Bannon v Nauru Phosphate Royalties Trust

[2019] VSCA 303

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2018 0152

BETWEEN

PAUL BANNON	Applicant
v
NAURU PHOSPHATE ROYALTIES TRUST	Respondent

AND BETWEEN:

S APCI 2019 0003

NAURU PHOSPHATE ROYALTIES TRUST	Cross-Applicant
v
PAUL BANNON	Cross-Respondent

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JUDGES:	EMERTON and OSBORN JJA and KENNEDY AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	7–8 November 2019
DATE OF JUDGMENT:	17 December 2019
MEDIUM NEUTRAL CITATION:	[2019] VSCA 303
JUDGMENT APPEALED FROM:	[2018] VSC 532 (McDonald J)

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PRACTICE AND PROCEDURE – Appeal – Whether appeal made out of time – No orders made at time of delivery of principal judgment – Application made within time – Supreme Court (General Civil Procedure) Rules 2015, r 64.05.

ESTOPPEL – Estoppel by convention –  Promissory estoppel – Whether trial judge erred in finding applicant estopped from claiming unpaid monthly entitlements for acting as Secretary/Director of 19 subsidiaries of the respondent – Meaning of ‘monthly entitlement’ – Meaning of ‘subsidiary company’ – Whether payments payable or calculable on monthly basis – No reference to unpaid entitlements in annual budgets prepared and submitted by applicant – No claim made by applicant during course of his employment – Respondent induced to rely on assumption there was no liability to pay – Applicant acquiesced in assumption – Detriment if applicant permitted to resile – Applicant estopped from claiming monthly entitlements.

CONTRACT – Whether claims for monthly entitlements prior to June 2009 statute barred.

CONTRACT – Whether finding of overpayment of funds advanced to applicant in excess of funds expended on behalf of respondent made on pleaded claim – Whether finding of overpayment open on the evidence – Whether onus of proof reversed – Whether claim barred by Nauruan law – Open on pleadings to claim overpayment – Finding of overpayment open on the evidence – Onus of proof not reversed – Nauruan law does not apply to defeat claim for set off or counterclaim – Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418, John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 applied.

EMPLOYMENT – Notice of termination of employment – Whether notice of termination valid – Whether provider of notice authorised on behalf of Board – No error in finding notice of termination of employment was valid – Applicant acted consistently with having been given notice – Claims for accrued annual and long service leave – Whether records accurate – Whether entitlement to annual leave loading – Claims for superannuation entitlements – Whether such claims subject to maximum superannuation salary base in Superannuation Guarantee (Administration) Act 1992 (Cth).

INTEREST – Whether interest payable on claim and counterclaim separately – Interest payable on amount reduced by set off. 

COSTS – Proceeding included claims for penalties under the Fair Work Act2009 (Cth) (‘FWA’) – Where claims under the FWA only abandoned on first day of trial – Where trial judge struck out FWA claims with effect from date of issue of proceeding for lack of jurisdiction – Strike out order based on incorrect view that costs regime under s 570 FWA otherwise inapplicable – Costs orders made under s 24 Supreme Court Act 1986 (Vic) without regard to s 570 – Proceeding was ‘in relation to a matter arising under [the FWA]’ given applicant sought to enforce FWA claims up to first day of trial – Strike out order substituted with effect after date of abandonment – s 570 regime applies up to date of abandonment in relation to claim – No separate orders in respect of counterclaim where success only on basis of set off – Order made under s 570(2)(b) where unreasonable inclusion of FWA claims – No interference with costs discretion after date of abandonment – Energy Australia Yallourn Pty Ltd v Automotive, Food, Metal, Engineering, Printing and Kindred Industries Union (2018) 264 FCR 342;  Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 cited.

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APPEARANCES:	Counsel	Solicitors
For the Applicant/ Cross-Respondent	Mr T J North QC with Mr M Rinaldi	Lander & Rogers
For the Respondent/ Cross-Applicant	Mr R A Millar with Mr R J W Hooper	HMB Employment Lawyers

EMERTON JA
OSBORN JA
KENNEDY AJA:

1. This appeal relates to the determination of a series of claims by Paul Bannon against his former employer, the Nauru Phosphate Royalties Trust (‘NPRT’ or ‘the Trust’).  The total of such claims was $4,020,333.

1. Following an 18 day hearing in the Trial Division of this Court, McDonald J gave judgment in September 2018[1] holding that:

   [1][2018] VSC 532 (‘Reasons’).

(a)       Bannon was estopped from claiming fees otherwise payable pursuant to his contract of employment in respect of services provided as Secretary and/or Director of 19 subsidiary companies of NPRT between July 2005 and 30 June 2014 (‘secretarial fees’).  Bannon had claimed $3,111,000 in this regard;

(b)      the companies in respect of which Bannon could claim secretarial fees did not include two related companies which were not subsidiaries of NPRT and no entitlement to such fees arose with respect to them in any event;

(c)       further and alternatively, NPRT had a partial limitation of actions defence to the claim for secretarial fees;

(d)      Bannon was given 12 weeks’ notice of termination on 31 March 2014 and had no claim for damages against NPRT for a sum equivalent to salary in lieu of notice;

(e)       Bannon was entitled to $222,153.62 in lieu of 288.8 days of accrued annual leave;

(f)       Bannon was not entitled to claim a 17.5 percent leave loading with respect to his annual leave entitlement;

(g)      Bannon had a contractual entitlement to 50 percent of accrued sick leave upon termination of employment amounting to $105,769.13; 

(h)      Bannon was entitled to back pay in consequence of a salary increase approved by the Board of NPRT in May 2013.  This resulted in an additional entitlement of $71,045.18 inclusive of superannuation;

(i)       Bannon was entitled to $46,153.80 for 12 weeks’ redundancy pay;

(j)        Bannon had accrued long service leave of 17.2 weeks resulting in an entitlement of $66,153.85;

(k)      NPRT was entitled to set off the amount of $141,052.91 against the damages otherwise payable to Bannon.  Such sum represented funds advanced on account of expenses incurred by Bannon on behalf of NPRT which exceeded the amount actually expended;

(l)       interest was awarded with respect to the net figure of damages arrived at after the set off. 

1. On 29 October 2018, his Honour determined applications for consequential costs orders and ordered:[2]

·paragraphs of the statement of claim purporting to rely on the Fair Work Act 2009 (Cth) be struck out with effect from the commencement of the proceeding;

·NPRT pay Bannon damages in the sum of $370,222.67 together with interest in the sum of $120,489.57;

·subject to certain specific exceptions each party pay 50 percent of the other party’s costs on a standard basis. 

[2]Bannon v Nauru Phosphate Royalties Trust (Costs Ruling) [2018] VSC 643 (‘Costs Reasons’).

1. Bannon now seeks leave to appeal the Court’s decision with respect to the following matters:

(a)       the issue of estoppel relating to secretarial fees in respect of subsidiary companies;

(b)      the relevant meaning of ‘subsidiary company’ in his contract of employment and his consequent entitlement with respect to services provided to related companies;

(c)       the limitation of actions issue;

(d)      the notice of termination issue;

(e)       the quantum of his annual leave entitlement;

(f)       the quantum of his long service leave entitlement;

(g)      the basis on which interest should be awarded;

(h)      the decision as to costs.

1. NPRT seeks leave to cross-appeal with respect to the decision as to costs. 

1. For the reasons which follow, we would refuse leave to appeal the trial judge’s decision with respect to Bannon’s claims save with respect to the estoppel issue.  We would grant leave to appeal with respect to the estoppel issue but dismiss the appeal. 

1. We would grant leave to NPRT to appeal his Honour’s decision with respect to costs and allow such appeal by NPRT.  We would set aside orders 1 and 3 made by his Honour and substitute the following:

(1)Paragraphs 36-38 and D and E of the prayer for relief of the statement of claim are struck out with effect from 17 April 2018.

(3)That, subject to paragraph 4, there be no order as to the parties’ costs in respect of the claim and counterclaim, save that:

(a)the defendant is to pay 50% of the plaintiff’s costs of the claim and counterclaim on a standard basis incurred from 17 April 2018;

(b)the plaintiff is to pay 50% of the defendant’s costs of the claim and counterclaim on a standard basis incurred from 17 April 2018.

1. In addition, the following will be added to paragraph 4:

(d)that the plaintiff is to pay the defendant’s costs thrown away by reason of the inclusion of the claims made under the FWA.

A  procedural issue: is the application out of time?

1. NPRT contends the application for leave to appeal was made out of time. 

1. In its written case, NPRT ‘observed’ that the principal judgment (as opposed to the judgment on costs) was delivered on 14 September 2018, and the application for leave to appeal was made 73 days later.  NPRT asserted that the application was not competent in relation to the grounds arising from the principal judgment.

1. This assertion is incorrect. Although the principal judgment was delivered on 14 September 2018, no orders were made on that day. Orders, including as to costs, were made on 29 October 2018, the parties having been given time to consider the judgment and make submissions as to costs. The application for leave to appeal made on 26 November 2018 was therefore made within the 28 day time period specified in r 64.05 of the Supreme Court (General Civil Procedure) Rules 2015 (the ‘SC Rules’).[3]    

   [3]As then in force.

Background

1. NPRT is a body corporate established under the Nauru Phosphate Royalties Trust Act 1968 (Nauru) (the ‘NPRT Act’). The NPRT Act established the Nauruan Land Owners Royalty Trust Fund (the ‘Fund’).[4] 

   [4]Nauru Phosphate Royalties Trust Act 1968 (Nauru), s 19(1) (‘NPRT Act’).

1. The Fund received many millions of dollars derived from the proceeds of phosphate mining upon the island of the Republic of Nauru.  The Fund was invested in assets, particularly real estate in other countries including Australia.  The beneficiaries of the Fund were landowners in the Republic of Nauru whose property had been the subject of mining. 

1. A principal function of NPRT was the administration of the Fund and the distribution of payments to beneficiaries of the Fund. Section 19 of the NPRT Act established the Fund and contemplated an annual distribution of moneys to the beneficiaries as follows:

19       Nauruan Land Owners Royalty Trust Fund

(1)A fund is hereby established, to be known as the Nauruan Land Owners Royalty Trust Fund.

(2)In this section the expression ‘Ronwan Interest’ means the aggregate business profits, dividends, interest and rents earned by the Fund in respect of each year ending on the 30th day of June after deducting all provisions, costs and expenses necessarily and properly made or incurred in connection therewith and after taking into account any business losses incurred and any costs and expenses incurred by the Trust in accordance with section 32.

(3)The Ronwan Interest earned by the Fund after the first day of July 1989 and until 30 June 1990 and for each 12 months ending 30 June thereafter, shall be ascertained by the Trust and applied in the manner herein provided.

