FEDERAL COURT OF AUSTRALIA
Cohen v iSoft Group Pty Limited [2012] FCA 1071
Citation: 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 1764 of 2011 Judge: FLICK J Date of judgment: 28 September 2012 Catchwords: CONTRACTS – construction – identification of parties – objective approach – significance of execution by parties – significance of execution in manner provided for by law
CONTRACTS – abandonment or abrogation – regard to be had to conduct of parties – whether extrinsic evidence admissible to prove abandonment or abrogation – expiration of fixed term – whether conduct of parties evidenced intention to continue contract
CONTRACTS – employment – secondment agreements – whether agreement preserves original or “underlying” contract of employment
CONTRACTS – employment – termination – notice – “reasonableness” of notice given in absence of term provided for by contract – factors relevant to assessment
CONTRACTS – employment – terms – implied term of mutual trust and confidence
INDUSTRIAL LAW – overseas employment – operation of Fair Work Act 2009 (Cth) – whether Fair Work Act applicable to Australian engaged in employment outside Australian territoryINDUSTRIAL LAW – long service leave – entitlement to – operation of Long Service Leave Act 1955 (NSW) – whether Act capable of applying to worker engaged in service outside New South Wales – requisite degree of connection with the state
Legislation: Corporations Law (Cth) s 127
Fair Work Act 2009 (Cth) ss 34, 35, 119, 570Long Service Leave Act1955 (NSW) ss 2, 3, 4, 12
Workers Compensation Act 1928 (Vic)Cases cited: Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, applied
Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218, cited
Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429, 77 NSWLR 299, cited
Ajax Cooke Pty Ltd t/as Ajax Sparway Fastners v Nugent (unreported, Supreme Court of Victoria, Phillips J, 29 November 1993), cited
Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28, 217 CLR 424, referred to
Australian Insurance Employees Union v WP Insurance Services Pty Ltd (1982) 42 ALR 598, applied
Australian Timken Pty Ltd v Stone (No 2) [1971] AR (NSW) 246, considered
Barker v Commonwealth Bank of Australia [2012] FCA 942, questioned
Black v Brimbank City Council (1998) 152 ALR 491, considered
Brambles Ltd v Wail [2002] VSCA 150, (2002) 5 VR 169, considered
C & T Grinter Transport Services Pty Ltd, Re; Ex parte Fitzgerald [2004] FCA 1148, considered
City & Suburban Group Pty Ltd v Gambetta Holdings Pty Ltd [2011] WASCA 233, cited
Clifford v Rentokil Ltd (1995) 1 ERNZ 407, referred to
Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337, applied
Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226, considered
Crawford Fitting Co v Sydney Valve and Fittings Pty Ltd (1988) 14 NSWLR 438, considered
Dye v Commonwealth Securities Ltd [2012] FCA 242, considered
Elliott v Kodak Australasia Pty Ltd [2001] FCA 807, 108 IR 23, considered
Energy World Corporation Ltd v Maurice Hayes and Associates Pty Ltd [2007] FCAFC 34, 239 ALR 457, cited
Finance Sector Union of Australia v Commonwealth Bank of Australia [2001] FCA 1613, 111 IR 241, cited
Fitzgerald v Masters (1956) 95 CLR 420, considered
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, 76 NSWLR 603, cited
Gothard, in the matter of AFG Pty Limited (Receivers and Managers appointed) (in liq) v Davey [2010] FCA 1163, 80 ACSR 56, referred to
International Computers (Australia) Pty Ltd v Weaving [1981] 2 NSWLR 64, cited
IOOF Building Society Pty Ltd v Foxeden Pty Ltd [2009] VSCA 138, 23 VR 536, cited
Kimberley Securities Ltd v Esber [2008] NSWCA 301, cited
McCluskey v Karagiozis [2002] FCA 1137, 120 IR 147, considered
Mediterranean Olives Financial Pty Ltd v Gita Lederberger [2011] VSC 301, cited
Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297, cited
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, considered
Mynott v Barnard (1939) 62 CLR 68, considered
Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014, considered
Northside Developments Proprietary Limited v Registrar-General (1990) 170 CLR 146, applied
O’Sullivan Partners (Advisory) Pty Ltd v Foggo [2012] NSWCA 40, cited
Parmalat Australia Ltd v Norco Co-operative Ltd [2006] QCA 129, cited
Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567, distinguished
Rankin v Marine Power International Pty Ltd [2001] VSC 150, 107 IR 117, considered
Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104, 69 NSWLR 198, questioned
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65, 69 NSWLR 603, considered
Shaw v State of New South Wales [2012] NSWCA 102, questioned
Spunwill Pty Ltd v Bab Pty Ltd (1994) 36 NSWLR 290, considered
State of South Australia v McDonald [2009] SASC 219, 104 SASR 344, referred to
Steed v Busby 268 Ark 1, 593 SW 2d 34 (1980), considered
Stilk v Myrick (1809) 2 Camp 317, 170 ER 1168, considered
Termination, Change and Redundancy Case (1984) 8 IR 34, cited
Thiess Pty Ltd v Arup Pty Ltd [2012] QSC 185, cited
Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52, 219 CLR 165, applied
Viva Olives Pty Ltd v Origin Olives Australasia Pty Ltd [2012] FCA 545, citedChin, Servant or Serf? Severance Pay on Transmission of Business and the Right to Choose an Employer (2003) 16 Australian Journal of Labour Law 1
Mason, The Utility Of Consideration – A Comparative View, (1941) 41 Columbia Law Review 825
McLaughlan, Common Assumptions and Contract Interpretation (1997) 113 Law Quarterly Review 237
McLauchlan, Objectivity in Contract (2005) 24 University of Queensland Law Journal 479
Meyer-Rochow, The Requirement of Consideration (1997) 71 Australian Law Journal 532
Sappideen et al, Macken’s Law of Employment (7th ed, 2011)Date of hearing: 16, 17, 18, 19, 20, 23 July 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 182 Counsel for the Applicant: Mr M Seck Solicitor for the Applicant: Duncan Cotterill Lawyers Counsel for the Respondents: Mr J J E Fernon SC Solicitor for the Respondents: Baker & McKenzie
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1764 of 2011
BETWEEN: BRIAN COHEN
ApplicantAND: ISOFT GROUP PTY LIMITED (ACN 063 539 702)
First RespondentISOFT HEALTH (ASIA) PTE LIMITED (A COMPANY REGISTERED IN SINGAPORE - COMPANY NO 199905436Z)
Second Respondent
JUDGE:
FLICK J
DATE OF ORDER:
28 SEPTEMBER 2012
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The parties are to bring in Short Minutes of Orders giving effect to these reasons on or before 12 October 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1764 of 2011
BETWEEN: BRIAN COHEN
ApplicantAND: ISOFT GROUP PTY LIMITED (ACN 063 539 702)
First RespondentISOFT HEALTH (ASIA) PTE LIMITED (A COMPANY REGISTERED IN SINGAPORE - COMPANY NO 199905436Z)
Second Respondent
JUDGE:
FLICK J
DATE:
28 SEPTEMBER 2012
PLACE:
SYDNEY
REASONS FOR JUDGMENT
On 13 October 2011 the Applicant, Dr Brian Cohen, filed an Originating Application and a Statement of Claim in this Court. Dr Cohen has over 30 years experience in designing and developing systems in the healthcare market. He obtained a Bachelor of Computer Science (Hons) degree from the University of New South Wales in 1973 and won the University Medal. He completed a Doctor of Philosophy in “Computer Science – Artificial Intelligence” in 1978.
The Respondents to the proceeding as named in the Originating Application and Statement of Claim were iSoft Australia Pty Limited (“iSoft Australia”), as First Respondent, and iSoft Health (Asia) Pte Limited (“iSoft Health”), as Second Respondent. An Amended Originating Application and an Amended Statement of Claim filed on 31 January 2012 identified the First Respondent as iSoft Group Limited. A Further Amended Statement of Claim was filed on 5 April 2012. A Second Further Amended Statement of Claim was filed on the second day of the hearing amending the First Respondent’s name to “iSoft Group Pty Limited” (“iSoft Group”) and a Third Further Amended Statement of Claim was filed on the final day of the hearing.
The First Respondent (iSoft Group) is part of a global group of companies having subsidiaries across the United Kingdom, Europe, the United States of America and Asia. It underwent a number of corporate restructures and names and was formerly called IBA Healthcare Limited, IBA Technologies Limited, SWi Holdings, IBA Health Limited and IBA Health Group Limited. In very summary form, it is involved in the provision of software in the healthcare industry. Rather than referring to the particular name of the corporation as at particular dates, it is convenient at times to simply make reference to the First Respondent.
The Second Respondent, iSoft Health, is a company registered in Singapore. It was formerly called SWi Singapore Solutions Pte Limited, IBA Technologies Asia Pte Ltd and IBA Health (Asia) Pte Ltd.
In the present proceeding, Dr Cohen maintains that his services as the Chief Technology Officer were terminated by the First Respondent on 30 September 2011. His principal claims for relief are as against the First Respondent founded upon alleged:
·breaches of contract; and
·contraventions of the Fair Work Act2009 (Cth).
In particular, he claims:
·underpayment of remuneration as between 1 July 2010 and 30 September 2011 in the sum of $75,500.42;
·underpayment of annual leave paid upon termination of employment in the sum of $120,873.12;
·retention payment in the sum of $100,000;
·payment in lieu of notice in the sum of $725,238.75;
·redundancy pay in the sum of $409,109.03; and
·long service leave in the sum of $177,283.68.
As against the Second Respondent, iSoft Health, Dr Cohen seeks, if necessary:
·rectification of an agreement when he was seconded to Bangalore in India.
The principal claims for relief were founded upon the entering into in February 2000 – and the continuation thereafter – subject to variation – of a contract of employment between Dr Cohen and the First Respondent. This claim was founded upon a document expressed to commence operation on 15 February 2000 by both Dr Cohen and the First Respondent (“the 2000 Agreement”). It was claimed that this document constituted an agreement which continued to regulate the “core” terms upon which Dr Cohen was employed up until the date his employment was terminated. Counsel for Dr Cohen quite properly accepted that it was central to his various claims for relief to establish that the First Respondent was the employer of Dr Cohen throughout or, at least, at the date of termination of his services. If he did not establish the status of the First Respondent as employer, it was accepted that his claims in contract and pursuant to the Fair Work Act and the Long Service Leave Act 1955 (NSW) would fail. It was also accepted that if the claim in contract was made out, it was unnecessary to resolve the claims advanced pursuant to that legislation as the claims in contract would yield a better result.
It is ultimately concluded that the First Respondent was not Dr Cohen’s employer as at the date of the termination of his services in September 2011.
In reaching this conclusion it is necessary to set forth in some detail:
·the chronological sequence of a series of agreements, including those preceding the 2000 Agreement, commencing with an agreement in 1988;
·the execution of the 2000 Agreement, whether or not that agreement ever came into effect and whether or not it was abrogated or abandoned;
·the circumstances in which Dr Cohen entered into a “secondment agreement” to provide services in Bangalore in India in early 2006; and
·the circumstances in which Dr Cohen thereafter entered into a further “secondment agreement” to provide services in Chennai in India in the latter half of 2007.
The conclusion that Dr Cohen was not employed by the First Respondent as at the date of termination of his services renders it unnecessary to resolve a number of further submissions which were advanced on his behalf. Given the attention these other submissions received, it is nevertheless appropriate to also briefly address:
·the remedies which would otherwise have been available had it been concluded that the First Respondent was Dr Cohen’s employer as at September 2011, including – in particular – submissions in respect to what would otherwise have been the reasonable period of notice that should have been given in respect to the termination of his employment;
·the application or non-application of the Fair Work Act; and
·the application or non-application of the Long Service Leave Act.
