DECISION

Fair Work Act 2009
s 604 - Appeal of decisions

Krav Maga Defence Institute Pty Ltd t/a KMDI
v
Saar Markovitch
(C2018/6094)

Appeal against decision [[2018] FWC 6114] of Commissioner Riordan at Sydney on 18 October 2018 in matter U2018/6030 – jurisdictional objection – Small Business Fair- Dismissal Code – exclusion of CCTV evidence - errors in exercise of discretion – failure to give reasons – failure to take into account material considerations - appeal upheld – remitted for rehearing.

INTRODUCTION

[1] Krav Maga Defence Institute t/a KMDI (‘Krav Maga’ or the ‘appellant’) has appealed a jurisdictional decision of Commissioner Riordan of 18 October 2018 in respect to an application for an unfair dismissal remedy, filed by Mr Saar Markovitch (the ‘respondent’), pursuant to s 394 of the Fair Work Act (the ‘Act’); see: Markovitch v Krav Maga Defence Institute Pty Ltd t/a KMDI [2018] FWC 6114 (the ‘Decision’). The respondent was dismissed from his employment as the Manager of the appellant’s Krav Maga gym in Bondi Junction (the ‘Gym’) on 21 May 2018 for serious misconduct. In the proceedings before the Commissioner, the appellant had claimed that it was a small business, and that it had complied with the Small Business Fair Dismissal Code (the ‘Code’) when it dismissed the respondent.

[2] The Commissioner dismissed the appellant’s jurisdictional objection, upon concluding that the CCTV footage relied on by the appellant to justify the respondent’s summary dismissal, had been unlawfully obtained in accordance with the Workplace Surveillance Act 2005 (NSW) (the ‘WS Act’). The appellant conceded that absent this evidence, the jurisdictional objection was bound to fail.

[3] By its notice of appeal, filed on 31 October 2018, Krav Maga applied for permission to appeal and appeals the Decision, pursuant to ss 600 and 400(1) of the Act. On 17 January 2019, we granted permission to appeal; see: Krav Maga Defence Institute v Markovitch [2019] FWCFB 263. We listed the substantive appeal for hearing on 19 March 2019 and this decision deals with the merits of the appeal.

BACKGROUND

[4] The appellant operates three Krav Maga gyms in Sydney: at Surry Hills, Bondi Junction and Caringbah. Mr Ron Engelman is the sole director of Krav Maga and owner of the gyms. Krav Maga is a specialised full contact martial arts/self defence system, which originated in the 1940s in Israel. It is taught and practiced by the Israeli army and has been adopted by other countries for use by their military and police forces. It has also extended into civilian martial arts schools, including more recently, in Australia.

[5] It is common ground that Krav Maga is an inherently high risk physical contact self defence system. Classes are conducted for students, ranging in age from 9-17 years. Self-supervision or self-learning is not permitted. It is for this reason that class participants must be continuously and closely supervised by a qualified certified Instructor. The respondent was such an Instructor. Instructors receive compulsory annual four day training on safety policies and guidelines. The most recent training was in April 2018 and the respondent participated in that training. To ensure the protection and safety of both the participants and Instructors, the appellant’s premises are monitored by CCTV cameras. The CCTV cameras in the Gym were installed in March 2018. The respondent was aware of, and had discussed with Mr Engelman, the plans to install the cameras. He had actually authorised the payment of the contractor who did so.

[6] Mr Engelman and the respondent were previously best friends and had served together in the Israeli army. Mr Engelman had sponsored the respondent to Australia on a subclass 457 visa, because of his skills in the Krav Maga technique and in order for him to manage and lead the gyms in Australia. The respondent was employed as the Manager and only full time Instructor at the Bondi Gym, which operated six days a week. He also conducted two classes a week at the Surry Hills Gym. He had commenced employment on 15 September 2015 and was paid a salary of $59,000 (including superannuation).

[7] On 17 May 2018, Mr Engelman had reviewed CCTV footage at the Gym, as he was concerned at a discrepancy in the numbers of students registered for classes. When reviewing the footage, he observed the respondent on his phone on numerous occasions, and not supervising the class. He said he was shocked and disturbed by what he had observed.

[8] The respondent was dismissed on 21 May 2018, following a meeting the appellant had with him that day to discuss allegations that he had failed to properly supervise the students under his care. It is accepted that having been shown the CCTV footage, the respondent admitted his conduct and offered to resign. However, his resignation was subsequently withdrawn. This was accepted by the appellant. Nevertheless, Mr Engelman made the decision to summarily dismiss the respondent, which he confirmed in a letter dated 24 May 2018.

[9] The misconduct said to be corroborated by the CCTV footage included the respondent:

•  spending a substantial part of his working time on his mobile phone at the reception desk, out of sight of the students in the classes;

•  allowing students to spar, without supervision;

•  leaving the training area unsupervised to use his mobile phone;

•  leaving the training area to use his mobile phone, while his students were practicing with weapons; and

•  leaving the training of a children’s class to use his mobile phone.

[10] The evidence disclosed that the respondent had received two earlier written warnings in December 2015 and December 2017 for similar use of his phone and for failing to properly supervise students, with the latter incident involving a student being injured while under the respondent’s supervision (which he denied).

