Bgc (Australia) Pty Ltd v Phippard [2002] WASCA 191 (18 July 2002) Last Updated: 18 July 2002 JURISDICTION : WESTERN AUSTRALIAN INDUSTRIAL APPEAL COURT CITATION : BGC (AUSTRALIA) PTY LTD -v- PHIPPARD [2002] WASCA 191 CORAM : ANDERSON J (Presiding Judge) PARKER J HASLUCK J HEARD : 1 MAY 2002 DELIVERED : 18 JULY 2002 FILE NO/S : IAC 7 of 2001 BETWEEN : BGC (AUSTRALIA) PTY LTD Appellant AND IAN PHIPPARD Respondent Catchwords: Industrial relations - Unfair dismissal claim - Whether claims for business expenses by senior employee justified - Whether sufficient grounds for summary dismissal - Whether relationship of trust between employer and employee undermined by comparatively minor acts of dishonesty - Whether Industrial Relations Commission has jurisdiction to resolve claim for set off against a contractual benefit Legislation: Industrial Relations Act 1979 (WA) , s 7 , s 29 , s 29(1)(b) , s 23 , s 23A , s 23(3)(h) , s 26(1)(a) , s 49 Minimum Conditions of Employment Act 1993 , s 5 , s 3(1) , s 17C , s 17D , s 23 , s 23A(1)(a), s 24 Result: Appeal allowed Category: A Representation: Counsel: Appellant : Mr M J McCusker QC & Mr M C Hotchkin Respondent : Ms W F Buckley Solicitors: Appellant : Hotchkin Hanly Respondent : Clayton Utz Case(s) referred to in judgment(s): Case(s) also cited: Rankin v Marine Power International Pty Ltd [2001] VSC 150 ; (2001) 107 IR 117 Sargant v Lowndes Lambert Australia Pty Ltd (2001) 81 WAIG 1149 Sinclair v Neighbour [1967] 2 QB 279 1 ANDERSON J (Presiding Judge) : I have had the advantage of reading in draft the reasons for judgment of Hasluck J. I entirely agree with that judgment and with the orders proposed. There is nothing I can usefully add. 2 PARKER J : I respectfully agree with the reasons for decision now published by Hasluck J and with the order proposed. 3 HASLUCK J : The respondent, Ian Phippard, was employed by the appellant, BGC (Australia) Pty Ltd, as the General Manager of its contracting business. His employment commenced in November 1994. He was responsible for the overall control of the BGC business, its day-to-day operations, project outcomes, profitability and the maintenance of business objectives and business developments. The respondent had the authority to incur and authorise his own business expenditure, and in the absence of specific guidelines in that regard such expenditure was a matter of judgment and a discretionary decision. 4 Towards the end of 1999 the Chairman of BGC, Mr Buckeridge, and the Company Secretary, Mr Teo, contended that the respondent, by reason of the misuse of the expense system, had abused his position of trust as General Manager of BGC. These allegations ultimately led to the summary dismissal of the respondent on 2 December 1999. It seems that there were no substantial criticisms by BGC which went to the respondent's work performance in other respects. 5 The respondent commenced proceedings against BGC upon the basis that his dismissal was both unfair and unlawful. He claimed compensation for that unfair dismissal. He also claimed, as a contractual benefit, six months' salary in lieu of notice in the sum of $86,250 and certain other benefits. 6 The claim was opposed by BGC. The company contended that the respondent was substantially indebted to BGC in the sum of $29,576.90 and that, if the respondent were to succeed in his claim, this sum should be set off against any amount awarded to him by the Commission. 7 I note in passing that BGC was apparently willing to concede that the respondent should receive a payment equivalent to one month's pay in lieu of notice save that any amount found to be due to the company by the respondent should be set off against any amount otherwise to be paid pursuant to the concession. 8 The matter came before Commissioner Kenner who handed down his reasons for decision on 24 January 2001. He found (at par 95) that there were no fixed rules in regard to the claiming of expenses and that a high degree of trust was part of the arrangement between the parties. He reviewed the evidence bearing upon the allegations said to justify the summary dismissal. He accepted that the respondent did not deliberately set out to deceive his employer but he did have (at par 97) "a cavalier attitude to expenses claims". He considered (at par 108) that the crucial question was whether the conduct of the respondent constituted such a deliberate flouting of his contract of employment to warrant summary dismissal. 9 Commissioner Kenner proceeded to hold (at par 110) that the respondent's dismissal was wrongful or unlawful at common law in that he was not guilty of conduct warranting summary dismissal in all of the circumstances of the case. He was not persuaded that it had been established by BGC that the respondent had engaged in a wilful course of conduct in relation to his expenses. 