THE SEQUENCE OF AGREEEMENTS
It is necessary to set forth in some detail the sequence of agreements which Dr Cohen executed with a view to resolving his claims that:
·it was the First Respondent who was his “employer” throughout; and
·the 2000 Agreement was the agreement which governed the “core” terms of his employment up until his employment was terminated.
There was an understandable forensic desirability on the part of Dr Cohen in fixing the First Respondent as his “employer”. It is thus prudent to also identify the principles to be applied when identifying the “employer” of an “employee”.
The sequence of agreements
The facts giving rise to the sequence of agreements of present relevance may be traced back to 1987 when SW International Systems Pte Ltd was established. Dr Cohen was employed as that company’s Technical Director. A letter on that company’s letterhead and dated 1 November 1988 confirmed Dr Cohen’s position as Technical Director and set forth the terms and conditions of his employment as from that date. He later became the Managing Director from about September 1998. The agreement in September 1988 provided that the period of employment was to be as follows:
3. Period of employment
Unless terminated earlier under clauses 9 or 11, the Employment will be for the period of two years from the Effective Date and continuing thereafter unless and until terminated by either party giving six months notice in writing to the other party, such notice expiring on the second anniversary of this agreement or any time thereafter.
Clause 14 provided:
14.Governing Law
14.1The validity, interpretation and performance of this agreement shall be governed by and construed in accordance with the law of the republic of Singapore.
Sometime in 1998 SW International Systems Pte Ltd worked on a project with iSoft Group’s predecessor, IBA Healthcare. Discussions regarding a possible merger commenced in about February 1999. Part of those discussions was the perceived need for key personnel to be employed for a three year period. That merger took place in September 1999. Dr Cohen’s brother, Mr Gary Cohen was appointed Chairman; Dr Cohen became the Chief Technology Officer.
The first of the agreements which assumed particular prominence in the proceeding was the 2000 Agreement. At the time this agreement commenced, Dr Cohen was living in Singapore. The 2000 Agreement was described as an “Executive Service Agreement”. The parties to the agreement were IBA Technologies Limited (which later became iSoft Group) and Dr Cohen. The recitals to the agreement provide as follows:
RECITALS
A.The Company wishes to employ the Executive on the terms and conditions of this agreement.
B.The Executive wishes to accept employment with the Company on the terms and conditions of this agreement.
Clause 2.1 describes Dr Cohen’s position as follows:
2.1Position
The Company agrees to employ the Executive in the position set out in part 2 of schedule 1 and the Executive agrees to serve the Company in that capacity, on the terms of this agreement.
Clause 2.2 provides for the period of the agreement as follows:
Period
The Company must employ the Executive for the Term unless the Executive’s employment is terminated earlier in accordance with this agreement or by operation of law.
The expression “Term” is defined in clause 1.1 as meaning “the period set out in part 3 of schedule 1”. Part 3 of Schedule 1, in turn, identifies the period as “3 years from 15 February 2000”.
Clause 7 deals with leave entitlements and provides in part as follows:
7.1Annual leave
The 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.
7.2Long service leave
The 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.
Clause 10.1 provides for “termination” as follows:
Termination of Employment
The 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;
…
Clause 10.2 provides for “early termination” as follows:
Early Termination
Notwithstanding clause 10.1, where either party gives the other notice under paragraph 10.1(a) or (c), the Company may at its option, on the date the notice is given or any subsequent date during the currency of the notice, pay to the Executive the amount which the Executive would have been entitled to be paid under this agreement during or on the expiry the period of notice (in addition to all the Executive’s other entitlements payable at the time on which the notice would have expired including all leave entitlements which would have accrued during that period) and the employment of the Executive terminates on making that payment.
The next agreement which assumed prominence in the proceeding arose out of the secondment of Dr Cohen to Bangalore in India. In late 2005 the First Respondent, then known as IBA Health Limited, acquired a Bangalore-based IT company known as “Medicom”. At the time, the acquisition of Medicom for about $30 million was iSoft Group’s largest acquisition. Dr Cohen was asked to go to Bangalore and he agreed.
The agreement is said by Dr Cohen to be contained within a letter dated 23 February 2006 (“the Bangalore Secondment Agreement”). The letter is on the letterhead of IBA Health (Asia) Pte Limited, a company registered in Singapore (the Second Respondent). The letter provides in part as follows:
This letter is an addendum to your original employment contract with IBA Health (Asia) Pte Limited (“IBA”) dated 15th February 2000. The terms of your employment with IBA are amended as follows: …
The letter goes on to state that the “date of commencement in Bangalore is 1 February 2006 on a fulltime basis”. It then sets forth his “remuneration” and “other benefits” and concludes as follows (without alteration):
8. CONFIRMATION
All other terms of your Executive Service Agreement, as amended, will continue in full force and effect.
We look forward to your confirmation of the above terms and trust that your ongoing employment with us will be satisfying and rewarding experience.
The letter does not refer to an express term providing for the duration of employment.
Notwithstanding the date of the letter, it was common ground between the parties that it was signed by Dr Cohen on 1 August 2006 and that it took effect from 1 April 2006 and not 1 February 2006.
The last in the sequence of agreements which assumed prominence arose out of the later secondment of Dr Cohen to Chennai. Product development was taking place there and Dr Cohen was asked to manage the merger of product development teams. Again he agreed to do so.
This agreement is said by Dr Cohen to be contained within a letter dated 10 June 2008 (“the Chennai Secondment Agreement”). The letter is again on the letterhead of IBA Health (Asia) Holdings Pte Limited.
That letter provides in part as follows (without alteration):
Dear Brian,
EXPATRIATE ASSIGNMENT – 24 months secondment to Chennai, India
I am pleased to be able to confirm IBA’s terms and conditions for the continuation of your current Expatriate Assignment for a further period of 24 months. For the coming 24 months of this assignment, you will continue to be based in India, however, the exact location will now be Chennai. This document sets out the main particulars of your Terms and Conditions of Employment through the duration of this addition 24 month period.
1 Name of Parties
1.1The Company: IBA Health Group
1.2The employee: Brian Cohen
2 Employment Details
2.1Your employment continues in the capacity of CTO based in Singapore. However, for the coming period of 24 months, you will be based in Chennai, India.
2.2Please note that it is IBA’s intention that you will return to Singapore in 24 months time to continue in the same role.
3 Commencement of Employment
3.1Your secondment to Chennai will commence on 1 November 2007 and is contingent on the company being able to continue to be able to obtain any appropriate visas for yourself and your family in Chennai.
3.2Your employment with IBA Health (Asia) Pte Ltd is deemed to have commenced on the first day you joined the company, therefore, your continuous service is effective from 1 November 1988.
The letter goes on to provide details (inter alia) of his salary and benefits. It also provides in part as follows:
8Annual Leave
8.1Your paid annual leave entitlement will remain the same as your current terms and conditions.
8.2In addition to your paid annual leave entitlement, you will also be entitled to all public holidays applicable to the country of your place of work, ie Chennai, during your
one(2) years assignment. You will not be eligible for the Singaporean public holidays during the assignment.9Notice Period
9.1Your notice period will remain the same as your current terms and conditions.
9.2IBA reserves the right in its absolute discretion to pay salary in lieu of notice.
10Personal Leave & Sick Leave
10.1Your personal leave and sick leave entitlement will remain the same as your current terms and conditions.
11Changes to your terms of employment
11.1The Company reserves the right to make reasonable changes to any of your terms and conditions or employment and will notify you in writing of such changes at the earliest opportunity and, in any event, within one month after such changes have taken effect.
11.2Such changes will be deemed to be accepted unless you notify the Company of any objection in writing before the expiry of one moth from the date of notification by the Company of the changes.
12Acceptance of this Offer
12.The details in this letter, your original offer of employment in your home country and the accompanying documentation, including but not limited to the India Employee Handbook, form both the Principle Statement of the written particulars of your employment and your individual Contract of Employment.
13Governing Law
13.1Whilst you are seconded to IBA in Chennai, your employment will be governed by Indian employment law.
Identifying the employer - the principles to be applied
The correct identification of the employer of an employee where there may be two or more employers may be significant in a variety of different legal contexts, including a liability to pay workers compensation benefits; liability to pay redundancy payments; and liability under occupational health and safety legislation: Finance Sector Union of Australia v Commonwealth Bank of Australia [2001] FCA 1613 at [60], 111 IR 241 at 266 per Moore J.
In Re C & T Grinter Transport Services Pty Ltd; Ex parte Fitzgerald [2004] FCA 1148 Finn J summarised the principles to be applied when seeking to identify the employer of an employee as follows:
APPLICABLE PRINCIPLES
[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; Re Coogi Nominees Pty Ltd (Administrators appointed); McCluskey v Karagiosis (2002) 120 IR 147. 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.
(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 AGLC 206 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, 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 Official Trustee in Bankruptcy (1988) 18 FCR 449 at 454.
(4) Conversations and conduct at the time of the alleged engagement of the employee is of considerable significance: Romero, at [9]. The beliefs of the employees as to the identity of their employer is admissible and is 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, FCA, Ryan J, 19 November 1998.
The identity of a contracting party is to be determined looking at the matter objectively: Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429 at [28], 77 NSWLR 299 at 304 per Allsop P and Handley AJA (Hodgson J agreeing); City & Suburban Group Pty Ltd v Gambetta Holdings Pty Ltd [2011] WASCA 233 at [21] per Newnes JA, at [45]-[48] per Murphy JA (Hall J agreeing). See also: Mediterranean Olives Financial Pty Ltd v Gita Lederberger [2011] VSC 301 at [5]-[7] per Pagone J.
THE 2000 AGREEMENT – DID IT EVER APPLY, WAS IT ABANDONED AND WHEN DID IT COME TO AN END?
The starting point for Dr Cohen’s broad proposition that the 2000 Agreement was the contract of employment that prevailed throughout was challenged at the outset by Senior Counsel on behalf of the Respondents.
The execution of the 2000 Agreement was preceded by discussions as to the listing of iSoft on the Australian stock exchange. As a condition of brokerage firms underwriting the Initial Public Offering Mr Gary Cohen was told that it was necessary to “lock in” the key executives for a minimum period of three years. That included the employment of Dr Cohen. The prospectus dated 15 February 2000 was lodged with ASIC on that date and stated in part:
Each of the senior management team has agreed to enter into a service agreement for a period of three years …
Immediately prior to the execution of the 2000 Agreement Dr Cohen was employed by SW International Systems Pte Limited, subsequently known as IBA Health (Asia) Holdings Pte Limited. After the execution of the 2000 Agreement, Dr Cohen’s duties did not change.
On behalf of the First Respondent, it was submitted that:
·the 2000 Agreement never constituted a contract of employment as between Dr Cohen and the First Respondent, even though it was signed by both parties;
·in the event that it was a contract of employment, it was a contract which was abandoned; and
·even if it was a contract of employment which was not abandoned, it came to an end according to its terms – namely after the expiration of the three year term.
A contract of employment?
The First Respondent admits that it executed the “Executive Service Agreement” but does not admit that it operated as a contract of employment. Its case is that the document was only ever executed to fulfil representations made in the prospectus.
Notwithstanding this non-admission, it is concluded that the “Executive Service Agreement” constituted a written contract of employment commencing from 15 February 2000. This conclusion follows principally from the fact that the agreement was executed by the parties to it.