THE DECISION

[11] After setting out the terms of Part 2 of the WS Act and making some critical observations as to the parties’ failure to comply with directions, the gravamen of the Commissioner’s consideration is set out at [22] to [30]. As it is shortly stated, we set out below this extract in full:

‘[22] I accept the evidence of Mr Engleman (sic) that the Applicant was aware of the plan to install CCTV cameras and that, even though they were installed whilst he was overseas, the Applicant actually authorised the payment to the contractor for the installation upon his return. I also accept that the reason why the CCTV equipment is primarily installed is for the protection of employees and students. I have taken this into account.

[23] If the Applicant was a partner rather than an employee, this explanation would be satisfactory. However, the Respondent has emphatically stated that the Applicant was an employee. As such, the Applicant is entitled to the protections that are afforded to employees under the Workplace Surveillance Act 2005, ie, the provision of signs in the workplace and two weeks’ notice in writing from the employer before the CCTV system starts recording. Neither of these two privacy measures have been initiated by the Respondent. Therefore the recordings of the Applicant do not comply with the Workplace Surveillance Act. As a result, I find the CCTV recordings to be inadmissible. I have taken this into account.

[24] Although Mr Engleman (sic) testified that signs had been installed at the Bondi Junction gym identifying that video cameras are in operation, proof of the existence of these signs has not been provided. I accept the evidence of the Applicant that these signs do not exist. I have taken this into account.

[25] Students pay money to attend this gym to receive tuition in Krav Maga. This tuition should not result in self-supervision or self-learning. In this regard, the behaviour of the Applicant is unsatisfactory. I have taken this into account.

[26] I have taken into account all of the submissions and evidence that has been submitted by the parties.

Conclusion

[27] When attending for work, every employee has a right and expectation that there employer will abide by the law.

[28] The breach of safety, as alleged by the Respondent, is not of sufficient magnitude to warrant a determination to override the provisions of the Workplace Surveillance Act. Even if I were to allow the video recording into evidence, the conduct of the Applicant did not create an imminent risk of serious injury to the Applicant or any of the students.

[29] The Respondent’s decision to terminate the Applicant was based on evidence obtained from the CCTV recordings of the gym. These recordings were not conducted in accordance with the NSW Workplace Surveillance Act 2005. This means that the recordings were obtained illegally. As a result, the Respondent has no evidence to infer that a serious safety incident has occurred. Therefore, the provisions of the Small Business Code have not been met.

[30] The jurisdictional objection raised by the Respondent is dismissed.’

[12] It is useful at this juncture to set out the relevant terms of the WS Act which fundamentally underpinned the Commissioner’s Decision to dismiss the appellant’s jurisdictional objection.

[13] Part 2 of the WS Act provides as follows:

‘9   Application of Part

This Part applies to the surveillance of an employee carried out or caused to be carried out by the employee’s employer while the employee is at work for the employer.

10   Notice of surveillance required

(1)  Surveillance of an employee must not commence without prior notice in writing to the employee.

Note.

Subsection (6) provides for an exception to the notice requirement.

(2)  The notice must be given at least 14 days before the surveillance commences. An employee may agree to a lesser period of notice.

(3)  If surveillance of employees at work for an employer has already commenced when an employee is first employed, or is due to commence less than 14 days after an employee is first employed, the notice to that employee must be given before the employee starts work.

(4)  The notice must indicate:

(a) the kind of surveillance to be carried out (camera, computer or tracking), and

(b) how the surveillance will be carried out, and

(c) when the surveillance will start, and

(d) whether the surveillance will be continuous or intermittent, and

(e) whether the surveillance will be for a specified limited period or ongoing.

(5)  Notice by email constitutes notice in writing for the purposes of this section.

(6)  Notice to an employee is not required under this section in the case of camera surveillance at a workplace of the employer that is not a usual workplace of the employee.

11   Additional requirements for camera surveillance

Camera surveillance of an employee must not be carried out unless:

(a)  cameras used for the surveillance (or camera casings or other equipment that would generally indicate the presence of a camera) are clearly visible in the place where the surveillance is taking place, and

(b)  signs notifying people that they may be under surveillance in that place are clearly visible at each entrance to that place.

12   Additional requirements for computer surveillance

Computer surveillance of an employee must not be carried out unless:

(a)  the surveillance is carried out in accordance with a policy of the employer on computer surveillance of employees at work, and

(b)  the employee has been notified in advance of that policy in such a way that it is reasonable to assume that the employee is aware of and understands the policy.

13   Additional requirements for tracking surveillance

Tracking surveillance of an employee that involves the tracking of a vehicle or other thing must not be carried out unless there is a notice clearly visible on the vehicle or other thing indicating that the vehicle or thing is the subject of tracking surveillance.

14   Exemption for certain surveillance by agreement

Surveillance of an employee is taken to comply with the requirements of this Part if the employee (or a body representing a substantial number of employees at the workplace) has agreed to the carrying out of surveillance at the premises or place where the surveillance is taking place for a purpose other than surveillance of employees and the surveillance is carried out in accordance with that agreement.’

