Cohen v iSoft Group Pty Ltd

Case [2013] FCAFC 49

FEDERAL COURT OF AUSTRALIA

Cohen v iSOFT Group Pty Limited

[2013] FCAFC 49

Citation: Cohen v iSOFT Group Pty Limited [2013] FCAFC 49
Appeal from: Cohen v iSOFT Group Pty Limited [2012] FCA 1071
Parties: BRIAN COHEN v ISOFT GROUP PTY LIMITED (ACN 063 539 702) and ISOFT HEALTH (ASIA) PTE LIMITED (A COMPANY REGISTERED IN SINGAPORE - COMPANY NO 199905436Z)
File number: NSD 1790 of 2012
Judges: RARES, COWDROY AND KERR  JJ
Date of judgment: 8 May 2013
Date of orders: 16 May 2013
Catchwords: CONTRACTS – construction of employment contracts within long term employment relationship – where employee continued in same position in the employ of a company of international company group – where employment continued past initial fixed term – effect of secondment to new location within group – whether intention to vary, replace or terminate initial contract of employment – whether original employer continued or different group member became employer – objective test of identification of intention to contract and of contracting parties 
Legislation:

Annual Holidays Act 1944 (NSW)

Corporations Law s 127
Fair Work Act 2009 (Cth)
Long Service Leave Act 1955 (NSW)

Cases cited:

Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 applied
Concut Pty Ltd v Worrell (2000) 176 ALR 693 applied

Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 applied

Fitzgerald v Masters (1956) 95 CLR 420 applied
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 applied
Re C & T Grinter Transport Services Pty Ltd:  Ex parte Fitzgerald [2004] FCA 1148 referred to
Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 applied
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 applied
Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 applied

Date of hearing: 7 and 8 May 2013
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 55
Counsel for the Appellant: Mr J West QC with Mr M Seck
Solicitor for the Appellant: Duncan Cotterill
Counsel for the Respondents: Mr J Fernon SC
Solicitor for the Respondents: Baker McKenzie

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1790 of 2012
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

BRIAN COHEN
Appellant
AND:

ISOFT GROUP PTY LIMITED (ACN 063 539 702)
First Respondent

ISOFT HEALTH (ASIA) PTE LIMITED (A COMPANY REGISTERED IN SINGAPORE - COMPANY NO 199905436Z)
Second Respondent

JUDGES:

RARES, COWDROY AND KERR  JJ

DATE OF ORDER:

16 MAY 2013

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The appeal be allowed.

2.Order 2 made by the primary judge on 19 October 2012 be set aside.

3.Within 28 days of the date of this order, the first respondent pay the appellant the amount of AUD516,830.35, consisting of:

(a)payment in lieu of six months notice on the redundancy of the appellant’s position (AUD228,062.50);

(b)       long service leave (AUD167,248.75);

(c)       annual leave (AUD114,469.83);  and

(d)outstanding balance of salary for the…

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Cohen v iSOFT Group Pty Limited [2013] FCAFC 49
Case
[2013] FCAFC 49
Decision Date

CaseChat Overview and Summary

The case of Cohen v iSoft Group Pty Ltd involved Dr Cohen, an employee of iSoft Group, seeking payment of his accrued leave, annual leave, long service leave, notice period, and a redundancy entitlement. Dr Cohen argued that these were due under an implied term of his employment, or alternatively, under State legislation and the Fair Work Act 2009 (Cth). The central dispute was the construction of Dr Cohen's employment contracts over the years, particularly regarding whether the contracts were entirely separate or if they supplemented each other, and whether the original employer remained the same or changed with company mergers and name changes.

The legal issues before the court included determining whether the various employment contracts were discrete or if they were part of a continuing employment relationship, and whether the employer remained the same entity throughout these changes. Additionally, the court had to ascertain whether Dr Cohen's employment was subject to the Fair Work Act 2009 (Cth) and whether he was entitled to redundancy benefits under the Act or under his employment contracts.

