Hill v Brady VMC Pty Ltd

IN THE MAGISTRATES’ COURT OF VICTORIA
AT MELBOURNE
INDUSTRIAL DIVISION

Case No. MAG-CI-230077719

MATTHEW HILL	Plaintiff
and
BRADY VMC PTY LTD (ACN 654 081 400)	Defendant

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MAGISTRATE:	K Fawcett
WHERE HELD:	Melbourne
DATE OF HEARING:	14 May 2024
DATE OF DECISION:	23 July 2024
CASE MAY BE CITED AS:	Hill v Brady VMC Pty Ltd
MEDIUM NEUTRAL CITATION:	[2024] VMC 13

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CONTRACT – Contract of employment – Term providing for payment in lieu of eligible pro-rata bonus from previous employer – Term providing bonus amount is subject to the employer’s approval – Annual incentive term – Term providing for payment of reasonable relocation costs – Effect of termination of employment on employer’s obligation to pay relocation costs.

APPEARANCES:	COUNSEL	SOLICITORS
For the Plaintiff	Mr Geoff Lake	Jewell Hancock
For the Defendant	Mr Anthony Schlicht	Simon Nixon & Associates

HER HONOUR:

INTRODUCTION

The Plaintiff Mr Matthew Hill was employed by the Defendant Brady VMC Pty Ltd (Brady) as General Manager of the Voco Melbourne Central Hotel (Voco) from 29 August 2022 until the termination of his employment on 5 December 2022.
Mr Hill was employed pursuant to a written contract of employment dated 22 July 2022 (the Contract).
Mr Hill claims that in breach of the Contract, Brady failed to pay him a ‘bonus in lieu’ of $52,000 (Previous Pro-rata Bonus) in circumstances where his previous employer, the Intercontinental Hayman Island Resort (Hayman Island), did not pay him an eligible pro-rata bonus in that sum. Brady denies the Previous Pro-rata Bonus was payable in full as it required the sum to be pro-rated, or at all as Mr Hill did not satisfy the preconditions for eligibility, and the amount was subject to approval which was not given as Brady was not satisfied a bonus would have been paid by Hayman Island.
Mr Hill further claims that in breach of the Contract, Brady failed to pay him reasonable relocation costs for he and his family from Hayman Island to Melbourne, to the value of $14,326.22 (Relocation Costs). During the course of the hearing of the matter, Brady accepted that some of the Relocation Costs were payable, but maintained that others were not because they were incurred after the termination of Mr Hill’s employment, were not reasonable or were not provided for under the Contract.
A further claim by Mr Hill in respect of unpaid salary in lieu of notice of termination was resolved by Brady making that payment to Mr Hill after the proceeding was issued.

EVIDENCE AND FINDINGS

Mr Hill gave evidence, as did Mr James Pellicano, a consultant with the Brady Group and the sole negotiator of the Contract with Mr Hill on behalf of Brady. The parties agreed that documents referred to in the evidence or submissions would be tendered and I have treated them as such.
Mr Hill gave evidence as to the circumstances of his termination. Whilst no claim relating to the termination remains to be determined, I considered this evidence relevant to the timing of the relocation of Mr Hill’s family and the incurring of the Relocation Costs, and have had regard to it for that purpose.

Findings on uncontested/consistent evidence

Most of the evidence of the two witnesses was consistent or uncontested and documents evidencing the engagement between the parties were not in dispute. I did not consider any issues of credit to arise in respect of either witness. I am accordingly satisfied, based on this evidence, as to the following matters.
Mr Hill has managed luxury hotels in many different countries over many years. He returned to Australia as Resort Manager of Hayman Island just before the Covid-19 pandemic. Hayman Island is a managed hotel within the IHG Group.
Voco is owned by the Brady Group, which includes Brady. It opened on around 28 April 2022. At that time, Voco was also a managed hotel within the IHG Group, which was the brand owner and operator.
Mr Hill was approached in March 2022 to assist with the opening of Voco. Following a meeting with representatives of the Brady Group including Mr Pellicano and Mr Simon Pethica, a Director of Brady and the General Manager of the Brady Group, from around April 2022 Mr Hill travelled back and forward between the Acting General Manager role at Voco in Melbourne and his role at Hayman Island. Mr Pellicano agreed that the business was impressed with the job Mr Hill was doing on a temporary basis and it was a priority to secure a competent and professional General Manager for Voco. Mr Tony Brady, the owner of the business, asked Mr Hill to consider the permanent role. Negotiations for the role were undertaken during July 2022 between Mr Hill and Mr Pellicano.
On 11 July 2022, Mr Hill emailed Mr Brady and Mr Pellicano stating:
Many thanks for your time this afternoon.
I sincerely appreciate the feedback you provided and grateful for being considered for the role as General Manager.
It would assist me greatly in my decision making process, if I could kindly ask for you to please provide an outline on the offer/package being proposed so I can ensure that I am able to evaluate this wonderful opportunity in its entirety. …
Following that, Mr Hill and Mr Pellicano discussed the package on the telephone, then Mr Hill put the main points of their discussions in an email on 13 July 2022 to Mr Pellicano:
Further to our conversation yesterday evening and again this morning, just wanted to encapsulate the main points:-
·Base Salary $220K plus super;
·30% bonus (target TBC) with possible stretch bonus target also;
…
·Relocation to Melbourne;
·Temporary accommodation in Melbourne (until family arrive);
·Rental Assistance of $500 per week for family to continue to reside on Hayman end of 2022 schools;
…
·Subject to approval - 2022 pro-rata Bonus from Hayman (should this not be covered by Hayman Ownership or IHG). …

