Central Innovation Pty Ltd v Garner (No 4)
[2020] FCA 1796
•16 December 2020
FEDERAL COURT OF AUSTRALIA
Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796
File number: NSD 2221 of 2016 Judgment of: BROMWICH J Date of judgment: 16 December 2020 Catchwords: EMPLOYMENT – applications by two related companies in a group of entities relating to breach by the first respondent of contractual terms, or in the alternative, equitable fiduciary obligations or statutory obligations under Corporations Act 2001 (Cth) s 183 – where by virtue of his employment contract the first respondent had access to two customer databases containing details of customers of the second applicant – where the first respondent was made redundant – where in the period after the first respondent was made redundant, at least 37 customers of the second applicant sought to switch their provider to the new employee of the first respondent, the second respondent – whether the first respondent had entered a new contract of employment provided to him by the applicants in March of 2011 – whether the first respondent was employed by the first or the second or both applicants – whether the first respondent took and used either or both of the applicants’ confidential information – whether any such taking and use by the first respondent was in breach of contractual, equitable or statutory obligations – whether any breach of contractual, equitable or statutory obligations caused loss to either or both of the applicants – the quantum of any loss caused by any breach of contractual, equitable or statutory obligations by the first respondent – held: the first respondent was employed by the first applicant to do work for the second applicant – the first respondent was bound by all the terms of the contract entered into on or about 30 November 2009 with clauses prohibiting the taking and use of the first and second applicants’ confidential information – the first respondent did not enter a later second contract in March 2011 – the first respondent breached express contractual terms during his employment by the first applicant by taking and using the applicants’ confidential information – the first respondent’s breach of contract caused 36 customers of the applicants to switch service provider to the first respondent’s new employer, the second respondent – quantum of loss of customers to be calculated by reference to two expert reports from the applicants’ expert forensic accountant – the first respondent to pay damages and pre-judgment interest in an amount to be calculated on the evidence at trial of the applicants’ expert forensic accountant – the first respondent to pay applicants’ costs Legislation: Corporations Act 2001 (Cth) ss 183, 500
Evidence Act 1995 (Cth) ss 59, 136, 140(2), 161(1)
Cases cited: Armory v Delamirie (1722) 1 Stra 505; 93 ER 664
Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154; 374 ALR 90
Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) [2003] FCA 1525; 137 FCR 317
Azzopardi v The Queen [2001] HCA 25; 205 CLR 50
Berry v CCL Secure Pty Ltd [2020] HCA 27; 381 ALR 427
Boardman v Phipps [1967] 2 AC 46
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424
Briginshaw v Briginshaw (1938) 60 CLR 336
Browne v Dunn (1894) 6 R 67
Commonwealth v Amann Aviation (1991) 174 CLR 64
Commonwealth Bank of Australia v Barker [2014] HCA 32; 253 CLR 169
Concut Pty Ltd v Worrell [2000] HCA 64; 176 ALR 693; 75 ALJR 312
Cox Purtell Staffing Services Pty Ltd v Our Energy Group Pty Ltd [2017] NSWSC 1122
Director of Public Prosecutions v Kilbourne [1973] AC 729
Doney v The Queen (1990) 171 CLR 207
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
Gothard v Davey [2010] FCA 1163; 80 ACSR 56
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Jones v Dunkel (1959) 101 CLR 298
Kriketos v Livschitz [2009] NSWCA 96; 14 BPR 26,717
Lifeplan Australia Friendly Society Ltd v Woff [2016] FCA 248; 259 IR 384
LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499
Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; 207 CLR 165
Pitcher Partners Consulting Pty Ltd v Neville’s Bus Service Pty Ltd [2019] FCAFC 119; 271 FCR 392
R v Baden-Clay [2016] HCA 35; 258 CLR 308
R v Hannes [2000] NSWCCA 503; 158 FLR 359
R v Hester [1973] AC 296
RPS v The Queen [2000] HCA 3; 199 CLR 620
SBA Music Pty Ltd v Hall (No 3) [2015] FCA 1079
Shepherd v The Queen (1990) 170 CLR 573
Webster v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCA 702
Weissensteiner v The Queen (1993) 178 CLR 217
Division: Fair Work Division Registry: New South Wales National Practice Area: Employment and Industrial Relations Number of paragraphs: 353 Date of last submissions: 16 March 2020 Date of hearing: 2-5 December 2019 Counsel for the Applicants: G Hatcher SC with R Jedrzejczyk Solicitor for the Applicants: SD Commercial Lawyers Counsel for the First Respondent: D Robertson QC with J Zhou Solicitor for the First Respondent: AJH Lawyers ORDERS
NSD 2221 of 2016 BETWEEN: CENTRAL INNOVATION PTY LTD
First Applicant
INTERCAD PTY LTD
Second Applicant
AND: GARY GARNER
First Respondent
N C CADCAM SYSTEMS PTY LTD (IN LIQUIDATION)
Second Respondent
ORDER MADE BY:
BROMWICH J
DATE OF ORDER:
16 DECEMBER 2020
THE COURT ORDERS THAT:
1.Judgment and verdict be entered in favour of the applicants in respect of 36 of the customers claimed to have been lost, in a sum to be calculated by reference to the evidence of Ms Bateman, plus pre-judgment interest.
2.The first respondent pay the applicants’ costs.
3.The parties confer and by or before 27 January 2021, or by such other date as may be sought and allowed, submit:
(a)agreed or competing orders to give effect to the judgment and verdict and interest in dollar sums;
(b)any agreed or competing orders in relation to the remaining relief sought by the applicants; and
(c)agreed or competing procedural orders for any remaining dispute to be adjudicated upon.
4.The proceeding be listed for a case management hearing at 9.00 am on 29 January 2021, or such other date as may be fixed in consultation with the parties.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BROMWICH J:
Introduction
This is a case concerning allegations of misuse of confidential information obtained by an employee during a former employment relationship in the course of subsequent employment with a competitor. The allegations relate to events alleged to have occurred during the original employment, between the two jobs, and, most importantly, during employment with the subsequent employer. Relief is sought by way of declarations, injunctions (including delivery up of confidential information), damages, compensation (including equitable compensation), interests and costs.