GROUNDS OF APPEAL

[14] In its notice of appeal, Krav Maga relied on four grounds of appeal which we set out below:

‘1. The Commissioner erred in holding that the CCTV recordings relied upon by the Appellant were not obtained in compliance with the Workplace Surveillance Act 2005 (NSW).

a) The Commissioner erred by failing to deal with, and failing to provide adequate reasons for rejecting, the Appellant’s argument that the CCTV surveillance was carried out in accordance with an agreement with the Respondent that complied with s.14 of the Workplace Surveillance Act, such that the CCTV surveillance complied with the requirements of Part 2 of that Act. That argument was put by the Appellant in submissions, was supported by evidence, but is not referred to in this Decision.

2. The Commissioner erred in proceeding on the basis that, as the CCTV recordings relied upon by the Appellant did not comply with the Workplace Surveillance Act 2005, they were necessarily inadmissible (see [23] and [29] of the Decision).

3. To the extent that the Commissioner exercised a discretion in determining to exclude the CCTV recordings, on the basis that such evidence was obtained improperly or illegally, the Commissioner erred in the exercise of that discretion.

a) The Commissioner applied the wrong approach to any such exercise of discretion, namely whether the breach of safety alleged by the Appellant was of sufficient magnitude to warrant a determination to override the provisions of the Workplace Surveillance Act 2005 (see [28] of the Decision). The correct approach was to consider whether the evidence should be admitted having regard to ss. 590 and 591 of the Fair Work Act 2009 (Cth) and s.318 of the Evidence Act 1995.

b) The Commissioner failed to have regard to matters that were material to the exercise of that discretion, including the probative value of the evidence, its importance and role in the proceedings, the fact that the Respondent admitted the conduct disclosed by the CCTV footage, and other matters that s.138(3) of the Evidence Act 1995 (Cth) required to be taken into account when considering whether to allow such evidence.

4. The Commissioner erred in holding that even if the CCTV recordings relied upon by the Appellant were allowed into evidence, the Appellant’s jurisdictional objection should be dismissed.

a) The Commissioner applied the wrong approach to determining the Appellant’s jurisdictional objection, namely whether the Respondent’s conduct created an imminent risk of serious injury to the Respondent or any of the students (see [28] of the Decision). The correct approach was to determine whether, at the time of dismissal, the employer held a belief on reasonable grounds that the employee’s conduct was sufficiently serious to justify immediate dismissal.

b) Further or in the alternative, the Commissioner failed to give any or adequate reasons for that conclusion, including failing to address any of the arguments and evidence put in support of the Appellant’s jurisdictional objection.’

[15] We propose to summarise the parties’ submissions and determine each ground of appeal seriatim. We note that although the respondent was represented by Counsel (Ms L Saunders) in the earlier permission to appeal proceedings, he was unrepresented in the merits hearing. Nevertheless, he relied on Ms Saunders’ earlier submissions on permission to appeal. Mr P Moorhouse of Counsel continued his appearance for the appellant.

Ground One

[16] The appellant submitted that the Commissioner’s finding that the CCTV footage did not comply with the WS Act was not only incorrect, but was an error of law, as he gave no reasons for rejecting the appellant’s submissions as to why the footage had not been obtained unlawfully, after having expressly provided the parties with an opportunity to put further evidence and submissions on the issue.

[17] The appellant had relied on s 14 of the WS Act which reads:

‘14   Exemption for certain surveillance by agreement

Surveillance of an employee is taken to comply with the requirements of this Part if the employee (or a body representing a substantial number of employees at the workplace) has agreed to the carrying out of surveillance at the premises or place where the surveillance is taking place for a purpose other than surveillance of employees and the surveillance is carried out in accordance with that agreement.’

[18] Counsel had submitted that the CCTV surveillance fell within the s 14 exemption and was therefore not ‘covert surveillance’. Accordingly, the WS Act had no application to the matter.

[19] It was further submitted that in addition to the evidence that the respondent was the Manager of the Gym, and was aware of the installation of the cameras, he had agreed, or at least impliedly agreed, to their installation. Moreover, the CCTV cameras had been installed ‘for a purpose other than the surveillance of employees’, as outlined in s 14 of the WS Act. This evidence was wholly ignored by the Commissioner. The failure to consider the evidence and a failure to provide reasons for rejecting the appellant’s submissions, constitutes error; see: Ellawala v Australia Postal Corporation Print S5109 (‘Ellawala’); Barach v University of New South Wales (2010) 194 IR 259 (‘Barach’); and Rodger v De Gelder [2015] NSWCA 211.

[20] In any event, the appellant submitted that the CCTV surveillance was not unlawful. There was no evidence that the respondent had complained about the CCTV cameras and he had agreed, at least impliedly, to their use in the Gym. Counsel put that the meaning of ‘agreed’ in s 14 of the WS Act should be given its plain, ordinary meaning, which is not limited to a written agreement. Mr Moorhouse relied on One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union (2018) 277 IR 23; [2018] FCAFC 77 and SZTAL v Minister for Immigration and Border Protection [2017] HCA 34 and the Second Reading speeches on the Workplace Surveillance Bill 2005. He submitted that s 14 of the WS Act does not require written agreement, or any formality, as to whether agreement had been given by the employee. That being so, the Full Bench would be satisfied that the CCTV footage was not obtained, or used in a manner contrary to the WS Act and should not have been excluded from the evidence in the proceedings below.

