Deguara v Qeii Sports Club Ltd

[1999] QDC 300

DISTRICT COURT OF QUEENSLAND

[Deguara v Qeii Sports Club Ltd]

REGISTRY:     BRISBANE
  NUMBER:    2237 OF 1997

Plaintiff:  
  KEVIN JOHN DEGUARA

AND

Defendant:  

QEII SPORTS CLUB LIMITED

JUDGMENT - McGILL D.C.J.

Judgment Delivered:  

Catchwords:  Taylor v. Johnson (1983) 151 CLR 422 at 429

Majau Carrying Co Pty Ltd v. Coastal Rutile Ltd (1973) 129 CLR 48
Burn v. Australian Airlines Ltd (1995) 185 CLR 410.
Kilbon v. NZENZED Precision Products Pty Ltd 91988) 4 VIR 31 at 34
New South Wales Cancer Council v. Sarfaty 91992) 28 NSWLR 68

Counsel for the plaintiff:           R.A. Perry

Counsel for the defendant:       D.R. Cooper S.C.  

Solicitors for the plaintiff:         McCullough Robertson            

Solicitors for the defendant:      Lees Marshall Warnick           

Hearing Dates:  

DISTRICT COURT OF QUEENSLAND

REGISTRY:     BRISBANE
  NUMBER:    2237 OF 1997

Plaintiff:  
  KEVIN JOHN DEGUARA

AND

Defendant:  

QEII SPORTS CLUB LIMITED
  ACN 058 108 062

REASONS FOR JUDGMENT - McGILL D.C.J.

Delivered the 1st day of  December 1999

This is an action for damages for wrongful dismissal.  The plaintiff was formerly employed by the defendant in a variety of positions, ultimately holding a position called “Club Manager”.  He was dismissed from that employment on 20 March 1997 and in this action claims that dismissal was wrongful.  The defendant asserted that it was entitled to dismiss the plaintiff as it did, and counterclaims for the return of monies which were paid to the benefit of the plaintiff to which it says the plaintiff was not entitled.  There has been a good deal of conflict in the evidence as to the terms on which the plaintiff was employed from time to time, principally because of a failure on the part of the defendant properly to document the various changes in the plaintiff’s employment. 

The Initial Employment
The defendant operates a club, despite its name essentially a social club, in premises leased from the Brisbane City Council at the QEII Sports Grounds, in which facilities are provided for entertainment and the provision of food and drink: p.147-8.  The club operated a number of poker machines, and was apparently one of the first clubs to take advantage of the legalisation of these machines in Queensland: p.148.  It began operations on 28 March 1993 (p.230), with a Mr. Lord as general manager; he has remained with the club either as general manager or as a consultant more or less ever since. The club is a member’s club with liability limited by guarantee (p.378) although some directors may be appointed as minutes of a directors’ meeting (part of Exhibit 61) refer to two directors as nominees of the Broncos Leagues Club.

The plaintiff was formerly employed by the Broncos Leagues Club where he worked in various positions over about three years, ultimately becoming operations manager: p.25, 66.  In late 1992 he moved to Mackay to manage a motel: Exhibit 3.  When the defendant started up, apparently a number of employees from the Broncos Club came over, including a Mrs. Kym Paterson who became operations manager of the defendant.  In about August 1993 she resigned and went back to the Broncos Leagues Club: p.27.  The plaintiff also took up employment with the defendant, initially as a casual employee doing bar work: p.26.  There is an application for employment (Exhibit 3) and an ATO Employment Declaration (Exhibit 5) dated 26 May 1993 which suggests that he started there on that date in that position.  This provides what seem to be reliable evidence of when that employment commenced, and confirmation of the nature of the initial employment.

The plaintiff said that he subsequently became a full time employee (p.26) when Mrs. Paterson resigned in August 1993, and he was appointed a duty manager (p.66) and later operations manager (p.27), personally by Mr. Lord: p.70.  Mr. Lord did not dispute that the plaintiff became operations manager, but said that he thought this occurred in 1994: p.248.  He denied that the plaintiff replaced Mrs. Paterson (p.248). Both Mr. Lord (p.248) and  Mr. Koman (p.391) denied that the plaintiff had replaced Mrs. Paterson, but agreed that no one else was appointed operations manager between Mrs. Paterson and the plaintiff; they said that other people carried out the duties required of that position. 
Mr. Koman had been appointed financial controller by the defendant on 23 March 1993: p.383.  He produced a schedule which purported to set out the history of the plaintiff’s employment with the defendant.  He said that this was based on records of the club (p.383), but one of the entries in the document asserts the plaintiff was appointed as supervisor at one time and Mr. Koman admitted that there was no document in the records of the club which supported that proposition, and that this was merely his personal recollection: p.383, 385.   Mr. Koman thought that the plaintiff was employed in that position on 27 May 1993 (p.385) when he became a permanent employee, but that is inconsistent with Exhibits 3 and 5.  It is also inconsistent with the recollection of Mrs. Cook, that the plaintiff became a full time employee a couple of weeks after he was first employed as a casual employee: p.124.  In July 1993 the plaintiff appears on the printout of the payroll journal as a duty manager, this being a computerised document printed out each time a payroll was made up in order to explain what amount was paid to each employee, but  Mr. Koman said that there was no record of a letter of employment: p.385.   The plaintiff is not shown on the  payroll journal  payroll journal as being operations manager until about the middle of 1994, but there is no documentation to show that he was promoted to that position at that time.  Exhibit 69 is also inaccurate in other respects, and I think its principal significance is as to the reliability of Mr. Koman.

Mr. Koman said at one point that for every other employee there was a document on file signed by a superior manager or some superior authorising the salary package and identifying the terms and conditions of the employment: p.318.  That is what I would expect to occur in a properly run club; it is what occurs for example at the Greenbank RSL Club: p.359.  No such document was produced in respect of the plaintiff’s employment in any of the positions that he ever held with the defendant.  Either that evidence was false, or there is a specific deficiency in the records of the defendant relating only to the plaintiff.  It seems unlikely that the plaintiff, although being appointed to a number of positions over the years, was consistently the only employee not properly documented.  One can think of various possible explanations for this deficiency, but probably the simplest is that  Mr. Koman’s evidence is wrong and these employment matters were in fact not properly documented by the defendant.

The only direct significance of the question of when the plaintiff became operations manager is that the plaintiff claims an entitlement to five weeks annual leave accruing as from the time when he was appointed operations manager. He alleged in the amended plaint that this occurred on or about 27 May 1993, but plainly it occurred at a later date. There are other records of the club dealing with annual leave which show the plaintiff as being entitled to five weeks annual leave, and which show he was entitled to receive such leave by 27 May 1994 (Exhibit 6) so it must be that by then someone had agreed to allow the plaintiff annual leave at the rate of five weeks per year.

The Written Employment Contract
In July/August 1995 the plaintiff was offered the position of club manager with the Crushers Leagues Club at a salary of $70,000 per annum: p.28.  The plaintiff said that he told Mr. Lord, whose response was to ask him to hold off and he would see what he could do for the plaintiff as he did not want the plaintiff to leave.  Mr. Lord agreed that he was told about this, but claimed that the plaintiff had said he had been offered $80,000 (p.232) and said his response was that he would not be able to match the $80,000 but would see if he could make the package more attractive so that the plaintiff could stay: p.233.  He said he came up with a package in consultation with Mr. Knapp.  According to the plaintiff, about a week later Mr. Lord spoke to him and told him that they did not want him to leave and they were working out what could be done for him to keep him: p.29. 
The plaintiff said that Mr. Lord took him to lunch at a restaurant at Sunnybank where he proposed that the defendant increase the plaintiff’s salary to $55,000, and provide to the plaintiff an “expense account” of $15,000, and the title of assistant manager: p.29.  Mr. Lord was vague about how he came to make the offer to the plaintiff (p.234) but denied that it occurred in the circumstances described by the plaintiff: p.291.  There was however no dispute about the terms;  there could not be on this occasion, because fortunately on this occasion they were later reduced to writing.  It seems that it was the plaintiff’s idea to have a written contract: p.234.  Mr. Lord’s attitude to such contracts, which was that he generally did not go with them, is certainly consistent with the general way in which the defendant’s affairs were conducted.  He said the contract was prepared by a consultant, David Morgan, that there were no discussions about the document and that it was straightforward; “It was a document prepared that Kevin wanted.  I didn’t have any objection to it so it wasn’t a great issue”:p.234.  He was quite vague about how it came to be prepared: p.291. According to the plaintiff, the document was prepared by Mr. Morgan while he and Mr. Lord were physically present in Mr. Lord’s office, and that as they went through the document the various clauses were discussed, in a fairly cursory way apparently, and they were then put in the document by Mr. Morgan: p.75-6.  There was then some delay while the document was approved by Mr. Knapp, as it eventually was, with the comment that “It is most important that Kevin stays with the club”: Exhibit 11.  The document was signed by Mr. Lord and the plaintiff on 14 December 1995, although it took effect from 14 September: clause 2A, Exhibit 10. 

The contract, Exhibit 10, is a remarkable document in a number of respects.  Mr. Morgan’s qualifications to be employed by the defendant as a “consultant” to draw the agreement were not made clear by Mr. Lord; having read the document I certainly hope that he is not a lawyer.  Clause 2 for example is internally inconsistent as to whether in the absence of further agreement the contract comes to an end after a term of two years.  Clause 3 dealing with remuneration provides for a “base (cash) salary” during the first year of $55,000 gross, with provision for it to be increased by agreement in future years, for the club to “provide and cover genuine business expenses” of the plaintiff, and for the club to provide “an expense account to be drawn on for any purpose and for the sole use of the [plaintiff] to an amount equalling $15,000 (the club will cover all FBT costs associated with the expense account)”.  In addition, the defendant was to provide an income protection policy for the plaintiff, pay superannuation at 6% of the base salary, and reimbursement for professional development and education payments in all courses and seminars approved by “the Executive” (a term which, so far as I can see, is not defined in the agreement), and for the plaintiff to receive bereavement leave, long service leave, annual leave and professional development leave in accordance with the “Club Manager’s (State) Award.”  There was no such award in Queensland.  There are then provisions for days of work (clause 4), dismissal for misconduct (clause 5), and confidentiality (clause 6). Clause 7 deals with termination of the agreement in the event of the death of the plaintiff, his being declared bankrupt, his being convicted of an indictable offence, his being “found guilty of serious and wilful misconduct” (which appears to duplicate part of clause 5, in a way which is inconsistent), for the plaintiff to be able to terminate the agreement on 6 months notice, and this provision:

“In the event that the club wishes to terminate the employment of the [plaintiff] and without cause as provided otherwise in this clause and/or clause 9 [sic] of this agreement it may do so only by providing payment to the [plaintiff] equal to nine months salary which would have been received by the [plaintiff].”