The two applicants are Central Innovation Pty Ltd and Intercad Pty Ltd. Central Innovation and Intercad are part of a group of companies that operate collectively under a business umbrella called the “CI Group”. One or more of the members of the CI Group of companies advise customers in design, manufacturing and construction industries about optimising their design processes and systems, and supplying them with three dimensional (3D) computer aided design and drafting software, commonly referred to as “CAD” software. The first and now only active respondent, Mr Gary Garner, refers to the CI Group of companies being neither a legal entity, nor a registered business name. As will be seen, nothing turns on this.
The 3D CAD software and related services supplied by one or more of the members of the CI Group of companies came from SolidWorks Corporation (formerly called SolidWorks Inc), a United States-based company and subsidiary of French company Dassault Systèmes. Dassault Systèmes is one of the largest developers of 3D CAD software in the world. Mr John Atkinson, Director of Applications Development for Central Innovation at the time of the trial in December 2019, in his affidavit evidence estimated that SolidWorks captured approximately 50% of the Australian 3D CAD software market. Between about 1996 and 2009, Intercad was an exclusive distributor of SolidWorks’ software in Australia and New Zealand. Since then, Intercad periodically entered into distribution agreements with SolidWorks by which Intercad had the non-exclusive right to sell its software in Australia and New Zealand.
Customers who purchase SolidWorks’ 3D CAD software from one of SolidWorks’ resellers acquire both a perpetual licence for the software, and a 12-month subscription to software updates. During the subscription period, the reseller also provides technical support, and is known as a “Value Added Reseller” (VAR). A customer of a SolidWorks VAR may have more than one software subscription. At the end of each subscription period, which may or may not be synchronised as between different subscriptions, the customer chooses whether or not to renew any given subscription. CI Group/Intercad subscriptions were synchronised. A SolidWorks VAR’s information about customers who are subscribers is important to the process of servicing the needs of subscribers and securing the renewal of subscriptions.
The CI Group of companies employs just under 150 people, approximately 42 of whom perform work for Intercad. Mr Garner admits in his defence that he performed work for Intercad, says in his affidavit evidence that he was employed by Intercad, and denies in both his defence and evidence ever having been employed by Central Innovation. Central Innovation and Intercad contend that they were each jointly or severally the employer of Mr Garner, and that he was employed by one, or the other, or both of them.
Mr Garner’s subsequent employer, the second respondent, N C Cadcam Systems Pty Ltd (NCCS), also supplied SolidWorks 3D CAD software as a VAR, confined to Victoria and Tasmania. At the core of this dispute is the question of whether, during the time that he performed work for Intercad, Mr Garner appropriated SolidWorks customer information and misused that information during the course of his employment with NCCS. The principal form of misuse alleged by the applicants was getting a subscriber customer of a VAR member of the CI Group to become an NCCS subscriber customer. Mr Garner denies any wrongdoing.
NCCS went into voluntary liquidation on 10 April 2019, just under eight months before the trial in early December 2019, preventing this proceeding continuing against it without the leave of the Court: see s 500, Corporations Act 2001 (Cth). No leave was sought or granted for the proceeding to continue against NCCS. That is understandable as most if not all of the relief sought against it was rendered futile. NCCS’s stance towards this proceeding is now irrelevant.
In cases involving misuse of confidential information by a former employee, a former employer is often going to be at a practical disadvantage in ascertaining and proving what is suspected to have taken place at the new employer (and therefore in pleading a case), including in particular the use of the former employer’s confidential information. This was certainly so for the applicants, who have had considerable difficulty in marshalling evidence in support of their case. Not the least source of this difficulty was the supposed disappearance of a work laptop computer provided to Mr Garner by NCCS (NCCS Laptop). Mr Garner’s case is that the NCCS Laptop was stolen from him a matter of hours before he was served with orders made by a judge of this Court on Friday, 23 December 2016, requiring that he give the applicants’ computer expert access to it. This and other events resulted in corresponding difficultly for the applicants in finalising their pleadings, which took until the lead up to the trial.
The course of the litigation leading to a final hearing has been protracted, with numerous interlocutory disputes and contested case management hearings, especially in relation to pleadings, expert computer evidence and discovery. The applicants undoubtedly had a very difficult task in assembling the evidence that they took to trial. Unsurprisingly, the basal dispute is the sufficiency of that evidence. The level of agreement and general cooperation between the parties has been poor. This has mostly, in my view, been the fault of the respondents and their solicitors, which since April 2019 has been confined to Mr Garner and his solicitors.
Mr Garner’s conduct
It is relevant that Mr Garner has been obstructive and uncooperative in this proceeding, from soon after the ex parte first steps in this proceeding when he was served with the initiating process and initial orders of the Court, and continuing right up to and including the time when he gave evidence at the trial. Mr Garner did not comply with important aspects of interlocutory ex parte orders made against him by Justice Katzmann on 23 December 2016 and served on him that day. Among other things, those orders restrained him from
… destroying, tampering with or parting with possession of any computer (including laptop) or other electronic device, including any electronic storage device, used in or in connection with or which relates in any way whatsoever to his employment with N C Cadcam Systems Pty Ltd (NCCS).
As mentioned above, Mr Garner claimed that the NCCS Laptop provided by his new employer, which was clearly covered by those orders, had been stolen earlier on the very day when he was served with those orders. Such an unhappy coincidence calls for close scrutiny as to whether that was merely bad luck, or a departure from the truth. There are grounds for grave suspicion that the supposed theft was not just an unhappy coincidence, but a fabrication by Mr Garner designed to provide an ostensibly legitimate basis for depriving the applicants of access to that laptop. These include the fact that the theft was not detected until long after when it was supposed to have occurred, and not reported to police until the next week.
NCCS’s conduct
Prior to its voluntary liquidation, NCCS had been obstructive in this litigation. At its worst, this may have included concealing the existence of information on its computer systems, and failing to preserve that information, contrary to what was sought by the applicants through Court processes. In combination with the absence of the NCCS Laptop allocated to Mr Garner, considered below, I am concerned that had proper access been given to NCCS’s computer records, this might well have revealed the presence of confidential information that had to have come from Mr Garner’s time performing work for Intercad. However, that cannot now be determined, and even if it could be, would not be directly relevant to the case against Mr Garner.
I was ultimately confined to such inferences as could properly be drawn from the matrix of evidence that was able to be adduced by the applicants, including the effect of potentially contrary evidence. Mr Garner’s case relied quite heavily not just on the asserted inadequacy of the evidence adduced by the applicants, but on the acceptance of contrary evidence from him and adduced on his behalf. Mr Garner’s credibility and reliability was therefore of considerable importance to the outcome of this proceeding.