(4)On or before 31 October of each year but subject to any extension granted by the Minister and notified in the Gazette, the Trust shall (upon such proof as the Trust shall with the approval of the Minister determine) issue each beneficiary, or where there is a trustee for a beneficiary, to the trustee; a statement of the beneficiary’s account in such form as the Minister shall approve.

(5)Subject to any direction given in accordance with subsection (7) the Trust shall (in such manner and upon such proof of entitlement as the Trust, with the approval of the Minister, determines) pay to each beneficiary, or where there is a trustee for a beneficiary, to the trustee, at the time of issue of the statement pursuant to subsection (4) or if the statement is issued before 31 October, not later than that date, the Ronwan Interest credited to the account of the beneficiary in respect of the preceding year ended on 30 June.

1. Bannon commenced employment with NPRT as an administrative assistant in October 1994.  In April 2003, he was appointed Acting Secretary of NPRT and on 22 July 2003 he was appointed Secretary on an ongoing basis.  The position of Secretary to the Trust was a statutory one.[5]  As Secretary, Bannon was the most senior employee of NPRT.  He was the head of NPRT’s administrative office which was based in Melbourne.  The office had a staff of four.

   [5]See the NPRT Act, s 27.

1. In the course of July 2003 Bannon was further appointed to act as Company Secretary of some 22 subsidiaries of NPRT.  In addition, he was appointed to act as Company Secretary for two further companies, Central Pacific (Downtowner) Pty Ltd and Randwick Nominees Pty Ltd, which he contends should be regarded as subsidiaries of NPRT for the purposes of calculating his entitlement to remuneration.

1. In April 2004, the assets of NPRT, together with those of a number of other entities associated with the Republic of Nauru, were placed in receivership.  The receivers took control of a number of property assets in Melbourne and Sydney.

1. For the balance of his employment Bannon thus performed his duties knowing that the financial future of NPRT was uncertain and in circumstances where NPRT was constrained in the performance of its functions by the receivership.

1. On 24 August 2007, Bannon and NPRT entered into a written employment contract (‘the 2007 contract’).  The recitals to the 2007 contract stated:

A.  The Employee has been in the full time continuous employment of the Employer since 3 October 1994;

B.   On 22 July 2003 (hereinafter called “the Commencement Date”) the Employee was appointed by the Employer to act as Secretary to the Employer on and subject to the terms and conditions hereinafter contained and the Employee accepted such terms and conditions;

C.  The Parties hereto agreed prior to the Commencement Date to record the terms and conditions of the Employee’s said Employment by the Employer but had not done so and are now desirous to record all of the agreements and understandings made between the Parties hereto concerning such employment in this Contract of Employment with the intention that the terms and conditions hereinafter contained shall be legally binding on the Parties hereto and shall apply in respect of the Employees [sic] employment at all times from the Commencement Date.

1. Schedule 1 to the 2007 contract set out Bannon’s duties:

In addition to the Duties set out below, the Employee’s Duties in this position include all those that would normally attach to a Company Secretary. The Employer may change these Duties during the course of the Employee’s employment after consultation with the Employee.

The Employee’s Duties include assisting the Employer to:

1.        Follow Board policies and procedures.

2.Co-coordinate the completion and dispatch of Board agendas, briefing papers and minutes of proceedings.

3.Established [sic] and properly maintain the necessary Registers required to be kept under the Corporations Act.

4.        Hold meetings in compliance with applicable laws.

5.Comply with ASIC and Australian Taxation Office statutory requirements if applicable.

6.        Obtain advice regarding their regulatory and statutory requirements.

7.        Keep statutory records up to date.

8.        Comply with the Nauru Phosphate Royalties Trust Act.

9.Keep the board advised in respect of the accounting, administration and property functions of the Trust.

10.      Co-ordinate external parties in respect of operational decisions.

11.      Analyse and review recommendations made by external parties.

12.      Compile proposals in relation to external advice.

1. It can be seen that sch 1 referred in part to the NPRT Act.

1. Section 32 of the NPRT Act imposed a specific obligation upon the Secretary to prepare an annual administration budget:

32       Annual Administration Budget

(1)The Secretary to the Trust shall prepare an Annual Administration Budget for the Trust which shall be submitted before 30th June each year for consideration and approval by the members of the Trust.

(2)The Annual Administration Budget shall set out the projected administration costs and related expenses of the Trust (including taxes, rates, charges, duties and other like amounts, commissions and fees) likely to be incurred by the Trust on behalf of the funds administered by the Trust in the ensuing financial year.

(3)Following approval of the Annual Administration Budget by the Trust, the Secretary shall provide to the Minister responsible for the Trust a copy of the Annual Administration Budget.

(4)The Annual Administration Budget may be reviewed and revised by the members of the Trust at any time before or during the financial year to which it applies.

(5)The Trust shall inform the Minister of any revisions to the Annual Administration Budget made under clause (4) of this section.

(6)Payment of the administration costs and related expenses of the Trust shall be sourced from or through the deduction or set-off against receipts of income earned by the funds under the administration and/or control of the Trust, except that in the event that the Trust has insufficient income to meet such costs and expenses, the outstanding balance of any such costs and expenses shall be paid from moneys appropriated by Parliament from the Treasury Fund.

1. The Nauru Phosphate Royalties Trust (Amendment) Act 2009 substituted the word ‘shall’ in s 32(1) for the word ‘may’ where it first appears. It also amended s 32(6) to impose the primary obligation for meeting administration costs upon NPRT.

1. Schedule 2 to the 2007 contract set out Bannon’s remuneration:

Remuneration

The Employee’s remuneration whilst employed by the Employer will consist of the following:

1.        Yearly Salary:  $80,000 to be paid on a Fortnightly basis;

2.The use of a company car for private and business use which at the time of this agreement is a 2001 Holden Commodore Acclaim.  The provision of this car includes running expenses such as fuel, oil, maintenance and repairs as required;

3.Any entitlement at law to leave loading or other forms of salary loading or payment required by law to be made;

4.During each period that the Employee acts as a Director or Secretary of a subsidiary company of the Nauru Phosphate Royalties Trust, a Monthly Entitlement of $1,500 in respect of each such subsidiary company;

5. All unpaid entitlements from the Employee’s previous employment with the employer will be carried forward;

6.The payment of such other payments and such other entitlements as is provided for in this Agreement;

7.Superannuation contributions equivalent to 9% of the Employee’s base salary and the Employee’s entitlements under paragraph 4 of this Schedule 2, pursuant to the Superannuation Guarantee (Administration) Act 1992 (Cth) to a superannuation fund selected by the Employee or, if no fund is chosen by the Employee, to an eligible fund nominated by the Employer;

8.At any time the Employee may request the Employer to pay part of the salary component into the Employee’s nominated super fund.  This is in addition [to] the statutory requirement of the Employer’s contribution under the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Guarantee Charge Act 1992. Provided that there is no detriment to the Employer in so doing and such payment is permitted by law and deductible to the company then the company will comply with that request. The Employee’s salary shall be reduced by the amount of such payment.

1. On 17 October 2007, the Board members of NPRT (Ms Alvina Aremwa, Ms Ruby Thoma, Mr Doneke Kepae and Ms Clarissa Jeremiah) agreed to increase the base salary paid to Bannon from $80,000 to $140,000.  The Board’s members signed a memorandum the following day which stated:

The Trustee [sic] of the Nauru Phosphate Royalties Trust, in a meeting held on Wednesday 17^th October, 2007 have unanimously agreed to increase the base salary paid to Trust Secretary, Mr. Paul Bannon, from $80.000 − $140.000 per annum a monetary increase over the currently paid of $36,000 since April 2003 up to present.

1. Shortly after 18 October 2007, Bannon arranged for a payment of back pay to be made to himself totalling $295,475.  This represented the salary increase approved by the Board, together with superannuation.  At trial, NPRT contended that the back pay was not authorised but ultimately failed in this contention.

1. The most contentious aspect of Bannon’s remuneration package concerns the fees payable to him as Secretary and/or Director of subsidiary companies pursuant to cl 4 of sch 2 of the 2007 contract. No claim was made for fees payable under this clause during the period of his employment.

1. Nonetheless, reference was made to the relevant item under sch 2 in March 2013 when Bannon sought a further increase in salary.

1. On 1 March 2013, Bannon wrote a letter to Mr Alexius Namaduk, the then Chairman of NPRT in the following terms:

Dear Chairman,

Re:  Secretary to the Trust – Salary review / increase

The purpose of this paper is to seek your approval to grant an increase in the annual salary paid to myself in performance of the role of Secretary to the Nauru Phosphate Royalties Trust. 

Background

·           I have been in full time employment with the Trust since October 3rd 1994.

·           On July 2nd 2003, I was appointed to the position of Secretary to the Trust.

·The current employment contract between the Nauru Phosphate Royalties Trust Board and myself was executed on August 24th 2007.

· Details specific to my remuneration are found in Schedule 2, items 1 − 4.

·Further, on October 18th 2007, the Board unanimously agreed to increase the annual salary paid to me from $80,000 to $140,000.

·By agreement, the Trust has not had to outlay the expense of a company car as this represented part of the justification behind the salary increase that occurred on October 18th 2012.[6]

·Although payable under my contract of employment, I have not sought payment of the fees payable to myself under Schedule 2 item 4, as a result of the continued receivership of the Trust and the associated tight financial liquidity associated with it.

[6]Scil 2007.

·           No review of my salary has occurred since October 2007. 

…

Proposal

·Mr Chairman, I would welcome your consideration to the following variations of my contract:

·An increase in the Annual base salary from $140,000 to $200,000 pa. Given the financial assets of the Trust amount to approximately $100m, a salary of $200,000 represents a cost of 0.02 of 1% of the total funds under management.  This is on the low side of similar financial institutions remunerations, where 2.5% (on average) of funds under management is paid as a base salary.

·The provision of a fully funded company car to a maximum of $40,000.  In this regard I propose my current car be purchased from me by the Trust at an agreed rate. 

Mr Chairman, I realise the increases sought represent a significant increase over and above the current level paid, however in my opinion they are reflective of the fact that no increase has been forthcoming for in excess of 5 years.  The increase of $60,000 represents an increase of approx. 43% or 8.5% for each of the five years no increase was provided.[7]

[7]Emphasis added.

1. This letter was forwarded to the Chairman on 19 March 2013 under cover of an email which stated as follows:

Chairman,

I realise the timing may well be inappropriate, however I attach for your kind consideration a letter from myself seeking your consideration for an increase in the annual salary paid.  I further attach a copy of my employment contract as well as the variation to it dated October 185^th [sic] 2007.