The court held that Dr Cohen's employment contracts, though executed at different times, were not entirely separate but rather supplementary to each other. The court applied an objective test to determine the intention of the parties and found that Dr Cohen's employment continued with the same employer despite changes in company names and structures. The court also concluded that Dr Cohen was not an Australian-based employee within the meaning of the Fair Work Act, as his duties in Australia were insubstantial. Therefore, the appeal was allowed, and the respondents were ordered to pay Dr Cohen his accrued leave, long service leave, annual leave, notice period payment, and interest on those amounts. Additionally, the respondents were ordered to pay Dr Cohen's costs of the appeal.

Orders

Orders of the court

1. The appeal be allowed.

2. Order 2 made by the primary judge on 19 October 2012 be set aside.

3. Within 28 days of the date of this order, the first respondent pay the appellant the amount of AUD516,830.35, consisting of:

(a) payment in lieu of six months notice on the redundancy of the appellant’s position (AUD228,062.50);

(b) long service leave (AUD167,248.75);

(c) annual leave (AUD114,469.83); and

(d) outstanding balance of salary for the month of September 2011 (AUD7,049.27).

4. Within 28 days of the date of this order, the first respondent pay the appellant interest in the amount of AUD68,378.22.

5. The respondents pay the appellant’s costs of the appeal, as agreed or assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Dr Cohen sought payment of his accrued leave, annual leave, long service leave, the amount of his notice and, pursuant to what he argued was an implied term of his employment, a redundancy entitlement. Alternatively, he claimed those entitlements under State legislation and the Fair Work Act 2009 (Cth).BACKGROUND It is necessary to explain the events leading up to the making of the 2008 agreement in some more detail. Dr Cohen was a developer of information technology for use in the health care industry. He began working for SW International Systems Pte Limited (SWI) in Singapore, under a contract dated 1 November 1988. In September 1998, Dr Cohen and SWI entered into a new employment contract. By that time, the chairman of SWI was Dr Cohen’s brother, Gary, a former solicitor and principal in the Allco Finance Group. SWI became a subsidiary of the first respondent in 1999 and came to be called IBA Health Asia Holdings Pte Limited, and we will refer to it generally as “IBA Holdings”. That occurred in September 1999 when the first respondent entered into a merger agreement. Gary Cohen became chairman of the first respondent. Then, on 15 February 2000, the first respondent lodged a prospectus with the ASX. The prospectus recorded that each of the senior management team, including Dr Cohen as chief technology officer, had entered into a service agreement with the first respondent for a period of three years on similar terms. Earlier, on the same day, Dr Cohen and the first respondent executed an executive service agreement (the 2000 agreement). That agreement had been drafted by a major Australian law firm. THE 2000 AGREEMENT The 2000 agreement provided that:·the first respondent agreed to employ Dr Cohen in the position of chief technology officer and he agreed to serve it in that capacity on the terms of the agreement (cl 2.1);·the term of the agreement was three years from 15 February 2000 (Sch 1);·the first respondent had to employ Dr Cohen for the term, unless his employment terminated earlier (cl 2.2);·Dr Cohen had to undertake the duties and exercise the powers that the first respondent’s board assigned or vested in him, comply with its instructions, and among other things, if required, perform services not only for the first respondent, but also for any of its related bodies corporate, as the first respondent might from time to time reasonably require (cl 3.1);·Dr Cohen was to be paid an annual remuneration, to be calculated using a base package in a manner agreed between the remuneration committee of the first respondent’s board and Dr Cohen (cll 4.1, 4.2);·the remuneration committee had to review the base package of Dr Cohen on an annual basis in accordance with the first respondent’s policies as varied from time to time provided that his remuneration could not be reduced and any increase in Dr Cohen’s base package would be at the first respondent’s absolute discretion (cl 4.6);·clauses 7.1, 7.2 and 10.1(a) were in the following terms:7.1 Annual LeaveThe Executive (in addition to the usual public holidays) is entitled to 4 weeks leave in each year to be taken at a time or times agreed between the Board and the Executive.7.2 Long service leaveThe Executive’s long service leave entitlements are to be determined in accordance with law and with the policy of the Company and the Executive must take reasonable steps to ensure that long service leave is taken at a time convenient to the Company.10.1The employment of the executive is terminated by whichever of the following events occurs first:(a)the expiration of 6 months’ notice of termination given by either party to the other, or of such shorter period of notice as may be agreed; …” (emphasis added)·the 2000 agreement was governed by the law in force in New South Wales (cl 13.1(a));·Finally, cl 13.3(a) provided:“This agreement contains the entire agreement between the parties about its subject matter. Any previous understanding, agreement, representation or warranty relating to that subject matter is replaced by this agreement and has no further effect.”EVENTS AFTER THE 2000 AGREEMENT WAS MADE