10 Commissioner Kenner went on to say that it is not necessarily the case that an unlawful dismissal, in the sense of one effected in contravention of a contract of employment, will always be unfair. He was not persuaded that BGC had abused its right to dismiss the respondent or that the dismissal was unfair. He went on to hold (at par 115) that in relation to the contractual benefits claim, as a benefit under the contract of employment, the respondent had been denied six months salary in lieu of notice. He was not prepared to allow BGC to set off against the amount awarded any sum alleged to be owed to BGC on the ground that a debt due to an employer by an employee cannot be the subject of a set off or counterclaim in an action for contractual benefit. Conti Sheffield Real Estate v Brailey (1992) 48 IR 1 ; (1992) 72 WAIG 1965. 11 The consequence of these findings was that BGC became liable to pay to the respondent the sum of $86,250 being six months payment in lieu of notice and $7,257.60 in respect of accrued annual leave. The contractual benefits allowed to the respondent therefore amounted to $93,507.60. 12 Two appeals were then brought before the Full Bench pursuant to s 49 of the Industrial Relations Act being, first, an appeal brought by BGC against the learned Commissioner's ruling and, second, a cross appeal brought by the respondent. BGC contended on the hearing of the appeal that the learned Commissioner erred in law. He had misdirected himself as to the proper legal principles in determining whether the respondent had been guilty of misconduct sufficient to justify a summary dismissal and in failing to reach certain findings on the evidence. The respondent (Mr Phippard) contended on the cross appeal that the Commissioner erred in law and in fact in determining that the dismissal was not harsh, oppressive or unfair. 13 President Sharkey of the Full Bench undertook a full review of the evidence and of various specific incidents which were said to reveal the misconduct the subject of the allegations made by BGC. In essence, President Sharkey and the other members of the Full Bench were of the view that the method used by the respondent for claiming and reconciling expenses was casual and inadequate. According to Commissioner Wood, the respondent's actions displayed something more than carelessness in the extreme in the conduct of his affairs. This could be seen in the Midland Disposal Store claim, the excessive and errant use of telephone and fuel accounts, and the wrongly claimed expenses for parking, a parking fine, car maintenance and an Albany flight. 14 It appears from the judgment of President Sharkey between par 165 and par 174 that findings of some dishonesty made by Commissioner Kenner were "open to be made on the almost undisputed evidence". It was open to be found that the claim for refund of parking fees was dishonest and a form of petty rorting, although these matters were very minor. Claims such as the Midland Disposal Store claim, the Get Smart claim, the Feroza claim and some others were claims that "might be said to be dishonest claims, but might equally be accounted as culpably careless". Put shortly, the respondent conducted a system of claims for expenditure in his own case which allowed mistaken, unverifiable claims and several dishonest claims. His inability to explain why he misclaimed was proof of how obviously and fundamentally flawed the system was. It constituted a breach of the respondent's fiduciary duty to allow and claim on such a system, in some cases dishonestly. The system was correctly described by the Commissioner as "lax and cavalier and a failure in proper corporate administration." 15 President Sharkey then went on to say this: "172 However, in my opinion, there was not sufficient evidence to justify the inference that Mr Phippard was calculatedly, by unverifiable claims, stealing systematically from his employer. There simply were not enough such claims nor were the amounts large enough to lead to that conclusion. He was, in fact, dismissed for stealing or the suspicion of stealing, not just for flippancy. Mr Buckeridge's evidence made that clear. His carelessness and minor dishonesty, in my opinion, might have been enough to be destructive of the necessary confidence or involve the incompatibility, conflict or impediment to constitute an actual repugnance between his acts and relationship. 173 However, in characterising it otherwise, there was sufficient evidence to justify the Commissioner at first instance finding as he did. I am not disposed to say that there was so much dishonesty or that the breach of fiduciary duty was so great, within the tests I have laid down above, as to justify summary dismissal and the Commissioner did not err in that respect. I would add that, in my opinion, read as a whole, the Commissioner's reasons for decision did not reveal his application of the wrong test. Further, he did not err, as I have indicated, in the context of the application of the right test. 174 However, manifestly in all of the circumstances, a dismissal on notice was not unfair, for the reasons advanced by the Commissioner." 16 It was against the background of these observations that the Full Bench dismissed both appeals and affirmed the determination made by Commissioner Kenner with the result that the respondent was to be paid the sum of $93,507.60 without any provision being made for a set off of the amount claimed by BGC against the respondent. As to that matter, the Full Bench doubted that the Commission had power to entertain such a claim. Further, and in any event, the evidence in support of the alleged debt was thought to be insufficient. 