I would welcome the opportunity of discussing this matter with you further should you desire.

I had wanted to discuss this matter with you in Fiji or whenever we were due to meet next.

Kind regards

Paul Bannon

Secretary to the Trust

1. The letter of 1 March 2013 was signed by each of the four members of the Board as ‘approved’.  The approval was noted to take effect from the pay period ending 22 May 2013.  Despite the approval, Bannon did not seek to implement the increase until 24 June 2014.  He then sent an internal memorandum to NPRT’s finance manager in the following terms:

Romys,

For your kind information and action, would you please refer to the attached wages letter dated March 31^st 2013 duly signed by the former Chairman of the Trust Mr Alex Namaduk.  The wages letter was ratified by the board at a meeting in Melbourne on May 13^th 2013.

I have elected not to give effect to the increase as yet as a means of implementing an enforced savings program upon myself as the speculation concerning the Trust and its future was subject to increased speculation and uncertainty.

With the closure of the Trust scheduled for Monday June 30^th 2014, would you kindly:

1.Refer to the attached worksheet and arrange for payment of my back pay adjustment in the amount of $46,400 (net).

2.Ensure the back pay adjustments are included within the 2013/2014 wage records summaries.

3.The final pay from 18 June to 30 June 2014 is calculated at the new rate.

4.My superannuation adjustments are calculated and paid accordingly.

…

1. Bannon was not paid the requested back pay prior to the termination of his employment on 30 June 2014.  The extent of his entitlement to back pay was disputed at the trial.

1. On 9 November 2012, the receivers paid a sum of $85,215,466 into the New South Wales Supreme Court.  The amount represented a surplus arising from sales by the receivers of properties of various Nauruan entities.  During the course of the receivership the receivers had realised assets which secured loan facilities granted by GE Capital to Ronsi Business Pty Ltd and Republic of Nauru Finance Corporation and discharged the debts owing under the facilities.  The receivers held the surplus proceeds of sale as trustees for the Nauruan entities.  The funds in court were ultimately paid out to NPRT on or about 1 November 2013. 

1. During 2013 and 2014, the Republic of Nauru passed legislation providing for the distribution of funds to beneficiaries and the winding up of the NPRT.  The explanatory memorandum relating to the Ronwan Distribution Bill 2013 (Nauru) summarised the circumstances in which this took place:

The Government of Nauru was elected with a mandate for – among other matters – the finalisation and vesting of the Nauruan Land Owners Royalty Trust Fund (the Fund) to the Landowners.

Since its enactment in 1968:-

(i)the number [of] Land Owners interested in the Fund has grown exponentially;

(ii)       Land Owners have indicated:-

(a)disapproval of what they consider intermeddling with the operation of the Fund by previous Governments;

(b)disappointment with the external administration of the Fund;

(c)a desire to self-manage any part of the Fund to which they may be entitled;

(iii)The Government is mindful that a number of substantial assets comprising part of the Fund were the subject of appointment of external receivers & managers from 2004;

(iv)The Government is sympathetic to the concerns of Land Owners and moreover considers that it would be beneficial for funds comprising the fund – at the option of respective Land Owners – to be deposited or invested in Nauru, rather than wholly invested off-shore.

The Government is further mindful that:-

(i)the Bendigo Bank is anticipated to establish a bank branch in Nauru in early 2014.

(ii)the majority of the Fund is in liquid form and has in recent months been repatriated to the control of NPRT after protracted court disputes in Australia;

(iii)As far as is practical to do so, it would be desirable for the administration and regulation of matters concerning the Fund to take place within Nauru.

(iv)the will of the electorate and the Land Owners is that the Fund be gotten in and vested or distributed to the Land Owners without any undue delay.[8]

[8]Explanatory Memorandum, Ronwan Distribution Bill 2013 (Nauru).

1. On 31 March 2014, Bannon together with the other employees of NPRT received an email from Mr Andrew Jacobson, lawyer for the Board, headed ‘Notice of Redundancy’.  The email stated in part:

Dear Paul, Mary, Kham & Romys,

I confirm as has been made known previously, that Nauru Phosphate Royalties Trust (NPRT) will be closing down its Melbourne Branch office on Monday 30 June 2014 and that the current employment positions of all staff of the Melbourne office shall be made redundant on 30 June 2014.

…

1. Bannon disputes that this email constituted valid notice of termination of his employment contract and has claimed damages in lieu of notice.

1. When Bannon’s employment was terminated he was not paid accrued annual and long service leave entitlements.  The quantum of these entitlements was also disputed at trial.  He also had, and was not paid, contractual entitlements to 50 percent of accrued but untaken sick leave and for redundancy pay.  His entitlement to both untaken sick leave and redundancy pay was not disputed at trial, however the salary basis for calculating such entitlements was disputed. 

The preliminary construction issues:  the meaning of ‘monthly entitlement’ and the meaning of ‘subsidiary company’ of NPRT

1. Before turning to the proposed grounds of appeal, it is convenient to address two contentions raised on behalf of the applicant which address the ambit of the provision of the 2007 contract relating to the provision of services to subsidiary companies.  It is convenient to repeat the relevant provision:

The Employee’s remuneration whilst employed by the employer will consist of the following: …

4During each period that the Employee acts as a Director or Secretary of a subsidiary company of the [NPRT], a Monthly Entitlement of $1,500 in respect of each such subsidiary company;

1. The applicant contends first that the entitlement did not stipulate that the secretarial fees were to be payable at a particular time.  It is submitted that the secretarial fees were monthly entitlements in the sense of being calculable by reference to monthly periods, not payable monthly. 

1. Secondly, it is submitted that the entitlement with respect to subsidiary companies extended to an entitlement with respect to services performed as Company Secretary for two related entities which were not subsidiaries within the meaning of the Corporations Act 2001 (Cth).

1. Insofar as the first question is concerned, the applicant submits that the secretarial fees were not subject to a contractual stipulation as to the time for payment, unlike Bannon’s salary, which was expressly required to be paid fortnightly by cl 1 of sch 2 of the 2007 contract.

1. In consequence, it is submitted that the secretarial fees were payable, like accrued untaken annual leave entitlements, upon termination of employment. The point raised bears both on the nature of the entitlement in respect of which the trial judge held an estoppel arose and upon the alternative question of whether a partial defence would arise in any event under s 5(1) of the Limitation of Actions Act 1958. 

1. The trial judge rejected the applicant’s construction of ‘monthly entitlement’:

I reject Mr North’s submission that Mr Bannon’s fees entitlement is analogous to an entitlement such as long service leave. Clause 4 of sch 2 confers a ‘Monthly Entitlement’ of $1,500 during each period that Mr Bannon acts as a Secretary or Director of a subsidiary company of NPRT, in respect of each subsidiary company. This entitlement accrues and is payable on a monthly basis. This conclusion is reinforced by the obligation under cl 7 of sch 2 to pay superannuation contributions of nine per cent of the monthly entitlement ‘pursuant to the Superannuation Guarantee (Administration) Act 1992 (Cth).’

…

The [Superannuation Guarantee (Administration) Act 1992 (Cth)] imposes an obligation upon an employer to pay superannuation contributions on a quarterly basis.[9] A failure to do so renders the employer liable to recovery proceedings under pt 4–15, sch 1 of the Taxation Administration Act 1953 (Cth). The requirement under cl 7 of sch 2 for NPRT to make quarterly superannuation contributions of nine per cent in respect of Mr Bannon’s fees entitlement, points strongly to the conclusion that the fees entitlement under cl 4 accrued and was payable on a monthly basis.

In addition to the matters set out above there is authority for the proposition that, absent a term of a contract to the contrary, where the performance of work is governed by a contract, a cause of action for breach accrues upon the performance of the work, rather than when a demand for payment is made.[10]  There is no provision in the 2007 contract, the effect of which is that a cause of action for non-payment of the monthly entitlement arises upon the service of a demand for payment.  Mr Bannon’s claim for breach of contract for non-payment of Secretary/Director fees is statute barred prior to 29 June 2009.[11]

[9]See ss 16, 19, 22 and 23.

[10]Coburn v Colledge [1897] 1 QB 702, 705−706; Swansea City Council v Glass (1992) 24 HLR 327, 333; Coshott v Barry [2012] NSWSC 850 [41]−[42]; Foyle Enterprises Pty Ltd v Steve Parcell Building Services Pty Ltd [2015] QDC 225 [128], [136].

[11]Reasons [134], [136]–[137] (citations in original).

1. In our view, the trial judge was correct.  The plain meaning of the words providing for remuneration in respect of a monthly entitlement ‘during each period that the employee acts’ in the requisite capacity, is that the employee is entitled to receive monthly payments. 

1. There was no practical constraint arising from the nature of the entitlement, such as may occur with respect to annual leave, which prevented or inhibited the taking of the entitlement from month to month. One may compare the practical constraints in cl 7 of the 2007 contract which governed the employee’s entitlement to annual leave.

7. ANNUAL LEAVE

7.1The Employee is entitled to four (4) weeks annual leave per year of service in accordance with Division 4 of Part 7 of the Workplace Relations Act 1996.

7.2Annual leave accrues on a pro rata basis and is credited to the Employee on a [sic] annual basis.  Unused annual leave will be cumulative from year to year.

7.3Annual leave will be given and taken in periods agreed to between the Employee and the Employer.

7.4The Employer can also direct the Employee to take up to 2 weeks’ annual leave during a particular period where more than 8 weeks of annual leave has been accrued.

7.5The Employer has the right to refuse the granting of annual leave based on the demands of the business.

1. We further agree with his Honour that the absence of a provision requiring a demand to be made as a condition of the obligation for payment supports the view that the secretarial fees became payable upon the completion of each month’s service. 

1. The obligation imposed by the Superannuation Guarantee (Administration) Act 1992 (Cth) (‘SGA Act’) for employers to pay superannuation contributions on a quarterly basis also, as his Honour noted, points to the conclusion that the fees entitlement under cl 4 accrued and was payable on a monthly basis.[12]  We therefore reject the applicant’s construction of the phrase ‘monthly entitlement’.  The applicant’s construction would read words into the 2007 contract, ‘calculated on a [monthly] basis’, which are simply not there.  The entitlement accrued and was payable on a monthly basis.

   [12]See ss 16, 19, 22 and 23 of the Superannuation Guarantee (Administration) Act 1992 (Cth) (‘SGA Act’) and discussion of the recovery proceedings an employer is exposed to if they fail to do so at Reasons [136] quoted above at [43].

1. The second construction issue relating to cl 4 of sch 2 relates to the phrase ‘Director or Secretary of a subsidiary company of [NPRT]’. Clause 27 of the 2007 contract provided that it was governed by the laws of the State of Victoria.