On 20 July 2022, Mr Graham Hines, the Director of Finance from Hayman Island, emailed Mr Hill providing calculations indicating that his bonus payment for the full 2022 calendar year at Hayman Island would be $52,004.70.
On 21 July 2022 Mr Pellicano emailed Mr Hill, attaching a draft contract with yellow highlights requiring Mr Hill’s completion. In response, Mr Hill emailed Mr Pellicano on 22 July 2022 (the 22 July Email) attaching the email from Mr Hines, and listing ‘just a few wrinkles to iron out’ including ‘[p]revious pro-rate bonus – currently in discussion with current owners approval (pro-rate value at $52K)’.
Mr Pellicano then sent Mr Hill a further marked up version of the draft contract by email at 4.49pm. In this final version, Mr Pellicano amended the Previous Pro-Rata Bonus clause to add the figure of $52,000.
The Contract was signed on 22 July 2022. It comprised a letter of offer and two attachments. The letter of offer provided that Mr Hill was employed by Brady in the role of General Manager at Voco, commencing on 29 August 2022. Attachment A ‘Compensation and benefits summary (Employment Letter dated 22 July 2022)’ contained the following relevant terms:

Annual incentive You will be eligible to participate in the incentive plan. Under the plan, you will have the opportunity to earn up to 30% (or higher amount as agreed by the Employer) of your annual base salary as an incentive payment, subject to the achievement of performance goals (target to be determined the Employer [sic]). During the first year of your employment you will be entitled to a proportionate payment based on the date you commenced work.
Details of the plan will be provided after you commence work

Relocation costs Reasonable relocation costs for you and your family from Hayman Island to Melbourne

Temporary Accommodation Reasonable temporary accommodation to be provided until the earlier of your family’s relocation or 31 December 2022.

Rental Assistance Rental assistance of $500 per week for your family to continue to reside on Hayman Island until the earlier of your family’s relocation or 31 December 2022.

Previous Pro-rata Bonus
In the event your previous employer does not pay you an eligible pro-rata bonus for 2022 of $52,000, the Employer will pay you a bonus in lieu.
The bonus amount is subject to the Employer’s approval.

The Rental Assistance term was subsequently varied by agreement between the parties in writing to $700 per week, evidenced by an exchange of emails between Mr Hill, Mr Jeremy De Silva and Mr Pellicano on 4 October 2022.
Mr Hill commenced employment with Brady on 29 August 2022. On around 1 September 2022 Voco moved from being a managed hotel to a franchise of the IHG group. Mr Pellicano, in his email to Mr Hill of 21 July 2021, had sent Mr Hill execution copies of a number of documents relating to the transition of Voco to a Franchise. Mr Hill referred in the 22 July Email to hoping to receive the revised copy of the contract that day so he could provide 4 weeks’ notice to his current employer to ‘ensure I am available at the time of the changeover from Managed to Franchise’.

