Fiji Bank and Finance Sector Employees Union v ANZ Banking Group Ltd [2008] FJAT 3; Award 03 of 2008 (5 February 2008)

THE REPUBLIC OF THE FIJI ISLANDS

NO 3 OF 2008

AWARD OF
THE ARBITRATION TRIBUNAL

IN THE DISPUTE BETWEEN

FIJI BANK AND FINANCE SECTOR EMPLOYEES UNION

AND

ANZ BANKING GROUP LIMITED

FBFSEU: Mr P Rae with Mr D Singh
ANZ: Mr J Apted with Ms T Colawai

DECISION

This is a dispute between Fiji Bank and Finance Sector Employees Union (the Union) and ANZ Banking Group Limited (the Employer) concerning the summary dismissal of Mr Sanjay Verma (the Grievor).

A trade dispute was reported by the Union on 21 October 2005. The report was accepted on 14 November 2005 by the Chief Executive Officer who referred the Dispute to a Disputes Committee.

As a consensus decision was not reached the Minister authorized the Chief Executive Officer to refer the Dispute to an Arbitration Tribunal for settlement pursuant to section 5A (5) (a) of the Trade Disputes Act Cap 97.

The Dispute was referred to the Permanent Arbitrator on 17 February 2006 with the following terms of reference:

"- - - for settlement over the summary dismissal of Mr Sanjay Verma on 22/04/05 which your Union views the Bank’s action as unjust, unreasonable, harsh and unfair and seeks Mr Verma’s re-instatement without loss of pay and benefits."

The Dispute was listed for a preliminary hearing on 24 February 2006. On that day the parties were directed to file preliminary submissions within 21 days and the Dispute was listed for mention on 24 March 2006. On that day the parties were granted an extension of 28 days to file submissions and the Dispute was relisted for mention on 26 May 2006.

The Union filed its preliminary submissions on 18 April and the Employer did so on 1 May 2006.

On 2 June 2006 the Tribunal gave directions for the disclosure to the Union by the Employer of the transcript of the disciplinary interview which had been conducted on 22 April 2005.

The Dispute was subsequently listed for mention on 23 June, 28 July, 1 September and 29 September 2006.

On 5 October 2006 the Tribunal gave directions in relation to the disclosure of information concerning the accounts of certain clients in accordance with section 71 of the Banking Act 1995. The Dispute was then listed for mention on 27 October, 24 November 2006 and 19 January 2007.

The Dispute was fixed for a five day hearing scheduled to commence on 14 May 2007. When the Dispute was called for hearing, the parties indicated that for various reasons they were not in a position to commence the hearing. The Union applied for further directions concerning the disclosure of documents. The Tribunal gave the necessary directions. The Employer raised a preliminary issue concerning the burden of proof. The parties were directed to file submissions on the matter in accordance with an agreed schedule. The hearing dates were vacated and the Dispute was to be relisted for mention on a date to be fixed.

Following the filing of submissions, the Tribunal handed down its Ruling on the preliminary issue on 1 June 2007 (Award No 30 of 2007).

The hearing of the Dispute commenced on 8 August 2007 in Suva. The hearing continued on 9-10 August, 13-15 August, 17 August, 20-21 August and 4-7 December 2007. The parties presented closing oral submissions on 11 January 2008. During the course of the hearing the Employer called 12 witnesses and the Union called two witnesses to give evidence. In addition 67 documentary exhibits were admitted into evidence.

The Grievor commenced employment with the Employer on 4 November 1996 as a part time teller at the Nausori Branch. Prior to that he had been employed as a customer services officer with the National Bank of Fiji at the Government Buildings Branch.

He had some banking experience working with the National Bank before he commenced employment with the Employer.

In 2001 the Grievor was transferred to the Suva Branch (Victoria Parade) as a part time teller on the ground floor. Towards the end of 2001 he gained full time employment with the Employer as a trade and finance officer at Grade 2 level at the Suva Branch.