1. The applicant’s claim for damages arising out of his entitlement to fees as a Secretary or Director related to 19 companies. As we have said, there was an issue at trial as to whether two of these companies were subsidiary companies within the meaning of cl 4 of sch 2.

1. It is common ground that the two companies were not subsidiaries of NPRT within the meaning of s 46 of the Corporations Act 2001 (Cth). As the respondent submits, the evidence was to the following effect:

(a)       NPRT did not hold any shares in either Central Pacific (Downtowner) Pty Ltd nor Randwick Nominees Pty Ltd;

(b)      Bannon was appointed as a Director of each of the two companies by the Nauruan Government and not by the Board of NPRT;

(c)       Bannon’s own evidence was that ‘I don’t consider Central Downtowner a subsidiary’.  He also deposed by affidavit that ‘Central Pacific (Downtowner) Pty Ltd is not a related entity of NPRT’;

(d)      The sole shareholders in Randwick Nominees Pty Ltd were Theodore Moses and Kenneth Walker.  Bannon confirmed in cross-examination that he understood the shareholders held the shares on behalf of the Nauruan Government.

1. The trial judge dealt with the applicant’s submissions as follows:

Mr Bannon submits that the objective common intention of the parties to the 2007 contract was not to have regard to the strict legal definition of ‘subsidiary’ but to regard all relevant companies within the Nauruan government’s effective control as ‘subsidiary companies’ of the defendant. Mr Bannon submits that ‘subsidiary company’ in the context of the 2007 contract should be read and understood as being similar to an ‘associated entity’ as defined in s 50AAA of the Corporations Act.  Mr Bannon submits that both Randwick Nominees Pty Ltd and Central Pacific (Downtowner) Pty Ltd were subsidiary companies of NPRT in this sense.

The phrase ‘subsidiary company’ has an unambiguous meaning in accordance with s 46 of the Corporations Act. Neither Randwick Nominees Pty Ltd nor Central Pacific (Downtowner) Pty Ltd is a subsidiary of NPRT within the meaning of s 46. Mr Bannon’s submission that ‘subsidiary company’ should be read as being similar to an ‘associated entity’ is an invitation to rewrite cl 4 of sch 2. I reject this submission. Neither Randwick Nominees Pty Ltd nor Central Pacific (Downtowner) Pty Ltd is a subsidiary company of NPRT within the meaning of cl 4 of sch 2 of the 2007 contract.[13]

[13]Reasons [34]–[35] (citations omitted).

1. There was no error in this reasoning.  Whilst the 2007 contract did not itself define ‘subsidiary company’, the term should be given its ordinary meaning under Victorian law.  The extrinsic evidence does not establish that the parties objectively intended to regard all associated companies under the effective control of the Nauruan Government as ‘subsidiary companies’ of NPRT, as was contended by the applicant.

1. In the course of submissions made on his behalf, the applicant referred to correspondence relating to Randwick Nominees Pty Ltd in March 2007.  At that time, Bannon requested payment by Randwick Nominees Pty Ltd of fees payable to Hon. Roland Kun MP — former Chairman/Director of the company; Ms Aremwa — then Chair/Director of the company; and himself, then Director/Secretary of the company. 

1. Ultimately, Ms Aremwa advised Bannon (in her capacity as chair of Randwick Nominees Pty Ltd) that he would be paid for the work he had undertaken for that company.  Omitting formal parts, the email stated:

I’ve just been in a meeting with the Minister and amongst other things, we discussed Randwick Nominees. 

We both agreed that 43 months at $1,000 per month be paid to Paul Bannon — current Director/Secretary. 

The Minister and myself did our duties as Chair of NPRT while you took on the job separate from your role as Secretary to the Trust.  You did your job well and your claim is justifiable.  We will ratify this at the next board meeting.

1. In our view, the reference to Bannon’s performance of a ‘job separate from your role as Secretary to the Trust’ does not assist his case. 

1. The applicant also points to the evidence of two of the directors of NPRT as demonstrating the common intention of the parties.  Mr Elvin Brechtefeld was first appointed to the Board of NPRT in June 2012.  Ms Sharain Hiram was first appointed in March 2014.  Neither could give evidence bearing on the circumstances at the date of the contract.[14] 

   [14]Reasons [93].

1. It follows that properly understood the applicant’s claim to monthly entitlements accrued monthly and related to 17 companies.  As such, it comprised a claim for $2,898,000.[15] 

   [15]Reasons [33].

1. We turn now to the proposed grounds of appeal. 

Proposed ground 1

1. Proposed ground 1 of appeal is: the trial judge erred in determining that the applicant’s claim for secretarial fees was defeated by an estoppel by convention or alternatively equitable promissory estoppel as those findings were not supported by the evidence, and the trial judge should have held that the applicant was entitled to payment of the fees in accordance with his contract of employment.

The findings of the trial judge

1. The trial judge treated the estoppel issue carefully and in detail.[16]  It is necessary to traverse that treatment because the ultimate question raised by ground 1 is whether his Honour was entitled to draw the factual inferences from the evidence as a whole which formed the basis of his conclusions as to the estoppel issues.

   [16]Reasons [36]–[130].

1. His Honour commenced his treatment of the topic by identifying a series of contextual matters including the following.

·The defence of estoppel was added by amendment during the course of the trial.

·The terms of the 2007 contract conferred a monthly entitlement of $1,500 (plus nine percent superannuation) in respect of services rendered as Secretary and/or Director of each subsidiary of NPRT.

·Upon execution of the 2007 contract on 24 August 2007, NPRT was immediately liable to pay Bannon a sum of approximately $1.15 million.[17]

[17]Reasons [39], [48], [95].

·Bannon’s ongoing entitlement to secretarial fees was over two and a half times his base salary.

·Due to the receivership and the liquidity situation which it created, NPRT could not have met its liability with respect to secretarial fees as at the date of the contract.

·Bannon made no claim for secretarial fees during the course of his employment.

·From April 2009 onwards, s 32 of the NPRT Act imposed an obligation upon Bannon to report on the annual administration budget to both the Board of NPRT and the Minister responsible for NPRT.

·During the period Bannon was under a statutory obligation pursuant to s 32 of the NPRT Act, no audited accounts of NPRT were finalised. Throughout this period the Board and the Nauruan Government were entirely reliant upon the administration budgets and unaudited accounts prepared by Bannon as the source of information regarding the ongoing financial position of the Trust.

·Auditors for NPRT were appointed in 2008 and sought to produce audited accounts.  But no draft set of accounts was produced to Bannon or the Board by the auditors in the following years.

·In each year of his employment after August 2007, Bannon’s contractual entitlement with respect to secretarial fees increased by more than $250,000.  As a result, a failure to refer to any accrued and ongoing liability in this respect meant that the difficulty of the financial position of NPRT was seriously understated.

·Bannon prepared unaudited accounts for the year ending 30 June 2008 which made provision for employee entitlements of $278,530 but did not disclose his entitlement to secretarial fees, which at that time by his reckoning was approximately $1.8 million.  He gave evidence that the failure to include reference to this entitlement was ‘an omission rather than an intentional lack of inclusion’.

·In subsequent years, Bannon did not include the accrued or ongoing liability for secretarial fees in the annual administration budgets prepared by him.  Bannon gave two explanations for this.  First, the Trust did not have the capacity to pay the secretarial fees at that point in time, and secondly, there was a distinction to be drawn between claims which were likely to require payment in the following year and the secretarial fees which were not intended to require payment until the receivership concluded.  As explained by Bannon, the distinction between the two categories was a fine one.

The budget, again, is an attempt obviously to include the expenditure that is likely to be incurred in the next 12 months.  I did not anticipate the receivership of the Trust – sorry, the receivership of the Trust may or may not have concluded during that particular period of time and, if it did, it was then my intention obviously to raise the director and secretarial fees, but because of the uncertainty I limited the budget inclusion to just the statutory amounts that were payable by the Trust in the event that the office closed.  But, as I said, the budgets were prepared in this manner since 2004, and actually – and we worked within this environment that may or may not be the case.

·Notwithstanding this attempted explanation Bannon conceded that the accumulated value of the secretarial fees should have been included in the annual administration budgets if the budgets were to provide properly for employee expenses upon the closure of the trust. 

We interpolate that the transcript of Bannon’s evidence includes the following passage:

The practice was to, what, to include provision in the budget for the full expense associated with the close down of the Trust; that’s correct isn’t it? --- Best estimates, Mr Millar, yes.

Best estimates of what the Trust would have to pay out if it closed, and that includes all of the leave entitlements that you’ve run through; that’s correct? --- Yes, but I’m sure that there would have been omissions in a number of other sub-heads that probably wouldn’t have been sufficient if the office did in fact close, such as removal costs or things like that.

On that basis, if you’re approaching the framing of the budget with the need to include provision for employee expenses upon closure of the Trust, you needed another $2.2 million included there, didn’t you? --- If that’s the accumulated value of the secretary and directors entitlements, then yes, that’s correct.

So again, the document that you’ve produced for the year ended 30 June 2010 is materially misleading? --- Yes, on the basis – sorry, yes, that is correct.

1. His Honour then analysed further the evidence relating to the administration budgets for the years ending 30 June 2010 and 30 June 2011.  It is unnecessary to repeat that analysis in full but we note the following matters.

·The administration budgets provided estimates for the salaries of those in the Melbourne office including ongoing entitlements such as annual leave, long service leave and sick leave.  No provision was made for Bannon’s secretarial fees.

·The administration budget for the year ending 30 June 2011 was provided to the Board of NPRT under cover of a note which expressly stated:

The 2010/2011 Administration Budget of the Nauru Phosphate Royalties Trust endeavours to encapsulate all potential liabilities facing the Nauru Phosphate Royalties Trust for the financial year in question.

·Bannon acknowledged in cross-examination that the liability for secretarial fees was a potential liability which should have been included in the administration budgets.

·The note to the Board also stated:

Salaries expatriate … has been prepared on the basis of a worst case scenario in which staff entitlements are not utilised during the financial year in question – that is no annual leave is utilised during the financial year.

·Bannon sought to distinguish between the worst case scenario referred to and the potential liability for secretarial fees which he said would be negotiated on completion of the receivership.

·In fact, as his Honour noted, the proceeds of the receivership were provided to NPRT in November 2013 but no discussion took place between Bannon and the Board concerning an entitlement to secretarial fees between November 2013 and 30 June 2014.

·Bannon maintained in evidence that the Board knew of his entitlement even though it had not been exercised and was not disclosed in the administration budget.[18]

·Bannon said statutory entitlements of employees were included in the administration budget because the Trust had the capacity to meet them, but he did not include the secretarial fees because the Trust would not have had the capacity to meet them until the receivership was complete.[19]

[18]Reasons [59].