The common law attaches significance to the fact that a contractual document has been signed: Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52, 219 CLR 165. Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ there observed:
[42]Consistent with this objective approach to the determination of the rights and liabilities of contracting parties is the significance which the law attaches to the signature (or execution) of a contractual document. ….
[43]More recently, in words that are apposite to the present case, in Wilton v Farnworth [(1948) 76 CLR 646 at 649] Latham CJ said:
“In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business trans-actions.”
…
[45]It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.
Their Honours continued:
[47] The importance which, for a very long time, the common law has assigned to the act of signing is not limited to contractual documents. Wilton v Farnworth was not a contract case. The passage from the judgment of Latham CJ quoted above is preceded by a general statement that, where a man signs a document knowing that it is a legal document relating to an interest in property, he is in general bound by the act of signature. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.
The execution of a document in an approved manner has the same significance as signature by an individual: Northside Developments Proprietary Limited v Registrar-General (1990) 170 CLR 146 at 156 per Mason CJ.
There is no reason not to give significance to the fact that the 2000 Agreement was executed by the First Respondent and executed in the manner then set forth in s 127 of the Corporations Law.
Was it abandoned or abrogated?
Nor should the First Respondent’s submission be accepted that the 2000 Agreement was abrogated or abandoned.
A contract may be found to have been “abandoned” by reason of, for example, “an ‘inordinate’ length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them”: Fitzgerald v Masters (1956) 95 CLR 420 at 432. Dixon CJ and Fullagar J there said that in such circumstances what “is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … ‘the matter is off altogether’”. Where a concluded contract is said to have been abandoned or abrogated, extrinsic evidence regarding the conduct of the parties is admissible in order to determine whether the parties have acted to abandon and thus abrogate the agreement: cf. Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 321 per Hope JA. See also: (1985) 2 NSWLR at 334 per Mahoney JA; at 339 per McHugh JA.
The basis upon which Senior Counsel for the Respondents sought to contend that the 2000 Agreement had been “abandoned” remained obscure.
However the argument may have been advanced, it is relatively clear that the First Respondent engaged in conduct which is not consistent with an intention to abandon the 2000 Agreement. That conduct includes conduct before and after the date of its commencement on 15 February 2000.
Thus, a paper of the Remuneration Committee of the First Respondent dated 8 February 2000 refers to the remuneration of three executives, including Dr Cohen. It refers to a termination notice period of six months and refers to the terms of each agreement being three years.
During the currency of the three year period, a minute of a meeting of the Remuneration Committee on 21 August 2000 refers to a “review of the current contracts of Senior Management”. But Dr Cohen is not mentioned.
Minutes of a meeting of the Appointment and Compensation Committee of the First Respondent on 1 June 2001, however, do refer to “a proposal for the establishment of new remuneration packages and contracts for senior executives”. Dr Cohen’s contract (along with the contracts of several others), it was noted, was “still to be finalized”. Whether this was to be a “new” contract was not stated. But there was in evidence a draft of a different Executive Service Agreement produced in about July 2001. There were differences between this draft and the 2000 Agreement, including the July 2001 draft:
·not containing any fixed term;
·proposing a commencing date of 1 July 2001; and
·providing for termination on the giving of three months notice.
Dr Cohen maintains that the July 2001 draft is certainly consistent with the provision of services by Dr Cohen and the existence of an employment agreement.
Conduct subsequent to February 2003 (the time at which the 2000 Agreement was due to expire), included a draft amendment to the 2000 Agreement to commence in July 2004. The draft contained the following recitals:
RECITALS
A.The Company and the Executive entered into an Executive Service Agreement on [insert date] (“ESA”).
B.In the course of providing services to the Company, the Executive has or will produce certain intellectual property and other materials which will remain the property of the Company.
C.Both parties now wish to enter into this Agreement to more clearly define their respective rights and obligations with respect to that intellectual property and other materials.
Particular reliance was placed by Dr Cohen upon the acknowledgment in the first recital that an agreement had been entered into and the acknowledgment in the second recital as to the provision of services by Dr Cohen.
A conclusion that the 2000 Agreement was a contract which in fact recorded the terms and conditions of employment of Dr Cohen is sufficiently founded upon the fact that it was executed by both Dr Cohen and the First Respondent. The conclusion that that document in fact evidenced the agreement between the parties is only further reinforced by reference to the conduct of the parties before and after 15 February 2003, namely when the three year term came to an end. There is no basis for a conclusion that it was abandoned. The submissions to the contrary put by Senior Counsel for the Respondents on these questions are rejected.
A contract for a fixed term – expiration after 3 years?
The final submission advanced by Senior Counsel for the Respondents in this trilogy of submissions was that – even if the 2000 Agreement was in fact a contract of employment between the First Respondent and Dr Cohen which had not been abandoned or abrogated, it nevertheless came to an end when the period of three years expired in accordance with the terms of the agreement.
Any conclusion as to whether or not the provisions of a fixed term contract continue to govern the parties after it has expired is not a question of substantive law but rather a question of evidence.
It is a question of whether an inference can be drawn from the conduct of the parties that they intended to keep the original contract on foot: Brambles Ltd v Wail [2002] VSCA 150, (2002) 5 VR 169. Winneke P, Charles and Batt JJA there observed:
[57]It is not easy to find much discussion in the books or case law, except in North America, of the question whether the terms of a detailed written agreement for a fixed term continue, after that term has expired, to govern the parties to it where they continue dealing with each other. However, the following appears in Chitty on Contracts:
There may also be an implied contract where the parties make an express contract to last for a fixed term, and continue to act as though the contract still bound them after the term has expired. In such a case the court may infer that the parties have agreed to a newly expressed contract for another term.
Their Honours thereafter reviewed North American decisions and continued:
[59]… In the New York Telephone Co case, after the passage referred to in Steed v Busby, Lehman CJ, speaking for the Court of Appeals of New York, had stated:
Even in such a case, however, the reciprocal obligations arise from the new implied contract and, unless an intent to make such a new contract is expressed or may be fairly inferred from the conduct of the parties, the obligations of the parties are as matter of law not measured by the terms of the contract which has expired.
In another decision of the last-mentioned court, which cited the passage from an earlier edition of Corbin corresponding to that set out above and is in turn cited in the current edition, Cinefot International Corporation v Hudson Photographic Industries Desmond CJ, speaking for the majority, stated that the rule that there was available an inference or implication of fact that the parties intended to renew was not really one of substantive law, but of evidence. His Honour said that entering into a contract to run for a year, and then continuing to act as if its time had not run, was sufficient evidentiary support for a finding that the parties in fact intended to keep it alive for another year. The contract in that case was classified as an agency agreement and the principle was stated not to be limited to leases and employment contracts. …
On the facts of the case before them, their Honours concluded:
[61]Here the written agreement came to an end on 4 April 1993. The question whether an implied or tacit agreement to continue dealing on the same terms save that the agreement should be terminable on reasonable notice is to be inferred is, as Desmond CJ stated and as the other cases and the treatises make abundantly clear, an evidentiary or factual question. On the facts we have set out earlier we consider such an inference should be drawn here. The evidence, fairly sparse though it is, warrants the finding that after 3 April 1993 the parties proceeded as though still governed by the terms of the original agreement (save that, since it had already expired, either could terminate the substitute arrangement on reasonable notice), rather than a finding that they impliedly agreed merely that Andar should collect and deliver the laundry and that Brambles should pay it a reasonable sum for that or a finding that the parties made a series of individual implied agreements, six days a week, for that work to be done for a reasonable sum. In other words, after 3 April 1993 the parties operated under a standing agreement under which all the procedures and, importantly, the remuneration were exactly the same as they had been under the written agreement. The parties intended that that should be so. The contract thus made was not a mere variation of the original agreement, for it was not made until after the latter had expired. Accordingly cl 15.1, requiring signed written agreement for a variation, did not apply to it. Nor did cl 14.5, the “whole agreement” clause, since it was not apt to apply to a subsequent and separate agreement. Clauses 6.1 and 8.2, for instance, contemplate “renewal” and “extension”. Renewal and extension are closely related concepts, normally involving a continuation of the contractual relationship on essentially the same terms and conditions as contained in the original contract. Whether a renewal creates a new contract, or extends the original contract, depends primarily on the intention of the parties as evidenced by the agreement or agreements they have made. Thus, generally an option to renew a contract is the right to require the execution of a new contract, whilst an option to extend the term, exercised during the currency of the term, merely operates by way of variation to extend the term of the original agreement. Whether the implied or tacit contract made after 3 April 1993, which cannot be an extension, is called a renewal is really a matter of definition. The important point is that it was a new and separate contract.
This decision does not stand as authority for the proposition that the terms of a detailed written agreement for a fixed term continue to govern the parties where they continue dealing with each other after the fixed term has expired; it is authority for the proposition that “it is open to a court to draw the relevant inference”: Energy World Corporation Ltd v Maurice Hayes and Associates Pty Ltd [2007] FCAFC 34 at [24], 239 ALR 457 at 463 per Moore, Tamberlin and Gyles JJ. The drawing of an inference is “an evidentiary or factual question”. “What is required is conduct by the parties as if the contract remained on foot”: Viva Olives Pty Ltd v Origin Olives Australasia Pty Ltd [2012] FCA 545 at [13] per Perram J.
In the present proceeding it is concluded that the 2000 Agreement most probably came to an end, according to its terms, in February 2003.
The facts and circumstances as they existed between February 2003 and the commencement of the Bangalore Secondment Agreement in February 2006 (or April 2006) received little attention during the course of the proceeding. Other than the reference in the Bangalore Secondment Agreement to it being an “addendum to [his] original employment contract”, there is little evidentiary support for any conclusion that Dr Cohen was employed by the First Respondent according to the same “core” terms and conditions as were previously set forth in the 2000 Agreement.
It may, however, be the case that the First Respondent remained Dr Cohen’s employer for this period of time. It may well be the case that the continuation of the prior relationship can be implied from the course of conduct: Steed v Busby 268 Ark 1, 593 SW 2d 34 at 38 (1980). The Supreme Court of Arkansas there concluded:
… When an agreement expires by its own terms, if without more the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old, and the existence of a new contract is determined by an “objective” test, i.e., whether a reasonable man would think, from the actions, that they intended to make a new binding agreement. ... In such a case, when the parties continue to do business together, their conduct may permit, or even constrain, a finding that they impliedly agree that their rights and obligations should continue to be measured as provided in the old contract.
This decision was one of the North American decisions cited by the Victorian Court of Appeal in Brambles Limited v Wail [2002] VSCA 150 at [59], (2002) 5 VR 169 at 187 per Winneke P, Charles and Batt JJA. This decision, it should be noted, was reversed in part: Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28, 217 CLR 424. It was unnecessary, however, for that Court to comment upon the North American authorities. It was only Callinan J who agreed with the Court of Appeal as to the renewal of the contract.
It is, however, unnecessary for the purposes of the present proceeding to reach any more certain conclusion as to whether the 2000 Agreement continued in force by reason of the conduct of the parties after February 2003.
A BREAK IN THE CHAIN – THE BANGALORE SECONDMENT?
Dr Cohen began working out of Bangalore in February 2006. His Research and Development Manager, Mr Srivinas SampathKumar, also moved to Bangalore at the same time.
Irrespective of the contractual arrangements governing Dr Cohen’s employment between February 2003 and February 2006 (or April 2006), the case sought to be advanced on behalf of Dr Cohen would confront difficulties if the Bangalore Secondment Agreement was characterised as an employment contract between Dr Cohen and a corporate entity other than the First Respondent. The principal case advanced on behalf of Dr Cohen was, of course, that he was employed throughout by the First Respondent.