17 BGC has now brought an appeal to the Industrial Appeal Court against the decision of the Full Bench upon the following grounds: "1. The Full Bench erred in law in failing to find that the Respondent's breaches of fiduciary duty justified summary dismissal. 2. The Full Bench erred in law in finding that the Commission did not have jurisdiction to entertain the Appellant's claim for a set-off or payment in respect of the salary sacrifice component of the Respondent's contract of employment with the Appellant. 3. The Full Bench erred in law in failing to remit the matter back to the Commission to give the parties a further opportunity to determine the amount agreed to be owing by the Respondent by way of salary sacrifice, or in what respect the amount alleged to be owing by the Respondent remained in dispute." 18 Counsel for BGC (the appellant) referred to previously decided cases concerning the circumstances in which summary dismissal of an employee is justified. Counsel submitted that the Full Bench erred in finding that the magnitude of dishonesty or breach of fiduciary duty was not sufficiently great as to justify summary dismissal. 19 Counsel submitted that the ordinary relationship of employer and employee at common law is one importing implied duties of loyalty, honesty, confidentiality and mutual trust. Reference was made to Blyth Chemicals Ltd v Bushnell [1933] HCA 8 ; (1933) 49 CLR 66 where it was said by Dixon and McTiernan JJ at 81 that conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal. An actual repugnance between the employee's acts and his relationship must be found. It is not enough that ground for uneasiness as to future conduct arises. 20 Counsel also relied upon Concut Pty Ltd v Worrell [2000] HCA 64 ; (2000) 176 ALR 693 in which Kirby J said this at 707: "It is, however, only in exceptional circumstances that an ordinary employer is entitled at common law to dismiss an employee summarily. Whatever the position may be in relation to isolated acts of negligence, incompetence or unsuitability, it cannot be disputed (statute or express contractual provision aside) that acts of dishonesty or similar conduct destructive of the mutual trust between the employer and employee, once discovered, ordinarily fall within the class of conduct which, without more, authorises summary dismissal. Exceptions to this general position may exist for trivial breaches of the express or implied terms of the contract of employment. Other exceptions may arise where the breaches are ancient in time and where they may have been waived in the past, although known to the employer. Some breaches may be judged irrelevant to the duties of the particular employee and an ongoing relationship with the employer. But these exceptional cases apart, the establishment of important, relevant instances of misconduct, such as dishonesty on the part of an employee like Mr Wells, will normally afford legal justification for summary dismissal. Such a case will be classified as amounting to a relevant repudiation or renunciation by the employee of the employment contract, thus warranting summary dismissal." 21 When one has regard to the reasoning of the Full Bench it appears that there was an acceptance that some acts of dishonesty had occurred. It appears from a consideration of the reasons provided by Commissioner Kenner that various euphemisms for dishonest conduct were used which had the effect of disguising the principal finding that the respondent had acted dishonestly and in a way, given the seniority of his position, that was bound to undermine the relationship of trust that ought to exist between employer and employee. I am referring to the use of terms such as "a cavalier attitude to expenses" and "careless in the extreme." The Full Bench recognised that a finding of dishonesty had been made, but, in its turn, perpetuated the Commissioner's approach by giving tacit approval to the use of such terms. This meant, in the end, that insufficient weight was given to the principal finding. 22 The reasoning of Kirby J in Concut Pty Ltd v Worrell ( supra ) makes it clear that acts of dishonesty which are destructive of mutual trust ordinarily fall within the class of conduct which, without more, authorises summary dismissal. He allowed that an exception to this general position may exist for trivial breaches. In the present case, however, where the respondent occupied a senior managerial position, and could reasonably be expected to set an impeccable example in regard to such claims, I am of the view that the outcome of the present case must be decided by reference to the rule rather than to the exception. Accordingly, in my view, the Full Bench misconstrued the test to be applied in determining whether summary dismissal is justified. I consider that the appeal brought by BGC should be allowed upon the basis set out in the first ground of appeal. 