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The primary judge’s conclusion was correct that Dr Cohen was not an Australian based employee within the meaning of the Fair Work Act. That was because he was excluded from the operation of that Act by s 35(3). Dr Cohen argued that he had had some duties to perform from time to time in Australia, and so he fell outside that exclusion. On the material in evidence, those duties, whatever they were, were not sufficiently significant to displace the ordinary and natural construction of s 35(3), that excludes from the operation of the Act overseas based employees who might perform no more than an insubstantial part of their duties in Australia. CONCLUSION For these reasons, the appeal should be allowed. The parties should bring in draft orders to the effect of these reasons and to deal with the issue of costs.

Ratio Decidendi

Legal Principle Established

In applying those principles, their Honours concluded that the service agreement did not entirely supplant the earlier agreement, but, rather, supplemented it, finding (176 ALR at 699 [20], [22]):“… the text of the service agreement itself, as well as the surrounding circumstances, indicate that such a conclusion would not be in accord with the manifest intention of the parties.”CONSIDERATION We are of opinion that the primary judge erred by construing each of the 2000, 2006 and 2008 agreements as self contained, discrete contracts. His Honour had not been referred to the decision Concut 176 ALR 693 and the parties did not refer to that decision in their written submissions on the appeal. The Full Court drew the parties’ attention to that decision before the hearing. Its reasoning is apposite and applicable to the present matter. While the term of the 2000 agreement expired on 15 February 2003, it could not be said that, as a consequence, Dr Cohen’s employment by the first respondent came to an end. He and the first respondent continued in an employment relationship from where that agreement left off. Having regard to the context in which the parties dealt and all of the evidence, there is no reason to conclude that a different employer was introduced to Dr Cohen’s activities, or that anything changed in the way in which he and the first respondent continued to deal with or regard each other after February 2003. The 2006 agreement was signed by the chief executive officer of the first respondent. It concluded with a confirmation that all the other terms of the 2000 agreement, that were left unamended or not supplemented by its preceding terms, “will continue in full force and effect”. In our opinion, it was not strictly necessary for the primary judge to rectify that agreement, since the reference in the two first lines to the 2000 agreement as having been made with IBA Asia was plainly incorrect: Fitzgerald 95 CLR at 427, 436-438. Both Dr Cohen and the first respondent, the parties who executed the 2006 agreement, knew when they signed it that, first, the 2000 agreement had been made by them and, secondly, it subsequently formed the basis of their relationship, with such changes as they had agreed. The confirmation of the continuity of the 2000 agreement reflected the objective facts. Thus, the 2006 agreement amended and supplemented the 2000 agreement. This amended and supplemented agreement formed the mutually known background for negotiation and entry into the 2008 agreement. Once again, that document used the concepts of continuation and Dr Cohen’s retention of his current entitlements to such provisions as standard working hours, annual and sick leave, notice and his original offer of employment. Moreover, cl 1 identified the parties as Dr Cohen and “The Company: IBA Health Group”. The first respondent’s then corporate name was IBA Health Group Limited. Critically, cl 2.1 began:“Your employment continues in the capacity of CTO [chief technical officer] based in Singapore.”