[21] In submissions put earlier on the respondent’s behalf, it was said that Appeal Ground One, could not be made out, because the evidence went no higher than the respondent knowing the CCTV cameras would be installed, at some future point. This was not an ‘agreement’, for the purposes of s 14 of the WS Act. In oral submissions, the respondent claimed he was never told he would be under surveillance. There were never any discussions about it; let alone any agreement. He understood the CCTV cameras were for the purpose of theft or in the case of an injury to a student. He had no idea he was being monitored by the CCTV cameras. The respondent had understood that the students themselves felt they were being properly supervised.

[22] We turn now to consider Ground One of the appeal.

[23] Ground One has two related components. Firstly, that the Commissioner had failed to give reasons or adequate reasons as to why he had not accepted the appellant’s submissions that the WS Act had not been complied with, and secondly, that in any event, his conclusion that the WS Act was not complied with was incorrect, as the s 14 exemption applied to the surveillance, and was therefore not unlawful.

[24] While it can be comfortably inferred that the Commissioner had rejected the appellant’s submissions as to the non-application of the WS Act to the surveillance in question, it is apparent that the Commissioner provided no reasons why he did so. We note his reference at [22] of the Decision where the Commissioner accepts and takes into account the evidence that the respondent was aware of the plan to install the cameras and had authorised the payment for the contractor for the work. In our view, this evidence supports the appellant’s contentions, rather than the opposite.

[25] A failure to provide adequate reasons, including a failure to disclose the steps in the reasoning process leading to a decision maker’s conclusions, can be an error of law if the decision maker has a duty to give reasons. It is well established that this duty applies to Members of the Commission. In Ellawala, a Full Bench of the Australian Industrial Relations Commission (as the Commission was then known) set out the principles to be applied in this respect. At [62]-[64] the Full Bench said:

‘[62] The decision subject to appeal does not disclose the steps in the reasoning process which led the Commissioner to make the order subject to appeal. A failure to give adequate reasons can be an error of law if the decision-maker is under a duty to give reasons. The extent of the duty to give reasons in the context of a s.170CG arbitration was dealt with by Moore J in Edwards v Giudice in the following terms:

“In my opinion the subject matter of the power to arbitrate under s.170CG, when taken together with the conditional right of an appeal conferred by s.45 and the ground of appeal in s.170JF, point to the conclusion that the Commission is, when determining an application under s.170CE by arbitration, obliged to give reasons for its determination which deal with the material legal and factual issues presented for determination and which deal with the matters the Commission must consider because of s.170CG(3) and the relevant provisions of s.170CH.”

[63] In the same case Marshall J expressed the obligation in these terms:

“In a seriously contested case before a tribunal which is required to afford procedural fairness and act judicially, an arbitrator is obliged to disclose the steps involved in the reasoning which leads to a particular result.”

[64] In our view Edwards v Giudice is authority for the proposition that in determining an application under s.170CE by arbitration the Commission is obliged to give reasons for its determination which:

•  disclose the steps involved in the reasoning which leads to a particular result; and

•  deal with the material legal and factual issues presented for determination and which deal with the matters the Commission must consider because of s.170CG(3) and s.170CH.’ (footnotes omitted)

[26] Further, in Barach, a Full Bench of Fair Work Australia (‘FWA’) emphasised that the decision maker’s reasons must address the material questions of fact and law, but need not be lengthy or elaborate. At [16], the Full Bench said:

‘[16] The duty to give adequate reasons for decision has been considered on many occasions. Important public policy considerations underlie this duty. In particular, the reasons for decision must be sufficient to allow the parties to exercise such rights of appeal as may be available and to enable an appeal bench to determine whether or not error has occurred in relation to a decision. Consequently the reasons given must articulate the essential grounds for reaching the decision and must address material questions of fact and law in a manner which discloses the steps which lead to a particular result. However the reasons for decision of a tribunal member need not be lengthy or elaborate and need not spell out every detail in the reasoning process or deal with every matter of fact or law which was raised in the proceedings.’(footnotes omitted)

[27] The question of whether the WS Act applied to the CCTV footage generally, and in particular whether s 14 exempted the surveillance footage as being covered by the WS Act, was a material, indeed decisive question in the proceedings below. It was the foundation for the Commissioner’s decision to dismiss the appellant’s jurisdictional objection.

[28] When viewed in this way, we consider that the failure to give adequate reasons as to why the Commissioner did not accept the appellant’s submissions on the s 14 exemption question, was an error, for which appellate intervention is necessary. This finding is sufficient for us to uphold the appeal.

[29] Counsel for the appellant submitted that if the Full Bench made this finding, it would be in a position for itself, to determine whether the surveillance footage was exempt from the provisions of the WS Act, and if it was, it would follow that the Commissioner’s decision to reject the CCTV footage could not be correct.

[30] We accept the appellant’s invitation to take that course for the following reasons.

