Harvey v CDM Australia Pty Ltd - [2001] WADC 8

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: HARVEY -v- CDM AUSTRALIA PTY LTD [2001] WADC 8

CORAM: HH JACKSON DCJ

HEARD: 21-25 AUGUST 2000

DELIVERED : 25 JANUARY 2001

FILE NO/S: CIV 680 of 1995

BETWEEN: MURRAY HARVEY
Plaintiff
AND
CDM AUSTRALIA PTY LTD
Defendant

Catchwords:

Contract of employment - Terms

Legislation:

Nil

Result:

The terms of the plaintiff's employment by the defendant between 1 January 1993 and 1 July 1994 were as pleaded by the defendant at trial of the issue

Representation:

Counsel:

Plaintiff: Mr L A Tsaknis
Defendant: Mr P B O'Neal

Solicitors:

Plaintiff: Hammond Worthington
Defendant: Bartlett & Co

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

HH JACKSON DCJ: In these proceedings the plaintiff seeks moneys claimed to be owing by the defendant to him pursuant to his terms of employment. It was agreed at trial that the proceedings should be split so that findings might be made as to the terms of the plaintiff's employment by the defendant before evidence was called as to any remuneration claimed to be owing pursuant to those findings.
The defendant is a company carrying on a family business at Mt Hawthorn. The defendant employed the plaintiff as a manager in its business from February 1984. The terms of employment of the plaintiff varied from time to time. From March 1986 the plaintiff became manager of the business systems division of the company's business. He remained the manager of the business systems division until 1 July 1994 save for a brief period as general manager prior to mid 1991. The writ issued in 1995 in these proceedings. The plaintiff claims that the defendant is indebted to him in respect of moneys for the period from 1 January 1993 to 1 July 1994.

Pleadings

It is necessary to deal with the position adopted by the plaintiff and the defendant in respect of the terms of the plaintiff's employment contract at different periods of time prior to as well as during that for which money is claimed by the plaintiff to be still owing to him by the defendant.
The plaintiff says that from 1 January 1993 until the contract was terminated on 1 July 1994 he was employed on terms which were constant throughout that period. The plaintiff's pleadings in relation to the terms of employment are set out in par 3 and par 4 of the further amended statement of claim as follows:
"3.By an agreement made in December 1992, alternatively January 1993, between the parties it was agreed that, in consideration of the Plaintiff continuing to serve the Defendant as manager of its business systems division ('the division') the employment agreement be varied so that as from 1 January 1993 the Plaintiff would be remunerated by the Defendant for his services under the employment agreement by the payment to him of 50% of profit on all sales in the division.

PARTICULARS
(a)Insofar as the said agreement was in writing the terms were contained in a document dated 4 January 1993 addressed to the Plaintiff and signed by the Defendant, by its director Camillo Della Maddalena.
(b)Insofar as the said agreement was oral it was made:
(i)in December 1992 when the Plaintiff orally requested the Defendant, through Camillo Della Maddalena, and the Defendant, (through Camillo Della Maddalena), agreed to vary his remuneration for his services in the division to a profit share arrangement in the terms contained in the document referred to in 3(a) save that the oral agreement did not provide for interest calculations to apply to old stock;
(ii)Camillo Della Maddalena undertook to present to the Plaintiff an offer confirming the terms upon which the Defendant and Plaintiff had reached agreement;
(iii)the Defendant on or about 4 January 1993 delivered to the Plaintiff the document dated 4 January 1993 referred to above containing the terms which the Defendant agreed would apply for the remuneration of the Plaintiff's services as from 1 January 1993;
(iv)the Plaintiff accepted the said terms for his remuneration contained in the said document, did not in any way dissent or demur from or object to the said terms and thereafter returned to work for the Defendant as its manager and thereby agreed to the said terms.

4.It was an express term of the employment agreement, as varied, inter alia, that:
(a)the Plaintiff's share of profit agreed upon would be calculated by reference to the gross value of sales on all goods and equipment of the division ('the goods') on and after 1 January 1993 less the direct purchasing cost of the goods less an agreed administration fee of $4,000.00 per month;
(b)the Defendant would pay to the Plaintiff as an advance on his said profit share a monthly amount of $2,916.66."

These terms are denied by the defendant. The defendant's version of the terms of the plaintiff's employment is rather more complex and is set out in par 3.3 to par 4 of the further amended defence supplemented by further and better particulars thereof as follows:
"3.3Immediately prior to 1 January 1993, the Plaintiff was employed by the Defendant as the manager of its business systems division ('the division') on a gross salary of $4166.65 per calendar month plus an entitlement to bonuses based on the sales performance of the divisional manager incentive scheme ('divisional manager incentive scheme').
...
PARTICULARS OF REMUNERATIONS
3.3.2(a)     In or about July 1989 the Defendant offered and the Plaintiff accepted an increase in remuneration for his employment, such increase being detailed in the Defendant's letter to the Plaintiff dated 19 July 1989.
(b)Pursuant to this increase, from 1 July 1989 the Defendant paid the Plaintiff an annual salary and car allowance of $50,000 per annum ($4,166.65 per calendar month), a superannuation contribution of $2,000 per annum, and a share of the profits of the division, such share being calculated in accordance with the Defendant's letter to the Plaintiff dated 19 July 1989 ('initial profit share scheme').
PARTICULARS OF BONUSES
3.3.3(a)     In or about July 1991 the initial profit share scheme was discontinued and replaced by the Defendant with an executive incentive scheme, such scheme being detailed in the Defendant's internal memorandum dated 7 July 1991 from Geoff Wheatley to, inter alia, the Plaintiff ('executive incentive scheme').
(b)The replacement of the initial profit share scheme with the executive incentive scheme was agreed by the Plaintiff orally and/or by conduct in failing to object to the replacement and continuing in his employment with the Defendant.
(c)In or about July 1992 the executive incentive scheme was discontinued and replaced by the Defendant with the divisional manager incentive scheme, such scheme being detailed in the Defendant's undated three-page document entitled 'Profit Incentive Contract', a copy of which was provided by the Defendant to the Plaintiff in or about July 1992.
(d)The replacement of the executive incentive scheme with the divisional manager incentive scheme was agreed by the Plaintiff orally and/or by conduct in failing to object to the replacement and continuing in his employment with the defendant.
PARTICULARS OF DIVISIONAL MANAGER INCENTIVE SCHEME
3.3.4The Plaintiff was entitled to ten (10) per cent of the amount by which the Profit of the division exceeded the Fair Return, where:
Profit = customer sales of the division (net of any credits) LESS cost of sales, division salaries and payroll costs, advertising and promotion, portion of yellow pages costs, installation costs, all other divisional overheads, fixed Administration costs ($4,000.00 per month), interest on stock, stocktaking variance and bad debts; and
Fair return =    six (6) per cent of sales turnover.
3.4By an agreement which was partly in writing, partly oral, partly by conduct and partly implied, made between the Plaintiff and the Defendant on or about 31 December 1992, they agreed that the remuneration of the Plaintiff for continuing to serve the Defendant as the manager of the division would be varied so that as from 1 January 1993, the Plaintiff was entitled to the salary and bonuses pursuant to the divisional manager incentive scheme as pleaded above, and in addition, to further bonuses based on the Plaintiff's personal sales ('personal sales incentive scheme').
PARTICULARS OF AGREEMENT
3.4.1In so far as the agreement was in writing, the terms were contained in the Memorandum dated 21 December 1992 from the Defendant, by its Director, Camillo Della Maddalena, to the Plaintiff.
3.4.2In so far as the agreement was oral, its terms were agreed in the following conversations:
(a)discussions between the Plaintiff and Mr Della Maddalena in or about December 1992 relating to the poor performance of the division; and
(b)discussions between the Plaintiff and Mr Della Maddalena on or about 31 December 1992 in which the Plaintiff and the Defendant orally agreed that the Plaintiff would be remunerated on the basis set out in paragraph 3.4.5 below.
3.4.3In so far as the agreement was by conduct, the terms were confirmed by the Plaintiff and the Defendant by the following conduct:
(a)during the period from 1 January 1993 until ceasing his employment with the Defendant as manager of the division on 1 July 1994, the Plaintiff was paid only his salary, leave entitlements and motor vehicle allowance, from which ordinary income tax and other deductions were made by the Defendant; and
(b)the Plaintiff did not make any claim for a bonus under either the divisional manager incentive scheme or the personal sales incentive scheme until on or about 14 January 1994, over twelve (12) months after the 1 January 1993 commencement date of the agreement referred to in paragraph 3.4 above.
3.4.4In so far as the agreement is to be implied, it is to be implied from the fact that all other salespersons in the division participated in personal sales incentive schemes and all those schemes were substantially identical to the personal sales incentive scheme.
PARTICULARS OF PERSONAL SALES INCENTIVE SCHEME
3.4.5The Plaintiff was entitled to fifty (50) per cent of Profit on the Plaintiff's personal sales less fixed Administration costs ($4000 per month) and less the Plaintiff's salary; where:
Profit = customer sales of the Plaintiff (net of any credits) LESS the cost of sales.
4.Further, by an oral agreement made between the Plaintiff and the Defendant by Mr Della Maddalena in or about July 1993, the Plaintiff and the Defendant agreed that for the financial year commencing 1 July 1993, in consideration of the Plaintiff's continued service to the Defendant:
(a)The Defendant would pay the Plaintiff an annual salary and car allowance of $50,000.00 per annum; and
(b)In lieu of any other commission arrangement, the Defendant would pay the Plaintiff commissions equal to 50% of the profit of the Business Systems Division, where profit is as defined in the Divisional Manager Incentive Scheme pleaded in paragraph 3.3.4 herein ('the July 1993 Agreement').
The defendant filed the following further and better particulars of defence shortly before trial:
1.As to Paragraph 4 – Particulars of Oral Agreement.
1.1In a meeting between the Plaintiff and Camillo Della Maddalena in or about the first week of July 1993, in the meeting room at the Defendant's premises in Mt Hawthorn, the parties met to discuss the commission incentive arrangements that might apply to the Plaintiff in the financial year 1993/94.
1.2The parties agreed that neither the Divisional Manager Incentive Scheme particularised at paragraph 3.3.4 of the further amended defence, nor the Personal Sales Incentive Scheme particularised at paragraph 3.4.5 of the further amended defence, had worked to their satisfaction, and that a new arrangement was required.
1.3Camillo Della Maddalena offered the Plaintiff an incentive package calculated by reference to the formula set out in the Divisional Manager Incentive Scheme, but removing the requirement of a 6% fair return to the Defendant, increasing the share of "surplus profit" from 10% to 40%, leaving administration costs at $4,000.00 per month, with the Plaintiff's salary costs included as an operating cost of his division, not an advance against the profit share. The Plaintiff countered by asking that the percentage of profit so calculated by increased to 50%. Camillo Della Maddalena said he would consider the Plaintiff's proposal and respond later.
1.4About one week later in a meeting between the Plaintiff and Camillo Della Maddalena in Mr Della Maddalena's office at the Defendant's premises in Mt Hawthorn, Mr Della Maddalena told the Plaintiff that his proposal of 50% as discussed in the previous meeting was accepted and suggested that the plaintiff confirm the arrangement in writing.
2.As to Paragraph 4(b).
As pleaded therein, 'profit' of the Business Systems Division, means profit as is defined in paragraph 3.3.4 of the further amended defence, being:
'Customer sales of the division (net of any credits) LESS cost of sales, division salaries and payroll costs, advertising and promotion, portion of yellow pages costs, installation costs, all other divisional overheads, fixed Administration costs ($4,000.00 per month), interest on stock, stocktaking variance and bad debts.'
3.As to Paragraph 6.3.
The phrase 'gross profit' of the division, means sales for the whole division (net of any credit) less the cost of goods sold.
4.As to Paragraph 6.4.
The phrase 'net profit' of the division, means 'profit' as defined in paragraph 3.3.4…
'Customer sales of the division (net of any credits) LESS cost of sales, division salaries and payroll costs, advertising and promotion, portion of yellow pages costs, installation costs, all other divisional overheads, fixed administration costs ($4,000.00 per month), interest on stock, stocktaking variance and bad debts.' "
The remainder of the pleadings are concerned with calculations of payments made by the defendant to the plaintiff and of each party's calculations as to whether further sums are or are not payable. As indicated above, the parties agreed that I would not need to deal with those issues until having made findings as to the contractual terms of the plaintiff's employment by the defendant, it being understood that following those findings having been made it may be possible for the parties to agree upon the entitlements flowing therefrom.