The clause then goes on to provide:

“Following termination of employment for whatever reason, the [plaintiff] shall return to the club all “non-cash” benefits outlined in this agreement”.

No one suggested there was anything to which this provision could attach, and I think its presence merely serves to emphasise just how badly drafted this document is.
Apart from any deficiencies in legal drafting, it is in other respects curious. The reference to “expense account” in clause 3(c) seems to be consistent with the description given by the plaintiff, that he could, in effect, draw on the club for up to $15,000 per year for the payment of personal expenses. Hence the reference to Fringe Benefits Tax; the arrangement would seem to provide for an “expense payment benefit” within s.20 of the Fringe Benefits Tax Assessment Act 1986. The evidence was that the defendant paid fringe benefits tax on these “expense accounts”:p.163. Another term used for them was “salary sacrifice” (p.395), the idea being that if part of the salary were taken in this way it could be advantageous for tax purposes. It would seem to have had the consequence of reducing the liability for superannuation contributions from the defendant, since under clause 3(e) these were 6% of the “base (cash) salary”. One other consequence with emerged is that it created the potential for confusion as to whether the “expense account” was something payable on top of the nominal salary, or whether the “salary sacrifice” came out of the nominal salary.

The plaintiff described the mechanism for making a claim against the “expense account” (p.31) which was essentially the same as that described by Ms. Cook (p.130) who came to be the administration manager of the defendant until May 1997: p.122.  It was also confirmed by Mr. Goode (p.165) who was the financial controller of the defendant from 30 May to 11 December 1996: p.164.  Evidence of some expenditure was provided to Ms. Cook who checked that that could be paid without exceeding the employee’s entitlement and then prepared a cheque requisition form which was forwarded with a cheque to the appropriate people to sign.  Examples of the claims made by the plaintiff were in Exhibit 17, 18 and 19, and some of these cheques were signed by Mr. Lord, Mr. Knapp, Mr. Mitchell who was at the time the  general manager of the club, or other directors.

The contract is curious in a further respect,  in that a provision for payment in lieu of notice is unusual for a contract for employment for a fixed term.  It was also unusual in a contract for employment for a person in a managerial position in the industry because of the length of the period involved.  Mr. Conway, a human resources manager working for the Greenbank RSL Club (p.343) who was called as an expert witness on behalf of the defendant, said that:

“Nine months  notice for a manager was extremely unusual, not just based on my experience in clubs, but based on my experience in the hospitality industry in general. ... [It] seems untenable.”:p.355.

Mr. Cooper, an industrial relations officer employed by the Club Management Association of Australia (p.183) expressed the opinion that an appropriate period of notice for a position such as that of the plaintiff was six to nine months, but was unable to give examples of any case where more than six months notice had been agreed to.

According to the plaintiff, clause 7, dealing with this and other matters was suggested by Mr. Morgan and agreed to by Mr. Lord (p.76) and he did not suggest that he had insisted upon nine months notice for termination in such circumstances.  Since the effect of Mr. Lord’s evidence is the same, that the document was prepared by Mr. Morgan, it seems clear that the plaintiff was not insisting upon this clause, and what seems to have happened is that the plaintiff  was presented with an exceptionally generous provision for payment in lieu of notice under this agreement.  Other provisions of the agreement were unusually generous.  Mr. Conway said that as a result of his experience, the salary range for an operations manager was from $40,000 to $49,000 (Exhibit 59) and the plaintiff said that his position remained as operations manager other than in name after this contract was entered into: p.30.  Nominally it provided for remuneration of $70,000 plus superannuation, but the “expense account” of $15,000 was in practical terms the equivalent of almost double that amount of a salary, because the plaintiff could use it to pay personal expenses which would otherwise have to be paid out of after tax earnings, so that it was for practical purposes the equivalent of $29,000 in additional salary.  That meant that what the plaintiff was being paid under this agreement was in effect $84,000 per annum plus superannuation contributions based on $55,000.  This was not only well beyond the range of salaries for operations manager in 1997, it was outside the range given by Mr. Conway for assistant general manager ($45,000 to $78,000): Exhibit 59, para. 3.  He expressed the opinion that in 1997 the salary range for such a person of $70,000 to $80,000 would have been considered appropriate in the industry, so that even if the plaintiff was in substance treated as an assistant to Mr. Lord during this period (and it does not appear that he ever actually worked with Mr. Lord on that basis) the salary package was still outside the range  of what was appropriate within the industry. 

The offer was also more generous than it needed to be just to beat the competing offer.  Mr. Lord said that he had been told that the competing offer was worth $80,000, but this beat it comfortably, notwithstanding his comment when initially told of the figure of $80,000 that he could not match it.  Mr. Lord was unable to explain that discrepancy in a sensible fashion under cross-examination (p.261) but one possible explanation is that Mr. Knapp was so keen to keep the plaintiff that he insisted on offering a package which was more generous than $80,000, or much more generous than $70,000.  Neither Mr. Lord or  Mr. Knapp offered that explanation, although it is consistent with Mr. Knapp’s comment in Exhibit 11.  It is possible that there was a deliberate decision on the part of Mr. Lord and Mr. Knapp to give the plaintiff a remuneration package which was much more generous than the going rate for an operations manager to reflect their desire to keep him with the club.  There is no evidence that they were under any pressure from the plaintiff to do so.

Another factor may have been the general disposition on the part of this club to be very generous with salaries to its senior managers.  Mr. Conway also said that there would be very few clubs in 1999 who would be paying for a general manager (or chief executive officer) $120,000 plus a car and an expense account (p.351), and in 1997 there would be only a small number of clubs in Queensland who would be paying anywhere near that figure.  Mr. Mitchell, who became CEO of the defendant from 1 July 1996 received a remuneration package valued at $150,000: p.142.  Mr. Goode, while he was financial controller in 1996, was receiving a remuneration package worth effectively $59,500 (p.165), and in Mr. Conway’s survey, financial controllers received an average of $47,518, most falling within the range of $33,000 to $55,000, although exceptionally there were two above $65,000: Exhibit 59.  When looking at these figures it is important to bear in mind that since 1997 there has been a general increase in salaries in this industry of about 10%: p.348.  I note also the comment by Ms. Cook to Mr. Koman in August 1996 that  “ ...we’re paying a number of people huge salaries” (p.399) which clearly indicates that the defendant’s generosity was not confined to the plaintiff.   Accordingly, in 1996 the defendant was also paying well above the average for its financial controller.  It may well have been a general practice of this club to be unusually generous in paying salaries to its senior management.

Mr. Lord’s indifference to contracts seems to have continued after this particular one was signed;  he kept the contract himself (p.396) and it does not appear that anything was ever done to give effect to the contractual obligation to maintain income protection insurance for the plaintiff in clause 3(d), although ultimately it was accepted on behalf of the plaintiff that he has not suffered any loss as a result of this breach by the defendant. It also appears that he did not tell Ms. Cook that the expense allowance was $15,000 until 28 May 1996: Exhibit 16.  The position seems to have been that Mr. Lord did not regard contracts as being important, but if the plaintiff wanted him to sign one he would sign one; he had done so, but the contract was of no interest to him (p.291 - an astonishing admission) and he proceeded to forget about it. 

The Appointment As Acting General Manager
At the end of March 1996, Mr. Lord resigned his position as general manager, in order to establish a consultancy company, although it seems that he continued on as a consultant to the company for a period of three months: p.235, 297.  It seems that the plaintiff was not informed of this until the following day when he was telephoned at home by Mr. Knapp, who according to the plaintiff, offered him the position of general manager on a temporary basis until Mr. Lord had been replaced, with a salary increase to about $70,000 which Mr. Lord would speak about: p.33.  The plaintiff said the following day Mr. Lord saw him at the club and told him that his salary was going to be increased to $72,000 per year: p.34.  There was no discussion about  any other terms of the plaintiff’s employment, and in particular no mention of the plaintiff’s “expense account”.  Mr. Lord said that he suggested to Mr. Knapp that this would be a reasonable compensation for the plaintiff for the acting role: p.254.  According to Mr. Knapp, the decision to offer the acting appointment to the plaintiff was made by the Board and a decision was made that his salary ought to be increased and the figure of $72,000 was mentioned: p.297. 

It seems quite clear that there was an intention on the part of the Board to increase the salary (p.314), but it seems that nobody bothered to ascertain with precision the details of the current remuneration received by the plaintiff, since Mr. Knapp said at the time the decision was made he was not aware that the plaintiff was receiving the “expense account”: p.297, p.310.  To offer the plaintiff $72,000 without the expense account is to offer to cut his salary, something which would be to say the least unusual for a person assuming more substantial responsibility, even on a temporary basis, and of course there was no reason for the plaintiff to have accepted such a proposal.  Whatever the Board may have thought however, Mr. Lord clearly recognised that the expense account continued; he said as much in a memo which he sent to Ms. Cook dated 27 March 1996: Exhibit 16.  The date on this memo is somewhat curious, since the other evidence was that Mr. Lord resigned on 31 March (p.297) and the offer to the plaintiff was made after that, and indeed on 1 April: p.77, 112.  The plaintiff said he was telephoned at home on Monday and 1 April 1996 was a Monday.  Perhaps the Board took its decision and Mr. Lord took steps to implement it before anyone told the plaintiff. 

It was submitted on behalf of the defendant that the April 1996 agreement was not at the time perceived by any party to be of a temporary nature.  On the contrary, it was plainly a temporary appointment.  Obviously the plaintiff was not being appointed on 1 April 1996 as the permanent replacement of Mr. Lord, and there is not the slightest suggestion of anything like that in the evidence.  The clear evidence was that this was a temporary promotion into the position on an acting basis, and even then the circumstance that Mr. Lord remained as a “consultant” during this period meant that the plaintiff did not even take over full responsibility as general manager of the club, even on a temporary basis.  The idea that this was an entirely new contract which completely superceded the earlier agreement is wholly unrealistic in the circumstances.  Mr. Lord, at p.254, clearly referred to the plaintiff’s being in an acting role for a period.  The evidence led from Mr. Lord in chief was in the same term (p.235):

“It that hiatis period before there was a permanent appointment, the plaintiff acted as the acting CEO.  Is that correct?-- That’s correct.”