The 2022 IHG Hotel Annual Performance Plan

Both Mr Pellicano and Mr Hill agreed that the 2022 IHG Hotel Annual Performance Plan (IHG Bonus Scheme) applied to IHG managed hotels and not to franchised hotels such as Voco. I am satisfied based on this evidence that the IHG Bonus Scheme reflects the terms in respect of payment of bonuses at Hayman Island for the 2022 calendar year. I am satisfied on the evidence of Mr Hill and Mr Pellicano that both were aware of and familiar with the terms of the scheme as described in the document at the time that the Contract was concluded.
The IHG Bonus Scheme provided that a general manager’s annual performance target is 30 per cent of base salary. It provided that gross operating profit (GOP) comprises 50 per cent of the target bonus, requiring 100 per cent of budget to be achieved to obtain the full bonus, with achievement of 95 per cent of budget permitting 50 per cent of total bonus to be paid. GOP is based on budgeted GOP set at the beginning of the year. However, budgeted GOP may be revised during the year.
The Guest Satisfaction Index (GSI) and overall performance (OP) made up the other 50 per cent of the bonus. GSI is measured on targets set at the beginning of the year however for some hotels this may have been considered inappropriate due to the trading environment and, if so, a ‘Guest Love’ target would be assigned in its place based on the circumstances during the year. OP was determined based on goals, behaviours and development, with a scale from 0 per cent to 100 per cent reflecting manager judgment and discretion, with the possibility that the overall payout, where GOP is achieved but OP is ‘mixed,’ may have been reduced to zero.
The ‘Plan Rules and Eligibility’ included the following:
Participation in the Plan is governed by these Plan rules. IHG’s Hotel Annual Performance Plan is discretionary. InterContinental Hotels Group PLC reserves the right to change, modify, alter, or terminate the Plan at any time.
·If an employee is hired during the Plan year, changes performance Plan, target opportunity, salary, working hours or location during the Plan year, the bonus earned will be prorated based on the date of hire/change. Participants who change bonus opportunity or transfer from one hotel/business unit to another will be eligible for pro-rated bonus for each portion [emphasis added]. In these circumstances, the salary used for calculating pro-rated bonus payments will be the last effective salary in each portion. The calculation for GOP will be based on Full Year results and payment will be made in each location it is earned.
·Where an employee is eligible for pro-rated bonus, bonus will be calculated on the number of days in the eligible period.

Evidence regarding the Previous Pro-rata Bonus clause

The evidence as to the surrounding circumstances relating to the Previous Pro-rata Bonus clause was otherwise contested.
It was not in dispute that the Hayman Island bonus would have been payable in or around February or March 2023 in respect of the 2022 calendar year, that Hayman Island did not pay Mr Hill a bonus and that Brady had not approved payment of the bonus.
Mr Hill said because Voco was moving from a managed property to a franchise on 1 September 2022, there was time sensitivity around his employment as Voco needed a General Manager in place by that date. Mr Pellicano said the franchise agreement did not require this, and that Brady Group has a General Manager who runs the hotels. I preferred Mr Hill’s evidence on this matter. I consider it is borne out by his statements in the 22 July Email. Further, Mr Hill had been provided with the franchise documents by Mr Pellicano on 21 July 2022, apparently for execution. I am satisfied that it was commonly understood that Mr Hill’s employment needed to commence before the intended transition to a franchise arrangement on 1 September 2022.
Mr Hill said the Previous Pro-rata Bonus term was included in the Contract through a discussion with Mr Pellicano, in which Mr Hill advised Mr Pellicano that he would be entitled to receive a bonus at Hayman Island which would be foregone, hence they agreed if it was not received from Hayman Island or IHG it would be paid by Brady. Mr Pellicano agreed that they discussed Mr Hill’s expectation he would receive a $52,000 bonus for his work across 2022, and agreed that is why the clause was added to the Contract. I am satisfied based on this evidence that it was commonly understood that by leaving Hayman Island at the relevant time, Mr Hill would be foregoing a bonus payment he expected to otherwise receive.
Mr Hill described the $52,000 as a form of sign-on bonus albeit not written that way. Mr Pellicano disagreed there was a mutual understanding that they were negotiating that a bonus of $52,000 would be paid by Brady and said it was always pro-rata.
Mr Pellicano said the pro-rata aspect was because the entire amount, had Mr Hill worked for a year, would have been $52,000, and at that point of the negotiations they didn’t know what the time frame would be, so they used the term pro-rata. This was discussed with Mr Hill and it was accepted he would chat to the owners and it was always going to be pro-rated. In response to the proposition that ‘pro-rata’ meant Mr Hill getting around two thirds of the sum, he agreed that was what was stated in the documents but not what he understood. Mr Hill’s interpretation was that Brady would pay the whole bonus he was foregoing, because that was the conversation with Mr Pellicano who said if it wasn’t paid it would be covered by Brady. He couldn’t explain the use of the term other than Mr Pellicano could have referred to it as pro-rata. He agreed pro-rata means a portion of, but said that was not the intent. On balance, I am not satisfied that Mr Pellicano discussed explicitly with Mr Hill that the clause provided for only a part payment of the $52,000. I was persuaded by Mr Hill’s evidence that he genuinely understood that the full sum was payable. However, I accept Mr Pellicano’s evidence that at that point of negotiations, the parties did not know what the timeframe would be.
Mr Pellicano said that ‘eligible’ means Mr Hill must have met the criteria to be eligible for the bonus by his previous employer. Mr Hill said the IHG Bonus Scheme demonstrates that by moving from a managed hotel to a franchise, he immediately lost his bonus. He agreed had he remained at Hayman Island, his receipt of the full amount of the bonus would have been subject to the performance criteria set out in the IHG Bonus Scheme however said everyone in the hotel on an incentive in 2022 was fully paid out. However he is no longer working for Hayman Island and does not have access to any of the financials. These were not requested at the time of doing the Contract in order for the bonus to be calculated as a sum and he does not believe this is what is mentioned in the clause. He agreed he had to earn the bonus at Hayman Island by attaining certain milestones, but said this requirement was never requested by Brady at the time of contract writing. I am satisfied on Mr Hill’s evidence, which was not contradicted by Mr Pellicano, that there was no express discussion between the parties as to the requirement to verify that the bonus would have been payable by Hayman Island, or the method for doing so.
Mr Pellicano said the bonus was subject to the employer’s approval, meaning in the event that Mr Hill was eligible and had been approved for the bonus by Hayman Island and it was not paid by his previous employer, Brady would consider payment of that bonus. He said had the preceding criteria been met, the bonus would have been 8 months or two thirds of a year.
Mr Hill agreed it could be interpreted that it was for the employer to determine how much the bonus amount would be, but he considered that the amount he was foregoing having worked on Hayman would be received from either his old employer or his new employer.
Whilst the evidence of Mr Hill and Mr Pellicano explains the competing interpretations of the Previous Pro-Rata Bonus clause, beyond the findings I have made, I considered this to be no more than evidence of the subjective understanding of the parties as to the meaning of the clause, and I have not been assisted by it in determining the objective common intentions of the parties.