Plaintiff's evidence

The plaintiff's evidence is that he was recruited by the defendant company, through third parties, to boost its sales of business equipment especially photocopiers. The defendant had an exclusive agency to sell Mita photocopiers which might be lost if sales did not improve. Its business at the time had been largely one of servicing earlier typewriter sales. In 1986 and 1989 his employment conditions were altered. The plaintiff says that as from 1986 there was an arrangement or practice by which he was paid $1,000 per month in cash as well as his salary and that commissions were not calculated or paid. On 10 July 1989 he tendered his resignation as a result of proposed changes. He says he was then offered a new employment package of $52,000 per annum plus commissions but that again commissions were never calculated or paid and that in lieu thereof he received $2,000 per month paid either in cash or in goods purchased in the name of the defendant company: see exhibit 2 and exhibit 3. The reference to monthly advances of $2,000 commission in fact was to be a payment of cash or in kind regardless of the fact that commissions were not in fact to be calculated or paid: see exhibit 4 and exhibit 5. He said these payments were known as being made from or through "the book", a reference to a book kept by Mr Della‑Maddalena senior.
The situation continued until January 1991 when the defendant appointed an executive director, Mr G Wheatley, who informed the plaintiff the monthly $2,000 payment would cease and an incentive scheme would be introduced: see exhibit 6. However the incentive scheme was never actually put into operation. The plaintiff says that the 1991 changes simply removed payment to him of the $2,000 per month in cash or kind and that no commission structure was actually implemented. This left the plaintiff with a salary package of $52,000. This position continued until July or August 1992 when Mr Wheatley left the company. The cash payments however did not resume and neither was the promised incentive scheme put in place.
On the last business day of 1992 before Christmas he spoke to Camillo Della‑Maddalena the son of the effective controller of the defendant company and who had replaced Mr Wheatley as managing director.
The plaintiff says he wanted an arrangement whereby he was paid commissions of 50 per cent of the gross profit on all sales made by the business systems division including sales of second hand items with commissions being calculated and paid every two months and with the defendant company making available to him monthly sales figures in order to properly calculate those commissions. The plaintiff says the parties agreed that in calculating the plaintiff's commissions a figure of $4,000 per month would be deducted by way of an administration fee to cover the defendant's expenses as well as the cost price to it of the goods sold. He says the parties also agreed that the defendant would pay him a monthly payment of $2,916.66, or $35,000 per annum, as "salary" to be deducted from his share of commissions and would pay a car allowance of $15,000 and an insurance allowance of $2,000 per annum.
"---Well, we were just talking generally about it had been a bad year and we needed to turn things around.
What did you say to that?---Well, I said, 'I don't disagree at all.' I mean, we'd been a very successful company up until Mr Wheatley had joined the company and I like to think that Camillo and I were a big part of the building of that company to that point and we both knew that if we put our minds to it, we could build the business up again. …
Did you say anything particularly to him?---Yes. I said, 'I would like a new incentive scheme. I haven't been paid any money for around about 18 months,' and that I needed the money for the young family and I needed to be making some bonuses again, commissions. …
I said, 'if the book's not an option any more, all I'm asking for is a straightforward, one‑page, easy to understand agreement between the two of us as to what the terms of my running the business systems division will be.'
...
So you discussed your salary package. Did you discuss anything else?---Yes. We talked about the contents of an incentive scheme and … I asked that, firstly, there be a computer system put in place that would reflect the sales of the division, the sales turnover, the cost of sales. The administration fee which we had agreed to was $4000. …
Did Camillo respond in any way to that?---He agreed with everything that was said, except for the commission percentage.
… I asked him for bi‑monthly payments of commissions … I said to him, 'Would you mind if I claim it bi‑monthly,' my commission claim, because that means by the time it takes you ‑ and it goes through the system, that's another month. I don't see any more moneys until at least 3 months while it goes through the system … and he agreed to that. …
Did you discuss how profit was going to be divided?---He said 40 per cent, which was the standard for divisional managers, as I understood it, of the profit of the division and I asked him for 50 and he said, 'Leave me to think about that,' and I said, 'Okay, but I must have this all in writing,' to which he agreed.
And did you discuss anything else?---No, that was about it. …
So you've discussed 50 per cent of the profit, you've discussed you want it to be paid every 2 months?---Yes.
And you discussed the administration cost. Nothing further than that was discussed at that time?---No, nothing else.
Did you discuss what other items would be included in the sales figures?---What other items?
Would be included in the sales figures, as part of the 50 per cent of sales?---My salary being part of it?
No. I'm just asking you what did the sales mean to you? What's encompassed in 'sales'?---Just sales of products of the division.
What sort of products?---Mita photocopiers, facsimile machines. There was a product there called a Ricograph 2, which was a duplicator type one.
After you'd finished going through the list did Camillo say anything to you?---On that day?
Yes?---No. We were both happy with the arrangement."

He says this oral agreement reached in December 1992 was confirmed by letter from the defendant dated 4 January 1993, exhibit 1.
"4th January 1993
MURRAY HARVEY
PERSONAL REMUNERATION PACKAGE
As from the 1st January 1993 the following package will apply.
It will be based on all sales on and after the 1st January 1993 including second‑hand sales. All second‑hand products will be processed as new equipment on S.O.D's. Note: Elio's second‑hands will be processed and the gross profit will go to off set his threshold.
Administration cost will be fixed at $4,000.00 per month. Interest calculations will apply to old stock (ie anything over than 120 days).
Profit is defined as Sales less (direct purchasing cost and Administration cost).
The resulting Profit will be shared 50% to yourself and 50% to the company.
Your current salary will be paid as an advance against your share of profits and calculation of Profit will be calculated bi‑monthly (ie. end of February is the first calculation).
Target for new photocopier for first quarter will be 50 as agreed.
CAMILLO DELLA MADDALENA"
The plaintiff says this letter contains references to old stock and interest and to a quarterly target of 50 sales of new photocopiers which were matters not discussed between the parties but with which he did not disagree.
"TSAKNIS, MR: …
Did you receive that document on or about the day it's got on it, 4 January 1993?---Yes, I did. Yes.
And what did you do when you received that document?---I thought it was terrific, I thought it was fine. It covered everything we had spoken of. We had talked about second‑hand products.
Which paragraph are you referring to now?---The second paragraph. It says, 'All second‑hand products will be processed as new equipment on SODs. Note: Elio's second‑hands will be processed and the gross profit will go to offset his threshold.' Elio was Carlo's middle son ‑ still is.
Was that important to you?---Extremely important. In this industry at that particular time, with Japanese manufacturers it was important to move new products and Camillo and I had spoken on a number of occasions about making sure that the machines were got out, even if at that point there wasn't a profit to be made, because the profit would be made in the service department where the toner and the service contracts were. If you had an opportunity to have a trade‑in second‑hand photocopier and you made a profit on the new photocopier, as long as there wasn't large costs in repairing that particular photocopier, it was a very, very profitable sale to be put back into the marketplace. …
... I knew this ‑ this is a crucial part of the business. If we are to get a good profit out of it, it had to come through my divisional figures.
...
You'll see it refers to 'Interest calculations will apply to old stock.' Was that discussed at the meeting?---No, it wasn't.
Did you have any difficulty with that?---No. I thought it was fair.
H H JACKSON DCJ: What does it mean?---If you keep old ‑ if you don't turn over your stock it could be suggested that you're ‑ if the company's borrowing money, that there's a cost factor involved and I wasn't ---
So there was charge against the division ---?---That's correct.
--- for the interest cost on stock that was held in the division?---Yes.
… If I didn't get the products out within a reasonable period of time, that would apply.
TSAKNIS, MR: And if I can take you down to the third last paragraph, the result in profit ---?---Yes.
--- and you shared 50 per cent to yourself, 50 per cent to the company?---Yes.
Did you have any difficulty with that?---No. that's what we had discussed and he agreed to ‑ when he came back with this document he obviously had agreed to it.
Can I take you down to the last paragraph ---?---Yes.
'--- the target for new photocopier for first quarter will be 50 as agreed.' Did you recall discussing that at the meeting?---Not at all. No, we did not discuss any target at all at that verbal meeting, plus I didn't think it was unfair.
You didn't think it was ‑ you weren't concerned about that figure?‑‑‑No, as a divisional product, but as a number of machines to be sold for the division I thought it was fair and accepted it. …
H H JACKSON DCJ: ... ‑ in round figures, the company had six or seven divisions. You were in the charge of the business systems division?---Yes. After being the general manager I went back as a divisional manager for business systems.
...
And you had three or four salesman under you?---Yes.
Were you making sales yourself?---Yes. I was doing what we called house sales which was handling dealers, a dealer actually, low‑margin sale to a dealer, just really a box moving exercise as we'll call it.
All right?---But, yes, I did contribute, and I generally sold the larger machines, specialising in engineering.
...
TSAKNIS, MR: So how many machines would you estimate that you would sell on a quarterly basis?---On a quarterly basis, 20‑odd maybe.
So on a weekly basis or a monthly basis? Perhaps we'll do it ‑‑‑?‑‑‑On a monthly basis, seven or eight perhaps. I also did ‑ obviously was managing the sales force. …
At this stage, were you getting any ‑ as part of your own sales of photocopiers, did you see sales figures? Did you see any sales figures after the agreement in January 1993?---No.
… What did you do?---Well, at various times Camillo was trying to get a computer system under way and for whatever reasons was having lots of problems in doing so. I was interested in getting it in place so that I could manage my part of the business professionally and that's all that I was interested in. I trusted him to get that system in place as he had promised and my main emphasis was to focus on building the business back up and getting the business systems operation running smoothly and profitably and getting it back to its former glory."
As a result of delays in implementing the computer system and thereby producing the relevant figures, the plaintiff says he made no commission claim and was not aware of any amounts owing to him.
The plaintiff says that in July 1993 the defendant's accountant George White gave him a document which White said set out the plaintiff's commission entitlements: exhibit 7. The plaintiff says that White referred to his entitlement as 40 per cent of profit. He says he challenged this with White and with Camillo Della‑Maddalena. Mr Della‑Maddalena confirmed that the figure should be 50 per cent and asked the plaintiff to calculate his claim. He said this involved his collecting and assembling a variety of documentation and information relating to the six months from January 1993. This was summarised on a spread sheet, exhibit 8, which together with the supporting documentation was supplied to Mr Della‑Maddalena and his father in January 1994. He had allowed for interest on old stock at 11 per cent and that was agreed to. No other items were discussed. It shows a resulting claim for the six months of $27,237.50. The accompanying letter reads, exhibit 8A:

"Camillo,
The details of the attached claim are based on your letter of the 4th January 1993.
The claim has been calculated on a bi‑monthly basis as requested, with a 50% gross profit split after defining sales less administration costs of $4000.00 per month.
(A) I have not claimed from the direct purchasing cost having absorbed other costs such as delivery charges because I have used commission claims as standard. These could of course be calculated in later.
(B) This claim does not include the cash or contra sales that have been made throughout the year and not recorded.
(C) I have not included consumable sales as they are not available to date.
(D) As per your letter I have held my administration charges at $4000.00 although I believe that other divisions were adjusted to $3700.00 mid year.
(E) Interest on stock held over 120 days has been calculated at 11.0% per annum."