In early 2002 he was appointed to a level 4 position as a Manager’s Assistant in a lending role. From April 2003 to 3 May 2004 he was a lending assistant to an Assistant Manager for Small and Medium Size Enterprises (SME) Mr Vincent Fong. As such he dealt with loan and credit customers whose business came within the SME category.

In an internal written application dated 26 February 2004 the Grievor applied for the position of Assistant Manager – Business Financial Services East at the Nausori Branch.

It would appear that this was a new position to enable business loans to be processed and approved (up to certain amounts) at the Nausori Branch. Previously business loan applications were handled by the Suva Branch. The selected officer was to be the Business Lending Manager at the Nausori Branch.

In his application, the Grievor described the principal duties of his present position as including:

"Provide Small Business customers with friendly, efficient and highly professional service in all aspects of their lending needs. Market Small Business customers and interview them. Identify their needs and type of business facility needed and write up the deal. Complete proposal (RCM) and get approval by (AM) if it is within CAD, or submit it for Credit department’s approval.

Visit Customer sites for inspection and valuation of property to ascertain the correct value and calculate LVR on this basis. Prepare LOO, receive acknowledgment and drawdown facility or load limit in case of Overdraft.------ "

In his application the Grievor also stated that he thought he was a suitable applicant because (amongst other reasons) he had been:

"a teller in Nausori Branch for five years with Nil Non-Lending losses and to date I have not had any write-offs since joining the bank in November 1996.----"

The position description dated 13 February 2004 stated that the position required a sound knowledge of BFS products and services, good credit assessment skills, solid account management exposure and small business lending skills. The experience required by the successful applicant included a minimum of 3-5 years in a lending environment, thorough knowledge of bank procedures products and services and thorough knowledge and skills in preparing, completing and maintaining credit facilities.

By letter dated 4 May 2004 the Grievor was offered the position which he subsequently accepted. His appointment became effective on 10 May 2004.

After a careful consideration of the evidence, the Tribunal has concluded that, based on the material in the Grievor’s application, and taking into account the sum total of his lending experience since 1996 and his in-house training, the Employer had sufficient grounds for selecting the Grievor for the position. The Employer had not acted unreasonably in appointing the Grievor to the position of Assistant Manager BFS East at Nausori.

When the Grievor took up his appointment at Nausori on 10 May 2004, his contract of service contained terms and conditions which were derived from a number of sources. First, there were those terms and conditions contained in the Grievor’s Service Agreement dated 4 November 1996 which were still relevant to the Grievor as a full time employee. Secondly, the applicable provisions of the Collective Agreement dated 13 April 1994 were an implied conditions of the Grievor’s contract of service by virtue of section 34 (7) of the Trade Disputes Act Cap 97. Thirdly, there were the relevant terms contained in the letter of appointment dated 4 May 2004.

Clause 9 of the Grievor’s Service Agreement, so far as is relevant, provided

"a. The employment of the Employee shall be terminated by any of the following events:

(a)

(b)

(c)

(d) By the Employee’s dismissal from the Bank’s service for:

(i) Dishonesty, wilful insubordination, neglecting his work, absenting himself therefrom without authority, or the willful breach by the Employee of any of the Bank’s regulations for the time being in force or any of the conditions of this Agreement.

(ii) Any other conduct or act which in the opinion of the constitutes misconduct.

Any dismissal under this sub-clause may be with or without any period of notice or prior suspension from duty and with or without any payment in lieu of any period of notice as the Bank sees fit".

In so far as the Employer decided to summarily dismiss the Grievor (i.e. without notice or payment in lieu of notice) that decision must be consistent with section 28 of the Employment Act Cap 92. Not only must the misconduct come within one of the categories listed in the section, it must also be sufficiently serious that it would have justified the Employer treating the contract as having been brought to an end (i.e. discharged) at common law.