The Annual Incentive clause

Evidence as to the Annual Incentive clause was also contested.
Mr Pellicano said that at the time the Contract was negotiated, Brady still hadn't determined what the budget would be going forward as they had just moved to the franchise arrangement. Brady was going to set out the key performance indicators which would make Mr Hill eligible for a bonus. The bonus period would have been from the commencement of Mr Hill’s employment through to December. His previous employer ran on calendar years for bonuses whereas Brady Group has financial reporting on 30 June. The intention was to go to December, then reassess for June, and from there on, annual bonuses.
Mr Hill said that the Annual Incentive clause was a standard clause in any general manager contract he had received, whereas the Previous Pro-rata Bonus clause reflected the bonus Mr Hill would be foregoing in moving outside the IHG network and working for Brady. He agreed that the Annual Incentive clause provided that he would be eligible for a bonus with Brady for the period 1 September to 31 December 2022 valued at $24,000. He also agreed that his interpretation of the Previous Pro-rata Bonus clause gave rise to the possibility of receiving a bonus under both clauses and it was not intended that he could ‘double dip’. However Mr Hill disagreed that he would have received a bonus under the Annual Incentive clause had things worked out with Brady as he wasn’t given any specifics as to the incentive and what he was being measured on, and new hotels never meet incentives in the first year. He said the Previous Pro-rata Bonus clause was a one off whereas the other one was a long term provision. He agreed that was potentially why the term ‘pro rata’ was inserted in the clause but said he didn’t write the contract.
Mr Pellicano agreed that no details were provided by Brady in accordance with the clause and agreed a hotel takes time to reach its financial potential and in the first six months of operation a hotel would not be expected to earn as much as two or three years later. However, he disagreed that because of these factors, everyone was proceeding on the basis that Mr Hill would be paid the $52,000 under the Previous Pro-rata Bonus clause.
Beyond accepting that it was commonly understood between the parties that Voco would be unlikely to perform well financially during the period that the Annual Incentive clause applied to, the evidence as to the Annual Incentive clause otherwise demonstrates no more than each party’s subjective understanding of its meaning, and what occurred subsequent to the Contract being formed. I have not had regard to it in considering the objective meaning of the Pro Rata Bonus clause.