The evidence led from Mr. Knapp in chief was in the same terms (p.297):

“Mr. Deguara was appointed in a holding position until the final appointment could be made?-- That’s so.”

The only reasonable interpretation of this agreement is that it involved a temporary modification to the terms of the contract of employment, so that once the club appointed a new general manager and the plaintiff was no longer required to act in that role, the temporary modification of his contract of employment would expire and he would resume employment in accordance with the terms in Exhibit 10.

The plaintiff was therefore from 1 April 1996 in the position of acting general manager receiving in effect $101,000 plus superannuation contributions for $72,000.  This was a good deal more than he had been earning, but a good deal less than Mr. Lord had been paid, and Mr. Mitchell  once he was appointed.  The plaintiff also applied for the position himself, and spoke to Mr. Lord about it, who, according to the plaintiff, said he did not think he would get the position, and a friend of his was applying, a Mr. David Harper: p.35.  Mr. Lord denied that he made this comment, although Mr. Harper, with whom he had previously worked did apply, but was also unsuccessful: p.246-7.  According to Mr. Knapp, the plaintiff had lobbied very hard to get the position, and some of the staff wrote encouraging sympathetic treatment for the plaintiff’s application: p.299. 

Further Agreement As To the Plaintiff’s Employment
Apparently before the final decision on a replacement for Mr. Lord was made, and presumably as a result of the comment made by Mr. Lord, the plaintiff was becoming concerned about his future at the club, a concern he had communicated to at least two others: p.35-6.  Whether because of this or otherwise, the Board was certainly aware of this.  Mr. Knapp said that the directors had heard that the plaintiff may disappointed at not getting the job and may be considering going elsewhere: p.299.  The Board considered that the club needed a good operations manager to work with Mr. Mitchell, the incoming general manager, and that the plaintiff was the obvious person for that job: p.299.  I think that it is a fair inference that the position remained much what it had been when Mr. Knapp wrote Exhibit 11; he and the other directors were keen to keep the plaintiff working for the defendant.  Thus would provide some continuity after the new general manager took over, and keep the other employees happy, and I think there was recognition of the plaintiff’s own ability.  Mr. Knapp described him as a very pleasant and efficient operator in his field (p.298) and Mr. Lord was also complimentary, in a somewhat patronising way: p.235. There was praise for the plaintiff in the minutes Exhibit .............  For reasons which will become clear later I would not place much reliance on this as evidence of the plaintiff’s ability, but his later history does suggest that he has considerable capacity for work of this nature. 

As a result, there was a conversation between the plaintiff and Mr. Knapp apparently on 20 June 1996.  Prior to this conversation Mr. Lord had spoken to the plaintiff and told him that he did not get the general manager’s job but Mr. Knapp wanted him to stay with the club and that they were proposing to increase his salary and provide him with a vehicle: p.39.  The plaintiff told him that the provision of a vehicle was not so important for him and that from his point of view what was important was that his wife have a good car, rather than what he drove to and from work.  Mr. Lord denied that there was any such conversation.  For reasons I will give later, I prefer the evidence of the plaintiff and find that this conversation did occur as he said.

There was then the conversation between the plaintiff and Mr. Knapp in the office of the latter in town.  Only the plaintiff and Mr. Knapp were present.  There is no contemporaneous note of this conversation by either.  According to the plaintiff, he was told that someone else was to be appointed general manager (which he already knew), and given some details about Mr. Mitchell, that Mr. Knapp was happy with the plaintiff’s work, and did not want him to leave the club, and that he was going to appoint him to the position of club manager and increase his salary to $80,000 a year and provide him with a motor vehicle: p.38.  The plaintiff again said that the vehicle was not so important to him. The plaintiff denied that the expression “package” had been used: p.79.  He did subsequently telephone Mr. Knapp and accept that offer. 

According to Mr. Knapp, when the plaintiff came to his office he told him that the Board had instructed him to speak to the plaintiff about taking up the job of club manager and offering him a new package of $80,000 per year salary plus a motor vehicle.  He said there was then some discussion about the motor vehicle but the plaintiff did not immediately accept the offer and did not express much enthusiasm for it: p.300.  Later however the plaintiff rang back and said he would accept the offer: p.301.

There was no discussion about the earlier contract, nor any discussion about the “expense account”.  There was really very little dispute between the parties as to the content of this conversation.  Nevertheless, there was a difference between them as to their understanding of its effect.  Mr. Knapp, although he said he had at some stage after 1 April 1996 found out that the “expense account” was still being paid to the plaintiff, he had forgotten the terms of the contract, Exhibit 10, and did not appreciate that the plaintiff was already receiving $72,000 plus the “expense account” of $15,000.

intended to offer to him a total of $80,000 plus a car, that is he did not intend the plaintiff’s “expense account” to be additional to this amount.  On the evidence an alternative construction of Mr. Knapp’s position would be open, but for reasons I will deal with later I am satisfied that that was Mr. Knapp’s intention at the time. 

Mr. Knapp’s  intention was to offer the plaintiff an increase in salary (p.314), in circumstances where he had not taken the trouble to ascertain exactly what the plaintiff’s current earnings were, or what he was entitled to continue to earn once the temporary promotion came to an end.  But a salary of $80,000 was not an increase over the then current salary of the plaintiff in his position as acting general manager, and (apart from the car) would not have been an increase over what he was receiving under the contract, Exhibit 10.   Indeed, whether it was worth more depends on the value placed on the car. 

Mr. Koman, when preparing certain schedules put in evidence, used a figure of $15,000 per annum as the value of the car; Mr. Conway on the other hand used a figure of $10,000 as the value of the provision of a motor vehicle: p.359.  This, I suspect, is more realistic since I was rather impressed by Mr. Conway as a witness.  But the difficulty is that the value of the car depends upon how the value is assessed.  For some people a car might be of really no value at all, whereas for other people it might be a very welcome benefit.  There is no particular reason why the value of the car to the person to whom it was supplied should correspond with the cost of providing it by the employer.  Although the plaintiff was free to use the vehicle as he wished, he was expected to drive it to work each day so that during the day it could be available for other people from the club to use if required: p.41  If the plaintiff’s evidence that the car was not of much value to him is true, then what he was being offered was arguably no more to him than what he was entitled to under his contract, possibly even less. Mr. Knapp’s intention in June was to offer the plaintiff an increase (p.314), an increase over what the plaintiff had been receiving in his position as acting general manager.  He described it to the plaintiff as a generous offer: p.86.  But if it was a “package” of $80,000 plus a car it was neither an increase nor a generous offer.  The plaintiff was sitting on $84,000, and I have no reason to doubt his evidence that a car was not important to him.  Even if from the point of view of the defendant the car was worth $15,000 per annum, there is no reason why it should be treated as having that value to the plaintiff.  The plaintiff was entitled to stay and work out his contract at, in effect, $84,000 per annum plus superannuation.  There was no justification for the view expressed by Mr. Knapp that by this time all previous arrangements were abandoned: p.327. but was threatening to leave the club, a clear indication that he was not satisfied with that?.  If he was not going to be satisfied with that, he was unlikely to be persuaded to change his position by being offered a lower salary together with a car he did not want.  That is hardly a reflection of a desire, which was obviously strongly felt, on the part of Mr. Knapp to keep the plaintiff working for the club. 

If the offer was for $80,000 plus a car but no expense account, it was certainly less than his then current earnings as acting general manager, and much less than the remuneration package provided to Mr. Mitchell, of $150,000 (p.142), the package the plaintiff would have been receiving if he had been successful in his application for the position of general manager.  I think it is reasonable to conclude from Mr. Conway’s evidence that the plaintiff would have been hard put to find a position with another club as operations manager for a remuneration which was better than $80,000 plus a car, but he may well have been able to do better elsewhere as a  general manager, even in a smaller club, and he may have been prepared to move to another club with an attractive salary if there were prospects of promotion.  That seems to have been what occurred when he was first employed as a casual bar attendant with the defendant.  Against the background, I do not think the idea of the plaintiff’s being employed as a “club manager” for $80,000 plus the expense account plus a car is so inherently improbable that it must have been obvious to the plaintiff that he was not being offered an increase in salary in circumstances where it was contemplated that his entitlement to an “expense account” would continue.  This is so particularly in the context of an employer which as I have said had a propensity to pay generous salaries to senior management, and in the context of the unduly favourable terms Mr. Lord and Mr. Knapp had agreed to in 1995 in Exhibit 10.

The only real conflict as to what actually occurred on 20 June 1996 is as to whether or not the word “package” was used by Mr. Knapp.  It seems to me frankly that the position is that Mr. Knapp thought that what he was offering was remuneration of $80,000 plus a car and nothing else, having forgotten that the plaintiff had been since September 1995 receiving the benefit of an “expense account” in addition to his nominal salary.  He was by 20 June 1996 unaware that the plaintiff was receiving anything more than $72,000 plus superannuation, and if that was the starting point, $80,000 plus a car must have seemed like a significant increase.  In this context there was no particular reason for Mr. Knapp to have emphasised that $80,000 plus a car was all that the plaintiff would be receiving, and there was no reason for him to have said anything which would convey that to the plaintiff.  On the other hand, from the plaintiff’s point of view, the situation was very much like that in April 1996, when he was offered a salary increase to $72,000, and the “expense account” continued on top of that salary although nothing was said at the time about it.  I think it likely that by the time the plaintiff accepted the offer his intention was to accept an offer to vary his existing salary without deleting the contractual entitlement to an “expense account”.