The terms of the Bangalore Secondment Agreement presented a potential break in the chain of that employment contract. The Bangalore Secondment Agreement commenced with a reference to it being an addendum to “… [Dr Cohen’s] original employment contract with IBA Health (Asia) Pte Limited …”.
It was in this context that it became important for Dr Cohen to submit either that:
·the reference in the letter to the “employment contract with IBA Health (Asia) Pte Limited” was properly to be construed as a reference to the 2000 Agreement with the First Respondent; or
·the Bangalore Secondment Agreement needed to be rectified to record the employment as being with the First Respondent.
A fall back position adopted by Dr Cohen was that the true character of a secondment agreement was an agreement which left intact the underlying agreement. On this approach, at the conclusion of the period of secondment, the underlying contractual relationship between Dr Cohen and the First Respondent re-emerged.
Each of these two primary submissions should be considered separately.
A process of construction
A document can be construed to “avoid absurdity or inconsistency”: Fitzgerald v Masters (1956) 95 CLR 420 at 426-427. Dixon CJ and Fullagar J there observed:
There is a superficial difficulty in cl. 8, because it purports to incorporate a set of conditions so far as they are inconsistent with what has been specifically agreed upon. No real difficulty, however, is created. Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency. Here it would be indeed absurd to suppose that the parties, having expressed their agreement on a number of special and essential matters, should intend to incorporate by reference terms inconsistent with what they had specially agreed upon. What they must clearly have intended is to incorporate a set of general conditions except so far as they were inconsistent with what they had specially agreed upon, and cl. 8 must be read as if it said “consistent” or “not inconsistent”.
See also: Kimberley Securities Ltd v Esber [2008] NSWCA 301 at [33] per Gyles AJA (Allsop P and Macfarlan JA agreeing). In the context of commercial contracts, this is but an aspect of construing such contracts in a “businesslike” manner and in a manner which promotes “business commonsense”: Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [13] per Basten JA (McColl JA and Campbell JA agreeing) (citing Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [19], 76 NSWLR 603 at 618). See also: Parmalat Australia Ltd v Norco Co-operative Ltd [2006] QCA 129 at [42] per Jerrard JA. This process of construction, however, is no mandate for a Court to rewrite a contract.
For present purposes no submission was made to suggest that such an approach to construction should not also be employed when construing a contract of employment. And where a contract contains words which are ambiguous it is permissible for a Court to examine extrinsic evidence to determine whether the parties have in fact used the words in question in only one sense: cf. Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218 at 223 per Gault, McKay and Thomas JJ. See also: McLaughlan, Common Assumptions and Contract Interpretation (1997) 113 Law Quarterly Review 237.
Where a document can be construed to “avoid absurdity or inconsistency”, rectification in such case is not required: Spunwill Pty Ltd v Bab Pty Ltd (1994) 36 NSWLR 290 at 299-300. Santow J there observed (in the context of construing a restraint of trade clause) that there were a number of “settled principles for construction of a written document”, including the following:
3. In construing a written document, the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the document's language to create. The emphasis is thus on giving effect to the apparent intention of the parties, and direct evidence of the parties' actual subjective intentions and expectations is inadmissible for purposes of construction: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales at 348 and 352; Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840.
4.The language of a term is generally assigned its natural and ordinary
meaning, read in the light of the contract as a whole but where it is ambiguous surrounding circumstances may be taken into account in assigning the presumed meaning. The surrounding circumstances include the matrix of mutually known facts, and the background, object, context and commercial purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (at 347-352); Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd (at 844-850);Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Insurance Cases 60-853 at 75,343.5. The consequences of alternative interpretations are not immaterial, and where the meaning of language in a contract is ambiguous, that interpretation will be preferred which avoids consequences which are in the circumstances capricious, unreasonable, unjust or not consonant with business efficacy: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 50 ALJR 769; 11 ALR 305; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd (1993) 115 ALR 295; 10 ACSR 615.
6. Every passage of a document must be read as part of the whole instrument. This may justify departing from what had seemed the plain meaning of a clause considered in isolation: The Metropolitan Gas Co v Federated Gas Employees' Industrial Union (1925) 35 CLR 449 at 455-456.
7. Where a court can discern the intent of the parties from an examination of the document as a whole, words may be supplied, omitted or corrected in the instrument, where it is clearly necessary in order to avoid absurdity or inconsistency:Fitzgerald v Masters (1956) 95 CLR 420 at 426-427. In such cases rectification of the document is not required: Re United Pacific Transport Pty Ltd [1968] Qd R 517; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (at 346).
8. “If, by any reasonable construction, the intention of the parties can clearly be arrived at from the document itself, then the court will give effect to that intention even though this involves departing from or qualifying particular words used. So the court will be prepared to restrict, transpose, modify, supply or reject words or terms in the documents, provided the intention of the parties is plain in spite of the words”: Chitty on Contracts, 26th ed (1989) vol 1 par 827; Tropwood AG of Zug v Jade Enterprises Ltd (The Tropwind”) [1982] 1 Lloyd's Rep 232.
See: McLauchlan, Objectivity in Contract (2005) 24 University of Queensland Law Journal 479.
Support for a construction of the Bangalore Secondment Agreement such that IBA Health (Asia) Pte Limited should be regarded as a reference to the First Respondent may be found in any of the following expressions used elsewhere in that letter, namely:
·the agreement being an “addendum to [Dr Cohen’s] original employment contract” – there being no earlier contract with IBA Health (Asia) Pte Limited;
·the reference to an “addendum” and the terms of employment being “amended” – it being submitted on behalf of Dr Cohen that that was an amendment or an addendum to 2000 Agreement;
·the reference to the other terms of Dr Cohen’s “Executive Service Agreement”, “as amended” continuing “in full force and effect”; and
·the reference to Dr Cohen’s “ongoing employment.”
Some reliance was also placed upon the letter being signed by Mr Garrington who described himself as Chief Executive Officer of “IBA Health Limited”. Each of these references, it may be noted – including the reference to the statement that the terms were to “continue” and that there was “ongoing employment” – do not dictate any conclusion as to the 2000 Agreement continuing in force after February 2003 and prior to the execution of the Bangalore Secondment Agreement.
But these references do lend some support for construing the reference in the Bangalore Secondment Agreement to IBA Health (Asia) Pte Limited – as opposed to the First Respondent – as erroneous.
That process of construction is, however, rejected. It would not be “absurd” to read the letter as evidencing an intention on the part of the Respondents to “continue” the same terms and conditions as were recorded in the 2000 Agreement subject to variation – including a variation to address Dr Cohen’s secondment to Bangalore.
The alternative submission for Dr Cohen was to seek rectification of the Bangalore Secondment Agreement. It was sought to rectify that agreement to delete the reference to IBA Health (Asia) Pte Ltd and to substitute it with the name of the First Respondent.
Rectification
Rectification is available where it can be demonstrated that the parties to an agreement were in complete agreement as to its terms and where the agreement erroneously records those terms: Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65, 69 NSWLR 603. Tobias JA there reviewed some of the authorities and summarised the principles to be applied as follows:
The relevant legal principles
[122]As is observed in Meagher Gummow & Lehane Equity, Doctrines & Remedies, 4th ed (2002), Australia, Butterworths LexisNexis, at 886 [26–010], it is of the upmost importance for a proper appreciation of the basis of the equitable doctrine of rectification to realise that the court, by its orders, merely reforms the instrument in which the parties have mistakenly expressed their agreement. The learned authors then cite the following passage from the judgment of Denning LJ in Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 at 461:
“In order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract but by an error wrote them down wrongly …”
[123]The authors then observed that the need for rectification will thus arrive when the court can discern from the document itself and the surrounding evidence that “something must have gone wrong” which cannot be cured by the process of construction: Investors Compensation Scheme Ltd v West Bromwich Building Society ([1998] 1 WLR 896 at 913). The relevant passage in which these words occur in Lord Hoffman’s speech is set out (at 625[106] supra). Of course, the present case is not concerned with what might be regarded as a mere linguistic mistake in a formal document but, according to Ryledar, a complete misunderstanding with respect to what are otherwise the clear words of the relevant written document as embodying an intention of the parties which, so it is submitted, they plainly did not have.
[124] In Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349, Mason J noted the “more recent desire” in the authorities to “… emphasize that the remedy [of rectification] is designed to relieve against the mistaken expression of the true agreement of the parties”. His Honour further observed (at 350):
“What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a firm insistence on the requirement that the mistake as to the writing must be common to the parties and not merely unilateral … .”
[125] This Court referred to the relevant principles in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329. In agreeing with the leading judgment of Sheller JA, Mahoney AP relevantly observed (at 331):
“In my opinion, the principle upon which rectification is granted involves two things: that … the parties (in the case of a transaction between parties) had at all relevant times an intention which was to be given effect by the document to be rectified; and that that document does not give effect to that transaction.”
When dealing with a claim for rectification, it has been said that a court is “not entitled to determine the common intention of the parties by confining itself to the correspondence between them and any relevant conduct, and treat as irrelevant any inconsistent evidence to the effect that, subjectively speaking, no such common intention was held”: Thiess Pty Ltd v Arup Pty Ltd [2012] QSC 185 at [92] per Applegarth J.
The case advanced on behalf of Dr Cohen was that all previous drafts and negotiations as to the terms of the Bangalore Secondment Agreement disclosed the identity of the employer as being IBA Health Limited. There was, he submitted, agreement as to those terms. Although unnecessary to go so far as to show how the error occurred, Dr Cohen nevertheless took that further step and submitted that the final version of the letter was sent without any real attention being given on the part of the Respondents to the accuracy of the name of the employing corporate entity set forth in the letter. Senior Counsel for the Respondents also seized upon the circumstances in which the final version of the letter was forwarded to Dr Cohen. But Senior Counsel submitted that the final version evidenced a deliberate choice on the part of the Respondents as to the identity of the corporate employer. This choice, he maintained, denied the existence of any common intention that could be the subject of rectification.
The course of those negotiations started in about September 2005, when the intention to relocate Dr Cohen commenced, and continued right up to 1 August 2006 when Dr Cohen signed the Bangalore Secondment Agreement
That course of negotiations discloses:
·the reference to IBA Health Limited being repeated in further drafts sent by way of e-mail on 9 January 2006, 23 February 2006 and 8 June 2006;
·Ms Romano, on behalf of the Respondents, in an e-mail sent on 21 June 2006 to Dr Cohen stating that “your IBA employment contract is complete”; and
·Ms Romano sending to Messrs de Figueiredo and Baker an e-mail on 30 June 2006 enclosing the agreement stating in part that “the following documents have been agreed on”.
If attention is confined to that exchange of e-mails it may be safely concluded that there had throughout been a common intention that IBA Health Limited – and not IBA Health (Asia) Pte Limited – was to be the employer. It may also be safely concluded that there had been agreement as to the terms in June 2006 and that all that remained outstanding was the execution of the agreement.
Notwithstanding this course of negotiations, there were inevitably factors supporting the contrary submission advanced on behalf of the Respondents. Evidence supporting a conclusion that the Bangalore Secondment Agreement was in fact an agreement between Dr Cohen and the Second Respondent included the following:
·the fact that the February 2006 letter was on the letterhead of the Second Respondent;
·a letter sought by Dr Cohen prior to his departure for Bangalore on 17 March 2006 for use in the event that he encountered “any hurdles from Indian customs when he lands”. The letter was dated 15 March 2006 and was signed by Ms Mary Romano, as the HR Administrator on the letterhead of “ibahealth”. The letter certified that “Brian Cohen, holder of Australian Passport No … & Singapore NRIC No … is employed with IBA Health (Asia) Holdings Pte Ltd…”. A letter in like terms had previously been given to the Product Research and Development Manager, Mr SampathKumar. Dr Cohen had seen the letter provided to Mr SampathKumar and sought a “similar letter” for himself; and
·the Annual Reports for the First Respondent for the years 2005, 2006 and 2007 set forth in each year the name and position of what were identified as “specified executives”. The “employer” was also identified for each executive. Most of those executives were identified as employees of IBA Health Limited; Dr Cohen was the only person whose “employer” was identified as IBA Health (Asia) Holdings Pte Limited.
