Employment Contract: Amponsem v Laundy (Exhibition) Pty Ltd [2014] FCCA 2206

Breach of contractual duty of fidelity and fiduciary duties

The former head chef of North Wollongong Hotel has been ordered to pay his employer more than $70,000 after it was found that he swindled hundreds of thousands of chicken schnitzels through his wife’s company and profited more than $1.00 on every schnitzel piece. The Federal Circuit Court found that the chef had breached his contractual duty of fidelity and fiduciary duties that he owed to his employer.

The facts

Mr Amponsem was the head chef of North Wollongong Hotel from March 2008 until he was dismissed in March 2011. Part of his role involved purchasing stock for the hotel.

In March 2009, after problems with their chicken schnitzel supplier, the hotel directed Mr Amponsem to find a new supplier. He found a local supplier who could provide the schnitzels for $1.80 per piece. Mr Amponsem did not advise his employer of this and instead acquired the chicken through the supplier and funnelled it through his wife’s business. The business would then invoice the hotel at $2.80 per chicken schnitzel and pocket $1.00 for every piece.

This continued on until, in March 2011, a duty manager of the hotel realised that a number of quiches had gone missing. The hotel then decided to audit its quiche and schnitzel sales history. After an investigation, it was found that more than 9,000 chicken schnitzels had been paid for but not received and the hotel uncovered that the business issuing the invoices was owned by Mr Amponsem’s wife.

After he was dismissed, police laid charges against Mr Amponsem for two counts of dishonestly obtaining financial advantage for deception and one count of obtaining money by deception. In November 2012, the Wollongong Local Court dismissed the charges against him as there was insufficient evidence.  

Mr Amponsem subsequently commenced proceedings in the Federal Circuit Court against the hotel for failing to pay him his accrued annual leave, amounting to $11,305.

However, the hotel filed a cross-claim against Mr Amponsem alleging that they were entitled to withhold his accrued annual leave as Mr Amponsem had dishonestly caused the hotel to suffer a financial loss of $139,577.

The decision

The judge found that Mr Amprosem had an express duty to act with fidelity, both under his letter of employment and the hotel’s behaviour standards manual. Despite Mr Amponsem’s claims that he had not read the manual, it was found that he was aware of the manual, and it was therefore incorporated into his contract of employment.

In any event, the judge said that:

the law implies in every contract of employment a term that is generally referred to as a duty to act with fidelity and good faith.”

The duty therefore required Mr Amponsem to purchase the schnitzels, as directed by the hotel, for the benefit, and only for the benefit of the hotel. By promoting the interests of himself and his wife’s business ahead of those of the hotel, Mr Amponsem breached his duty to act with fidelity and good faith.

The Court allowed a discount in the amount awarded to the hotel for the work involved in Mr Amponsem obtaining the chicken schnitzels, mainly in negotiating the price of $1.80 and in using his car and mobile phone to order and pick up the schnitzels. The Court found that Mr Amponsem owed $84,143.60 to the hotel. His claim for unpaid accrued annual leave was deducted from his amount and the Court ordered Mr Amponsem to pay $72,838 to the hotel.

This case demonstrates that despite the absence of an express term in an employment contract or workplace policy, a term requiring an employee to act with fidelity and good faith will be implied into every contract of employment. This term requires employees to promote the employer’s interests above their own and act honestly whilst carrying out employment duties.

* PCC Lawyers are a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training.  They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.