In these circumstances Mr. Knapp had no reason to think he needed to make clear to the plaintiff in the course of this interview that the remuneration of $80,000 plus a car which was offered was all that was being offered by way of remuneration, and that it was in lieu of any existing entitlement to remuneration.  Such a thing could have been done by the use of the term “package”, provided that it was made clear that what was being spoken of was all that was intended to be in the “package”.  If Mr. Knapp had been conscious of the fact that the plaintiff was already receiving a $15,000 “expense account” over and above his “salary”, I think that he would have spoken of an offer of a package of $80,000 salary plus a car and nothing else in rather different terms.  On the whole, and bearing in mind conclusions as to the credibility of witnesses with which I will deal later, I am not prepared to find on the balance of probabilities that the word “package” was used in a way which would have made clear to an objective observer that what was being offered to the plaintiff was $80,000 plus a car and nothing else.  The word may well have been mentioned, but in a context which would not have made clear to a person who was already receiving “an expense account” over and above his salary that the intention was to offer a “package” which did not include that  “expense account”.  Neither witness purported to recall the conversation verbatim, and of course neither could have done so.  All that either could really do was give his best recollection of the effect of the conversation.  Mr. Knapp had no reason at the time to be making a particular point of using the word “package”, and no reason to try to recall whether he had done so until over six months earlier.  In view of the plaintiff’s then current remuneration, and the form in which it was being provided, I think that it was incumbent on Mr. Knapp to make clear that what he was offering was something which did not include the  “expense account”, and I am satisfied that he did not do so. There is no magic in the word “package” (see the use of it by Mr. Mitchell at p.144), and I am satisfied that Mr. Knapp did not express himself in a way which would make it clear to a person who was aware of the true situation that what was being offered was in substitution for all existing rights the plaintiff had to remuneration.

Much of the submissions on behalf of the defendant boiled down to the proposition that I cannot find other than that what Mr. Knapp offered to the plaintiff on 20 June 1996 was “a package of $80,000 plus a car” (i.e., and nothing else) because it was not expressly put to Mr. Knapp in cross-examination that he had not used the word “package”. Mr. Knapp was certainly cross-examined about his recollection of this (e.g., at p.335-6).  The issue was exposed during the evidence of the plaintiff (p.79) and it was clear that their recollection differed on this point.  If Mr. Knapp had been asked “You did not use the word package, did you?”, he would have undoubtedly responded “I did”.  In the circumstances of this trial, not only was nothing lost by not asking the question, to have asked it would have been labouring the obvious and a waste of time. I do not consider that I am constrained by the absence of such a question in cross-examination to accept Mr. Knapp’s evidence to that effect.  For reasons which I have given I do not regard Mr. Knapp as a reliable witness, and I am not prepared to accept his evidence that he used the term “package” on that occasion.  It follows that there is no evidence that he did.  I accept the plaintiff’s evidence that he did not. I do not regard the plaintiff’s answer under cross-examination at p.86, line 30 as an admission of the use of the term “package”.  This was contrary to his answer at p.79, and I think what the plaintiff was intending to convey by the answer was that he could not recall the reference to the term “package” but that what was offered expressly was $80,000 plus a car.   I find that Mr. Knapp did not, during that conversation, use the term “package” as used by him in giving evidence.  These findings are made on the balance of probabilities.  My assessment is made having regard to my conclusions as to the credibility of the evidence of the plaintiff and Mr. Knapp, and in the light of the objective circumstance that Mr. Knapp at the time of that conversation had forgotten that the plaintiff was entitled to receive the “expense account” in addition to his salary, and was still receiving it in his position as acting general manager.  He thought that the plaintiff’s remuneration was $72,000 per annum, the increased remuneration that he and Mr. Lord had in late March thought appropriate.

Insofar as a contract involves a meeting of the minds, that I think did not occur in the present case.  Mr. Knapp made an offer to the plaintiff intending it to have a certain effect, and the plaintiff accepted it, intending it to have a different effect.  If one were to adopt the subjective theory of contract, the consequence would be that there was no binding contract: Taylor v. Johnson (1983) 151 CLR 422 at 429. As the majority in that case went on to say however the weight of authority leaves the objective theory of contract in command of the field, under which the contract is valid and binding, notwithstanding this mistake, subjected to any jurisdiction in equity or by statute to vary it or set it aside. No such jurisdiction is involved in this case, so these issues need not be considered. In Taylor a written contract which did not reflect the intention of one of the parties was set aside on the basis that it had been entered into by that party under a serious mistake as to its contents in relation to a fundamental term and the other party was aware that circumstances existed which indicated that the first party was entering into the contract under some serious mistake or misapprehension about a fundamental term and deliberately set out to ensure the first party did not become aware of the existence of the mistake or misapprehension: p.432.  In other words, the situation was one where one party was aware of the other party’s mistake and deliberately sought to take advantage of it.  In the present case there is no evidence that the plaintiff was aware of Mr. Knapp’s mistake, the relevant mistake being the lack of awareness that the plaintiff’s current terms of employment included the provision of an “expense account” over and above the salary which had been increased in April to $72,000 per annum. 

The question therefore becomes what is the correct objective interpretation of the offer that was made and accepted. 

The argument on behalf of the defendant came down to saying that the plaintiff must have realised that what was being offered to him was $80,000 plus a car, but no “expense account” because all that was spoken of was $80,000 plus a car, and that plus an expense account was just far too much for what he was doing for the club.  It followed that that also had to be the correct objective interpretation of the offer. But the situation needs to be assessed in the context of the level of the plaintiff’s remuneration under the contract, Exhibit 10,  the level of the plaintiff’s remuneration when he was acting as general manager, the level of remuneration for the position as general manager for which the plaintiff had applied, and which the plaintiff was apparently going to be concerned about missing out on, that the offer was put to him as a generous one, and was likely to have been presented as an increase over his current earnings, as that was what was intended, the club’s expressed desire to retain the services of the plaintiff, its habit of paying generous salaries.  I think that the interpretation put by Mr. Mitchell on what he was told by Mr. Knapp, considered below, is also significant, and the fact that when his salary had been increased to $72,000 per year without anything being said about the “expense account” that “expense account” in fact continued. Mr. Knapp may have forgotten about the contract, but in my opinion an objective observer assessing what did occur would assess it in the light of those background facts known to both parties, which included the contract and the fact that the plaintiff was receiving $72,000 plus the “expense account” following the earlier negotiations about an increased salary in respect of the acting appointment. I think it is also of some importance that, although the plaintiff was offered a new title of “club manager” effectively this was largely just   a change in title and he was being expected to continue on in his role of second in charge to the new general manager. The plaintiff did have some additional responsibilities, taking over from the gaming manager, Mr. Gray (Exhibit 60) who became marketing manager and later left: Exhibit 62.  But this to some extent came later, and at the start his job was essentially the same.  This, I think, is a factor which supports an interpretation of what was occurring was a modification of the existing agreement; if the plaintiff had been employed in a completely different position it would, I think, be easier to characterise this as an exercise in starting again with a clean sheet in contractual terms. 

In such circumstances it seems to me that the appropriate objective construction of an offer to pay the plaintiff a salary of $80,000 plus a car is that the plaintiff’s remuneration under the contract, Exhibit 10, was to be increased so as to provide for a “base (cash) salary” of $80,000 and to provide in addition for a car, but that the plaintiff would otherwise be entitled to the benefits provided under that contract, Exhibit 10.   That offer having been accepted, that became a contract between the parties to vary the written contract, Exhibit 10.  It cannot be set aside on the basis contemplated in Taylor v. Johnson (supra) because there is no evidence that the plaintiff was aware of Mr. Knapp’s mistake, or ought to have been aware of Mr. Knapp’s mistake, or any evidence that he unconscientiously took advantage of that mistake. 

In fact, what happened after this further agreement is that both parties communicated orally with different officers of the defendant.  Mr. Knapp spoke to Mr. Mitchell, the new chief executive officer, to tell him that the Board had taken measures to reward the plaintiff for his work as acting club manager and that he expected the plaintiff was going to be supportive of Mr. Mitchell in his role as general manager: p.143.  He said the plaintiff’s salary had been increased to $80,000 and that the company was also going to provide him with a motor vehicle: p.144.  There was no discussion about the “expense account” and Mr. Mitchell concluded that the only aspects of the plaintiff’s salary package which were to change were the base salary and the provision of a motor vehicle.  Mr. Knapp did not bother to prepare any written record of the agreement, let alone a new comprehensive statement of the plaintiff’s conditions of employment, although the plaintiff asked for this (p.41) and any reasonably competent person would have done so. 

The plaintiff spoke to Ms. Cook who prepared a memo addressed to Mr. Mitchell and Mr. Knapp (Exhibit 15) raising specifically the question of the entitlement to continued “expense account”.  This memo demonstrated that the plaintiff very soon after it regarded the effect of what he had been offered as a salary of $80,000 plus the “expense account” of $15,000, and he was saying so openly to the officer of the defendant responsible for administering that arrangement.  That officer sent a memo concerning the matter to the relevant people within the club, the general manager  and the Chairman of Directors.  Ms. Cook also saw Mr. Mitchell who told her that what she had put in the memo was consistent with what had been indicated to him by Mr. Knapp, and she should give effect to that: p.144.  Ms. Cook endorsed the memo accordingly, and referred it to Mr. Goode: Exhibit 15, and see p.127.  Mr. Goode confirmed that he subsequently spoke with Ms. Cook about this (p.169) and that Exhibit 15 was referred to him: p.170.   Mr. Mitchell had been told by Mr. Knapp personally of the agreement he had reached with the plaintiff very soon after it occurred.  Obviously he regarded the interpretation set out in Exhibit 15 as consistent with what he had been told by Mr. Knapp.   I think that when it comes to assessing the appropriate objective effect of the offer made by Mr. Knapp as of some significance.  It demonstrates that Mr. Knapp was still not making it clear that the remuneration was $80,000 plus a car but nothing else, that he was still being ambiguous and that the interpretation the plaintiff put on the offer was not so obviously wrong that no one could honestly believe it.  Mr. Mitchell’s evidence on this point was not challenged in cross-examination and I accept it.  It seems to me to be quite inconsistent with the idea that the plaintiff’s interpretation of the offer was so clearly unreasonable that the plaintiff must have been dishonest.  