The plaintiff said he later prepared a similar document for the succeeding six months: exhibit 9. No expression of disagreement was made with his calculations by or on behalf of the defendant. It showed a claim for the six months of $50,771.
The plaintiff said he made and kept notes in a diary occasionally concerning these matters as they occurred. In February 1994 he noted a meeting at which he had raised the issue of payment of his claim to commissions. Camillo Della‑Maddalena then insisted that at a meeting in July 1993 between himself, the plaintiff and George White an incentive scheme had been agreed based on 50 per cent of net profit. He said he did not recall any such meeting and asked for documentation. There was none then available.
At later meetings he presented further claims. Camillo Della‑Maddalena undertook to look at them. By reference to an entry in his diary dated 15 February 1994 the plaintiff gave evidence that at one meeting Mr Della‑Maddalena suggested that his entitlements related only to sales personally made by the plaintiff and produced a document dated 1992 showing figures with the plaintiff's name on it: exhibit 10. He said he had told Mr Della‑Maddalena he had not been shown the document before and that it did not relate to him.
"Did Camillo say anything when you told him that?‑‑‑He then apologised that he made a mistake and that it hadn't been given to me and in fact the report was based on profit and loss but the truth of the matter was that the company had not produced profit and loss figures, so he admitted that I wasn't on the agreement and that those figures weren't available."
On 15 May 1994 the plaintiff wrote to Camillo Della‑Maddalena: exhibit 11 adding $13,000 in additional claims for transport costs previously deducted but it seems said to be provided for by the administration fee of $4,000 per month, a claim for cash and contra sales and a claim for sales of consumables. He received no reply.
On 17 May he said he met Mr Della‑Maddalena again and advised he would leave the company's employment from 1 July if a suitable financial package was arranged. He also presented a claim for commissions for the first months of 1994 totalling $24,521: exhibit 12. A later claim was submitted to 30 June 1994 for $15,118: exhibit 13. Before his employment with the defendant terminated Mr White handed him a document to sign as acknowledgment of his position. He refused. In July the plaintiff again met Mr Della‑Maddalena.
Cross‑examined, the plaintiff agreed that he had sent a letter of resignation dated 10 July 1989: exhibit 14. It raised a number of issues including the production of accounting records, which he agreed later continued to remain a problem. Following discussions he wrote a letter dated 12 July 1989: exhibit 15. A letter from his employer of 19 July 1989, exhibit 4, in reply provided that no "bonus" or "profit" share "would be paid until net profit before tax" reached $130,000.
Mr Wheatley was appointed "general manager, "executive director", or "chief executive officer" of the defendant company in about January 1991 without prior notice to the plaintiff, who thereupon reverted to the position of divisional manager of the Business Systems division.
He was asked in cross‑examination:
"It was quite an unhappy surprise for you, wasn't it?---No.
Weren't you angry that Mr Wheatley had been appointed effectively in your place?---No.
...
Then within a very short time after his arrival Mr Wheatley stopped this guaranteed commission payment to you. That's true, isn't it?‑‑‑Yes.
Were you unhappy then?---No.
Mr Wheatley told you that there was going to be a new commission structure put in place, didn't he?---That's correct.
You knew, didn't you, that the reason that Mr Wheatley had been engaged was because it was believed that the company was actually in some difficulty? Isn't that right?---It was never discussed with me.
…What I asked you was, it was commonly understood that the company was having financial difficulty at that time, wasn't it?‑‑‑I saw no figures to verify that. Nobody presented figures to say that the company was in trouble and that was why he was appointed. There was no documentation at all to suggest that the company was needing a person like Mr Wheatley.
H H JACKSON DCJ: If the question was put this way, was the general view around the staff, around the management, that the company was in trouble financially, what would your answer be to that?---No, because again the company's financial position ‑ you could never tell from financial records whether a division, the company, was running at a profit or not.
O'NEAL, MR: Mr Harvey, you keep referring to an absence of documents but you were the general manager of this business, weren't you?---Mm.
...
Are you saying to his Honour that you had no comprehension at all of what the trading position of CDM was?---Yes, I am.
Did you know what the sales revenue was within $100,000?‑‑‑No, I didn't.
Do you know what the expenditure was within $100,000?‑‑‑No, they were things that Carlo and I presume Camillo kept to themselves.
You weren't able to walk in to accounts and just have an inquiry as to what the position was? Is that what you're telling his Honour?‑‑‑Yes, that's a fact.
Did you ask why Geoff Wheatley had been appointed?‑‑‑No, I don't think I did.
Mr Harvey, I'm producing and showing to you a document entitled Internal Memorandum. It's addressed to you from Geoff Wheatley and it's dated 3 May 1991. A couple of months after Mr Wheatley ended your commission he wrote you a memo about it. …‑‑‑Yes."
The memorandum, dated 3 May 1991, is exhibit 16.
In fact, in his diary for 25 December 1993, exhibit 24, the plaintiff referred to this matter in terms which show his disappointment and hurt at what had occurred.
The plaintiff said he later received a memorandum of the "revised Executive Incentive Scheme" dated 7 July 1991, exhibit 6. He said it was never discussed with him and never became operative.
"O'NEAL, MR: Right, and you never pursued whether or not there was any payment coming to you under it, did you?‑‑‑No.
That's because you took the position that because it had simply been given to you, you neither accepted nor rejected it. That was the position, wasn't it?‑‑‑No, it was a case of ‑ that I believed that if this was the package that I was under, these figures should be supplied to me and I should be given the information that allowed me to be able to establish if there was a profit and loss situation occurring.
Are you saying that if you had been given the accounting information, then you would have accepted this without any further dissent?---That if the sales and data and information were supplied to me in a reliable computer form that had been agreed upon it could have been accepted, yes."
In fact, the plaintiff said, Mr Wheatley had not discussed the package with him as he had expected would occur and he, the plaintiff, had not approached Mr Wheatley about it either at the time or subsequently.
The plaintiff's evidence is that there was no change to his remuneration package until the discussion in December 1992 and the subsequent documentation. He continued working for his salary package without any commission component.
Further cross‑examination of the plaintiff confirmed that in 1991 the business systems division had employed about six persons, a number which reduced in 1992 and 1993 to somewhere between two and four plus himself. Administration services including telephonist and secretarial services and accountancy were provided by another division to the various other divisions including business systems. In and about 1992 the company comprised some six or seven divisions. Sales staff during this period were generally employed on salary plus commission, which was claimed monthly through the relevant divisional manager who confirmed the commissions payable after sighting relevant sales order dockets.
The plaintiff's evidence is that he was never required or did calculate the actual or projected profitability of the division which was not his concern but that of the company.
"How long have you been in the office equipment business?‑‑‑Over 20 years.
And you know what I mean when I refer to gross profit in the kind of business you are in, don't you?‑‑‑Yes.
You know that I'm talking about sales revenue less the cost of purchasing those goods?---Yes.
And when I speak about net profit you know what I mean as well, don't you?---Yes.
You know that what I'm talking about is revenue less all of the costs that were necessary to earn that money. That's it, isn't it?‑‑‑That's right.
The salesmen that you engaged ‑ first of all, it was you in the first instance who set the terms that they were engaged upon. That's correct, isn't it?‑‑‑Base salary?
Yes?---And car allowance, yes.
And you also negotiated commission with them, didn't you?‑‑‑Yes, there was a commission structure in place.
And the way that it worked was ordinarily their gross profit would be determined and then a threshold figure that had been set by you would be deducted from that gross profit and a percentage of that would be paid as commission. Isn't that right?‑‑‑Yes.
Of course, even in 1992 and 1993 you knew the kinds of key ratios that were important in the office equipment business to make a success of it, didn't you?‑‑‑Key ratios?
Key ratios. You knew, for example, ordinarily what gross profit should be on the sales of products, didn't you?‑‑‑Yes.
Ordinarily it would be about 20 per cent, wouldn't it?‑‑‑Yes, that's a fair figure.
There would be some exceptions; for example, sales to government, you might accept a smaller margin. It might only be, say, 15 per cent. That's true, isn't it?‑‑‑That's correct.
But overall a reasonable figure to work with is about 20 per cent. Do you agree with that?‑‑‑Yes.
Do you also agree that one of the key ratios that you as a manager looked to in determining profitability was this: you would never want to pay more than 40 per cent of your gross profit in salary‑related expenses if you could. Do you agree with that?‑‑‑No, I don't remember using that as a calculation.
Did you ever set a figure for yourself in budgeting for your division, a salary figure that you didn't want to exceed?‑‑‑No."
He said that over about 18 months around 1992 his divisional gross sales were about $1.5 million and that gross profit thereon would approximate 20 per cent. However he denied having any knowledge of the quantum of a range of other expenses which would be deducted from gross profit in order to calculate net profit. Salesmen's commissions were calculated having regard to an agreed sales threshold being achieved; and from a point in time after Mr Wheatley's departure managers' commissions were calculated after an agreed monthly administration fee had been deducted from profit to cover company administrative and other expenses not specific to the division concerned. Actual expenses and profitability were not disclosed to divisional managers.
However the plaintiff agreed that he had assisted Mr Wheatley in 1991 in the preparation of a 1992 budget document for the business systems division: exhibit 17. That shows actual gross sales in 1991 of $1.3 million projected to rise to $1.6 million in 1992 with a gross profit thereon of $325,000. There is provision also for expense recovery from suppliers of an estimated $52,000. The estimated cost of salaries was $124,644, commissions $17,000 and insurance/tax and superannuation were also shown, a total of salary ‑ related expenses of $158,432. Car allowances and expenses amounted to a further $52,608. Other items were advised to him at the time by Mr Wheatley. Mr Wheatley had also nominated a general administration expense cost of $4,500 per month to cover other unspecified expenses. The plaintiff said no attempt was made to justify this as a figure. Nor did he think his or the division's performance would later be measured against it. In March 1992 Mita, the major supplier to the division, provided a sales budget to the defendant in relation to its products: exhibit 18.

