Esanda Finance Corporation v Kenghington No. SCGRG 93/33 Judgment No. 3962 Number of Pages 6 Contracts General Contractual Principles
[1993] SASC 3962
•21 May 1993
COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA PRIOR J
CWDS
Contracts - general contractual principles - Construction and interpretation of contracts - contract of comployment and redundancy policy - whether respondent's position was "materially or significantly downgraded" or responsibilities "materially diminished" - damages - appeal - no clear offer of position higher than that at which respondent worked - appeal allowed.
HRNG ADELAIDE, 12 May 1993 #DATE 21:5:1993
Counsel for appellant: Mr M. Evans
Solicitors for appellant: Finlaysons
Counsel for respondent: Mr T. Bourne
Solicitors for respondent: Stanley and Partners
ORDER
Appeal allowed.
JUDGE1 PRIOR J The respondent successfully sued the appellant for $14,781.18 damages. He had been employed by the appellant from September 1989 to March 1990 when he resigned. The appellant acquired or took over the business of Mercantile Credits Ltd at the end of April 1989. The respondent was then an employee of Mercantile Credits Limited. In the early part of 1989, he was acting as a Branch Manager. 2. It is admitted that around the takeover date of Mercantile by Esanda, employees of Mercantile were sent a document headed, "Intentions of Esanda Finance Corporation to the continuing business of Mercantile Credit Limited (MCL)". Within that document were a number of paragraphs relied upon in these proceedings. Two particular paragraphs provided:-
"Inevitably there will not be suitable postings for all of
M.C.L.'s present employees. However, because of ESANDA's size,
we have substantial ability to absorb staff into vacancies as
and when they arise within our own workforce. Where possible,
particularly at the senior level, we will plan the integration
so that staff for whom we do not have continuing employment
opportunities will have ample notice, and therefore ability to
properly plan their own redeployment. As set out in the draft
share sale deed ESANDA is committed to retention of the existing
M.C.L. redundancy policy, save only for the qualification that
it does not require ESANDA to continue with these redundancy
terms for staff once they have transferred to ESANDA's employ." 3. Under the respondent's contract of employment with Mercantile he had the benefit of a redundancy policy providing certain rights to employees including the right to resign and obtain a benefit in certain circumstances. Those circumstances included "a material or significant downgrading" by the employer of an employee's position or where an employee's responsibilities were "materially diminished" by the Mercantile Credits Group. 4. After Esanda took over Mercantile in April 1989, the respondent remained as a Branch Manager in Townsville for some time. On 24 July 1989 he received a written offer of employment from the appellant. The respondent accepted that offer. The letter inviting the respondent to "formally join Esanda" provided information. That information included two particular statements:-
"1. The position we offer is a senior role on our relief staff
in the Commercial Finance Unit. This is a temporary position
pending placement in a permanent posting as soon as suitable
opportunity arises. The job level we see as suitable to you
having regard to your current role and experience is a Level 4
position
...
5. For Mercantile Credit staff who accept positions with
Esanda, the redundancy policy and conditions as set out in E.W.
Thompson's letter of 10 March 1989 to staff will continue until
26 April 1990." 5. In these proceedings the appellant conceded that the redundancy provisions carried over until 26 April 1990 and that if the respondent made out his claim of a downgrading or material diminution in his responsibilities then he was entitled to judgment for the sum claimed, $14,781.18. 6. It was the respondent's evidence before the Magistrate that a telephone conversation with another employee of Esanda explained a particular paragraph in the offer of employment to him. That paragraph read:-
"As discussed orally we do not have a position available for you
at this time. However, we are aware of your desire to return to
Adelaide and the offer contained herein represents a genuine
endeavour to assist you in this regard and to also provide you
with an opportunity to continue your career in the finance
industry." 7. The respondent was asked to accept the offer by signing an acknowledgment on a duplicate copy of the letter returning it to the author of the letter by 25 July 1989. This the respondent did. It was his evidence that before accepting the offer he had a conversation with the State Manager for South Australia and Northern Territory, Mr McRobinson, who, the respondent said, told him that he would come into Esanda in a managerial capacity. The respondent came to Adelaide and commenced employment on 12 September 1989. It was his evidence that he commenced in Commercial Finance, spending most of his time in training courses. When he took up his position in Adelaide his package or remuneration and benefits continued at no lesser level than the remuneration and benefits he was receiving immediately before his transfer to Adelaide. It was common ground before the Magistrate that right up until the respondent's resignation in March 1990, the respondent continued to receive financial remuneration and other benefits equal to or arguably better than those which he had received before his commencement in Adelaide with Esanda. 8. It was the respondent's evidence that when he started in Adelaide the State Manager told him there were no current positions of a permanent nature available to him and that that was why he was allocated a relieving position in the Commercial Finance Unit. It was also the plaintiff's evidence that in November 1989 he was told by Mr Mineff that a vacancy had arisen for a position as a Finance Consultant with the appellant and that he was to take up that position. He said that position was not a managerial job. His duties included servicing former clients of Mercantile and seeking to build up a new base of Esanda clients. His evidence to the Magistrate was that he "was really going back to the job that (he) held when (he) first started with Mercantile Credits." 9. The respondent's case was that the finance consultancy position given to him in November 1989 was a Level 3 position. The Magistrate found that it was a Level 4 position being regarded as a higher level than a Level 3 position. The Magistrate found that the respondent took up his position in November 1989 without complaint at that time even though the remuneration payable was less than would have been payable had he been a Financial Consultant at a Level 4 position. It was the respondent's evidence that he was not at that stage in a financial position which enabled him to take a firm stand to oppose his posting. Because of this he accepted the Finance Consultant's position. In early 1990 he sought alternative positions and began to make other job applications. After receiving advice from his union, the respondent resigned. He did this by letter dated 20 March 1990, the resignation to take effect within four weeks. An agreement between the parties resulted in the date of the respondent's actual resignation being brought forward, the requirement for notice being waived. In his letter of resignation the respondent wrote:-
"In early November 1989 I was appointed to a permanent position
as a Finance Consultant in the Commercial Finance Writing area,
a position I still occupy. This is a level 3 position.