[31] Firstly, we agree that there is no express or implied requirement for the agreement of the employee or ‘a body representing a substantial number of employees at the workplace’, to be in writing. This accords with the plain, ordinary meaning of the words ‘to agree’ or ‘agreed’ and the legal definition of those words as set out in the various authorities to which we were taken by Counsel; see: [20] above.

[32] Secondly, in our view, there was a sufficient evidentiary foundation for the Commissioner to have formed the view that at the very least, the respondent had impliedly agreed to the CCTV surveillance. This evidence includes the following:

•  the respondent was aware of the proposal to install CCTV cameras and had been involved in discussions with Mr Engelman about the proposal;

•  the respondent had actually authorised the payment to the contractor for the installation of the cameras; and

•  the respondent had not objected to, or complained about the cameras.

[33] Thirdly, it was accepted by the respondent and expressly accepted by the Commissioner that the surveillance was ‘for a purpose other than the surveillance of employees’; namely; the protection of employees and students. It is difficult to reconcile the respondent’s submission that he understood the reasons for the introduction of the CCTV cameras with his contention that he did not know he was under surveillance. The respondent was involved in planning for the installation of CCTV cameras. He authorised payment for the installation. Given the high risk activity taking place in the Gym, a reasonable person would objectively accept that CCTV could assist in ensuring the safety of students and staff. In our view, the evidence supports a finding that the respondent agreed to the use of the CCTV cameras at the Gym at least for the protection of employees and students. It follows that the s 14 exemption in the WS Act applies to the CCTV surveillance at the Gym and the footage was not unlawfully obtained. This finding means the Commissioner’s basis for refusing to admit the footage must fall away.

[34] This leads us to the Second and Third Grounds of appeal.

Appeal Grounds Two and Three

[35] These Grounds are said to relate to the Commissioner’s decision that the CCTV footage was inadmissible. We will proceed to consider both Grounds on that premise.

[36] The appellant submitted that the Commissioner proceeded on the basis that if the CCTV footage did not comply with the WS Act (and was therefore obtained unlawfully), it was necessarily or automatically inadmissible; see: [23] and [29] of the Decision. In oral submissions, Mr Moorhouse said that an automatic exclusion approach was an error. There was nothing in the WS Act, the Fair Work Act or any other legislation mandating or requiring such an approach. The correct approach as to whether to exclude the CCTV footage, was a matter of discretion, with reference to s 590 of the Act. Discretion may be guided by the test for the admissibility of evidence, where such evidence is obtained unlawfully, as provided for in the Evidence Act 1995 (Cth) (‘Evidence Act’); notwithstanding that the Commission is obviously not bound by the rules of evidence; see: s 591 of the Act. We note the comments of the Full Bench in Hail Creek Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (2004) 143 IR 354; [2004] AIRC 670 (‘Hail Creek’) at [48]:

‘[48] While the Commission is not bound by the rules of evidence that does not mean that those rules are irrelevant. As the then President of the Industrial Relations Commission of Western Australia said in respect of a similar provisions in the then Industrial Relations Act 1979 (WA):

“However, this is not a licence to ignore the rules. The rules of evidence provide a method of enquiry formulated to elicit truth and to prevent error. They cannot be set aside in favour of a course of inquiry which necessarily advantages one party and necessarily disadvantages the opposing party (R. v War Pensions Entitlement Appeal Tribunal: ex parte Bott [1933] 50 CLR 228 Evatt J. at 256 (dissenting)). The common law requirement that the Commission must not in its reception of evidence deny natural justice to any of the parties acts as a powerful control over a tribunal which is not bound by the rules of evidence.”’ (footnotes omitted)

[37] Counsel put that, in in any event, s 590 of the Act which goes to the Commission being able to inform itself ‘in such manner as it considers appropriate’, does not limit how the Commission may inform itself, and does not prevent the Commission from accepting evidence, which is obtained improperly or unlawfully; see: Hail Creek.

[38] Mr Moorhouse submitted that despite the appellant’s detailed submissions below on this matter, none of those considerations are mentioned in the Decision.

[39] Alternatively, even if it is assumed that the Commissioner exercised a discretion to exclude the CCTV footage, it is evident that the discretion miscarried as he:

•  asked the wrong question or acted on a wrong principle; and

•  failed to take material considerations into account.

This constituted an error of a House v The King (1936) 55 CLR 499 (‘House v King’) kind.

[40] Counsel submitted that the Commissioner either excluded the CCTV footage automatically, because he determined it had been obtained unlawfully, or he limited himself to only answering whether the alleged breach of safety was of sufficient magnitude to warrant a determination to override the provisions of the WS Act. On either basis, he failed to have regard to patently material matters going to the exercise of discretion; including:

(a) the probative (in fact compelling) value of the CCTV evidence;

(b) its importance in the proceedings;

(c) the respondent’s awareness of the CCTV camera system;

(d) the fact that any contravention by Krav Maga of the WS Act was not deliberate;

(e) the fact that the respondent admitted his misconduct as disclosed by the CCTV footage prior to his dismissal; and

(f) the fact that the CCTV footage was admitted into evidence, without objection, and played during the hearing, including while the respondent was being cross-examined.

