Cohen v iSoft Group Pty Ltd

Case [2012] FCA 1071

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 territory

INDUSTRIAL 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, 570

Long 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

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AGLC
Cohen v iSoft Group Pty Limited [2012] FCA 1071
Case
[2012] FCA 1071
Decision Date

CaseChat Overview and Summary

In Cohen v iSoft Group Pty Ltd, the plaintiff, Dr Cohen, sued the defendants, iSoft Group Pty Ltd and another entity, for various employment-related claims, including long service leave, termination notice, and mutual trust and confidence. Dr Cohen argued that the 2000 Agreement between him and iSoft Group Pty Ltd remained in effect throughout his employment, despite several secondment agreements, and that iSoft Group Pty Ltd was his employer when his employment was terminated. The defendants contended that the 2000 Agreement was a fixed-term contract that expired, and that Dr Cohen's employer was a different entity when his employment ended.

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

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”.

Decision

Reasons for decision

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.

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.