23 This brings me to the issue raised by ground 2 of the appeal as to whether the Full Bench erred in law in finding that the Commission did not have jurisdiction to entertain BGC's claim for a set-off or payment in respect of the salary sacrifice component of the respondent's contract of employment with BGC. Commissioner Kenner and the Full Bench addressed that issue upon the basis that the respondent had been unlawfully dismissed and was entitled to certain contractual benefits, namely, $86,250 being six months payment in lieu of notice and $7,257.60 in respect of accrued annual leave. The jurisdictional issue may have to be viewed in a different light as a consequence of my finding that the respondent's breaches of fiduciary duty justified summary dismissal. 24 I must begin by looking at s 23 of the Act in which the jurisdiction of the Commission is described. By s 23(1) the Commission has authority to enquire into and deal with any industrial matter. The term "industrial matter" is defined broadly in s 7 of the Act to mean any matter affecting or relating to the work, privileges, rights or duties of employers or employees in any industry. That the concept is broad enough to include a claim of harsh, oppressive or unfair dismissal is borne out by s 23(3)(h) , for in that provision one finds that the Commission shall not make any order concerning such a claim except an order authorised by s 23A. 25 The effect of s 23A(1) is that the Commission may (a) order the payment to the claimant of any amount to which the claimant is entitled; (b) order the employer to reinstate a claimant who has been harshly, oppressively or unfairly dismissed; (ba) subject to certain restrictions, order the employer to pay compensation to the claimant for loss or injury caused by the dismissal; and (c) make any ancillary or incidental order that the Commission thinks necessary for giving effect to any order made under this subsection. 26 By s 29(1)(b) of the Act an industrial matter may be referred to the Commission by the employee in the case of a claim by an employee; (i) that he has been harshly, oppressively or unfairly dismissed from his employment; or (ii) that he has not been allowed by his employer a benefit, not being a benefit under an award or order, to which he is entitled under his contract of service. It is important to understand, however, that this provision does not confer jurisdiction or additional powers on the Commission. It gives the employee standing to pursue a claim in certain prescribed circumstances: Coles Myer Ltd v Coppin & Ors (1993) 11 WAR 20 ; (1993) 73 WAIG 1754 per Kennedy J at 24. 27 It is clear from these provisions that if an employee such as the respondent in the present case complains of unfair dismissal and seeks compensation for loss or injury caused by the dismissal, the Commission will have jurisdiction to deal with the matter, although the power to order compensation is limited by s 23A(4). 28 The position appears to be less clear where the claimant seeks an order for payment of any amount to which the claimant is entitled pursuant to s 23A(1)(a) of the Act. To my mind, the claim must be for the enforcement of a benefit for which the contract provides. Furthermore, a distinction must be drawn between seeking to enforce a benefit conferred by the contract and a claim for damages for breach of the contract by failing to provide an entitlement. 29 My earlier finding that BGC was entitled to dismiss the respondent summarily makes it unnecessary to give any further consideration to his claim for a payment of $86,250 in lieu of notice. His claim for $7,257.60 in respect of accrued leave gives rise to different issues which have a bearing on BGC's ground 2 of the appeal and the question of whether the Commission had jurisdiction to deal with BGC's claim for a set off in the sum of $29,576.90 as an amount allegedly owed by the respondent to BGC. In dealing with these issues it will be useful to take a closer look at this stage at the nature of the contractual relationship between the parties. 30 The respondent's employment commenced in or about November 1994 pursuant to the terms of an oral contract of employment. The respondent said in evidence that he did not recall any specific occasion on which all of the terms and conditions were agreed. He said: "It was agreed between Sweet and I that my remuneration package was to include salary, a motor vehicle (by a novated lease) and superannuation. In addition to this, it was agreed that BGC would pay for my telephone accounts." 31 It appears that no specific term was agreed concerning annual leave or payment for accrued leave. 32 However, s 5 of the Minimum Conditions of Employment Act 1993 provides that the minimum conditions of employment are taken to be implied in a contract of employment. Minimum conditions are defined by s 3(1) of the Act to include a condition for leave. Section 23 provides that an employee is entitled for each year of service, to paid annual leave. The entitlement accrues pro rata on a weekly basis. Employees of a class prescribed by the regulations (such as commission workers, piece workers, volunteers and persons with disabilities in supported employment) are not affected, but this exclusion does not apply in the present case. 33 To my mind, it follows from these provisions that, prima facie , the respondent's claim for $7,257.60 in respect of accrued leave should be characterised as a claim for a benefit under the contract of employment, within the meaning of s 23A(1)(a) with the result that the Commission had jurisdiction to deal with the claim for the reasons previously given. 