Guthrie v News Limited

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 10144 of 2008

BETWEEN

BRUCE ROBERT GUTHRIE	Plaintiff
v
NEWS LIMITED (ACN 007 871 178)	Defendant

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JUDGE:	KAYE J
WHERE HELD:	Melbourne
DATES OF HEARING:	27-30 April, 3 and 4 May 2010
DATE OF JUDGMENT:	14 May 2010
CASE MAY BE CITED AS:	Guthrie v News Limited
MEDIUM NEUTRAL CITATION:	[2010] VSC 196

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CONTRACT – Employment – Action for wrongful dismissal – Plaintiff employed as editor-in-chief of daily newspaper for three years – Whether defendant entitled to terminate appointment during that term – Whether defendant breached any obligation of good faith – Damages – Loss of opportunity for renewal of contract or redeployment in comparable position – Alternative claim for damages for termination payment stipulated by contract.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N O’Bryan SC and Mr J McDougall	A J Macken & Co
For the Defendant	Mr W Houghton QC and Mr R Attiwill	Messrs Allens Arthur Robinson

HIS HONOUR:

In this proceeding, the plaintiff claims damages in respect of his dismissal by the defendant from his position as the editor-in-chief of the Herald Sun newspaper in November 2008.

The Herald Sun newspaper is published by the Herald and Weekly Times Pty Limited. That company is a subsidiary of the defendant, News Limited. During the period which is relevant to these proceedings, Mr John Hartigan was the chairman, and chief executive officer, of News Limited.

In late 2006, the then long standing managing director of the Herald and Weekly Times Limited, Mr Julian Clarke, informed Mr Hartigan that he intended, in the following year, to retire from his position as managing director. Mr Hartigan decided that Mr Clarke should be succeeded in his role by Mr Peter Blunden, who had been the editor-in-chief of the Herald and Weekly Times Pty Limited since May 2001, and the editor of the Herald Sun since 1996. Mr Blunden was to be appointed deputy managing director, with the intention that he would commence his duties as managing director upon the retirement of Mr Clarke in twelve months’ time. Accordingly, it was necessary for Mr Hartigan to consider a replacement for Mr Blunden as the editor of the Herald Sun. After consulting with Mr Blunden and Mr Clarke, Mr Hartigan decided to appoint the plaintiff to the position of editor of the Herald Sun newspaper.

At that time, the plaintiff was the editor of the Weekend Australian magazine, and the editor-in-chief of Wish magazine. He had a long history of working in print media, commencing as a cadet journalist in 1972, and rising, through the ranks, to positions as the editor of a number of publications from the early 1990s.

The first offer of the position of editor to the plaintiff was made by Mr Hartigan in Mr Hartigan’s office in Sydney. The plaintiff states that the meeting took place on about 24 November 2006. Mr Hartigan in his evidence thought that the meeting occurred in early December. At that time, the plaintiff was working in Sydney, where he was living with his wife and two school age children. The plaintiff told Mr Hartigan that the decision would be difficult, because of the circumstances of his family.

Subsequently, in early December, the plaintiff had a meeting with Mr Clarke, in which they discussed Clarke’s views as to the direction, which the plaintiff should take in editing the Herald Sun, if he agreed to accept the position. On 13 December 2006, the defendant formalised its offer to the plaintiff by a letter of appointment, which commenced by offering to the plaintiff the position of “editor-in-chief of the Herald Sun”. The parties then entered into a period of negotiation concerning the offer, which, it would appear, was interrupted, not only by the Christmas/New Year break, but also by a trip taken by the plaintiff and his family to Mexico. In any event, the plaintiff responded to that offer by a letter dated 7 January 2007 addressed to Mr Hartigan. In that letter, the plaintiff set out, in some detail, a number of matters relating to the terms of his proposed employment. Shortly after that date, and at least by 18 January (on which date the defendant announced the plaintiff’s appointment as editor-in-chief of the Herald Sun), the plaintiff accepted the offer of the defendant. On 25 January 2007, the defendant sent to the plaintiff a “letter of appointment”, which was subsequently signed by both parties on 10 March 2007. In the meantime, the plaintiff and his family moved to Melbourne in late January, and the plaintiff commenced his duties as editor-in-chief of the Herald Sun newspaper on 19 February 2007.

In March 2007, some differences occurred between the plaintiff and Mr Blunden concerning what the plaintiff perceived as undue interference by Mr Blunden with his duties as editor. Mr Clarke intervened and spoke to them about those issues. As a result, Mr Clarke instituted a series of regular meetings between the plaintiff, Blunden and himself, which commenced in mid 2007, in order to ensure that there was a proper line of communication between the plaintiff and Blunden.

In August 2007, Mr Hartigan met the plaintiff, by appointment, for lunch at the Pure South Restaurant at Southbank. In his evidence, Mr Hartigan stated that he arranged the meeting, because he had received a number of reports from Mr Clarke that the plaintiff and Mr Blunden had been unable to form an appropriate professional relationship between them. Mr Hartigan stated that he arranged the meeting for the sole purpose of addressing that issue. On the other hand, the plaintiff, in his evidence, stated that a number of issues were discussed at the meeting, one of which was his relationship with Blunden.

On 30 November 2007, Mr Clarke retired as the managing director of the Herald and Weekly Times, but he remained a member of the Board of the company, and he became chairman of it in May 2009. Mr Blunden therefore commenced his duties as managing director on 1 December 2007.

On 14 February 2008, an argument developed between the plaintiff and Mr Blunden arising out of the forthcoming trip by the Melbourne Storm rugby league football club to London. At that time, the plaintiff learnt that it was proposed that the Melbourne Storm club was to pay the expenses of a Herald Sun photographer, who was covering the trip to London. After learning of that proposal, a series of emails passed between the plaintiff and Mr Blunden, in the course of which the plaintiff expressed his concern that the proposal might be considered to compromise the perception of the independence of the newspaper. In response, Mr Blunden disagreed. Mr Guthrie sent a further email, stating that the proposal “… sounds like a newspaper equivalent of cash for comment”. Mr Blunden replied, by referring to a trip to Dubai which had been taken by the plaintiff, and which had been funded by the National Australia Bank. On the next day, 15 February, Mr Blunden, in two further emails, rebuked the plaintiff for deceiving the readers of the Herald Sun in an article published on that day, which had incorrectly suggested that there had been an increase in its week day sales from Monday to Friday. In fact, the sales of the newspaper had declined by 5,000 copies per day during that period.

In August 2008, a further dispute arose between the plaintiff and Blunden, arising out of the announcement by the plaintiff, on 12 August 2008, of four senior appointments in the Herald Sun. One of those appointments was Mr Peter Flaherty as the executive director of the newspaper. At that time, Mr Blunden was in Beijing for the 2008 Olympic Games. A series of emails then passed between the two men, in which Mr Blunden expressed his displeasure to the plaintiff, and claimed that he had not been told about the new executive editor role in advance. The plaintiff then telephoned Mr Hartigan, to discuss the issue raised in the email. He also informed Mr Hartigan that he had been informed, recently, by a “prominent Melburnian” that Blunden had been criticising the plaintiff behind his back. Mr Hartigan advised the plaintiff that he should meet face to face with Mr Blunden upon the latter’s return from Beijing. Accordingly, on 19 August 2008 the plaintiff met with Blunden. I shall return later to what occurred at that meeting. However, as a result of it, the plaintiff sent an email to Mr Hartigan, stating that the meeting between himself and Blunden had gone well, and there was no need for Mr Hartigan to become involved.

The next event of significance occurred in October 2008. At that time, it was proposed that the Herald Sun would, in a two week period commencing Monday 13 October, provide with each copy of the newspaper sold by it, a National Geographic DVD. The same promotion had been conducted by the Herald Sun in the previous year. At a weekly management meeting held on Thursday 9 October 2008, Mr Blunden criticised the plaintiff for his lack of advance promotion of the National Geographic DVD. There are competing versions as to what was said by the plaintiff in response to that criticism, and I shall return to this topic later. On the following day (Friday 10 October), the newspaper prominently featured a promotion of the National Geographic DVD on its front page. A smaller such promotion was repeated on the following day, Saturday 11 October. The issue, relating to the sufficiency of the advance promotion of the National Geographic DVD, is of some importance in this case, since it was described by Mr Hartigan, in his evidence, as the “tipping point” for the decision which he made, at that time, to terminate the plaintiff’s appointment as editor-in-chief of the Herald Sun.

As a result of that decision, in the morning of 10 November 2008, the plaintiff was requested to attend Mr Hartigan, who was then present in Melbourne. In their evidence, the plaintiff and Mr Hartigan gave versions of the ensuing conversation which are, for relevant purposes, virtually the same. The meeting commenced with Mr Hartigan telling the plaintiff that they were about to have a conversation which neither of them would enjoy. Mr Hartigan stated that he had decided to terminate the plaintiff’s appointment as editor of the Herald Sun. The plaintiff asked the reason for that decision. Mr Hartigan responded that he could not have a situation at the Herald Sun, one of the most important newspapers in the News Limited Group, where the editor-in-chief and the managing director were not getting on. The plaintiff responded that he thought that he and Blunden were getting on, to which Mr Hartigan replied “That’s not what Peter Blunden has been telling me, he says he’s had to pull you up most weeks about the paper”. The plaintiff stated that that was not true, and that he and Blunden were getting on “quite fine”. Mr Hartigan, however, stated that the decision had been made. He then proceeded to state that he did not want Mr Guthrie to leave the company, and that he felt that he could find Mr Guthrie work in a magazine division or in the Australian in Sydney. Mr Guthrie said that Sydney was not an acceptable proposition, because he had just purchased a house in Melbourne, he was selling his house in Sydney, and his eldest daughter was entering her final year of school. He told Hartigan that the decision could not have come at a worse time for him. To that Mr Hartigan responded, “I’m sorry, we’ve given you a real shit sandwich”. Hartigan said that the defendant was prepared to be “generous” with the plaintiff, and advised him to speak to Mr Keith Brodie the group human resources director.

Subsequently, at 7.00 pm on the same evening, Mr Blunden telephoned the plaintiff, and they spoke about the reasons for his termination. There are competing versions of what was said by Mr Blunden in that conversation, and I shall return to that conversation later in these reasons. On the next day, the plaintiff completed his employment with the defendant. On his termination, he received a “termination package”, which amounted to a payment of $844,523 gross. That payment included (inter alia) the plaintiff’s remuneration to the date of expiry of his contract (18 February 2010), together with his outstanding leave, and the value of his other contractual entitlements to 18 February 2010.

The plaintiff’s claim and the issues

The plaintiff claims that the termination by the defendant of his appointment as editor-in-chief of the Herald Sun was a breach by the defendant of its agreement to employ him in that capacity for three years. Alternatively, the plaintiff claims that in terminating his service, the defendant breached an implied term of trust and confidence between the parties, on the grounds that the termination of his employment by the defendant was capricious, unfair and unreasonable.

The plaintiff claims that as a result of either breach of the contract, he has suffered loss and damage, consisting of the value of the lost opportunity of renewing the contract of service which he had with the defendant for a further period of three years. In his statement of claim, the plaintiff valued that lost opportunity in the sum of $2,765,475. In final address, it was submitted that the value of the opportunity was $3,648,105. Alternatively, the plaintiff claims that if there was no chance of renewal of the contract or redeployment by the defendant, he was entitled to an appropriate termination payment by the defendant, consisting of payment in lieu of reasonable notice of twelve months, together with a four week severance termination payment, the sum total of which was claimed in the statement of claim to be $951,222. In final address, the amount claimed, in respect of the termination payment, was put at $1,176,295.