Although I had been told I was moving to Adelaide to a level 4
position, I was now being downgraded to level 3. I have
continued to be employed in the downgraded position." He also wrote:-
"I have been downgraded to the position I held when I originally
joined Mercantile Credits in February 1985. If I wished to
remain a Finance Consultant I would not have accepted a
promotion that required myself and my family to move all the way
to Townsville, Queensland. The responsibilities I had with
Mercantile Credit in Townsville, Queensland prior to the merger,
and which were to continue after the merger by my permanent
position to a level 4 Managerial Position (as per the letter
24th July 1989) had materially diminished. My position
immediately after the merger was on relief staff awaiting
appointment to a level 4 Managerial Position when it became
available. My posting as Finance Consultant in November 1989
represents a material and significant downgrading of my
responsibilities." 10. The appellant's response to the respondent's letter was made on 20 April 1990. In the appellant's letter it was said:-
"The statement in the second paragraph in your letter to the
effect '... I had been told I was moving to Adelaide to a level
4 position ...' is not correct in the true sense. You have
already acknowledged the relief position was temporary pending
placement in a permanent position as soon as a suitable
opportunity arose. Whilst ESANDA Finance has indicated the job
level suitable to your experience etc was seen as Level 4, for
obvious reasons, no advance commitment could be, nor was given.
As a Level 4 position suitable to your experience and
background, had not become available by early November 1989, you
were appointed to the post of Finance Consultant at level 3, the
same level as the relief position. This appointment was
considered desirable to provide you greater job satisfaction and
development opportunity rather than continuing with relief
duties; it was understood you preferred this course. In
comparison to the relief position originally accepted the
appointment to the Finance Consultant post did not involve
downgrading or any reduction in remuneration or benefits; in
fact, you gained the additional significant benefit of a company
car. That appointment did not exclude you from a subsequent
appointment to a level 4 position in line with our intentions." 11. The Magistrate considered that the respondent was entitled to succeed upon the basis that his appointment within Esanda to the position of Finance Consultant, that being a Level 3 position when his offer of employment was that he would be employed in a Level 4 position was a downgrading of his posting or a diminishing of his responsibilities. In his judgment, the Magistrate said:-
"When the plaintiff accepted a contract of employment with
ESANDA he lost any rights which he might have had under the
redundancy provisions of his Mercantile Contract of Employment.
To take the benefit of the Redundancy Policy incorporated in the
ESANDA contract of employment, the plaintiff must establish that
there was a material or significant downgrading by his employer
of his position or he must establish that his responsibilities
were materially diminished by ESANDA during the course of his
employment with ESANDA." 12. The Magistrate then continued:-
"The defendant has pointed to the fact that the plaintiff's
entitlement to salary, wages and other benefits was in no way
affected by his move to ESANDA. The defendant further points to
the fact that the plaintiff's appointment to the position as
Finance Consultant in November 1989 brought with it a benefit
which he had not previously had with ESANDA ie the benefit of a
motor vehicle. Evidence was lead to demonstrate that within
ESANDA the targets and business written by a Finance Consultant
were significantly greater than the sorts of business which a
Finance Consultant wrote with Mercantile. The plaintiff
countered that to some extent by his evidence that the systems
within the two organisations were quite different. Within
ESANDA branches provided business for the Finance Consultants to
write; within Mercantile the business written by the Finance
Consultant was business which he himself negotiated and
arranged. But even allowing for that, bearing in mind that the
evidence that ESANDA was a significantly larger financial
institution than Mercantile was, there is some force in the
defendant's proposition that a position as a Finance Consultant
with ESANDA carried with it a status and responsibility greater
than an equivalent position with Mercantile. I accept all of
those contentions. But it seems to me they overlook one vital
point. The vital point is that the offer of employment to the
plaintiff by the letter dated 24th July 1989 said `the job level
we see as suitable to you having regard to your current role and
experience is a level 4 position.' That sentence follows an
earlier statement in the same paragraph of that letter informing
the plaintiff that he would be given `a senior role' on the
relief staff but that that was a temporary position. Then
follows the sentence, quoted above, that the defendant saw the
plaintiff's proper position in its organisation as a level 4
position. Upon the evidence of both the plaintiff and of Mr
Mineff, the position occupied by the plaintiff as a Finance
Consultant was a level 3 position. On the evidence of Mr
Mineff, within ESANDA there were different levels or gradings.