[41] Mr Moorhouse put that the error in approach, or the miscarriage of discretion was fundamental to the determination that the dismissal did not comply with the Code. In this case, the Full Bench would view the CCTV footage and come to its own view as to whether it should be excluded. In oral submissions, Mr Moorhouse conceded that if the CCTV footage is excluded, the appellant has no evidence on which it could form a reasonable belief as to whether the respondent’s conduct was sufficiently serious as to justify summary dismissal.

[42] Mr Moorhouse examined each of the matters a Court must have regard to (in s 138(3) of the Evidence Act) when considering whether to admit unlawfully obtained evidence. He submitted:

•  Mr Engelman formed his view based on what he observed in the footage. This evidence was compelling in that it showed the respondent sitting behind the reception desk, playing games on his phone, during times where students were engaged in full contact sparring. It was repeated conduct and showed him outside of the line of sight of the students. The footage was patently of high probative value;

•  the appellant did not deliberately contravene the WS Act and he was not aware of the Act’s notice requirements;

•  the Commission would have regard to the respondent’s knowledge of the existence of the CCTV system; and

•  the CCTV system had been installed to protect employees, the students and the business in the event of incidents occurring at the Gym.

[43] Mr Moorhouse relied on a decision of Asbury DP in Law v Groote Eylandt Mining Company Pty Ltd t/a GEMCO [2018] FWC 1824 and a judgment of the NSW Court of Appeal in Parker v Comptroller-General of Customs (2007) FLR 362; [2007] NSWCA 348 (‘Parker’) in support of these contentions.

[44] In his earlier submissions, the respondent submitted that the Commissioner undertook a broader inquiry of relevant matters, than simply whether the CCTV footage had been unlawfully obtained. At [22]-[26] of the Decision, the Commissioner identified a number of other relevant matters which he weighed appropriately and made relevant findings. There was no error in this approach. The Commissioner correctly exercised his discretion as to the seriousness of the respondent’s conduct in the context of other material considerations.

[45] Section 138(3) of the Evidence Act deals with the admissibility of improperly or illegally obtained evidence and provides as follows:

‘(3) Without limiting the matters that the court may take into account under subsection (1), it is to take into account:

(a) the probative value of the evidence; and

(b) the importance of the evidence in the proceeding; and

(c) the nature of the relevant offence, cause of action or defence and the nature of the subject-matter of the proceeding; and

(d) the gravity of the impropriety or contravention; and

(e) whether the impropriety or contravention was deliberate or reckless; and

(f) whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights; and

(g) whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention; and

(h) the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law.’

[46] We agree with the appellant’s submission that the Commissioner’s approach to ‘automatically’ exclude the CCTV footage was wrong and an error of law. It would amount to the application of a general rule, which is inconsistent with the exercise of discretion and to considerations arising under s 138 of the Evidence Act. We would add that to the extent the Commissioner may have engaged in an exercise of discretion, it is not apparent that he considered and properly balanced all of the materially relevant considerations in the case. Most notably, he was not bound to automatically exclude the CCTV footage, because it was, in his view, obtained unlawfully.

[47] It is to be observed that the Commissioner had invited further evidence and submissions on the application and relevance of the WS Act. However, it is not readily discernible that he took into account that he was entitled to inform himself in any manner he saw fit as to the admissibility of the CCTV footage. Having failed to engage with any of the detailed submissions of the appellant, going particularly to the matters relevant to the admission of evidence that was unlawfully obtained, the Commissioner did not have regard to, or sufficient regard to, a material consideration in the exercise of discretion (assuming he undertook that exercise). This was an error of a House v King kind.

[48] We readily acknowledge that the Commission is not necessarily bound to adopt the provisions of s 138(3) of the Evidence Act, when deciding to inform itself in any manner it sees fit. However, we consider that in this case, it was plainly appropriate to do so, even if there was any doubt about the CCTV footage being obtained unlawfully. We observe that the Decision does not disclose any reference to the submissions of the appellant as to s 138(3) of the Evidence Act, or the authorities referred to concerning the admissibility of unlawfully or improperly obtained evidence. Nor was there any reference or discourse as to whether s 590 of the Act operated in such a way as to limit the Commissioner from accepting unlawfully obtained evidence.

[49] In this later respect, in Belan v National Union of Workers – New South Wales Branch [2018] FWCFB 94, the Full Bench of the Commission considered whether oral or documentary evidence produced before a Royal Commission can be admitted into evidence in proceedings before the Commission. While the Full Bench dealt primarily with whether the Commission was a Court for the purposes of the Royal Commissions Act 1902 (Cth), which precludes evidence before a Royal Commission from being admitted in civil or criminal proceedings in a Court (the Full Bench accepting the Commission was not a Court for that purpose), the Full Bench also considered the admission of such evidence as a matter of discretion in unfair dismissal proceedings, by reference to ss 590 and 591 of the Act. At [42]-[45] the Full Bench said:

‘[42] Taking into account these factors, in all the circumstances we do not consider the Commission to be a “court” within the meaning of section 6DD of the Royal Commissions Act.

[43] Given this conclusion it follows that no statutory bar is created by the Royal Commissions Act to the admission of evidence given before the Royal Commission in proceedings before the Commission. Grounds of appeal 1, 1A and 2 are not made out.