In response, the defendant denies that it breached the agreement between itself and the plaintiff, on the ground that, upon a proper construction of the contract of service, the defendant was entitled to terminate the contract before the end of the three year term, by paying the balance owing to the plaintiff under the contract. Secondly, the defendant denies that it breached any implied term of trust and confidence between itself and the plaintiff. In particular, it submits that, to the extent to which such a term may be implied into a contract of employment, the mode of termination of such a contract cannot, as a matter of law, constitute a breach of the implied term. In any event, it is submitted that the defendant did not act capriciously, arbitrarily or unreasonably in terminating the employment of the plaintiff. Finally, the defendant submits that, if it breached the contract between the plaintiff and itself, the plaintiff has not suffered any damage as a consequence. First, it submitted that, as a matter of law, a plaintiff may not, in a claim for wrongful dismissal, claim damages for loss of opportunity or for renewal of his contract of service. Secondly, in any event, it is submitted that, on the facts of the case, there was no prospect of the plaintiff’s contract of service being renewed, if, hypothetically, he had remained in employment with the defendant until the expiry of his contract of service in February 2010. The defendant also denied liability for the alternative claim, based on the plaintiff’s entitlement to a termination payment, and put in issue the plaintiff’s estimate of the quantum of that entitlement.

Accordingly, the following issues arise:

(1)Did the contract of service between the plaintiff and the defendant entitle the defendant to terminate the plaintiff’s employment in November 2008, before the expiration of the three year period of service set by the contract?
(2)If the contract of service did contain a provision entitling the defendant to terminate the plaintiff’s contract of service in November 2008 –
(a) was there an implied term of the contract that the defendant would act in good faith in exercising that power under the contract;
(b) if so, did the defendant breach such obligation of good faith in terminating the plaintiff’s employment with it?
(3)If the defendant breached the contract of service by terminating the plaintiff’s employment in November 2008, is the plaintiff entitled to make a claim for damages, arising from such breach, comprising the loss of opportunity by him, in February 2010, to obtain a renewal of that contract of service?
(4)If the plaintiff is entitled to maintain such a claim for loss and damage, did the plaintiff lose such an opportunity of renewal of his contract of service, by reason of the termination of his employment in November 2008, and, if so, what is the value of that lost chance to the plaintiff?
(5)Alternatively, is the plaintiff entitled to claim the additional payment asserted by him as the alternative basis by which he claims loss and damage?
(6)If the plaintiff is entitled to claim the termination payment, what is the amount of that payment?

The right of the defendant to terminate the plaintiff’s employment

The first question is whether, under the contract between the defendant and the plaintiff, the defendant had the right to terminate the appointment of the plaintiff unilaterally before the expiration of three years from the commencement of that contract. Mr W Houghton QC, who appeared on behalf of the defendant with Mr R Attiwill, contended that clause 22.2 of the agreement gave the defendant such a right, subject to it paying out to the plaintiff the value of his remuneration entitlements for the balance of the three year term. Thus Mr Houghton submitted that the defendant did not breach its contract of engagement of the plaintiff by unilaterally terminating his employment in November 2008, because it did pay to the plaintiff his remuneration and other entitlements for the balance of the contract term.

On the other hand, Mr N O’Bryan SC, who appeared with Mr J McDougall for the plaintiff, submitted that, on its proper construction, clause 22.2 did not entitle the defendant to terminate the plaintiff’s employment unilaterally before the expiration of the three year term of the contract, unless the plaintiff had been guilty of serious misconduct, which, by the terms of the agreement, entitled the defendant to terminate the plaintiff’s employment without further notice.

In light of those competing positions, it is necessary to examine the terms of the contract of employment of the plaintiff by the defendant. As I have already stated, it is common ground that the terms of that agreement are contained in the letter of appointment addressed by the defendant to the plaintiff dated 25 January 2007, which was signed by or on behalf of the parties on 10 March 2007. That letter commenced by offering the plaintiff employment as Editor-in-Chief of the Herald Sun. Clause 1 of the agreement provides that the plaintiff would be employed by News Limited, but if directed by the defendant, he would also perform duties for any of the company’s related bodies corporate. It is common ground that throughout his employment by the defendant, the plaintiff performed his duties for the Herald and Weekly Times Pty Limited.

The relevant provisions relating to the term of the plaintiff’s employment, and relating to the termination of it, are clauses 4 and 22 of the agreement. Clause 4 provided as follows:

“4.0 Contract of Employment
The period of your employment in this role will commence on 19 February 2007 and terminate three years after. Continuity of employment in this role and under these terms and conditions will (sic) renegotiate it with you at the end of the 30 months.”

Clause 22 of the agreement is entitled “Termination of Employment”. Clause 22.1 provides that the defendant may terminate the plaintiff’s employment at any time, without prior notice, if the plaintiff should commit “any act of serious misconduct”. The clause provides seven specific examples of such misconduct. They include: any refusal to perform the plaintiff’s duties in accordance with the managing director’s reasonable direction; any act which in the reasonable opinion of the defendant is likely to cause significant damage to the company’s reputation; any breach by the plaintiff of his obligation of good faith specified in clause 3 of the agreement; and any other act of serious or wilful misconduct. I interpolate that the defendant does not, in this case, seek to justify the summary determination by it of the plaintiff’s employment in November 2008 on the basis of any “serious misconduct” under clause 22.1.

Clauses 22.2 to 22.4 are particularly relevant to this case, and provide as follows:

“22.2 Termination of your Employment
(a)Should the Company terminate your employment, the Company will pay to you the balance owing to you under this contract.
(b)If you do not complete the full term of your contract, the Company can require you to forfeit your remuneration for the unexpired period of the contract.

22.3 Entitlements on Termination
On termination of your employment for any reason whatsoever, you will be entitled to receive from the Company:
(a)The Remuneration payable up to and including the date of termination;
(b)Payment in lieu of any accrued annual leave to which you are entitled as at the date of termination;
(c)Payment in lieu of any long service leave to which you are entitled as at the date of termination; and
(d)Any other remuneration or payment expressly required under this agreement or by law.

To the extent permitted by law, the Company will be entitled to offset any amount owing and payable by you to the company at the date of termination against any amount then payable to you by the Company.

22.4 Redundancy
In the event that your contract is not renewed, the Company may redeploy you to any other comparable position which is available within the company or the group. However, if the Company is unable to obtain for you offer of a comparable position, the Company will terminate your employment.
In these circumstances, in addition to your entitlements under clause 22.3, you will receive a termination payment which is inclusive of notice and redundancy/severance pay. In determining an appropriate termination payment, the Company will take into account any applicable legislative requirements and your length of service with the Company.
If the Company obtains an offer of a comparable position for you and you do not accept the offer, you will only receive the payments due to you under clause 22.3.”

Mr Houghton submitted that under clause 22.2(a) the defendant had the right to terminate the employment of the plaintiff, subject to the defendant paying to the plaintiff the balance of the amount he would have earned for the whole of the three year term of the contract. In other words, he submitted, clause 22.2(a) provided to the defendant the right to terminate the contract short of three years, but “at a price”, namely, the payment to the plaintiff of the whole of his remuneration and entitlements for that period. Mr Houghton submitted that clause 22.2 operates independently of clause 22.1, and is not confined to operating only in the circumstances of a termination by the defendant of the plaintiff’s employment under clause 22.1 for serious misconduct. He further submitted that clause 22.2(a) is the counterpart of clause 22.2(b) which provided a corresponding right to the plaintiff to unilaterally terminate the contract of employment. Mr Houghton submitted that, in that sense, the words “the balance owing to you under this contract” in clause 22.2(a) was not restricted to the payment by the defendant of the amounts owing to the plaintiff at the time of termination, but, rather, required the defendant to pay out the whole of the plaintiff’s entitlements for the balance of the contract period.

In response, Mr O’Bryan submitted that clause 4 of the agreement, unequivocally, provided for the contract of employment to subsist for a period of three years from 19 February 2007. Clause 22.2 does not expressly contain any right for either party to terminate the contract before that date. He submitted that the implication of any such right, in clause 22.2, would be contrary to the express language of clause 4.

In my view, the meaning of clause 4 and clause 22.2 is clear and unambiguous. Clause 4 of the agreement provides, expressly, that the contract shall be for a period of three years. Indeed, the second sentence contained in clause 4 demonstrates that the parties, in an objective sense, contemplated the extension of the contract beyond that date. Clause 22.2 does not contain any express provision which derogates, in any relevant respect, from the fixed term set by clause 4 of the agreement. While it is premised on a termination by either party of the agreement, nevertheless it does not provide, of itself, for any such lawful termination of it, before the completion of the three year term. In that sense, in my view, and in its plain terms, clause 22.2 does not derogate from the plain provision of clause 4, which provides that the contract shall be for a period of three years. Rather, it makes express provision for the liabilities and rights of each party should the plaintiff’s employment, for some reason, be terminated before the expiration of three years. The defendant’s submission is based on the implication, in clause 22.2, of a right of either party to terminate the agreement during the three year period. Such an implied term would be directly inconsistent with clause 4. It is neither necessary, nor so obvious, as to justify the construction of clause 22.2 as containing it.[1] The construction of clause 22.2 in such a way is not justified, and is contrary to the plain terms of the agreement.
[1]BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20, 26; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1977) 144 CLR 597, 605-6.

In support of his contentions, Mr Houghton relied, to some extent, on the negotiations which preceded the agreement to the terms contained in the letter of appointment. In particular, Mr Houghton relied on evidence of Mr Hartigan, which was to the effect that, in those negotiations, Mr Guthrie had expressed concerns about the willingness of his family to move from Sydney to Melbourne. He told Mr Hartigan that if the contract was expressed to be limited to a period of three years, then he could use such a contract as the means of persuading his wife to move, on the assurance that his term of employment in Melbourne would be of a limited term only.

The evidence relied upon by Mr Houghton, is of no assistance for three reasons. First, Mr Houghton seeks to rely upon the evidence of Mr Hartigan to demonstrate the actual intentions of Mr Guthrie, and Mr Hartigan, in inserting the three year term in the contract of appointment. It is clear from the authorities that that evidence is not admissible for that purpose, and may not be used in the manner contended for by Mr Houghton.

It is well established that, while the evidence of antecedent negotiations may, in the case of an ambiguous term, be relevant to establish the objective background facts known to both parties, it is not received as evidence of the actual intentions and expectations of the contracting parties. The reason for that principle was stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[2]:

“The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, although admissible in an action for rectification.”

[2]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J); Prenn v Simmons [1971] 1 WLR 1381, 1384-1385 (Lord Wilberforce).

Secondly, I do not accept the evidence given by Mr Hartigan in this respect. In my view, Mr Hartigan was an unreliable witness in respect of the negotiations which preceded the formation of the contract. For example, he professed to have a clear memory of long and protracted negotiations before the contract was executed. In cross-examination, after being shown contemporary documents, he accepted that agreement was reached between the parties as to the terms of the contract before 18 January, and probably by 11 January. The period of the negotiations, and indeed the nature of the negotiations revealed by the evidence, do not support Mr Hartigan’s evidence at all in this regard.

In this respect, and, as I shall later demonstrate, in other respects, Mr Hartigan’s evidence was very much affected by the events which ultimately transpired under the contract. While I do not consider that he made a conscious effort to mislead the Court, his recollection of a number of events, including the negotiations, was affected by the fact that the termination of the plaintiff’s contract has given rise to what has been clearly a hard fought litigation between the parties.

Another instance of such a phenomenon in Mr Hartigan’s evidence is constituted by his testimony, in evidence in chief, to the effect that Mr Guthrie insisted on being given the title of “editor-in-chief” of the Herald Sun, in circumstances in which that particular title did not exist hitherto. It was that circumstance which, he maintained, was the subject of the long and protracted negotiations between the parties. However, the objective facts, established by the documents, contradict that assertion by Mr Hartigan. As I have already stated, the first letter of offer made by the defendant to the plaintiff (on 13 December 2006) offered to the plaintiff the position of “editor-in-chief” of the Herald Sun newspaper. Mr Hartigan’s evidence was that he first approached Mr Guthrie about the appointment in early to mid December. On no view could the formal title of the role, to be offered to Mr Guthrie, have been the subject of long and protracted negotiations. In this respect, I also note that the substance of Mr Hartigan’s evidence on this aspect was not put in cross-examination to Mr Guthrie, notwithstanding that Mr Houghton was particularly conscientious, in cross-examination, to ensure that he complied with the rule in Browne v Dunn.[3]
[3](1893) 6 R 7.