Although the significance of the letterhead cannot be discounted, the fact that the Bangalore Secondment Agreement was on the letterhead of IBA Health Asia Pte Ltd assumes only marginal relevance.
Senior Counsel for the Respondents also sought to place significance upon events in late July and early August 2006. In mid-July 2006 Dr Cohen had made an inquiry as to when he could get a signed copy of “the Expatriate Contract addendum to [his] employment contract as agreed …”. Ms Romano replied on the same day, 19 July 2006, stating that she was “still waiting on [Dr Cohen’s] actual contract [to be] returned to [her] duly signed”. Dr Cohen wanted another “version” of the contract deleting certain payments so as to not “confuse the local tax authorities …”. Further attention was given to “tax implications” later that month. Dr Cohen had also sought to minimise his tax liabilities by entering into a consultancy agreement. On 28 July 2006 an internal e-mail from Ms Chua to Ms Romano stated (without alteration):
I just realised that Brian’s offshore invoices were addressed to Sydney office. May I know the contract is prepared in the name of IBA Health Asia Pte Ltd or IBA Health Ltd (Sydney office)? Btw, the auditors is asking for Brian and Srinivas’s overseas posting contract. Can you email the signed contract?
A subsequent e-mail sent on 1 August 2006 to Mr Tony Connell, the Chief Financial Controller, stated (without alteration):
Hi Tony,
As per Mary’s email below, Brian’s consultancy agreement is issued by IBA Health Ltd (Sydney). Should this payment be made in Sydney as his invoices were addressed to Sydney office (see attached)? I do not know what is the agreed arrangement. If the consultant fee has to be paid out of Singapore, the agreement must be made by either IBA Health Asia Pte Ltd or IBA Health Asia Holdings Pte Ltd. I do not know whether there is any tax implication on this.
Would appreciate it if you could help to check on this so that we are on the right track of payment to avoid any audit or tax issue.
Dr Cohen sent an e-mail on 1 August 2006 to Ms Chua and others stating (without alteration):
Hang on.. there may be Australia tax implications here…!
A “revised IBA contract that requires your signature” was sent by Ms Romano to Dr Cohen later on 1 August 2006. It was that version which was signed and which contained the reference to “your original employment contract with IBA Health (Asia) Pte Limited …”.
Although it may be accepted that the last exchange of e-mails was focussed upon the consultancy agreement, it was also apparent that attention was being given to the “tax implications” of their arrangement by both Dr Cohen and those financial officers within the First Respondent.
An available inference was that by late July/early August 2006 both Dr Cohen and officers of the Respondents had directed their attention to the “tax implications” and had decided that the “employer” for Dr Cohen should change from the First Respondent to IBA Health (Asia) Pte Limited.
But no such inference, it is concluded, should be drawn. On balance it is concluded that Dr Cohen has discharged the onus of establishing a common intention that the First Respondent was to be the “employer”. The Bangalore Secondment Agreement should accordingly be rectified so as to reflect the common intention of the parties that the employer was to be the First Respondent.
A BREAK IN THE CHAIN? – THE CHENNAI SECONDMENT & THEREAFTER
Discussions which ultimately led to Dr Cohen agreeing to a further secondment in India commenced in about October 2007. He was asked to go to Chennai and he agreed. He moved to Chennai in November 2007. Dr Cohen further says that as from the end of August 2010 he no longer worked in Chennai on a full-time basis. Instead, he thereafter spent about half of his time in Singapore and about half of his time in Chennai.
It is at least at that point of time when the Chennai secondment commences that the contractual case advanced on behalf of Dr Cohen breaks down.
Even though it is concluded that the reference to the Second Respondent in the Bangalore Secondment Agreement should be rectified such that it should refer to an employment contract with the First Respondent, and even if it were to be further concluded that after 15 February 2003 (the date the 2000 Agreement concluded) and the commencement of the Bangalore Secondment Agreement there was to be an implied contract of employment on very much the same terms and conditions as set forth in the 2000 Agreement, any contract of employment between Dr Cohen and the First Respondent came to an end at that point of time when:
·the Bangalore Secondment Agreement concluded;
or when
·the Chennai Secondment Agreement commenced.
Given the prospect that Dr Cohen’s employment with the First Respondent may have continued after February 2003 by reason of the conduct of the parties, it may also have been the case that the First Respondent remained his employer after the Bangalore Second Agreement concluded. But the conclusion that the First Respondent was not the employer of Dr Cohen as at the date his employment was terminated renders it unnecessary to determine the precise date that he ceased employment with the First Respondent.
The nature of secondment agreements, of itself, does not assist any contrary conclusion. And, although caution must be exercised when reviewing individual documents, there is evidence which supports the conclusion that the First Respondent was not the employer of Dr Cohen in late 2010. Although it may initially appear curious that Dr Cohen served one period of secondment with one employer and the second period of secondment with a different employer, so much it is concluded necessarily follows from the form of the Chennai Secondment Agreement. It is further concluded that no question arises of the First Respondent purporting to transfer the services of an employee from one employer to another without his knowledge or consent.
The Chennai Secondment Agreement – employment by IBA Health (Asia) Pte Ltd
It is concluded that the letter dated 10 June 2008 (‘the Chennai Secondment Agreement’) is a letter evidencing the employment of Dr Cohen by IBA Health (Asia) Pte Ltd.
There is considered to be no ambiguity or uncertainty in cl 3.2 which expressly refers to Dr Cohen’s “employment with IBA Health (Asia) Pte Ltd”. Marginal further support for that conclusion may also be derived from the fact that the letter was on the letterhead of IBA Health (Asia) Holdings Pte Limited.
Such other terms or phrases within that letter as were relied upon by Dr Cohen in support of a submission that his employment was with the First Respondent do not lead to any contrary conclusion. Those phrases or terms included:
·the “Names of the Parties”, including a reference to “IBA Health Group”, in cl 1;
·the “continuation of your current Expatriate Assignment”, in the introductory words to the letter;
·“your current terms and conditions” in cl 7.1, cl. 9.1 and cl 10.1; and
·“your original offer of employment in your home country” and “the written particulars of your employment” in cl 12.1.
Although it may readily be accepted that the 10 June 2008 letter certainly contemplates a continuity of service on the part of Dr Cohen, the reference in cl 3.2 remains unambiguous. The identification of the “Names of the Parties”, it is considered, does no more than refer to the group of companies in the “IBA Health Group” and is not a reference to any particular corporate entity. Nor can cl 3.2 be construed, as submitted by Dr Cohen, as merely creating a “fiction” for the purposes of calculating payments. Those provisions which refer to Dr Cohen’s “current terms and conditions” do no more than identify the terms and conditions to govern his employment on secondment in Chennai by reference to his terms on the Bangalore secondment. They do not identify, or assist in identifying, the employer.
Unlike the situation in respect to the Bangalore Secondment Agreement, there were no circumstances surrounding the Chennai Secondment Agreement that could be relied upon by Dr Cohen in support of any application to rectify the 10 June 2008 letter of agreement. His case stood or fell upon how that agreement was construed.
Clause 11
One particular aspect of the Chennai Secondment Agreement assumed particular significance relevant to Dr Cohen’s primary submission that the 2000 Agreement continued throughout and that the First Respondent remained his employer at all times.
This aspect focussed attention on cl 11, namely the clause headed “Changes to your terms of employment”.
In construing the agreement as signed, Counsel on behalf of Dr Cohen correctly submitted that consideration could be given to the content of drafts of the clause and, in particular, to what was deleted from the final version.
Reliance was placed upon the following observations of Mason J in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-353:
There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances: see Heimann, (38 SR(NSW) at 695).
The importance of this evolution of the law as it affects the construction of contracts is that it centres upon the presumed, rather than the actual, intention of the parties. Once it is accepted that in the construction of the contract account is taken of the presumed intention of the parties it naturally follows that account should also be taken of their presumed intention when the court is called upon to decide whether a term is to be implied. The existence of the remedy of rectification and the purpose which it serves make it obvious that the actual intention of the parties cannot constitute the basis of an implied term.
An earlier draft of the Chennai Secondment Agreement as forwarded to Dr Cohen on 11 April 2008 contained the following proposed clause:
11Change to your terms of employment
11.1The Company reserves the right to make reasonable changes to any of your terms and conditions of employment and will notify you in writing of such changes at the earliest opportunity and, in any event, within one month after such changes have taken effect.
11.2Such changes will be deemed to be accepted unless you notify the Company of any objection in writing before the expiry of one month from the date of notification by the Company of the changes.
11.3This Agreement is in substitution for any previous agreements, arrangements, contracts of employment or for services between the Company or any of its Group Companies (whether written oral or implied), which should be deemed to have terminated by mutual consent.
A subsequent draft was forwarded on 15 May 2008. The draft as forwarded was in a “marked up” version recording that the proposed cl 11.3 was deleted. Clauses 11.1 and 11.2 remained. The final version of the agreement, being the version signed by both Ms Walkington (as the “Group HR Director”) and Dr Cohen, only contained clauses 11.1 and 11.2.
The deletion of cl 11.3, it was submitted, removed any suggestion that the Chennai Secondment Agreement contained the entirety of the agreement as between the parties. Counsel for Dr Cohen contended that the deletion of that clause left open the conclusion that the entirety of the agreement was not confined to the Chennai Secondment Agreement and was to also include the 2000 Agreement – albeit as negotiated and varied as between April and June 2008 over time.
The deletion of cl 11.3 lends some support to Dr Cohen’s submissions. But the deletion of that clause cannot transform the true identity of Dr Cohen’s employing entity in the face of the unequivocal identification of IBA Health (Asia) Pte Ltd as the employer.
The date of expiration of the Chennai Secondment Agreement
Even if a contrary conclusion had been reached in respect to the effect of cl 3.2 of the Chennai Secondment Agreement, and even if it had been concluded that that agreement constituted a further contract of employment between Dr Cohen and the First Respondent, it would have been further concluded either that:
·any contract of employment between Dr Cohen and the First Respondent came to an end (at the very latest) when the Chennai Secondment Agreement itself came to an end; or that
·Dr Cohen had failed to establish that the First Respondent was his employer when the Chennai Secondment Agreement came to an end.
There is, however, some uncertainty arising from the terms of the agreement as to when the Chennai Secondment Agreement came to an end.
There is no uncertainty that the agreement was for the secondment of Dr Cohen for a “further period of 24 months”. But whether that period commenced on 10 June 2008 (the date of the letter) or on 1 November 2007 (in accordance with cl 3.1) was unresolved. On any view, however, it came to an end in either November 2009 or June 2010. The preferable view is that it came to an end in November 2009.
Dr Cohen’s evidence was that the agreement commenced in November 2007. He was first given notice that his employment was to be terminated in a conversation with the Executive Vice-President, WW Solutions of iSoft, Mr Jackman. This was later confirmed in e-mail sent to Dr Cohen on 18 June 2011.
There is no persuasive basis upon which any conclusion could be reached that the employment relationship between the First Respondent and Dr Cohen resumed at the cessation of the Chennai Secondment Agreement in either November 2009 or June 2010.