[44] The Deputy President proceeded to determine, in the exercise of her discretion, whether to admit the evidence given by Mr Belan to the Royal Commission. She observed as follows:

“In my view, evidence is not unfairly prejudicial merely because it tends to damage the case of one party or because it supports the case of their opponents.”

[45] We agree with the Deputy President’s observation. The Deputy President took into account relevant facts and submissions concerning alleged prejudice and weighed them against countervailing considerations. She concluded that there was no compelling basis to exclude the evidence. Her decision was the exercise of a value judgment akin to the exercise of a discretion. It does not manifest an arguable case of appealable error.’ (footnotes omitted)

[50] In Hail Creek the Full Bench said at [56]-[57]:

‘[56] Section 138 of the Evidence Act 1995 (Cth) is relevant to the exercise of our discretion to exclude the challenged material .The proper construction of s 138 was considered by Branson J in Employment Advocate v Williamson. In that case her Honour concluded that the words “improperly” and “impropriety” extend to cover evidence obtained by “unfair” as well as “unlawful” means. Further, her Honour made it clear that s 138 is not limited to evidence obtained by the police or other enforcement organisations.

[57] For completeness we note our acceptance of Hail Creek Coal’s contention that s 109 of the Constitution permits the Commission to receive evidence in a manner that overrides any limitations under State law. We did not exclude the evidence on the basis that we had no jurisdiction to receive it. Rather we excluded it in the exercise of our discretion pursuant to s 110 because it was our view that it would have been unfair to admit the evidence in question.’ (footnotes omitted)

[51] In Parker, Basten JA described it as a two-step process. At [57] His Honour said:

‘The exercise of the discretionary power conferred by this provision involves two steps. The first is to determine whether evidence sought to be adduced was in fact obtained improperly or unlawfully in one of the senses identified in pars (a) and (b). The second step is to consider whether despite that conclusion, the discretionary considerations favour its admission. The importance of giving appropriate weight to the effect of any impropriety or unlawfulness is reflected by means of a qualified proscription – the evidence “is not to be admitted unless”.’

[52] It would seem inescapable that the Commissioner effectively concluded his consideration when he decided the WS Act applied, its terms had been breached and it was therefore inadmissible to accept the CCTV footage and that was the end of the matter. We do not accept that this approach was correct or appropriate.

[53] In our opinion, even if the Commissioner had correctly taken the first step (as described above) he did not undertake the second step and to the extent he did so, he inferentially came to the wrong conclusion, by not having regard for material considerations. This led to error.

Appeal Ground Four

[54] This ground of appeal deals with the Commissioner’s finding that, even if the CCTV footage was admitted into evidence, the conduct of the respondent did not create an imminent risk of serious injury. The appellant submitted that this finding can only be read as a conclusion that the jurisdictional objection would be rejected, as the dismissal did not comply with the Code. It was submitted that this finding was a significant error of fact which was plainly determinative of the outcome in the case.

[55] The appellant put that this approach was incorrect, and constituted error, in the context of Full Bench authority which requires that the employer need only have a belief based on reasonable grounds that the employee’s conduct was sufficiently serious to justify immediate dismissal; see: Pinawin t/a RoseVi.Hair.Face.Body v Domingo [2012] FWAFB 1359 (‘Pinawin’); Grandbridge Limited v Wiburd [2017] FWCFB 6732 (‘Grandbridge’). In finding as he did, the Commissioner failed to address any other arguments and evidence, that once Mr Engelman viewed the footage, he had a reasonable basis to believe that the respondent’s repeated failure to supervise his students, contrary to previous warnings, justified summary dismissal. Other evidence justifying Mr Engelman’s belief included the high risk nature of the Krav Maga system, the appellant’s policies stating the need for direct supervision at all times, the history of injuries at the gym and the injury of a student under the respondent’s care.

[56] Mr Moorhouse submitted that even if this finding was a ‘throw away line’, or he asked himself the wrong question, the finding would be set aside having regard for the overwhelming evidence to the contrary. It was put that if the appeal was dismissed and the application went to a hearing as to its merits, the appellant would be prejudiced by such a finding.

[57] Mr Moorhouse referred to the respondent’s evidence that he was aware of the importance of safety, and that he was not permitted to leave classes unsupervised, particularly where sparring was involved. He agreed he had seen the policy and understood it and he and Mr Engelman had spoken about it several times.

[58] It is convenient to set out below the provisions of the Code:

‘The Code

Summary Dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

Other Dismissal

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

Procedural Matters

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.’