Mr Wheatley left the company in mid 1992. Mr Camillo Della‑Maddalena became managing director. A document entitled Profit Incentive Contract for Financial Year 1 July 1992 to 30 June 1993, exhibit 10 and exhibit 25, was shown to the plaintiff in cross‑examination. He denied having received it in 1992 and said he would not have accepted it. Exhibit 25 is a typed copy. Exhibit 10 is in part a handwritten version which the plaintiff says he did not see until Mr Camillo Della‑Maddalena gave it to him in 1994.
"You say you got the one with the handwriting on it which is exhibit 10 but until these proceedings commenced, you never saw the typed version. Is that right?---I'm saying that in 1994 a version of this agreement was given to me and I don't remember which one of ‑ whether it was the typed one or the handwritten one.
But it was only the one?---Yes.
All right. Sir, do you know why it is then that you have discovered both the typed version and exhibit 10?‑‑‑No idea.
No idea. Do you accept that you gave discovery in 1995 of the typed version that I have just placed in front of you?‑‑‑I gathered a lot of information that I thought would be relevant that was lying around the company before I left. It may well have been amongst those."
The plaintiff said he had had no "commission" payments since the payments of $2,000 per month had ceased in January 1991. 1992 was a poor year for the division. He denied however that it had been evident to him that the division was at best breaking even, no figures having been produced to him. He accepted however that he knew or could collate the monthly gross sales, that 20 per cent of that was a reasonable figure on which to calculate gross profit thereon, and that he knew the amount of divisional salesman's salaries and commissions. He did not always know the cost of advertising or promotions and the cost of a range of other matters were not known to him. Essentially his evidence is first that a lot of financial information was kept confidential by the company so that he had no access to it and secondly that the "main aim of the hardware part of the business is to make sure that the profits ‑ if they don't come through hardware, that they came through the consumables and the supplies that flowed on from those products being put in the field" although those consumables are then credited to a different division of the company.
The plaintiff explained that until the meeting of December 1992, the sale of second‑hand items and cash sales had not been credited always to the division. The younger son of the Della‑Maddalena family in particular had effected such sales without crediting them to the division. The plaintiff said he had not concerned himself about it. Until 1991 he had been, in any event, receiving $2,000 per month in cash or kind. He asked Mr Camillo Della‑Maddalena to agree that these sales be counted and that was agreed.
He denied that Camillo told him he proposed that the plaintiff's commission be fixed at 50 per cent of gross profit from the plaintiff's personal sales after deduction for an administration fee of $4,000 per month. The $4,000 administration fee was, he said, raised on another occasion. It was never suggested that his commission refer only to his personal sales. At the meeting in December 1992 it was agreed that the $4,000 monthly administration fee be deducted in respect of all sales of the division. He confirmed his evidence that he had asked Mr Della‑Maddalena for 50 per cent of "the profits" of the business systems division which was subsequently agreed. He said he had made no calculation of what such an arrangement might mean in dollar terms. He said he had been confident of building the business up.
He made no diary note of the meeting or of the agreement reached.
Using the figures in the budget for 1992 prepared by the plaintiff with Mr Wheatley in 1991, exhibit 17, the plaintiff would, Mr O'Neal suggested, receive about $138,000 per annum if gross sales equalled $1.6 million of which gross profit was $325,000 and, after deducting an agreed administration fee of $4,000 per month, $48,000 per annum, he was to receive 50 per cent of the balance. Of this $138,000 he would receive $35,000 by way of salary advance. However his car allowance would he said be paid in addition. He said he had not made any calculation such as this or at all.
Mr O'Neal put it to the plaintiff also that using these budget figures any such agreement would also have meant that the defendant would have incurred a significant loss on the division's activities.
Cross‑examined, the plaintiff said it had not become apparent to him until July 1993 that the company's computer system was not able to generate a profit and loss statement for the division. He trusted Mr Camillo Della‑Maddalena and understood efforts were being made to right the situation. It was only after that time that he began to calculate what the company owed to him. He said he had previously, with the defendant, been paid "through the book" that is a fixed amount in cash or goods not related to actual sales commission and that at that time, 1993, his sole objective was to effect sales and in due course the amount owing to him would be calculated and he would be paid. They were to be calculated on a monthly basis payable bi‑monthly, and within three months of being earned.
At the start of 1993 the only persons employed to effect sales in the business systems division apart from the plaintiff were Mr D Drew and Mr Elio Della‑Maddalena. Exhibit 20 and exhibit 19 are respectively Mr Drew's commission claim form for January and February 1993 and the plaintiff's calculations relating thereto. However the plaintiff was unable to say why exhibit 19 also contains calculations relating to the profitability of sales made by Mr Drew.
The plaintiff agrees that he made no claim for commissions during 1993. He denied that on presenting a claim in early 1994 Mr Camillo Della‑Maddalena had told him he was not entitled to commissions based on gross profits:
"He made passing comments about 40 per cent of net and 50 per cent of net and whatever, but that didn't concern me. I had the agreement that laid out the terms of the claim, whether it was net or gross.
But you had the letter that you say set it out. Isn't that right?‑‑‑Yes; the agreement based upon our discussion, yes."
He was referred to his personal diary.
"I started taking notes in July of ‑ not taking notes but just scribbling things down on a particular day from July 93, as I understand it, when I thought the company was not going to honour its commitment as far as the commissions were concerned and I started to get a little nervous about it because another divisional manager had been in the same position and had left the company to get reimbursed. So I made notes from that month forward.
You kept a diary?---I kept a diary for general purposes in the job, yes.
Yes, and we have seen one here for 1992 and one for 1993 and one for 1994. Those are all the diaries that you kept, I take it? …
Those were, respectively, your diaries for those years, 1992 to 1994?---Yes.
Yesterday you refreshed your memory from pages in your 1994 diary. Do you remember that?---Yes.
I understood you to tell his Honour that those pages in your diary had been made about the time of the event that they recorded. Is that correct?---Yes.
Now, just so that there's no misunderstanding about this, I'm just going to ask you whether, when we look at this entry in your diary in this volume marked 1994 - when we look at the entry for, say, 1 February - that you made that entry in this book on 1 February. Is that correct?---I don't know. They were just scribbled notes. There was nothing refined about it. …
The question is, if in one of your diaries something is written in a for a particular day, does that mean it was actually written down on the day in which it's shown?---By and large, yes. If it was the end of a year, as I remember, and the diaries - because the company also sold diaries. If there wasn't one available or I didn't have one for the following year, some notes would be kept over into the previous - like, in December you make additional notes for the forthcoming year about something that's happening in the New Year perhaps."
A number of extracts from the 1993 diary are exhibit 24.
It is clear that the plaintiff made notes or entries at the end of his 1993 diary and later wrote them up in his 1994 diary as if the entries had been made contemporaneously on the day of the entry. He said, however, that he wrote them in the end of the 1993 diary on or about the days in 1994 to which they refer.
He denied that he made any of the notes after leaving the employment in July 1994.
It is obvious however from the tense in which some of the entries are written and from the retrospective nature of some of them that they have at least been written significantly after the event.
In the plaintiff's diary for 1 February 1994, see exhibit 21, the entry in his writing reads:
"Discussed my 1993 incentive scheme and claim. Camillo insisted that there was a meeting between he George and I in July and that the incentive scheme was performance based and related to 50% nett profit. I said I did not remember any such meeting and asked him to supply documentation. He did not have any and said he would find it. He later said that maybe George wasn't at the meeting and that perhaps it was in Sept. Again I asked for proof of documentation because as far as I was concerned there was no such meeting. I told him he must have got me mixed up with other managers because he had not spoken to me. I said I had only been given one piece of paper from George - rough figures which in no way related to any incentive scheme.
Going through his file he did not or could not produce a copy of the incentive scheme he said he had put in place or the letter he wrote in January. He stated there was no way he would base a scheme on 50% gross. 'He wasn't that stupid.' "
In about July 1993 he received a document from Mr White and then had a discussion with Mr Camillo Della‑Maddalena. He was cross‑examined:
"It was a discussion about a net profit arrangement for you for the business systems division, wasn't it?---No, it was just a comment that he made about net profit.
In fact didn't you and he have a discussion where he said to you that it was obvious that the personal incentive scheme hadn't been successful because you hadn't earned in excess of $12,000 in personal sales? Do you remember that?---No, he didn't say that.
All right. You said to him that the divisional incentive scheme was 'a lot of crap' or words to that effect because you could never achieve the 6 per cent fair return. Do you agree that that happened?---That may have happened, yes.
What he said to you was that both schemes would be replaced by a scheme based on the divisional incentive scheme but without the requirement of a fair return. Do you remember that?---No, I don't specifically, no.
What he told you was that he would remove the 6 per cent requirement, that is, there was no requirement of fair return, and he would give you 40 per cent of the net profit of your division. Do you remember that?---He raised the 40 per cent net and I made the notation in my diary. The full details of it I can't remember. I just remember writing that he was going to change the circumstances, or try to, of my agreement."
He denied then asking for 50 per cent of net profit. He said that in December 1992 the defendant had already agreed 50 per cent of net profit. He was referred to his diary entry for 2 July 1993, exhibit 22: "Spoke with Camillo - he offered 40% commission on nett profit." He said Mr Camillo Della‑Maddalena just raised the point and he noted it in his diary.
On 7 July his diary entry reads:
"Received division details from George - four headings, list numerous sub‑headings. Spoke to Camillo - OK on 50% of nett profit to be paid in commission - suggested I put in writing." see exhibit 23.
He was asked:
"You said to Camillo that 40 per cent wasn't acceptable on a net profit basis but that you would take 50 per cent, didn't you?---Yes. I had received these divisional figures which I had said weren't applicable to our agreement and Carmello said it was okay on 50 per cent of the net profit to be paid in commission.
You were offered 40 per cent net profit. You then asked Camillo for 50 per cent net profit, didn't you---No. I didn't ask him for anything. He said okay on 50 per cent of net profit. I said to him that my agreement said 50 per cent of the profit. He agreed and remembered that we had agreed on my agreement which obviously was different to what he had been dealing with, and that it was okay to go ahead with that claim and he suggested I put it in writing.
Mr Harvey, that's simply not true, is it?---It's a fact.
Mr Harvey, what you have recorded ---?---That's the basis. That was the basis. That July meeting was the basis for me going ahead and putting the claim together as we had agreed in January.
Mr Harvey, what you have recorded on 7 July is this: 'Received division details from George.' What are the next two words there?---'But numerous subheadings. These ---'
Sorry. In the first line, what are those last two words?---'Received division details from George for headings. Numerous subheadings. Spoke to Camillo ---'
Is that a reference ---?---And I said, 'This is not what we had agreed to.' "
The plaintiff says that there may have been some passing reference to commissions being based on personal sales but that that was never the basis of his commission entitlements.
He said he was not asked to submit claims or why he had not done so or shown figures suggesting what his entitlements amounted to or correspondence in relation to the agreement reached or further discussions in respect to it.
The plaintiff recalled the position as being that he had taken the document containing the divisional figures given to him by Mr White, exhibit 7, to Mr Camillo Della‑Maddalena and explained that they were not in accordance with the agreement reached in January. Mr Della‑Maddalena asked him to put his claim in, based on the agreement between them. He agreed that Mr Della‑Maddalena "may have said net profit and I have written down here that he said it's okay on 50 per cent of net profit but … Net profit, gross profit - what he said was irrelevant."
A number of times the plaintiff commented that Mr Carlo Della‑Maddalena controlled the affairs of the company very closely and in ways which had the effect both of keeping some relevant financial information hidden from managers and of permitting or engaging in financial practices which would not be acceptable in a public company inferentially to evade taxation or for some other inappropriate reason.

Mrs G R Harvey's evidence

The plaintiff's wife, Mrs G R Harvey, gave evidence which in its essentials, confirmed that of her husband but which was in large measure the product of things she said her husband had informed her of and of documents which he had supplied to her. She agreed that she calculated his claims in the way he had instructed her, by deducting from gross sales shown on sales order dockets the cost price of the goods sold shown on the salesman's commission claim sheet, then deducting an administration fee of $4,000 per month, taking 50 per cent of the result, deducting the "salary" advanced, and interest on "old stock" at 11 per cent.
She said her husband and she had expected the new arrangements to result in substantial increases to their income but no commissions had been claimed or received until she calculated the first claim and until then she had not known how much it might amount to. Her husband had not told her an exact amount.
She had no knowledge of the preparation of any profit and loss statement for the business systems division.
In the plaintiff's diary entry of 17 January 1994, part of exhibit 24, reference is made to the plaintiff having been working on creating such a statement for three months.

Ms M B Medlicott

Ms M B Medlicott was called by the plaintiff. She had worked for the defendant company for about seven years from January 1989 commencing part time in the accounts department, then as secretary and personal assistant to the managing directors, Carlo and Camillo Della‑Maddalena, and assistant to the accountant, George White, paying accounts, typing and acting as a receptionist.
She said the company was, during her period of employment, closely controlled by Carlo Della‑Maddalena, with his son Camillo very involved. She did not know the details of managers' access to information stored in the company computer. She said Carlo Della‑Maddalena instructed her on different expenses which were to be debited against the various divisions of the company. She did not know how this was calculated. Non‑business expenses were also paid by her. A lot were costed to individual family members loans accounts but others were debited within the company in accordance with instructions.
Under cross‑examination, she agreed that some accounts were held in a suspense account and later transferred to the correct account and that each financial year, Mr White finalised the accounts. How various expenses charged during the year were then treated she did not know.