Overview of the evidence
The court book containing the evidence adduced by the parties is voluminous, comprising some 17 lever arch folders and over 10,000 pages of material, mostly from the applicants. Despite that, only a relatively small proportion of that evidence required detailed consideration in these reasons. In part, that is due to evidence being required to be adduced by the applicants on all manner of mundane things. That was apparently (and I consider reasonably), seen to be necessary by the applicants because of Mr Garner’s pleaded defence to the applicants’ case. This was ultimately in response to the second further amended statement of claim (statement of claim) and was replete with denials of “each and every allegation”, often contradicted by counter pleading that in fact admitted key aspects of what was alleged. This approach by Mr Garner greatly increased the burden in writing this judgment. Once capable of being proven, most of the formal and background facts were not disputed by Mr Garner in opening or closing submissions, but that did not absolve the Court from needing to make numerous factual findings.
The documents principally relied upon by the applicants were as follows:
(1)Two affidavits with exhibited documents from Mr John Atkinson, the Director of Applications Development for Central Innovation, who had been the General Manager of “Intercad, ANZ”, which is a joint reference to Intercad and Intercad NZ Pty Ltd. Mr Atkinson had access to various books and records of both applicants. He was narrowly cross-examined for a little over two hours, with little of what he deposed to being challenged.
(2)Two expert reports from a forensic information technology specialist and computer expert, Mr Matthew O’Kane, and two expert reports from a forensic accountant, Ms Fiona Bateman, both of whom were briefly and narrowly cross-examined, with much of what they deposed to being only indirectly challenged.
(3)Three affidavits from their solicitor, Mr Stephen D’Emilio, who produced a large volume of documents, and who was cross-examined at some length about the limitations of that material.
Mr Garner relied upon:
(1)an affidavit from him, upon which he was cross-examined to significant adverse effect; and
(2)an affidavit from another information technology forensic expert, Mr Graeme Conn, who was not required for cross-examination.
Agreed facts
A very limited number of agreed facts were reduced to writing and admitted as the first numbered exhibit at the trial, the substance of which is as follows, with additional comments and cross-references added:
(1)Intercad was incorporated on 31 January 1996.
(2)Central Innovation was incorporated on 21 December 2006.
(3)Intercad is, and has been since 12 January 2016, a wholly-owned subsidiary of Central Innovation.
(4)On l April 2014, Intercad and SolidWorks entered into an agreement titled “Distribution Agreement”.
(5)During the period between 30 November 2009 and 22 August 2016, SolidWorks operated an electronic database known as the “Value Added Reseller Resource Centre” (VRC) and Mr Garner had access to it. The text of the Distribution Agreement states that Intercad was to ensure that only “authorized employees” could access the VRC.
(6)During the period between 30 November 2009 and 22 August 2016, Mr Garner had access to SUGAR. The evidence of Mr Atkinson establishes that SUGAR was an electronic customer relationship management (CRM) system used by the applicants. Mr Garner gave similar evidence.
(7)On 30 November 2009, Mr Garner entered into a contract of employment. That contract is referred to in these reasons as Contract One. For completeness, I note that this contract is dated 23 November 2009 at the point signed by Mr Garner and at each point initialled by Mr Garner, and is dated 26 November 2009 at the point signed by the “Regional Sales Manager South West”, Mr Ben Darling. The prior covering letter from Mr Darling confirming the offer and acceptance and seeking to have the enclosed contract signed was dated 12 November 2009. It seems likely that the parties have settled on 30 November 2009 as the contract start date because that appears to be the date from which Mr Garner actually started work, as confirmed by a subsequent letter reproduced in part at [33] below. Nothing turns on this distinction.
(8)On 16 March 2011 at 1l.54 am, Ms Penny Myerscough sent an email to Mr Garner, to which was attached a letter, the pages of which comprised a second contract. That contract is referred to in these reasons as Contract Two.
(9)On 16 March 2011 at 1.04 pm, Mr Garner sent to Ms Myerscough an email in reply.
(10)Between 30 November 2009 and about l March 2013, Mr Garner’s position was “Business Development Manager”.
(11)On or about l March 2013, Garner was promoted to the position of “Team Leader, Victoria”.
(12)During the period between 30 November 2009 and 22 August 2016, Garner used a laptop computer (HP EliteBook 8560w, serial no. 5CB2261V6H) for the purposes of carrying out his duties as a Business Development Manager and, later, as Team Leader, Victoria. This laptop is referred to in these reasons as the Intercad Laptop, despite being referred to as the Garner Laptop in evidence and submissions.
(13)On 22 August 2016, Mr Garner was made redundant.
(14)On 22 August 2016, Mr Garner contacted Mr Stalin D’Souza on LinkedIn. Mr D’Souza was the Director of NCCS.
(15)On 15 November 2016, Garner commenced employment with NCCS.
(16)During the period between 15 November 2016 and around June 2017, NCCS operated a CRM system known as “Hatchbuck”.
The key issues in dispute
As the case has unfolded, there are three key issues in dispute to be resolved, apart from the preliminary contract issue addressed below as to whether Mr Garner was employed by Central Innovation, by Intercad, or by both companies. They are whether the applicants have discharged their onus of proving:
(1)that Mr Garner took and used either or both of the applicants’ confidential information;
(2)that any such taking and use was in breach of contractual, equitable or statutory obligations;
(3)that any such breach caused loss to either or both of the applicants, and if so, the quantum of that loss.
The applicants’ case is substantially, but not entirely, circumstantial. I therefore surmise that the reference in Mr Garner’s submissions to a lack of direct evidence necessarily constitutes an assertion that there is also an insufficient basis for drawing adverse inferences in combination with the available direct evidence.
Preliminary issue: Mr Garner’s contract of employment
Relevant facts
The evidence includes two written contracts to which Mr Garner is named as a party, one signed (defined above as Contract One) and one not (defined above as Contract Two).
Mr Atkinson deposes to all of the persons working for Intercad being formally employed by Central Innovation in the sense of that being the entity to whom each is contracted. However, some of those persons perform duties exclusively for Intercad or other entities within the CI Group of companies. Mr Garner’s pleaded case is that he entered into Contract One with Central Innovation, or with CI Group (despite pleading that it is not a legal entity), and did not enter into Contract Two. As noted above, Mr Garner also asserts that he was employed by Intercad, and not by Central Innovation.