[19]Reasons [62].

1. The trial judge then analysed the evidence relating to the administration budget for the year ending 30 June 2012.  We note the following matters.

·The 2012 budget was also provided under cover of a note which again stated ‘the 2011/2012 Administration Budget of the Nauru Phosphate Royalties Trust endeavours to encapsulate all potential liabilities facing the Nauru Phosphate Royalties Trust for the year in question’.[20]

·Contemporaneous email documentation demonstrates the Board reviewed the budget in considerable detail.

[20]Reasons [65] (emphasis added). The note also concerned a statement indicating it was prepared on the basis of a worst case scenario.

1. His Honour next addressed the evidence relating to a document titled ‘Budget Working Papers 2012-2013’.[21]

   [21]Reasons [67] following.

·Bannon agreed that during the process of establishing a budget for each financial year he did not disclose the secretarial fees.[22]

·Further, there was never any agreement or explicit discussion with the Board concerning his approach.[23]

·The 1 March 2013 letter, which we have quoted above,[24] did not make a claim for the payment of secretarial fees but noted that Bannon had not sought payment of them.

·There is no evidence that the Board shared an expectation that an invoice would be presented for the secretarial fees upon the completion of the receivership.

·Nor was there evidence that the Board was aware on an ongoing basis of the existence or quantum of the entitlement.

·The evidence of Ms Aremwa, who was Chairman of the Board in 2007, did not, on analysis establish such awareness.[25]

[22]Reasons [68].

[23]Reasons [69].

[24]See [29] above.

[25]Reasons [78]–[87].

1. The trial judge concluded:

Ms Aremwa believed that the contents of the financial reports prepared by Mr Bannon were accurate and relied upon those reports when making decisions as a Board Member.  Those reports never included any reference to Mr Bannon’s accrued or ongoing entitlements to Secretary/Director fees.  Ms Aremwa believed that Mr Bannon was entitled to be paid something for the work which he was undertaking for subsidiaries.  However, she thought there were less than ten subsidiaries.  There was ‘nothing to them, only the names and the accounts and all that.’  She believed that any liability to pay Mr Bannon the fees for Secretary/Director duties he undertook rested with the subsidiary companies themselves.  Ms Aremwa’s evidence supports a finding that between August 2007 and March 2013 (being the date of Mr Bannon’s letter of 1 March 2013 requesting a pay increase) NPRT assumed that Mr Bannon had no entitlement to be paid Secretary/Director fees by NPRT.[26]

[26]Reasons [87].

1. Likewise, the evidence of Ms Thoma, the other signatory to the 2007 contract supported the conclusion that she assumed there was no liability to pay Bannon fees beyond those identified in the accounts he prepared.[27]

   [27]Reasons [88]–[91].

1. The evidence of three other Board members — one of whom (Ms Clarissa Jeremiah) had been a Board member at the time of execution of the 2007 contract in August 2007 and when Bannon received approval for the salary increase in October 2007 — demonstrated no knowledge of an entitlement by Bannon to the secretarial fees.[28]

   [28]Reasons [92]–[93].

1. The above evidence established a continuing course of dealing between Bannon and NPRT which assumed as its basis that there was no ongoing liability on the part of NPRT to pay the secretarial fees.  We will return to the most significant features of this course of dealing shortly but first it is desirable to summarise the trial judge’s conclusions with respect to the fact and consequences of NPRT’S reliance upon the shared assumption as to its ongoing obligations.

1. His Honour concluded that NPRT suffered detriment in consequence of the reliance upon the shared assumption, namely:

(a)       the amount in issue was very substantial;[29]

[29]Reasons [95], [97], [105].

(b)      NPRT accepted, adopted and implemented annual administration budgets which fundamentally misstated the potential liabilities of the Trust;[30]

[30]Reasons [98].

(c)       no ongoing provision was made for the accrued and continuing claims in respect of secretarial fees;[31]

(d)      the distribution to landowners commenced and proceeded for more than six months before Bannon made claim for his  entitlements;[32]

(e)       the net sum available for distribution to landowners was less than that to be inferred on the basis of the administration budgets prepared by Bannon and accepted by NPRT and the Minister.[33]

[31]Reasons [97].

[32]Reasons [96].

[33]Reasons [97].

1. In summary, the evidence analysed by the trial judge demonstrated that:

·Bannon did not claim secretarial fees at any point during his employment.

·Bannon did not make payment to himself of any of such secretarial fees during the course of his employment despite having the capacity to do so.

·Bannon presented ongoing accounts to the Board in a way which both implicitly and explicitly purported to state all the ongoing potential liabilities of NPRT with respect to the entitlements of employees.

·Such accounts failed to identify either the accrued or potential liability of NPRT with respect to the secretarial fees.

·The Board of NPRT examined and accepted the accounts prepared by Bannon and, in particular, annual administration budgets which were provided in accordance with his statutory duty under ss 32(1) and (2) of the NPRT Act.

·There is direct evidence that on at least one occasion the administration budget was presented directly to the Minister at a board meeting but it may also be inferred from the presumption of regularity that the administration budgets generally were presented to the Minister in accordance with Bannon’s statutory duty. 

·No provision was made by NPRT in the administration budgets for the existing or continuing liability in respect of the secretarial fees. 

·There was no agreement between Bannon and NPRT that liability for the secretarial fees would be deferred until the completion of the receivership. 

·There was no advice by Bannon to the Board that Bannon was postponing a claim for secretarial fees otherwise due to him until the completion of the receivership. 

·There was no claim by Bannon for the secretarial fees when NPRT received substantial sums from the receivership. 

·At the time distribution to beneficiaries commenced of funds released by the liquidator no accounts had been presented to the Board or the Minister identifying any accrued liability for secretarial fees payable to Bannon. 

1. We would add that in our view the significance of the above matters was accentuated by the fact that the applicant had a contractual duty to keep the Board advised in respect of the accounting and administrative property functions of the Trust. No advice was given to the Board explaining the omission of reference to the secretarial fees within the administration budgets. No advice was given as to the level of accrued continuing entitlements under cl 4 of sch 2 of the 2007 contract. The fact that the annual administration budgets fell to be understood as giving a true picture of NPRT’s financial position on their face was thus in part a product of Bannon’s failure to give further advice.

1. After addressing the evidence, the trial judge summarised the principles governing estoppel by convention.  The relevant principles were elaborated by Tobias JA in Ryledar Pty Ltd v Euphoric Pty Ltd,[34] in a passage adopted by this Court in FJ & PN Curran Pty Ltd v Almond Investors Land Pty Ltd:[35]

   [34](2007) 69 NSWLR 603.

   [35][2019] VSCA 236 [214].

…. estoppel by convention is a form of estoppel founded upon an assumed state of affairs by the parties whether as to a matter of fact or a matter of legal effect which both will be estopped from denying: Con-Stan Industries of Australia Pty Ltd v Norrich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244–245. That assumed state of affairs takes as a given the terms of the contract as known to and understood by the parties but from which the parties have departed for the purpose of their furtherance of their relationship under the contract.

As Dixon J therefore observed in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 676, belief in the correctness of the facts or state of affairs assumed is not always necessary. Parties may adopt as the conventional basis of a transaction between them an assumption which they know to be contrary to the actual state of affairs.

In his recent book, Estoppel by Conduct and Election (2006) Sydney, Thomson Sweet & Maxwell, at 115 [8-0001], KR Handley described estoppel by convention in the following terms:

“When parties make a statement of fact or of mixed fact and law the conventional basis of their transaction … both are estopped from questioning its truth for the purpose of that transaction. Estoppels by convention can be created ad hoc, expressly, by a course of dealing, or by other acts and declarations. In such a case ‘there must be some mutually manifest conduct by the parties’ with the intention of effecting their legal relationship.”

In Amalgamated Investment & Property Co Ltd v Texas Commercial International Bank Ltd (in liq) [1982] QB 84 at 121, Lord Denning MR observed:

“To use the phrase of Latham CJ and Dixon J in [Grundt] … the parties by their course of dealing adopted a ‘conventional basis’ for the governance of the relations between them … They are bound by the ‘conventional basis’ in which they conducted their affairs. The reason is because it would be altogether unjust to allow either party to insist on the strict interpretation of the original terms of the contract — when it would be inequitable to do so having regard to dealings which have taken place between the parties.”

His Lordship also observed (at 121) that:

“[t]here is no need to enquire whether their particular interpretation is correct or not — or whether they were mistaken or not — or whether they had in mind the original terms or not. Suffice it that they have, by their course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it.”

The principles were restated by Lord Steyn in delivering the principal speech in The “Indian Grace” (No 2) [1998] AC 878 at 913, where his Lordship said:

“… an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared … or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption.”

Recently the principles were restated by Brereton J in Moratic Pty Ltd vGordon [2007] NSWSC 5 [30], where his Honour observed (at 89,913 [30]; 56,215 [30]) that the doctrine of conventional estoppel precluded either party to a contract from denying an assumption which has formed the conventional basis of the relationship between them. Accordingly, it is necessary to determine whether the parties have in fact adopted such an assumption as the conventional basis of their relationship.

His Honour then stated the matters necessary to establish conventional estoppel (at 89,914 [32]; 56,215 [32]) as being that:

(a)the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant;

(b)the defendant has adopted the same assumption;

(c)both parties have conducted their relationship on the basis of that mutual assumption;

(d)each party knew or intended that the other act on that basis; and

(e)departure from the assumption will occasion detriment to the plaintiff.

In noting the differences between promissory estoppel and conventional estoppel his Honour then observed with respect to the latter (at 89,914 [33]; 56,216 [33]) that it:

“[33] … is focussed on the consensual basis of the parties’ relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved so as to hold both parties to their common understanding.

1. The trial judge referred to the judgment of Brereton J in Moratic Pty Ltd v Gordon[36] and the reasons of Gleeson JA in Sze Tu v Lowe.[37]  As he further observed, an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, where the assumption is made by one and acquiesced in by the other.  His Honour went on to say:

The assumption must be proved by evidence.  This does not mean that inferential reasoning is unavailable to prove the assumption.  It is not necessary that the parties believe the assumption to be true and the parties may adopt as the conventional basis of a transaction between them, an assumption which they know to be contrary to the actual state of affairs.  Unconscionability is not an element of estoppel by convention.  It must be proved by the plaintiff that there is a connecting link between some action or inaction taken and the assumption.  This will be established by the plaintiff proving reliance upon the assumption to act in a way which it would otherwise not have done.[38]

[36][2007] NSWSC 5 (‘Moratic’).