On his evidence, a level 4 grading is a higher level and higher
grading carrying with it higher responsibilities and better
remuneration than is a level 3 position. Exhibit 18 is a
document which sets out various levels of remuneration depending
upon the personal competence of the holder of the position.
There are different levels of remuneration depending upon
whether one's performance is assessed as being on a grade
referred to either as base or adequate or competent or
commendable or outstanding. But if that document is looked at,
it can be seen that as one rises in levels, so does one's
prospects and capacity for remuneration increase. The fact that
the plaintiff did occupy, as from November 1989, a level 3
position is proven by the evidence of the plaintiff and the
evidence of Mr Mineff. Further, in response to the plaintiff's
letter of resignation, by letter dated 20th April 1990 the
defendant wrote of explanation to the plaintiff saying:
`As a level 4 position, suitable to your experience and
background, had not become available by early November 1989, you
were appointed to the post of Finance Consultant at level 3, the
same level as the relief position.'
In the offer of employment to the plaintiff of 24th July 1989
referred to above, the position as put to the plaintiff was
quite different. The position as put to him was that his
position in the Commercial Finance Unit as relief staff was
temporary. The permanent posting and the position which the
defendant offered to the plaintiff was identified to the
defendant as a level 4 position. That is not the position which
the defendant later made available to the plaintiff. By making
a level 3 position available to the plaintiff in November 1989,
the defendant did in fact in a material or significant way
downgrade the plaintiff's position within the group. The
evidence of Mr Mineff and the evidence of salary ranges
establishes that." 13. The Magistrate found the offer of employment made to the plaintiff in November 1989 was couched in unambiguous terms. He preferred the plaintiffs account about that to that of Mr Mineff. The Magistrate said:
"I am satisfied that the plaintiff was not told that the Level 3
position as Finance Consultant was a temporary posting. There
was no explanation to the plaintiff along the lines that a Level
4 position was not available at that point of time or that the
plaintiff would be transferred to a Level 4 position as soon as
such a position did become available. I am satisfied that what
happened was that he came to Adelaide, he worked for several
months on the relief staff in the Commercial Finance Unit,
mainly attending courses, after several months another employee
of the defendant resigned his position as Finance Consultant,
the plaintiff was informed that thereafter that he would be
placed in that position and he was." 14. The Magistrate's concluded his judgment in this way:-
"I find for the reasons aforementioned that the plaintiff
commenced his employment with the defendant on 12th September
1989 and that subsequently in November 1989 his position was
downgraded when he was posted to a level 3 position. I find
that the plaintiff was offered employment, which he accepted,
and that it was a term or condition of his employment that he
would be provided with a level 4 position. I find that it was
by reason of or related to the fact that the plaintiff in
November 1989 was placed in a level 3 position, that he
resigned. I find that the resignation was `voluntary' as
defined in the Redundancy Policy. In those circumstances I find
that he is entitled to the benefits of that policy. Judgment
for the plaintiff for $14,781.18." 15. In this appeal the respondent contends that the Magistrate erred in holding the letter of 24 July 1989 from the appellant to the respondent contained an immediate offer of employment at a Level 4 position. It is said that the Magistrate erred in holding that despite the respondent accepting a position with the appellant as a relief officer in Commercial Finance from 7 July 1989 to November 1989 and as Level 3 Finance Consultant in November 1989 and subsequently working in that position until his resignation, he was still entitled to exercise an option to rely on the redundancy offer of the appellant and claim benefits under the redundancy policy on the basis of not having been provided with a Level 4 position. It is also said that the Magistrate erred in holding that the respondent's resignation fell within the appellant's redundancy policy and that the Magistrate erred in holding that the respondent's resignation was due to his having been downgraded to a Level 3 position. 16. I accept the findings of the Magistrate, particularly the credibility finding favourable to the respondent. However, in my view no claim was made out on the redundancy policy. True, the respondent was never appointed to a Level 4 position but the basis for recovery under the redundancy policy is a material or significant downgrading by Esanda of the respondent's position with Esanda, or a diminution of his responsibilities within that organisation. It was nothing to the point that the respondent's position at Mercantile Credits was that of a manager or that the appointment in November 1989 compared less favourably with that. No downgrading or diminution within Esanda occurred. That had to be established for the claim before the court to succeed. The opinion expressed in the 24 July 1989 offer of employment was prospective. It could have occurred within time, but no loss of benefits flowing from positions with Esanda ever occurred. If the opinion as to suitability for a Level 4 position amounted to anything, it was a representation which might have given rise to some claim in contract, but the failure to appoint to a Level 4 position before the respondent resigned was not a downgrading or material diminution within the redundancy policy. The appeal must be allowed and judgment entered for the defendant in the court below. It follows that a cross-appeal as to costs must be dismissed. The respondent needed to hold the judgment to pursue it. I will hear counsel on the question of costs.
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