By a letter dated 12 November 2009, on letterhead with a logo and the words “Central Innovation” and with a footer “Central Innovation Group Pty Ltd Employment Contract”, Mr Ben Darling, using the title Regional Sales Manager, wrote to Mr Garner confirming his acceptance of an offer to “join our company as Business Development Manager with Central Innovation Group”, based in the Victorian Office. That letter attached a document, on the same letterhead and with the same footer, entitled “PERMANENT STAFF Terms and Conditions of Employment”. The letter stated that those terms and conditions form a part of the contract, asked Mr Garner to read them carefully, asked him to advise if he had any queries, and asked him to initial each page and sign the final page to signify acceptance. A consequence of the reasoning below is that I have concluded that Mr Darling was employed by Central Innovation.
Mr Darling’s 12 November 2009 letter is numbered as page “1”, followed by the terms and conditions document as pages “2” to “9”, followed by a page “10” headed:
Intercad
Sales Commissions and Bonus PlanEffective 1 July, 2009
All 10 pages of the letter and enclosure have the same logo and footer.
Mr Garner initialled and wrote the date “23/11/09” on the letter and on each of the 10 pages. He also signed and dated pages 9 and 10, being the contract itself and the annexed Intercad “Sales Commissions and Bonus Plan”. Mr Darling signed the last page of the contract and also signed the annexure and dated it “26-11-09”. The formation of Contract One was thereby complete.
The opening sentence of the terms and conditions for Contract One stated:
For the purposes of this Contract of Employment, references to “the CI Group” shall include Intercad Pty Ltd, Intercad NZ Pty Ltd, Graphisoft Pty Ltd and Central Innovations [sic] Pty Ltd.
Although Mr Darling’s 12 November 2009 letter and page 9 of the contract both refer to “Central Innovation Group”, there is no reference to any company called “Central Innovation Group Pty Ltd” other than as it appears in the footer of each of the 10 pages, as opposed to “Central Innovation Pty Ltd”. There is no evidence of the existence of any company called “Central Innovation Group Pty Ltd”, nor any explanation as to why that name was used. This situation also applies to Contract Two. It may be that there was a confusion or error in the preparation of the letterhead between CI Group (or Central Innovation Group) and Central Innovation, and if so that the company that was intended to be referred to in the footer was Central Innovation Pty Ltd, being the legal entity with the closest name. However, that is speculative, and I therefore put to one side the footer reference.
The terms and conditions of Contract One contain many express and implied references to Mr Garner being employed by the CI Group. As already noted above, CI Group is not a single legal entity, but rather an umbrella term for companies comprising that group.
Nine days after Mr Garner signed Contract One, on 2 December 2009, an email was sent to “All Staff at Central Innovation” (email address “[email protected]”) from Ms Kerri McFarlane, using an email signature with the title “Human Resources Manager” and the entity name “Central Innovation”. The email said that the link in the email was to what was described as the “new IT policy that applies to all Central innovation staff”.
Just over 14 months later, on 11 March 2011, an email was sent to staff at Intercad in Adelaide, Brisbane, Melbourne, Perth and Sydney, and all staff at Graphisoft Pty Ltd, by Mr Max Piper, a director of Central Innovation since 23 December 2009 (three years after its registration) and a director of Intercad since the same date. The burden of the email was to advise that work had been done to standardise the employment contracts held by all Intercad and Graphisoft staff, referring to there being several versions of employment contracts with differences in conditions.
Mr Piper’s 11 March 2011 email advised that terms and conditions relating to any financial benefit would not change with the new contract, with the changes primarily relating to confidentiality, notice periods and non-compete clauses. As noted below, there was not even that degree of change for Mr Garner, possibly because Contract One had only been signed less than 16 months earlier in November 2009. Mr Piper’s email concluded by advising that “Penny” (from what follows, a reference to Ms Penny Myerscough, Human Resources Manager, the domain for whose email address was “centralinnovation.com.au”) would be emailing the recipients new contracts over the coming days, and asked each recipient to review, sign and return their contract to her. The last two sentences of the email were:
After a period of two weeks from receipt of the new contract, we need to assume that you consent to the terms and conditions should we not have heard from you nor received a signed version of your contract within the said two weeks. So please contact Penny if you have any concerns before this time.
Five days later, at 11.54 am on 16 March 2011, Ms Myerscough forwarded Mr Piper’s email to Mr Garner, stating that it attached what was described as an updated contractual agreement, and further stating:
If you are happy with it, please sign it and return it to me within two weeks. In the instance where I don’t hear from you with the 2 week period and you continue working at Intercad, this will be taken as acknowledgement [of] and consent [to] the agreement.
Attached to Ms Myerscough’s email was a letter from her to Mr Garner, dated much earlier, 1 January 2011, at which time Contract One was only just over 13 months old. As with Contract One, the letter had an enclosure entitled “PERMANENT STAFF Terms and Conditions of Employment”. The letter and enclosure were numbered pages 1 to 9. All nine pages had the same logo as was on the covering letter and terms and conditions of Contract One, and all of pages 2 to 9 had the footer “Central Innovation Group Pty Ltd Employment Contract”. The terms and conditions contain many express and implied references to Mr Garner being employed by the CI Group. As already noted, this second contract is referred to in these reasons as Contract Two.
The first paragraph of Ms Myerscough’s letter was as follows:
This letter updates the terms and conditions of employment between yourself and Central Innovation Pty Ltd. It supersedes all pre-existing agreements. This agreement confirms your role as Business Development Manager with Central Innovation Group, reporting to the Regional Sales Manager. Your date of commencement was 30th November 2009.
I have carefully compared the terms and conditions of Contract One with those of Contract Two. The only differences of note, apart from some minor explanatory additions and some slight changes in wording in the non-compete clause (which are immaterial for present purposes), are that there is no probationary period in Contract Two and the governing law clause in Contract One referred to the laws of New South Wales, while the corresponding clause in Contract Two referred to the laws of Victoria. It follows that there was no material change at all between the two contracts, save perhaps that it might have been better for Mr Garner to have had his employment contract governed by the laws of Victoria, given that was where he lived.
An hour and ten minutes later, at 1.04 pm on 16 March 2011, Mr Garner replied to Ms Myerscough’s email and letter in relation to Contract Two as follows (omitting salutations):
I have read the contract, and would like to request clarification in regard to exactly when superannuation payments will be made e.g. with each payment of salary and commissions.