The defendant's case

The defendant's position is that two, and only two, commission agreements are of importance.
The plaintiff says that there was a discussion in December 1992 and that an agreement was then reached.
Originally, it was pleaded that that agreement took the form of a request by the defendant in December 1992 and a response by the plaintiff in the writing that became exhibit 1 and that the acceptance was by conduct. By reason of a late amendment to the statement of claim what was alleged at trial was an oral agreement in the initial conversation in December.
The defendant says the agreement that was made at the end of December 1992 was actually an agreement based only on the sales of the plaintiff, to be calculated on gross profit but only on the gross profit of the plaintiff's sales, and therefore not taking into account sales made by other people within the division.
There were problems within the plaintiff's division and the defendant proposed to address them by trying to do something to motivate the personal performance of the plaintiff in December 1992. What was sought to be done was to give reason to the plaintiff for going out and generating his own personal sales.
The defendant also says, and that also is the subject of a late amendment, that there was yet another agreement at the end of the financial year for 1992 to 1993 to commence on 1 July 1993. It had been the practice at CDM to revisit these arrangements at the end of each financial year. The defendant says that the two previous arrangements having failed, another option was sought comparable to one being used with another divisional manager, the virtue that it had being that it was considerably simpler than the arrangement from July 1992 and potentially more profitable for the plaintiff or at least profitable for the plaintiff.
That arrangement was made with the 1992 agreement as a backdrop. The requirement of a fair return for the defendant was removed. In other words, there was no minimum net profit that had to be generated before profits were to be divided.
In addition, the 10 per cent commission the plaintiff would have received under the 1992 scheme was increased to 50 per cent. That arrangement was the one in place from that time onwards.
The defendant says the divisional commission arrangement for the year 1992 to 1993, exhibit 10 and exhibit 25 formed the basis for an arrangement for the calculation of commission that carried on, in effect, from July 1992 to June 1993. However, problems with the computer system meant there could not be any automatic calculation of the amounts but that in any event there would not have been sufficient net profit generated to earn the plaintiff anything.

The arrangements that were put in place for the plaintiff made it possible for him to make claims for commission if indeed there was any basis upon which he could do so. It was a relatively simple matter for the plaintiff to calculate gross profit in any month and also a relatively simple matter to work out the expenses for his division that applied to his division.
There is no dispute that there were problems with CDM's computerised accounting system created by the fact that a family‑owned company had grown in size quickly and perhaps a lack of management attention to that aspect of the business.

Mr C Della-Maddalena's evidence

Mr Camillo Della‑Maddalena gave evidence. He has been managing director of the defendant company since May 1992. He met the plaintiff on joining the company in 1984. He became joint managing director in 1986 but in 1991 was relieved of that position for a time when Mr G Wheatley was appointed as general manager. At that time, the plaintiff had been general manager of the company but was at that time returned to the position of divisional manager of business systems division. Mr Della‑Maddalena's evidence is that the plaintiff was very unhappy about this.
He agreed that until 1991, the plaintiff was paid $2,000 per month in addition to his salary and that that arrangement was then terminated. He was not aware how the $2,000 per month was paid although he knew the company had agreed to pay it.
Mr Della‑Maddalena did not agree that the cessation of the $2,000 monthly salary payments coincided with the introduction of the 1991 executive incentive scheme. On his evidence, the latter was introduced some months later, the former coinciding with the earlier arrival of Mr Wheatley.
The terms of the internal memorandum of 3 May 1991 exhibit 16 were put to Mr Della‑Maddalena as suggesting that payment of $2,000 per month as "guaranteed commission" ceased then and not earlier. He replied: "No. I was in that meeting with Murray in 89 and that $2,000 payment was based on a percentage of net profit of the company, and with him being put back to a divisional manager he would have lost that ...".
The various divisional managers were presented in 1991 with a document in terms of exhibit 6. The plaintiff was annoyed that it had not been discussed with him.
Mr Della‑Maddalena said the plaintiff had been upset at Mr Wheatley's appointment and the plaintiff's relationship with himself had started to become strained.
Mr White joined the company in February 1992 and Mr Wheatley left the company later in 1992. At that time, Mr Della‑Maddalena was appointed managing director.
The company had no satisfactory computer accounting system and was suffering massive cash flow problems. Mr White's task was to address these issues.
The Profit Incentive Contract - Financial Year 1 July 1992, exhibit 10 and exhibit 25, was discussed with the plaintiff in July 1992.
"I met with Murray in July. As was my style, it was very consultative and we talked about some of the numbers in here. I said I was going to introduce a new system based on percentage of net profit. We worked out what was fair expected return for the company, and we agreed at that time it was going to be 6 per cent. We talked about an administration fee being $4,000, and over the page Murray was to share 10 per cent of the net profit if 6 per cent was achieved.
When we got to the end of this agreement, Murray wanted ... other aspects to be added in. One was the second‑hands, and all manufacturing rebates and advertising subsidies were to be credited to the division.
...
After Murray ... George White and I got together. I told George White what we had agreed. He filled ... in the sheet, gave it to one of the girls in accounts and they had it typed up."
Mr Della‑Maddalena believed that Mr White then gave the plaintiff a copy. The document is exhibit 25. Business in 1992 was poor and their main supplier of business equipment, Mita, was considering removing the defendant's exclusive distributorship rights in Western Australia. In late 1992, Mr White discussed these issues and suggested either changing or motivating the plaintiff. The plaintiff had been Mr Della‑Maddalena's mentor in the 1980's and they had developed a strong personal relationship. However, in late 1992, the relationship was strained. Mr Della‑Maddalena thought the plaintiff blamed him after Mr Wheatley's appointment.
He said he had retained the plaintiff as a divisional manager out of friendship and against Mr White's advice.
In mid‑December 1992, he wrote the plaintiff a memo: exhibit 26:
"21 December 1992
To: Murray Harvey
From: Camillo Della Maddalena
Re: Business Systems
We need to discuss a number of issues which is causing a lot of frustration for both of us.
The following are the points which we need to finalise before the new year:-
1.It is evident that your division is at best breaking even if not losing money.
2.Lack of motivation of your sales staff which you have already commented.
3.Second hands is still a major problem, even since Geoff Page has instigated a system, your staff do not document the movements of this stock. We must find a solution to this problem.
4.The current profit and loss scheme is based on a net profit being generated which is currently not happening, therefore, we will need to introduce a personal package based on your own sales (including wholesale and house accounts), a formula which incorporates a percentage of profit based on your direct sales. The formula to be similar to the salesmen's packages.
I would like you to consider these points so we can discuss them."
The plaintiff's evidence is that he first saw the letter dated 21 December 1992 from Camillo Della‑Maddalena to himself at the defendant's solicitors' office when discovery of documents was given following litigation being commenced.
They discussed the matter on the last business day of 1992 after midday in the showroom. Mr White was in the adjacent computer room working. The plaintiff raised the issue of secondhand sales by Elio Della‑Maddalena for cash not being recorded on company sales order dockets. They then discussed the question of the business systems division either breaking even at best or losing money and Mr Della‑Maddalena's wish to introduce a salary package for the plaintiff based on the plaintiff's personal sales. The plaintiff was a very good and experienced salesman. Mr Della‑Maddalena suggested to the plaintiff that house sales, being accounts dealing with multiple sales and sales made nationally and under dealership arrangements, would be credited to the plaintiff as his personal sales.
House sales is an expression which covers all the major accounts including dealer sales. Giving commission on these to the plaintiff would be a major incentive.
The plaintiff would prepare the sales order dockets showing the client, product, sale price and trading terms.
"The proposal was Murray would be given a commission structure on his own sales, less $4,000 administration fee and the resulting profit - 50 per cent would be given to Murray and his salary package would be considered as an advance against his 50 per cent.
...
He was happy, I was happy. ...
H H JACKSON DCJ: ... The agreement you say that was reached was that you would take his ... personal sales which includes house sales ---?---Yes, your Honour.
You would deduct from that the cost of purchase to the company, in other words the wholesale price if you like?---The cost of goods sold.
You then deduct a further $4,000 which was called an administration fee but which was really to cover all other expenses?---Yes, your Honour.
So you take your gross sales less your cost of goods gets you what you call a gross profit?---Yes, your Honour."
After the $4,000 monthly administration fee is deducted to reach a profit figure, the plaintiff was to receive 50 per cent. Advances were to be made against that by way of a fixed "salary" of $50,000 per annum. The plaintiff decided on how that was to be allocated for his own purposes as between "salary" and "car allowance". They discussed the defendant's concern that unless the company sold 50 Mita products per quarter the company's position would be changed to that of sub‑dealer to a new distributor. They also discussed the question of the company applying an interest component to stock which had been held for longer than a certain period.
The plaintiff had criticised the secondhand sales made by Elio Della‑Maddalena. This was a problem of principle but in money terms not a significant one. He denied discussing computer problems at that time.
After returning to work on 4 January 1993 Mr Della‑Maddalena drafted the memo, exhibit 1, to document the discussion. In evidence, however, he agreed it was "jumbled and unclear".
His evidence essentially is that the three issues discussed were that of Mita engaging another distributor, that of Elio's secondhand sales and that of a salary package for the plaintiff. A package was agreed of 50 per cent of gross profit on personal sales, less $4,000 administration fees and with the salary advanced against the 50 per cent commission.
"Murray was our best salesperson so therefore, offering him a percentage on his own sales gave us the best chance of increasing our numbers."
The memo covered these three matters but was jumbled and unclear. It reads as if all secondhand sales made within the division were to be credited to the plaintiff whereas only his own were. He also agreed that, on the other hand, the administration fee of $4,000 was for the whole of the divisional expenses.
He met the plaintiff a number of times after that to discuss the computer system being implemented by Mr White. By January 1993 it could produce gross sales figures but not specific reports about net profit for each division. It reached that point only years later. In April 1993, Mita appointed an additional distributor in Perth.
In July 1993, Mr Della‑Maddalena met the plaintiff to discuss the salary package for business systems division. He said he met all divisional managers at the beginning of each financial year.
"I put it to him, "Let's talk about the divisional incentive system" and his words were, "That's a lot of crap, isn't it?"
Did he explain what he meant by that?---The 6 per cent of turnover and then achieving 10 per cent of the net profit if the 6 per cent was achieved was what he was referring to.
Was there any discussion about the arrangement that you had discussed in your meeting of 31 December?---We talked about his personal sales package as well and ... Mita had then made an appointment of another distributor in Western Australia and the gross profit figure Murray needed to achieve on a monthly basis wasn't being achieved, so I proposed that we introduce a new system which was a divisional system, we get rid of the criteria of the 6 per cent, his salary is no longer to be treated as an advance but as part of the cost of running the division and of the subsequent profit, I proposed that he be paid 40 per cent of that figure.
Does it make a difference whether the salary comes out as an expense of the division or whether it's treated as an advance on the commission?---It does, yes.
...
... from a profit point of view, it's calculated as part of the cost of the division so any profit the division made he would be paid as a percentage of every dollar made from the first dollar.
... is it better or worse for Mr Harvey if it's simply treated as an expense?---I think it's better.
You said that you offered him a percentage?---Yes, I did; 40 per cent of the net.
What discussion, if any, was there about what had been called administration fees?---We talked about the administration fees. The fees the previous year were $4,000. I was happy we didn't need to increase that figure of $4,000. ... Andrew MacKeith was producing his P and L's on a monthly basis and submitting them and Murray said he would like to have a look at his costs for the prior 3 months which I undertook to get to him, and he also proposed that he not be paid 40 per cent but he would be paid 50 per cent of the net profit.
Did you in that meeting respond to this suggestion of 50 per cent?‑‑‑No, I did not.
... the meeting was left that I would consider his proposal of 50 per cent and in the meantime, I would ask George to get the figures together and supply Murray with a copy of those figures.
We've heard about the administration fee. What purpose did the administration fee serve? What costs did it capture?---The administration was a fixed fee for the whole year which is given to each division, but it covers costs which cannot be easily allocated to any divisions; things like store people. There was a storeman in the back, there was a receptionist, there were administration clerks, there were things like insurance, security, cleaning, invoices, bank fees; really anything which a divisional manager didn't incur the cost specifically to a division.
How did you go about breaking it down? Did you simply divide a total number by the number of divisions or was there some other basis of allocation?---George White calculated the admin fees. What he did is add up all the running costs of the business and then he worked a formula out between head count and revenue.
What happened with that?---... well, before the meeting finished I said to Murray I would get back to him regarding his proposed 50 per cent. I would get the figures sent to him by George. When the meeting finished I rang George."
Within a couple of days Mr White produced exhibit 7 showing the cost of running the business systems division. Mr Della‑Maddalena received a copy.
"Within the week of our first meeting I met with Murray and accepted that we pay 50 per cent of net profit. ...
Once we agreed to that I suggested to Murray he document it."
In early January 1994 Mr Della‑Maddalena received the first of the plaintiff's commission claims. He spoke to the plaintiff immediately saying:
"This is 50 per cent of the division's gross profit. How stupid do you think I am?"
The plaintiff just walked out of the office. In early February he met the plaintiff and pointed out that their agreement was for 50 per cent of net profit as the plaintiff had requested. The plaintiff responded that unless he provided documentation to establish that, the plaintiff did not accept it. His father asked him to put the figures together showing the claim was not correct. He and Mr White spent time doing so, and the figures produced showed no moneys were owing.
Cross‑examined, Mr Della‑Maddalena agreed that until about 1996, his father had been the driving force behind the company. During the decade between 1984 and 1994, turnover increased from about $3 million to about $12 million. The business systems division accounted for about $2 million of the latter. He agreed also that sale of consumable items such as paper which followed from photocopier sales contributed to company profits. Mr Wheatley had been dismissed from the company by Mr Della‑Maddalena's father at a time, mid 1992, when the company was in dire financial straits.
Mr Della‑Maddalena's task was to put its finances into order. The computer system was not functioning. Mr White took over the accounting and finances of the business implementing an operative computer system and attending to cash flow problems.
He agreed with the plaintiff that at that time, the plaintiff was selling about 20 photocopiers per quarter. He agreed that nothing was done to implement the plaintiff's commission scheme agreed in 1992 by the company making its own calculations of his entitlements. The computing system was not working. It was left to divisional managers to calculate and submit their claims. Others did so. The plaintiff did not, although he had the information with which to do so.
Salesmen's remuneration packages were individually negotiated by managers but were based on personal sales beyond a threshold figure.
Mr Della‑Maddalena said that being referred to the plaintiff's diary entries of 2 July 1993 and 7 July 1993 very shortly before trial refreshed his own memory of their discussions and of his asking the plaintiff to document them. Previously, he had had no documentary evidence of them and the claim was for 50 per cent of gross profit on all sales within the division which he knew was never agreed. Amendments to the statement of defence were then prepared. He said Mr White had been aware of the discussions in July 1993.
"At the beginning of each financial year I would sit down with all the managers. George would produce a document which I would sit down with the managers on. I sat down with Murray. I proposed that his salary was no longer going to be part of an advance but part of a divisional cost. I proposed the admin fee would stay at $4000. I proposed that he'd be paid 40 per cent of net profit and he said he wanted 50 per cent. After that meeting I rang George and said Murray wanted the other costs. If he could just combine the costs for the previous 3 months to give to Murray, and Murray wants to go from 40 per cent to 50 per cent. George says, "Camillo, what's another 10 per cent where the division is now?"
You told Mr White presumably that you would go along and agree with the 50 per cent?---Yes, I did."
He was shown exhibit 7. The plaintiff, he said, had asked for details of divisional expenses, and as a result Mr White had prepared the document for the plaintiff showing three months expenses.
At the meeting between himself and the plaintiff about introduction of a new management incentive scheme to start in July 1993 the proposal he put to the plaintiff was to vary the 1992 agreement by deleting the provisions concerning a minimum return of 6 per cent and to change the basis of the plaintiff commission entitlement to 40 per cent of net profit. The figures calculated in exhibit 7 were to give an idea of the divisional expenses involved which would be deducted from gross profit to reach net profit. Expenses which could not be specifically allocated to particular divisions, such as electricity, rates and taxes and secretarial expenses were included under the heading of the administration fee. That fee is determined by management at the start of each financial year and advised to the relevant divisional manager. Later the defendant agreed on a figure of 50 per cent of net profit. The "salary" paid to the plaintiff was to be treated as part of the divisional running costs. Using these figures, that would result in the plaintiff receiving about $12,000 in commissions on top of his $50,000 salary and $2,000 commissions. As it happened, there were other costs, especially marketing costs incurred which were not reflected adequately in these estimates. Exhibit 7 dealt specifically with expenses referable to the particular division such as salaries and vehicle expenses.
Where losses were incurred, they were carried forward and set off against profits in the later financial period.
The company left it to divisional managers to put in claims for commissions. When the plaintiff ultimately put in his claim the claim was put in on the wrong basis but the plaintiff would not accept this unless documentary evidence were provided. In fact, Mr Della‑Maddalena concluded, the business systems division had not made a profit in the year to 30 June 1994 and the plaintiff had not therefore been entitled to commission for that period. He agreed he had not shown the figures by which he made this assessment to the plaintiff in mid‑1994. He said the figures were very conservative.
Mr Della‑Maddalena denied that he had been approached by the plaintiff on 2 July 1993 to supply figures with which the plaintiff could complete his commission claim. He reiterated that he had proposed commissions being 40 per cent of net profit on divisional sales. They had agreed on 50 per cent after Mr Della‑Maddalena had discussed the matter with Mr White and Mr White had supplied the plaintiff with divisional costings for three months as requested. He denied that the agreement had been for 50 per cent of "profit" and that he had later seen the plaintiff's diary entries dated 2 July and 7 July and perceived an ambiguity in that expression and thereafter used the expression "net profit". When presented with the first commission claim in January 1994, he saw that it was for 50 per cent of gross profit and commented "How stupid do you think I am?". His father had not been present. The claim had simply been left on his desk. After the second claim was presented he had a meeting with the plaintiff and explained that the plaintiff had agreed to the introduction of the divisional profit incentive scheme in July 1993.