[37](2014) 89 NSWLR 317, 393 [431].

[38]Reasons [101] (citations omitted).

1. The applicant accepted that his Honour’s statement of the relevant principles was correct in law.  In the present case, NPRT sought to establish an estoppel by convention by proving:

(a)       NPRT was induced by Bannon to adopt an assumption as to the terms of its legal relationship with Bannon;

(b)      Bannon acquiesced in the same assumption;

(c)       both parties conducted their relationship during Bannon’s employment on the basis of that mutual assumption as to his entitlements;

(d)      each party knew that the other would act on the basis of the assumption; and

(e)       departure from the assumption would cause detriment to NPRT. 

1. His Honour stated his conclusions with respect to the existence of a shared assumption between the parties as follows:

From 24 August 2007 until 1 March 2013 (the date of Mr Bannon’s letter to Alexius Namaduk seeking a $60,000 salary increase) relations between Mr Bannon and NPRT were conducted on the basis that, notwithstanding cl 4 of sch 2 of the 2007 contract, Mr Bannon had no entitlement to be paid Secretary/Director fees by NPRT. Between 24 August 2007 and 1 March 2013 Mr Bannon never made any reference, either verbally or in writing, to the existence of his fees entitlement. He was the senior employee of the Trust’s Melbourne office. He had the authority to facilitate payment of his accrued and ongoing fees. In October 2007 he facilitated a payment to himself of $295,475. This represented 4.5 years back pay of the $60,000 salary increase approved by the Board on 17 October 2007. Mr Bannon did not facilitate payment to himself of his accrued and ongoing fees entitlement. Further, he made no reference to his accrued entitlements in the annual administration budgets which he prepared post-2007. He was aware that Board Members relied upon the accuracy of the administration budgets when making financial decisions regarding the Trust’s operation.

Mr Bannon advanced two explanations for his failure to claim fees during the course of his employment.  First, he decided not to pursue the fees because NPRT lacked the capacity to pay and he did not wish to be the creditor who would place the Trust into liquidation and cost the jobs of the people that he worked with.  Second, Mr Bannon did not include any reference to his accrued fees entitlement in annual administration budgets on the basis that he did not anticipate that in any of the years he had prepared an annual budget that he would be making a claim for payment of his accrued fees.  He therefore considered it unlikely that the Trust would actually incur any liability to make the payment in any given year.  As to this explanation, it is inconsistent with Mr Bannon’s evidence that since the appointment of receivers in 2004 the Melbourne office of the Trust had constantly operated under a threat of closure upon the release of the receivership funds.  Further, the explanation is underpinned by an assumption, which I reject, that the Trust’s liability to make payment did not crystallise until Mr Bannon made a demand for payment.

For the period 24 August 2007 to 1 March 2013 there is no evidence of Mr Bannon explaining his reasons for failing to facilitate payment to himself of his fees entitlement under cl 4 of sch 2 of the 2007 contract. During this period relations between Mr Bannon and NPRT were conducted on the basis that he did not have any entitlement to be paid Secretary/Director fees by NPRT.

As set out earlier in this judgment, I have concluded that NPRT assumed during the period 24 August 2007 to 1 March 2013 that Mr Bannon had no entitlement to be paid by NPRT the fees prescribed by cl 4 of sch 2 of the 2007 contract. Mr Bannon acquiesced in NPRT’s assumption. He did so by never making any reference to the existence of an entitlement to be paid between 24 August 2007 and 1 March 2013. He presented administration budgets to the Board and the Minister for the Trust which included no reference to any liability to pay his accrued and ongoing entitlements. The present case is not one where the Trust has acted on an assumption independently of any conduct by Mr Bannon. Mr Bannon’s failure to include any reference to a very substantial accrued and ongoing liability in the administration budgets ‘crossed the line’ between Mr Bannon and the Trust, thereby manifesting his assent to the Trust’s assumption that he had no entitlement to be paid Secretary/Director fees by the Trust.[39]

[39]Reasons [102]–[105] (citations omitted).

1. His Honour then rejected a series of submissions made on behalf of Bannon asserting that the terms of the 2007 contract itself and the conduct of Bannon were inconsistent with the asserted estoppel[40] and that evidence relating to work done for Randwick Nominees Pty Ltd as Secretary/Director supported the conclusion that there was no shared assumption of the kind contended for.[41] 

   [40]Reasons [106]–[107].

   [41]Reasons [108]–[109].

1. The trial judge further rejected a submission that the parties’ conduct was consistent with an equally plausible assumption to that said to underpin the estoppel, namely that Bannon was deferring payment of his accrued entitlement until the financial position of the Trust improved.[42]  This was because the administration budgets never made any reference to Bannon’s accrued, ongoing or future entitlements. 

   [42]Reasons [111].

1. His Honour then reiterated his conclusions that NPRT had relied upon the shared assumption and had, in consequence, conducted its financial affairs and reported to the Minister on the basis that it had no liability to pay the secretarial fees. 

1. Further, Bannon’s letter of 1 March 2013 did not terminate the estoppel by convention, because whilst referring to his contractual entitlement it made no claim for accrued or ongoing secretarial fees.  To the contrary, it relied upon the non-receipt of such fees as a factor supporting a substantial salary increase.[43] 

   [43]Reasons [113]–[114].

1. Moreover, no claim was made for secretarial fees when NPRT received substantial funds from the receivership. 

1. In the circumstances, his Honour concluded that an ongoing estoppel by convention was established.[44]

   [44]Reference was made to the judgment of Edelman J in Minerology Group Pty Ltd v Sino Iron Pty Ltd (No 6) (2016) 329 ALR 1. See Reasons [116]–[120].

1. In the alternative, his Honour concluded that having regard to his findings of fact the evidence established a promissory estoppel up until November 2013.[45] 

   [45]Reasons [130].

1. His Honour stated the elements of promissory estoppel as requiring NPRT to establish:[46]

   [46]Reasons [122] (citation in original).

(i)It assumed that a particular legal relationship existed or would come to exist between it and Mr Bannon;

(ii)Mr Bannon induced it to adopt that assumption or expectation;

(iii)It acted or abstained from acting in reliance on the assumption or expectation;

(iv)Mr Bannon knew of NPRT’s action or intended NPRT to act in that way;

(v)NPRT’s action or inaction will cause it to suffer detriment if the assumption or expectation is not fulfilled;

(vi)Mr Bannon has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.[47]

[47]Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428−9.

1. His Honour made the following factual findings:

As Secretary of the Trust Mr Bannon was responsible for providing the annual administration budget to the Minister responsible for the Trust. Section 32(2) of the Act provides that the budget is to set out the projected administration costs and related expenses of the Trust likely to be incurred by the Trust on behalf of the funds administered by it in the ensuing financial year. Mr Bannon’s annual entitlement to Secretary/Director fees and superannuation was an administration cost of the Trust likely to be incurred in the ensuing financial year. His failure to include his fees entitlement in the annual budget was not merely an act of acquiescence or silence. It was a positive representation to the Trust and the Minister that the Trust would not incur any liability to pay Secretary/Director fees in the forthcoming year.

NPRT acted on the basis of Mr Bannon having no entitlement to be paid fees by:

(a)       Not making any payment of fees;

(b)       Not making any provision for payment;

(c)Providing administration budgets to the Minister which included no reference to Mr Bannon’s accrued and ongoing entitlements; and

(d)Proceeding with the distribution of the receivership residual without making any allowance for Mr Bannon’s fees entitlement. 

Mr Bannon knew that NPRT was acting on the basis set out above.

Earlier in this judgment I concluded that NPRT had established that it would suffer detriment if Mr Bannon was permitted to depart from the conventional basis upon which relations between him and the Trust were conducted.  That reasoning applies equally for the purposes of promissory estoppel.[48]

[48]Reasons [124]–[126].

1. Once again, the applicant does not join issue with his Honour’s statement of the relevant principles but takes issue with his Honour’s conclusions of fact essentially upon the same bases as he challenges his Honour’s findings in support of the conclusion with respect to estoppel by convention. 

1. His Honour went on to consider whether any promissory estoppel was suspensory rather than permanent. 

1. His Honour characterised the 1 March 2013 letter as foreshadowing that once the receivership was over, and the Trust’s financial position had improved, Bannon would seek payment of secretarial fees going forward.  In our view, this characterisation was correct.

1. If however the letter is to be regarded as an assertion by Bannon of an entitlement to be paid secretarial fees as at 1 March 2013 then any promissory estoppel would cease to have effect upon the expiry of a reasonable period of notice for departure from the Trust’s assumption that it was not liable to pay the secretarial fees.  His Honour held that this reasonable period would be until November 2013.

1. On this assumption, promissory estoppel ceased to preclude Bannon from claiming secretarial fees from November 2013.  This is coincidentally the point in time in which surplus funds held by the receivers were paid out to NPRT.

1. It is sufficient for our purposes to say that we agree with his Honour’s characterisation of the letter of 1 March 2013 and that, in consequence, any promissory estoppel ended upon the payment of the proceeds of the receivership out of court to NPRT on or about 1 November 2013.  Promissory estoppel would thus not preclude a claim for eight months of secretarial fees totalling $168,000.[49]

   [49]Reasons [130].

The parties’ submissions with respect to proposed ground 1 on appeal

1. In his written case, the applicant agitated the following matters.  First estoppel by convention was raised only during the course of the trial and in response to discussion with the trial judge.  In this regard, we note that nothing turns on this fact as no challenge has been made to the procedural fairness of the course adopted.

1. Secondly, it is submitted that the trial judge erred in finding that:

(a)       NPRT assumed that it had no liability to pay Bannon for secretarial fees; and

(b)      Bannon acquiesced in NPRT’s assumption.

1. In our view, the matters identified by his Honour as emerging from the evidence, which we have summarised above, overwhelmingly justified the inference that NPRT assumed that its actual and potential liabilities with respect to costs in the nature of secretarial fees were as set out in the administration budgets submitted to it by Bannon.

1. The applicant’s submissions combined three primary elements.  First, the applicant contended that the proper characterisation of his entitlement to secretarial fees was not one which accrued monthly.  Obviously enough if there was no present entitlement to the secretarial fees until they were demanded then the course of conduct upon which NPRT relied could not easily be said to give rise to an estoppel by convention.  For the reasons we have given concerning the construction of the 2007 contract, however, we reject this threshold contention.

1. Secondly, the applicant contended that the Board always knew of his continuing contractual entitlement.  Particular reliance was placed upon the evidence of the two Board members who signed the 2007 contract (Aremwa and Thoma).  Because of the emphasis placed on this matter in oral submissions we shall return to it in some further detail below.  But we are not persuaded that this evidence demonstrated that there was a continuing understanding of the applicant’s ongoing entitlement to secretarial fees.  To the contrary, the fact that the Board considered and approved the annual administration budgets in the terms in which they were submitted confirms that the Board accepted them as stating the true financial position of NPRT as best it could be estimated from year to year.