The various officers of the defendant thereafter proceeded on the basis that the plaintiff was entitled to continue to draw on his “expense account”, and he continued to do so.  He put in a number of claims and they were paid. by cheques dated 6 August 1996, 14 August 1996, 7 October 1996, 6 November 1996, 4 December 1996: Exhibit 19.  On one occasion the cheque was  signed personally by Mr. Knapp: Exhibit 20, and see p.134.  Mr. Knapp’s explanation of course was simply that he assumed that the “expense account” payment to the plaintiff came out of his $80,000 salary, rather than being on top of it: p.380.  There was certainly nothing clandestine about the plaintiff’s continuing to claim on the expense account, and in circumstances where the cheques in payment of it were being signed personally by the same person with whom the increased remuneration had been negotiated (Mr. Knapp) he hardly could have concealed the circumstances he was continuing to claim on and be paid in respect of the “expense account”.  So far as Mr. Mitchell was concerned, he was entitled to be so paid, and indeed the other relevant members of the staff of the defendant acted on the view that things were in order because of this. 
At the time when Mr. Mitchell took over, the defendant had some financial problems.  There had been a steady decline in its earnings for some time, and that decline continued so that while he was general manager the club changed from making a profit to making a loss: p.146.  Mr. Knapp became concerned about the continuing deterioration of the club’s financial position and had Mr. Lord’s company scrutinise the August accounts.  This was done by Mr. Koman who had left the defendant at the end of April 1996 (p.383) to work for that company.  He said that he was told by Ms. Cook that “we are paying a number of people huge salaries” and she specifically mentioned that she could not believe what the plaintiff was being paid: p.399.  According to Mr. Koman, he told Mr. Lord in August that the plaintiff was receiving the benefit of an expense account of $15,000 in addition to his salary, to which Mr. Lord simply asserted that that was not right (p.399) but Mr. Koman did nothing in response.  Mr. Lord’s version was somewhat different: he said that in August all that happened was that Mr. Koman made a comment to the effect the plaintiff was being paid far too much, and he agreed with that proposition, without any investigation of the details: p.238.  Mr. Lord was cross-examined about this and at one point (p.266, line 49) he seemed to say that in August when Mr. Koman told him that the plaintiff was being paid a lot, he responded “$80,000 and a car, yes, it is a lot” which would have revealed any misunderstanding between  Mr. Koman and Mr. Lord at that stage, but after further cross-examination (p.267) Mr. Lord reverted to the position that he was not told the details in August and that this discussion was at a further meeting in November with  Mr. Koman.  I think therefore that there is a clear conflict between Mr. Lord and  Mr. Koman at this point.   Mr. Koman had ascertained that the plaintiff seemed to be in receipt of unusually generous remuneration.  In the circumstances I would expect him to have told Mr. Lord of the details of that, rather than just making a general comment. It is clear from the terms of the statement of Mr. Lord in Exhibit 53 at p.2 (and see p.274) which is not consistent with Mr. Lord’s evidence to me, that Mr. Koman’s evidence as to these conversations is more accurate, indeed, that Mr. Lord’s evidence about what Mr. Koman said in August 1996 was wrong.  However, it seems clear that nothing further was done about the matter at that stage.  Evidently neither of them bothered to tell Mr. Knapp.

In November 1996 there was a further review by  Mr. Koman.  Again, he was told by Ms. Cook that the plaintiff was receiving $80,000 plus the expense account and again told Mr. Lord: P.400.  He says that Mr. Lord’s response was “It’s got to be $80,000 and a car because that was what agreed with Bernie”.  This version is consistent with the evidence of Mr. Lord: p.238.  Mr. Lord’s evidence really came down to the proposition that on this occasion he was told the true situation but concluded at the time that the information he was getting from  Mr. Koman must be wrong.  Again, apparently this matter was not brought to the attention of Mr. Knapp or anyone else on behalf of the defendant, although I cannot be certain about this because I did not see the report. Mr. Koman said that the report from Mr. Lord’s company to the defendant was not in writing: p.400.  However, a report from his company dated 16 December 1996 was tabled at the board meeting on 17 December: Exhibit 65. 

It was extraordinary that Mr. Lord was told that the plaintiff was receiving $80,000 plus a $15,000 “expense account” in either August or November 1996 and thought that that was wrong but did not report that to the defendant, that is to say for practical purposes to Mr. Knapp.  Mr. Lord’s company had been asked to review the monthly accounts (p.237) presumably in order to see whether the club was paying out money it should not have been paying out (p.268), and if Mr. Lord really thought that the plaintiff was not entitled to the “expense account” on top of his salary of $80,000 per annum, that was the very thing his company had been asked to look at.  Yet he did nothing about it. Mr. Lord said that shortly before 5 February 1997 he had a further discussion with  Mr. Koman during which he was again told by  Mr. Koman that the plaintiff was getting the “expense account” in addition to his salary of $80,000.  Mr. Lord asked  Mr. Koman to document that and get back to him, and as a result  Mr. Koman prepared a memo, Exhibit 32, which was based on his discussion with Ms. Cook: p.399.  Mr. Lord said that when he was shown this it was to his mind “totally contrary to my understanding of the package negotiated between  Mr. Koman and Mr. Deguara ... It screamed out as a major problem and I had to pass it on to the Board for further action”: p.239.  Mr. Lord was unable to explain why his reaction would have been so dramatically different in February from his reaction to being given the same information by  Mr. Koman in the previous November; the only difference was that on this occasion it was given to him in writing.

It seems to me that there are only two rational explanations for this situation: Mr. Lord had been told by Mr. Knapp of the arrangement of the plaintiff, and at the time drew the same conclusion as did Mr. Mitchell, that the “expense account” was to continue, so that he took the view at the time that there was nothing untoward to report.  The second is that Mr. Lord was informed of the “overpayment” to the plaintiff and thought that it was an overpayment but decided not to tell the defendant about it.  Ultimately, Mr. Mitchell left his employment with the defendant on 11 December 1996 (p.42, Exhibit 65) and I rather suspect that he was invited to leave.  Subsequently Mr. Lord’s company was engaged to perform the managerial role in the company, in effect to take over the functions previously performed by Mr. Mitchell, and prior to that Mr. Lord.  Once that situation had occurred, Mr. Lord was able to inform Mr. Knapp of the “overpayment” to the plaintiff. Mr. Lord’s failure to disclose the true situation would be consistent with his having decided to save up the revelation about the plaintiff’s remuneration until he could use it to his advantage.  Unsurprisingly, Mr. Lord did not offer either of these as an explanation for his failure to act on what he was clearly told by  Mr. Koman in November 1996. 

During the latter part of 1996 the financial position of the defendant continued to deteriorate.  During September Mr. Knapp indicated that he or another director, Mr. Johnson, were to counter sign all the defendant’s cheques, so from then someone would take them into his office for him to countersign from time to time: p.145.  Mr. Goode described the procedure at pages 170-171;  typically about 50 cheques were done in a session (p.174) and Mr. Goode said Mr. Knapp would review the material all pretty intensely: p.172. 

The plaintiff put in a further “expense account” claim in February 1997, which curiously the defendant was unable to produce at the trial: p.45.  He said that  Mr. Koman approached him the following day and said that due to the financial position of the defendant the club could not make the payment at that time: p.45.  The plaintiff said that not long after this Mr. Lord said to him that Mr. Knapp had said there should not be an “expense account” and that he did not know why the plaintiff was claiming for the “expense account”: p.45.  The plaintiff said his response was that it was part of his contract.   Mr. Lord  said that after he received Exhibit 32, it was passed on by him to Mr. Knapp, and he also spoke to the plaintiff about it, told the plaintiff that it was a major problem, and that the plaintiff’s response was “Oh, do you want me to pay it back?”.  He replied that this was a serious problem and the Board was going to want an explanation and there was nothing he could do about it: p.239.  He said there was subsequently a further conversation when he informed the plaintiff that he had advised the Board and that the Board and the Chairman were looking for an explanation; he said the plaintiff’s response was that he had a claim in for $2,000 and asked him to push it through for him.  The plaintiff in cross-examination denied that he had offered to pay the money back (p.84), he admitted that there was a further conversation subsequently when he asked what was happening with the “expense account” because a payment had to be made so he needed to know whether the defendant was going to make the payment: p.85.  I must say that such a version seems to me much more plausible than that given by Mr. Lord; it sounds very strange for the plaintiff to have been offering to refund payments already made on one day and on a later day asking Mr. Lord to chase up a further payment. 

On 21 February 1997  Mr. Koman prepared a memorandum to Mr. Whitelaw, one of the directors, at his request: Exhibit 14, p.400. This document purports to show the value of the salary package payable to the plaintiff prior to 1 April 1996, and as a result of the increases on that date and 1 July 1996.  The totals were given as $62,800, $106,120, and $129,600.  This last total values the car at $15,000; without that the total is $114,600.  

Mr. Koman admitted in his evidence that this document was wrong, but asserted that it was prepared just prior to the Board meeting (the Board meeting was in fact four days later) and claimed that he did not have time before the Board meeting to go back and check all the documents: p.401.  I do not find such an explanation plausible.  Exhibit 14 is not only inaccurate, it is misleading.  Prior to 1 April 1996 the plaintiff’s salary was $55,000 plus the “expense account” of $15,000; the plaintiff had never had an “expense account” for $5,000, nor was he ever on a salary of $50,000. Mr. Koman, as the financial controller during the relevant period, should have known this. Had it been prepared accurately the first entry would not have read $62,800, it would have read $88,100.  There was no room for argument about that figure; it is based on what was signed off on by Mr. Lord in Exhibit 10. 

Mr. Knapp said that he could not recall having seen Exhibit 14 before, and he could not recall it being used at the Board meeting on 25 February: p.378.  The minutes, Exhibit 58, contain a statement by Mr. Whitelaw obviously based on Exhibit 14.  There is, I think, no reason to doubt that its contents would have influenced the mind of Mr. Whitelaw if not others.  The minutes do not indicate that Mr. Knapp or Mr. Lord, who must have known the true situation, said anything  in the course of that meeting to correct its misleading feature. 

On 25 February 1997, the plaintiff was called to a meeting at the club with Mr. Knapp, Mr. Johnson, Mr. Whitelaw and Mr. Smith (all Board members): p.46.  A note of this meeting prepared by Ms. McKenzie, secretary at the club, became Exhibit 52.  Both Mr. Lord (p.241) and Mr. Knapp (p.301) verified this record, and the plaintiff in his account of this meeting did not, I think, really depart from it.  He did recall that he had referred to an entitlement to receive the “expense account” on the basis that it was part of his contract (p.49) which is, I think, essentially consistent with the answers recorded that he believed that the “expense account” was still in place. 