The nature of secondment agreements
In searching for such a persuasive basis, reliance was placed by Dr Cohen on the nature of secondment agreements. Such agreements, it was submitted, gave effect to the secondment of an employee for a limited period of time; thereafter the employee reverted to the original terms of his employment with his original employer. A secondment, Counsel on behalf of Dr Cohen contended, did not sever the original contract of employment.
The nature of a secondment agreement was relied upon by Counsel for Dr Cohen both in respect to the Bangalore and Chennai Secondment Agreements. The rectification of the Bangalore Secondment Agreement renders it unnecessary to then look closer at secondment agreements and whether or not anything in the nature of such agreements supported a conclusion that any underlying agreement was revived upon the conclusion of a secondment.
The authorities relied upon by Counsel for Dr Cohen were usefully collated by Edmonds J in Gothard, in the matter of AFG Pty Limited (Receivers and Managers appointed) (in liq) v Davey [2010] FCA 1163, 80 ACSR 56. His Honour there said:
[207]The terms of his secondment agreement did not expressly terminate any existing employment agreement although such a termination might be implied from those very same terms or from the conduct of the parties.
[208]In an article entitled “The seconded or transferred employee” by Graham Rossiter of Massey University published in the New Zealand Law Journal, August 2007 at 265, reference is made to two New Zealand cases: Clifford v Rentokil Ltd [1995] 1 ERNZ 407 and Royds v FAI (NZ) General Insurance Co Ltd [1991] 1 ERNZ 820. The learned author writes:
In Clifford v Rentokil Ltd, the applicant was employed by Rentokil as an area manager. In 1991, he agreed to go to Fiji and take on the task of re-structuring a Fiji company. Rentokil and the second respondent were both subsidiaries of the same parent company. The applicant claimed he was constructively dismissed in early 1993 and brought proceeding against Rentokil. Rentokil applied to have the action struck out on the ground that the applicant had been employed by the Fiji company while in Fiji and that his employment was governed by Fiji law. The Employment Court held that this was a situation of the secondment of the applicant by the Rentokil to the Fiji company. The expression “second” in this context was said by Judge Palmer to mean “to transfer an employee to other employment or to another position”. A secondment does not, however, mean a severing of employment or contractual links with the general or primary employer. In this case, notwithstanding that Clifford was providing services for the Fiji company and was being paid by that company, his employment relationship with Rentokil continued. Accordingly, his personal grievance had been correctly commenced under New Zealand law. Somewhat similar circumstances and issues arose in Royds v FAI. Royds was employed by FAI and, in February 1998, was asked to work in Papua New Guinea in an equivalent role for an associated company for a three year term. In September 1998, the applicant was given six months notice of termination. The Employment Court had to determine whether the applicant was entitled to bring a personal grievance in New Zealand or rather had to pursue remedies under PNG law on the basis he had been employed by the defendant’s associated company. Judge Travis held that what had taken place had the “characteristics of a secondment arrangement” (p 832). It therefore followed that the defendant remained throughout the plaintiff’s true employer and New Zealand law was applicable. A key factor in the court’s reasoning appeared to be that the centre or, as it might be put, ultimate control of this business remained with the New Zealand company. Again, as in the Clifford matter, the arrangements at the time of the applicant’s appointment to PNG contemplated repatriation to and future employment in New Zealand by the defendant.’
[209]At the end of the day, the answer to the issue is to be found from an overall view of the entire factual matrix but like the evidentiary deficiencies that faced the court (Finn J) in C&T Grinter, I suspect that I may not have all relevant material and information before me.
Edmonds J was obviously not there purporting to do anything other than set forth the authorities to which he had been referred and to express the conclusion that “the answer to the issue is to be found from an overall view of the entire factual matrix”.
Counsel for Dr Cohen also relied upon Clifford v Rentokil Ltd (1995) 1 ERNZ 407 at 425. Palmer J, sitting as the Employment Court in Christchurch, set forth the natural meaning of the term “second” as follows:
Upon a plain words/plain meaning approach, that is to say the “golden rule of construction” that words usually mean what they say, “second” means “transfer (a[n] … official or worker) temporarily to other employment or to another position. Secondment n.” (The Concise Oxford Dictionary – The New Edition for the 1990s, p 1092).
The authorities relied upon by Counsel for Dr Cohen do not establish any general legal proposition; they are decisions confined to the facts and circumstances of the facts there prevailing.
The nature of a secondment agreement, it is concluded, is properly to be discerned from the terms of the agreement itself. Whether or not it is called or termed a “secondment”, whether or not it severs any pre-existing contractual relationship between the parties and whether the rights and entitlements of the parties revert to being determined by any pre-existing contractual relationship, obviously depends (inter alia) upon the terms of any pre-existing contract and the terms of the secondment agreement in issue. Much may also depend upon the conduct of the parties prior to and, perhaps more importantly, after a secondment comes to an end.
Whether or not the pre-existing rights and entitlements of parties to a contract of employment continue to govern their relationship at the expiration of a secondment agreement is not to be resolved simply by characterising an intervening agreement as a “secondment agreement”. Counsel for Dr Cohen did not submit to the contrary.
The characterisation of the Bangalore Secondment Agreement and the Chennai Secondment Agreement as “secondment agreements”, it is thus concluded, says nothing as to whether the 2000 Agreement continued at the expiration of either or both of those agreements. It certainly does not necessitate any conclusion that the First Respondent again became the employer after the Chennai secondment came to an end.
Employment by the Second Respondent – the evidence and the need for caution
After the Chennai Secondment Agreement came to an end there was some evidence as to the identity of Dr Cohen’s employer at that time. But that evidence did not unequivocally or necessarily point in favour of the employer being the First Respondent.
Prior to the Bangalore Secondment Agreement Dr Cohen had not identified the First Respondent as his “employer” for income tax purposes. Dr Cohen in his income tax returns for the period from 1994 through to 2006 had recorded his “employer” as IBA Health (Asia) Holdings Pte Ltd, SW International Systems Pte Ltd or IBA Technologies Asia Holdings Pte Ltd. It would appear from the oral evidence that Dr Cohen considered that there was a difference between his “contractual employer” as opposed to his “employer” for taxation purposes. The following exchange thus occurred between Dr Cohen and his cross-examiner:
MR FERNON: … The companies that were named in the various tax documents that you have reviewed for the purposes of preparing for these proceedings, and told us about in the last few questions, were the companies that you identified as your employer at the relevant times. That’s correct, isn’t it? --- No, I – the companies were represented as where I was based to pay tax. It wasn’t considered by me as my contractual employer. It was a – when I was based in Singapore, I considered that my residence there – tax residence was Singaporean, and India was India.
But in each of the records that you’ve seen, there was a provision for the name of the employer? --- Yes.
And the name of the employer was identified as the Asia Holdings company, or its earlier version, the International System company in Singapore? --- Yes.
Or the Indian companies that you’ve ---?--- Yes.
--- just identified? --- Yes.
Correct? --- Yes.
And in each case, you were identifying that entity that you regarded as your employer, weren’t you? --- Not as my employer in terms of contractual terms.
Well, if the taxation authority requires the employer to be named, it would be necessary, wouldn’t it, to do just that – name the employer? --- Yes.
And that’s what you were doing, naming the employer that you considered you were employed by at that time? --- For the tax purposes, yes.
Well what – if it was for tax purposes or any other purpose, why would a tax purpose be different from the true position? --- Because I considered the iSOFT, or the IBA company before it, to be the overall company that I worked for, and that wherever I was currently based, that was the one that I had to pay my tax and the other conditions demanded by the government. And that was the place that the company decided to put up for tax purposes and other reasons locally, but my overall employer was always the group.
… Is this your evidence Dr Cohen, that you would name as the employer, the company that you thought was most convenient to yourself at the particular time? --- No.
Well, if you considered that your true employer was a company different to the employer named in the tax document, for taxation purposes, you would be doing just that, wouldn’t you? --- No. I mean, I was told when I was asked to second to India that during that stage, that I would have to file tax returns which were done for me and that I was not an employee of India. And I assumed that that was the ways things were done.
The true position is that you never named the first respondent as your employer, correct? --- Not in those documents, no.
And you never regarded the first respondent as your employer? --- That’s not true. I always regarded it as my employer.
The explanation provided is, with respect, less than satisfactory. Why the entity that Dr Cohen “regarded” as his employer was not also the entity identified in the tax returns to which he was taken by his cross-examiner as his employer is not satisfactorily explained by saying that his tax returns were “done for [him]”. There is also a disturbing lack of consistency between Dr Cohen acknowledging that “[his] overall employer was always the group” and his insistence that he “always regarded [the First Respondent] as [his] employer”.
Extension of Notice
PeriodRetention payment /date Andrea Fiumicelli 12 months $100,000 30.09.11 Mike Jackman $100,000 30.09.11 Brian Cohen 6 months Steve Garrington $100,000 30.09.11 Martin Deda $50,000 31.12.10 Guillermo Ramas 6 months $100,000 30.09.11 Adrian Stevens $100,000 30.09.11 Peter Herrmann $100,000 30.09.11 Michael Dahlweid $100,000 30.09.11
Thereafter there was a further discussion between Mr Gary Cohen and Mr Fiumicelli, who had been appointed the interim Chief Executive Officer of iSoft. Mr Fiumicelli told Mr Gary Cohen that “[s]ome members of the Board want me to stop talking to” Dr Cohen because “they don’t trust him not to tell you everything”. Whatever the reason for the decision, the decision to not make a “retention payment” to Dr Cohen was clearly deliberate.
On behalf of Dr Cohen it is said that there is an implied term in employment contracts that an employer should not, without proper cause, conduct itself in a manner calculated to damage or destroy the relationship of mutual trust and confidence: Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104, 69 NSWLR 198 per Rothman J. In declining the make the “retention payment” to Dr Cohen, it is then said that “the first respondent’s conduct breached the implied term of mutual trust and confidence”. A “reasonable inference”, it is submitted, “can be drawn that no adequate explanation exists other than the discriminatory reason asserted”.
In seeking to give content to an employer’s duty pursuant to such an implied term and to the purpose to be served by such a term, Doyle CJ, White and Kelly JJ in State of South Australia v McDonald [2009] SASC 219, 104 SASR 344 observed:
[232]It is plain that the duties which may be required of an employer under the implied term of mutual trust and confidence, or perhaps the conduct from which an employer should refrain, are still being developed. This seems inevitable given the open ended nature of the way in which the duty is expressed. In England, the implied term of mutual trust and confidence has evolved into a duty by employers to treat their employees fairly. Basten JA appeared to approve of this evolution in Russell. But other authorities have resisted the notion that the implied term connotes an obligation which is closely related to that of fairness, namely, an obligation by employers to treat employees reasonably.
[233]It may be that the better view is that the implied term operates in a variety of circumstances within an employment relationship to restrain abuses of an employer’s power. This purpose of the term is suggested by the authors of Macken’s Law of Employment:
Whilst the duty may add little to the obligations of the employee, its importance lies in the extent of obligations it imposes on the employer. It provides a means by which “a balance [is] struck between an employer’s interest in managing his business as he sees fit and the employee’s interest in not being unfairly and improperly exploited”. In a climate of reduced collective bargaining, it protects the vulnerable employee by imposing limits on the managerial prerogative.
It should, however, be noted that the Full Court there went on to conclude:
[234]The determination of the State’s submission concerning the necessity for the implication of the term as to mutual trust and confidence in contracts of employment generally would require a closer analysis of the basis of the term, the nature, scope and effect of the term, and of the interrelationship of the term with other established terms and conditions of employment relationships than we have attempted so far.