1. Thirdly, the applicant submitted that the annual administration budgets were directed to stating expenses that were likely to be incurred in the following year and that the secretarial fees were not included because he did not propose to claim them until the receivership was concluded.  There are a series of difficulties with this proposition.  At a factual level it is difficult to see why other accrued staff entitlements which would arise if the office were closed down fell to be included in the budgets but the secretarial fees did not.  Moreover, the evidence showed that there was a real prospect the company would be wound up throughout the period of budgeting in question.  Further, there were express statements made to the Board by Bannon that the annual administration budgets stated all potential liabilities of NPRT.  In these circumstances, the annual administration budgets gave rise to an assumption on the part of NPRT that they did in fact state all potential liabilities including liability for the secretarial fees.  Bannon acquiesced in the continuing assumption which he created.  Moreover, the critical question is not what was Bannon’s ongoing subjective intention but rather the assumption he created as to the objective obligations of NPRT.

1. During the course of oral submissions on the appeal it was put on behalf of Bannon that it was no part of NPRT’s case at trial that Bannon misled the Board of NPRT.  In fact, the proposition was put squarely to Bannon in cross-examination and he conceded that budget documents produced by him were materially misleading if they were understood to disclose potential liabilities upon the closure of the Trust. 

1. We return then to the evidence of the Board members upon which the applicant sought to rely to establish that NPRT had a continuing understanding that the applicant had an ongoing entitlement to claim secretarial fees. 

1. In oral submission on the appeal, senior counsel for Bannon submitted that each of the two key trustees (Ms Aremwa and Ms Thoma), who signed the 2007 contract, said ‘they knew that he was entitled to the fees, but they had not calculated the amount, or had not been told of the amount, because … it was continuing.’ 

1. It was further submitted that a fair reading of the evidence of these witnesses was that ‘they maintain that they knew that there was in fact an entitlement, and that it was to be paid, and that he did a good job.  He provided the service, and that “he was owed a lot of money”, to use the term they used, and … everybody in the court knew Mr Bannon was owed a lot of money.’ 

1. It will be recalled that the trial judge took a different view of the overall effect of the evidence of Ms Aremwa[50] and Ms Thoma.[51]  We therefore turn to their evidence. 

   [50]See [65] of our reasons above.

   [51]See [66] of our reasons above. 

·Ms Aremwa was a member of the Board of NPRT between 2005 and 2014 and chair of the Board for various periods within that time.

·She retired on 31 March 2014 after disagreement with the relevant Minister concerning the appointment of Andrew Jacobson as Secretary of NPRT. 

·She thought Bannon worked OK and was very good for NPRT.  He negotiated some good settlements relating to taxation disputes. 

1. We do not consider that the FWA matters were so minor as to be insignificant in comparison with other causes of action in this case. First, the claim for civil penalties is not raised as an alternative. It warranted consideration of substantive claims under the FWA in respect of annual leave (ss 87(1)(a) and 90(2)), payment in lieu of notice of termination (ss 117(1), 117(2)(b) and 117(3)), and redundancy pay (ss 119(1)(a) and 119(2)). Although the prayer for relief sought 60 penalty units (worth some $10,200) this was ‘for each breach.’ The maximum penalty that could be imposed for each contravention was also $51,000 given NPRT was a corporation.[165]  Even without taking into account the number of breaches, the amount of $51,000 was larger than the value of a number of the other claims.[166]  Secondly, the approach we have adopted is consistent with the approach in Coghill v Indochine Resources Pty Ltd (No 3) wherein Katzmann J found the requisite connection even where the claims were characterised as ‘subsidiary’ or ‘alternatives’.[167]  Finally, it is significant that the phrase ‘in relation to’ is viewed as an expression of wide and general import.[168] 

   [165]Section 12 of the FWA provides that ‘penalty unit’ has the same meaning as in s 4AA(1) of the Crimes Act 1914 (Cth) which at the time was $170. Sections 546(2)(a) and 546(2)(b) of the FWA provide that the maximum penalty per breach is 60 penalty units in the case of an individual and 300 penalty units in the case of a body corporate.

   [166]Eg 12 weeks’ redundancy pay ($46,153.85);  12 weeks’ pay in lieu of notice of termination ($46,153.85);  leave loading ($41,164.70).

   [167](2015) 237 FCR 282, 289 [37].

   [168]Energy Australia Yallourn Pty Ltd v Automotive, Food, Metal, Engineering, Printing and Kindred Industries Union (2018) 264 FCR 342, 365 [98] citing Fountain v Alexander (1982) 150 CLR 615, 629 (Mason J).

1. Prima facie then, the proceeding (prior to the striking out order) was a proceeding ‘in relation to a matter arising under the [FWA].’ Notwithstanding that the striking out order involved an exercise of discretion, the trial judge fell into error in basing his decision on a wrong view of s 570. He has also allowed an extraneous matter to affect him, ie that s 570 did not, or ought not, apply to the proceeding where the Court lacked jurisdiction.[169] 

   [169]House v The King (1936) 55 CLR 499, 505.

1. The striking out order is to be set aside. However, an issue then arises as to whether there ought still be a strike out on the correct basis that s 570 was otherwise applicable up until 17 April 2018.

1. The fact that there was no prospect of success might ordinarily justify a strike out ‘from the outset’ and thereby justify the approach of the trial judge in any event. However, the making of such an order in this case does not sufficiently take account of the fact that the parties proceeded on the basis that the FWA claims were included as part of the claim up to the first day of trial, ie that the proceeding was effectively a ‘no costs’ proceeding.

1. In Hartley Poynton Ltd v Ali, Ormiston JA concluded that the power of courts to make orders nunc pro tunc derives from the Court’s inherent jurisdiction to remedy a situation by dating an order in a way which gives effect to the justice of the case.[170]  It is not generally to be exercised so as to alter substantive rights[171] and cannot deem something to have remained in existence which no longer remains in existence.[172]

   [170](2005) 11 VR 568, 609 [80].

   [171]Ibid 606 [73].

   [172]Ibid 613 [91].

1. A retrospective order backdated to the commencement of the proceeding would affect more than merely matters of procedure, and would deem something to exist which did not truly exist (namely a proceeding that did not include the FWA claims). We do not consider that it is in the interests of justice that an order be made with effect from the commencement of the proceeding.

1. However, equally, we do not consider that an order ought be made only prospectively on the determination of the proceeding. As highlighted already, Bannon abandoned his FWA claims on the first day of the trial. There were thereafter no ‘live’ FWA claims the subject of submission or adjudication by the trial judge. Notwithstanding, then, that no formal order was made to grant leave to Bannon to withdraw his FWA claims[173] or amend his pleadings, after 16 April 2018 the case proceeded on the basis that those claims were abandoned.  From that time Bannon no longer sought ‘to enforce an entitlement for which the [FWA] provides’[174] and, as a matter of substance, the proceeding no longer related to a ‘matter arising under the [FWA].’ 

   [173]Pursuant to Supreme Court (General Civil Procedure) Rules 2015, r 25.02.

   [174]Stanley (2014) 225 FCR 357, 363 [27].

1. The making of a striking out order with effect from 17 April 2018 would thereby address the realities of the situation as it existed post 16 April 2018 and would give effect to the justice of the case. Thus, from 16 April 2018 the trial judge was faced with no more than a procedural irregularity in circumstances where the parties knew that the claims under the FWA were gone. Rather than deeming something to exist ‘which did not exist’, a strike out with effect from 17 April 2018 would correctly reflect the issues between the parties; namely, that while the proceeding related to matters arising under the FWA up until 16 April 2018, this was not the case thereafter.

1. A number of matters flow from this analysis:

·first, proposed ground 2 of cross-appeal is sustained as the strike out order should only have been made with effect from 17 April 2018;

·secondly, s 570 will apply to the proceeding up to and including, 16 April 2018, however, after that time the Court may make costs orders in the exercise of its general discretion under s 24 of the SC Act unrestricted by s 570;

·thirdly, proposed ground 1 of cross-appeal is also sustained given the trial judge has wrongly ordered the NPRT to pay 50 percent of Bannon’s (entire) costs of the proceeding without regard to s 570.

1. It therefore remains to consider the appropriate costs disposition in light of this analysis. 

Costs generally (Bannon’s proposed ground 10 and proposed ground 3 of cross-appeal)

The trial judge’s findings on costs

1. The trial judge observed that s 24 of the SC Act confers a wide discretion on the Court. He carefully set out the extent to which each party had succeeded or failed. He also highlighted that the amount of damages awarded to each party represented a relatively small proportion of their respective claims, though each had successfully defended significant aspects of claims brought against them.[175]

   [175]Costs Reasons [39].

1. In respect of Bannon, he had failed in respect of the primary element of his claim being $3,111,000 for unpaid secretarial fees.  He was unsuccessful in his claim for 12 weeks’ pay in lieu of notice and for leave loading, but he was otherwise substantially or wholly successful in relation to his other claims.  NPRT was unsuccessful in respect of the first three elements of its counterclaim and succeeded only in respect of the fourth element of that claim in respect of the 2014 financial year.[176] 

   [176]Costs Reasons [42].

1. The trial judge found that approximately 40 percent of the hearing was devoted to Bannon’s claim, with the balance taken up with the counterclaim.  His Honour did not consider it appropriate to apportion costs of the trial based on the hearing days which were devoted to the respective claims.  He noted that a number of days were taken up with evidence of Mr Fitzgerald, which resulted in a substantial reduction in the quantum of the counterclaim.  Further, that NPRT was unsuccessful in respect of three elements of its counterclaim.[177] 

   [177]Costs Reasons [44].

1. The trial judge also rejected a submission that the Court should have regard to the fact that Bannon’s claim for secretarial fees was defeated by an estoppel by convention defence that was only pleaded during the trial.  He found that no prejudice was shown and that Bannon had been on notice of a defence of promissory estoppel for some time.[178] 

   [178]Costs Reasons [45].

1. He also rejected a submission that NPRT’s entitlement to costs should be reduced for various reasons, in particular:

·in relation to an alleged ‘limited extent of success’ on the counterclaim, he said that the same observation could be made in respect of Bannon’s claim;

·in relation to the success being based on particulars to paragraph 42A of the SFADC, he rejected a submission that Bannon was not given adequate notice and that the particulars did not support the pleaded allegation;

·in respect of the late abandonment of claims, he found that the same criticism could be levelled at Bannon;

·in relation to the time taken by the counterclaim and lack of utility of Mr Fitzgerald’s evidence, he considered that this was already taken into account in determining that a time based costs order was inappropriate.[179]

[179]Costs Reasons [46]–[54].