The Grievor had been given approval to take 35 working days paid holiday leave commencing on Tuesday 1 March 2005. The Tribunal accepts that the Grievor was present at work on Monday 28 February 2005 but did not meet or see Mr Ali on that day. The Tribunal also accepts that the relieving officer, Mr Lance Whippy, attended at the Nausori Branch on Friday 25 February 2005. The Tribunal has concluded that the Grievor and Mr Whippy had a discussion on that day about certain files which were included in notes prepared by the Grievor. The Tribunal has also concluded that the Grievor did not hand a copy of those notes to Mr Whippy and that Mr Whippy did not see a copy of those notes.

It would appear that on Monday 28 February 2005 Mr Whippy noted irregularities in ten of the Grievor’s files and contacted the then recently appointed Head of SME, Mr Haroon Ali. The Tribunal accepts that it was a practice adopted by the Employer that a relieving officer routinely conducted an audit of the relieved officer’s files.

Mr Ali attended at the Nausori Branch on 28 February 2005 and checked the 10 files identified by Mr Whippy. He reported his observations to his line Manager (Mr Browne) and to the Head of People Capital (Mr Fedrick). After consulting with the Employer’s General Manager (Mr Velegrinis) it was decided to recall the Grievor from leave and a meeting was arranged for 4 March 2005.

This meeting was attended by Messrs Browne, Ali and Fedrick together with the Grievor and the Union representative Ms Ann Khan.

A diary note prepared by Mr Fedrick was signed by Mr Browne, Mr Ali and Ms Khan as being a fair summary of what had transpired at the meeting.

The Tribunal accepts that the Grievor’s representative was an experienced union officer who had previously represented union members at numerous disciplinary interviews.

At the meeting the Employer’s concerns about the 10 files were summarized as follows:

"1. Non-compliance with ANZ’s credit and lending policies and procedures.

2. The lack of security being taken in these lending transactions and the risk this posed to ANZ.

3. The breaches of SV’s Credit Approval Discretion (CAD).

4. The irregularities found in the disbursement of loan proceeds.

5. The revocation of a loan letter of offer on an unsupported bases.

6. The use of a single accounting form (Singh’s) to prepare cash flow forecast in supporting of lending deals for self employed borrowers/principally taxi drivers) without any assumption notes to underpin data tabled."

To enable the Grievor to consider his response to the matters raised by the Employer, the meeting was adjourned. The Grievor and the Union representative were given the opportunity to peruse the ten files and to discuss the matter.

There was no request for additional time to consider the files nor did the Grievor or his Union representative ask for any further details or information. During the adjournment the Grievor prepared a brief written response. The Grievor’s explanation was:

"The breaches of policies specified according to me is due to improper training conducted for us and we do not have any lending manual in our branch to refer to. We lack "max" on the system to access and adhere to proper policies and procedures. I can state that this should not be repeated in future and I will - - - to get copies of "Max" manually to refer to and stay within policy guidelines for my future lendings".

The meeting adjourned a second time to consider the Grievor’s response. It was decided that the Grievor should be suspended from duty although he was on annual leave. The Grievor was given a suspension letter and he acknowledged receipt of same on a copy. The reason for the suspension was based on the consideration that the matter was extremely serious.

Although not referred to in his written response, during the meeting the Grievor attempted to place some blame on his assistant at the Nausori Branch (R. Singh). Having considered the evidence and the material the Tribunal is satisfied that this allegation was not substantiated. The material available to the Employer was sufficient to conclude that it was the Grievor who conducted the interviews with the majority of clients and it was the Grievor who made all the relevant decisions in relation to loan applications.

The Tribunal has considered the signed statement dated 9 March 2005 by Ratish Singh and witnessed by the Union Representative Ms Ann Khan. The Tribunal is satisfied that the Assistant was at all times simply complying with instructions from the Grievor.

After the meeting on 4 March 2005, Mr Ali then proceeded to investigate a further 23 files at the Nausori Branch. Mr Ali prepared a report based on his investigation of the 33 files. Copies of the Report were handed to Mr Browne and Mr Fedrick.