Thirdly, and in any event, if I had accepted the evidence of Mr Hartigan on this aspect, and if it were admissible for the purposes of construing the contract, I do not consider that it has the effect contended for by Mr Houghton. If in fact Mr Guthrie had requested a three year term in order to placate his wife, that evidence would not, in any event, reveal any underlying intention by the parties that, notwithstanding the express provisions of clause 4 of the contract, either party could terminate the plaintiff’s employment during that three year period. If I had accepted Mr Hartigan’s evidence on this aspect, and if it were admissible for the purposes of construing the agreement, it would have demonstrated, at most, that Mr Guthrie wished to secure a finite period of employment for himself in Melbourne, as distinct from an indeterminate one. In that sense, the evidence of Mr Hartigan would, if anything, support the construction of the contract contended for by the plaintiff, and which I have accepted.

For those reasons, the evidence given by Mr Hartigan as to the reason why Mr Guthrie sought that the contract be expressed to be for a period of three years, does not affect the proper construction of clause 4 and clause 22. I do not accept his evidence on this point. Further, as I have stated, the evidence of Mr Hartigan is not admissible in any event to assist in the construction of the agreement.

In my view, the objective background circumstances, established by the evidence, lend support to the construction of the agreement contended for by Mr O’Bryan. When Mr Hartigan offered the position of editor-in-chief of the Herald Sun to the plaintiff, the latter was living in Sydney with his family. His daughter was about to enter the later years of her secondary education. The move by the plaintiff and his family to Melbourne was a significant step in their personal and professional lives. It is understandable, in those circumstances, that the inclusion of a provision, such as clause 4, in the agreement, would have been of some importance to Mr Guthrie. Further, as I stated, the second sentence of clause 4 provides some evidence of an expectation by the parties that the appointment of the plaintiff might extend beyond the period of three years set by the agreement. Mr Blunden and Mr Clarke both enthusiastically supported, to Mr Hartigan, the proposal that Mr Guthrie be appointed to the position of editor-in-chief. The provisions of the contract, particularly relating to reimbursement by the defendant of his expenses of moving from Sydney to Melbourne, were generous. All those circumstances support the proposition that clause 4 of the agreement was intended to provide some certainty of tenure to Mr Guthrie of the position of editor-in-chief of the Herald Sun newspaper.

For those reasons, I reject the first submission made on behalf of the defendant, namely, that clause 22.2 of the agreement provided to the defendant the right to unilaterally terminate the contract, subject to it paying to the plaintiff the balance of his entitlements for the contract period.

In those circumstances, it follows that the defendant breached the contract between the plaintiff and itself, by unilaterally terminating the plaintiff’s appointment as editor-in-chief of the Herald Sun on 10 November 2008. That breach constituted a repudiation by the defendant of the agreement, which was accepted by the plaintiff by a letter from the plaintiff’s solicitor to Mr Hartigan dated 3 December 2008.

Does clause 22.3 preclude the plaintiff’s claim for damages?

The question which then arises is whether the provisions of the contract, and particularly clause 22.3, operate to exclude the claim by the plaintiff for the primary category of damage claimed by him, namely, a loss of an opportunity to be re-employed by the defendant on the conclusion of the three year contract term.

In this connection, Mr O’Bryan, in opening the case, submitted that the plaintiff’s claim for those damages is encompassed within the expression “… or payment expressly required under this agreement or by law” in clause 22.3(d) of the contract of employment. In particular, he submitted that a claim for unliquidated damages, such as loss of opportunity, is embraced by the part of that phrase which relates to a “payment … required … by law”. On the other hand, Mr Houghton submitted that those words do not include a claim for damages for wrongful dismissal. Mr Houghton submitted that if I were to conclude (as I have) that the defendant breached the terms of the agreement by terminating the contract on 10 November 2008, clause 22.2(a) and clause 22.3 exclusively provided for the entitlements to be paid by the defendant to the plaintiff in such an event. Thus, he submitted that the parties had agreed that, apart from the entitlements referred to in those clauses, the plaintiff would not be entitled to claim damages for wrongful dismissal. Mr Houghton supported his submissions by referring to the decision of Robson J in G T Corporation Pty Ltd v Amare Safety Pty Ltd.[4] In that case, Robson J held that a provision in a contract of employment, which is similar to clause 22.3, was intended to be exhaustive as to the damages which the employer defendant was obliged to pay to the employee if it terminated the agreement.
[4][2008] VSC 223, [74].

The construction of clause 22.2 and clause 22.3 is not without some difficulty in this respect. As I have already indicated, it is common ground between the parties that the phrase “the balance owing to you under this contract”, in clause 22.2(a), required the defendant, on early termination, to pay to the plaintiff the balance of all the entitlements which he would have earned throughout the balance of the contract term. Pausing there, I have some reservations about that proposition, since it involves an unusual construction of the phrase “balance owing”. However, accepting that the parties are at one about that construction of clause 22.2(a), two questions of construction arise in relation to clause 22.3, namely, whether that clause is the exclusive repository of the plaintiff’s rights upon wrongful termination of the contract by the defendant, and, if so, whether clause 22.3(d) covers a claim for damages of the type made by the plaintiff in this case.

The starting point for both questions is that, in the absence of a contractual provision to the contrary, the plaintiff would, at common law, have a right to claim unliquidated damages for wrongful termination of his contract by the defendant before the expiry of his term on 19 February 2010. Clause 22.3 does not expressly purport to exclude the plaintiff’s right to claim such damages. Nor was it expressed to be the sole and exclusive source of the rights of the plaintiff upon termination of his employment. The plaintiff’s right to claim damages for wrongful termination of his employment, before the expiration of the three year period, was a valuable right. In my view, there is no basis for construing clause 22.3 as excluding his rights to claim damages for wrongful repudiation by the defendant of the contract of his employment. Ordinarily, it is presumed that, in the absence of clear language, a contracting party does not intend to abandon its remedies for breach of contract arising by operation of law.[5] Accordingly, I do not consider that, on its proper construction, clause 22.3 did exclude the plaintiff’s rights to claim damages of the kind claimed by him in this case.
[5]Concut Pty Ltd v Worrell & Anor (2000) 176 ALR 693, 699 (Gleeson CJ, Gaudron and Gummow JJ); [2000] HCA 64, [23]; Gibert-Ash (Northern) Ltd v Modern Engineering Bristol Ltd [1974] AC 689, 717-718 (Lord Diplock); Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205, [27] (Gillard J).

That conclusion is supported by the background circumstances to the contract, in which the plaintiff and his family were being required to move from their home in Sydney to Melbourne so the plaintiff could undertake his employment with the defendant. In those circumstances, it is unlikely that the parties, objectively, would have intended to have precluded the plaintiff from exercising his rights at common law to claim damages. For those reasons, the plaintiff is entitled to claim damages, of a kind sought by him in this case, for the wrongful breach by the defendant of his contract of employment on 10 November 2008.

Further, in my view, the decision of Robson J in GT Corporation Pty Ltd v Amare Safety Pty Ltd, to which Mr Houghton referred, may be distinguished. The relevant clause in that case was entitled to a “compensation for termination”. It expressly prescribed what amount would be paid by the principal (the defendant) by way of “compensation” should it terminate the contract of engagement of the plaintiff. By contrast, clause 22.3 does not purport to describe what “compensation” shall be payable by the defendant to the plaintiff upon termination of the plaintiff’s employment; rather, it prescribes the entitlements of the plaintiff in such a position. As I stated, it does not, expressly or by necessary implication, exclude any residual rights of the plaintiff to damages arising from wrongful termination by the defendant of the agreement.

The conclusions, which I have reached so far, do not require me to consider the alternative claim made by the plaintiff, namely, a claim by him for breach of an implied term of the utmost good faith and trust in the contract of employment. That alternative claim was the subject of competing submissions by the parties, and accordingly, in deference to those submissions, I shall return to it later. However, it is convenient to deal first with the plaintiff’s claim for damages arising from the wrongful termination by the defendant of his employment on 10 November 2008.

Damages for loss of opportunity

The primary category of damages claimed by the plaintiff consists of damages for loss of opportunity to obtain a renewal of his contract with the defendant upon its expiration on 18 February 2010. As I have already stated, the defendant has resisted that claim on two bases. First, Mr Houghton submitted that, as a matter of law, damages for loss of opportunity to renew a contract of employment are not recoverable in an action by an employee for the wrongful termination by the employer of the contract. Secondly, and in any event, Mr Houghton submitted that, on the evidence in this case, the plaintiff had failed to establish that he had any chance of obtaining a renewal of his contract of employment upon its expiration in February 2010.

The first issue raised by Mr Houghton concerns the question whether an employee may, in an action for wrongful dismissal, claim damages consisting of loss of opportunity to renew the contract of employment upon its expiration. That question has been the subject of conflicting decisions. On the one hand, decisions of the Federal Court support the proposition that such damages may be recovered by an employee in an action for wrongful dismissal. On the other hand, there are two decisions of the Court of Appeal of New South Wales which support the contrary proposition.

The first decision was that of the New South Wales Court of Appeal in New South Wales Cancer Council v Sarfaty[6]. In that case, the plaintiff succeeded, at first instance, in a claim for damages for wrongful dismissal. However, the trial judge did not uphold his claim for lost opportunity to renew the contract of employment upon its expiration. The Court of Appeal, by a majority, dismissed the defendant’s appeal on the question of liability, and allowed the defendant’s appeal, in part, on the question of damages. It also dismissed the plaintiff’s cross-appeal, one component of which concerned the rejection by the trial judge of his claim for loss of opportunity to renew his contract. The joint judgment of Gleeson CJ and Handley JA is principally concerned with the issues raised by the defendant’s appeal on the question of liability. Their Honours dealt with the cross-appeal, in relation to the claim by the plaintiff for damages for loss of opportunity, in two short paragraphs at the conclusion of their judgment. In that passage, Gleeson CJ and Handley JA observed that, by the terms of his contract, the plaintiff did not have any right of further appointment after the expiration of the term prescribed in the contract. They stated that the “relevant principle” was that referred to by Mason CJ and Dawson J, in their joint judgment in The Commonwealth v Amann Aviation Pty Ltd[7], namely:

“Where there are two or more ways in which a defendant might perform the contract, the Court, in assessing damages, adopts the mode of performance which is most beneficial to the defendant. That rule, which is a manifestation of the principle that damages will not be awarded for not doing that which there is no legal obligation to do, is well supported by authority.”

[6](1992) 29 NSWLR 28.

[7](1991) 174 CLR 64.

With respect, the principle, so stated by Mason CJ and Dawson J, did not preclude their Honours, in Amann Aviation, from upholding the claim of Amann, a necessary part of which was a claim for loss of opportunity to renew its contract with the Commonwealth. Their Honours recited the principle, which I have quoted above, but distinguished it, on the basis that, in a claim for loss of opportunity, the court is engaged in a hypothetical exercise, in determining how the contract would have turned out, if it had not been brought to an end by the Commonwealth’s wrongful repudiation of it.[8] Thus, the passage from their Honour’s judgment, relied upon by Gleeson CJ and Handley JA in Sarfaty, did not support the conclusion that an employee may not make a claim for damages for loss of opportunity.
[8]Footnote above page 94.

The analysis of Sarfaty, to which I have just referred, was adopted by Heerey J in Martin v Tasmanian Development & Resources[9]. For that reason, his Honour did not follow the decision of the Court of Appeal in Sarfaty. On the facts of the case before him, Heerey J held that the plaintiff, whose employment had been wrongfully terminated by the defendant, would have had a “real prospect” of obtaining a renewed contract of employment, if his contract had not been wrongly terminated by the defendant. Accordingly Heerey J awarded the plaintiff damages for his lost opportunity to obtain the renewal of his contract.[10] On appeal, the Full Court of the Federal Court upheld the decision of Heerey J in Tasmanian Development & Resources v Martin[11]. There, Kiefel J (with whom Lee and Cooper JJ agreed) stated:

“In Amann, as his Honour the primary Judge pointed out, Mason CJ and Dawson J (90-92) observed that the rule that a defendant is not liable in damages for not doing that which was not promised, is itself subject to the rule in Hadley v Baxendale (1854) 9 Exch 341, that a party is entitled to such damages as arise naturally from the breach or as may be supposed to have been in the contemplation of the parties, at the time they made their contract, as the probable result of the breach. If it was shown to have been in their contemplation, the plaintiff would be entitled to compensation. In that case, the prospect of renewal would arise by Amann’s performance of the contract. It was a distinct benefit which accrued by reason of its performance. The corollary was that the parties must necessarily have contemplated the loss of that prospect as the probable result of a repudiation or fundamental breach on the part of the Commonwealth.”[12]

[9][1999] FCA 593.