34 It follows that this aspect of the matter must be referred back to the Commission for further consideration in light of the ruling on appeal that the respondent was justifiably dismissed for misconduct on 2 December 1999. It seems that it will be necessary to recalculate the amount due in respect of accrued leave. 35 It also follows from this reasoning that the Commission continues to have jurisdiction in respect of an industrial matter, namely, the issue concerning accrued leave, notwithstanding the failure of the respondent's principal claim. The further question then arises (being the question raised by ground 2 of the appeal) as to whether the Commission has jurisdiction to deal with the BGC claim for a set off on payment of $29,576.90 in respect of the salary sacrifice component of the respondent's contract of employment. 36 When I turn to this issue I must begin by taking account of various provisions of the Minimum Conditions of Employment Act which weigh against deductions from pay. I have already noted that by s 23 an employee is entitled to paid annual leave. Section 24 provides that an employee is to be paid for a period of annual leave at the time payment is made in the normal course of employment. Section 17C provides for an employee be paid in cash, by cheque or bank deposit or in any other manner authorised by the contract of employment. Deductions from an employee's pay are authorised by s 17D in certain limited circumstances including, per s 17D(1)(b) , an amount the employer is authorised to deduct under the contract of employment. 37 Section 17D of the Act reads as follows: "(1) Despite section 17C , an employer may deduct from an employee’s pay - (a) an amount the employer is authorized, in writing, by the employee to deduct and pay on behalf of the employee; (b) an amount the employer is authorized to deduct and pay on behalf of the employee under the workplace agreement, award or contract of employment; and (c) an amount the employer is authorized or required to deduct by order of a court or under a law of the State or the Commonwealth. (2) The employee is entitled to have any amount so deducted paid by the employer in accordance with the employee’s instructions or in accordance with the requirements of the workplace agreement, award, contract of employment, court order or law of the State or the Commonwealth (as the case may be). (3) Nothing in this section requires an employer to make deductions requested by an employee. (4) An employee may, by giving written notice to the employer, withdraw an authorization under subsection (1) (a)." 38 At a first glance the various provisions of the Minimum Conditions of Employment Act concerning deductions from pay suggest that in the circumstances of the present case, where the employee is entitled to a payment in respect of accrued leave, it would not be open to the employer to purport to deduct from or set off against whatever amount is ultimately found to be due an outstanding debt which is said to be owed by the employee to the employer. 39 It is true that by s 26(1)(a) of the Industrial Relations Act the Commission, in the exercise of its jurisdiction, shall act according to equity, good conscience, and the substantial merits of the case without regard to the technicalities or legal forms. This might suggest that in some general sense the Commission should not provide for a payment to be made to the employee in respect of accrued leave without bringing to account other matters in issue between the parties. However, in strict analysis, the position will usually be, having regard to the provisions of the Minimum Conditions of Employment Act , that the employer is obliged to make the payment in respect of accrued leave without deduction. This will mean that all industrial matters in issue between the parties have been resolved with the result that the Commission does not have any continuing jurisdiction to resolve other matters and is therefore not at liberty to embark upon any further inquiry as to whether the employee is indebted to the employer pursuant to some transaction lying outside the contract of employment. 40 Reasoning of this kind is consistent with the view of the Full Bench in Conti Sheffield Real Estate v Brailey ( supra ), being a decision relied upon by Commissioner Kenner and the Full Bench in the present case to refuse relief to BGC. Further, in HotCopper Australia Ltd v Saab [2002] WASCA 190 , being a decision to be handed down in conjunction with this decision, the Industrial Appeal Court has affirmed that a private claim of a commercial nature which lacks any ingredient or complexion of industrial relations cannot be characterised as an industrial matter, with the result that the Commission lacks jurisdiction to deal with such a claim. Claims of that kind concerning the enforcement of existing legal rights require the exercise of judicial power and are to be dealt with in the Courts. 