The trial of this action came on for hearing before me on 21 August 2000. The dispute between the parties centred around the terms on which the defendant had employed the plaintiff during the period from 1 July 1993 to 1 July 1994. On the basis of his pleadings as to that issue, the plaintiff claimed $120,850.
The defendant pleaded that the terms of the plaintiff's employment were different and that the defendant was not indebted to the plaintiff. Alternatively, if some aspects of the plaintiff's pleaded terms of employment were upheld, the defendant said some (albeit much smaller) sum was owing.
A few days before the first morning of trial and, therefore, obviously before the plaintiff opened his case or evidence was called, the defendant moved to amend the defence by varying the basis on which it said the plaintiff had been employed.
Over the plaintiff's objection, I allowed such an amendment.
No material application was made by the plaintiff to vary his pleadings or to adjourn the trial.
The following exchange is recorded by the transcript as to how the trial of the matter should proceed:
"O'NEAL, MR:
The other thing that we propose to do, which both my learned friend and I have some considerable enthusiasm for, your Honour, is the idea of resolving first, the issue of liability in a sense of having the court determine at that stage what agreement, if any, applies to this arrangement and that subsequent to that, if necessary, then there be further proceedings to determine what amount, if any, is owing in the consequence of the finding about the agreement.
So that there's no misunderstanding about it, both my learned friend and I agree that that doesn't mean that there won't have to be some evidence of financial matters and accounting for the factual matrix of the agreements. What we're not going to be arguing about is what, if anything, is owed."
Thus the parties indicated that the matter should first proceed to trial to determine the issues of the terms of the plaintiff's employment.
When that had been done, any questions which arose as to the extent of the defendant's indebtedness to the plaintiff, and which were not resolved by agreement, could be brought back to the court for assessment pursuant to the findings as to the terms of employment.
It is important to note that the plaintiff's claim was that the defendant was indebted to it (for an amount quantified in the Statement of Claim at $120,850) on the basis of the alleged terms of employment as pleaded by it. No alternative claim was made on the basis of the defendant's original version or of its final version of the terms of employment.
After the trial had been conducted on that basis and after I delivered my reasons for judgment, Mr O'Neal for the defendant moved that the claim be dismissed with costs. However, Mr Tsaknis argued that there were a number of matters which should be further considered including the possibility of an application to amend the Statement of Claim, as has now been made.
It is clear that on the basis of the pleadings as they were at trial, given my findings in favour of the defendant as to the terms of the contract of employment at the relevant time, the plaintiff's claim must be dismissed. Mr Tsaknis concedes as much.

Plaintiff's submissions

The plaintiff, in essence, however, says that on the basis of my findings, there remains owing to him by the defendant a substantial sum of money. He, accordingly, seeks to amend his Statement of Claim to so plead. There is no doubt that to bring such a claim by issuing a new Writ would be available to him save for the existence of the statutory limitation period.
Thus the plaintiff now seeks leave to amend the Statement of Claim by adding certain paragraphs which, in effect, allege that the terms of the plaintiff's employment by the defendant at the material dates were as I found them to be. He would then seek to have the court assess what, if any, moneys are owing to him thereunder.
The principles upon which leave to amend a Statement of Claim may be given this late in the day and after the original limitation period has expired require to be considered.
Each side provided written submissions, with authorities, supplemented subsequently by oral submissions. I do not intend now to canvass all of them but it should be said that in the case of the plaintiff, they deal with issues both factual and legal and that I do not accept all of what is said in either regard. However, I will limit my comments to those sufficient to deal with what I see as the issues necessary to be dealt with.
In the final analysis, the plaintiff argues, whether an amendment should be allowed is, as the High Court observed in Queensland v J L Holdings Pty Ltd (1997) 71 ALJR 294, a matter for the discretion of the trial judge who should be guided in the exercise of his or her discretion by his assessment of where justice lies.
The plaintiff argues that the interests of justice require that he be granted of leave to amend by reason of:
(a)the nature and the lateness of the defendant's amendments which were made very soon before trial and omitted its previous reliance on a letter of 4 January 1993, the interpretation of which was thought to be the key issue between the parties, and raised for the first time the July 1993 agreement,
(b)the length of time between commencement of the action and the filing of the defendant's original defence and the amendment, some five years,
(c)that the amendment seeks to raise an issue on which the evidence of the defendant is complete, the amendment giving effect to the case pleaded by the defendant,
(d)that the amendment would reflect the issues litigated at the trial: Water Board v Moustakas (1988) 180 CLR 491 at 497,
(e)that the defendant is said to be a corporation with substantial assets and will not suffer any undue personal strain,
(f)that the proposed amendment is of considerable importance to the rights of the plaintiff, who is an individual and not a corporation, and
(g)that granting leave to amend is the only way in which the real merits of the plaintiff's case can be determined and an artificiality avoided.
Mr Tsaknis pointed out that the principles relating to amendments have been applied to permit pleadings to be amended at the close of the evidence: National Australia Bank Ltd v Nobile & Martelli (1988) 100 ALR 227; after judgment, Midland Bank Trust Co Ltd v Green (No 2) [1979] 1 WLR 460; Singh v Atombrook Ltd [1989] 1 WLR 810; F F Seeley Nominees Pty Ltd v El Ar Initiations (UK) Ltd (1990) 55 SASR 302; and even on appeal, Introvigne v Commonwealth (1980) 32 ALR 251 at 260; Bell v Lever Bros Ltd [1932] AC 161 at 216; Maloney v Commissioner for Railways (NSW) (1978) 18 ALR 147 at 151.
He also argues that the defendant was never led to believe that if its pleaded case was accepted, there would be no damages payable. That is denied, in my view correctly, by the defendant.
The plaintiff points out that the orders made by me envisaged that the hearing on the question of damages would be determined later, and says that, accordingly, to proceed to an assessment of damages on the finding would be to complete the process originally envisaged. Splitting the trial in the manner that occurred meant, the plaintiff says, that the defendant has not, or ought not to have, incurred unnecessary costs which will be thrown away by preparing to meet a damages case based on the plaintiff's pleaded case.
Thus, the plaintiff argues that if the amendment is allowed the defendant will not suffer prejudice in any real sense and that in any case if the defendant is able to show any prejudice it will be protected by the usual costs order that the plaintiff pay any of its costs incurred and thrown away. Again, as will be seen, I disagree.
The plaintiff argues that a chief purpose of O 21 r 5 is to ensure that pleading defects be cured to avoid a multiplicity of proceedings and to ensure that all issues arising in the proceedings be determined. In any event, the rule in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 might be argued to bar fresh proceedings.
The plaintiff then argues that the proposed amendment is not precluded by the provisions of the Limitation Act s 38(1)(b)(5) because of s 44(1) and s 44(3) of that Act applying where an acknowledgment or promise has been made or is contained by or in some writing signed by the party chargeable or by his agent duly authorised. Such an acknowledgment is said to arise from the defendant's own pleadings which are said to constitute an acknowledgment of a contract and a promise of payment thereunder. In addition, it is said that the defendant admitted the debt in evidence: Transcript 381‑382 and 480.
I agree with Mr O'Neal that the transcript references do not support that contention, and that to the contrary, all that evidence shows is that in one calculation of possible entitlement, without taking into account the cost of relevant marketing activities, a small positive balance was seen.
I do not accept that either in fact or in law the defendant by pleadings through counsel or in evidence acknowledged indebtedness to the plaintiff so as to start the statutory limitation period running again.
In my view, the defendant denied such indebtedness whilst accepting it is an (unquantified) possibility). That is not enough: Good v Parry [1963] 2 QB 418; Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535.
The acknowledgment must be in writing and an admission that a debt is due, or that it is outstanding and unpaid: Stage Club Ltd v Millers Hotels Pty Ltd (supra).
An admission only of the possibility of a claim, and a willingness to examine it, is not an "acknowledgment": Good v Parry (supra).
An argument was also mounted that in the circumstances of this case, the defendant would be perpetrating a fraud and benefiting from its own unconscionable behaviour if it is permitted to take the position either of pleading the amended defence more than six years after the debt is incurred as it has and amendment is now denied to the plaintiff or if the defendant is permitted to rely on the Limitation Act after failing to disclose the plaintiff's entitlements within that time and that such a fraud would again take the matter outside the Limitation Act provisions. It is argued that somehow, this calls for the exercise of the court's auxiliary or collateral equitable jurisdiction. In my view, it is quite obvious that there is no merit in those arguments, either in law or equity or fact in the present case.