In his evidence Mr Ali stated that he had concluded that the Grievor had engaged in dishonest practices by blatantly manipulating standard policies and procedures. Mr Ali considered that this was deliberate and had nothing to do with a supposed lack of knowledge or training.

The Grievor was requested to attend a meeting on 22 April 2005, following his return from his overseas trip. He was informed that he could have union representation and again the experienced Ms Ann Khan appeared with and represented the Grievor. Mr Ali and Mr Fedrick were also present. It would appear that both parties independently tape-recorded the proceedings.

The agreed transcript of the proceedings which was admitted into evidence was lengthy, running to about 44 pages. A number of preliminary matters were discussed before the allegations were considered.

For the purpose of the meeting Mr Ali prepared a version of his report which grouped various files under relevant credit principles that it was alleged had been breached by the Grievor.

This report was read out in stages by Mr Ali. The Tribunal accepts that all the files to which reference was made by Mr Ali in his report, were made available at the meeting for either the Grievor or Ms Khan to examine or peruse.

The first principle alleged to have been breached was assessing repayment capacity. In the report 13 files were listed where it was alleged that the Grievor had failed to obtain the necessary financial information to correctly establish repayment capacity.

The second principle alleged to have been breached was planning for the possibility of default. The customer’s ability to repay the loan beyond the primary source of repayment must be identified and assessed. The Bank’s access to realistic alternative repayment sources must be identified, documented and correctly secured. Twelve files were listed in this category where the loan to value ratio was 100% or more and allowed no margin for Bank protection.

The third principle alleged to have been breached was that the Grievor had failed to behave ethically in his credit transactions. Under this category there were 16 files where it was alleged the Grievor had conducted the transaction unethically.

The transcript indicated that after Mr Ali had read that part of his report which dealt with assessing repayment capacity, Mr Fedrick gave the Grievor an opportunity to comment and he also questioned the Grievor comcerning his approach to assessing repayment capacity.

The thrust of the allegation was that in the thirteen files mentioned in this category, the Grievor had failed to obtain the required financial information to correctly establish repayment capacity. In particular the Grievor was asked about his reliance on cash flow forecasts from Singh’s Accounting in Nausori and why he didn’t obtain other material such as tax records and pay slips. There were a number of explanations given by the Grievor.

The Grievor was asked about the forecasts in the cash flow statements and the absence of any explanatory notes as to how the figures were derived.

The Tribunal accepts that the cash flow forecasts from Singh’s Accounting were obtained by applicants at the request of the Grievor. The Tribunal notes that there was an inexplicable uniformity and similarity in the forecasts. The Tribunal also notes that none of the cash flow forecasts prepared by Singh’s Accounting contained any notes which would have enabled the Grievor to determine how those forecasts were calculated and the extent of their reliability.

Mr Ali then proceeded to read from his report the allegation concerning the Employer’s fallback position in the sense that where was the secondary repayment source in the event that the primary cash flow ceased and the borrower was in default. The Tribunal accepts that as a matter of routine lending practice, the Employer must be able to identify and assess the borrower’s ability to repay beyond the primary source of repayment. That secondary source of repayment must be documented and secured.

The transcript showed that the discussion on this matter to a large extend centred about the file involving a loan of $25,000 to Napolioni Masirewa on the security of one truck valued at $12,500.

One of the explanations provided by the Grievor as recorded in the transcript was the practice of past Managers with specific reference to Mr Ali himself. However the Tribunal has noted that it was the performance of the Grievor that was being considered and examined. Furthermore, Mr Ali had apparently managed those files in a manner which was consistent with the Employer’s practices and procedures.

Mr Ali then read out the material which related to the Grievor’s unethical behaviour in credit transactions. The allegations involved documentation being completed in a manner which did not accurately or reliably reflect the position of the applicant borrower. There were also allegations that loan funds were disbursed in a manner which was inconsistent with Bank practices. There was a considerable amount of discussion about the allegations concerning the unethical manner in which loan transactions had been handled by the Grievor.