[235]As noted at the outset of these reasons Mr McDonald’s submissions, made as a self represented litigant, did not address adequately many of the issues of legal principle to which the appeal gave rise. In particular, his submissions did not address adequately the issues of principle which arose from the State’s submission that his contract of employment did not contain the implied term of mutual trust and confidence. We do not say this by way of criticism of Mr McDonald: only to indicate that the Court has not had the benefit of detailed submissions about these issues.
[236]In these circumstances, we consider it inappropriate to determine the State’s submission that the implied term of mutual trust and confidence does not form part of Australian employment contracts generally. We think it sufficient to address only the State’s alternative submission that the implied term did not form part of Mr McDonald’s contract of employment.
Their Honours thus set aside an award of damages that had been made at first instance for breach of the implied term.
Irrespective of how these concerns may ultimately be resolved, there are a number of difficulties in accepting the claim now made by Dr Cohen for the “retention payment”.
First, it has been concluded that the First Respondent was not the employer of Dr Cohen as at mid-2010. And that conclusion is adhered to notwithstanding the fact that the Remuneration Committee was apparently a committee of the First Respondent. The form of the Remuneration Committee Paper is but another instance of there being a lack of consistency or precision in identifying with any degree of certainty the true employer of Dr Cohen.
Second, if it had been necessary to decide the point, it would have been concluded that the term should not be implied into Dr Cohen’s contract of employment as at mid-2010. The basis upon which any such term should be implied was not fully explored either during the course of oral submissions or in the written submissions filed on his behalf. The New South Wales Court of Appeal has recently concluded that a pleading founded upon an implied term of trust and confidence “should be regarded as disclosing an issue that is triable in the sense …. indicated by reference to the General Steel test”: Shaw v State of New South Wales [2012] NSWCA 102 at [44] per Barrett J (Beazley, McColl, Macfarlan JJA and McClellan CJ at CL agreeing). An even more recent decision of this Court has concluded that such a term should be implied into the contract of employment there in issue: Barker v Commonwealth Bank of Australia [2012] FCA 942 at [330] per Besanko J. There is much to be said, however, for the reservations expressed by Buchanan J in Dye v Commonwealth Securities Ltd [2012] FCA 242 at [601] as to “the general existence of an implied term of mutual trust and confidence”. But these questions received scant attention in the present proceeding and the circumstances of this case do not give rise to a need to express any concluded view.
Third, even if a term of the kind alleged is to be implied, the content of any such term was not specified. In the absence of knowing with some degree of precision the precise term sought to be implied, it is difficult to reach any conclusion as to whether that particular term has been breached. Whatever may be the content of the term sought to be implied, it is concluded that the evidence most probably falls short of demonstrating any breach. Mr Fiumicelli was obviously not comfortable with the Board not wanting him to talk to Dr Cohen. But no inference should be drawn as to why Dr Cohen did not receive the payment other than that explained to Mr Gary Cohen by Mr Moran.
The claim made by Dr Cohen for unauthorised deductions from his salary must also fail. Dr Cohen alleges that for the period between 1 September and 30 September 2011 he has remained unpaid. Any claim for any amount outstanding is to be made against his employer and not the First Respondent.
THE FAIR WORK ACT
The conclusion that the First Respondent was not the employer of Dr Cohen as at the date his services were terminated also renders it unnecessary to determine whether the Fair Work Act applies to Dr Cohen’s employment.
But, again, both oral and written submissions were advanced in respect to this question. Those submissions should thus be briefly addressed. A question inevitably arose as to whether the Act applied to services being performed by Dr Cohen whilst he was employed outside Australia. He was employed to provide services in both Singapore and in India whilst on secondment.
Given the fact, however, that it is unnecessary to resolve the argument as to the application of the Fair Work Act and the potential significance that any observations in respect to the operation of the Act beyond Australia may assume, it is prudent to express no more than very tentative views.
Part 1-3, Division 3 of the Fair Work Act provides for the “geographical application of this Act”. Within that Division, s 34 extends as follows the Act “beyond the exclusive economic zone and the continental shelf”:
Extension of this Act beyond the exclusive economic zone and the continental shelf
Extension to Australian ships etc.
(1)Without limiting subsection (3), this Act extends to or in relation to:
(a)any Australian ship outside the outer limits of the exclusive economic zone and the continental shelf; and
(b)any ship, outside the outer limits of the exclusive economic zone and the continental shelf, that:
(i)is operated or chartered by an Australian employer; and
(ii)uses Australia as a base.
(2)For the purposes of extending this Act in accordance with paragraph (1)(b):
(a)any reference in a provision of this Act to an employer is taken to include a reference to an Australian employer; and
(b)any reference in a provision of this Act to an employee is taken to include a reference to an employee of an Australian employer.
Extensions prescribed by regulations
(3)Without limiting subsection (1), if the regulations prescribe further extensions of this Act, or specified provisions of this Act, in relation to all or part of the area outside the outer limits of the exclusive economic zone and the continental shelf, then this Act, or the specified provisions, extend accordingly to:
(a)any Australian employer; and
(b)any Australian-based employee.
(3A)For the purposes of extending this Act in accordance with subsection (3):
(a)any reference in a provision of this Act to an employer is taken to include a reference to:
(i)an Australian employer; and
(ii)an employer of an Australian-based employee; and
(b)any reference in a provision of this Act to an employee is taken to include a reference to:
(i)an employee of an Australian employer; and
(ii)an Australian-based employee.
Modified application in the area outside the outer limits of the exclusive economic zone and the continental shelf
(4)Despite subsections (1) and (3), if the regulations prescribe modifications of this Act, or specified provisions of this Act, for their operation under subsection (1) or (3) in relation to all or part of the area outside the outer limits of the exclusive economic zone and the continental shelf, then this Act, or the specified provisions, have effect as so modified in relation to the area or part.
(5)For the purposes of subsection (4), the regulations may prescribe different modifications in relation to different parts of the area outside the outer limits of the exclusive economic zone and the continental shelf.
Section 35 defines what is meant by an “Australian employer” and an “Australian-based employee” as follows:
Meanings of Australian employer and Australian-based employee
(1)An Australian employer is an employer that:
(a)is a trading corporation formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution); or
(b)is a financial corporation formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution); or
(c)is the Commonwealth; or
(d)is a Commonwealth authority; or
(e)is a body corporate incorporated in a Territory; or
(f)carries on in Australia, in the exclusive economic zone or in the waters above the continental shelf an activity (whether of a commercial, governmental or other nature), and whose central management and control is in Australia; or
(g)is prescribed by the regulations.
(2)An Australian-based employee is an employee:
(a)whose primary place of work is in Australia; or
(b)who is employed by an Australian employer (whether the employee is located in Australia or elsewhere); or
(c)who is prescribed by the regulations.
(3)However, paragraph (2)(b) does not apply to an employee who is engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories.
Section 34, it is considered, is not confined to applying the Fair Work Act to “Australian ships”; s 34(3) clearly is expressed in terms of being not limited by s 34(1). Provision is made in s 34(3) for the making of regulations to “prescribe further extension of this Act”. For the purposes of the present proceeding, it is accepted that there is no relevant regulation.
The First Respondent, it may be accepted, falls within s 35(1)(a). But Dr Cohen cannot bring himself within s 35(2)(b) by reason of s 35(3). Even if the 2000 Agreement had been a continuing source of contractual obligations and he were found to be engaged by the First Respondent, he was “engaged outside Australia … to perform duties outside Australia”. When taken at the outset of his oral evidence, Counsel appearing for Dr Cohen asked whether there were any corrections he wished to make to his Affidavit and the following exchange occurred:
Which parts of your affidavit would you like to change?---Paragraph 45, in relation to my recollections of signing the 2000 contract.
What is the correction you wish to make, Dr Cohen?---In my original affidavit, I stated that I couldn’t recollect exactly which place that I had signed the document. But when I went back to look over the document, I realised that it was witnessed by my then personal assistant, Zena Vacbutter who was with me in Singapore at that state and had not come to Australia, so by deduction, I assumed that I had signed it in Singapore.
That’s the only change you wish to make, Dr Cohen?---Yes.
If “engaged” is a reference to the physical location where Dr Cohen executed the 2000 Agreement, as was the contention of Senior Counsel for the Respondents, the place of “engagement” was Singapore. Dr Cohen was thus a person who was “engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories” within the meaning of and for the purposes of s 35(3).
THE LONG SERVICE LEAVE ACT
In the present proceeding it was also claimed on behalf of Dr Cohen as against the First Respondent that he has an unpaid entitlement to long service leave in the sum of $177,283.68. That is a sum claimed for leave accruing during the period from 1 November 1988 through to 30 September 2011.
That sum is calculated on the basis that:
·there was a contract of employment between the First Respondent and Dr Cohen;
·the period of entitlement was from 1 November 1988 to 30 September 2011; and
·Dr Cohen performed “services” for the First Respondent within the meaning of and for the purposes of the Long Service Leave Act.
The claim in contract is dependent upon the provisions of the State Long Service Leave Act.
Irrespective of whether the 2000 Agreement applied until the termination of Dr Cohen’s employment in September 2011, the claim for long service leave fails for quite separate reasons.
Any entitlement to long service leave is contingent upon laws, awards or agreements beyond the contract of employment. Clause 7.2 of the 2000 Agreement simply provided as follows:
Long service leave
The 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.
The only written “policy” in evidence was one with an “effective date” of 1 January 2010. Assuming that that “policy” – or a different earlier version – was in like terms, Clause 2.4 provided as follows:
Long Service Leave is a leave entitlement granted to employees for “long service” to an employer. Entitlements are contained in either state legislation or in federal awards or agreements.
Employees can contact Human Resources to determine eligibility for entitlements.
Any “entitlements” are thus to be found, if at all, in the State Long Service Leave Act.
Section 2 of the Long Service Leave Act provides as follows:
Construction
This Act shall be read and construed subject to the Commonwealth of Australia Constitution Act, and so as not to exceed the legislative power of the State to the intent that where any provision of this Act, or the application thereof to any person or circumstances is held invalid, the remainder of this Act, and the application of such provision to other persons or circumstances shall not be affected.
Section 3 of the State Act defines an “employer” as “any person employing any worker or workers and includes the Crown”. Section 4(1) further provides as follows:
Except as otherwise provided in this Act, every worker shall be entitled to long service leave on ordinary pay in respect of the service of the worker with an employer. Service with the employer before the commencement of this Act as well as service with the employer after such commencement shall be taken into account for the purposes of this section.