Mr. Knapp claimed that the plaintiff did not refer during that meeting that he took the money because his contract entitled to have it: p.301.  I think this evidence was given simply because there is no statement in those terms in the minutes.  Obviously not every word said in the course of the meeting was recorded in Exhibit 52. What the plaintiff was saying is that he believed he was entitled to it, and the legal effect of such an assertion is that he was entitled to it under his contract.   The plaintiff’s position consistently throughout the meeting was that he honestly believed that he was entitled to it (p.322), but he did express the willingness to pay the money back, a willingness which I think should be treated as predicated on the proposition that his belief that he was entitled to the money was in fact incorrect: see also Exhibit 23.  I must say that there is nothing recorded in the minutes which strikes me as amounting to an admission of dishonesty on the part of the plaintiff; on the contrary, his position was that he honestly believed that he had been right, but was willing to acknowledge the possibility that he had been honestly mistaken about the effect of what was being offered to him.  There is no indication in the minutes, or indeed in the course of his evidence before me, that Mr. Knapp has ever been prepared to acknowledge the possibility that he might have been wrong about the effect of the meeting that he had with the plaintiff on
20 June 1996.

Mr. Knapp is shown in the course of the meeting as referring to this payment as a “bonus” (Exhibit 52, pages 1 and 2), and he used similar terminology at least during the trial: e.g., p.311, 312, 329.  For Mt. Knapp to refer to the “expense account” as a “bonus” is, in my opinion, misleading and tendentious.  Whenever the “expense account” was in place, it was an entitlement of the plaintiff under his contract.  It was not a bonus to be conferred at the whim of Mr. Lord, and it was nonsense for Mr. Knapp to pretend that it was anything of the sort. 

At the end of the meeting, Mr. Knapp asked everyone to keep quiet about the matter, but made a comment to the plaintiff recorded as “Feel free to get legal advice or talk to your wife.”  I shall return to the significance of this remark.  Later that day the plaintiff went home, spoke to his wife, and found the written agreement, went back into the defendant’s premises and showed it to  Mr. Koman who was surprised to see it: p.53.  He then showed it to Mr. Lord whose response was “This is nothing”: p.54.  That at least is consistent with the attitude Mr. Lord displayed generally to the contract.  A copy was faxed to Mr. Knapp, to whom the plaintiff spoke to say that it was coming. 

The following morning the defendant’s Board of Directors met at 7.40 a.m.  There were two sets of minutes kept for these, the minutes dealing specifically with the plaintiff (Exhibit 58) and the minutes dealing with the rest of the meeting: Exhibit 56.  At the meeting Mr. Knapp referred to the “new pay arrangements” after Mr. Mitchell was appointed as general manager and referred to the memo, Exhibit 15, which was said to have been “discovered by Steve Koman”, which Mr. Knapp said he did not recall ever having received.  He also referred to the plaintiff’s having provided a copy of the 1995 agreement yesterday which he said “confirmed that [the plaintiff] was aware of the $15,000 and there could not have been any doubt in the mind of any reasonable person that it was to continue”: Exhibit 58.  Mr. Knapp explained that he was  attempting to convey that the plaintiff knew that the $15,000 was not to continue: p.339.  He was quite unable to suggest how that proposition could have been confirmed in any way by the contract, Exhibit 10.  Obviously it does nothing to confirm such an idea.  He went on to describe the plaintiff’s actions as a breach of trust and said that he could not have anyone on the staff who could not be trusted.  The minutes record that a Mr. Crane, one of the directors, noted surprise that a memo such as Exhibit 15 would not come from the general manager or the Chairman and suggested that in the future arrangements for salary packages be confirmed in writing by the appropriate person.  I could not agree more.

Mr. Knapp said that at this meeting a decision was taken by the Board to dismiss the plaintiff: p.303.  He was not deterred by the fact that the minutes do not record such a decision (p.337), and a careful reading of Exhibit 58 shows that this is because no such decision was taken.  At the top of page 2 it notes Mr. Knapp advising that in a telephone conversation the previous day the plaintiff had offered his resignation which was “now before the Board for consideration”.  Later on the same page there is a reference to Mr. Knapp “awaiting approval of the Board to discuss with Kevin Deguara the terms of his resignation as outlined”.  The Board subsequently determined to obtain legal advice, which was relevant to the question of whether or not the plaintiff should be resigning and if so in what terms, and “to draft an appropriate agreement whereby [the plaintiff] accept the forbearance of the club to sue in full satisfaction of his claims in relation to his employment departure from the club”.  There is no ambiguity at all about the minutes, and if they are accurate they record a decision authorising Mr. Knapp to negotiate an agreement with the plaintiff for him to resign on those terms.  Mr. Knapp’s evidence that there was a decision on that occasion to sack the plaintiff is plainly inconsistent with the minutes of the meeting, and I think just wrong.  He is, no doubt, accurately reflecting the view of the Board that the plaintiff’s employment was not to continue, but plainly the Board expected that this situation would be resolved by a negotiated agreement for the plaintiff to resign.  There was therefore no need to decide to sack him.  It follows that the assertion in the written submissions on behalf of the defendant that the plaintiff was in fact sacked on 25 February 1997, which is contrary to para.10 of the Further Amended Entry of Appearance and Defence is rejected.

The minutes of the rest of the Board meeting on 25 February, Exhibit 56, confirm an expectation that the plaintiff would be leaving promptly.  There was some discussion about a new manager with Mr. Lord, which indicates that what they were talking about was the general manager’s position; see the comment by Mr. Carter in the fourth paragraph on p.2.  I should mention that since Mr. Mitchell resigned the minutes consistently show the plaintiff as being in the position of general manager of the defendant club (Exhibit 65, 66), although Mr. Knapp denied that that was appropriate: p.372   It certainly seems the plaintiff was not, in substance, in that position, since in effect Mr. Lord, through his company’s consultancy, was running the club as he used to when he was general manager, but I think it unlikely that the Board minutes could be consistently inaccurate; I think it more likely that Mr. Knapp was wrong about this as well and the plaintiff held this position nominally.  In the course of the meeting there was some discussion about a Mr. Sabine who Mr. Lord said was a manager available for temporary on site positions. Mr. Sabine took over as “club manager” of the defendant, by his company Bell Reef Pty Ltd being engaged for 12 months to supply his services, for an amount of $75,000 per annum: Exhibit 55.  This letter which Mr. Lord admitted he signed is dated 25 February 1997, and this would be consistent with the decision of the Board on that day, although Mr. Lord asserted the date must be wrong as it would not have been signed on that day: p.278.  I do not find this plausible.  Interestingly, the defendants’ written submissions in para. 24 argue on the basis that the letter is correctly dated and reflected the appointment on that date. During the meeting, the club extended its arrangement with Mr. Lord’s company until the end of June: Exhibit 56.

Later that morning there was a further meeting between the plaintiff, Mr. Knapp, Mr. Lord and  Mr. Koman recorded in Exhibit 53.  The document was dated 26 February but that is wrong.  Mr. Knapp referred to an amount of something like $30,000 having to be paid back, which was later questioned by the plaintiff; the minutes do not record the response until later.  According to the plaintiff,  Mr. Koman looked at some figures and came up with a total of $13,000: p.59.  The plaintiff asked whether there was anything wrong with his work and was told that he was the most popular person on the staff, but they felt that they had been let down.  He said that if he was dishonest he would not have offered to take a reduction in his salary previously; Mr. Knapp said in evidence that in late 1996 the plaintiff had spoken to him and offered to take a significant salary cut in view of the financial difficulties the club was then having, which offer Mr. Knapp declined: p.379. This offer also seems to me to be inconsistent with dishonesty on the part of the plaintiff.  Nevertheless, Mr. Knapp said that the Board could not continue to employ the plaintiff, but did not require him to repay any money if he was prepared to resign: Exhibit 53.  During the meeting, the plaintiff was pressured to make a decision but he said that he knew that he was in the right and that he would talk to other people.  He invited them to draw up an agreement and said he would show it to his solicitor.  Arrangements were made for the agreement to be sent to Mr. Walters.  Again, I think there was no significant argument from the plaintiff about the accuracy of this document.  It shows the plaintiff maintained his position that he had done no more than receive what he honestly believed he was entitled to.

The plaintiff did not do anything in the course of his employment thereafter.  There was an exchange of correspondence between the various solicitors, culminating in a letter of 20 March 1997 by which the plaintiff’s employment was terminated “as from today”, on the ground that he was guilty of serious misconduct in that he wrongly advised the administration manager of the club that he was entitled to an allowance of $15,000 per annum as from 1 July 1996 when he knew that the club had not agreed to pay him that amount as an “expense account”, or had no reasonable grounds for believing that it had done so.  When the plaintiff’s pay was made up the time spent from 25 February to 20 March was taken off the plaintiff’s accrued annual leave.  This was in accordance with a direction given to Ms. Cook by Mr. Lord and  Mr. Koman: p.132.  Mr. Lord admitted that he gave this instruction to Ms. Cook on the basis that “Mr. Deguara wasn’t working so he wouldn’t be paid for that.  He wasn’t sick so you couldn’t pay sick leave.  He was on leave so the appropriate measure in my mind would be annual leave”: p.276.  When I asked Mr. Lord about this (p.294) and pointed out the plaintiff was not on holidays at that time, he said that the plaintiff was not performing duties at the club and it was “an awkward situation to put a name to it”.  I suggested that the obvious name to put to it was that he had been suspended from duty, which Mr. Lord denied, although he was unable to explain why that was not true. 

Exhibit 53 in the middle of p.4 shows that during the meeting on 25 February Mr. Lord said that the plaintiff “be relieved of duties” until the renegotiation agreement was prepared and said he would get some cab vouchers so the plaintiff could go home.  The plaintiff did so.  It is abundantly clear from Exhibit 53 that the plaintiff was suspended from duty on 25 February, and that it was Mr. Lord who suspended him.  Mr. Lord’s refusal to admit that in the course of his evidence says a great deal about Mr. Lord’s credibility, indeed his honesty.  Changing the records so that the plaintiff was treated as being on holidays during the period from then until he was sacked was entirely without justification.  It was not a difficult situation that Mr. Lord or the defendant was placed in.  Any competent manager, indeed any ordinary, decent, honest person would have realised without having to think twice about the matter that the plaintiff had been suspended from duty but that he was entitled to be paid unless and until he was sacked.  Treating this as a period of leave was an underhand way of getting money back from the plaintiff, undoubtedly motivated by the tight financial position of the defendant at the time, and a desire for revenge because the plaintiff was not prepared to go quietly.  See also Exhibit 41 point 3.  It is a revealing measure of the petty nastiness of Mr. Lord, and his refusal to admit what he did, and his absurd attempts to justify this action, showed that he is a witness whose evidence is worthless. When the plaintiff complained to Mr. Lord at the time, Mr. Lord’s response was “You are on holidays.  That’s the way it is.  That’s it”: p.63. 