[10]Above, at [101].

[11](2000) 97 IR 66; [2000] FCA 414.

[12]Page 73 [37].

The issue as to the recoverability of damages for loss of opportunity to renew a contract of employment again came before the New South Wales Court of Appeal in Murray Irrigation Limited v Balsdon[13]. In that case, Bryson JA (with whom Handley JA and Ipp JA each agreed) referred to the decisions of Heerey J, and the Full Court of the Federal Court, in Tasmanian Development & Resources v Martin. His Honour concluded:

“In my respectful opinion, the law was correctly stated in New South Wales Cancer Council v Sarfaty, and unless it is shown by evidence that there was some relevant contemplation of the parties relating to renewal of the contracts of employment and to loss of renewal as the probable result of a breach, consideration of prospects of renewal cannot be embarked on in a case of wrongful dismissal; certainly it cannot be taken that renewal was in contemplation in the absence of any demonstration by evidence that in fact it was.”[14]

[13](2006) 67 NSWLR 73.

[14]Page 89.

A number of observations may be made concerning the foregoing passage from the judgment of Bryson JA. First, the conclusion so expressed by his Honour is based on the decision in Sarfaty which, as I have pointed out, itself is founded on an incorrect construction of the decision of the High Court in Amann. Secondly, Bryson JA did not, it would seem, hold that a claim for lost opportunity to renew a contract of employment is, as a matter of law, not open to an employee who has been wrongfully dismissed. In the passage, which I have quoted, his Honour referred to the need for the plaintiff to establish, “by evidence”, that the loss of renewal would be the “probable result” of the breach. That proposition is drawn from the well known passage from the judgment of Alderson B in Hadley v Baxendale[15]. I note that the statement by his Lordship of that rule does not require actual proof of what was in the subjective contemplation of the parties at the time of the contract. Rather, it is necessary to demonstrate that the loss “may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it”. Secondly, and importantly, the loss which is claimed in this case is not a loss of a right to renew the contract, or a loss of renewal of the contract; rather, what is claimed is a loss of an opportunity to renew the contract of employment. Thus, on the reasoning applied by Bryson JA in Murray Irrigation, it would be sufficient for the plaintiff to demonstrate circumstances from which it may be reasonably supposed that the parties had in contemplation, at the time they made the contract, a loss by the plaintiff of the opportunity to obtain a renewal of his contract, as a probable result of the breach of it.
[15]Footnote above, 354.

The modern basis for a claim for damages for loss of opportunity is to be found in the judgment of the High Court in Commonwealth v Amann Aviation Pty Ltd[16]. In that case, Amann entered into a contract with the Commonwealth to conduct aerial coastal surveillance for three years. The Commonwealth served a notice on Amann purporting to terminate the contract. In fact the notice was invalid. Amann treated the notice as a repudiation by the Commonwealth of the contract, and terminated it. After, and as a result of, entering into the contract, Amann had spent $5.2 million in acquiring and fitting out surveillance aeroplanes with which to perform the contract. It also incurred operational expenses totalling $854,000. It was common ground that the resale value of the aeroplanes was only $917,000, because the aircraft had been adapted to a special use for which there was only very limited demand. It was also clear, on the findings of the trial judge, that the prospects of Amann making a profit from the contract depended on it obtaining a renewal of the contract upon the expiration of the initial three year term. Amann claimed damages consisting of the wasted expenditure incurred by it in acquiring and fitting out the aircraft and preparing to perform the contract. That claim was rejected at first instance. On appeal the High Court (McHugh J dissenting) held that Amann was entitled to those damages.
[16]Footnote above.

There were a number of steps involved in the reasoning of the members of the Court in their separate judgments. For the purposes of the question, with which this case is concerned, those steps can be summarised shortly. The starting point for the majority judgments was the well known principle stated in Robinson v Harman[17], that where a party sustains a loss by reason of a breach of contract, that party is entitled to damages which would place it in the same situation as if the contract had been performed. Based on that principle, it was recognised that, ordinarily, expenditure incurred by a party in preparing to perform a contract, which is wasted by reason of the wrongful repudiation by the other party of that contract, would not be recoverable by the innocent party, unless those expenses would have been recouped by it, if the contract had not been breached.[18] Thus, ordinarily, a plaintiff would need to demonstrate that, if the contract had not been breached, the plaintiff would have derived earnings from the performance by it of the contract, which would have enabled it to recoup the expenses incurred by it in preparing to perform the contract. However, the court also recognised that where, by reason of the wrongful breach of a contract, a plaintiff is unable to prove the amount of damages which it would have earned had the contract not been breached, the plaintiff is, prima facie, entitled to claim the damages for the wasted expenditure incurred by it. With the exception of Toohey J[19], the majority members of the court based that principle on the prima facie assumption that, ordinarily, a party does not incur expenses in preparing for a contract unless it has a legitimate expectation that its earnings from the performance of the contract will enable it to recover those expenses.[20]
[17](1848) 1 Ex 850, 855.
[18]Above, 85 (Mason CJ, Dawson J); 104 (Brennan J); 127 to 127 (Deane J); 154 (Gaudron J).
[19]138 to 140.
[20]86 to 90 (Mason CJ, Dawson J), 105 to 108 (Brennan J), 126 (Deane J), 156 (Gaudron J).

In that light, it was essential for the plaintiff, in Amann, to establish that it had lost a valuable opportunity to obtain a renewal of the contract, upon its expiration in 1990, because of the wrongful repudiation of it by the Commonwealth. The majority of the High Court held that, as a result of entering into the contract, Amann had obtained a distinct commercial benefit, which it had lost by reason of the wrongful repudiation of the contract by the Commonwealth.[21]
[21]92, 94 (Mason CJ, Dawson J), 104, 111 to 112 (Brennan J), 130 to 131 (Deane J), 143 to 145 (Toohey J).

It might be argued that, in Amann, the court was not, strictly speaking, determining whether the plaintiff was entitled to make a claim for damages for loss of opportunity to renew the surveillance contract. Rather, it may be contended that the court was concerned to determine whether the plaintiff did have an opportunity to obtain a renewal in 1990, which was of value to it, and which might be brought into the equation in determining whether the defendant could demonstrate that if, it had not breached the contract, the plaintiff would not have recouped the amount expended by it in performing the contract. However, it is clear that, in the passages of the judgment of the High Court, to which I have referred above, the members of the majority concluded that, as a result of the wrongful repudiation of the contract by the Commonwealth, Amann had lost a valuable opportunity to obtain the renewal of the contract in 1990, and that the loss of that opportunity was part of the compensable damages which could be claimed by the plaintiff. In any event, that construction of the reasons of the majority in Amann was confirmed in the joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ in Sellars v Adelaide Petroleum NL & Ors[22], where their Honours stated:

“… in the Commonwealth v Amann Aviation, Mason CJ and Dawson J, Brennan J and Deane J concluded that a lost commercial advantage or opportunity was a compensable loss, even though there was a less than fifty percent likelihood that the commercial advantage would be realised. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened.”

[22](1994) 179 CLR 332, 349; see also Tabet v Gett [2010] HCA 12, [47] (Gummow ACJ), [123]-[124] (Kiefel J).

For those reasons, in my view, the authorities, to which I have referred, support the proposition that an employee may claim damages for loss of opportunity to renew a contract of employment which has been wrongfully terminated by the employer.[23]
[23]See also GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 143, [478]-[481] (Robson J).

In light of the foregoing analysis, the right of the plaintiff to succeed in his claim for loss of an opportunity to renew his contract on its expiration in February 2010 depends on two questions, namely:

(1)Whether at the time at which the parties entered into the contract, it may be reasonably supposed to have been in their contemplation that, as the probable result of a breach of that contract by the defendant before its expiration, the plaintiff might suffer a loss of a valuable opportunity to renew or extend his contract with the defendant.
(2)If so, whether the plaintiff, as a result of the breach by the defendant of the contract in November 2008, did in fact lose a valuable opportunity to renew or extend his contract with the defendant.

The first issue, to which I have just referred, involves the application of the principle stated by Alderson B in Hadley v Baxendale[24]. It is now accepted that the principles, stated in that celebrated decision, are applied by reference to the information available to the defendant at the time at which the contract was made. In C Czarnikow Ltd v Koufos,[25] Lord Reid stated:

“The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or the loss of that kind should have been within his contemplation.”

[24]Footnote above.

[25][1969] 1 AC 350, 385.

Thus, as I have stated above, the relevant test is applied by determining the information available to the defendant at the time of the making of the contract, and postulating whether the defendant, in light of that knowledge, would have realised that a loss of opportunity to the plaintiff to renew his contract was a likely result of a wrongful termination by it of the contract during its three year term.[26]
[26]See also The Commonwealth v Amann Aviation Pty Ltd (above), 91 to 92 (Mason CJ, Dawson J), 99 (Brennan J); European Bank Ltd v Evans of Robb Evans Associates (2010) 264 ALR 1; [2010] HCA 6, [13].

In my view, it is clear, both from the express terms of the contract dated 25 January 2007, and from the background circumstances, that, at the time at which the parties entered into the contract, the defendant knew that if it wrongfully terminated the plaintiff’s appointment before the expiration of the three year term provided in the contract, it would probably thereby deprive the plaintiff of the opportunity to obtain a renewal of the contract upon its expiration.

The express terms of the letter of appointment dated 25 January 2007 make it clear that the parties contemplated that there would be negotiations, at the expiration of the three year term, relating to the continuation by the plaintiff in his employment with the defendant as the editor-in-chief of the Herald Sun, or in a comparable capacity. The second sentence of clause 4 specifically provided for renegotiation of the “continuity of the employment” of the plaintiff in his role of editor-in-chief of the Herald Sun six months before the expiration of the three year period of his appointment. It is not necessary for me to determine whether that provision, in the contract, constituted a binding agreement between the parties to enter into such negotiations.[27] The point remains that, by including the second sentence in clause 4 of the contract, the defendant knew and was aware that, at the outset of the term, it was contemplated by the parties that they would enter into genuine negotiation, after 30 months, concerning the continuity of the plaintiff’s employment as editor-in- chief of the Herald Sun.
[27]See for example Coal Cliff Collieries Pty Ltd & Anor v Sijehaama Pty Ltd & Anor (1991) 24 NSWLR 1, 26 to 27 (Kirby P); United Group Roll Services Limited v Rail Corporation New South Wales [2009] NSWCA 177, [62] and following (Allsop P); Con Kallergis Pty Ltd v Calshoni Pty Ltd (Unreported, Court of Appeal, 25 March 1997) BC 9700880, at 20 and following (Hayne JA); compare Walford v Miles [1992] 2 AC 128, 138 (Lord Ackner).

Clause 22.4 was included in the contract to make specific provision, should those negotiations not succeed. It provided that if the contract was not renewed, the defendant might redeploy the plaintiff to another comparable position, which is available within the defendant or the News Group. It further provided that if the defendant was unable to obtain an offer of a comparable position, the defendant would terminate the plaintiff’s employment. Again, it is not necessary for me to determine whether that part of clause 22.4 obliged the defendant to redeploy the plaintiff in a suitable position if it were available, should the defendant not re-engage the plaintiff as the editor-in-chief of the Herald Sun at the conclusion of three years. The salient point is that, at the outset of the contract, the defendant recognised in the contract that there was a realistic expectation that the plaintiff would remain in his employment, at the expiration of the three year period, either as the editor-in-chief of the Herald Sun, or in a comparable position. In that sense, the provision in clause 4 for negotiations in respect of the renewal of the contract, and the provision in clause 22.4 for the possible redeployment of the plaintiff in a comparable position, recognised that, at the conclusion of the three year period, the plaintiff might have an opportunity for re-employment by the defendant in the same role, or in a comparable role.