Ms Myerscough replied six days later, at 3.06 pm on 22 March 2011 as follows (omitting salutations):
Super payments are made each month. There are deductions made from you[r] salary and then 9% is also deducted from your commissions made.
Hope that makes sense, if not please give me a call.
There is no evidence of any further communication about Contract Two. I infer that there was in fact no such further communication both from the lack of any evidence of that taking place, and because in evidence is a copy of the letter and the following pages constituting Contract Two handwritten upon it “Emailed 16/3 Implemented 30/3”, suggesting that Contract Two was treated as being assented to by Mr Garner.
As well as Mr Garner deposing to his belief that his contract of employment was with Intercad, he deposes to all pay slips listing him as an employee of Intercad, but does not produce any such pay slip, nor give any explanation for not doing so. Without seeing the pay slip, it is difficult to know whether the description he gives is objectively accurate, or merely reflects the arrangement described by Mr Atkinson whereby he was performing work for Intercad, but was nonetheless employed by Central Innovation. I therefore cannot attach any weight to Mr Garner’s evidence about his pay slips. In any event, I attach very little weight to Mr Garner’s assertion as to who employed him. This is because this depends upon accepting Mr Garner’s uncorroborated word in circumstances where his interest in the outcome of the proceeding against him may be materially affected by who is found to be his employer. Even if that was not so, the substantiation of Mr Garner’s claims about his pay slips would not itself have been determinative in all the circumstances as it would reflect who he performed work for, not necessarily who his formal and legal employer was.
Mr Garner deposes to the following in his affidavit:
[19] On or around 1 January 2011, Intercad sought to update the terms of my employment agreement by providing me with a new contract dated 1 January 2011 (‘Contract Two’).
[20] I did not agree to the proposed change to the terms of my employment and did not sign Contract Two. I continued to carry out my duties as an employee of Intercad in accordance with Contract One.
In cross-examination, Mr Garner was asked what recollection he had that allowed him to tell the Court that he did not agree to the proposed changes in Contract Two. Mr Garner’s response was that he does not remember seeing Contract Two other than in the course of this proceeding. He stated that, if he had indeed agreed to Contract Two, there would have been a copy of it with his signature and initials, as there was with Contract One. As Mr Garner’s email in response to Myerscough’s email shows, he did in fact read and engage with the contents of Contract Two at the time it was provided to him. Mr Garner’s evidence in cross-examination therefore only goes to his supposed lack of memory concerning Contract Two. I find that his assertion that he overtly rejected Contract Two is unreliable and therefore cannot be accepted.
Paragraph 19 of Mr Garner’s affidavit, reproduced above at [35], is curious because, while the letter from Ms Myerscough was dated 1 January 2011, there is no evidence that it was sent to Mr Garner prior to, or otherwise than by, Ms Myerscough’s 16 March 2011 email. Nor is there any evidence that updating Mr Garner’s contract was raised with him any earlier than Mr Piper’s 11 March 2011 email. In the absence of any suggestion by him that anyone spoke to him in person about Contract Two, or that he received any other email or other communication about Contract Two, this suggests that Mr Garner has reconstructed what took place based upon the date on the letter, rather than based upon any actual recollection of what took place, including apparently receiving that letter for the first time by email more than two months later than its date. This is another telling indicator of how unreliable Mr Garner is as a witness. It means that even direct and explicit assertions by him as to any fact must be approached with great caution, because he is, at best, careless about the accuracy of his evidence.
Both Contract One and Contract Two refer to Mr Garner being employed by the CI Group. As that is not a legal entity, that necessarily means that the contracting party on the employer side had to be one of the companies in that group, confined to the two corporate applicants, given that no other company in the group is suggested by anyone to have been Mr Garner’s employer. As already noted, the applicants in their pleadings and case as argued contend that the employer was Central Innovation, and in the alternative Intercad, or both Central Innovation and Intercad, while Mr Garner contends it was never Central Innovation, but only ever Intercad. Mr Garner also asserts that he continued to carry out his duties as an employee of Intercad in accordance with Contract One.
Noteworthy in Mr Garner’s email response at 1.04 pm on 16 March 2011 are the following:
(1)When Mr Garner responded to the invitation to seek more information, he referred to having read the contract and confined his enquiry to the issue of superannuation. It was not an enquiry directed to any change manifested by Contract Two, given that there was no such apparent change in respect of superannuation. It was more of a practical enquiry as to how and when superannuation contributions were made, than a contractual rights enquiry.
(2)Mr Garner did not raise any objection to the terms of either Contract One or proposed Contract Two. In particular, Mr Garner did not refer to any objection concerning any particular proposed change to the terms of his employment, which is unsurprising as there was no material change made by Contract Two.
(3)Mr Garner expressed no disagreement, dissent, or even surprise in response to the first sentence of the letter: “This letter updates the terms and conditions of employment between yourself and Central Innovation Pty Ltd.” At this juncture, the emphasis is on the “updates” part of this sentence, to be contrasted with indicating any substantial change in the parties to the employment contract. The fact that Mr Garner did not express any disagreement or surprise might support an inference that he was not surprised or did not disagree.
Whether Mr Garner entered Contract Two
In relation to the issue of whether or not Mr Garner ever entered into Contract Two, given that he did not sign it within the two weeks requested, the applicants rely upon the summary of principles in Cox Purtell Staffing Services Pty Ltd v Our Energy Group Pty Ltd [2017] NSWSC 1122 at [51]-[57]. While that summary is helpful as a guide, it is instructive to go to the appellate authority summarised in Cox Purtell and beyond for a more detailed exposition of the principles and the reasoning supporting them.
In Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 (per Allsop J, with whom Drummond and Mansfield JJ agreed), it was observed (at [369]):
[A] number of authorities discuss the need not to constrict one’s thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i’s and crossing t’s or where they think they have done so. … Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: “and we hereby agree to be bound” in this or that respect. The essential question in such cases is whether the parties’ conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract.
The now Chief Justice then listed a substantial body of authority supporting the propositions summarised.