Notwithstanding the manner in which s 4 is drafted, it was obviously common ground that the Long Service Leave Act does not apply to all contracts of employment entered into anywhere in the world. There is a territorial limitation: Mynott v Barnard (1939) 62 CLR 68 at 73. Latham CJ there observed in respect to an argument as to the application of the Workers Compensation Act 1928 (Vic) in respect to a worker injured in New South Wales:
… It would be unreasonable to read the section as applying to all employers, all workers, and all accidents everywhere. Some territorial limitation must be introduced in the construction of the section. The court has been offered an embarrassing choice of possible limitations …
The territorial limitation which it has been accepted applies in respect to the Long Service Leave Act is that it is necessary to find some nexus between the Act and the State of New South Wales: Australian Timken Pty Ltd v Stone (No 2) [1971] AR (NSW) 246 at 253. The test which was there applied was whether the there was a “substantial connection” with New South Wales. McKeon, Sheldon and Sheppard JJ there concluded:
… We are, therefore, in agreement with the appellant’s approach to the problem to the extent that it contends that the service involved must be connected with New South Wales. We think, however, that its submission go too far when they involve the proposition that the service (subject to temporary absences) which is to be rewarded must be performed entirely in New South Wales. We think that the benefits provided for in the Act accrue if at the time the relevant event occurs (that is, completion, termination or cessation) the service which was being performed up to that time has a substantial connection with this State. This interpretation seems to us to accord with the purpose and policy of the Act without being in any way inconsistent with its language. It is to be assumed that the legislature intended the statute to bear a meaning which would have regard to the practical situation in industry and would leave as few anomalies as possible. We believe that the interpretation we favour achieves this result. This view does not make it necessary, as in the case of workers’ compensation legislation, that the relevant event must occur within the State but it is essential that, at the time of its occurrence, the service, looked at as a whole, may fairly be said to be to a substantial extent New South Wales service. Whether it is or not must be a question of fact and degree in each case. If, however, the service is actually being performed here at the time when the relevant event occurs, this is strong although not conclusive evidence that the service has a substantial connection with New South Wales. While we realize, on this pragmatic test, that there will be some cases close to the border, we see no difficulty in the present case. …
This decision was subsequently applied in International Computers (Australia) Pty Ltd v Weaving [1981] 2 NSWLR 64 at 74 per Watson, Dey and Maclean JJ.
In the present proceedings, it is submitted on behalf of Dr Cohen that the “substantial connection” with New South Wales is to be found in:
·the fact that the First Respondent is incorporated in New South Wales and has its principal place of business in New South Wales;
·the fact that Dr Cohen was born in, and grew up in New South Wales;
·the fact that the 2000 Agreement is, by reason of cl 13.1, “governed by the law in force in New South Wales”; and
·the fact that the entitlement to “long service leave” referred to in cl 7.2 of the 2000 Agreement is “quintessentially” an entitlement conferred and recognised by Australian law.
The Respondents maintained at all times that Dr Cohen’s service did not have a substantial connection with NSW and that the factors relied upon by Dr Cohen only served “to demonstrate the disparity between the Applicant’s service and New South Wales”. The “connection” with New South Wales is only further removed if:
·the 2000 Agreement did not operate continuously throughout his employment as a contract of employment;
And, irrespective of whether there was such a continuity of agreement, any connection is also further removed if reference is made to:
·clause 13.1 of the Chennai Secondment Agreement which provided that the employment of Dr Cohen whilst on secondment in Chennai was to be “governed by Indian employment law”.
In resolving these competing submissions, it has not been considered appropriate to determine whether there are more considerations pointing to a connection with New South Wales as opposed to those which indicate the lack of any such connection. It has thus not been considered appropriate to approach any determination as to whether there is a “substantial connection” with New South Wales by reference to which jurisdiction has the greater connection to that State. A contract may have a “substantial connection” with New South Wales even though it may also have “substantial connection” with (for example) India.
Approached in such a manner, it is concluded that there is no substantial connection between Dr Cohen and New South Wales for the purposes of the Long Service Leave Act.
It is unnecessary to address the submission advanced on behalf of the Respondents that this Court lacked jurisdiction to make an order for the recovery of long service leave accruing by virtue of a State Act. Section 12 of the Long Service Leave Act, it may be noted, confers jurisdiction to make such an order upon a Local Court of New South Wales or the Industrial Relations Commission of New South Wales in Court Session. Whether those Courts possess jurisdiction exclusive of this Court is equally unnecessary to resolve.
The claim for payment of long service leave therefore fails.
CONCLUSIONS
The case advanced on behalf of Dr Cohen dependent upon the continuation of the 2000 Agreement throughout (or a contract replacing it in substantially identical terms) and dependent upon the First Respondent being the employer as at the date of termination thus fails.
The fact is that insufficient attention was given by Dr Cohen to the form in which letters in respect to his employment were expressed. He paid little attention to the entity identified in that correspondence as his employer. It may have mattered little to him to definitively identify his employer – at least until that point of time when his services were terminated. But it is concluded that the First Respondent was not his employer when Dr Cohen departed for Chennai on his second secondment. And thereafter there is an insufficient factual basis upon which any conclusion can be reached that the First Respondent again became his employer when he returned from Chennai to Singapore.
Except with respect to the claim for long service leave, no question was raised as to the jurisdiction of this Court to resolve all of the claims for relief as were relied upon by Dr Cohen.
The parties are to bring in Short Minutes of Orders within fourteen days to give effect to these reasons. Consideration should also be given by the parties to the question as to whether the present proceeding falls within s 570 of the Fair Work Act. Short submissions directed to that question may also be filed.
I certify that the preceding one hundred and eighty-two (182) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate:
Dated: 28 September 2012
- AGLC
- Cohen v iSoft Group Pty Limited [2012] FCA 1071
- Case
- [2012] FCA 1071
- Decision Date
CaseChat Overview and Summary
The court had to decide several legal issues, including whether the 2000 Agreement was an ongoing employment contract or a fixed-term contract that expired, whether extrinsic evidence could be used to prove the abandonment or abrogation of a contract, and whether Dr Cohen was entitled to long service leave under the Long Service Leave Act 1955 (NSW). The court also needed to determine the applicability of the Fair Work Act 2009 (Cth) and the relevance of the mutual trust and confidence term in the employment context.
The court held that the 2000 Agreement was a contract that recorded the terms and conditions of Dr Cohen's employment, and that it was not abandoned or abrogated. The court rejected the defendants' argument that the contract expired after three years, stating that the question of whether the terms of a fixed-term contract continue to govern the parties after it has expired is an evidentiary or factual question, not a question of substantive law. The court found that there was insufficient evidence to conclude that Dr Cohen's employer was iSoft Group Pty Ltd when his employment was terminated. The claim for long service leave also failed, as the court found that the Long Service Leave Act 1955 (NSW) was not applicable to Dr Cohen's employment outside New South Wales.
The court ordered the parties to bring in Short Minutes of Orders within fourteen days to give effect to these reasons. The court also suggested that the parties consider whether the present proceeding fell within s 570 of the Fair Work Act and to file short submissions directed to that question. The ratio of the case was that a contract for a fixed term does not necessarily cease to govern the parties after it has expired, and that the intention of the parties to keep the original contract on foot can be inferred from their conduct.
Orders
Orders of the court
1. The parties are to bring in Short Minutes of Orders giving effect to these reasons on or before 12 October 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
A conclusion that the 2000 Agreement was a contract which in fact recorded the terms and conditions of employment of Dr Cohen is sufficiently founded upon the fact that it was executed by both Dr Cohen and the First Respondent. The conclusion that that document in fact evidenced the agreement between the parties is only further reinforced by reference to the conduct of the parties before and after 15 February 2003, namely when the three year term came to an end. There is no basis for a conclusion that it was abandoned. The submissions to the contrary put by Senior Counsel for the Respondents on these questions are rejected.A contract for a fixed term – expiration after 3 years? The final submission advanced by Senior Counsel for the Respondents in this trilogy of submissions was that – even if the 2000 Agreement was in fact a contract of employment between the First Respondent and Dr Cohen which had not been abandoned or abrogated, it nevertheless came to an end when the period of three years expired in accordance with the terms of the agreement. Any conclusion as to whether or not the provisions of a fixed term contract continue to govern the parties after it has expired is not a question of substantive law but rather a question of evidence. It is a question of whether an inference can be drawn from the conduct of the parties that they intended to keep the original contract on foot: Brambles Ltd v Wail [2002] VSCA 150, (2002) 5 VR 169. Winneke P, Charles and Batt JJA there observed: [57]It is not easy to find much discussion in the books or case law, except in North America, of the question whether the terms of a detailed written agreement for a fixed term continue, after that term has expired, to govern the parties to it where they continue dealing with each other. However, the following appears in Chitty on Contracts:There may also be an implied contract where the parties make an express contract to last for a fixed term, and continue to act as though the contract still bound them after the term has expired. In such a case the court may infer that the parties have agreed to a newly expressed contract for another term.Their Honours thereafter reviewed North American decisions and continued:[59]… In the New York Telephone Co case, after the passage referred to in Steed v Busby, Lehman CJ, speaking for the Court of Appeals of New York, had stated: Even in such a case, however, the reciprocal obligations arise from the new implied contract and, unless an intent to make such a new contract is expressed or may be fairly inferred from the conduct of the parties, the obligations of the parties are as matter of law not measured by the terms of the contract which has expired.In another decision of the last-mentioned court, which cited the passage from an earlier edition of Corbin corresponding to that set out above and is in turn cited in the current edition, Cinefot International Corporation v Hudson Photographic Industries Desmond CJ, speaking for the majority, stated that the rule that there was available an inference or implication of fact that the parties intended to renew was not really one of substantive law, but of evidence. His Honour said that entering into a contract to run for a year, and then continuing to act as if its time had not run, was sufficient evidentiary support for a finding that the parties in fact intended to keep it alive for another year. The contract in that case was classified as an agency agreement and the principle was stated not to be limited to leases and employment contracts. …On the facts of the case before them, their Honours concluded: [61]Here the written agreement came to an end on 4 April 1993. The question whether an implied or tacit agreement to continue dealing on the same terms save that the agreement should be terminable on reasonable notice is to be inferred is, as Desmond CJ stated and as the other cases and the treatises make abundantly clear, an evidentiary or factual question. On the facts we have set out earlier we consider such an inference should be drawn here. The evidence, fairly sparse though it is, warrants the finding that after 3 April 1993 the parties proceeded as though still governed by the terms of the original agreement (save that, since it had already expired, either could terminate the substitute arrangement on reasonable notice), rather than a finding that they impliedly agreed merely that Andar should collect and deliver the laundry and that Brambles should pay it a reasonable sum for that or a finding that the parties made a series of individual implied agreements, six days a week, for that work to be done for a reasonable sum. In other words, after 3 April 1993 the parties operated under a standing agreement under which all the procedures and, importantly, the remuneration were exactly the same as they had been under the written agreement. The parties intended that that should be so. The contract thus made was not a mere variation of the original agreement, for it was not made until after the latter had expired. Accordingly cl 15.1, requiring signed written agreement for a variation, did not apply to it. Nor did cl 14.5, the “whole agreement” clause, since it was not apt to apply to a subsequent and separate agreement. Clauses 6.1 and 8.2, for instance, contemplate “renewal” and “extension”. Renewal and extension are closely related concepts, normally involving a continuation of the contractual relationship on essentially the same terms and conditions as contained in the original contract. Whether a renewal creates a new contract, or extends the original contract, depends primarily on the intention of the parties as evidenced by the agreement or agreements they have made. Thus, generally an option to renew a contract is the right to require the execution of a new contract, whilst an option to extend the term, exercised during the currency of the term, merely operates by way of variation to extend the term of the original agreement. Whether the implied or tacit contract made after 3 April 1993, which cannot be an extension, is called a renewal is really a matter of definition. The important point is that it was a new and separate contract. This decision does not stand as authority for the proposition that the terms of a detailed written agreement for a fixed term continue to govern the parties where they continue dealing with each other after the fixed term has expired; it is authority for the proposition that “it is open to a court to draw the relevant inference”: Energy World Corporation Ltd v Maurice Hayes and Associates Pty Ltd [2007] FCAFC 34 at [24], 239 ALR 457 at 463 per Moore, Tamberlin and Gyles JJ. The drawing of an inference is “an evidentiary or factual question”. “What is required is conduct by the parties as if the contract remained on foot”: Viva Olives Pty Ltd v Origin Olives Australasia Pty Ltd [2012] FCA 545 at [13] per Perram J.