Towards the end of the meeting, Mr Fedrick summarized the issues which the documents had disclosed and which were of concern to the Bank. First, there were deficient credit assessments of the lending proposals put forward by the customers which had resulted in default and required the Employer to make provisions for bad debts.

Secondly, most of the lending was approved on a no security or limited security basis together with deficiencies in some cases, all of which meant that the Employer could not if necessary, realize the security to recover the debt or mitigate the loss.

Thirdly, the manner in which the loan was disbursed. By allowing the encashment of the loan the Employer was not in a position to conclude that what the customer said the loan was for was where it actually ended up.

Fourthly, there were instances where the CCR scoresheets did not actually reflect the risk grading which in turn affected the ability of the Grievor to approve the loan within his CAD.

Finally, there were instances where the customer’s reason for the loan application differed from the reason stated on the customer’s file.

The Grievor was given a further opportunity to comment on the above summary and he stated that he did not want to make any further contribution to the discussion.

At that stage the Grievor was advised that a decision had been taken during the break that his employment was to be terminated with immediate effect. Prior to handing the Grievor his termination letter, Mr Fedrick informed the Grievor that the Employer had decided to pay the Grievor the period of his suspension and pay out his full leave entitlement.

The only comment made by the Grievor at this stage was:

"So that means for the days which is outstanding, you will pay".

The termination letter stated:

"I refer to discussion held between you and the ANZ Bank on 4 March 2005 and 22 April 2005. In these discussions ANZ outlined to you numerous examples where you failed to exercise reasonable care as a representative of the ANZ Bank in lending monies to the public. Your actions and conduct have resulted in ANZ Bank being exposed to significant losses.

Your actions and conduct are deemed serious misconduct by ANZ Bank.

Subject to clause 6 of your Service Agreement you have committed "unauthorized act (s)" which are summarised as follows:

- Lending funds without appropriate assessment being completed and prior to security to cover the debt if default occurred being put into place.

- Serious breaches of ANZ credit policy and procedures.

- Conduct which has created imminent and serious risk to the reputation and profitability of ANZ’s business.

- Unauthorised waiving of fees.

As a direct consequence of committing unauthorized acts and with the information supplied, through Head of SME in the continuing investigation, I now confirm that the Bank views your actions as a serious breach of both your Service Agreement and the Collective Agreements.

In terms of the Collective Agreement Clause 4 B ii) a) & d) and Clause 9 (d) (i) & (ii) of your Service Agreement, you are hereby dismissed from the Banks services with immediate effect."

It is clear to the Tribunal that based on the information gathered by Mr Ali and based on all the documents relating to the Grievor’s approved loan applications processed and approved by the Grievor, the Employer had reasonable grounds to honestly and genuinely believe that the Grievor had committed the acts which the Employer correctly considered constituted misconduct.

The Tribunal also accepts that the Bank acted reasonably when it concluded that the misconduct was serious. There is an onus on a bank employee to conduct himself with the utmost honesty and integrity.

As an explanation and in mitigation, the Grievor consistently maintained that he did not have access to the relevant publications when he took up the position at the Nausori Branch. The Tribunal accepts that there were no copies of the publications at the Nausori Branch at that time.

The Grievor also maintained that the Employer’s MAX computer programme was not available at Nausori at that time. The programme contained an electronic version of the Bank’s publications, policies and practices. The Tribunal also accepts that this was the position.

However, at some stage after taking up the position at Nausori the Grievor received his Credit Approval Discretion (CAD) document. It was clear from the evidence that the Grievor was well aware of what was meant by the CAD. He expressly referred to in his application for the position. The Tribunal has no hesitation in concluding that the Grievor was aware or ought to have been aware of the key components of the CAD document.

It is clearly stated in the CAD document that these discretions "must be used in conjunction with the Pacific Credit Risk Principles and Policy Manual and Pacific Credit Procedures Manual except where Retail Risk has issued contrary instructions."