In Kriketos v Livschitz [2009] NSWCA 96; 14 BPR 26,717 (Allsop P, McColl and Macfarlan JJA), Allsop P referenced the above passage in Branir in brief reasons with which Macfarlan JA agreed. Further, in Kriketos, McColl JA, in more detailed reasons with which Macfarlan JA also agreed, observed as follows:
[107] Whether a contract has been formed, and the terms of any contractual arrangement, requires objective determination: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; 208 ALR 213; [2004] HCA 35; BC200404838 (at [22]) per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; 211 ALR 342; [2004] HCA 52; BC200407463 (at [40]) per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; 211 ALR 101; [2004] HCA 55; BC200407555 (at [34]) per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ; Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; 187 ALR 92; [2002] HCA 8; BC200200663 (at [25]) per Gaudron, McHugh, Hayne and Callinan JJ.
[108] The exercise of objective determination requires the court to consider the text of relevant documents, and also the surrounding circumstances known to participants, and the genesis, purpose and object of the transaction, but not the participants’ subjective beliefs: Pacific Carriers Ltd (at [22]); Toll (at [40]); International Air Transport Assn v Ansett Australia Holdings Ltd (2008) 234 CLR 151; 242 ALR 47; 65 ACSR 1; [2008] HCA 3; BC200800357 (at [8]) per Gleeson CJ; (at [53]) per Gummow, Hayne, Heydon, Crennan and Kiefel JJ; (at [127]) per Kirby J. The surrounding circumstances include the parties’ relationship to one another: Ermogenous (at [25]).
[109] “[P]ost-contractual conduct is admissible on the question of whether a contract is formed”: Brambles (at [25]) per Heydon JA; see also Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263; [2007] NSWCA 154; BC200705100 (at [59]) per Campbell JA (Beazley JA agreeing); Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149; BC200807133 (at [99] and following) per Giles JA (Hodgson and Campbell JJA agreeing); special leave to appeal refused: Sagacious Procurement Pty Ltd v Symbion Health Ltd [2009] HCATrans 23.
[110] The conventional approach to the question whether a contract has been formed turns on determining whether there has been offer and acceptance, that is to say, a “clear indication by one party of a willingness to be bound on certain terms, accompanied by an unqualified assent to that offer communicated by the other party”: J Carter, E Peden, G Tolhurst, Contract Law in Australia, 5th ed (2007) LexisNexis Butterworths at [3–02]. Offer and acceptance analysis is “normal” and “conventional”: Brambles (at [74]). As McHugh JA (with whom Samuels JA agreed) said in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 (at 534): “The objective theory of contract requires an external manifestation of assent to an offer. Convenience, and especially commercial convenience, has given rise to the rule that the acceptance of the offer should be communicated to the offeror.”
McColl JA in Kriketos, after referring to the facts in that case, then referenced (at [113]-[120]) a body of authority on the “non-conventional” approach to be applied where overt offer and especially acceptance is in some way absent. In doing so, her Honour considered the circumstances in which offer and acceptance can be inferred from the totality of what has taken place. In this case, the focus is on Mr Garner’s response to Contract Two being sent to him, in the context of it being made express to him twice (albeit in two emails received simultaneously, the one forwarding the other) that the revised contract would be treated as binding if he either signed it, or did not respond within two weeks. The authority most apposite to this situation is Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 (Kirby P, Samuels and McHugh JJA, Samuels JA agreeing with McHugh JA). That decision was cited and quoted by McColl JA in the passage from Kriketos at [110] reproduced above as authority for usually needing an overt manifestation of acceptance of an offer. McHugh JA said the following (at 534-5):
Under the common law theory of contract, the silent acceptance of an offer is generally insufficient to create any contract: Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 692 and Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1432; [1966] 3 All ER 128 at 131-132. The objective theory of contract requires an external manifestation of assent to an offer. Convenience, and especially commercial convenience, has given rise to the rule that the acceptance of the offer should be communicated to the offeror. After a reasonable period has elapsed, silence is seen as a rejection and not [an] acceptance of the offer. Nevertheless, communication of acceptance is not always necessary. The offeror will be bound if he dispenses with the need to communicate the acceptance of his offer: Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 at 269. However, an offeror cannot erect a contract between himself and the offeree by the device of stating that unless he hears from the offeree he will consider the offeree bound. He cannot assert that he will regard silence as acceptance: Felthouse v Bindley (1862) 11 CB (NS) 869 at 875; 142 ER 1037 at 1040 and Fairline Shipping Corporation v Adamson [1975] QB 180 at 189. The common law’s concern with the protection of freedom is opposed to the notion that a person must take action to reject an uninvited offer or be bound by contractual obligations.
Nevertheless, the silence of an offeree in conjunction with the other circumstances of the case may indicate that he has accepted the offer: Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd’s Rep 334 at 340. The offeree may be under a duty to communicate his rejection of an offer. If he fails to do so, his silence will generally be regarded as an acceptance of the offer sufficient to form a contract. Many cases decided in United States jurisdictions have held that the custom of the trade, the course of dealing, or the previous relationship between the parties imposed a duty on the offeree to reject the offer or be bound: CMI Clothesmakers Inc v ASK Knits Inc 380 NYS 2d 447 (1975); Brooks Towers Corporation v Hunkin-ConkeyConstruction Co 454 F 2d 1203 (1972); Alliance Manufacturing Co Inc v Foti 146 So 2d 464 (1962). But more often than not the offeree will be bound because, knowing of the terms of the offer and the offeror’s intention to enter into a contract, he has exercised a choice and taken the benefit of offer.
…The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.
Applying the last sentence of the above quote from Empirnall Holdings, the question for determination is whether a reasonable bystander would regard Mr Garner’s conduct as signalling that the offer to enter into Contract Two, in replacement of the substantially identical Contract One, had been accepted. I note that this is not a question of silence on his part, but rather a question of what is to be made of his response to what had been communicated to him.
Given that the overt terms of the two contracts were substantially the same, the live question is whether the inference should be drawn that Mr Garner, by his reply and subsequent conduct in continuing to work for Intercad, conveyed that he accepted Contract Two. I conclude that this is not the most practical and sensible inference to draw, and would not be drawn by a reasonable bystander. The enquiry made by Mr Garner, and the lack of issue being taken by him with the fact of Contract Two being proffered, cannot on their own support the inference that, at the time, Mr Garner conveyed that he was content to be bound by Contract Two in place of Contract One. This is especially so as accepting either contract made no material difference to him. There is therefore no general conduct by Mr Garner, including continuing to perform work for Intercad, referable to Contract Two that is not also equally referable to remaining bound by Contract One. This does not mean that I accept Mr Garner’s assertion in his evidence and submissions that he rejected Contract Two and continued with Contract One as reflecting the reality of the situation. But, by his overt conduct and in the context of what he did and did not say, there is insufficient evidence to show that Mr Garner accepted the change from Contract One to Contract Two, particularly where there was in fact no real change at all. Contract Two not having been formalised by a signature is consistent with this view, though not determinative in my conclusion.
