Andrew Hennessey v Architectus Group Holdings Pty Ltd

[2010] NSWSC 1390

CITATION:	Andrew Hennessey v Architectus Group Holdings Pty Ltd [2010] NSWSC 1390
HEARING DATE(S):	13 September 2010
JUDGMENT DATE :	6 December 2010
JUDGMENT OF:	Slattery J at 1
DECISION:	See paragraphs 78 of judgment.
CATCHWORDS:	CONTRACT - contract of employment - terms of contract - whether contract terminable only after two years or terminable on reasonable notice - whether document passing between parties after employment commenced is incorporated in to their contract - whether consideration for variation to their agreement - whether form of agreement should be rectified to delete clause providing for minimum two year term of employment. - HELD - contract terminable only after two years - no common intention to have other than a minimum two year term of employment - determination of issues relating to assessment of damages
CATEGORY:	Principal judgment
CASES CITED:	Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 Earl of Bradford v Earl of Romney (1862) 54 ER 956 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Foakes v Beer (1884) 9 App Cas 605 Fowler v Fowler (1859) 45 ER 97 Frederick E Rose (London) Limited v William H Pim Junior & Co Limited (1953) 2 QB 450 Joscelyne v Nissen [1970] 2 QB 86 MacKenzie v Coulson (1869) LR8Eq 368 Ryledar Pty Limited v Euphoric Pty Limited (2007) 69 NSWLR 603 Sells v Sells (1860) 62 ER 294
TEXTS CITED:	Equity: Doctrines and Remedies, Meagher Gummow and Lehane, Butterworths, Lexis Nexis, (2002)
PARTIES:	Plaintiff-Andrew Hennessey Defendant- Architecus Group Holdings Pty Ltd
FILE NUMBER(S):	SC 2009/336656
COUNSEL:	Plainitff-Dr J Berwick Defendant-Mr J. Giles
SOLICITORS:	Plaintiff-Craddock, Murray Neumann Lawyers Defendant-Clarendon Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SLATTERY J

MONDAY, 6 DECEMBER 2010

2009/336656 ANDREW HENNESSEY v ARCHITECTUS GROUP HOLDINGS PTY LTD

JUDGMENT

1 HIS HONOUR: In September 2008 the Australian architectural practice, Architectus Group Holdings Pty Ltd (“Architectus”) employed Mr Andrew Hennessy as an information technology specialist. The terms of that employment contract are in dispute in these proceedings. In July 2009 as a result of the global financial crisis, Architectus made Mr Andrew Hennessy redundant. He now sues Architectus claiming entitlements under what he says are the terms of his contract of employment. Architectus disputes that the written materials passing between itself and Mr Hennessy represent their true agreement. The employer seeks rectification of the written form of these materials so that they accord with what it says is the true common intention of the parties. At issue in the proceedings is whether the written materials passing between the parties represent the consensus they reached and if so, whether Architectus has paid Mr Hennessy his proper entitlements. A more detailed account of Mr Hennessy’s engagement is required for analysis of these issues. Dr J. Berwick appeared for Mr Hennessy and Mr J. Giles for Architectus.

Architectus Engages Mr Hennessy

2 Mr Hennessy holds a Bachelor of Science (Computer Science) degree from Macquarie University. Since his graduation in 1992 he has worked in the information technology sector with EDS (Electronic Data Systems), Fujitsu Australia, and UNISYS. He was born in February 1969 and at the date of the hearing was aged 41.

3 Mr Hennessy was made redundant by UNISYS in March 2008. He set about looking for other employment within his field of expertise. He was unemployed between March and August 2008. Mr Hennessy used the recruitment group Hays Information Technology (“Hays”) to assist him in finding employment. Hays arranged a job interview for him with the company secretary and Chief Operating Officer of Architectus, Mr Barry Aarons. Architectus was looking for an Information Technology (“IT”) manager in a role which Architectus described as being “responsible for leading the information technology team in providing effective strategies and IT operational practices for all Architectus’ business activity”.

4 Mr Lee-Martin Seymour of Hays set up the first meeting between Mr Hennessy and Mr Aarons on 27 August 2008 at the Architectus offices. Mr Aarons explained that Architectus had recently had a strategic management report done and that one of the report’s recommendations was that Architectus engage an in-house IT manager. This first meeting discussed the job specifications for that position and Mr Hennessy’s experience in similar business environments. Mr Aarons also analysed Mr Hennessey’s resume with him. There was no discussion of a precise proposed salary or any terms of employment at this first meeting.

5 The discussions continued further. About a week later Mr Hennessy attended another meeting at the Sydney office of Architectus with Mr Aarons and Mr David Sainsbery, the Managing Director of Architectus. Two other employees Ms Christine Wigg and Mr Abdual Lakhesi were also present on this occasion. The Archictectus representatives seemed more concerned at this meeting with testing Mr Hennessy’s IT capacities than discussing the details of his future terms of employment. Indeed, communication of whether or not Mr Hennessy’s employment application had been successful only occurred later through Mr Seymour.