Regardless of when the Grievor actually received his hard copy of the CAD, the Tribunal has concluded that he did not at any time ask his superiors, his Manager or any other person for a copy or copies of the publications nor a hard copy of the relevant material on the MAX programme. Even if such a request had been made, it was never followed up. It is the Tribunal’s conclusion that the Grievor should have done so in order to ensure that at all times his lending activities complied with the Employer’s policies and procedures.

The Grievor also maintained that his training was inadequate and did not enable him to carry out his duties in accordance with the accepted procedures and practices. The Tribunal does not accept this. The Tribunal notes the training the Grievor received under Mr Vincent Fong prior to taking up the position. The Tribunal also notes that the Grievor had undertaken and successfully completed a substantial number of his CAL modules.

The Tribunal also accepts that the Grievor had attended a number of in house training sessions in 2003 and 2004, one of which dealt with credit principles on 30 September 2003.

The Grievor did not offer any satisfactory explanation as to why he did not at any stage seek the assistance or advice of any one of his Managers in respect of any problem where either his lack of experience, information or knowledge presented a problem in the performance of his duties.

The Tribunal does not accept that the pressure of meeting targets set by management either justified or compelled the Grievor to process loan applications in non-compliance with reasonable and standard banking practices. There was no evidence before the Tribunal that targets set by management had resulted in other SME assistant managers proceeding down the same path as the Grievor.

The Tribunal has concluded that the Employer acted with justification when it decided to terminate the Grievor’s employment with immediate effect. Such a penalty was within the band of penalties which a prudent employer acting reasonably would have have considered appropriate.

As for the procedure followed by the Employer, the Tribunal has concluded that there has been substantial compliance with clause 13 of the Collective Agreement in so far as it applied to this Dispute. There has been no breach of the clause.

During closing submissions, the Union submitted that the Tribunal should consider only the initial ten files which were the subject of the meeting on 4 March 2005. It was submitted that when the Grievor and his union representative went to the interview on 22 April 2005 they were in a position to respond to those matters. The Grievor, it was submitted, did not have time to consider his responses to the other files.

Whilst the submission does seem attractive on its face, the Tribunal has concluded that it is without merit. The Grievor had been informed in his suspension letter dated 4 March 2005 that:

"Based on information/documentation that has recently come to my attention, ANZ has serious concerns regarding your conduct in exercising your Credit Approval Discretion and complying with ANZ Credit Policy. An investigation is currently in progress to ascertain the extent of your involvement in these matters and the immediate and potential business consequences of your actions".

Therefore the Grievor had been put on notice that there were on-going investigations into his activities at the Nausori Branch. Furthermore, at the meeting on 4 March 2005 the Grievor was informed by Mr Browne that one of the reasons for his suspension was that an investigation was continuing into his lending portfolio.

At no stage during the course of the meeting on 22 April 2005 did the Grievor or his union representative raise any objection to the fact that an additional 23 files were being discussed. At no stage did the Grievor or his representative request an adjournment of the meeting or some further time to consider the files all of which were available for perusal and examination.

When he felt compelled to do so, the Grievor demonstrated a more than adequate knowledge of each and every transaction under discussion.

The Tribunal has concluded that there was nothing that could be described as procedurally unfair in the manner in which the Employer had reached its decision.

As a result the Tribunal has concluded that the decision to terminate the Grievor’s employment was neither unreasonable nor unfair.

Finally, during the course of its closing submissions, the union indicated some concern about the manner in which the Tribunal had pursued some questions with the Grievor. To the extent that the Tribunal pursued its questions in a robust manner it was entirely due to the evasive and smart manner in which the Grievor conducted himself whilst giving his evidence.

The Tribunal wishes to stress that the credibility of all witnesses was assessed objectively and the weight given to each witness’s evidence was determined by a consideration of the mostly uncontradicted documentary evidence.

AWARD

The summary dismissal of the Grievor was not unjust, unreasonable nor unfair.

DATED at Suva this 5^th day of February 2008.

Mr. W. D. Calanchini
ARBITRATION TRIBUNAL