41 In the present case, however, in dealing with grounds 2 and 3 of the appeal and the question of whether the BGC claim for $29,576.90 should be remitted to the Commission for further consideration, I am conscious that there is an additional layer of complexity. The Industrial Appeal Court must not accede too readily to the notion that the position reflected in Conti ( supra ) and HotCopper ( supra ) is applicable to the present case, for I noted earlier that by s 17D(1)(b) of the Minimum Conditions of Employment Act an employer is authorised to deduct from the employee's pay an amount authorised by the contract of employment. If, after a careful consideration of the salary sacrifice arrangement and related events, it emerges that the amount being claimed by BGC is a deduction or payment authorised by the contract of employment then a basis may exist for remitting the issue to the Commission in the manner contended for by BGC. 42 It therefore becomes necessary to take a closer look at the salary sacrifice arrangements and the nature of the BGC claim. 43 The respondent described the salary sacrifice arrangement in his witness statement. It seems that pursuant to the verbal contract of employment negotiated by the parties the respondent was at liberty to purchase items for his own use on the company's account with a view to taking advantage of discounts and other benefits. He would nominate the amount, for his "salary sacrifice" at the end of the financial year, that is to say, the amount to be withheld from his pay entitlement in the expectation that it would in due course be applied towards the private expenses he incurred on the company's account. The company accountant would keep a tally of the expenses and a reconciliation statement would be prepared from time to time. The respondent said at par 11 of his statement: "The salary sacrifice component of my total remuneration package varied between $15,000 in 1994, $25,000 between 1994-1999 and $2,377.00 in 1999. It was offered to me by BGC on commencement." 44 The Group Financial Controller of BGC, Mr Phillip Ng, gave evidence concerning the respondent's salary package. His witness statement included this passage: "16. A third component was a salary sacrifice. Whether to sacrifice a portion of their salary and how much was up to the discretion of each individual employee. The system provided for employees to set aside certain money in anticipation of events occurring. The employees would either telephone me or come and see me to put in a verbal or written request that part of their salary be put aside. I would then arrange their salary accordingly. 17. Salary sacrificing would be done on a year to year basis. 18. If an employee anticipated they would like to purchase something from BGC suppliers, or if they were going on an overseas business trip and were extending it to include a personal holiday, they would ask me to set aside a certain amount so that any expenditure they made either from BGC suppliers or whilst on their holiday, could be charged to the company. Any Fringe Benefit Tax would be paid and accounted for. 19. At some point during the year reconciliation would be done. I would rely on the employees to inform me as to the accurate amounts they had spent for their salary sacrifice. If an employee did not spend all of their salary sacrifice that amount would be carried over until next year. If they spent more than their salary sacrifice they were expected to reimburse the company and/or recouped out of the following year. 20. Reconciliations did not occur at the same time every year. In particular I remember Ian was very difficult to get hold of and consequently his reconciliations were done sporadically throughout his employment. I was dependent on him telling me the particulars of his expenditure throughout the year. 21. The last reconciliation on Ian Phippard was done in November 1999. I tender a copy of his salary sacrificing for 1998 and 1999. (see annexure "A") 22. In 1998, Ian overspent $3,452.00 on his salary sacrifice. At the end of 1999, he had over-spent $22,404.00 on his salary sacrifice. That included our expenditure on his overseas travel for airfares and accommodation of about $10,000.00. If he repays that to BGC, his salary sacrifice allowance would be largely satisfied." 45 Commissioner Kenner referred to this evidence at par 11 of his reasons for decision. He observed that a salary sacrifice arrangement was in place such that the applicant could use the allocated sum for private expenses. He went on to say this: "To use this system, the applicant would deal with either Mr Newman, the respondent's finance system manager or Mr Edwards, the respondent's commercial manager, to order particular items. These purchases would then be debited against the applicant's salary sacrifice account. The applicant testified that he often found it difficult to reconcile his salary sacrifice position, because the system would only be updated infrequently, generally on an annual basis. The applicant testified that the process to determine the amount for his salary sacrifice was that he nominated an amount to be allocated for salary sacrifice towards the end of a preceding financial year, which amount would be the relevant amount for the following financial year." 46 Commissioner Kenner eventually arrived at this conclusion: "121. As to the claim by the respondent to set-off any award in favour of the applicant by the sum alleged to be owed to the respondent, I am not persuaded this can succeed. 