It is clear from the evidence that the position of the editor-in-chief of the Herald Sun, to which the plaintiff was appointed, was considered by the defendant to be an important position within its organisation. According to the evidence, at that time the Herald Sun had the largest daily circulation of any newspaper in Australia. The defendant was keen to appoint the plaintiff to that position. His appointment was enthusiastically supported to Mr Hartigan by both Mr Blunden and Mr Clarke. The plaintiff, at that time, had an impressive curriculum vitae, and, as I have already noted, his career path had taken him through the ranks of journalism, rising to the level of editor of significant publications from the early 1990s. The generous relocation package provided for in the agreement of January 2007 indicates the high value which the defendant then placed on acquiring the services of the plaintiff as the editor-in-chief of the Herald Sun. The previous incumbent, Mr Blunden, had occupied that role for more than a decade. The defendant was also aware that, by moving his family and home to Melbourne, the plaintiff was requiring his family to undergo significant dislocation of their lives.

Those background circumstances give force to the conclusion that the parts of clause 4 and clause 22.4 of the agreement, to which I have just referred, constituted a contractual recognition by the defendant that the plaintiff would have the opportunity to treat with the defendant, at the conclusion of the first three year term, for an extension of his term of office as editor-in-chief of the Herald Sun, or, at the least, for a comparable position of employment with the defendant. Given the nature of the role of editor-in-chief, and the long tenure of the previous occupant of that position, in my view the defendant would have been well aware, in January 2007, that, by securing his appointment as editor-in-chief of the Herald Sun in January 2007, the plaintiff, at the expiration of that time, would have been well placed, at the least, to be given favourable consideration for an extension of his term of office, or, otherwise, for re-employment in a comparable position by the defendant. In those circumstances, in my view, it is clear that the defendant was well aware that, by engaging the plaintiff as editor-in-chief of the Herald Sun, the defendant enabled the plaintiff to derive a significant commercial advantage constituted by the prospect of his re-appointment in that position, or a comparable position, at the expiration of the first three year term. It follows that it would have been in the reasonable contemplation of the defendant, at the time of the contract, that if it wrongfully terminated the plaintiff’s appointment to that position during the three year period provided for in the contract, the plaintiff would be likely to suffer a loss of his opportunity to secure re-appointment to that position, at the end of the three year term.

Did the plaintiff lose an opportunity for re-employment?

That conclusion brings me to the next question, namely, whether, at the time at which the plaintiff’s contract of employment with the defendant was terminated in November 2008, the plaintiff in fact did lose an opportunity, of some value, to obtain re-appointment as editor-in-chief of the Herald Sun in February 2010, or redeployment by the defendant in another comparable position. Mr Houghton submitted on behalf of the defendant that if the plaintiff’s appointment had not been terminated in November 2008, there would have been no prospect of him gaining a renewal or extension of his contract in February 2010. Mr Houghton submitted that, as a result of the circumstances which had led to the termination of the plaintiff’s appointment in November 2008, his prospects of renewal of the contract, in February 2010, would have been “zero”, if, hypothetically, the defendant had not terminated his contract in November 2008. In support of that proposition, Mr Houghton relied on evidence given by Mr Hartigan to that effect, namely, that he would not have renewed the plaintiff’s contract when it came up for renewal in February 2010. That evidence was supported by the testimony of Mr Clarke and Mr Blunden, each of whom stated that, if the plaintiff had remained as the editor-in-chief of the Herald Sun until February 2010, they would have strenuously advocated to Hartigan that he not renew the plaintiff’s contract.

In response, Mr O’Bryan submitted that if the defendant had not terminated the plaintiff’s appointment in November 2008, the plaintiff would have had a realistic prospect of obtaining a renewal of his contract on its expiration in February 2010. In particular, he submitted that if the plaintiff had remained as the editor-in-chief of the Herald Sun until February 2010, he would, at the least, have had a reasonable prospect of being redeployed in another capacity with the defendant, if, at that time, the defendant was of a mind not to reappoint him as editor-in-chief of the Herald Sun.

The different positions taken by the parties on this issue focused on the reason why Mr Hartigan decided, in November 2008 to terminate the plaintiff’s employment as editor-in-chief of the Herald Sun. In effect, it was argued on behalf of the plaintiff that, when Mr Hartigan’s evidence is properly analysed, it can be seen that the sole or predominant reason for the plaintiff’s dismissal at that time was because he concluded that there had then been a breakdown in the relationship between the plaintiff as the editor-in-chief of the newspaper and Mr Blunden as the managing director of the Herald and Weekly Times. As a result of the perception by Hartigan that there had been such a breakdown in the relationship between the two men, he considered, then, that the only means of resolving the problem was to remove the plaintiff from his position as the editor-in-chief of the Herald Sun. However, it was submitted, the evidence discloses that Mr Hartigan was not averse to retaining the plaintiff in a comparable position as an employee of the defendant, and thus, at the least, the evidence reveals that, if the appointment had not been terminated in November 2008, there was a realistic opportunity that he might have been redeployed in a comparable position on the completion of the initial term of his contract with the defendant.

On the other hand, Mr Houghton submitted that, on the evidence, I should accept that Mr Hartigan’s disaffection with the plaintiff was based on wider grounds, so that, if the plaintiff’s appointment had not been terminated in November 2008, Mr Hartigan would definitely not have re-engaged him at all in February 2010. Further, Mr Houghton submitted that, if, in any event, Mr Hartigan had offered to the plaintiff an alternative position in February 2010, there is no evidence that the plaintiff would, or might, have accepted such a position.

The competing positions between the parties were the subject of most of the evidence which was adduced in the trial. The plaintiff was the sole witness called for his case. On behalf of the defendant, Mr Hartigan, Mr Clarke and Mr Blunden each gave evidence. There were a number of issues, on which the evidence of the plaintiff on the one hand, and the defendant’s witnesses on the other, conflicted. In order to determine the central issue raised by the evidence, it will be necessary for me to resolve a number of those conflicts.

The evidence adduced by each side did, in part, deal with the question of how it was perceived that the plaintiff was performing his role as the editor-in-chief of the Herald Sun, and with the question as to how it was perceived the Herald Sun was faring under the editorship of the plaintiff. On the one hand, Mr Guthrie’s evidence was that he was acquitting himself well as the editor-in-chief of the Herald Sun, and that the newspaper was doing very well. On the other hand, evidence was given by Mr Hartigan, Mr Clarke and Mr Blunden as to their perception of the performance of the plaintiff, and of the newspaper, during the period of the plaintiff’s tenure of office as editor-in-chief. In determining the critical issue, which I have defined above, it is important to bear in mind that the evidence as to the perceived performance of both the plaintiff and the Herald Sun, during the relevant period, was not led in order to prove whether or not the plaintiff was a competent and successful editor, or to prove whether or not, during his term of office, the Herald Sun was succeeding or failing under the plaintiff’s leadership of it. Neither of those questions were in issue in the case. The defendant did not seek to justify the dismissal of the plaintiff on the basis that he was deficient in his capabilities and performance, nor was it sought to justify his dismissal on the basis that, while he was the editor-in-chief, the Herald Sun was deteriorating in its quality and in its performance. The evidence relating to the various witnesses’ perceptions as to those two matters was not led to enable me to make an assessment as to either of those issues, and it was not the subject of any submission by either party to that effect.

Rather, that evidence was adduced as being relevant to the state of mind of Mr Hartigan in particular, and also the state of mind of Mr Blunden and Mr Clarke, about the capabilities and performance of the plaintiff, and the performance of the Herald Sun, by November 2008. That is, that evidence was led solely to establish that, by that date, Messrs Hartigan, Clarke and Blunden had reached the state of mind that, to their perception, the performance of both the plaintiff and the Herald Sun, during the plaintiff’s tenure of office, was such that it was untenable for him to continue as the editor-in-chief of the newspaper. Thus, the issue, which I must determine, concerns the actual perception by Mr Hartigan, and indeed also by Mr Blunden and Mr Clarke, of Mr Guthrie, during that time. In reaching any conclusions about that matter, I do not express any conclusion, or make any finding, about the capabilities or performance of Mr Guthrie during the time of his editorship of the Herald Sun, or about the performance or quality of the newspaper during that period.

The evidence of each of the four witnesses was subjected to critical testing and cross-examination, and to detailed analysis in final address. Each party raised issues of credit and reliability as to the witnesses called by the other side. In particular, in final address, Mr Houghton attacked the credibility of Mr Guthrie, and, in turn, Mr O’Bryan strongly criticised the credibility, in particular, of Mr Blunden and Mr Hartigan.

I turn, then, to the evidence given by the witnesses on the issue in question.

As I have stated, the only witness to give evidence for the plaintiff was Mr Guthrie himself. He commenced by giving evidence as to his background, and as to the initial approach to him by Mr Hartigan on 24 November 2006, in which Hartigan offered to him the position of the editor-in-chief of the Herald Sun. Mr Hartigan told the plaintiff that he had discussed the matter with Mr Clarke and Mr Blunden, who had each advised that the plaintiff would be a first rate candidate for the job. The plaintiff stated that the main difficulty confronting him was his family position, and in particular the fact that his two children were in their secondary education levels at school. Two days later, the plaintiff met with Mr Julian Clarke, who was then the managing director of the Herald and Weekly Times Limited. Mr Clarke told the plaintiff that he considered that the plaintiff was an ideal candidate for the position, because of his background in newspapers and magazines. He told the plaintiff that he did not wish the newspaper to continue in the same direction as it had under Mr Blunden, but rather that it should become a “more intelligent” paper. In particular, Mr Clarke stated that he felt that the opinion pages were not “intelligent” enough. Mr Guthrie expressed the view that he felt that the most serious pages of the newspaper – the opinion pages – should not have followed immediately after the least serious pages (the confidential gossip column). Guthrie and Clarke both agreed that the principal “drivers” of the Herald Sun circulations had been news and sport.

Approximately two weeks later, Mr Guthrie came to Melbourne and spoke to Mr Blunden in his Melbourne office. Blunden told Guthrie that the nomination of Guthrie as editor-in-chief was his idea. Mr Blunden stated that he had been asked to prepare a list of names, and the list which he provided to Mr Hartigan had Mr Guthrie’s name at the top of it.

The plaintiff stated that subsequently he wrote the letter dated 7 January 2007 to Mr Hartigan, setting out the terms on which he would accept the appointment of editor-in-chief. At that time, the plaintiff was on holidays in Mexico with his family. By the time he returned from holidays on 20 January, he had accepted the position of editor-in-chief, and it had been announced at a press conference. The defendant had published a press release to that effect on 18 January. On his return from holidays, the plaintiff had a further meeting with Mr Hartigan. In his evidence, the plaintiff stated that Hartigan said he thought that the newspaper had gone “too far down market”, and he felt that the feature section of the paper needed work. Hartigan agreed with Clarke’s assessment that the paper needed to be more intelligent. Mr Guthrie mentioned his suggestion that the gossip column be moved away from the opinion pages, and Hartigan encouraged him to work on that concept.

The plaintiff then gave evidence about the move of his family from Sydney to Melbourne, and the commencement by him in his role as editor-in-chief on 19 February 2007.

In cross-examination (but not in evidence in chief), the plaintiff agreed that, in March 2007, shortly after he had started, differences of opinion arose between himself and Mr Blunden about what the plaintiff perceived to be interference by Blunden with his editorial responsibility. The plaintiff telephoned Mr Clarke about it, and Mr Clarke in turn spoke to Blunden. However Mr Blunden continued to interfere. Accordingly, the plaintiff sought a meeting with Mr Clarke. During that meeting, differences were discussed. It was decided at that meeting that Clarke, Blunden and the plaintiff would have regular meetings together to resolve the problem.

