and other financial matters. Mr Galloway regularly received payments in cash from clients and received payments away from the office at his home. During the proceedings both Ms Molina and Mr Zhai conceded that their tax returns did not include the monies received from Mr Galloway by way of cash or commission.

[78] The best that can be said about Mr Galloway’s accounting system is that it was shambolic. I do not need to decide whether Mr Galloway’s system was intentionally shambolic. The Applicants submitted that the lack of written evidence is consistent with Mr Galloway’s conduct in not keeping accurate employee and business records.

[79] Understandably Ms Molina decided to “protect herself” by keeping detailed records of the transactions she administered. She says she did so because Mr Galloway was “inconsistent, unpredictable and erratic.”

[80] I accept the theoretical possibility that Ms Molina dishonestly capitalised on Mr Galloway’s chronic disorganisation. However, I cannot move past the fact that Ms Molina recorded all the transactions in documents that she says she provided to Mr Galloway from time to time for his benefit and for him to “audit”.

[81] Many of the transactions were done by EFT and Ms Molina knew that Mr Galloway had access to bank statements and banking records – in fact they shared a single ‘token’ to do online transactions because one token had been lost. Mr Galloway’s accounts were also reviewed by Mr Galloway’s accountant: Ms Molina says that she prepared the records of the transactions, including the cash transactions, knowing that Mr Galloway would then discuss them with his accountant.

[82] Indeed, it is significant that in these proceedings Mr Galloway almost exclusively relies on documents prepared by Ms Molina to prove her alleged misconduct.

[83] The documents prepared by Ms Molina quite obviously reveal cash received by or for Mr Galloway, and payments made or allocated by Ms Molina to herself, to Mr Galloway and to Mr Zhai.

[84] The alleged authorised payments to Ms Molina are of a slightly different character to the payments to Mr Zhai. Ms Molina says she received a regular weekly payment of $650 in cash (i.e. by cash cheque) whereas the additional payments to Mr Zhai were calculated by reference to fees received from clients.

[85] Upon reviewing all of the documentary material, and the respective explanations of the parties, I cannot accept that cash/commission payments where not known to and authorised by Mr Galloway. Mr Galloway carries an evidentiary onus to prove that the misconduct occurred, which in this case means to prove that the payments were not authorised. Ms Molina and Mr Zhai provided positive evidence that the payments were authorised, and Mr Galloway has not negatived this evidence.

[86] Mr Galloway regards the regular payment of $650 per week as theft. It is also unlikely that Ms Molina would intentionally steal such a regular amount.

[87] In relation to commission payments Ms Molina says she was told by Mr Galloway to “just pay them when we’ve got cash lying around.” She said that in early 2020 there “wasn’t much money around” and that Mr Zhai was owed quite a lot. When asked whether she had sent any emails to Mr Galloway regarding the monies owed to Mr Zhai, Ms Molina said:

“He never wanted anything from email, he wanted everything in person with printed out reports for him, keep it simple was his - in fact there'd be certain times where he would say, "I'm not checking my email at the moment", and other times he would say (indistinct).”

[88] One aspect of the Applicants’ evidence that is not consistent with Mr Galloway’s ongoing approval of cash/commission payments to Mr Zhai, is the evidence that Ms Molina spoke to Mr Galloway in September 2019 about commission payments and that Mr Galloway had agreed to pay commission in acknowledgement for what Mr Zhai had done on the file. This evidence is troubling because, on the face of the rest of the evidence, Mr Zhai had received commission payments from August 2018.

[89] One final aspect that speaks against Mr Galloway authorising cash payments is that Mr Zhai was a newly admitted solicitor with a base salary of $75,000. As Mr Galloway says, “he was being paid quite well … for a young lawyer.”

[90] The allegation that Ms Molina paid herself $25,000 in February 2018, in instalments, is similar but different to regular payments made to Ms Molina and the commission payments made to Mr Zhai. There is no mention of these transactions in the termination letter given to Ms Molina. Mr Galloway says that the payments were never authorised. Ms Molina says that the payments relate to fees received from a particular client whom she was integral in bringing into the firm, and that she had to “rally” for Mr Galloway to agree to pay her this money. She says that there were discussions at the time between Ms Molina, Mr Galloway, Mr Galloway’s accountant and her own accountant. Some of the money was paid to Ms Molina’s company and the amounts paid to her company were treated as a tax deduction by Mr Galloway. Ms Molina says that Mr Galloway remarked at the time “great, that means I don’t have to pay super on it.”