122. Despite the application conceding in his evidence that expenditure particularised by the respondent in its amended notice of answer and counter proposal was incurred by it on his behalf, there was a gap on the evidence as to how many of these expenses were to be treated for fringe benefits tax purposes, which treatment may well substantially affect the final amount owing. In saying this, I am not critical of either party. That is simply the fact of the matter. Therefore, even if I considered there was jurisdiction in the Commission to determine this element of the matter, which for the reasons to follow I do not, I am not persuaded on the evidence that it would be open for me to make a positive finding as to quantum. 123. Furthermore, and more fundamentally against the respondent on this point, it is the decision of the Commission in Conti-Sheffield Real Estate v Brailey (1992) 72 WAIG 1765 , to the effect that a debt due to an employer by an employee cannot be the subject of a set-off or counterclaim in an action for contractual benefits. (See also Chernoff v Strata Page and Associates Pty Ltd (1990) 70 WAIG 4 at 8). Nor am I persuaded, without finally deciding the matter on this occasion, that the Minimum Conditions of Employment Act 1993 would allow such a course." 47 When BGC instituted an appeal to the Full Bench the ground of appeal concerning the sum of $29,576.90 was expressed in this way: "7. The Learned Commissioner erred in law in failing to take into account, either by way of adjustment to the contractual benefits found to be due to the Respondent (Applicant), or by way of set-off: (a) The sum of $15,042.67 incurred on his Diners Club Card paid by the Appellant (Respondent). (b) $12,032.66 paid by the Appellant (Respondent) for purchase of materials supplied to the Respondent (Applicant); and (c) $2,501.67 borrowed from the Appellant (Respondent) by the Respondent (Applicant); when the evidence was that all of these transactions took place as part of the Respondent's (Applicant's) conditions of employment, and that the Respondent (Applicant) and the Appellant (Respondent) reconciled such amounts as between themselves in the course of the Respondent's (Applicant's) employment. 48 President Sharkey of the Full Bench dealt with this matter at par 175 to par 214 of his reasons for decision. His reasoning in this regard was approved by Commissioner Coleman and Commissioner Wood. He referred to BGC's submission that the salary sacrifice and obligation to reimburse formed part of the employment relationship. He was of the view, however, the arrangement did not fall within the ambit of the authorisations allowed by s 17D of the Minimum Conditions of Employment Act because the arrangement was not in writing and was an arrangement for reimbursement rather than deduction. Further, and in any event, there was a dispute as to the extent of the debt and there was insufficient evidence to establish the claim. The consequence of these determinations was that the Commission lacked jurisdiction to deal with the matter. He held further that on the authority of the Conti case ( supra ), the BGC claim for an outstanding debt did not arise out of the employment relationship or because the parties were employer and employee in an industry. This meant that it could not be regarded as an industrial matter. 49 In the course of his reasons for decision President Sharkey said this: "197. However, there was no evidence that, by this arrangement, the employer was authorised to deduct items at will from Mr Phippard's wages to meet his expenditure. Firstly, there was no authority conferred by the contract to make those deductions and, further, there was no authority to deduct those amounts unless, as the evidence seems to reveal, it was given when figures were agreed on. That that authority did not exist is borne out in part by the evidence that such expenditure was also refunded by direct repayments by Mr Phippard. These provisions are not ambiguous and exist clearly to protect employees from statutorily unauthorised payments in lieu of wages or salary and statutorily unauthorised deductions from wages or salary. 198. In my opinion, the MCE Act did not and does not authorise the deductions which, it was said, could be made without the authority of Mr Phippard and, for the reasons expressed above, were not so authorised. Particularly, there was no evidence that any deduction was authorised in writing, as s.17D of the MCE Act requires. In particular, the amount claimed of $29,576.90 was not deducted and not authorised to be deducted at any time, because the amount claimed was disputed and still remains in dispute." 