The plaintiff then gave evidence as to the lunch meeting which he had with Mr Hartigan at Southbank in August 2007. The plaintiff stated that at that lunch they spoke about a number of issues. In the course of the lunch, Mr Hartigan said that Blunden had complained to him that the plaintiff was not talking to him enough. The plaintiff responded that he was bemused by what Blunden had told Hartigan, because Clarke, Blunden and he had been meeting every Wednesday. The plaintiff said that nevertheless he would bear Mr Hartigan’s comment in mind, and that if there needed to be more communication between the two men, he was happy to do it. The plaintiff, in his evidence, then stated that Hartigan said to him: “Bruce, I give you one word of warning, never go up against Peter Blunden”.

In the meantime, the plaintiff had been involved in altering the format of the Herald Sun, so as to include the non-news section of it into a “News Extra” section, which was to be placed separate to the opinion pages of the newspaper. The “News Extra” section was launched in June 2008. According to the plaintiff, Mr Hartigan telephoned him after that, and commended him on the launch of the new section of the newspaper.

In cross-examination (but again not in evidence in chief), the plaintiff gave evidence about the argument which developed between himself and Mr Blunden on 14 February 2008 concerning whether one of the Herald Sun photographers should travel to the United Kingdom, at the expense of the Melbourne Storm Football Club, in order to cover that club’s trip to London. I have already referred to the nature of the emails, in which that disagreement developed[28]. The plaintiff stated that on the following Monday (18 February 2008) Mr Blunden apologised to him for the emails. Mr Guthrie stated that he considered that the argument constituted a debate between the managing director, who was upholding the corporate interests, and an editor upholding the principle of the editorial independence against corporate interests.
[28]See paragraph 10 above.

In his evidence in chief, the plaintiff then referred to the emails, which passed between himself and Mr Blunden when Mr Blunden was in Beijing in August 2008 for the Olympic Games. The plaintiff stated that at about that time he had had a conversation with a “prominent Melburnian” ( who was later identified as the radio commentator, Mr Neil Mitchell), who told the plaintiff that Mr Blunden had been critical to him about the newspaper. As a consequence of that conversation, Mr Guthrie telephoned the editorial director of News Limited, who advised the plaintiff to speak to Mr Hartigan about it. Accordingly, the plaintiff telephoned Mr Hartigan, who counselled the plaintiff to speak to Mr Blunden when he returned from China.

Accordingly, the plaintiff had a meeting with Mr Blunden on 19 August on the latter’s return from Beijing. According to the plaintiff, Mr Blunden admitted that the tone of his emails was inappropriate. He also admitted that the “prominent Melburnian” was correct, and that he (Blunden) had said some things which were out of place. Blunden undertook not to repeat that conduct. Blunden and the plaintiff agreed that they would work more cohesively in the future. As a result, the plaintiff sent to Hartigan an email stating “The meeting with Peter went well, there was no need for you to get involved, it’s onwards and upwards from here”. I interpolate that a copy of the email could not be found. However, in his evidence, Mr Hartigan accepted that an email, to that effect, was sent to him at that time.

In late September 2008, the plaintiff and his wife purchased a home in Melbourne, and placed their Sydney home on the market. On 23 October 2008, the Herald Sun published a front page story with the headline “Beverley Hills Cop”, which was critical of the trip made by the then Chief Commissioner of Police, Ms Nixon, to Los Angeles. The plaintiff stated that on that day Mr Blunden spoke to him, and told him that Mrs Janet Calvert-Jones (the chairperson of the Herald and Weekly Times Limited) was not happy with the story, and considered that the paper had been too hard on Ms Nixon. According to the plaintiff, Mr Blunden stated that “Janet Calvert-Jones and Christine Nixon are mates”. The plaintiff further gave evidence that subsequently, after he and Blunden flew to Sydney, Blunden, at Sydney Airport, said to him “I’m not sure we got it right on Christine Nixon”.

In cross-examination, Mr Guthrie was questioned about some promotions, which featured in the Herald Sun in the latter part of 2008. He agreed that at a weekly management meeting on Thursday 9 October 2008, Blunden had criticised him for failing to publicise the National Geographic DVD promotion, which was to take place in the Herald Sun for a period of two weeks commencing the following Monday 13 October. Mr Guthrie stated to Blunden that he had developed the program with the marketing department, and that there were newspaper “blurbs” beginning the next day (Friday) and also in the Saturday and Sunday editions of the newspaper. He said there would also be a big page one “blurb” on Monday. Blunden questioned why no promotion had taken place in the newspaper that day, and he complained that the promotion had commenced too late. Mr Guthrie responded that the timetable had been developed in coordination with the marketing department. He asked Mr Blunden why he did not raise the issue of the timetable at the previous week’s management meeting.

Mr Guthrie was also cross-examined about the coverage given by the Herald Sun to the Australian Football League final series in September 2008, and in particular to the prominence given to the forthcoming preliminary finals (featuring four Victorian AFL clubs) in the edition of the Herald Sun on Friday 19 September and on Saturday 20 September. In this respect, it is significant that the cross-examination included a criticism of the treatment by Mr Guthrie of the forthcoming Hawthorn versus St Kilda final in the edition of 20 September 2008. I shall return to that matter later. However, in cross-examination Mr Guthrie denied that Blunden criticised either edition of the newspaper in relation to that matter. He also denied that he had been criticised for failing to give sufficient coverage to the visit to Melbourne of Princess Mary of Denmark in the edition of the newspaper of 30 August 2008.

The next relevant incident, about which the plaintiff gave evidence, was the termination of his employment by Mr Hartigan on 10 November 2008. I have already set out, in detail, the conversation which occurred between the two men on that date.[29] On the same day, Mr Blunden telephoned Mr Guthrie at about 7.00 pm. Mr Guthrie said that Blunden opened the conversation by saying “I am sick to my stomach about what’s happened today”. Guthrie replied “Why Peter? I gather it’s all your idea”. Blunden said “No, I am not driving this”. Guthrie replied “That’s not what John Hartigan tells me”. Blunden responded “I have told Hartigan there is no problem between you and me”. Guthrie then said “So what is this all about?” Blunden stated “It’s complicated and confidential, but essentially a third party got involved. That person said something to someone else, and then that person said something to someone else, and it went from there”. Guthrie replied “So I am out of a job because apparently we don’t get on”. Blunden stated “I am terribly sorry”. Guthrie said “This could not have come at a worse time for me and my family, we have just bought a house”. Blunden said “I know, I told them to err on the side of generosity”.
[29]Paragraph [13] above.

Accordingly, any conclusion which I might reach as to the availability of a comparable position in the News Limited group of companies to offer to Mr Guthrie in February 2010 would, of necessity, be based on pure speculation. Certainly, I could not be satisfied, on the balance of probabilities, that such a position was available in February 2010. Indeed, there is no evidence that there was even any chance of such a position being available to be offered to Mr Guthrie in February 2010.

It follows from the foregoing that the principal claim by the plaintiff for damages, for loss of opportunity to obtain a renewal of his contract, or re-deployment to a comparable position in February 2010, must fail. Accordingly, it is necessary for me to consider the alternative claim made by the plaintiff for damages.

Alternative claim for damages: plaintiff’s entitlement to a termination payment as at 19 February 2010

That alternative claim by the plaintiff is for damages consisting of a termination payment, to which he would have been entitled under clause 22.4 of the contract, if he had remained in employment with the defendant to 18 February 2010. The plaintiff claimed that as a result of the wrongful termination by the defendant of his employment in November 2008, he was thereby prevented from completing his contract of service with the defendant to February 2010, and thus becoming entitled to the termination payment at that time.

The claims so made by the plaintiff arise from part of clause 22.4, which I have quoted earlier in this judgment.[47] As I have already discussed, the first paragraph of clause 22.4 provides that if the contract was not renewed, then the defendant may re-deploy the plaintiff to a comparable position which is available in the company. It further provides that if the company was unable to obtain an offer of a comparable position for the plaintiff, the company would terminate his employment. The second paragraph of clause 22.4 then provides:

“In these circumstances, in addition to your entitlements under clause 22.3, you will receive a termination payment which is inclusive of notice and redundancy/severance pay. In determining an appropriate termination payment, the Company will take into account any applicable legislative requirements and length of service with the Company.”

[47]Paragraph 24 above.

The parties, in their submissions, adopted different constructions of the part of clause 22.4, to which I have just referred. Mr O’Bryan submitted that the phrase “which is inclusive of notice and redundancy/severance pay” should be construed to mean that the termination payment, payable by the defendant to the plaintiff, would include (at the least) payment in lieu of notice together with redundancy/severance pay. On the other hand, Mr Attiwill, who made the submissions of the defendant relating to damages on this aspect of the case, submitted that the word “inclusive” meant that the plaintiff would receive a termination payment, which would thus extinguish any rights the plaintiff might have to payment in lieu of notice and redundancy and severance payments. He submitted that the amount of such termination payment was to be determined by the defendant, at its discretion, upon the termination of the plaintiff’s employment.

The difference between the positions taken by the parties arose out of the question of the meaning of the adjective “inclusive”.

It is useful to consider, first, the ordinarily understood meaning of the adjective “inclusive”. In ordinary everyday use, the word “inclusive” is generally understood to connote that which includes or comprehends a particular fact or matter. Thus, a price, which is stated to be “inclusive of goods and services tax”, is a price which is deemed to include, and which comprehends, an allowance for that tax. In a legal dispute, an offer to compromise an action, which is expressed as a particular monetary sum “inclusive of costs”, is generally understood to comprehend, within the offered sum, an allowance for the costs of the offeree.

That common meaning of “inclusive” is consistent with the definitions of it in the Oxford English Dictionary and in the Macquarie Dictionary. The latter defines “inclusive” to mean:

“(1) including in consideration or account, as the stated limit or extreme (for example from 6 to 10 inclusive);
(2)including a great deal, or including everything concerned; comprehensive;
(3)that which includes; enclosing; embracing.”

In those senses, it can be seen the adjective “inclusive” contains two interrelated concepts. Something which is “inclusive” is taken to include a particular factor in it, so as to exclude that factor from further consideration. Thus, it is clear that a termination payment, under clause 22.4, would preclude any further entitlement of the plaintiff to claim payment in lieu of notice and redundancy and severance payments. However, and in addition, the termination payment would be taken to assume within it an allowance for both of those payments. In other words, the payment excludes any further entitlement to payment in lieu of notice, and redundancy/severance payment, because it would comprehend, within it, an allowance for each of those entitlements.

Clause 22.4 does not make it entirely clear as to how the termination payment is to include, within it, payment in lieu of notice and redundancy/severance pay. However, two points are relevant. First, clause 22.4 assumes and acknowledges, at least implicitly, an entitlement of the plaintiff to notice pay and redundancy/severance pay on the termination of his employment. The express reference in clause 22.4, to those payments, implies an assumption that the plaintiff would be entitled to them on the termination of his contract after three years. That proposition is supported by the third sentence of the second paragraph, which requires the defendant to take into account applicable legislative requirements. The concepts of notice pay and termination pay are relatively common in the area of industrial relations and industrial law. Indeed, they are now both the subject of express provisions in the Fair Work Act 2009. In that way, in my view, clause 22.4 acknowledges, at least implicitly, an entitlement of the plaintiff, upon termination of his contract after three years, to notice pay and redundancy/severance pay, which are to be catered for in the termination payment specified by clause 22.4.

The second relevant point is that, in my view, properly construed, clause 22.4 does not leave the defendant at large to determine, at its discretion, the composition or amount of the termination payment. Clause 22.4 is not expressed in terms of a discretion. To the contrary, it expressly refers to notice pay and to redundancy/severance pay, and the third sentence of the second paragraph of clause 22.4 is expressed in mandatory terms, in prescribing what the defendant must take into account in determining the appropriate termination payment. Moreover, it is unlikely that one party to a negotiated commercial contract would intentionally leave himself entirely at the discretion of the other party, in determining an important entitlement under the contract. Thus, contrary to the submission of Mr Attiwill, I do not consider that clause 22.4 reposed in the defendant a discretion to determine the composition or the quantum of the relevant termination payment. Rather, as I have indicated, in my view, in determining that payment, the defendant was required to include within it an appropriate notice payment and an appropriate redundancy/severance payment.