Nothing much turns on Mr Garner not entering into Contract Two, and only ever being employed pursuant to Contract One, because of the immaterial differences between the two contracts. The parts of both contracts relied upon by the applicants in relation to Mr Garner’s contractual obligations were relevantly the same, as discussed further later in these reasons, addressing the issue of breach of contract.
The identity of Mr Garner’s employer
Both the applicants and Mr Garner refer to the summary of principles by Edmonds J in Gothard v Davey [2010] FCA 1163; 80 ACSR 56:
Identifying an employer from two or more possibilities: The relevant principles to be applied
[52] Unsurprisingly, the outcome in cases which have been concerned with identifying an employer of a person or group of persons from two or more possibilities, whether from within the same group of companies or otherwise, has turned on their own facts and, in consequence, the case law in this area is of limited assistance. Nevertheless, it is possible to discern certain general principles that the courts have applied in the identification process. The courts have adopted the position that in undertaking this exercise, they are entitled to take a wide view of the putative relationship, beyond the terms of the contractual documentation, to examine how the parties conducted themselves in practice and whether, where there is contractual documentation, the reality of the situation accords with the terms of that documentation or whether it points to another entity being the employer.
…
[54] In Re C&T Grinter Transport Services Pty Ltd (in liq) & Grinter Transport Pty Ltd (in liq) (controller appointed) [2004] FCA 1148 (C&T Grinter), Finn J at [20] said:
[20] The principles to be applied in the identification of the employer of an employee where there are two or more possible employers, are reasonably well settled. For present purposes I would note the following:
(1) A contract of service cannot be transferred by one employer to another or novated as between them without the employee’s consent: Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014; [1940] 3 All ER 549; Re Coogi Nominees Pty Ltd (administrators appointed); McCluskey v Karagiosis (2002) 120 IR 147; [2002] FCA 1137. Questions of estoppel apart: Smith v Blandford Gee Cementation Co Ltd [1970] 3 All ER 154; the employee’s consent must be a real one whether express or implied and is “not to be raised by operation of law”: Denham v Midland Employers Mutual Assurance Ltd [1955] 2 QB 437 at 443; [1955] 2 All ER 561 at 564.
(2) The totality of the circumstances surrounding the relationships of the various parties including conduct subsequent to the creation of an alleged employment relationship is relevant to the assessment to be made: Romero v Auty (2001) 19 ACLC 206; [2000] VSC 462 at [10] and [42]–[44].
(3) Documentation created by one or more of the parties describing or evidencing an apparent employment relationship will be relevant to, but not necessarily determinative of, the true character of that relationship: Pitcher v Langford (1991) 23 NSWLR 142; Marrs Fabrics Pty Ltd & Nathan Wholesale Fabrics Pty Ltd v Whipps (1991) 33 AILR 167. In determining the identity of a disputed employer, the court is entitled to consider “the reality of purported contractual arrangements”: Dalgety Farmers Ltd t/a Grazcos v Bruce (unreported, NSWCA, 3 August 1995). The documentation may have been brought into existence for other purposes, for example, tax minimisation or the reduction of insurance premiums, without reflecting the reality of the [parties’] relationship: ibid; Pitcher v Langford at 149; Sharrment Pty Ltd v Offıcial Trustee in Bankruptcy (1988) 18 FCR 449 at 454; 82 ALR 530 at 537.
(4) [Conversations] and conduct at the time of the alleged engagement of the employee [are] of considerable significance: [Romero, at [10]]. The beliefs of the employees as to the identity of their employer [are] admissible and [are] entitled to weight: Pitcher v Langford.
(5) In cases of the engagement of new employees to work in a business in which a number of separate corporate entities participate otherwise than as partners:
“… it was open to those controlling the business to select which company should be the employer provided that the selection was consistent with the financial and administrative organisation of the business and was not otherwise a sham.”
See Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd (unreported, FCA, Ryan J, 19 November 1998).
[55] The majority of the NSW Court of Appeal (Basten JA dissenting) made the following observation in Shaw v Bindaree Beef Pty Ltd [2007] NSWCA 125 at [59] regarding the court’s earlier decision in Pitcher v Langford (1991) 23 NSWLR 142 (Pitcher):
The result in Pitcher v Langford turned on its own facts, and on the need for error in point of law. There is no doubt, however, that without going so far as to find a sham the “reality of purported contractual arrangements” (per Handley JA) can be considered, and the case illustrates that it can extend to the identity of a contracting party and that it can be found that a purported contracting party was not in reality party to the contract even where a written contract gives it as the party.
[56] The majority further noted (at [61]–[62]) that determination of the entity that entered into a contract is based upon an objective assessment of the state of affairs between the parties.
Edmonds J at [60] in Gothard summarised the effect of these authorities, concluding that the behaviours exhibited by an entity most likely to be identified as the true legal employer were that it:
(a) had practical and legal control and direction of the employees;
(b) made decisions about hiring;
(c) made decisions about disciplinary issues;
(d) made decisions about the level of remuneration;
(e) actually paid remuneration;
(f) communicated with employees about leave; [and]
(g) made decisions about termination of employment.
With those behaviours in mind, I turn to Mr Atkinson’s unchallenged deposition to the following features of Central Innovation’s operation during the time that he had been working for the CI Group. This includes the time of Mr Garner’s employment, and is evidence which I accept:
(1)Central Innovation’s directors had the final say in decisions relating to the business strategy and operations of Central Innovation, Intercad and Graphisoft. Mr Atkinson is aware of this because since mid to late 2014 he has participated in regular off-site meetings with directors and other managers of those organisations to discuss strategic and operational matters relating to the business of the CI Group.
(2)Central Innovation’s directors had the final say in decisions relating to the remuneration of persons employed by Central Innovation, including those who work for Intercad. Mr Atkinson gives the example that since May 2014, he has been required to submit salary recommendations to Central Innovation’s human resources staff and to two directors of Central Innovation for approval and processing. A slight indication to the contrary of this evidence, which tends to suggest a greater degree of ambiguity of the identity of Mr Garner’s employer, is a letter sent by Mr Atkinson to Mr Garner on 9 October 2015. The letter was signed on Mr Atkinson’s behalf and printed on Central Innovation letterhead, but with Intercad’s name beneath Mr Atkinson’s name. That letter advised that the executive team had reviewed salaries in line with market forces and that Mr Garner’s base salary would not be increased because the scheme he was in gave him the opportunity to earn money based on his performance. In the context of all the evidence, I do not attach much weight to this letter.