The plaintiff was subsequently employed from early in April to early June 1997 in a temporary position with Brothers Community and Sports Club: p.63-4.  In October 1997 he began employment with the Italio-Australian Centre which was then in voluntary administration.  By February 1998 it was out of administration, and the plaintiff’s salary was increased to $50,000: p.64. 

The plaintiff was not the only person to leave the defendant at about this time.  I have already referred to Mr. Mitchell who left in December; Mr. Goode left on 11 December 1996 (p.164) and subsequently made an unfair dismissal claim against the defendant (Exhibit 56) which was later withdrawn: Exhibit 67. Ms. Cook left in 1997 in March or April: p.140.  The executive chef, Mr. Cooper, left in February 1997: Exhibit 48.  He was replaced by the sous chef: Exhibit 56.  Mr. Gray, who had been gaming manager and then sales and marketing manager, was apparently put off in October 1996: Exhibit 62.  Other employees also left.  By late January 1997, the club’s management was reduced to the plaintiff, two duty managers and one supervisor, with the rest being done by Mr. Lord’s company: Exhibit 65. 

Credibility
I should say something about the question of credibility of the witnesses.  I was most unimpressed by Mr. Lord as a witness; he struck me as shifty, evasive (see e.g. p.259-60), patronising, arrogant and willing to say anything to make himself appear in a good light and the plaintiff in as bad a light as possible.  I have already referred to a number of aspects in his evidence which I found unsatisfactory, or inconsistent with other evidence.  One area where he was evasive was when he spoke of his own remuneration package at p.236 which he put at $120,000 per year plus a car plus a club phone and any work related expenses.  Under cross-examination he asserted that he did not get personal expenses from the club, but then admitted that he had had his children’s school fees paid for by the club and that these were personal expenses: p.290.  However he claimed that from 1985 he received no expenses and just $120,000 in salary.  That sounds inconsistent with the package offered to Mr. Mitchell, which included an expense account: p.142.  I cannot believe that Mr. Mitchell was offered a package significantly better than that of Mr. Lord.  The plaintiff said Mr. Lord was on $160,000 plus (p.82) and I think that was broadly accurate.  Mr. Lord denied that Mr. Sabine was working for the defendant during February 1997 (p.292) but on 24 February 1997 he co-signed a letter on the defendant’s letterhead which was signed by Mr. Sabbarn as “co-ordinator”.  The letter confirms the appointment of a Mr. Underhill as “executive chef” as from 17 March 1997.  This implemented Mr. Lord’s “recommendation” to this effect which he gave to the Board on the following day, 25 February: Exhibit 56, p. 5.  Mr. Lord could not offer any explanation for Mr. Sabine’s having signed the letter at that time.  I think the explanation is that Mr. Lord’s evidence at p.292 was false.  I have referred already to his evidence about why he deprived the plaintiff of much of his accrued annual leave.  Overall I regard his evidence as totally unreliable. 

I have more confidence in the evidence of  Mr. Koman, although I am also wary about his evidence as there were some things which he said which were shown to be wrong, as I have mentioned.  He put forward Exhibit 69 as being based on club records when in important respects it is not and is incorrect.  Exhibit 71 is wrong in detail.  I am also very wary about Exhibit 14, and whether it was deliberately misleading.   Mr. Koman still works for Mr. Lord’s company, and is therefore in a somewhat difficult position. This I expect explains why he backed up to some extent Mr. Lord’s nonsense about the plaintiff’s leave entitlement: p.408. The inconsistency between him and Mr. Lord as to what Mr. Lord was told about the plaintiff’s continuing receipt of the “expense account” is, I think, confirmed in  Mr. Koman’s favour by Exhibit 53.  On the whole, I do not think that I can rely confidently on  Mr. Koman’s evidence, and I am treating it cautiously.  I do not accept his schedules, Exhibit 70, as reliable unless they are confirmed by other acceptable evidence.

I have mentioned a number of occasions when Mr. Knapp’s evidence to me was shown to be wrong.  In other respects, it seemed to me that much of his evidence was self-justifying, and he appeared to be determined to cling to the idea that there was only one possible interpretation of what had been said in his conversation with the plaintiff.  I think this is because, once one accepts that the offer he put was ambiguous and capable of meaning what the plaintiff says it means, it necessarily follows that Mr. Knapp  bungled the negotiations with the plaintiff by not finding out just what the plaintiff’s current remuneration was before negotiating with him, and then by not making clear what was and what was not to continue, and then by not properly documenting the agreement that he had reached in writing, and I think because of this he is unduly defensive about the incident, and determined to cling to the idea that there was only one possible interpretation of that conversation, and that any other view must be dishonest. This has, I think, coloured and distorted his evidence.  There are a number of aspects of Mr. Knapp’s evidence which I found very worrying, but ultimately I do not think that Mr. Knapp was being dishonest in his evidence.  However, I cannot accept him as being a particularly reliable witness.  There are a number of matters I have referred to where his evidence is contradicted by contemporaneous documents, and in other respects I prefer the evidence of other witnesses.  In the conflict between him (p.371) and Mr. Lord (p.274) as to whether the contract between the defendant and Mr. Lord’s company was in writing, I prefer the evidence of Mr. Lord; notwithstanding my views otherwise on his evidence, an absence of writing would be entirely consistent with his business practices generally, and I did find that evidence of his most plausible.  I therefore think that Mr. Knapp was honest but not a particularly reliable witness, and I  need to be very careful about accepting  Mr. Knapp’s evidence where it is not inherently plausible or supported by contemporaneous documents. 

With regard to the plaintiff, I think that there were some parts of his evidence which were not accurate, but in general there was nothing arising in the course of the trial which caused me to have any serious doubt about whether he was trying to tell me his best recollection of what had actually occurred.  There was nothing which made me even suspect that he was being dishonest in his evidence; on the contrary my impression of him in the witness box was entirely favourable.  I have no hesitation in saying that in respect of the numerous conflicts between him and Mr. Lord about conversations to which only they were parties I definitely prefer the evidence of the plaintiff over that of Mr. Lord.  I think that Mr. Lord was persistently lying to me about his conversations with the plaintiff. 

It was submitted on behalf of the defendant that Exhibit 35, a curriculum vitae of the plaintiff, showed that the plaintiff was “an unmitigated liar” because he had falsely represented himself to have been the operations manager of the Broncos Leagues Club from 1987 to 1992.  The document plainly does not say that; the entry on p.4 relating to his employment with Broncos Leagues Club, which is said to have spanned 1987 to 1982, clearly states that he commenced employment as a duty manager, so it does not assert that he was operations manager throughout that period.  It is, I think, consistent with the plaintiff’s evidence under cross-examination that he achieved the position of operations manager during his period of employment with that club: p.66.  The plaintiff’s evidence in chief at p.25 does on the face of it look like an assertion that he was operations manager for three years at that club, but I think that the answer is not really inconsistent with the evidence in cross-examination that during his period of employment with that club the position he achieved was operations manager.  So far as I recall the plaintiff was not cross-examined about Exhibit 35.  I think that this attack on the plaintiff’s credit is quite unjustified. 

I do not think that any particular question of credibility arose in relation to any other witness in the trial. 

I accept the defendant’s submission that the plaintiff has not proved that he was employed under an oral agreement with Mr. Lord on or about 27 May 1993 in the position of operations manager.  Indeed, I think the evidence shows clearly to the contrary.  It is clear however that at some point he was employed in that position, and I accept that it was by Mr. Lord, and I further accept that whatever the prior terms of employment of the written agreement, Exhibit 10, superceded the earlier oral agreements.  The only significance of the early agreements therefore for the purposes of this action is whether they give rise to any and what right to unpaid accrued long service leave.

I have already resolved the effect of the conversation between the plaintiff and Mr. Knapp on 20 June 1996 when the plaintiff was offered the position of “club manager”.  This was not an offer of a new contract which superceded the contract then in place, what was being offered was a variation of the existing agreement.

There was certainly nothing said by Mr. Knapp which is inconsistent with that interpretation, and the various circumstances to which I referred support that interpretation.  I think it is of some significance that Mr. Mitchell, who was in a sense in the position of an objective and reasonable outsider, placed that interpretation upon the version of the conversation which he was subsequently given by Mr. Knapp.  The plaintiff accepted the offer and I think the result was that the contract in writing was varied accordingly. 

Such a conclusion necessarily disposes of the ground advanced on behalf of the defendant, that it was entitled to dismiss the plaintiff because he was dishonestly claiming payments to which he was not entitled.  The plaintiff was claiming payments to which in my opinion he was entitled to under his contract as varied.  Far from it being wrong for the plaintiff to be claiming these payments, in my opinion it was wrong for the defendant to doubt his entitlement to them.  But even apart from this, it is clear beyond argument that the plaintiff was in no sense acting dishonestly.  Even if I were wrong about the correct objective interpretation of the offer made by Mr. Knapp, such an interpretation is plainly one which can honestly be held.  There is not a shred of evidence to support the view that the plaintiff did not honestly believe that that was what was being offered to him.  The only basis which can be advanced for a contrary view is that the offer put by Mr. Knapp was so clear no other interpretation of it could possibly be honestly held by any intelligent person.  That is nonsense.  Even apart from the fact that a court is naturally reluctant to draw an inference of dishonesty against someone, that is an extraordinary argument to advance on the basis of an offer which at best was ambiguous.  It did not purport to be an exhaustive statement of the benefits to which the plaintiff was entitled under a contract of employment, even if the word “package” been used.  The plaintiff’s actions, in reporting the matter to Ms. Cook, in a way which invited reference to Mr. Knapp, and making claims in circumstances where he must have been aware that the claims would come to the attention of Mr. Knapp, are entirely inconsistent with the notion that he was claiming something that he knew he was not entitled to, and indeed I think that his reaction once he was challenged about the matter is entirely consistent with someone who believed that he was doing the right thing but was prepared to acknowledge that he might have made a mistake and was willing to make amends if he had.  Not only is there no direct evidence of dishonesty, I think there is no evidence of any conduct which is even consistent with dishonesty.  (For this purpose I disregard the evidence given by Mr. Lord as to some of his conversations with the plaintiff in early 1997, which I do not accept.)  At best for the defendant, the plaintiff was honestly mistaken about the effect of the agreement, but clearly the defendant was not entitled to dismiss the plaintiff summarily. 