50 To say that s 17D(1) requires an authorisation in writing before a deduction can be made is not entirely correct. Unlike s 17D(1)(a), the following provision in s 17D(1)(b) permits an employer to deduct from an employee's pay an amount the employer is authorised to deduct and pay on behalf of the employee under the contract of employment. It is important to keep in mind also that in the Conti case ( supra ) President Sharkey and Commissioner Negus said that the question of whether a set-off or counterclaim can be the subject of an order in a claim for a contractual benefit made pursuant to s 29(b)(ii) of the Industrial Relations Act was not answerable with certainty. Further, in that case, the employer sought to set-off against pay due to the employee by way of commission an amount that had been advanced to the employee in respect of commissions to be earned. The advance was held to be in the nature of a debt due to the employer arising from a loan arrangement and therefore was not to be regarded as an industrial matter. 51 In the present case, somewhat different considerations apply. The salary sacrifice arrangement was admittedly not made or evidenced in writing. However, to my mind, the arrangement falls within the ambit of s 17D(1)(b) (which does not require writing) in that the employer was authorised to deduct from the agreed salary that would otherwise be payable to the employee the amount nominated by the employee as the salary sacrifice component of his salary. The amount nominated for the forthcoming year at the end of each financial year was simply a provisional figure which was subject to adjustment when a reconciliation was effected. 52 It follows from this view of the matter that unlike the factual situation in the Conti case ( supra ) it could not be said that once the amount payable to the respondent for accrued leave had been determined it had to be paid to the employee without any deduction referable to other constituents of the salary package such as the salary sacrifice arrangement. This meant there remained a live issue between the parties in the nature of an industrial matter with the result that the Commission had jurisdiction to resolve the issue. 53 By s 26 of the Industrial Relations Act , in the exercise of its jurisdiction, the Commission was obliged to decide the matter before it according to equity, good conscience and the substantial merits of the case. To my mind, this means that it was obliged to enquire into and establish what was the final state of account between the parties after calculating the amount due to the employee in respect of accrued leave and the final figure due under the salary sacrifice arrangement. 54 Further, and in any event, I am of the view that the Commission had jurisdiction to deal with these matters upon the basis that the dispute concerning the salary sacrifice arrangement should be regarded as an industrial matter which was capable of being referred to the Commission by an employer. I have already acknowledged, having regard to Conti ( supra ) and HotCopper ( supra ) , that where the matter in issue is essentially a claim of indebtedness which lacks any ingredient of industrial relations, then it cannot be characterised as an industrial matter. It must be dealt with elsewhere by a court of law exercising judicial power. But here the question of the obligation to compensate the employer pursuant to the salary sacrifice arrangement cannot really be separated from the employee's statutory entitlement to accrued holiday pay. The latter is clearly an industrial matter: Minimum Conditions of Employment Act s 7(c). The whole matter should therefore be characterised as an industrial matter in respect of which the Commission had jurisdiction. 55 It follows that, in my view, Commissioner Kenner and the Full Bench erred in holding that the Commission lacked jurisdiction to deal with BGC's claim for a payment in respect of the salary sacrifice component of the contract of employment. Commissioner Kenner and the Full Bench referred to insufficient evidence in support of the BGC claim but the fact remains that, on the view of the matter I have just expressed, there was a failure or refusal to acknowledge that the jurisdiction existed and to exercise the powers allowed to the Commission. I am therefore of the view that grounds 2 and 3 of the present appeal have been made out and that this aspect of the matter must be remitted to the Commission. A determination will have to be made, having regard to the evidence previously received, and to these reasons, as to what amount, if any, is due to the employee in respect of accrued leave and what amount, if any, is due to the employer in respect of the salary sacrifice component of the contract of employment. 56 Accordingly, in regard to the second ground of appeal, I consider that the Full Bench erred in finding that the Commission did not have jurisdiction to make any orders in respect of that aspect of the claim. 57 It follows from these observations that, in my view, the third ground of appeal should be upheld also. There is a need for the matter to be remitted back to the Commission in the manner allowed for by the third ground of appeal.