Defendant's submissions

Mr O'Neal, opposing the plaintiff's application to amend, essentially argues two main propositions: that the amendment sought would be barred by the provisions of the Limitation Act and that in any event, it should be refused as a matter of discretion.
Mr O'Neal argues that the effect of the proposed amended pleading given the decision in Morgan v Banning is that the plaintiff is now seeking to plead a new cause of action so that O 21 r 5(5) does not apply.
Sub‑rule (5) permits a new cause of action to be added or substituted "if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment".
The expression "cause of action" describes a factual situation which will entitle a person to approach the court for relief in distinction to the expression "form of action" which refers to the old categories of action: Morgan v Banning at 484. Unless the new cause of action to be pleaded arises from that same "basket of facts" as the case already pleaded, it will not be permitted by way of amendment if it is time barred.
In this case, the plaintiff alleged that in December 1992 or January 1992 he agreed with the defendant that he would be given 50 per cent of the profit on all sales in his division, in consideration of his services. The agreement was particularised in detail.
That version was disputed by the defendant. In contradicting the plaintiff's version of the facts, the defendant pleaded a different agreement made on 31 December 1992 and, by an amendment, a further agreement made in July 1993. Only one party's version of the facts could be true. The plaintiff denied the truth of the case pleaded by the defendant and alleged that Mr Della Maddelena "fabricated" the July 1993 agreement, and that there was no such discussion.
By the proposed amendment, the plaintiff seeks to adopt facts "which he previously swore were untrue, and discard the cause of action which failed at trial. On any test, the plaintiff now wishes to substitute two new causes of action, being the two contracts pleaded by the defendant, arising out of facts which the plaintiff previously denied and contradicted". Once that is accepted, the question of any acknowledgment within s 44(3) of the Limitation Act arises because s 38(1)(c) of the Limitation Act 1935 provides a defence to the pleading of any new contract by the plaintiff as a cause of action unless there had been "such acknowledgment or promise ... made or contained by or in some writing signed by the party chargeable, or by his agent duly authorised": Section 44(3).
There has not been, either in oral evidence, by pleading or in other writing required by the Act, an acknowledgment of a debt due from the defendant to the plaintiff.
In the area of discretion, Mr O'Neal argues that the plaintiff should have pleaded as he now seeks to do from the outset, as he could have done in the alternative and consistently with his own diary entries, and in any event, should have, at the latest, moved to amend the Statement of Claim prior to trial when the defendant amended the defence rather than then oppose the defendant's course of action. He argues that the plaintiff should depose on affidavit as to those matters.
Mr O'Neal argues that in any event, the proposed amendments do not plead breach and further that they are not supported by an affidavit deposing as to the amount claimed and breach in respect thereof. As Mr O'Neal pointed out, neither in the transcript of the trial already conducted, in the proposed pleadings nor in any affidavit is an actual amount suggested by the plaintiff to be owing, let alone one which would establish the jurisdiction of this court. Nor is there evidence of any serious attempt to calculate such a figure. The amendment would be futile or has not been shown to be otherwise.
Mr O'Neal's submission is that notwithstanding both parties' respective pleaded cases, the evidence at trial demonstrated that there was, in fact, a further term, at the very least, to be implied into each of the commission arrangements that the defendant entered into with its employees. That is, that the commission was to be claimed by the employee, and supporting documentation was to be provided. That permitted the defendant to check the calculation and provide for payment. No claim for payment was ever made by the plaintiff.

Conclusion on discretion issue

Litigation should be conducted so that the merits of the matter are finally determined and it may be that the plaintiff is in fact owed some amount. The defendant amended in a major and ultimately successful way shortly before trial as to liability. Evidence has not been taken as to any quantum outstanding.
Notwithstanding the defendant's submissions, on balance, I think the interests of justice favour granting the plaintiff's application.
Of course, even when O 21 r 5(5) permits and the principle in Weldon v Neal [1887] 19 QBD 394 as now understood does not bar the amendment, there remains the discretionary question of whether, in the circumstances, it is just to permit the amendment.
The avoidance of cost and delay and the application of case management principles in the conduct of the court are, or, at least may be relevant, but the principles are wider than that. It is clear that, as the majority of the Full Court of the Supreme Court said in Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323 in considering whether it is just to grant belated amendments, the court will consider not only prejudice to the applicant, but prejudice to the public interest and prejudice to the opponent. The prejudice to the applicant of the refusal of leave does not predominate over prejudice to the public interest and the opponent.
Indeed, in Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146; 71 ALJR 294 the High Court of Australia has made it clear that the ultimate aim is the attainment of justice and that neither principle nor authority justify using management considerations to shut out a party from litigating an issue that is fairly arguable. In that case, Kirby J sets out at length various matters in consideration of which might argue for or against the exercise of discretion in favour of a party seeking to amend pleadings:
"Amongst considerations which may tend to favour the extension of an indulgence to a party applying for it are the following: that this is the only way in which the true issues and the real merits, factual and legal, can be litigated and artificiality avoided; that the oversight which occurred is adequately explained as, for example, that it arose out of sudden and unexpected events; that the proposed amendment is of considerable importance to the rights of a party, particularly where it provides a complete answer to a claim; that any fault is that of the party's legal representatives; that the oversight was wholly accidental; that it was simply the product of unavoidable human error or, possibly, the outcome of the application to the case of fresh legal minds who perceived an important new point; that cost orders or the imposition of other conditions could adequately rebalance the competing claims to justice; and that the hearing date is sufficiently in the future to permit a party to meet the amendment, taking into account any consequences for the gathering of fresh evidence, the conduct of discovery or like pre‑trial procedures and the loss of assigned hearing dates. Departures from a court ordered time‑table, whilst relevant, are not decisive. Such orders are the servants of justice. They are designed to enhance its achievement in a way that an inflexible application of rigid rules could prevent. ...
Considerations which tend to argue against the grant of an indulgence include many which are the counterparts of the foregoing. Thus, the failure of a party to offer anything by way of explanation for a late application has been held relevant. So has the blamelessness of the resisting party and the extent to which the applicant is at fault in its breach of clear directions. Courts now take into account the strain which litigation may place upon those involved and the natural desire of most litigants to be freed, as quickly as possible, from the anxiety, distraction and disruption which litigation causes. In my view this is not a consideration limited to litigation by natural persons or involving private citizens. Because justice cannot be measured solely in monetary terms, costs orders are not necessarily an adequate balm to the other party. Thus, the proximity of the hearing is clearly a most important consideration. An opposing party is entitled to have taken into account the consequences of an indulgence, especially where it should cause disarray at the last minute to its preparation of the trial. Similarly, the length of time that the proceedings have been pending before the application is made will often be a relevant consideration. The longer the time, the more reasonable it may be to expect that the parties, or their lawyers, should have earlier appreciated, and raised, the point in issue. If a consequence of the indulgence is truly a necessity to postpone a trial date, this will be a most important consideration. Its importance increases with the congestion of court lists and the difficulty, particularly in the case of a lengthy trial of securing early replacement dates. The extent to which a new issue would give rise to a substantial and new case in reply is also relevant. So may be the nature of the litigation and whether it has been assigned to a special list designed to cater for the peculiarities and special needs of commercial cases, long trials and the like. Writers on effective case management repeatedly stress the importance of adhering to a 'firm, credible ... trial date' as an important element in securing the serious attention to a dispute which may help to promote its resolution. They call attention to the risks of 'litigation abuse' by which some litigants seek, at all costs, to avoid firm hearing times. Courts are entitled to react unfavourably to repeated default on the part of a litigant whose conduct has the effect of frustrating a proper timetable fixed for the trial. Justice will not necessarily require that a party should have multiple opportunities to plead and present its case. A court must accord justice to the particular litigant. But it must also maintain its responsible use of scarce public resources and consider, in a general way, the impact which its orders have on other litigants and on the public generally.
Whilst taking all of the considerations relevant to the circumstances of the case into account, the judge must always be careful to retain that flexibility which is the hallmark of justice. New considerations for the exercise of judicial discretion in such cases have been identified in recent years. But the abiding judicial duty remains the same. A judge who ignores the modern imperatives of the efficient conduct of litigation may unconsciously work an injustice on one of the parties, or litigants generally, and on the public. But a judge who applies case management rules too rigidly may ignore the fallible world in which legal disputes arise and in which they must be resolved."