What happened therefore on 20 March 1997 is that the defendant wrongfully repudiated the plaintiff’s contract.  The plaintiff is therefore entitled to damages for breach of that contract, and the question becomes how they should be assessed.  Ordinarily damages for wrongful dismissal are assessed on the basis of the amount which would have been paid to the plaintiff had the plaintiff not been wrongfully dismissed, but if the defendant had acted to terminate his employment on the terms most favourable to the defendant.  Ordinarily that means that the plaintiff recovers the amount he would have earned during the period of reasonable notice to terminate the employment, subject to an allowance for any income earned during that period.  The present case is somewhat complicated by the fact that it is a fixed term contract, but with a provision for termination on nine months notice.  At the time of the termination however, the contract had less than nine months to run, since the two year term expired on 14 September 1997.  One way the club could have acted to bring the plaintiff’s employment to an end on terms favourable to it without breaching the contract would have been to allow the plaintiff’s contract to run out and not extend it. 

The plaintiff however submits that what occurred here is that the contract provided in clause 7(f) for a particular amount to be payable in the event of the defendant terminating the plaintiff’s employment other than within the terms of clause 7(d) or clause 5.  It follows from my earlier finding that neither clause 7(d) nor clause 5 applied, and the plaintiff’s submission is that therefore on the defendant’s termination of his employment he became entitled to a payment under the contract equal to nine months salary.  

Unpaid Long Service Lease
In my opinion, Exhibit 6 is an admission that by 27 May 1994 the plaintiff was entitled to receive annual leave at the rate of five weeks per year, and that is consistent with the evidence of Ms. Cook: p.123.  I think it is appropriate from this evidence to infer that there was an actual term of the contract of the plaintiff’s employment that he be entitled to five weeks annual leave.  If that is not justified, however, I think that it was an implied term of the plaintiff’s contract of employment that he had such an entitlement, at least once he was appointed operations manager.  I think that there is no difficulty in implying into a contract of employment an entitlement to annual leave; it would, I think, be completely contrary to commercial and industrial reality to imagine a contract of employment these days which made no provision for annual leave.  It then just becomes a question of what period of annual leave should be provided by the implied term. I do not think that it is necessary to consider issues of custom and usage throughout the industry, an issue which is in any event clouded by the circumstance that many if not most employers were under an obligation pursuant to an industrial award to provide a certain amount of annual leave: Majau Carrying Co Pty Ltd v. Coastal Rutile Ltd (1973) 129 CLR 48; Burn v. Australian Airlines Ltd (1995) 185 CLR 410. It is, I think, sufficient to say that in the absence of some express agreement to the contrary, the plaintiff would be entitled to annual leave in accordance with the usual practice of the defendant for a person of such a position within its organisation. The evidence was that, at least for people of the level of the plaintiff, this was five weeks: p.402 of an entitlement to five weeks annual leave, accruing, was not a term of the contract to be inferred from the evidence, which I think it is, I would find that there was an implied term of the contract to that effect.

There is nothing in Exhibit 6 to indicate that as at 27 May 1994 the plaintiff had any accrued annual leave, that is annual leave to which he was entitled but which he had not then taken.  There is, I think, no other evidence that, whatever the plaintiff’s entitlement to annual leave prior to 27 May 1994, it was not taken by the plaintiff.  For practical purposes therefore, Exhibit 6 is evidence of the plaintiff’s entitlement to accrued annual leave.

I should mention in passing a submission contained in para. 33 of the defendant’s submissions in reply. The plaintiff was entitled to terminate the contract on six months notice, or he could simply wait until it ran out on 14 September. There was no evidence that the plaintiff was intending to leave the employment with the defendant in breach of his contract.   I do not recall this being put to the plaintiff in cross-examination.  This submission is entirely unjustified.

What the defendant did was breach the contract of employment by wrongfully repudiating it, by purporting to terminate summarily on a ground which was not open to it, and no other ground for summary dismissal was shown to be open.  In such a situation, the ordinary measure of the plaintiff’s damages is such amount as puts him in the same position as if the breach of contract had not occurred, that is, as if he had not been wrongfully dismissed.  That is qualified by the assumption that the defendant would have performed the contract in a way most favourable to the defendant, which involves in the ordinary case the assumption that, if the defendant had not breached the contract, it would nevertheless have taken such steps as were lawfully open to it to terminate the plaintiff’s employment as quickly as could be done without a breach of the contract.  In the ordinary case of a contract of employment, this means by giving the plaintiff proper notice terminating that employment.  As a result the damages are limited to the amount the plaintiff would have earned during that period of notice, less any income that the plaintiff earned or ought to have earned from alternative employment during that period. 

In the present case, however, the hypothetical alternative, involving the defendant’s performing the contract in a way most favourable to the defendant, does not necessarily mean paying out the amount specified in clause 7(f); notwithstanding some ambiguity about clause 2, I think that it properly was a contract for two years in the absence of an agreement for an extension, and it would have been open to the defendant simply to let the contract expire at the expiration of two years from 14 September 1995.  The hypothetical situation which is used as the basis for assessing damages in these circumstances is that where the contract is performed most favourably to the defendant, which would not necessarily be by terminating under clause 7(f).  The plaintiff’s argument may amount to a construction that clause 7(f) is in effect a liquidated damages clause for wrongful dismissal; that its effect is that if the plaintiff’s employment is terminated in circumstances where the defendant is not entitled to terminate the plaintiff’s employment summarily, there is a contractual obligation to pay the amount specified in the clause. 

I think it is convenient at this point to resolve an issue of construction as to clause 7(f).  The plaintiff’s submission is that he is entitled to nine months “remuneration” under the contract, but that is not the term used in this clause; the term is “nine months salary”.  Clause 3 provides that the plaintiff’s “remuneration” consists of a number of things, one of which is a “base (cash) salary” at a particular rate, which may be increased by agreement, and there is a reference to the amount as varied being the “annual salary”.  Superannuation is payable by reference to the “annual salary” rather than 6% of the whole of the remuneration payable.  It seems to me that the  literal meaning of clause 7(f) is that it provides for payment of nine months salary, that is salary within clause 3(a), but nothing else.      

That indeed would be consistent with simplicity of operation.  It would be difficult to imply any sort of meaningful amount to remuneration under clause 3(b) and (g) in respect of the nine month period, there is no particular reason why the club should in such circumstances pay the nine months income protection insurance under clause 3(d) and it would be convenient to avoid what might be complicated calculations about the value of nine months expense account, superannuation contributions and leave entitlements to provide a formula which excluded consideration of those matters.  In addition, the “expense account” presumably operates on an annual total, and there is no particular reason other than by coincidence for the “expense account” would have been claimed pro-rata fully but no more up to the point when the employment was terminated.  The period of nine months is very generous on any view of its operation, but if it is treated as nine months of the base salary, this is equivalent to a shorter but still generous period of a total remuneration, while simplifying the calculations.  Although this contract was so badly drafted that I am wary about placing too much reliance on the mere use of the word “salary” rather than “remuneration”, the distinction appears on the face of the document and there is nothing in the document which justifies my overlooking the distinction, the agreement may be said plausibly to work more reasonably if effect is given to the distinction.  In my opinion, therefore what clause 7(f) provides  for is nine months salary, that is the amount payable under clause 3(a) as varied.  At the time of the termination the plaintiff was receiving a “salary” of $80,000 per annum, so the payout figure under clause 7(f) was $60,000. 

If the plaintiff had been simply allowed to work out the contract, he would have received salary  to a period to 14 September 1997, in effect 25 weeks.  The gross salary of $80,000 per year for this period is $38,462, and the superannuation contributions for the period $2,308.  He would also have received a further entitlement to annual leave in respect of which there was a 17½% leave loading, for which $647 should be allowed.  He would also have had the benefit of a motor vehicle, although he would have had to take it to work each day, and what he has really lost is the benefit of such private use of the vehicle as he would have made.  That, I think, is not properly measured at $15,000 per annum, but that would have been the cost to the defendant for the provision of the motor vehicle which for the 25 weeks would have been $7,212.    In addition, the plaintiff would have been able to obtain the balance of the expense account allowance of $15,000 for that second period.  Exhibit 19 shows that he was paid expense allowance after 14 February 1996 of $2,000 on 23 October 1996 and $2,240.37 on 2 December 1996, a total of $4,240.37.  He is therefore entitled to a balance of $10,759.63, but at this point a complication arises.  That amount he would have received free from tax, so that the cost to the defendant of keeping the plaintiff on until he worked out his contract would have been a further amount by way of fringe benefits tax of 47% of this.  The total cost to the defendant therefore of the balance of the “expense account” would have been $15,817.  Accordingly the total cost to the defendant of keeping the plaintiff in employment for the balance of his contract would have been $64,446.  There is some approximation involved in these figures, but for present purposes it is sufficient to point to the fact that they total amount greater than the cost of paying out the plaintiff under clause 7(f) of $60,000.  It follows that damages for breach of the contract of employment are properly assessed at $60,000. 

If this amount is to be paid as a gross figure it does not matter whether I am assessing damages for breach of contract or awarding an amount payable under a contract, because the figure will be the same.  There is no question of mitigation; the defendant would have paid this amount and the plaintiff would have walked away and been free to take other employment from the following day.  It may be however that there is a different tax treatment depending on whether the amount is awarded as damages for breach of contract or remuneration payable under a contract, and if so that may affect the assessment of damages.  Unfortunately, the submissions from the parties differ as to the legal position here.  The plaintiff’s submission was that the gross amount should be awarded, on the basis that it is taxable: Kilbon v. NZENZED Precision Products Pty Ltd (1988) 4 VIR 31 at 34. The defendant’s submission on the other hand was that the amount payable in damages should be calculated on the basis of net income: New South Wales Cancer Council v. Sarfaty (1992) 28 NSWLR 68.

Counsel for the appellant:
Counsel for the defendant:
Solicitors for the appellant:
Solicitors for the defendant:

Hearing Dates: