Dodds v Premier Sports Australia Pty Ltd

[2003] NSWSC 948

CITATION:	Dodds v Premier Sports Australia Pty Ltd & Ors [2003] NSWSC 948
HEARING DATE(S):	25 to 29 August, and 1 September, 2003
JUDGMENT DATE:	24 October 2003
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Palmer J
DECISION:	Plaintiff's claims for relief dismissed; declarations as sought by Defendants.
CATCHWORDS:	CONTRACT - EMPLOYMENT - Plaintiff engaged by United States corporation to manage pay television business - employment contract provided a very substantial termination benefit - control of the business changed and the United States corporation ultimately had no further interest in the business - Plaintiff continued to work in business - no express or oral employment contract with subsequent employer - new employer had no knowledge of the termination benefit in former contract with United States corporation - whether former contract, including termination benefit provision, "assigned" to new employer - whether new contract was made with new employer which by implication incorporated all the terms of the former contract, including the termination benefit. HELD: Plaintiff's contract with subsequent employer did not include the termination benefit provided in former contract of employment.
LEGISLATION CITED:	Industrial Relations Act 1996 (NSW) - s.106 Corporations Law - s.232, s.237
CASES CITED:	- BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 - Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410 - Hawkins v Clayton (1988) 164 CLR 539 - Premier Sports Australia Pty Ltd v Dodds [2001] NSWSC 707 - Carter & Harland "Contract Law in Australia" (4th Ed., para 909)
PARTIES :	David James Maitland Dodds - Plaintiff (50060/03); Defendant (50059/03) Premier Sports Australia Pty Ltd - First Defendant (50060/03); First Plaintiff (50059/03) Sports Investments Australia Pty Ltd - Second Defendant (50060/03); Second Plaintiff (50059/03) News Limited - Third Defendant (50060/03); Third Plaintiff (50059/03)
FILE NUMBER(S):	SC 50060/03; 50059/03
COUNSEL:	N.A. Cotman SC, P.R. Glissan - Plaintiff (50060/03); Defendant (50059/03) M.A. Pembroke SC, N.J. Beaumont - Defendants (50060/03); Plaintiffs (50059/03)
SOLICITORS:	Anthony J. Restuccia - Plaintiff (50060/03); Defendant (50059/03) Allens Arthur Robinson - Defendants (50060/03); Plaintiffs (50059/03)

Introduction

1    Mr D.J.M. Dodds is a highly experienced senior executive in the sports entertainment industry. Prior to 1994 he had held a number of positions of managerial responsibility, culminating in his appointment as Managing Director of Sky Channel. In 1994 he was recruited by a large American sports entertainment network, Liberty Media Corporation (“Liberty Media”) to be responsible for the establishment in Australia of the first domestic pay-TV channel, which was principally to broadcast sport to ‘pub and club’ audiences. The channel came to be known as “the Pub Channel”. 2    On 28 August 1994 Mr Dodds entered into a written contract for his services with Liberty Sports Inc (“Liberty Sports”), a subsidiary of Liberty Media. By a subsequent written amendment to that contract, Mr Dodds became entitled to a termination benefit which, by Australian standards, was extremely generous. It was agreed that if he left his employment “for any reason” , he was entitled to be paid 200% of the gross pre-tax profits earned by the Pub Channel in its last full financial year. 3    Liberty Media had formed the Pub Channel business as a joint venture with Australis Sports Pty Ltd (“Australis”). On 1 May 1996, Liberty Media disposed of half of its interest in the joint venture to a subsidiary of News Corporation, News Limited, which ultimately acquired the whole of the beneficial interest in the Pub Channel business. The corporate structure by which all of this was achieved is much more complex, and I will return to the detail later. 4    Despite the fact that Liberty Sports had no direct further interest in the Pub Channel business from 1 May 1996 Mr Dodds continued to do the same work in the business as he had done from the commencement of his contract. He was paid from a variety of sources from time to time and he says that he was never entirely sure which corporate entity was actually his employer. By the time he came to leave the Pub Channel business in September 1999, according to his lawyers, he could have been employed either by the First Defendant (“Premier”), or by the Second Defendant (“Sports Investments”), or by the Third Defendant (“News Limited”), or by all or some of them jointly: see paragraph 12 and the Summons referred to therein. 5    When Mr Dodds left the Pub Channel business he claimed to be entitled to a termination payment of 200% of the gross pre-tax profits of the business which, according to internal management accounts, had by then become profitable. The termination payment came to just over $5.4M. 6    When the Chief Operating Officer of News Limited, Mr P.J. Macourt, was told of Mr Dodds’ claim, he was outraged. Mr Macourt had, in July 1998, arranged with Mr Dodds that his employment would be extended for a further period of twelve months, but neither Mr Macourt nor any other officer of News Limited and its subsidiaries had known about the 200% profit termination payment in Mr Dodds’ contract with Liberty Sports. 7    Mr Dodds has brought proceedings to enforce a contractual claim to payment of the termination benefit. I will elaborate on the issues more fully below, but at the outset I should point out that Mr Dodds faces some difficulties in his claim. 8    First, as the parties agree, Mr Dodds’ contract of employment with Liberty Sports was terminated by implication, or mutually abandoned, by 1 May 1996. The parties agree that since that date Mr Dodds was employed under a contract with some company or other but such contract was not in writing. 9    Second, there has never been any oral contract between Mr Dodds and Premier, Sports Investments or News Limited which expressly incorporated all of the terms of the Liberty Sports contract or, in particular, the termination benefit provided in that contract, or which expressly contained any term to the same effect. 10    Third, the contract upon which Mr Dodds sues was said to have come into existence on 1 May 1996 and to have been extended by agreement in July 1998 but Mr Dodds did not provide a copy of the termination benefit clause in the Liberty Sports contract to Premier until about October 1998, after the agreement for extension had been concluded, nor did he expressly inform any officer of Sports Investments or News Limited of the existence of that clause prior to September 1999, when he came to leave his employment. 11    Fourth, as far as the evidence shows, no officer of Premier, Sports Investments or News Limited was aware from any other source of the existence of the termination benefit clause in the Liberty Sports contract until after Mr Dodds’ employment had been extended in July 1998.


The Proceedings

12 On 29 May 2000, Mr Dodds commenced proceedings against Premier, Sports Investments and News Limited by a Summons filed in the Industrial Relations Commission seeking relief under s.106 of the Industrial Relations Act 1996 (NSW) in respect of his contract of employment. On 10 October 2000, the respondents filed a reply and on 31 October Mr Dodds filed a response. 13 On 27 February 2001, Premier, Sports Investments and News Limited commenced proceedings against Mr Dodds in the Federal Court of Australia. On 15 August 2001, the proceedings in the Industrial Relations Commission were cross vested to this Court and the Federal Court proceedings were also cross vested so that all proceedings might be heard together in this Court. Accordingly, before the Court are two proceedings, Mr Dodds’ application under s.106 of the Industrial Relations Act (proceedings 50060 of 2003) and the Statement of Claim filed by Premier, Sports Investments and News Limited in the Federal Court proceedings (proceedings 50059 of 2003). 14 It is difficult to understand why Mr Dodds commenced proceedings in the Industrial Relation Commission under s.106 of the Industrial Relations Act . Under that section, the Commission may only make a declaratory order in respect of a contract or arrangement which it finds to be unfair. Likewise, under subsection (5) the Commission may make an order for payment of money only “in connection with” a contract found to be unfair and declared wholly or partially void, or varied. Absent a finding of unfairness, the Court has no power to make any declaration or order at all in respect of the contract: Premier Sports Australia Pty Ltd v Dodds [2001] NSWSC 707, para 19. Yet it emerges quite clearly from the Summons filed in the Commission that what Mr Dodds seeks in those proceedings is not a declaration that the termination benefit which he says is a term of his contract of employment is unfair and a consequential order varying that termination benefit. On the contrary, what he seeks is enforcement of the termination benefit according to its terms. 15 This much was conceded at the outset of the hearing by Mr Cotman SC, who appears with Mr Glissan, for Mr Dodds. By a cross claim in proceedings 50059 of 2003 which Mr Cotman filed in Court on the first day of the trial, Mr Dodds seeks orders for payment to him of money in due performance of a contract of employment which he says exists between himself and either Premier or else Sports Investments. No submissions were ultimately made by Mr Cotman in support of any order under s.106 of the Industrial Relations Act .


The undisputed facts

16    In about June 1994, a subsidiary of Liberty Media, Liberty Sports Australia Pty Ltd (“Liberty Sports Australia”) formed a joint venture with Australis in which each would own a fifty percent interest of the Pub Channel business. Premier was appointed to manage the joint venture which was called the “Premier Sports Australia Joint Venture”. Liberty Sports Australia later changed its name to Sports Investments Australia Pty Ltd (“Sports Investments”) and I will henceforth refer to it by that name. 17    By a contract in writing dated 28 August 1994, Mr Dodds agreed to enter into employment with Liberty Sports, a Colorado company and an intermediate parent of Liberty Sports Australia. The term of the employment was to commence on 4 October 1994 and, subject to certain termination provisions, was to expire four years later. Mr Dodds agreed to provide his services to Liberty Sports in respect of the formation and operation of the Pub Channel business in Australia. The contract provided for a salary of $300,000, a travel allowance, and other ancillary benefits. 18    Clause 4(e) of the contract provided:
“In addition to the salary set out in paragraph (a) above, the Company and the Executive will negotiate in good faith within the first two months of the employment for a bonus plan based upon a percentage of profits from the pub channel and the gaming channel.”
19    After execution of this contract, Mr Dodds negotiated with Mr Mat Tinley, a senior officer of Liberty Media, for a bonus plan, in accordance with Clause 4(e). They reached agreement that Mr Dodds would be entitled to a bonus of 10% of the monthly net profit of the Pub Channel business, as evidenced in a letter dated 28 October 1994 from Mr Dodds to Mr Tinley. 20    On 14 December 1994, Mr Dodds was appointed a director of Sports Investments and on 16 December he was appointed a director of Premier. He remained in those positions until his departure from the Pub Channel business on 4 October 1999. 21    Negotiations continued between Mr Dodds and Mr Tinley for the provision of an additional performance incentive for Mr Dodds. Mr Tinley said that it was the practice of the Liberty Media Group to give its senior executives an equity participation in a new venture such as the Pub Channel business, and he thought that it was appropriate that such a benefit be given to Mr Dodds. 22    Mr Tinley and Mr Dodds reached agreement upon additional terms in October 1995 and they were evidenced in a document dated 12 October 1995 signed by both Mr Tinley and Mr Dodds. Mr Pembroke SC, who appears with Mr Beaumont for Premier, Sports Investments and News Limited, was not at first prepared to concede that this agreement was genuine. However, Mr Tinley gave evidence about his discussions with Mr Dodds and Mr Pembroke ultimately made no submission that I should find that no variation to Mr Dodds’ contract with Liberty Sports had in fact been made in October 1995, as alleged. 23    The document signed by Mr Tinley and Mr Dodds contains a typewritten term which is irrelevant for present purposes. However, at the foot of the document, the following appears in Mr Tinley’s handwriting:
“David – It is further agreed that immediately after your current employment ends, for any reason, you will immediately be paid a lump sum equal to: the product of (1) ten percent of the gross pre-tax profits of the pub channel for its most recently completed financial year, multiplied by (2) a factor of (20) twenty.”
24    The history of Mr Dodds’ employment from October 1994 onwards is, to say the least, confusing. Although his contract of employment was with Liberty Sports, his remuneration under that contract from 4 October 1994 until 30 June 1995 was actually paid by Australis Media Ltd, which was not a related company of Liberty Sports. The personnel records of Australis Media show Mr Dodds as its employee. Why this occurred has not been explained. Mr Dodds never entered into a contract of employment with Australis Media or Australis. 25    On 1 July 1995, Mr Dodds’ remuneration began to be paid by Premier. Again, no explanation of this change is in evidence. Mr Dodds never signed a contract of employment with Premier; there is no evidence of an express oral contract. 26    By an agreement dated 30 October 1995 between Liberty Media, News Corporation, Tele-Communications International Inc (“TINT”), and Tele-Communications Inc it was agreed that the fifty percent interest of Liberty Media in the Premier Sports Australia Joint Venture would now be acquired by a new international joint venture, to be known as the Fox Sports International Joint Venture, and that News Corporation would indirectly own a fifty percent interest in that joint venture, the other fifty percent being held indirectly by Liberty Media and TINT. It was a term of that agreement that a company was to be formed to conduct the Fox Sports International Joint Venture and that that company would employ certain senior management employees of Liberty Media’s international sports business. It was provided that the employment of those executives would not be terminated “within the first eighteen months thereafter except for cause” . Amongst those employees was Mr Dodds. 27    Mr Dodds was not a party to the October agreement nor was he told a great deal about it. While he knew that there was a change in the ultimate ownership of the Pub Channel business he was not aware of the precise terms of the agreements effecting the change, nor was he aware of the provision in the October agreement as to the continuation of his employment for a minimum of eighteen months. Indeed, he frankly admits that because he was poorly informed of what was happening at this time, he did not really know which corporation was his employer or what was the status of his contract with Liberty Sports: T48.1-.11. 28    On 1 May 1996, the parties to the October agreement formed a joint venture company (“ISPP”) which acquired all of the shares in Premier and Sports Investments. Mr Dodds never entered into a written or express oral contract of employment with ISPP. His remuneration continued to be paid by Premier, as it had been since 1 July 1995. 29    On 26 September 1997, News Limited acquired from ISPP the whole of the shares in Premier and Sports Investments. News Limited thereby acquired fifty percent of the joint venture business of the Pub Channel, the other fifty percent still being owned by Australis. Mr Dodds never signed a contract of employment with News Limited; there is no evidence of an express oral contract made with News Limited in September 1997. 30    On 12 June 1998, Sports Investments, now a wholly-owed subsidiary of News Limited, acquired from the liquidator of Australis Media the remaining fifty percent interest in the Pub Channel business. News Limited then, through its ownership of all the shares in Premier and Sports Investments, owned one hundred percent of the Pub Channel business. 31    Mr Dodds’ remuneration from June 1998 to 30 June 1999 continued to be paid by Premier. From 1 July 1999 he was paid by Sports Investments. The reason for the change on 1 July is not explained in the evidence. 32    After the change in ownership of the Pub Channel business which was agreed in October 1995 and implemented on 1 May 1996, Mr Dodds clearly still regarded himself as employed under a contract which provided for a four year term expiring on 4 October 1998 although, as I have noted, he never expressly agreed with Premier, Sports Investments or News Limited as to the identity of his employer or as to the terms of his employment. 33    By early 1998, Mr Dodds wished to leave the Pub Channel business at the end of what he regarded as his four year term. 34    On 9 June 1998, Mr Dodds told Mr Ian Frykberg, his superior, that his contract of employment expired in October. Mr Frykberg told him to contact Mr Peter Macourt, Deputy CEO of News Corporation and a director of News Limited, to discuss his future. On 8 July 1998, Mr Dodds had a meeting with Mr Macourt in Mr Macourt’s office. Mr Macourt asked Mr Dodds to stay for another year and Mr Dodds agreed. There was no discussion as to the conditions of Mr Dodds’ extended contract of employment. There was no explicit reference to the particular contract which was being extended. There is some disagreement as to one part of what was said in that meeting and I will return to it shortly. 35    Some time after this meeting, in about October 1998, Mr R. Correll, the Chief Financial Officer of the Fox Sports International Joint Venture, asked Mr Dodds about the terms of his current contract. Mr Correll understood that Mr Dodds’ contract had been due to expire in October 1998 and had just been extended and he wanted to be sure of the terms of Mr Dodds’ remuneration. Mr Dodds gave him a copy of the written contract dated 28 August 1994 with Liberty Sports, a copy of the letter dated 28 October 1994 which recorded agreement as to Mr Dodds’ ten percent bonuses, and a copy of the document dated 12 October 1995 which provided the termination benefit. Mr Correll placed these documents on his file. He then endeavoured to confirm Mr Dodds’ current employment terms with Mr Frykberg without success and eventually, on 12 December 1998, he sent a memorandum to Mr Frykberg in the following terms:

“Re: David Dodds Remuneration

Ian,

As you are aware David Dodd’s [sic] former employment contract expired 4 October 1998. As I understand it the terms and conditions as set forth in it are to continue until notified.

Please contact me or simply return this memo signed by yourself to confirm the above.”

Mr Frykberg countersigned the memorandum. There is no evidence that Mr Dodds or Mr Macourt saw and approved the terms of this memorandum. As I have said in paragraph 34, neither Mr Dodds nor Mr Macourt says that there was an express reference in their discussion on 8 July 1998 to an employment contract expiring on 4 October 1998, nor was there express agreement that the terms and conditions set forth in the specified contract would continue until further notice.

36    It is clear that Mr Correll saw Mr Dodds’ 1994 contract with Liberty Sports, including the October 1995 variation providing for the termination benefit, well after the discussion between Mr Macourt and Mr Dodds in which Mr Dodds’ employment had been extended. Mr Correll did not forward a copy of Mr Dodds’ contract with Liberty Sports to Mr Macourt or Mr Frykberg prior to, or at the time when he sent his memorandum to Mr Frykberg on 12 December 1998. 37    Neither Mr Macourt nor Mr Frykberg were aware of the termination payment provision in Mr Dodds’ contract with Liberty Sports at the time that they had a discussion with him in mid-1998 as to extending the term of his employment in the Pub Channel business. Mr Macourt did not become aware of the termination benefit provision in the original contract with Liberty Sports until 23 or 24 September 1999, when Mr Dodds told Mr Macourt that he would be leaving the Pub Channel business and presented him with figures showing his claimed pay-out. When Mr Macourt saw the size of the claimed termination payment he became irate and told Mr Dodds to “go on holidays” . Mr Dodds’ employment was formally terminated on 4 October 1999.

Mr Dodds’ claim in contract

38    Mr Dodds has pleaded his contractual claim for payment of the termination benefit in different and inconsistent ways. In his Summons filed in the Industrial Relations Commission, Mr Dodds pleaded that he “commenced employment with [Premier] or its predecessor in or about 4 October 1994 pursuant to a written Contract dated 28 August 1994” , that Premier “restructured its operation” and that he “remained in the position of Company Executive Officer of [Sports Investments] and [News Limited] until the termination of his employment” . 39    The allegation that Mr Dodds commenced employment with Premier on 4 October 1994 pursuant to a written contract dated 28 August 1994 is plainly untenable. The contract was with Liberty Sports. Premier did not pay Mr Dodds’ remuneration from 4 October 1994 – it was paid by Australis. An internal memorandum of Australis dated 13 December 1994 mentions that while Mr Dodds’ salary is being paid by Australis, the salary is nevertheless to be recharged to the “Prime Sports Australia Joint Venture” – as the joint venture between Liberty Sports and Australis was originally called. How the remuneration was to be accounted for thereafter is not explained. 40    In his closing submissions, Mr Cotman asserted that as from 4 October 1994, Mr Dodds’ employer was in fact Sports Investments (then called Liberty Sports Australia), which was an Australian incorporated subsidiary of Liberty Media. This was contrary to his opening submission that Mr Dodds’ contract of employment was with Liberty Sports Inc, a company incorporated in Colorado: T2.4-.10. In any event, the express terms of the contract of 28 August 1994 identify Liberty Sports of Denver Colorado as Mr Dodds’ employer, not a company with an Australian address. No evidence was given that the reference to Liberty Sports of Denver Colorado was included in the contract by mistake and that it was the intention of the parties that the Australian company be the contracting party. In those circumstances, I am unable to conclude that the party with whom Mr Dodds expressly contracted by the document dated 28 August 1994 was Sports Investments rather than Liberty Sports. 41    Alternatively, Mr Cotman said that Premier became Mr Dodds’ employer pursuant to the terms of the Liberty Sports contract from 1 July 1995, when Premier began paying his salary in lieu of Australis. As I have noted, there was no evidence which explained why Australis had been paying Mr Dodds’ salary prior to 1 July 1995, and as to why Premier began to pay the salary thereafter. If assumption of every one of Liberty Sports’ contractual obligations under the 28 August 1994 contract is somehow effected merely by another corporation paying Mr Dodds’ salary, it is significant that Mr Cotman made no submission that Australis had in fact been Mr Dodds’ employer from 4 October 1994 onwards because Australis, not Liberty Sports, had paid Mr Dodds’ salary from that date. 42    In view of the unexplained circumstances in which Australis and, later, Premier came to pay Mr Dodds’ salary in 1995, I cannot conclude from that fact alone that Premier entered into a contract of employment with Mr Dodds upon all of the terms contained in Mr Dodds’ contract with Liberty Sports, particularly the term providing for the termination benefit. 43    Mr Cotman submits that on 1 July 1999 Sports Investments became Mr Dodds’ employer because on that date Sports Investments commenced paying Mr Dodds’ remuneration. Again, I note that there is no evidence explaining how this came about. As at 1 July 1999, Sports Investments had long ceased to be a subsidiary of, or associated with, Liberty Media. I cannot conclude that by the mere payment of Mr Dodds’ salary from 1 July 1999 onwards Sports Investments undertook all of the contractual obligations on the part of Liberty Sports contained in the 28 August 1994 contract and, in particular, the obligation to pay the termination benefit. 44    Both Mr Dodds and Premier, Sports Investments and News Limited seem to accept that the contract between Liberty Sports and Mr Dodds dated 28 August 1994, as subsequently amended, came to an end on 1 May 1996 when ISPP acquired all of the shares in Premier and Sports Investments: see paragraphs 26 to 28 above, paragraph 2 Further Amended Statement of Claim in proceedings 50059 of 2003, paragraph 2 of Mr Dodds’ Defence thereto, and see T316.25-.27, T336.36-337.5. 45    On and after 1 May 1996, Mr Dodds was undoubtedly employed under a contract of employment with some company or other. The problem is to identify which company because there is no evidence of an express written or oral agreement between Mr Dodds and any specified company at any time after 1 May 1996. The contract of employment is, therefore, wholly implied. 46    It is well established that the existence of a contract and the content of its terms can be inferred from a course of dealing between the parties seen in the context of mutually known facts and circumstances. The terms of such a contract may be actual – in the sense that the Court can infer that such terms represent the parties’ actual intention – and implicit, in the sense that, having regard to the actual terms, the Court is satisfied that further terms must be implied in accordance with the considerations enunciated by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, at 283: see e.g. Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410, at 422; Hawkins v Clayton (1988) 164 CLR 539, at 569-70. 47 In the present case, I am prepared to infer that on 1 May 1996 a contract for employment came into existence between Mr Dodds and Premier. This contract and its actual terms I infer from the following conduct of the parties from 1 May 1996 onwards:


– Premier continued to pay Mr Dodds’ salary;

– Premier paid Mr Dodds’ travel allowances and other benefits according to the terms contained in the Liberty Sports contract in accordance with specific requests from Mr Dodds from time to time;

– from 1 July 1997, when internal management accounts showed that the Pub Channel business had become profitable, Mr Dodds requested, and Premier paid to Mr Dodds at regular intervals, ten percent bonus commissions calculated in accordance with the bonus provisions in Mr Dodds’ contract with Liberty Sports as evidenced in the letter of 28 October 1994.

48    From this conduct I infer that the actual terms of the contract of employment were that Premier would employ Mr Dodds on terms as to salary, allowances and commissions which were in fact the same as had been contained in the Liberty Sports contract of 28 August 1994, as amended by the letter of 28 October 1994. No doubt Premier simply continued to pay salary and allowances at the same rates as had been paid by Australis in 1994. When Mr Dodds made a specific request for a bonus commission in 1997 and Premier paid the commission in accordance with the request, Premier was implicitly agreeing to an additional term of Mr Dodds’ contract in the terms set out in the letter of 28 October 1994. However, I am unable to infer that it was an actual term of the contract of employment with Premier that Mr Dodds be entitled to a termination benefit in accordance with the October 1995 amendment to the Liberty Sports contract. There are three reasons. 49    First there is no course of conduct between the parties at any time after 1 May 1996 which shows a mutual acknowledgement of Mr Dodds’ entitlement to payment of the termination benefit, such as there is in relation to the payment of his salary, allowances and his bonus commissions. This is not surprising since Mr Dodds did not actually seek to terminate his employment in the Pub Channel business and claim his termination benefits until September 1999. However, it is perhaps of significance that when Mr Dodds sent a note to Mr Frykberg on 9 June 1998 advising that his contract expired in October, he did not mention his entitlement to a termination payment. 50    Second, the evidence does not satisfy me that between 1 May 1996 and October 1998 Premier had in its possession a copy of the October 1995 amendment to the Liberty Sports contract which provided for the termination benefit, such that Premier must have known that this was a benefit to which Mr Dodds had been entitled under the Liberty Sports contract and which he might have had an expectation of receiving under his contract of employment with Premier. Mr Correll said that he first saw Mr Dodds’ original contract with Liberty Sports, including the October 1995 addendum, in about October 1998, when he asked Mr Dodds for it. It is a logical inference that copies of those documents were not on Premier’s files at the time of Mr Correll’s request: see paragraph 35. Further, Mr G.W. Herring, who was responsible for maintaining Premier’s files containing employment contracts from October 1994 until March 1996, was unable to say whether he had seen the termination benefit addendum to Mr Dodds’ contract. Mr Dodds himself said that when he received a copy of the addendum signed by Mr Tinley he put it either in his own office files or in his home files and it was kept there by him until Mr Correll asked him for a copy in 1998: T74.46-75.11. 51    Third, there is no evidence upon which an inference can be drawn that on 1 May 1996 News Limited, which had now acquired a substantial interest in the Pub Channel business, would have wished to offer the same generous employment incentive to Mr Dodds by way of termination benefit as had Liberty Media in October 1995. 52    In coming to this conclusion, I take into account that in May 1996 Mr Dodds and Mr Tinley were still directors of Premier. Mr Tinley was obviously aware of Mr Dodds’ termination benefit in the Liberty Sports contract because Mr Tinley himself had negotiated that term with Mr Dodds. But Mr Dodds and Mr Tinley were by no means the controlling minds of Premier at that stage. Mr Dodds was subject to the direction of Mr T. Ball, an appointee of News Corporation, and it is inconceivable that Mr Dodds, as a director of Premier, could have approved of a contractual benefit to himself such as the termination benefit which had appeared in the contract with Liberty Sports without Mr Ball’s knowledge and express approval. 53    Further, I am not able to imply into the inferred contract between Premier and Mr Dodds which came into existence on or about 1 May 1996 a term that all of the other terms of Mr Dodds’ contract with Liberty Sports, including the termination benefit provision, would be incorporated into Mr Dodds’ contract of employment with Premier. Nothing in the inferred actual terms of the new contract requires such an implication in order to give business efficacy to the contract with Premier, nor is it so obvious that it goes without saying: cf BP Refinery (Westernport) at 283. 54 In this regard, it is instructive to see how it came about that Premier began to pay bonus commissions to Mr Dodds from July 1997 onwards. By the beginning of July internal management accounts showed that the Pub Channel business had become profitable. On 8 July 1997 Mr Dodds sent a facsimile to Mr Ball making a claim for commission of $60,000 based on the profits of the Pub Channel business for the previous financial year. In support of this claim, Mr Dodds enclosed “relevant documentation” , which comprised only a copy of the letter of 28 October 1994 varying the Liberty Sports contract by the addition of an entitlement to a bonus commission. A handwritten note on Mr Dodds’ facsimile to Mr Ball records “Tony Ball has O.K’D this” . 55 In my opinion, one inference that may be drawn from Mr Dodds’ facsimile and Mr Ball’s response is that Mr Dodds was bringing to Mr Ball’s attention that under his previous contract with Liberty Sports he was entitled to a bonus commission and he was now seeking entitlement to a commission on the same basis from Premier. Mr Ball agreed, so that an entitlement to bonus commission thereafter became an actual term of Mr Dodds’ employment contract with Premier. 56 If this inference is able to be drawn, as I think it is, then Mr Dodds has not established to my satisfaction that I ought to draw a contrary inference, that is, that the bonus commission entitlement was always a term of the employment contract with Premier from 1 May 1996 onwards because that entitlement was implicitly incorporated into the contract with Premier together with all of the other terms in the Liberty Sports contract. 57 For these reasons, which essentially adopt the submissions of Mr Pembroke SC, I am of the opinion that the termination benefit provision was never a term of the contract of employment which came into existence between Mr Dodds and Premier on 1 May 1996. 58 I turn now to a submission by Mr Cotman that the Liberty Sports contract in its entirety was “assigned” to Premier. I am unable to accept this submission. First, conventional theory holds that while one can assign property, including choses in action, one cannot assign contractual obligations: see e.g. Carter & Harland Contract Law in Australia (4th Ed., para 909). Second, in any event, there was no express purported assignment of the obligations of Liberty Sports under the 1994 contract to anyone and there is no fact or circumstance which, in my view, gives rise to any implied assignment. 59    I come now to what occurred in mid-1998 when Mr Dodds’ employment was “extended”, to use a neutral term. 60    On 9 June 1998, Mr Dodds sent a letter to Mr Ian Frykberg, his immediate superior, in which he said:
“… with four months of my contract to run, I confirm that I will not be seeking any extension of my employment.”

Mr Dodds did not specifically identify the “contract” to which he was referring. Mr Frykberg says, and I accept, that his area of operations was sports programming and that he knew nothing of the terms on which Mr Dodds was employed other than that his salary was about $300,000 and that he was entitled to a car.

61    Shortly after he received Mr Dodds’ letter, Mr Frykberg informed Mr Macourt of its contents. Mr Macourt was Deputy Chief Executive Officer of News Limited. Mr Frykberg told Mr Macourt that he could not then think of anyone to replace Mr Dodds and that it would be best if Mr Dodds stayed on for another year “on the same deal” . 62    On 8 July 1998, Mr Macourt had a meeting with Mr Dodds in which operational issues were discussed. Towards the end of the conversation, according to Mr Macourt, he said to Mr Dodds: “I would like you to stay on as CEO at Fox Sports for another 12 months commencing in October.” Mr Dodds said: “I’d be prepared to stay on for a further 12 months.” 63    Mr Dodds does not dispute Mr Macourt’s account of the discussion to this point. However, he says that Mr Macourt said: “I will send you down the new contract” , Mr Dodds said: “Would you like me to have Rick Correll send you a copy?” and Mr Macourt replied: “No. I’ve got one here somewhere” . Mr Macourt denies this part of the conversation. 64    I accept Mr Macourt’s evidence on this point. In Mr Macourt’s position, as Deputy CEO of an operation of which the Pub Channel business was only one of many parts, it would be inherently unlikely for Mr Macourt to have in his possession a copy of Mr Dodds’ contract. The Chief Financial Officer of the Pub Channel business, Mr Correll, did not even have a copy of the Liberty Sports contract until he asked Mr Dodds for it after Mr Dodds’ discussion with Mr Macourt had already occurred. There is no satisfactory explanation as to how Mr Macourt could have had a copy of Mr Dodds’ contract when the files of Premier did not contain a copy, and the evidence of Mr Dodds strongly suggests that the October 1995 addendum to the Liberty Sports contract was kept in his own personal files until a copy was given to Mr Correll: see paragraph 50. 65    I accept Mr Macourt’s evidence that he did not know the terms of Mr Dodds’ current employment other than that he received a salary of about $300,000 and a car. It is clear, in my opinion, that Mr Dodds and Mr Macourt agreed that Mr Dodds would continue to be employed for another twelve months, implicitly upon the same terms of employment as were in effect as at the date of their conversation. 66    As I have found, Mr Dodds’ contract of employment as at July 1998 was a contract with Premier which came into effect on or about 1 May 1996. By July 1998, the terms of that contract which are to be inferred from the conduct of the parties up to that point included terms as to salary, allowances, a car and bonus commissions, but did not include a term for the payment of the termination benefit which had appeared in the Liberty Sports contract. It follows that the employment contract which was extended by the agreement between Mr Macourt and Mr Dodds on 8 July 1998 likewise did not include provision for the termination benefit. 67    As I have noted, from 1 July 1999 until the termination of his employment, Mr Dodds’ remuneration was paid by Sports Investments instead of Premier but there is no evidence explaining why this happened. Even if payment of remuneration by Sports Investments effected a change in the identity of Mr Dodds’ employer, there is no evidence to suggest that the new contract of employment contained terms which were any different from the terms of the contract between Mr Dodds and Premier, as extended by agreement between Mr Macourt and Mr Dodds on 8 July 1998. 68    For these reasons, it follows that Mr Dodds’ claim for payment of the termination benefit fails.


Whether any profit

69    Premier submits that even if Mr Dodds is otherwise entitled to enforce the termination benefit provision against it, nevertheless the Pub Channel business in fact generated no “gross pre-tax profits” within the meaning of that phrase in the October 1995 addendum to the Liberty Sports contract, for the last financial year prior to Mr Dodds leaving its employment. 70    The issue arises in this way. The Fox Sports International Joint Venture in fact conducts two businesses, a domestic channel business which provides pay television services to domestic premises throughout Australia and the Pub Channel business, which provides pay television services to commercial premises such as hotels and clubs. 71    The programming on the Pub Channel is generally identical to that on the domestic channel. In the Joint Venture management accounts, which were generated purely for internal use, all costs of programming, such as rights fees, production and promotion costs, were charged to the domestic channel business and no allocation of any part of these costs was made to the Pub Channel business. Only expenses specifically incurred in respect of the Pub Channel business were taken into account in the internal management accounts relating to that business. 72    The “gross pre-tax profits” of the Pub Channel business which were used by Mr Dodds to calculate his termination benefit of more than $5.4M in September 1999 were as shown in the Joint Venture’s internal management accounts relating to the Pub Channel business alone. Those accounts showed that the Pub Channel business had made a substantial profit in the last full financial year before Mr Dodds’ departure. 73    Premier says, however, that the internal management accounts do not truly reflect the “gross pre-tax profits” of the Pub Channel business because they do not show any liability for any portion of the rights fees, production and promotion costs of the programmes which it took from the domestic channel business. If an apportionment of those costs were shown as a liability of the Pub Channel business then, according to Mr P.R. Carter, the expert accountant retained by Premier, the Pub Channel business would have shown a substantial loss for the last financial year before Mr Dodds’ departure, so that his entitlement under his termination benefit would be nil. 74    Mr Humphreys, the expert accountant retained by Mr Dodds, has not done a calculation of “gross pre-tax profits” which includes any apportionment to the Pub Channel business of programming costs so that he is unable to dispute Mr Carter’s conclusion. 75    Mr Carter says that, according to conventional accounting methodology, where two businesses are conducted by one entity, one business utilising products or resources provided by the other, the costs of those products or resources would be apportioned between the two businesses to ascertain the profits of each. Mr Humphreys does not disagree with Mr Carter’s statement as to conventional accounting methodology. However, he says that the way in which the management accounts for the Pub Channel business were prepared shows that they were probably designed to reflect the terms of Mr Dodds’ contract as to bonus and termination payments, rather than to show the separate profits earned by the Pub Channel business and the domestic channel business. 76    As a matter of fact, the evidence of Mr Dodds and Mr Herring makes it clear that the internal management accounts for the Pub Channel business were not specifically designed to calculate benefits to which Mr Dodds might be entitled under his employment contract. 77    The question comes down to this: does the termination benefit provision require that “gross pre-tax profits” of the Pub Channel business be determined according to conventional accounting methodology or according to the manner in which Premier actually drew up its management accounts? This has been treated by both sides as a question of construction. Mr Dodds has not pleaded that, by representation or conduct, Premier is estopped or otherwise prevented from relying upon the construction of “gross pre-tax profits” for which it now contends. 78    The evidence is that the form and content of the internal management accounts for the Pub Channel business were decided upon by the then General Manager and Assistant General Manager of the joint venture business, Messrs Jemison and Herring respectively, together with Mr Dodds, some time “during the start-up operation” . Mr Herring says that the “monthly accounts” were presented to the joint venturers, which would include Liberty Media. However, the evidence does not make it clear whether by October 1995, when Mr Tinley concluded his agreement with Mr Dodds as to the termination benefit, Liberty Media, Liberty Sports or Mr Tinley had received internal management accounts for the Pub Channel business in the form of those now relied upon by Mr Dodds or in some different form. Mr Tinley was not asked whether, at the time that he concluded that agreement with Mr Dodds, he was aware of the manner in which the joint venture was allocating costs as between the Pub Channel business and the domestic channel business, and Mr Cotman made no submission that the agreement as to the termination benefit was made in a matrix of mutually known circumstances which included the manner of allocation of expenses as between the two businesses of the joint venture. 79    Accordingly, I am left to construe the words “gross pre-tax profits” unaided by any extrinsic evidence. In that circumstance, I am of the view that the words are to be given the ordinary meaning which a reasonable accountant would give to them if asked, without further elaboration, to ascertain the gross pre-tax profits of the Pub Channel business. In my view, the accountant would understand the words as requiring such profits to be determined, not according to whatever idiosyncratic method the joint venture might use form time to time in its internal management accounts for its own purposes, but rather according to the conventional methodology which accountants would normally use for the calculation of profits. It follows that I accept that the “gross pre-tax profits” of the Pub Channel business are to be determined by the methodology described by Mr Carter. 80    Mr Dodds bears the onus of establishing that, if the internal management accounts are not the proper basis for calculating his termination benefit, he is entitled nevertheless to some payment. As I have already noted, Mr Humphreys did not do a calculation based on some accounting methodology other than that employed in the internal management accounts. He said that there were a number of different ways one could allocate costs as between the Pub Channel business and the domestic channel business, but he did not say which of the unspecified different ways he thought the most appropriate. 81    In those circumstances, even if I had found that Mr Dodds had a contractual claim against Premier, I could not have been satisfied that there was a real likelihood of Mr Dodds establishing that there were any relevant “gross pre-tax profits” of the Pub Channel business so that I could not have referred it to the Master to enquire as to the amount to which Mr Dodds may have been entitled. 82    The remaining issues in the case require determination only if Mr Dodds’ claim for payment of the termination benefit succeeds because Premier, Sports Investments and News Limited have raised them by way of defence to Mr Dodds’ claim in contract. Nevertheless, in case I am in wrong in my conclusion as to the fate of Mr Dodds’ claim, I should briefly give my conclusions as to these issues and my reasons for my findings.

Whether Mr Dodds guilty of dishonest conduct

83    Mr Pembroke submits that if it be found that Premier contracted on 1 May 1996 to employ Mr Dodds on the same terms and conditions as those contained in the Liberty Sports contract then it is entitled to rectification of that contract by excision of the termination benefit provision because Mr Dodds consciously and deliberately did not disclose that provision to Ms P. Davis, the representative of the News Corporation interests, while Ms Davis was carrying out a due diligence investigation into the Pub Channel business in early 1996 for the purpose of enabling News Limited to decide whether or not to acquire an interest in the business. Mr Dodds’ failure to disclose, says Mr Pembroke, was unconscionable conduct which entitles Premier to rectification of any contract resulting from that conduct. 84    I am far from satisfied that Mr Dodds’ omission to disclose the termination benefits provision in the Liberty Sports contract during the due diligence investigation conducted by Ms Davis was the result of a deliberate and dishonest decision on his part. 85    Mr Dodds struck me as an honest witness who gave his evidence frankly and carefully, even when it did not promote his case. He said that from January to March 1996 he provided information about the Pub Channel business and its costs and expenses to Ms Davis, as and when she requested it. She then prepared business plans and projections relating to the business. Mr Dodds is not an accountant and he did not put together or verify for himself in any meaningful way the business plans and projections which Ms Davis prepared. 86    Mr Dodds says, and I accept that Ms Davis never expressly asked him to provide information about his contract of employment generally or any termination benefits in particular. Ms Davis does not suggest in her evidence that she did make any express and specific requests to Mr Dodds about the terms of his employment or about termination benefits. She certainly asked him for information about liabilities of the Pub Channel business generally but there is no evidence which is reasonably capable of founding a suggestion that Mr Dodds, having been asked expressly to disclose the terms of his employment contract, refrained from doing so in order to conceal the termination benefit. 87    Neither is there any reasonable basis for the suggestion by Premier that Mr Dodds was aware that the termination benefit was something which he ought to have disclosed even without being asked and that he nevertheless decided to remain silent. I accept Mr Dodds’ evidence that he believed that Ms Davis would have been aware of the terms of his employment by reason of the due diligence investigation which he believed she had conducted in Liberty Media’s head offices in the United States before she came to Australia. It would have been a reasonable assumption that amongst the records relating to the Pub Channel business kept by Liberty Sports or Liberty Media would have been copies of the employment contracts of the senior executives employed in that business, and that Ms Davis would have seen those contracts during her inspection. If she had seen Mr Dodds’ employment contract it would make sense that she would not have needed to ask Mr Dodds again about its terms. 88    Further, no plausible motive has been suggested for Mr Dodds to conceal his termination benefit from the News Corporation interests during the due diligence investigation. If he had concealed his termination entitlement during that investigation he could hardly have hoped to have had it paid by News Limited or its subsidiary without demur when he came to leave its employment later on. 89    For these reasons, I hold that Premier, Sports Investments and News Limited have failed to establish on the evidence their assertion that Mr Dodds deliberately misled them as to the terms of his previous employment contract.


Misconduct

90 Premier, Sports Investments and News Limited allege in their amended reply to the Summons for relief under s.106 Industrial Relations Act that Mr Dodds has been guilty of misconduct in a number of instances in the course of his employment. Mr Pembroke SC made it clear in both his opening and his closing submissions that those allegations were made only by way of discretionary defences to Mr Dodds’ original claim for relief under s.106 Industrial Relations Act : T28.43-.50, T354.24-.45. As no claim for relief under s.106 has been pressed by Mr Dodds it is unnecessary to deal with those allegations. 91 However, I think that I should say, in fairness to Mr Dodds, that in my view none of the allegations of misconduct were made out. In Mr Pembroke’s final submissions, all allegations of misconduct were abandoned save for the allegation concerning the Active-8 Agreement. As to that matter, I unhesitatingly accept Mr Dodds’ evidence that nothing came of an unsolicited suggestion made to him by third parties that he take a financial interest in a transaction in which his employer was also interested. There is no evidence at all to the contrary. 92 As far as the outcome of this case is concerned, there should not remain the slightest shadow over Mr Dodds’ career in respect of any of the allegations of misconduct which were made against him. 93 Premier, Sports Investments and News Limited pleaded breaches of s.232 and s.237 Corporations Law as additional defences if it were found that any of them had entered into a contract with Mr Dodds for the payment of the termination benefit. As I have found that there was no such contract, I do not think that it is necessary to prolong this judgment by a consideration of these defences.


Conclusions

94    For the reasons which I have given, I am not satisfied that Mr Dodds has proved the existence of a contractual obligation on the part of Premier, Sports Investments or News Limited in the terms of the October 1995 addendum to his contract with Liberty Sports dated 28 August 1994. 95    Further, even if such a contractual obligation had been proved, I am not satisfied that the gross pre-tax profits of the Pub Channel business in the relevant financial year were such as to entitle Mr Dodds to any payment of any sum pursuant to the termination benefit provision. 96    The orders I propose to make are as follows:


– Mr Dodds’ summons for relief under s.106 Industrial Relations Act in proceedings 50060 of 2003 will be dismissed;

– there will be declarations in terms of paragraphs 1 and 2 of the Further Amended Statement of Claim in proceedings 50059 of 2003;

– there will be judgment for the Cross Defendants on the Cross Claim in proceedings 50059 of 2003.

97    I will stand the proceedings over for a short time to enable the parties to bring in Short Minutes of Order reflecting these reasons, I will then hear any argument as to costs.
– oOo –

Last Modified: 10/28/2003