6 Shortly after the second meeting Mr Seymour communicated to Mr Hennessy that Mr Hennessy was being offered the job. On 2 September 2008 at 12.25pm Mr Aarons emailed Mr Seymour from Architectus’ Melbourne office on the subject “Architectus – Andrew Hennessy offer”, saying to him:

“Lee, attached please find the letter of offer. The plan will be to get Andrew to Melbourne on Monday for a series of meetings. This would continue on Tuesday. On Wednesday, I would go up to Sydney and start the introductions up there. I will call Andrew shortly.
Barry Aarons,
Chief Operating Officer
Architectus”

7 At 12.35pm the same day Mr Seymour forwarded the email on to Mr Hennessy stating “Barry, will be in touch with you ASAP to arrange travel details. Well done Andrew – it’s good to see this in black and white!”

8 Mr Aarons’ email attached a letter from Architectus to Mr Hennessy of 2 September 2008. The letter explained the structure of Architectus, forecast the nature of the business that Architectus expected to attract in the medium term, explained the merger between the Sydney and Melbourne centres of the practice and confirmed that the IT Group Manager role to be taken up by Mr Hennessy was Sydney based. Then in sections 3, 4 and 5 it gave a description of the position and Mr Hennessy’s proposed commencement date. These parts of the 2 September 2008 letter are set out below:

“3. Remuneration & benefits

Our salary offer for you to undertake the role of IT Group Manager is $155,000 inclusive of superannuation. The salary package would be subject to annual reviews and is made on the basis of your on-going contribution and involvement in the Practice.

We are very committed to the success of this role and the wider contribution and liaison with the other Architectus offices. We regard this as a long term role and that you will work with us for many years.

4. Employment Agreement

Architectus has an employment agreement that is used for the employment off all staff within the Practice. We include a copy of the Employment Agreement with this letter.

We will ensure that we formally discuss your role, six months after commencement and confirm that we are all comfortable with on-going arrangements.

5. Commencement date

We anticipate that you will commence on the 8 ^th of September. The first 2 days will be spent in Melbourne with meetings lined up with both Pitcher Partners and Emagin8. We would then anticipate that Barry will meet you in Sydney on the 10 ^th and arrange all necessary introductions as well as arrange initial meetings with Balmoral and key staff.

We look forward to you accepting this position and playing a key role in helping us achieve our long term vision.”

9 Section 4 of the 2 September 2008 letter refers to the inclusion of “a copy of the Employment Agreement” used for the employment of all staff. No copy of the Employment Agreement was actually included with the 2 September 2008 letter.

10 Mr Hennessy asked for a copy of the Employment Agreement shortly after 2 September 2008. He telephoned Mr Aarons and had a conversation to the following effect.

Mr Hennessy: “Thanks, Barry. I accept the offer and look forward to starting on the 8 ^th of September 2008. The letter of offer refers to an Employment Agreement, but it wasn’t with the letter of offer.”
Mr Aarons: ”I’m sorry about that. It should have been. I will get it to you.”

11 Mr Hennessy commenced at work at the Melbourne office of Architectus on 8 September 2008. Architectus staff gave him a document entitled “Architectus Company Policies and Procedures Handbook”. He spent two days at Architectus’ Melbourne office after which he worked full time in Sydney.

12 Architectus did not forward the Employment Agreement to Mr Hennessy. On a number of occasions in the five months after he commenced work Mr Hennessy raised the Employment Agreement with Mr Richard Hollerhead, the Practice Manager at Architectus. Mr Hennessy asked Mr Hollerhead for the letter of offer in the following terms:

“My letter of engagement referred to Employment Agreement. I told Barry Aarons when I got the letter of engagement that the Employment Agreement was not included. He said that he would get it. Any idea when I am going to get it?”

13 Mr Richard Hollerhead said to Mr Hennessy in response to these enquiries “don’t worry it’ll come”. About February 2009 Mr Hollerhead handed a document to Mr Hennessy entitled “Employment Deed”. It was undated and unsigned. When Mr Hollerhead gave the document to Mr Hennessy he said “here it is” to which Mr Hennessy replied “thanks”.

The Employment Deed

14 Mr Hennessy says and I accept that he believes that this document, although entitled “Employment Deed” was the “Employment Agreement” referred to in the 2 September 2008 letter for which he had been asking. Mr Hennessy read the Employment Deed merely to confirm that it correctly set out his salary.

15 The Employment Deed was crafted for Mr Hennessy’s own employment with Architectus. It referred in several places to Mr Hennessy’s role as Group IT Manager for Architectus. It contained terms specific to Mr Hennessy’s own employment with Architectus. The Employment Deed dealt with a wide range of the subject matters that would ordinarily be the subject matter of an employment contract between a professional and an employee in middle management. The Employment Deed covered issues relating to Mr Hennessy’s appointment, term, duties and responsibilities, remuneration and superannuation, expenses, legal entitlements, applicable policies and guidelines, confidential information, ownership of intellectual property, moral rights and termination, most of which were not in the 2 September 2008 letter. Architectus disputes that the Employment Deed represents terms binding between it and Mr Hennessy. It says the Employment Deed was given to Mr Hennessy in error.