[59] We agree with the appellant that the Commissioner did not make the requisite findings under s 396 of the Act, as to whether the appellant had a belief on reasonable grounds that the respondent’s conduct was ‘sufficiently serious to justify immediate dismissal’. Instead, the Commissioner fell into error by asking himself the wrong question; namely, whether the conduct itself was sufficiently serious to justify immediate dismissal. In Grandbridge, the Full Bench put it this way:

‘[14] We consider that an arguable case of error has been established and the public interest is enlivened by the appeal. Specifically, we are persuaded that Grandbridge has made out an arguable case of appellable error in relation to grounds 2, 13 and 15 of its Notice of Appeal in so far as they concern the dishonest conduct reason for Ms Wiburd’s dismissal. It is arguable that the Deputy President fell into error by asking herself the wrong question in focussing on whether Ms Wiburd’s conduct “was serious enough” to sustain summary dismissal. The proper inquiry raised by the Code is relevantly, whether at the time of the dismissal the employer genuinely believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. The Code focusses attention on the employer’s belief which must be based on reasonable grounds, not on whether the employee’s conduct as a matter of fact and law justified immediate dismissal. It is therefore arguable that the Deputy President failed to properly apply the Code as Grandbridge contends by ground 13 of its Notice of Appeal.’

[60] In our view, there was a sufficient evidentiary basis to find that the respondent’s conduct provided the foundation for a reasonable belief that there was an imminent risk to the safety of students arising from the respondent’s lack of supervision. That included evidence as to:

•  the nature of the Krav Maga technique;

•  a previous death of a student;

•  the appellant’s safety practices and policies;

•  the requirement that students must be supervised at all times;

•  the respondent being on clear notice from earlier warnings for the same conduct;

•  both parties’ acknowledgement that the CCTV was to protect the students and staff;

•  the respondent’s repeated conduct; and

•  the respondent’s acknowledgment of wrongdoing.

[61] We uphold Ground Four of the appeal.

[62] We were invited by the appellant to expressly set aside the Commissioner’s finding that there was no ‘imminent safety risk to the students by the respondent’s conduct’. Having regard to our findings above and the scope of this appeal, it is premature to make any substantive findings on the merits of the case.

[63] While not argued on appeal, there is also, in our view, a further fundamental difficulty with the findings as to the application of the Code in the context of the Decision read as a whole.

[64] Although not expressly stated, it can be inferred that the Commissioner’s finding flows from either the words in the Code defining ‘serious misconduct’ as including ‘serious breaches of occupational health and safety procedures’, or from the definition of misconduct in Regulation 1.07, which reads:

‘(1) For the definition of serious misconduct in section 12 of the Act, serious misconduct has its ordinary meaning.

(2) For subregulation (1), conduct that is serious misconduct includes both of the following:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

(i) the health or safety of a person; or

(ii) the reputation, viability or profitability of the employer's business.

(3) For subregulation (1), conduct that is serious misconduct includes each of the following:

(a) the employee, in the course of the employee's employment, engaging in:

(i) theft; or

(ii) fraud; or

(iii) assault;

(b) the employee being intoxicated at work;

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.’

[65] The Commissioner could only have come to a view about whether the dismissal was consistent with the Code if the appellant was a small business employer. There is no finding on whether the appellant employed less than 15 employees in the Decision, notwithstanding this was a ‘live’ issue in the proceedings, as is evident by the parties’ extensive submissions on the subject. The respondent confirmed in the appeal proceedings that he still maintained the appellant employed more than 15 employees. In other words, the precondition for findings in relation to the Code had not been established; see: Grandbridge at [14] and TIOBE Pty Ltd t/a TIOBE v Chen [2018] FWCFB 5726. It follows that the Commissioner erred in his finding in this respect.

CONCLUSION

[66] For the reasons set out above, we are persuaded that the appellant’s four grounds of appeal have been made out. That being so, the Decision must be quashed.

[67] A number of relevant matters may flow from a redetermination of the appellant’s jurisdictional objection. These may include:

•  whether the Code applied to the dismissal, having regard to the number of employees employed by the appellant at the time of the respondent’s dismissal;

•  if the Code applied, whether the dismissal was consistent with the Code according to the principles in Pinawan and Ryman v Thrash Pty Ltd t/a Wisharts Automotive Services [2015] FWCFB 5264;

•  whether the CCTV footage should be admitted into evidence, as a matter of discretion, in accordance with our conclusions in the appeal;

•  if the dismissal was not consistent with the Code, whether the respondent’s dismissal was ‘harsh, unjust or unreasonable’, within the meaning of s 387 of the Act; and

•  if the dismissal is found to be unfair, what, if any, remedy should be ordered, pursuant to s 394 of the Act.

[68] Given the need for further inquiry and analysis and the possibility that contested evidence may need to be tested in cross examination, we consider the appropriate course to adopt is to remit the matter for rehearing to another Member of the Commission, pursuant to s 607(3) of the Act. In doing so, we obviously do not intend to limit the evidence in those proceedings to that which has already been admitted in the proceedings below, nor do we discount the possibility of the matter being resolved through conciliation.

[69] We make the following orders:

•  The appeal is upheld;

•  The Decision in Markovitch v Krav Maga Defence Institute Pty Ltd [2018] FWC 6114 is quashed; and

•  Application U2018/6030 is remitted to the Region 1 Coordinator for allocation to another Member for hearing.

DEPUTY PRESIDENT

Appearances:

Mr P Moorhouse of Counsel for the appellant.

The respondent appeared for himself.

Hearing details:

2019.

Melbourne (with videolink to Sydney):

19 March.

Final written submissions:

For the appellant: 15 February 2019.

For the respondent: 7 March 2019.

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