Limitation Act and Order 21 Rule 5

That, however, leaves the question of the Limitation Act and the scope of O 21 r 5(5).
By O 21 r 5 of the Rules of the Supreme Court:
"5. Amendment of writ or pleading with leave
(1)Subject to -
...
(c)the following provisions of this Rule,
the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as the court may direct.
(2)Where an application to the Court for leave to make the amendment ... is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.
...
(5)An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment."
An amendment to the Statement of Claim, if granted, generally dates back to the issue of the Writ. It is the date of issue of the Writ which is critical to whether an action is commenced within the time limited by the Limitation Act. Then there is the principle that the court will not permit a new cause of action to be added once the limitation period has expired: Weldon v Neal (supra). In Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233, Burt CJ with whom Brinsden J agreed, said at 240:
"It seems as yet undecided whether subr (1) of that rule [O 21, r 5] gives authority to the court to allow an amendment to a statement of claim notwithstanding the expiry of a period of limitation in a case which does not fall within the subrules which follow it."
Franklyn J at 249 expressed the view more strongly that:
"There is authority in a number of ... cases for the proposition that [WA O 21, r 5(1)] should be given a wide interpretation and that such an amendment may be allowed under that rule should [O 21, r 5(5)] be found restrictive."
In that case, leave to amend was given, Franklyn J saying: "There is no prejudice to the defendant other than its loss of the defence of the statute, which in view of the provisions of [O 21, r 2] is not a relevant factor."
Mr Tsaknis argues that that is the position here save, a fortiori, that it was, he says, the defendant's late amendment which occurred outside the relevant statutory period which caused the problem.
That, I think, is to distort and oversimplify the position. First, to allow the application will cause the defendant to have to litigate the issue of quantum which refusal would negate in light of the statutory limitation issue. Secondly, the cause of the plaintiff's problem is not the defendant's late amendment but the plaintiff's failure to plead in the same terms, at least in the alternative.
In Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431 Owen J, with whom Malcolm CJ and Kennedy J agreed, concluded:
"In light of the authorities, and as a matter of construction, I think the effect of the rules is that the rule in Weldon v Neal continues in force in truncated form, being qualified only to the extent that O 21, r 5 allows some amendments out of time for certain limited purposes. Relevantly, when confronted with a proposed amendment that seeks to add a cause of action that is otherwise statute barred, the court has a discretion to allow the amendment under O 21, r 5(5) if the conditions set out in that rule are satisfied. The general discretion in O 21, r 5(1) is limited to that extent.
It seems to me, therefore, that once the trial judge had decided that the amendments did not come within O 21, r 5(5), that was an end to the matter. His Honour was correct in deciding that O 21, r 5(1) does not confer on the court a general and further discretion to permit amendment, despite the expiry of the relevant limitation period."
As Owen J said in Morgan v Banning (1999) 20 WAR 474 at 476‑477:
"But the question remains whether the writ covers a 'cause of action' which the plaintiff wishes to advance. This calls for a determination of the meaning of the phrase 'cause of action'. Problems arise when an amendment does, or may, introduce a new cause of action not encompassed within the writ as originally issued. ... Neither through the inherent jurisdiction or by rules of court could the court alter the operation of the Limitation Act. Order 21, r 5(2)‑(5) is a case in point. These rules empower the court to permit an amendment, if it is just to do so. ... or to add or substitute a new cause of action even though the limitation period may have expired. It is not difficult to see how a correction of a name or the alteration of a capacity could be done without interfering with any rights that the defendant may have to raise a limitation defence. Adding or substituting a new cause of action is more problematic.
This issue falls away if the phrase 'cause of action' in O 21, r 5(5) is understood in a narrow sense as meaning the basket of facts which give rise to the right to approach the court for relief rather than as the description of the right to sue by reference to the old forms of action. This must be so or the rule would be in conflict with the statute and, thus, ultra vires. It is interesting to compare the position in England. The Limitation Act 1980 (UK), s 35(5)(a) contains words that are virtually identical to those in our O 21, r 5(5). The same words appear again in English O 20, r 5(5). Accordingly, the issue of construction with which we are confronted would not arise in England because there is a statutory recognition of the right to substitute a new cause of action so long as there is the requisite degree of coincidence in the facts.
This is not to say that O 21, r 5(5) is devoid of meaning or of an area of operation. It avoids an overly technical and rigid investigation as to the degree of coincidence which must be found to exist between the facts necessary to establish the cause of action as originally advanced and those contained in the proposed amendments before the power to permit the amendment can be exercised."
In Morgan v Banning (supra), Wheeler J commented:
"Whatever the rules of court may provide, an action which is in fact instituted out of time is able to be defeated by reliance upon the Limitation Act, which the court has no power to override, whether by a procedural rule of 'relation back' or otherwise.
The clearest observations on this point are those of Toohey J, with whom Deane J agreed, in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 559‑562, where his Honour rejected the view that Weldon v Neal was no more than a 'rule of practice', and expressed the opinion that where an amendment seeks to introduce an 'admittedly new cause of action' a court has no power to ignore any statutory limitation period governing the bringing of that cause of action. Although these remarks were strictly obiter, they appear to me to stem from well understood principles governing the relationship between statutes and rules of court, and I would respectfully adopt them. Those remarks also make sense of occasional references in the authorities to the 'power' rather than the 'practice' of the court in permitting amendments after the expiry of limitation periods, including those which appear in Weldon v Neal itself.
... it is not immediately apparent why the rule in Weldon v Neal is often referred to as a 'rule of practice' that the court will not permit the Limitation Act to be defeated, or why O 21, r 5(5) appears to assume that the court has power to permit a cause of action to be added after the expiry of a limitation period.
The answer to both questions appears to me to lie in the ambiguity of the expression 'cause of action'. Not very long before Weldon v Neal, the Judicature Act 1873 (UK) had abolished the old rigid forms of action, but they still dominated - and to an extent continue to dominate - the discourse and thinking of courts and lawyers, leading to a lasting confusion in a number of contexts in which the expression 'cause of action' comes to be considered.
Diplock LJ discussed this phenomenon in the context of Limitation Act issues (although not in quite the context which is in issue here) in Letang v Cooper [1965] 1 QBD 232. His Lordship defined a 'cause of action' for limitation purposes (at 242‑243) as follows:
"A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person. Historically, the means by which the remedy was obtained varied with the nature of the factual situation and causes of action were divided into categories according to the 'form of action' by which the remedy was obtained and the particular kind of factual situation which constituted the cause of action."
His Lordship observed of the Judicature Act (at 243):
"... it was convenient for lawyers and legislators to continue to use, to describe the various categories of factual situations which entitled one person to obtain from the court a remedy against another, the names of the various 'forms of action' by which formally the remedy appropriate to the particular category or factual situation was obtained."
However, his Lordship warned that it must be remembered that the name of an old form of action could be considered to be no more than a convenient and succinct description of a particular category of factual situation; to forget this would, he said, 'encourage the old forms of actions to rule us from their graves'.
...
The confusion between the two concepts in the Weldon v Neal context has been exacerbated by two factors; first, it is not entirely clear from that decision whether 'cause of action' or 'form of action' is meant and, second, the Limitation Act itself tends to adopt the names of the old forms of action as convenient labels under which to group actions having specified periods of limitation. As to the second of these matters, while it may have led to some confusion, I do not think that it is possible to read the Limitation Act as intending to revive the concept of form of action. The breadth of the definition of 'action' tends to suggest otherwise and, more importantly, the purposes of the Limitation Act would not appear to be advanced by such a construction. A principal purpose, as I understand it, is to enable a defendant to know with finality what fact or facts are said to give rise to the action against him, rather than what label may be conveniently applied to those facts.
When one looks at the facts of Weldon v Neal, one can see that it was truly a new cause of action which was sought to be added to the statement of claim after the expiry of the limitation period. ...
It does appear that in the years since Weldon v Neal, the courts have experienced difficulty in defining precisely what constitutes a new 'cause of action' for the purposes of the rule, and it also appears to be the case that on occasion the rule has been applied to what may be seen as little more than a change of label, or the addition of particulars to facts already forming the basis of a claim, in a manner which may have been unduly rigid and capable of causing potential injustice to plaintiffs.
If I am correct in the view that the court's inability to permit the raising of a new cause of action (rather than a new description or new form of action) is as a result of a lack of power to do that which the statute of limitation prohibits, then O 21, r 5(5) and its equivalents can only be directed to curing the unduly rigid and narrow interpretation of Weldon v Neal which may be discerned in a line of authority. It is for that reason, I think, that r 5(5) permits amendment only 'if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action ...'. If the amendment is in that sense within the terms of the indorsement, no question of power arises.
The position now as I understand it is that the rule in Weldon v Neal applies to a cause of action which is truly new, and may not be abrogated without statutory authority. At least in a clear case, the court should refuse to allow the addition of a new cause of action in that sense. ...
Some of the views which I have expressed concerning O 21, r 5(5) may be thought to be inconsistent with a passage in the reasons of Owen J (with whom Malcolm CJ and Kennedy J agreed) in Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431. His Honour reached the conclusion that the rule in Weldon v Neal (at 439):
"... continues in force in truncated form, being qualified only to the extent that O 21, r 5 allows some amendments out of time for certain limited purposes: relevantly, when confronted with a proposed amendment that seeks to add a cause of action that is otherwise statute‑barred, the court has a discretion to allow the amendment under O 21 r 5(5) if the conditions set out in that rule are satisfied."
The finding which appears to have been central to the decision in Dye is found in his Honour's next sentence: 'The general discretion in O 21, r 5(1) is limited to that extent.'
Much of what I have said earlier is consistent with the reasoning in Dye. In particular, the definition of 'cause of action' in the broad sense in that case (at 434), and the understanding of the scope of O 21, r 5(5) as permitting the re‑categorisation of facts rather than the addition of a different claim arising from different facts (at 437), I understand to be identical to the conclusions which I have reached. I do not think, when the reasons are read as a whole, that Owen J was asserting that O 21, r 5(5) permitted the addition of a new cause of action, properly understood, in the absence of statutory authority. Rather, it is my view that his Honour was (at 439) simply adopting the words of O 21 itself which, in the first part of r 5(5), appears to use the expression 'cause of action' in a narrower sense than is now commonly the case and as meaning essentially a 'form of action'. Read as a whole, it is my view that Dye supports the conclusions which I have reached."
As the plaintiff correctly points out, the grant of leave to amend pursuant to O 21 r 5(5) will not require further evidence in respect of the matters the subject of the leave. The essence of the plaintiff's claim has always been that moneys are owed to him by the plaintiff arising from his employment by the defendant between 1 January 1993 and 1 July 1994. The dispute thus far has been about the terms of that employment. That is now resolved. In my view, the amendment proposed fall within the situations contemplated by the Full Court of the Supreme Court in Dye v Griffin Coal Mining Co Pty Ltd (supra) and in Morgan v Banning (supra) as one in which leave to amend may be granted without defying the provisions of the Limitation Act.
I have concluded that the present case falls within the terms of O 21 r 5(5) and that the rule in Weldon v Neal (supra) does not, in the present case, bar the amendment sought.

Costs and possible futility

Two issues which arise for consideration in relation to whether the application should be granted are whether appropriate orders as to costs would or would not adequately compensate the defendant for any prejudice it would thereby suffer and, secondly, whether to allow the application would be futile.
In respect of the first, I am satisfied that suitable costs orders could be made which would now so compensate the defendant.
At the time of granting the application to amend the defence, I ordered that the defendant pay any costs thrown away by reason thereof. In my view, not only was there no adjournment of the trial occasioned thereby, but the running of the trial in respect of length and witnesses called was not greatly affected thereby either. There may have been some modest effects, no doubt there were, and there may have been some modest effect on preparation, although it is to be recalled that the amendments were made only two working days before trial commenced. However, the plaintiff has agreed through counsel that any effects on trial were very limited.
The question which arises in the circumstances of this case, if the plaintiff's application is granted, is that of the appropriate orders to make in relation to costs up to and including both trial and the present application and its consequential results. Mr Tsaknis argues that the defendant should only be entitled to an order for costs thrown away by the late amendment of the Statement of Claim. In my view, if such an order were made, those costs would include the vast bulk of the costs of preparation for and conduct of the trial on liability already heard.
In respect of the second, I can only accept that that is an issue for determination in due course. However, Mr Tsaknis assures me that the plaintiff asserts a claim above the upper limit of Local Court jurisdiction of $25,000. He estimates that a further, say, two days of hearing would be required if the application were granted, along with preparation of accounting evidence and a pre‑trial conference, if, of course, agreement was not otherwise reached.
In my view, the present situation falls within the scope of O 21 r 5(5) as so explained and the proposed amendments do not plead a cause of action to which the Limitation Act could now be successfully pleaded as a defence.
Given what I have said above as to the exercise of discretion on matters concerning the preponderance of the interests of justice, it follows that the amendments proposed should be allowed. I note, however, Mr O'Neal's criticisms concerning the issue of failing to plead breach. No doubt that can be attended to.
The plaintiff argues that if leave to amend is granted, the "usual orders" which should be made as to costs are that the plaintiff pay any costs incurred and thrown away by the amendment but that the defendant pay the plaintiff's costs in opposing the application for leave to amend including costs reserved on 16 May 2001. However, the plaintiff also takes the view the trial already heard as to the terms of the plaintiff's employment should be regarded as a trial of a preliminary issue and that the costs of the preliminary issue should be reserved until the court has made findings as to what, if any, damages are payable to the plaintiff, had regard to any offers of compromise made and the timing of those offers, and considered those matters in the context4 of the defendant's late amendments to its defence.

Re‑listing for assessment

Although it is not necessary here to say so, given my findings on liability, it would perhaps be better if the matter of the assessment of whether any amount, and if so how much, is owing under the terms of employment as I found them to be listed before another judge.