16 Appointment and Term. The form of clause 2 of the Employment Deed Architectus appoints Mr Hennessy as Group IT Manager and records that he accepted that employment. Under clause 3 of the Employment Deed the term of Mr Hennessy’s employment was defined as, “the term of your employment under this Deed starts on Commencement Date and continues until your employment is terminated under clause 12”. The Commencement Date is defined under the Employment Deed as 8 September 2008.

. Under clause 4.1 of the form of Employment Deed Mr Hennessy was required to perform Duties set out in Schedule 2 of the Agreement. Although Schedule 2 was not clearly identified in the Employment Deed it is reasonably clear that Schedule 2 is a page with the Employment Deed, entitled “Role descriptions – Group” setting out in some detail the job definition, reporting responsibilities, duties, specific responsibilities, authority and competencies of the Group Information Technology Manager. Under the form of Employment Deed clause 4.1 Mr Hennessy is also required to devote the whole of his time, attention and skills during normal business hours to his position and to faithfully and diligently perform the defined Duties and exercise powers consistent with the position of Group IT Manager. Finally clause 4.1 (d) and (e) required Mr Hennessy to:

“(d) comply with the Company’s policies and procedures as amended from time to time,

(e) promote the interest of the Company and the Group“

18 The “Group” is defined under the Employment Deed as meaning Architectus itself and all bodies corporate subsidiary to it.

19 Remuneration and Superannuation. The form of Employment Deed clause 5.1 requires Architectus to pay Mr Hennessy the Fixed Annual Remuneration of $155,000 made up of base salary, superannuation and any salary packaging, but was exclusive of over time, loadings and penalty rates. The initial remuneration of $155,000 was to be reviewed no later than each anniversary of the Employment Deed. After review the amount of the Fixed Annual Remuneration was the amount agreed at review, which could result in an increase or decrease in his Fixed Annual Remuneration.

The form of Employment Deed clause 8 provides a regime for compliance with Architectus’ (the Company’s) policies and guidelines in the following terms:

“The Company has a number of policies and guidelines, which are varied from time to time and apply to your employment. You are obliged to read those policies and comply with them.“

. Employment Deed clause 12.1 and 12.2 provides for termination by Mr Hennessy and termination by Architectus in the following terms.

“12.1 Termination by employee

This deed may be terminated in writing at any time by you by giving the period of notice set out in item 4 of Schedule 1, or such shorter period as agreed between the parties.

12.2 Termination by Company
(a) Subject to clause 12.4, this deed may be terminated in writing at any time by the Company by giving the period of notice set out in item 5 of Schedule 1, or such shorter period as agreed between the parties.
(b) The Company must not terminate your employment without cause before the second anniversary of the Commencement Date.”

Mr Hennessy says and I accept that he did not read the Employment Deed closely. He says that if he did read it he did not subsequently remember clause 12.2(b) of the document.

22 Item 4 of Schedule 1 specifies that the employee’s notice period of termination is a minimum of 1 month. Item 5 of Schedule 1 specifies that the Company’s notice period for termination is a minimum of 1 month. The other provisions of the Deed covering expenses, leave entitlements, confidentiality, ownership of intellectual property rights are not of relevance to the issues in these proceedings.

Mr Hennessy’s Termination

23 The global financial crisis placed growing pressure on Architectus in the first half of 2009. In early June 2009 Mr Hennessy, apparently in common with a number of employees of Architectus, had meetings with Mr Aarons about their future. Mr Hennessy agreed to accept for a limited but undefined period of time a salary reduction from $155,000 Fixed Annual Remuneration to $139,500 Fixed Annual Remuneration. Architectus recorded this change in a letter it sent to Mr Hennessy on 5 June 2009. The 5 June 2009 letter commenced “We refer to your employment agreement with Architectus Group Holdings Pty Ltd dated 8 September 2008 and our recent discussions.” The letter proceeded to explain that the current financial position of Architectus meant that there was a need to reduce salaries at the Board, Associate Director and Senior Management level to enhance the financial performance of the company. The letter went on:-

“The purpose of this letter is to record the agreement reached in our discussions, namely the reduction of your Fixed Annual Remuneration (“FAR”). I confirm that from 1 ^st June 2009 your FAR will be reduced from $155,000 to $139,500. We are hoping that with the reduction of the Board and Associate Directors, and that of Senior Management staff, will ease our cashflow issues and that this reduction will be for a limited period only. I intend to discuss with you on a regular basis.

Please note that the components of your FAR will be as follows:

Base Salary $127,982
Superannuation $11,518

This letter only varies the terms of your Employment Agreement with respect to your FAR. All other terms remain unchanged. Please let me know if you want to Salary Sacrifice any further amount of your base salary.”

24 The letter concluded offering Architectus’ appreciation for Mr Hennessy’s “understanding in these tough times” and it “acknowledges the personal sacrifices you are making”.

25 Further cost constraint was required at Architectus. Towards the end of June 2009 Mr Aarons and Mr Henessy met again. Mr Aarons explained at this further meeting “things are tough all over, Andrew. We are going to let you go effective from 31 July 2009. Regard this as your four weeks notice”. Mr Aarons requested that Mr Hennessy work up to 31 July 2009. Architectus confirmed Mr Aarons’ news in a letter dated 30 June 2009. The letter referred to discussions on Friday 26 June 2009 and it went on:

“As explained our current financial position has meant that we are reviewing all staff positions at present and unfortunately this will mean that Architectus will no longer require your employment effective from 31 July 2009. The period from 1 July to 31 July will represent your notice period as required by virtue of your Employment Agreement. I would like you to work out this notice period to ensure that all the hard work you have put in is not lost and that the hand over of day to day matters is effective and smooth.”

26 This letter offered Mr Hennessy flexibility to attend other job interviews on appropriate prior notice and expressed appreciation for Mr Hennessy’s efforts; sought to make his departure as amicable as possible and offered to supply a written reference when required. Up to 30 June 2009 the arrangements for Mr Hennessy’s departure appeared smooth. There has never been any suggestion that Mr Hennessy was being terminated for cause. Shortly after 30 June 2009 that Mr Hennessy spoke to his solicitor which lead to Mr Hennessy arranging to meet Mr Aarons and Mr Hollerhead on the 9^th of July 2009.

Focus on Employment Deed Clause 12.2(b)

27 Mr Hennessy was unhappy that he was terminated from his employment. Following legal advice he met Mr Aarons and Mr Hollerhead at the Architectus Sydney office. He pointed out clause 12.2(b) of the Employment Deed to them. Mr Hennessy says that Mr Aarons responded in words that I accept Mr Aaron did say, to the following effect:

“The Deed is not signed. You can’t enforce it and anyway, it was a mistake. No one else has the clause. It is a directors clause. It is different from the Schedule. We won’t be paying it.“

28 The defendant supplemented the detail of what happened on the 9 July 2009 meeting in the evidence of Mr Aarons, who was not cross-examined. I accept that at the meeting on 9 July 2009 that the following further conversation took place. Mr Hennessy pointed out that “I have read my contract. You need to read clause 12.2(b)”. This is how Mr Hennessy introduced the subject of clause 12.2(b). Mr Hennessy handed the Employment Deed across to Mr Aarons who read it. I accept Mr Aarons’ evidence that he was genuinely surprised that clause 12.2(b) containing a 2 year employment term was in the Employment Deed. I accept this evidence that he thought that Mr Hennessy’s employment contract could be terminated on Architectus giving him four weeks notice. I also accept that the following conversation took place between Mr Aarons and Mr Hennessy:

Mr Aarons: “It is a mistake. You must know it is a mistake.”
Mr Aarons: “What is it that you are after?”
Mr Hennessy: “I want my contract paid out.”
Mr Aarons: “That is ridiculous. You know that it was not intended by either of us that you have a two year fixed term. You are trying to extract money out of us, and that is not correct or in the right spirit. We will only pay out your accrued leave. Why did you not raise this fixed term at any of our earlier meetings and particularly our meeting on 26 June?”

29 I find that Mr Hennessy did not respond to that question and that Mr Aarons then went on to say ”Now that you have made this demand it doesn’t make it sense here to serve out your notice period.” Architectus then paid out Mr Hennessy’s notice period in full. Mr Hennessy did not return to the office.

30 On 16 July 2009 Mr Hennessy’s solicitors, Messrs Craddock Murray Newman wrote to Architectus claiming it was in breach of the Employment Deed because it failed to give Mr Hennessy correct notice of termination of his employment. The 16 July 2009 letter claimed the Architectus – Hennessy contract was for a fixed period of 2 years and that only after that period could the notice option be enlivened. It dismissed Mr Aarons’ explanation that he had made a mistake in drafting the contract and claimed Fixed Annual Remuneration at the rate of $155,000 per annum for a further 14 months making a total claim of $180,833.88. On 30 July 2009 Messrs Clarendon Lawyers replied to this letter and deployed many of the arguments that Architectus has now advanced in these proceedings.

31 The matter was not resolved. Mr Hennessy commenced these proceedings by Summons on 13 May 2010.

Architectus Makes an Error

32 Architectus made an internal error in sending the Employment Deed to Mr Hennessy. Its witnesses have explained the error. They have not been cross-examined. I accept their evidence. The error arose from transactions of some complexity to which Mr Hennessy was not a party.

33 Although the 2 September 2008 letter referred to an Employment Agreement being included, not only was one not included but Architectus did not have a standard Employment Agreement for its senior staff at that time. Architectus had only then recently commenced operations as a single merged corporate entity operating the Sydney and Melbourne Architectus practices. Until 2 July 2008 the Sydney and Melbourne practices had been financially independent of one another but operating under the name “Architectus”. The shareholders of the companies which carried on the practices in Sydney and in Melbourne were different people. Architectus was formed when the two offices merged on 2 July 2008. Other offices using the “Architectus” name in Brisbane and Auckland remained financially independent of Architectus. Once the merger took place all the assets and staff of the Sydney and Melbourne offices were to be transferred to or employed by Architectus.

34 The merger of the Sydney and Melbourne offices was upon terms that the directors and shareholders in Architectus would be employed for at least two years from the date of the merger. The internal correspondence preceding the merger shows that there was an agreed two year moratorium on Architectus terminating a director’s employment without cause.

35 The above merger term resulted in the preparation of an Employment Deed for the Architectus Directors containing the minimum two year fixed term of employment clause. In the standard form of Director’s Employment Deed, clause 14.2 provided for this two year fixed term.

36 Merger related administration continued into August 2008 when Architectus also made offers to the Associate Directors of the Melbourne and Sydney offices to become shareholders in Architectus. Each Associate Director upon becoming a shareholder, was provided with a new employment contract containing the minimum fixed term clause. This clause was included in the Associate Director’s Employment Deeds as part of the consideration for their becoming shareholders in Architectus. Architectus wished to ensure that its Associate Directors would also become an integral part of the new merged company for at least two years in the same way as the Directors. The Directors’ Employment Deed and the Associate Directors’ Employment Deed only differed in respect of their non compete clauses.

37 The extent of this administrative activity goes some way to explaining why it took five months for Architectus to provide the Employment Agreement to Mr Hennessy which had been foreshadowed in its 2 September 2008 letter.

38 Once the share offers to Associate Directors were concluded in early January 2009 Mr Aarons began to arrange new contracts for the senior staff in the Sydney and Melbourne offices. Mr Aarons instructed Clarendon Lawyers, the Architectus’ solicitors to begin preparing employment contracts for all these senior staff. Clarendon Lawyers drafted a senior staff agreement, containing the two year minimum employment clause from the Directors’ Employment Deed and the Associate Directors’ Employment Deed.

39 The reason the two year employment term was in the new draft was understandable. Every draft that Mr Aarons had already instructed Clarendon Lawyers to prepare for the Directors or the Associate Directors up to that time contained the clause. The evidence does not show that Mr Aarons instructed the solicitor at Clarendon Lawyers not to include the two year minimum employment clause in the Employment Deed for senior staff.

40 Clarendon Lawyers and Mr Aarons settled a standard form senior staff Employment Deed by crafting a prototype Employment Deed for the financial controller of the Architectus Sydney office, Ms Lisa Crawford. Architectus then used that settled draft for other employees. The evidence shows that the document prepared for Ms Crawford contains clause 12.2 in the same form as the Employment Deed given to Mr Hennessy. Clarendon Lawyers based Ms Crawford’s Employment Deed on the Directors’ and Associate Directors’ Employment Deeds with various amendments which were highlighted to Mr Aarons in an email from Clarendon Lawyers. The amendments related to the subjects of annual leave loadings, personal/carer’s leave, the inclusion of a competition restraint and death benefits and a number of other minor matters. Clarendon Lawyers did not draw Mr Aarons’ attention to clause 12.2 of Ms Crawford’s Employment Deed. He says and I accept that he never asked Clarendon Lawyers to include a minimum fixed term clause in Ms Crawford’s Employment Deed. Mr Aaron says and I also accept that it was not his intention that the Employment Deed for Ms Crawford or for other senior staff should contain a minimum two year fixed term clause. He says that had he noticed the two year minimum fixed term clause in the draft of the Employment Deed for Ms Crawford that he would have instructed that it be removed immediately. But he did not notice that it was there.

41 Once the Employment Deed for Ms Crawford was finalised it became the template from which Mr Aarons prepared the agreements for the other senior staff, including Mr Hennessy. This explains how Mr Hennessy’s Employment Deed came to contain clause 12.2. Architectus says that it was included in error. It was a mistake on its part.

The Findings Based on the Oral Evidence

42 There was little evidentiary contest in the proceedings. How the error arose on the defendants’ side was not disputed. But counsel for Architectus cross-examined Mr Hennessy upon his state of mind. I make the following findings as to Mr Hennessy’s state of mind and at shortly after the time he made his Employment Agreement with Architectus.

43 First, Mr Hennessy did not think in September 2008 or at any time before his termination about whether he could leave Architectus by giving a period of notice or whether he himself could be terminated on reasonable notice. He says that he did not really think about those things and I accept that he did not think about them. When Mr Hennessy was asked that if things did not work out from his perspective whether he thought he “could leave [Architectus] by giving a period of notice” he answered “yes, I didn’t think about it at that level at all”. This only indicates in my view that he did not think about the matter. It does not indicate that he made any particular assumptions about notice periods, to which he gave any conscious attention. Indeed my strong impression of his evidence was that he just did not think about or have his attention directed in September 2008 to the issue of notice periods to terminate his employment.

44 Second, the first time Mr Hennessy seemed expressly to believe that he had been employed for two years was when he received legal advice after Architectus terminated his employment. This was because his lawyers went through the Employment Deed and gave him advice about it. His state of mind before he received that advice was not that he thought his employment could be terminated on being given reasonable notice but rather that he had not thought about the issue. However I also infer from the circumstances of his employment, including the Architectus pre-contract statements to him about the creation of the new IT position with Architectus he was to fill, that he believed that he was to be employed in the longer term not the shorter tem.

45 Although the passages of Mr Hennessy’s cross-examination may be thought in places to suggest a belief on his part that his employment could be terminated on giving reasonable notice, I do not think that is the true effect of his evidence at all. There are two passages concerning this subject. The first (Transcript page 23) is to the following effect:

“Q. Mr Hennessey what I am directing you to is the point in time at which you believed that, believed for the first time that my client had employed you for two years. I'm not suggesting you didn't believe that at some stage, I just want to know when the first time you formed that belief?
A. That when, it was when I saw my lawyers, yes.

Q. And that was after my client had terminated your employment?
A. Yes.

Q. And until then you believed that you could be terminated or your employment could be terminated on reasonable notice didn't you?
A. Yes I guess so.”

46 The next passage, when Mr Giles returned to the subject occurs a few lines later when the cross-examination continued in the following way (Transcript page 24):

“Q. And when you received this you still thought that your employment could be terminated on giving reasonable notice didn't you?
A. I hadn't really thought at that level, it didn't come up.

Q. You understood that your previous employers could terminate your employment on reasonable notice didn't you?
A. Yes.

Q. And you thought my client was in no different position?
A. Yes.”

47 In the first of these passages my impression of Mr Hennessy’s answers was that when he said “I guess so” he was not assenting to having any particular state of mind about his employment being terminated on reasonable notice at the time he made his Employment Agreement. In the second passage, when Mr Hennessy failed to differentiate his view about termination of his employment on reasonable notice with Architectus from the position that existed with previous employers, he is indicating that that is not a subject to which he turned his mind at all. These answers in my view do not amount to any positive assertion of belief on Mr Hennessy’s part that he knew that Architectus could terminate his employment on “reasonable notice”.

48 These answers were the product of a subtle cross-examination but one which left unresolved the precise boundaries between Mr Hennessy’s supposition and belief as to the notice period. The cross-examination did not establish that Mr Hennessy believed that he was not entitled to stay for a minimum two year term. It did establish that the 2 September 2008 letter did not convey to him that he was employed for a minimum of two years. I have found that he believed that he would be employed in the longer term because of his new IT position.

49 Third, Mr Hennessy did notice the Employment Agreement was not included with the 2 September 2008 letter. He regarded the 2 September 2008 letter as a general document, “an overview of the job description” and, as just being the “letter of offer”. But it did not appear to him to contain the detailed conditions that he expected concerning matters such as holiday pay. That is why he sought out a copy of the document. He did not regard his contract as being sufficiently well defined until he received the Employment Deed.

50 Fourth, Mr Aarons did explain to Mr Hennessy in January 2009 that Architectus was in the process of drafting contracts for management staff. He apologised that he had not given a contract to Mr Hennessy, although Mr Hennessy had been asking for one. He explained to Mr Hennessy, as was the fact, “we have so much on, I just haven’t had time to deal with it. I hope to have it to you by mid to late February”. I accept that Mr Hennessy could see that Architectus was undergoing a very busy period of reconstruction and was prepared to wait a little longer. I find that Mr Aarons did say these things to him.

51 It is now necessary to analyse the legal effect of this course of events. Mr Hennessy seeks the enforcement of clause 12.2 (b) of the Employment Deed and seeks to be paid out what he claims is the balance of his contract. Architectus advanced several matters in opposition to Mr Hennessy’s claim, which define the issues for consideration in these reasons:

(a) a minimum two year term was not agreed;

(b) if a two year minimum term was agreed it was a variation to the contract of employment for which there was no consideration;

(c) the unsigned Employment Deed should be rectified to delete clause 12.2(b);

(d) there is a dispute about the quantum of any damages.

52 These reasons now deal with each of these issues in turn.

A Minimum Two Year Term

53 A minimum two year term was agreed between Mr Hennessy and Architectus. There was no such term in the 2 September letter but it was contained in the Employment Deed which became part of the contract of employment between the two.

54 Both parties understood that the terms of the employment contract between Mr Hennessy and Architectus were incomplete as at 2 September 2010. The 2 September letter made clear that the rest of the terms that would be binding between them would be in the “employment agreement that is used for the employment of all staff within the Practice”.

55 When the document was left out of the 2 September letter both parties appreciated that the omission would be rectified later and something answering the description “employment agreement” would be supplied later to Mr Hennessy.

56 Mr Hennessy so firmly believed that would happen that he asked for the document a number of times. So did Mr Aarons, who indicated that it was coming and apologized for the delay.

57 Whether the terms contained in the Employment Deed were agreed is to be determined objectively: Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at [25] per Gaudron, McHugh, Hayne and Callinan JJ.

58 When it was given to Mr Hennessy he and Architectus objectively were entitled to assume that all the terms provided in this very form would be binding on both of them unless within a short time (probably until Mr Hennessy’s next periodic pay) Mr Hennessy sought to dispute any of the terms. He did not dispute them. What Mr Hennessy was given fitted exactly what the 2 September 2008 letter contemplated. The additional terms in this Employment Deed became binding on him shortly after its receipt.

59 Although the Employment Deed is in the form of a Deed which couldhave been executed and returned, Mr Hennessy’s failure to return it does not count against him. The 2 September 2008 letter did not suggest that the “employment agreement” must be signed and returned before it would become binding. Mr Aarons did not indicate to Mr Hennessy that it would not become binding until it was signed and returned. There was some effort and ceremony attached just to giving it to him. Also it was specific to him.

60 Furthermore both parties objectively viewed and expected the contents of the Employment Deed to become binding on them. Architectus itself gained many advantages from the detail and precision that was reflected in the Employment Deed. It defined his duties and all the other matters set out in paragraph [15] above.

61 The Employment Deed was a variation to the terms of the 2 September letter. It supplemented those earlier terms including by the addition of clause 12.2(b).

No Consideration

62 Architectus’ next point was that there was no consideration for the variation to the 2 September agreement. Architectus argued that by the Employment Deed that Mr Hennessy did not promise to do anything other than what he had already promised to do: Foakes v Beer (1884) 9 App Cas 605.

63 This argument does not succeed. The consideration for the variation is Mr Hennessy’s promise to abide by all the supplementary terms in the Employment agreement. They could have been enforced against him had Architectus chosen to do so.

Rectification

64 Architectus says that the form of the contract of employment between itself and Mr Hennessy should be rectified to delete clause 12.2(b), because the true agreement between the parties did not include a fixed two year term. It is useful to state the applicable principles of law before analysing this issue.

Legal Principles in Relation to Rectification

65 The principles of law that apply when the equitable remedy of rectification is invoked may be stated with reasonable clarity. Where the written form of an instrument such as a deed or contract embodies a mistake the document may be rectified by a court of equity. The equitable doctrine of rectification allows the court by decree to reform the instrument in which the parties have mistakenly expressed their agreement. Courts of equity do not rectify contracts but they rectify instruments purporting to have been made pursuant to the terms of a contract: MacKenzie v Coulson (1869) LR8Eq 368 at 375 in order to gain a decree of rectification it is necessary to show that the parties were in complete agreement on the terms of their contract but by an error wrote them down wrongly: Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 at 456 per Denning LJ.

66 It is not necessary for a plaintiff in a rectification suit to prove an antecedent contract before rectification will be decreed: Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329; (1995) 7 BPR 15,083. Even without a concluded antecedent agreement a court of equity has jurisdiction to rectify an agreement if there can be found a common continuing intention in regard to a particular provision of the agreement that is incorrectly embodied within it: Joscelyne v Nissen [1970] 2 QB 86; [1970] 1 All ER 1213 and Equity: Doctrines and Remedies, Meagher Gummow and Lehane, Butterworths, Lexis Nexis, (2002) at [26-035].

67 Convincing proof is required before the remedy of rectification will be granted Joscelyne v Nissen [1970] 1 All ER 1213; [1970] 2 QB 86 at 98.

68 Rectification is more difficult to obtain if the mistake unilateral as distinct from common or mutual mistake: Equity: Doctrines and Remedies, Meagher Gummow and Lehane, Butterworths, Lexis Nexis, (2002) at [26-075]. The general rule is that rectification in such circumstances is not permitted: Fowler v Fowler (1859) 45 ER 97; (1859) 4 De G & J 250, Sells v Sells (1860) 62 ER 294 and Earl of Bradford v Earl of Romney (1862) 54 ER 956; (1862) 10 WR 414. There are exceptions to this rule but none of them apply in the present case. The Court can decree rectification in the case of unilateral mistake where the party who is not mistaken is guilty of fraud. A party is also entitled to rectification of the contract on proof that he believed that a particular term was to be included it the contract and the other party omitted the term from the concluded contract and that the omission was made in the knowledge that the first party believed the term to be included. Both parties have expressly disclaimed reliance upon such doctrines in the present case.

69 But what is the common intention in this case and how is it to be ascertained? On this subject Mr Giles helpfully referred me to Campbell JA’s reasons in Ryledar Pty Limited v Euphoric Pty Limited [2007] NSWCA 65; (2007) 69 NSWLR 603 where his Honour explained at [281] the various ways that a common intention may be inferred:

“ In my view, when the fundamental requirement for granting rectification is a continuing common intention of the parties, it is of more assistance to concentrate on what is needed before an intention of the parties to a negotiation counts as a common intention. In my view, when that intention relates to the terms upon which they will contract with each other, it is still necessary for them to know enough of each other's intentions for it to be said that there is a common intention. They might come to know of each other’s intentions in this way through those intentions being directly stated, or they might come to know of them through the various other means by which one person’s intention can become known to another person. Those means can sometimes involve a process of conscious and deliberate inference. Those means can sometimes involve simply perceiving a gestalt in a series of events. Those means can depend to some extent on the people involved sharing a common understanding of how particular bodies of knowledge or markets or social institutions they are operating in work — the experienced surgeon, or the experienced chess player, can sometimes see what another surgeon, or chess player, is seeking to do, in a way that an inexperienced person cannot. What matters for present purposes is that for a negotiating party to perform actions or say words from which the other party can gather his or her intention is itself a form of communication. Negotiation of any contract takes place in a context in which various facts are known or assumed by the negotiating parties. Sometimes, for example, if a contract is negotiated in a context where there are well understood business practices and conventions, and nothing is said about those practices and conventions not applying, it can be legitimate to conclude that both parties to the contract intended to act in accordance with those practices and conventions, even if they did not expressly communicate to each other that they intended to act in accordance with those practices and conventions. This view of what is needed before an intention is a common intention, accords, it seems to me, with the Australian case law since Joscelyne .”

70 The difficulty for Architectus in this case is that it has not established a common intention not to have clause 12.2(b) included in Mr Hennessy’s contract of employment with Architectus. There are several reasons for this.

71 First, there was no common intention that the contract would not last for at least two years. Indeed my finding that Mr Hennessy thought that his employment with Architectus would be for the longer term was at least consistent with a two year term being incorporated into the written form of the agreement.

72 Second, another way that Architectus sought to show that there was a common intention not to include clause 12.2(b) in the contract of employment is to assert that Mr Hennessy (and Architectus) had a belief that was inconsistent with clause 12.2(b) remaining in the agreement, namely a belief that his employment contract could just be terminated on reasonable notice. But my findings above show that this case fails. Mr Hennessy had no such belief.

73 Third, as Campbell JA explained at [281] when the common intention being asserted relates to the terms upon which the parties will contract with each other “it is still necessary for them to know enough of each others intentions for it to be said there was a common intention”. The only way that the parties communicated their final intentions in this case was by means of the provision of the Employment Deed. It turns out that neither side read this document closely, despite the detail of its terms and its importance. In my view all that can be inferred from the parties’ conduct in this case is that they intended to be bound by the many unread terms of this document, whatever they might be. They contained clause 12.2(b) along with many other unread terms. No common intention not to include that term in the contract of employment is established.

Quantum Issues

74 Mr Hennessy is entitled to the benefits conferred on him by clause 12.2(b). In my view he is entitled two years salary from 2 September 2008 less any other earnings, he has received during that two years and consequent upon his early termination. There were three quantum issues: what was the base salary for calculating his losses; should certain Centrelink payments be deducted from the losses claimed; and, should the Court take into account in the assessment of damages events after a District Court hearing in February this year.

75 On the first of these issues, Mr Hennessy did agree to reduce his annual salary from $155,000 to $139,000. There is no evidence as to how long this reduction would have lasted had Mr Hennessy remained with Architectus. In my view, as it was a “temporary” measure it would be reasonable to assume that it would have lasted six months from the date that he was first paid at this lower rate. Thereafter it should be assumed that he would have been paid at the original contracted higher rate of $155,000. The parties should undertake their calculations on this basis.

76 The second issue is crediting Centrelink payments. Mr Giles has appropriately conceded there is no evidence that these are actually employment related benefits. In those circumstances they should not be deducted from the damages.

77 Mr Berwick also argued that the Court should not deduct Mr Hennessy’s earnings from his present job from the calculation of loss. This was put on the basis that if the matter had been tried in the District Court in February this year, when it was originally listed, that Mr Hennessy would not have had to deduct those earnings. In my view, the assessment takes place at trial in light of the actual events that have occurred, including his current employment. This argument fails and these earnings should also be deducted.

Conclusions and Orders

78 I have found that clause 12.2(b) of the Employment Deed is part of Mr Hennessy’s employment contract with Architectus and that he is entitled to recover his losses as a result of his early termination by Architectus. The parties should undertake a calculation of these losses in accordance with these reasons. I will then hear argument, if any, about interest or costs.

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