1. Ultimately, having regard to all of the matters, his Honour determined that NPRT should pay 50 percent of Bannon’s costs of the proceeding, and Bannon should pay 50 percent of NPRT’s costs of the proceeding.[180]  

   [180]Costs Reasons [58].

1. He further dealt with a submission that the costs of proving certain matters in a notice to admit dated 10 December 2015 ought be paid by NPRT pursuant to r 63.18 of the SC Rules.[181]  He found that it was appropriate that there be no order that NPRT pay costs of proving various matters notwithstanding that Bannon had been successful (in respect of sick leave, long service leave, and redundancy).  He found that NPRT had a legitimate basis for disputing these claims given they were based on a salary of $200,000.[182]

   [181]Rule 63.18 provides:  ‘Where a party serves a notice— (a)  under Rule 35.03(2) disputing a fact, and afterwards that fact is proved in the proceeding;  (b)  under Rule 35.05(2) disputing the authenticity of a document, and afterwards the authenticity of that document is proved in the proceeding—  that party shall pay the costs of proof, unless the Court otherwise orders.’

   [182]Costs Reasons [57].

1. In relation to costs reserved by various orders made during interlocutory applications, his Honour found that these ought to be payable on the same basis as the costs of the trial, subject to exceptions.[183] 

   [183]Costs Reasons [60].

1. The first exception concerned a ruling on a summons brought by NPRT to amend its defence and counterclaim filed on 27 July 2016 which was substantially allowed.  His Honour had regard to the fact that Associate Justice Ierodiaconou had recorded a number of criticisms of the manner in which the application was opposed by Bannon.  In such circumstances he determined that it was appropriate that Bannon be ordered to pay NPRT’s costs of and incidental to the summons filed on 27 July 2016 (order 4(a)).[184] 

   [184]Costs Reasons [62].

1. In relation to applications heard on 27 February 2017, the trial judge observed that Associate Justice Ierodiaconou published two rulings: one concerned an application by Bannon to set aside a subpoena; the second concerned applications brought by both parties.  He found that, although Bannon was successful in setting aside the subpoena, this was only one of a number of matters for determination and ought be viewed alongside his (mixed) success in respect of the other matters.  He ultimately determined that, as each party enjoyed a similar measure of success, it was appropriate that the parties bear their own costs of and incidental to the hearing (order 4(b)).[185]

   [185]Costs Reasons [64].

1. Finally, the trial judge dealt with the costs of a hearing on the eighth day of the trial on 26 April 2018 which concerned an application by NPRT to amend its defence and counterclaim and objections to the admissibility of reports of Mr Fitzgerald.  He noted that all of the arguments advanced on behalf of Bannon were rejected.  Further, he considered that Bannon’s approach was ‘misconceived’ in that he sought to strike out numerous paragraphs of the pleadings which were not the subject of the application to amend.  He found that significant costs were incurred by NPRT in having to respond to ‘voluminous material’ and considered that Bannon should bear the costs incurred at the hearing of 26 April 2018 and submissions thereof (order 4(c)).[186] 

   [186]Costs Reasons [68].

NPRT’s submissions

1. NPRT submitted that Bannon should not receive his costs because he had pursued untenable FWA claims, and because of his failure at trial in his substantive claim for the secretarial fees. Rather, the order should have been for each party to bear their own costs on Bannon’s claim.

1. In oral submissions it was also highlighted that Bannon had abandoned many claims.

1. NPRT further submitted that the counterclaim was a separate proceeding which was not subject to s 570, and that NPRT was entitled to costs on its counterclaim.

1. Strictly this ought result in a replacement of orders 3(a) and (b) with an order for Bannon to pay NPRT’s costs of the counterclaim, and each party to bear their own costs of the claim.  However, because the claim and counterclaim were run together, an order requiring Bannon to pay 50 percent of NPRT’s cost on both the claim and counterclaim represented a reasonable approximation (in order 3(b)).  It followed that order 3(a) ought be struck out and replaced with ‘save as otherwise ordered below, each party shall bear their own costs’. 

1. No challenge was otherwise made to the orders contained at paragraph 4 given there was no reason to doubt the correctness of the trial judge’s orders on costs reserved. Orders 4(a) and (c) were justifiable as orders made on the counterclaim, or as orders made by reason of the unreasonable acts or omissions of Bannon pursuant to s 570(2)(b) of the FWA. Order 4(b) was consistent with the application of s 570, and also reflected an assessment of the mixed success of the parties at the hearing on 27 February 2017.

Bannon’s submissions

1. Bannon rejected the suggestion that the FWA claims were an abuse of process and resulted in any breach of the CPA. He also relied on Aufgang as justification for bringing these claims.[187]

   [187][2008] VSC 27.

1. He submitted that he was a successful party and should receive the costs of his claims to at least 80 percent.  He also highlighted substantially similar matters to those already considered by the trial judge.

1. In relation to the counterclaim, it was submitted that the trial judge should have held that NPRT pay Bannon’s costs of the counterclaim to at least 90 percent plus indemnity costs for the late withdrawal of claims, alternatively, that NPRT pay all of Bannon’s costs of the counterclaim on a standard basis.  In so saying, Bannon relied on substantially the same matters he had raised before the trial judge.

1. In relation to the notice to admit, Bannon repeated his submission that costs ought be paid in accordance with r 63.18 of the SC Rules and claimed that such costs ought be ordered on an indemnity basis by reason of breaches of the CPA.

1. It was further submitted that all the reserved costs ought generally have been treated as costs in the cause given they were part of the process of defining the issues for trial. An exception was the setting aside of the subpoena to Ms Melissa Bannon of 3 May 2017 which should be the subject of an indemnity costs order given the subpoena was held by Ierodiaconou AsJ to have ‘no legitimate purpose’ and was also contrary to provisions in the CPA.[188]

   [188]Bannon v Nauru Phosphate Royalties Trust (Subpoena Objection) [2017] VSC 213.

1. The above submissions were made on the basis that s 570 did not apply to the proceeding. However, if s 570 applied, Bannon submitted:

…the failure of the Cross-Applicant to make appropriate admissions in respect of the claim, as well as its failure to file evidence, call relevant witnesses or make any sensible submissions in respect of its counterclaims, means that that [sic] the costs regime was enlivened notwithstanding the operation of s 570, by reason of the provisions of s 570(2)(b).

Resolution 

1. The starting position is that no costs were payable in respect of the proceeding up to, and including, 16 April 2018 unless they were covered by s 570(2).[189]  This would apply to all costs reserved prior to that time.  There was no error in making ‘no order’ in respect of the notice to admit in any event.

   [189]Sections 569 and 569A of the FWA were not applicable.

1. Although Bannon alleged that a costs order ought be made under s 570(2)(b), his submission did not rise above assertion. In particular, it was not shown that any conduct on behalf of NPRT ‘caused’ Bannon to incur costs. It is also significant that the trial judge did not make any indemnity costs orders against NPRT.

1. In relation to order 4(a), it will be recalled that the trial judge recorded criticisms of the manner in which the application was opposed.  Such an unchallenged finding justifies the order on the basis that Bannon’s unreasonable acts caused costs to be incurred.  Order 4(a) will therefore stand.

1. Order 4(b) correctly reflects the application of s 570 and should also remain.

1. Order 4(c) would be covered by s 24 of the SC Act (given the costs were incurred after 16 April 2018) and ought to remain in circumstances where Bannon did not demonstrate any error in the exercise of the trial judge’s discretion.

1. We also consider that the inclusion of the FWA claims was an unreasonable act given this Court lacks jurisdiction. First, even if Bannon had some subjective view that the Court was an eligible court (which was not the subject of evidence), it was ‘unreasonable’ to bring claims to a court which lacked jurisdiction. Moreover, even if regard is had to the subjective views of Bannon, it is significant that the FWA claims were still being pressed on the morning of the first day of trial. For the reasons given by the trial judge, Aufgang also did not provide support for the proposition that the Court had jurisdiction to impose a penalty for a contravention of s 44 of the FWA.[190] 

   [190][2008] VSC 27.

1. The result is that Bannon ought pay NPRT’s costs thrown away by reason of the inclusion of the FWA claims. This is also consistent with the concession of counsel that Bannon ought pay such costs under r 63.15 of the SC Rules[191] in any event.

   [191]Rule 63.15 provides: ‘Unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.’

1. In terms of the applicability of s 570 to the counterclaim, the matters pleaded in the counterclaim are pleaded both as a set off and by way of counterclaim and arose out of the same employment contract. In this way the two processes are ‘linked’.

1. However, a counterclaim generally constitutes a separate proceeding which has an independent existence.[192] Given the counterclaim does not seek ‘to enforce any entitlement for which the FWA applies’ it does not appear to constitute a proceeding ‘in relation to’ a matter arising under the FWA.

   [192]This was conceded by junior counsel for Bannon;  see also Clark v Loftus [2005] VSCA 155 [6].

1. However, even if s 570 of the FWA does not apply to the counterclaim and s 24 of the SC Act applies, it is inappropriate to make any order for costs separately in respect of the counterclaim in favour of NPRT. First, although the trial judge approached the matter on the basis that Bannon was entitled to damages of $511,275.58 and NPRT was entitled to damages of $141,052.91, he ultimately ordered the NPRT to pay Bannon the single sum of $370,222.67. In such circumstances, NPRT has been successful on its set off rather than its counterclaim. Secondly, the trial judge did not order costs separately in respect of the counterclaim, but made orders in respect of each party’s costs ‘of the proceeding.’ This was a recognition of the interconnectedness of the two proceedings which, as accepted by NPRT, were ‘run together’.[193]

   [193]See Barescape Pty Limited v Bacchus Holdings Pty Limited (No 12) [2012] NSWSC 1591 [6] citing Polwood Pty Ltd v Foxworth Pty Ltd (No 2) [2008] FCAFC 168 [12]–[13].

1. In these circumstances, there is no justification for making any separate order in respect of the counterclaim, and certainly none in favour of NPRT.  Rather, the costs of the entire ‘proceedings’ including the counterclaim, ought be treated in the same way, ie they ought lie where they fall, up to, and including, 16 April 2018.

1. In terms of the situation post 16 April 2018, the matters raised before us were similar to the matters already considered by the trial judge (as to time taken and extent of success).  In circumstances where none of the substantive proposed grounds of appeal have been successful, there is no reason to interfere with the discretion of the trial judge that each side bear 50 percent of the other party’s costs of the proceeding. 

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