That construction, of the second paragraph of clause 22.4, is supported by the third paragraph, which provides that if the defendant does make an offer of a comparable position to the plaintiff, and the defendant rejects that offer, the plaintiff will only receive the payments due under clause 22.3. Thus, clause 22.4 recognises and intends that the plaintiff shall be in a more favourable position, if the defendant is unable to provide to him a comparable position, than if the defendant has made an offer of such a position to the plaintiff, which the plaintiff has rejected. That consideration strengthens the submission by the plaintiff that the termination payment, referred to in the second paragraph of clause 22.4, was to include an appropriate payment in lieu of notice and a redundancy/severance payment.

Furthermore, that construction of clause 22.4 is consistent with, and supported by, the scheme of the contract, and the background circumstances in which it was made. The contract was designed to provide the plaintiff with some security of tenure for three years, with a prospect of the plaintiff being re-employed or redeployed at the conclusion of that period. The generous relocation payments in the contract recognised that the move of the plaintiff and his family from Sydney to Melbourne was a matter of substantial consequence to them. It is consistent with those provisions, and the scheme of the contract, that it should have provided an appropriate measure of financial protection to the plaintiff, should, at the end of the three year period, he not be re-employed by the defendant. In those circumstances, it is understandable that the parties would have comprehended, within the proposed termination payment, an appropriate payment in lieu of notice, and an appropriate redundancy/severance payment.

For those reasons, I accept the submission made by Mr O’Bryan that the phrase, “which is inclusive of notice and redundancy/severance pay”, in clause 22.4 should be construed to mean that the termination payment, payable by the defendant to the plaintiff in February 2010, would have included a payment in lieu of notice, together with a redundancy/severance payment.

Ordinarily, the question of notice, or of payment in lieu of notice, only arises where a contract of employment is not for a fixed term. In such a case, the law implies a term that the contract of employment may only be determined by reasonable notice by one party to the other, or, in the case of termination by the employer, the payment of remuneration to the employee for that period in lieu of the provision of such notice. However, clause 22.4 specifically provides for a termination payment to be constituted by “notice and redundancy/severance pay”. As I have stated, it is implicit, in that part of clause 22.4, that if the contract of employment of the plaintiff was not renewed at the end of its term, and if the defendant did not redeploy the plaintiff in a comparable position at that time, the defendant would make a payment to the plaintiff, which covered a notional period of notice of termination, and which also included an appropriate redundancy/severance payment.

That construction of clause 22.4 is supported by the structure of the written agreement between the parties. In particular, clause 4 and clause 22.4 clearly envisaged the prospect that the plaintiff might be re-employed by the defendant, or redeployed in a comparable capacity, at the expiration of the three year term. As I have stated, it is relevant that the plaintiff and his family had relocated to Melbourne in order to commence his duties under the contract. If he were not re-engaged, after three years, by the defendant in the same or a comparable position, it was reasonably foreseeable by the parties that the plaintiff may have some difficulty in gaining alternative suitable employment. Those circumstances support a construction of clause 22.4 that the termination payment, therein referred to, was to consist of an appropriate payment in lieu of notice, as well as a redundancy/severance payment.

The parties took substantially different positions in respect of the length of the period of such notice contemplated by clause 22.4, in lieu of which the defendant was required to make a payment of remuneration to the plaintiff. Mr O’Bryan submitted that the appropriate period of notice, in respect of which the plaintiff should have been paid remuneration, was the period of twelve months. In support of that submission, he drew my attention to a number of authorities, which have held that such a period of notice is appropriate, in respect of employees who occupy high ranking positions with significant responsibility.

On the other hand, Mr Attiwill submitted that the appropriate period of notice is five weeks. He pointed out the authorities, to which Mr O’Bryan referred me, concern cases in which the employee was not engaged on a fixed term contract. Mr Attiwill referred me to the relevant provisions of the Fair Work Act 2009, which came into operation in January 2010. In particular, he drew my attention to the minimum periods of notice fixed by s 117(3) of the Act, which, in the case of Mr Guthrie, would be five weeks notice.

It is clear from the cases that the following principles apply in determining the question of the length of notice, which should be provided to an employee, who has not been retained on a fixed term contract:

(1)The appropriate length of the “reasonable notice” (or period in lieu of which payment should be made) is determined at the time at which notice of termination of the employment is given, and not when the contract of employment was entered into.[48]
(2)In determining what is a reasonable period of notice, it is important to bear in mind the primary purpose served by the giving of such notice, namely, to enable the employee to obtain new employment of a similar nature.[49]
(3)Factors which are taken into account in order to determine the appropriate length of notice include matters pertinent to the nature of the employment itself, and also matters personal to the employee. Thus, they include the level of responsibility assumed by the employee, the high grade of his appointment, the importance of his position, the size of his salary, and industry practice. They also include matters personal to the individual employee, including the length of the employee’s service with the defendant, the employee’s age, the nature of the employment which the employee left, or gave up, in order to serve the present employer, and the expected period of time it would take for the employee to find suitable alternative employment.[50]
(4)Damages arising from the failure of the employer to give adequate notice, or to provide adequate payment in lieu of such notice, are calculated in gross monies, and not net of taxation.[51]

[48]Ikin v Danish Club Dannebrog Inc [2001] VSCA 123, [26]; Quinn v Jack Chia (Australia) Limited [1992] 1 VR 567, 580 (Ashley J).

[49]Australian Blue Metal Limited v Hughes [1963] AC 74, 99; Rankin v Marine Power International Pty Ltd [2001] VSC 150, [220] (Gillard J).

[50]See for example Quinn v Jack Chia (Australia) Limited (above) 580 (Ashley J); Rankin v Marine Power International Pty Ltd (above) [222]-[223], [232].

[51]Quinn v Jack Chia (Australia) Limited (above) 581; Kilburn v Enzed Precision Products (1988) 4 VIR 31, 34 (O’Bryan J).

In determining the applicable period of notice, I do not consider that much guidance is obtained from the Fair Work Act 2009, upon which Mr Attiwill relied. Section 123(1) provides that Division 11, in which s 117 is located, does not apply to an employee who is employed for a specified period of time. Thus, s 117 would not have applied to Mr Guthrie’s contract, in February 2010. Further, and in any event, s 117(3) only provides for the “minimum period of notice” to be provided to an employee. The Fair Work Act applies to a wide variety of employees. By prescribing the minimum period of notice, the Act does not, it seems to me, cast light on the appropriate period of notice, which should be given to an employee in Mr Guthrie’s position. In such a case, the minimum period provided by the Act, namely five weeks, would have been wholly inadequate, in light of the factors which are involved in the assessment at common law.

In my view, if the contract of service of the plaintiff was of indefinite duration, then, applying the principles to which I have already referred, he would have been entitled to a period of twelve months’ notice of termination of his agreement. A number of factors lead to that conclusion. In particular, the plaintiff’s employment with the defendant involved him working at a particularly high level in the defendant’s organisation, and assuming a high degree of responsibility. He left a position of responsibility, as editor of the Weekend Magazine of the Australian newspaper, to commence his duties with the Herald Sun. By 2010, he would have been employed by the defendant for a period of six years. The plaintiff was employed on a substantial salary, indicating the high grade of his employment. Although I did not receive evidence of the plaintiff’s age, it is safe to assume that he is in his late 50’s. The plaintiff was at a stage of life, and at a level in his industry, when, I would expect, it might be difficult for him to obtain suitable alternative employment of a similar nature to that which he performed with the defendant. In those circumstances, if the plaintiff had been employed on a contract of indefinite duration, then, in my view, the defendant would have been required to give the plaintiff twelve months’ notice of termination of that contract (or pay him twelve months’ remuneration in lieu of that notice), in order to fulfil its obligations pursuant to the implied term to that effect.

That conclusion needs to be modified, however, by a particularly salient feature in this case. The plaintiff’s contract with the defendant was not for an indefinite period, but for three years. Thus, unlike the employee who is engaged for an indefinite period of service, the plaintiff was provided some security of employment for that period. Further, he knew, in advance, when that secure period of employment would end. Clause 4 of the contract made specific provision for the parties to enter into negotiations about the renewal of his contract, six months before its expiration. Thus, it was envisaged that, before the expiration of the plaintiff’s term, he and the defendant would each have advance notice as to whether the plaintiff was to continue in the same position with the defendant, in a comparable position, or not at all. Those two circumstances, in my view, operate to modify the period of notice, which otherwise the defendant would have been required to provide to the plaintiff, if he had been hired by the defendant for an indefinite period. Bearing in mind, first, the fact that the plaintiff did have the security of three years contracted employment with the defendant, and, secondly, the fact that the contract envisaged that the plaintiff would have had advance notice, before 18 February 2010, whether his contract of employment was to be renewed, I do not consider that the notice payment, referred to in clause 22.4, would encompass the complete period of twelve months. In my view, taking those matters into consideration, and applying the principles to which I have referred, an appropriate period of notice, as contemplated by clause 22.4, would be a period of eight months.

The other entitlement, referred to in clause 22.4 of the agreement, is described as “redundancy/severance pay”. Mr O’Bryan submitted that that payment was separate and additional to the notice payment referred to in clause 22.4. In support of that proposition, he referred me to the judgment of Hely J in Reynolds v Southcorp Wines Pty Ltd & Anor[52]. Mr Attiwill did not make any submission to the contrary on that point. In particular, he did not contend that if I do not accept his submissions concerning the meaning and effect of the word “inclusive” in clause 22.4, I should treat notice payment and redundancy/severance payment as either the same, or as overlapping in any respect.
[52](2002) 122 FCR 301; [2002] FCA 712.

In my view, Mr Attiwill was correct in taking that position on behalf of the defendant. In Reynolds v Southcorp Wines[53], Hely J stated:

“Where a contract of employment is terminable by notice, any requirement to make a severance payment is in addition to the requirement to provide notice of termination – the two are distinct … .”

[53]Footnote above, 310, [44].

In support of that proposition, Hely J cited the decision of Von Doussa J, of the Industrial Relations Court, in Fryar v System Services Pty Ltd[54]. There, Von Doussa J differentiated between notice payment and severance payment as follows:

“A period of notice is to give an employee the opportunity to adjust to the change in circumstances which is to occur and to seek employment … The period may be worked out … and it often is, as it is recognised that the employee’s prospects of obtaining other employment may be better if the search is undertaken while the employee remains in employment … A severance payment, however, is intended to provide a payment as compensation for the loss of non-transferable credits and entitlements that have been built up through length of service such as sick leave and long service leave, and for inconvenience and hardship imposed by the termination of employment through no fault of the employee … The inconvenience and hardship includes the disruption to an employee’s routine and social contacts and the competitive disability to long term employees arising from opportunities foregone in the continuous service of the employer … .”[55]

[54](1996) 137 ALR 321.

[55]Page 331.

In Haley v Public Transport Corporation of Victoria[56], Ashley J (as his Honour then was) also gave consideration to the character and nature of the termination payment made in that case to the plaintiff, in order to determine whether it should be offset against the plaintiff’s claim for wrongful dismissal. His Honour held that, on the facts of that case, the particular termination payment made to the plaintiff was of the same character as that described by Von Doussa J in Fryar’s case, and accordingly his Honour held that it should not be offset against the plaintiff’s claim for damages for wrongful dismissal.
[56][1998] VSC 132.

Thus, it would seem that the common ground between the parties on this aspect is correct, and that the notice payment and redundancy/severance payment, referred to in clause 22.4, are separate payments which are additional to each other.

The parties also put different positions to me concerning the amount of the termination payment referred to in clause 22.4. Mr O’Bryan submitted that that payment should be calculated by multiplying the plaintiff’s gross remuneration, as at February 2010, by 24 weeks, which would allow four weeks gross remuneration for each of the six years in which the plaintiff served the defendant. On the other hand, Mr Attiwill submitted that the appropriate termination payment should be calculated by reference to the period of weeks specified in s 119(2) of the Fair Work Act, which, in the case of Mr Guthrie, would be eleven weeks.