[91] The payments were obviously for a large sum of money and appear in Mr Galloway’s bank records. Mr Galloway led almost no evidence to refute Ms Molina’s evidence. I do not think it would have been difficult for Mr Galloway to refute Ms Molina’s account of events if they were not true. Mr Galloway’s BAS records or his tax return, for example, would reveal whether Mr Galloway in fact claimed a tax deduction for payments he says he didn’t know about. Mr Galloway’s accountant could also have shed light on the situation.

[92] The allegations of misconduct have not been made out to the Briginshaw standard. Whether deliberately or by his chronic delinquency, Mr Galloway’s accounting records and systems were poor. Ms Molina recorded the movement of Mr Galloway’s funds and did not conceal any of the payments about which Mr Galloway denies contemporaneous knowledge. The transactions took place over a period of more than two years. Ms Molina and Mr Zhai gave evidence that the transactions were fully disclosed to Mr Galloway and his accountant. In many instances Mr Galloway acted in a way consistent with having relevant knowledge and having given relevant authorisation for the payments. Mr Galloway’s evidence, by contrast, falls comfortably within what the High Court referred to in Briginshaw as “inexact proofs, indefinite testimony, [and] indirect inferences”. 19

[93] I find that there was no valid reason to terminate Ms Molina’s employment on 18 March 2020, nor was there a valid reason to terminate Mr Zhai’s employment.

Was the Applicant notified of the valid reason?

[94] Because I am not satisfied that there was a valid reason related to dismissal, this factor is not relevant to the present circumstances. 20

Was the Applicant given an opportunity to respond to any valid reason related to their capacity or conduct?
[95] Neither applicant was given any opportunity to respond to the allegations against them. Instead Mr Galloway prepared letters, and arranged for security guards and even the police to be present when the letters were given over as a fait accompli.

Did the Respondent unreasonably refuse to allow the Applicant to have a support person present to assist at discussions relating to the dismissal?

[96] This factor is not a relevant consideration in this matter.

Was the Applicant warned about unsatisfactory performance before the dismissal?

[97] As the dismissal did not relate to unsatisfactory performance, strictly speaking this factor is not relevant to the present circumstances.

To what degree would the size of the Respondent’s enterprise be likely to impact on the procedures followed in effecting the dismissal?

To what degree would the absence of dedicated human resource management specialists or expertise in the Respondent’s enterprise be likely to impact on the procedures followed in effecting the dismissal?

[98] Mr Galloway’s business is a small one with no dedicated human resource management specialists or expertise, and the Commission ordinarily makes allowances for procedural shortcomings and the like in smaller enterprises.

[99] However, Mr Galloway has been a legal practitioner for a very long time. He does not appear to have any working knowledge or experience in employment law, but Ms Molina and Mr Zhai are entitled to expect that Mr Galloway would have afforded them some kind of procedural fairness or natural justice, and perhaps also some personal courtesy and consideration. The evidence of the applicants was that Mr Galloway was the leader of a small team in which lawyers and staff worked closely together, often under the pressure of high-stakes criminal proceedings.

What other matters are relevant?
[100] Section 387(h) requires the Commission to take into account any other matters that the Commission considers relevant.

[101] There are no other relevant factors to be taken into account in this matter.

Is the Commission satisfied that the dismissal of the Applicant was harsh, unjust or unreasonable?

[102] I have made findings in relation to each matter specified in section 387 as relevant. I must consider and give due weight to each as a fundamental element in determining whether the termination was harsh, unjust or unreasonable and therefore an unfair dismissal.

[103] I find that the dismissal of Ms Molina was, in the circumstances, harsh and unreasonable.

[104] I find that the dismissal of Mr Zhai was, in the circumstances, harsh and unreasonable.

[105] Most of incidents that were said by Mr Galloway to form the reasons for dismissal were stale and had already been dealt with. The more serious allegations, which only crystallised after the dismissal and once these proceedings commenced, were not made out. No procedural fairness was afforded at all.

[106] Having considered each of the matters specified in section 387 of the FW Act, I am satisfied that the dismissal of each applicant was unfair.

Remedy - Compensation

[107] Being satisfied that Ms Molina and Mr Zhai made applications for orders granting a remedy under s.394, were persons protected from unfair dismissal, and were unfairly dismissed within the meaning of s.385 of the FW Act, I may order reinstatement, or the payment of compensation, subject to the FW Act. The question whether to order a remedy remains a discretionary one. 21

[108] Neither applicant seeks an order for reinstatement. In all the circumstances, I consider that orders for payment of compensation are appropriate to compensate the Applicants for financial losses they have suffered arising from being unfairly dismissed.

Compensation – what must be taken into account in determining an amount?

[109] Section 392(2) of the FW Act requires all of the circumstances of the case to be taken into account when determining an amount to be paid as compensation to the applicants in lieu of reinstatement including:

“(a) the effect of the order on the viability of the employer’s enterprise; and

(b) the length of the person’s service with the employer; and

(c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and

(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and

(e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and

(f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and

(g) any other matter that the FWC considers relevant.”

[110] I will consider these factors in sequence:

a) There is no suggestion that an order for compensation would have a problematic effect on the viability of the employer’s enterprise;

b) Ms Molina worked for Mr Galloway for 9 years, which is substantial. Mr Zhai’s 2.5 years of employment is less substantial;

c) if the Applicants had not been dismissed on 18 March 2020 then each of them would have continued in employment until they found new employment;

d) the Applicants have mitigated their loss to some degree, Ms Molina by finding alternative employment, and Mr Zhai by starting a new business.

e) Mr Zhai gave evidence that he earned a small amount of money prior to commencing his new business;

f) the amount of income reasonably likely to be earned by each applicant is considered further below; and

g) There are no other directly relevant matters.

Compensation – how is the amount to be calculated?

[111] Both Applicants seek orders for compensation under s.392 of the FW Act.

[112] The well-established approach to the assessment of compensation under s.392 of the FW Act is to apply the “Sprigg formula” derived from the Australian Industrial Relations Commission Full Bench decision in Sprigg v Paul’s Licensed Festival Supermarket (Sprigg). 22

[113] The approach in Sprigg is as follows:

Step 1: Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).

Step 2: Deduct monies earned since termination. Workers’ compensation payments are deducted but not social security payments. The failure of an applicant to mitigate his or her loss may lead to a reduction in the amount of compensation ordered.

Step 3: Discount the remaining amount for contingencies.

Step 4: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.

Compensation – Calculation for Ms Molina

[114] In her closing submission Ms Molina says the following:

“Ms Molina submits that the weekly cash payments were authorised by Mr Galloway and considered part of Ms Molina’s salary and should therefore be included in the compensation assessment.

Ms Molina acknowledges that she commenced employment within 17.7 weeks of the dismissal at a reduced salary of $73,059 and that no notice was paid.

Ms Molina’s economic loss consists of $49,013.74 (gross):

a. $41,305.78 lost for 17.7 weeks; and

b. $7,707.96 for the shortfall of wages.

Ms Molina seeks the maximum compensation available of $49,013.74 (gross), less applicable tax.”

[115] Mr Galloway submits that the relationship between Ms Molina and Mr Galloway was breaking down by the time of the dismissal. Mr Galloway cites in support of this alleged breakdown the instances of insubordination and sabotage referred to in Ms Molina’s termination letter. Mr Galloway also relies on the fact that he had removed Ms Molina’s access to the bank accounts one month before the dismissal which, he says, “was consistent with him no longer having trust in her to fulfil her practice manager role.”

[116] Mr Galloway also relies on the unfolding Covid pandemic, related lockdowns and court closures to submit the following:

“Having regard to the difficulties in Ms Molina’s relationship with Mr Galloway, the likely effect of the Covid pandemic, and the fact that all other staff of the practice were dismissed within about 6 weeks, the Commission should conclude that Ms Molina would only have remained employed for no more than 8 weeks after her dismissal, plus the period of 2 weeks’ notice that Ms Molina was entitled to under s.117 of the FW Act (2 weeks’ notice, as Ms Molina was a full-time employee for just under 3 years – see paragraph 88 below). That make a total of 10 weeks likely further employment, regardless of whether the Commission accepts the Ms Molina had engaged in the conduct relied upon as constituting a valid reason for dismissal. “

[117] The reference in Mr Galloway’s submission to “the fact that all other staff of the practice were dismissed within about 6 weeks” is a reference to the following evidence from Ms Molina:

“I am aware that the Respondent no longer has any employees because:

a. Ms Huseyin told me that she resigned on 17 April 2020 because Mr Galloway was being erratic, not paying wages on time, not working on clients matters and threatening to call the police on clients who wanted to take their briefs to other firms.

b. Ms Kim Dinh told me that she resigned on 6 May 2020 because Mr Galloway was being erratic, he locked the staff out of the office and removed the computers, he advised Kim and Jessica that he was applying for Job Keeper to pay their wages. Kim made enquiries with the ATO and was advised that no such application existed; and

c. Ms Tohi told me she was dismissed on 7 May 2020 because Mr Galloway was being erratic and asked Ms Tohi to undertake several financial tasks. On advice from counsel Ms Tohi refused to undertake any tasks relating to the finances. Mr Galloway’s attitude towards Ms Tohi changed immediately. On May 7, at 12:30am Mr Galloway advised Ms Tohi by text message that she was fired due to Mr Galloway investigating her past. Mr Galloway called her ‘uncivilised’ referring to her Tongan and Aboriginal heritage and insinuated that what had happened to her as a child was due to her culture. I haven’t seen the text, but Ms Tohi expressed this to me over 2 phone conversations.”

[118] This evidence is not contradicted by Mr Galloway. I note from this passage of evidence that the departure of all three employees seem to revolve around Mr Galloway’s financial practices. Ms Molina had worked with Mr Galloway for a very long time and there is no reason, in my view, to think that Mr Galloway’s alleged “erratic behaviour” (if she had continued in employment) would have caused her to resign before obtaining alternative employment. Ms Molina did eventually obtain alternative employment within 17 weeks of her dismissal. There is no basis for me to assume that her employment would not have otherwise continued with Mr Galloway until she found an alternative position.

[119] Whilst I accept that the matters referred to by Mr Galloway as insubordination and sabotage were, in Mr Galloway’s mind, problematic for the ongoing employment relationship, I do not agree that they would have shortened the likely period of ongoing employment. For the same reasons that I have found that those matters were not valid reasons to terminate Ms Molina’s employment in March 2020, I do not consider that those matters formed a basis for Mr Galloway to dismiss Ms Molina after March 2020. There is no basis to speculate or find that Ms Molina might repeat any allegedly insubordinate behaviour or sabotage after 18 March 2020.

[120] I am inclined to make the order in similar terms to the order sought by Ms Molina. I separately apply the Sprigg formula to her circumstances as follows:

Step 1

[121] I have estimated the remuneration Ms Molina would have received, or would have been likely to have received if Mr Galloway had not terminated the employment to be 17.7 weeks pay. I am satisfied that Ms Molina would have stayed in her employment until she found another job, and that even if she had not been terminated it would have taken her this amount of time to find a new position.

Step 2

[122] I accept Ms Molina’s evidence that she did not receive any income in the 17.7 weeks between her dismissal and finding new employment.

Step 3

[123] Given that the period out of work is precisely known, I do not think it is appropriate to deduct any amount for contingencies.  23

Step 4

[124] I have considered the impact of taxation but have elected to settle a gross amount of $41,305.78 and leave taxation for determination.

[125] Having applied the formula in Sprigg, I am nevertheless required to ensure that “the level of compensation is an amount that is considered appropriate having regard to all the circumstances of the case.” 24

[126] I am satisfied that the amount of compensation that I have determined above takes into account all the circumstances of the case as required by s.392(2) of the FW Act. I have not granted Ms Molina’s claim for an additional $7707.96 shortfall of wages, being the differential between her full remuneration and her new salary. Although Ms Molina’s new salary is significantly less than her total remuneration with Mr Galloway, I am inclined to find that she would have taken the new role at less pay in any event, particularly given that Ms Molina’s new salary is almost the same as her base salary with Mr Galloway.

[127] In this matter the amount of the order for compensation is not to be reduced on account of misconduct (per s.392(3)).
[128] The cap on compensation in s.392(5) of the FW Act has no impact upon the present matter.

Compensation – Calculation for Mr Zhai

[129] In his closing submissions Mr Zhai submitted the following:

“Mr Zhai acknowledges that he commenced employment on 13 July 2020 earning $1,442.31 (gross) per week (or $75,000 gross per annum).

Mr Zhai further acknowledges that between 18 March 2020 to 13 July 2020 he received $500 (gross) income.

Mr Zhai’s economic loss consists of $23,586.41 (gross) and he seeks the maximum compensation available less appropriate taxation.”

[130] I am also inclined to make the order sought by Mr Zhai. I separately apply the Sprigg formula to his circumstances as follows:

Step 1

[131] Mr Galloway submits that I should find that Mr Zhai’s employment would not have lasted longer than 10 weeks after his dismissal because it was apparent that the relationship between Mr Galloway and Mr Zhai was breaking down by the date of the dismissal. Mr Galloway cites the same incidents of alleged insubordination and sabotage that are cited in Mr Zhai’s termination letter. Mr Galloway also submits that the deteriorating relationship would made it untenable for Mr Zhai to continue in Mr Galloway’s small workplace where Mr Zhai would have to work with and report directly to Mr Galloway. His submission includes the following:

“Having regard to the difficulties in Mr Zhai’s relationship with Mr Galloway, the then likely effect of the Covid pandemic, and the fact that all other staff of the practice were dismissed within about 6 weeks, the Commission should conclude that Mr Zhai would only have remained employed for no more than 8 weeks after his dismissal, plus the period of 2 weeks’ notice that Mr Zhai was entitled to under s.117 of the FW Act (2 weeks’ notice, as Mr Zhai was a full-time employee for approximately 2.5 years (see Ex 1, at [5]). That make a total of 10 weeks likely further employment, regardless of whether the Commission accepts the Mr Zhai had engaged in the conduct relied upon as constituting a valid reason for his dismissal.”

[132] By the same rationale applied to Ms Molina, I estimate that Mr Zhai would have remained in employment with Mr Galloway until he had found another job. Even if he had remained in employment it would have taken him until at least 13 July 2020 to find another job.

[133] Similarly, and by the same rationale that I have applied to Ms Molina, I am not satisfied that the earlier incidents of alleged insubordination or sabotage would have shortened the ongoing employment relationship.

[134] I estimate that the remuneration Mr Zhai would have received, or would have been likely to have received if Mr Galloway had not terminated the employment to be 17 weeks pay (to 13 July 2020), being $24,086.41.

Step 2

[135] I find that the amount of remuneration earned by Mr Zhai during this 17 week period was $500.

[136] The difference between the two sums is $23,586.41.

Step 3

[137] I do not think it is appropriate to deduct any amount for contingencies.

Step 4

[138] I have considered the impact of taxation but have elected to settle a gross amount of $23,586.41 and leave taxation for determination.

[139] I am satisfied that the amount of compensation that I have determined above takes into account all the circumstances of the case as required by s.392(2) of the FW Act.

[140] In this matter the amount of the order for compensation is not to be reduced on account of misconduct (per s.392(3)).

[141] The cap on compensation in s.392(5) of the FW Act has no impact upon the present matters.

[142] In light of the above, I will make orders that Mr Galloway pay $41,305.78 to Ms Molina and $23,586.41 to Mr Zhai, less taxation as required by law, in lieu of reinstatement within 21 days of the date of this decision, plus an additional component for superannuation. 25

DEPUTY PRESIDENT

Appearances:

Ms G Barry for the Applicants
Mr P Moorhouse of Counsel for the Respondent

Hearing details:

2021.
Sydney (By Video using Microsoft Teams)
December 9.

Final written submissions:

Respondent – 14 January 2022
Applicants – 7 February 2022

Printed by authority of the Commonwealth Government Printer

<PR740102>

 1   See Molina v Galloway [2021] FWC 1756 “Molina Decision”, PR728257 and Zhai v Brett Galloway [2021] FWC 1785 “Zhai Decision”, PR728297.

 2   Galloway v Molina and Zhai (2021) 310 IR 151, [2021] FWCFB 5419.

 3   See Milena Molina and Raymond Zhai v Brett Galloway [2021] FWC 6394 at [4]-[12].

 4   Council of the Law Society of NSW v Galloway [2012] NSWADT 176 at [2].

 5   Transcript 9 December 2021, PN234.

 6   (2012) 219 IR 128; [2012] FWAFB 1359 at [29].

 7   Sayer v Melsteel Pty Ltd [2011] FWAFB 7498, [14]; Smith v Moore Paragon Australia Ltd PR915674 (AIRCFB, Ross VP, Lacy SDP, Simmonds C, 21 March 2002), [69].

 8   Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371, 373.

 9   Ibid.

 10   Commonwealth of Australia (Australian Taxation Office) v Shamir [2016] FWCFB 4185 at [46] citing Walton v Mermaid Dry Cleaners Pty Ltd (1996) 142 ALR 681 at 685.

 11   Hyde v Serco Australia Pty Limited T/A Serco Australia Pty Limited [2018] FWCFB 3989 at [71].

 12   Ibid at [64] citing Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 430 per Brennan CJ and Dawson and Toohey JJ; Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1 at 14; Paech v Big W Monarto Warehouse [2007] AIRCFB 1049 at [8]; Dundovich v P&O Ports Print PR923358; Jetstar at [55]. See also Gautam v Costco Wholesale Australia Pty Ltd [2021] FWCFB 1097 at [44].

 13   Cited in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 410; 61 IR 32 at 43 and Australian Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1 at 9 and Hyde v Serco Australia Pty Limited T/A Serco Australia Pty Limited [2018] FWCFB 3989 at [71].

 14   Citing Gelagotis v Esso Australia Pty Ltd [2018] FWCFB 6092 at [117]; Titan Plant Hire v Van Malsen [2016] FWCFB 5520, 263 IR 1 at [28]; Sharp v BCS Infrastructure Support Pty Limited [2015] FWCFB 1033 at [25]-[35].

15 Edwards v Justice Giudice [1999] FCA 1836 at [7].

 16   King v Freshmore (Vic) Pty Ltd Print S4213 (AIRCFB, Ross VP, Williams SDP, Hingley C, 17 March 2000) at [23]-[24].

 17   Briginshaw v Briginshaw (1938) 60 CLR 336, [1938] HCA 34.

 18   See Ming Gao v Department of Home Affairs [2021] FWCFB 1906 at [35]-[36] citing Briginshaw v Briginshaw (1938) 60 CLR 336, [1938] HCA 34 at 362-3 and Barber v Commonwealth of Australia as represented by the Department of Parliamentary Services [2011] FWA 4092.

 19   Briginshaw v Briginshaw (1938) 60 CLR 336, [1938] HCA 34 at 362.

 20   Chubb Security Australia Pty Ltd v Thomas Print S2679 (AIRCFB, McIntyre VP, Marsh SDP, Larkin C, 2 February 2000) at [41]; Read v Cordon Square Child Care Centre [2013] FWCFB 762 at [46]-[49].

 21   Nguyen v Vietnamese Community in Australia t/a Vietnamese Community Ethnic School South Australia Chapter [2014] FWCFB 7198 at [9].

 22   (1998) 88 IR 21. See also Bowden v Ottrey Homes Cobram and District Retirement Villages (2013) 229 IR 6; [2013] FWCFB 431 and Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries [2016] FWCFB 7206 at [16].

 23   Enhance Systems Pty Ltd v Cox PR910779 (AIRCFB, Williams SDP, Acton SDP, Gay C, 31 October 2001) at [39].

 24   Double N Equipment Hire Pty Ltd t/a A1 Distributions v Humphries [2016] FWCFB 7206 at [17].

 25   PR740103.