(3)Central Innovation’s directors had the final say in decisions relating to terminating the employment of any person employed by Central Innovation, including those who perform work for Intercad. The termination/redundancy request form for Mr Garner in August 2016 is evidence which lends some objective support to this, and also directly relates to Mr Garner, as it has Central Innovation, not Intercad, as the company name. This letter tends to suggest, perhaps inconclusively, that Mr Garner (perhaps in common with all such employees performing work for Intercad) was regarded and treated as an employee of Central Innovation, well prior to there being any of the issues that have been the subject of this litigation. At the very least, this form on its face, apparently issued by an external payroll management company, indicates that Central Innovation paid Mr Garner, and tends to support it being Central Innovation that made termination decisions about at least Mr Garner, if not all employees working for Intercad. These points go to items (e) and (g) of Edmonds J’s list in Gothard reproduced above.
Mr Atkinson also deposes, and I accept, that at all times that he has been working for the CI Group, Central Innovation staff based in its offices in Sydney and Melbourne had been responsible for making decisions in relation to the hiring of persons who work for Intercad, including those who were based in the Melbourne office. These Central Innovation staff had also been responsible for the management of disciplinary matters and leave arrangements in relation to those workers. When Mr Atkinson commenced working for Central Innovation in December 2012, he decided to make redundant the positions of regional sales manager for Victoria, Tasmania, South Australia and Western Australia to be replaced by a national sales manager in Sydney and later in Adelaide.
Neither the evidence of Mr Garner, nor the cross-examination of Mr Atkinson presented any barrier to the acceptance of the above evidence. In relation to the above indicia summary by Edmonds J in Gothard at [60], the evidence makes it clear that the General Manager of Intercad, Mr Atkinson, was employed by Central Innovation to perform that role. His evidence to that effect was neither challenged, nor commented upon adversely, by Mr Garner. The evidence briefly summarised above, and further evidence considered in more detail below, makes it clear that, acting on behalf of Central Innovation, Mr Atkinson and those acting upon his direction, as well as human resources personnel working for Central Innovation itself, had practical and legal control and direction of employees, including those working for Intercad, such as Mr Garner.
There is no evidence about disciplinary issues at the time of Mr Garner’s employment that is relevant to this issue, but the general practice referred to above, and the policies dealt with in more detail below, provided for disciplinary decisions to be made by Central Innovation on behalf of the CI Group of companies.
The decision to make Mr Garner redundant was conveyed orally to Mr Garner by Mr Atkinson as General Manager of Intercad, but I find that was communicated by him on behalf of Central Innovation. This conclusion is reinforced by the formal letter dated the day after that conversation, sent on Central Innovation letterhead and stated in express terms to have been the result of a decision made by Central Innovation to restructure. In combination with other factors and overall, this factor favours Central Innovation being Mr Garner’s employer.
As stated above, Mr Garner asserts that he carried out his duties as an employee of Intercad. This is a case in which the usual course of attaching weight to the understanding of an employee as to who their employer was is not appropriate because it is not reliable, and cannot even safely be taken to be truthful if the truth might be adverse to Mr Garner’s interest in the outcome of this proceeding. I accept that he continued to do work for Intercad, because that is clearly supported by other evidence, including contemporaneous statements as to his position and duties. I am unable to attach any substantial weight to or place comfortable reliance upon Mr Garner’s assertion as to who he was employed by as it is conclusory, incomplete and unreliable, being deposed to in the shadow of this litigation, and with a weather eye to its outcome. It is also inconsistent with his conduct at the time as described above, and discussed below. The safer course is to assess who Mr Garner’s legal employer was – and therefore identify the other party to his contract of employment – as an objective exercise by reference to the contemporaneous records. These include Mr Garner’s acts and omissions at the time, especially those summarised and partly reproduced above.
The applicants’ case is that, having regard to the totality of the circumstances surrounding the relationship between Central Innovation and Mr Garner, the Court should find that Central Innovation was his employer, and in the alternative that he was employed by Intercad. I note that neither the applicants nor Mr Garner suggested that there was any change in this regard between Contract One and Contract Two.
The dominant reason for Mr Garner’s contrary stance that he was only ever employed by Intercad seems to be his interest in the outcome of this proceeding, rather than any bona fide belief as to who employed him at the time, given that the belief expressed now is contrary to his conduct at the time. Mr Garner contends that if his stance is upheld, such that he is found to have been employed by Intercad only, then Central Innovation would have no cause of action against him because there could not be any breach of any express or implied contractual obligation, and he would not owe Central Innovation any fiduciary duty or any duty under s 183(1) of the Corporations Act. Further, Mr Garner contends that as Central Innovation was not a party to any distribution agreement with SolidWorks, and was not privy to the distribution agreement that undoubtedly did exist between Intercad and SolidWorks, Central Innovation could not and did not sell SolidWorks software and could not have authorised Mr Garner to access the VRC. As such, Mr Garner contends, the customers or prospective customers that are referred to by the applicants cannot be regarded as customers or prospective customers of Central Innovation, and the confidential information alleged to have been taken by him cannot be its confidential information.
The applicants are entitled to judgment and verdict in a sum for the 37 former customers sued upon, 34 of which Ms Bateman made her assessment and calculations upon, less the amount attributable to Green Distillation Technologies Corp Ltd which has been excluded because the applicants have not made out their case in respect of it, plus pre-judgment interest. That calculation is to be made by reference to the existing evidence. This means that, although the applicants have made out breaches in respect of Austratek Designs, Pump Technology Pty Ltd and Scad Designs, because these customers were not amongst those considered by Ms Bateman, breaches in respect of those customers will not sound in damages.
Mr Garner is to pay the applicants’ costs.
As there may be related or collateral issues to be addressed, as well as calculations to be made, the parties are directed to confer and submit agreed or competing final orders, including as to any further procedural orders for any further determination required, whereupon arrangements can be made for any dispute to be adjudicated upon and final orders made.
I certify that the preceding three hundred and fifty-three (353) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromwich. Associate:
Dated: 16 December 2020
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