Again, the period, specified in the Fair Work Act, is the minimum period, which is specified by way of general application to a wide variety of employees to whom the Act applies. In my view, given the high level of the plaintiff’s employment, the responsibility which he bore in carrying out his duties with the defendant, particularly during the time of his editorship of the Herald Sun, and the intangible inconvenience which the plaintiff might experience, in transferring his employment on the termination of the contract, it would be appropriate to allow four weeks’ remuneration for each year of service, in calculating the appropriate termination payment under clause 22.4. In this respect, I note that in its letter to the plaintiff dated 10 November 2008, the defendant proposed a severance payment based (then) on four weeks per year of service by the plaintiff with the defendant. Accordingly, in calculating the plaintiff’s termination payment, I consider that the appropriate multiplier is a factor of twenty four weeks, and not, as contended on behalf of the defendant, a factor of eleven weeks.

For the purposes of determining the appropriate payment in lieu of notice, Mr O’Bryan submitted that the appropriate annual remuneration of the plaintiff, as at 19 February 2010, should be calculated in the sum of $844,258. That amount was calculated by reference to two primary components namely:

(a)Remuneration as at 10 November 2008 - $698,915;
(b)Plaintiff’s expected entitlements during the putative period of notice after 18 February 2010:
(i)Restrictive stock units (expected as at September 2010) $33,376.96;
(ii)Expected increase in salary as at July 2010 $14,125;
(iii)Annual leave $85,493;
(iv)Long service leave for the putative period of notice $12,349.

Mr Attiwill took issue with each of the components, to which I have just referred. The first component – remuneration as at 10 November 2008 – included, on Mr O’Bryan’s reckoning, the value of the relocation costs provided for in the original contract between the plaintiff and the defendant. By February 2010, the plaintiff would have been well settled in Melbourne with his own home. I agree with Mr Attiwill that that figure should be deducted from the calculation of the remuneration as at February 2010. Further, the calculation of the plaintiffs’ remuneration at February 2010 also included a component of annual leave, comprising $47,308. I agree with Mr Attiwill that that amount also should be deducted. With those adjustments, the value of the plaintiff’s remuneration package, as at February 2010, would be the sum of $514,807.

I also agree with Mr Attiwill that each of the four items, claimed by the plaintiff in respect of the second component, namely the entitlements during the putative period of 18 February 2010, would not form part of any calculation of the payment to be made to the plaintiff in lieu of notice. There is no evidence that the plaintiff would have qualified for restrictive stock units at September 2010. Nor does the evidence enable to me infer what increase, if any, would have been gained by the plaintiff in his salary, in July 2010. The claim for annual leave, and long service leave, would be a “double dip”, given that those payments are only made if the employee does not take the leave. Furthermore, none of those four items formed part of the plaintiff’s remuneration as at February 2010. They remained to be earned during the ensuing twelve months. By ordinary principles, in lieu of appropriate notice, the plaintiff was entitled to payment for the applicable period of notice (which I find to be eight months) at the rate of his remuneration as at February 2010, and not at some future date. Thus, I agree with Mr Attiwill that the appropriate rate of remuneration, to be applied for this purpose, was the annual remuneration rate of $514,807. Based on that figure, the appropriate payment in lieu of eight months’ notice amounts to the sum of $343,205.

Using the same remuneration rate ($514,807), pursuant to clause 22.4, the plaintiff would also be entitled to a termination payment (for the allowed period of 24 weeks) of $237,603. Thus, if the defendant had not breached the employment contract which it had with the plaintiff in November 2008, the plaintiff would have been entitled to a payment, at 18 February 2010, pursuant to clause 22.4, of $580,808.

The plaintiff’s claim in this respect is that, by reason of the wrongful termination of his employment in November 2008, he was prevented from completing his contract of employment with the defendant, and thus becoming entitled to the payment to which I have just referred, namely $580,808. It has not been put to me that any contingency had occurred, or would have occurred, between November 2008 and February 2010, which would have prevented the plaintiff from completing his employment with the defendant in February 2010. Thus, in my view, although the award of damages on this basis does, in a sense, involve postulating a hypothetical past situation, nevertheless nothing has been put to me which would indicate any realistic possibility that that hypothetical situation might not have come to pass, had it not been for the wrongful termination of Mr Guthrie’s appointment in November 2008. Accordingly, in my view, the plaintiff is entitled to damages calculated, in that way, in the sum of $580,808.

Plaintiff’s alternative claim: duty of good faith

In light of those conclusions, I turn, briefly, to the alternative claim for damages made by the plaintiff. As I indicated earlier in these reasons, the plaintiff made an alternative claim, in the event that I should conclude that the defendant did have the right, in November 2008, to unilaterally terminate the plaintiff’s employment. It was pleaded, and submitted, on behalf of the plaintiff, that, if the defendant did have such a right to terminate the plaintiff’s employment unilaterally, in exercising that right in November 2008, the defendant breached an implied term of the contract that the defendant would not, without proper or reasonable cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the plaintiff and the defendant. In essence, the plaintiff claimed that the defendant, in exercising such unilateral right of termination, breached an implied obligation by the defendant that it act in good faith towards the plaintiff as its employee.

In light of my conclusion, that the defendant did not have a right to unilaterally terminate the plaintiff’s employment in November 2008, it is not necessary for me to reach any conclusion about the alternative claim so asserted by the plaintiff. However, this aspect of the case was the subject of some detailed submissions, particularly on some questions of law involved in it. In deference to those submissions, and in the event that this matter is the subject of appeal, I shall deal with this issue in short compass.

Mr Houghton submitted that it is not established that there is an overall duty of good faith in a contract of employment of the type entered into between the plaintiff and the defendant. Further, and in any event, he submitted that any such obligation of good faith, in general, would not be implied so as to affect the express right of an employer to dismiss an employee. Mr Houghton also submitted that if there was such an obligation of good faith affecting the unilateral right of the defendant to dismiss the plaintiff in this case, no such want of good faith has been proven by the plaintiff. Finally, he submitted that, if the plaintiff has established a breach of good faith in respect of his dismissal as editor-in-chief of the Herald Sun, the plaintiff has failed to prove that any such breach has caused him loss and damage.

The question as to whether, in a contract of employment, there is to be implied an obligation of good faith, and, if so, the impact of that obligation on the parties’ rights to terminate such a contract, has been the subject of much discussion in the cases. There is authority for the proposition that such an obligation may be implicit in a contract of employment.[57] I note however that there are some cases, in which the view had been expressed, albeit obiter dictum, that no such obligation may be implied in a contract of employment.[58] Further, it has been held that any such obligation would not be implied, so as to affect a right of termination of a contract expressly provided by the contract itself or under statute.[59]
[57]See for example Russell v Trustees of Roman Catholic Church for Archdiocese of Sydney (2007) 69 NSWLR 169, [134] (Rothman J); Quinn v Gray [2009] VSC 136, [13]-[15] (Byrne J); State of South Australia v McDonald (2009) 104 SASR 344, 387 [223].
[58]See for example Van Efferen v CMA Corporation Ltd [2009] FCA 597, [79]-[85] (Tracey J); Walker v Citigroup Global Markets Pty Ltd (2005) 226 ALR 114, 156-7 (Kenny J); McDonald v Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903.
[59]Johnson v Unisys Ltd [2003] 1AC 518; State of South Australia v McDonald (above), 391, 399.

It is not necessary for me to enter into the debate. Indeed, in view of the conclusions which I have reached that the defendant was not entitled to terminate the plaintiff’s employment in November 2008, it is undesirable that I express a concluded view on the questions of law referred to in the authorities. However, if, (contrary to my decision) the defendant did have a legal right under the contract to terminate the plaintiff’s employment in November 2008, and assuming (without deciding) that there was an implied term in the contract that the defendant would only exercise that right in good faith, in my view the evidence does not establish, on the balance of probabilities, any breach of that duty by the defendant, and in particular, by Mr Hartigan, who was responsible for making and implementing the decision to terminate the plaintiff’s employment as the editor-in-chief of the Herald Sun. As I have already found, in reaching that decision, Mr Hartigan was substantially influenced by the constant reports to him by Mr Blunden that the relationship between the plaintiff and Mr Blunden had become unworkable. Mr Hartigan, notwithstanding the consistent imprecations by Blunden, had delayed for a substantial period, before finally deciding to terminate the plaintiff’s employment. It might have been desirable for him to have previously told the plaintiff that Blunden had been pressing for his dismissal, so as to impress on the plaintiff the gravity of the situation. However, I do not consider that his failure to do so would be described, in any relevant sense, as a lack of good faith. As I have already found, Mr Hartigan reached and implemented the decision to terminate the employment of the plaintiff, because he genuinely considered that the relationship between the plaintiff and Blunden had irrevocably broken down. In my view, the plaintiff has not demonstrated any absence of good faith on behalf of Mr Hartigan in doing so.

Further, if, (contrary to the above) there had been demonstrated to be an absence of good faith on behalf of Mr Hartigan, it is not demonstrated that that lack of good faith has caused the plaintiff any loss and damage. It would seem, from the submissions of Mr O’Bryan, that the lack of good faith, alleged by the plaintiff, was the failure by Mr Hartigan to give prior warning to the plaintiff that Blunden had been advocating his dismissal as editor-in-chief of the Herald-Sun. In my view, it is not demonstrated that if Mr Hartigan had warned the plaintiff of Mr Blunden’s attitude to him, that would have made any difference to the outcome. Mr Guthrie did not give evidence that, if Mr Hartigan had given him any such warning, he would have acted differently. Indeed, Mr Guthrie himself did not perceive that the problems between himself and Blunden were anywhere near as serious as Mr Hartigan perceived them to be. I am not satisfied that if Mr Hartigan had discussed the matter with Mr Guthrie, the latter would have been able to bring about an appropriate change in the position between himself and Blunden, and thus would have avoided Mr Hartigan reaching the decision that he should dismiss Mr Guthrie from his position as editor-in-chief of the Herald Sun. Accordingly, I am not satisfied that even if there was a breach by the defendant of any duty of good faith, that breach played any relevant causative role in the damage sustained by the plaintiff.

Late debt claim

Finally, in his final address, Mr O’Bryan submitted that, if I should conclude that the defendant was entitled to terminate the plaintiff’s employment in November 2008, nevertheless the defendant had failed to pay to the plaintiff a number of entitlements which had accrued to him under his contract. In effect, Mr O’Bryan sought to advance, on behalf of his client, a claim in debt against the defendant. That claim was not contained in the pleadings, and had not been foreshadowed in his opening. Nor had it been the subject of any evidence. In those circumstances, I upheld Mr Houghton’s objection to the late agitation of it by Mr O’Bryan.

Summary of conclusions

For the reasons which I have set out in this judgment, I have reached the following conclusions:

(1)The defendant breached the plaintiff’s contract of employment by terminating his appointment as editor-in-chief of the Herald Sun newspaper on 10 November 2008.
(2)I am not satisfied that, as a consequence of that breach of contract by the defendant, the plaintiff suffered a loss of a valuable opportunity to obtain a renewal of his contract of employment with the defendant on 18 February 2010, or to be re-deployed by the defendant, at that date, to a comparable position in the News Limited group of companies.
(3)I am satisfied that, as a result of the breach by the defendant of the contract of employment of the plaintiff, the plaintiff suffered loss and damage, consisting of the termination payment to which he would have been entitled under clause 22.4 of the contract, if the defendant’s wrongful breach of the contract had not prevented the plaintiff completing his term of service with the defendant.
(4)I assess the damages, which were thereby caused to the plaintiff, in the sum of $580,808.
(5)In light of the first conclusion, summarised above, it is not necessary for me to determine whether the defendant breached any duty of good faith it owed to the plaintiff in terminating the contract of employment of the plaintiff. However, if such an obligation of good faith was implied in the contract between the plaintiff and the defendant, I am not satisfied that the defendant acted in breach of any such obligation to the plaintiff.

Orders

Accordingly, there shall be judgment for the plaintiff in the sum of $580,808. I shall hear the parties on the question of interest and costs.

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[2010] VSC 196

14 May 2010