The events of 28 November 2022 - 5 December 2022

Mr Pellicano had no involvement in the termination of Mr Hill’s employment. The evidence of Mr Hill as to the events of 28 November - 5 December 2022 was uncontested, and I accept it with one minor exception where indicated.
The termination of Mr Hill’s employment arose following a duty manager employed at Voco posting anti-semitic comments from the duty manager’s personal social media account about a newly drafted AFL player.
Mr Hill first became aware of this on Monday 28 November 2022 when he received around half a dozen emails and more than a dozen phone calls from concerned community members. One such email stated:
As mentioned, here is the despicable conversation trail in which the VOCO Melbourne Duty Manager contributed to via the Age newspaper’s page of Facebook.
I would like reassurance that VOCO hotels will not stand by and tolerate such vile racism from their employees, even if expressed in public while off-duty.
I would like to discuss this further with senior leadership within your organisation.
That morning, Mr Hill had a planned meeting with Mr Pethica in which he discussed the issue and advised that he would be standing down the employee pending the investigation. He told Mr Pethica he had contacted IHG regarding potential reputation damage to have their ‘comms’ team prepare a holding statement. Mr Hill read out the holding statement to Mr Pethica and no concerns were raised. Mr Hill was not instructed by Mr Pethica to keep him abreast of the situation.
On the same day, Mr Hill was finalising arrangements for his family to join him in Melbourne. Prior to Mr Hill’s employment at Voco, he and his family had been living on Hayman Island. When he ended his employment to move to Voco, his family were required to relocate from the island to Airlie Beach. They packed up their belongings and put everything into storage, other than what they would take on the plane. The only thing left was Mr Hill’s car and boat, which he had been unsuccessful in trying to sell, and Mr Hill prearranged transport for these.
As of 28 November 2022, his children had finished school and his wife was making the final arrangements to relocate. The last thing was to arrange for them to fly from Queensland to Melbourne. At 8.04pm on Monday 28 November 2022, Mr Hill emailed Mr Pethica with the subject line ‘The Hill’s are (finally!) coming home to Melbourne!’ stating:
Just been speaking with the family.
They have been able to get out of school a few days earlier and the removalist has been booked for 7 December.
Regarding accommodation, I pick up the keys from the agent on the weekend so when
they arrive they can go straight into the house. Yay!
I kindly ask if you could please book the family’s flights down to Melbourne? [family details included]
…
There is a direct flight from HTI to Melbourne on this day – QF577
If you could also please book a second suitcase for each that would be greatly
appreciated.
Alternatively if you would like me to make the bookings directly, please let me know.
The following day, 29 November 2022, Mr Hill responded to the email complaints about the duty manager using an email template consistent with the holding statement. For example he replied to one email stating:
Thank you for bringing this to our attention. Given this comment was on the individual’s personal social media we wouldn’t otherwise have been aware, so we do appreciate you letting us know.
We are in full agreement that the comment on the post you have highlighted is unacceptable, and not only contravene [sic] our hotel’s policy on diversity, equity and inclusion, it goes against our team’s culture.
With that said, the colleague has been temporarily stood down as we go through the appropriate disciplinary process.
Mr Hill said a franchise is obliged to consult with the IHG group as the brand owner when in crisis management involving reputational risk and media. He discussed the issue with two people in IHG, Mr Chris Waite, Director of Communications, Japan, Australasia and Pacific for IHG, and Ms Mardi Sparrow, the Director of Human Resources Australasia for IHG, who provided advice which he took into account, notwithstanding that Ms Sparrow recommended that as a franchise hotel he should obtain independent employment advice.
After becoming aware of the issue on 28 November 2022, Mr Hill had notified and spoken to the hotel’s Human Resources Director to contact the duty manager and start an investigation. The investigation was required by IHG policy to be completed within 72 hours. Ultimately, the duty manager was not dismissed, on the basis that he had not breached any workplace policy. He was placed on a leave of absence and returned to a non-guest facing role as a back of house telephone operator.
On 1 December 2022 at 12.48pm, Mr Hill received an email from an Age reporter seeking media comment on the issue. He again consulted with Mr Waite who made revisions to a draft statement prepared by Mr Hill by email at 2.27pm, and also stated that he should seek his hotel’s own legal advice before responding ‘especially where highlighted in yellow’. The yellow highlight was an addition to Mr Hill’s statement made by Mr Waite adding ‘we have determined that the individual did not breach any employment conditions by posting an opinion on a personal social channel, so have now reinstated that colleague to a non-guest facing role.’ Mr Hill did not seek any additional legal advice following the email from Mr Waite, but said he did discuss it with Mr Pethica. I am not persuaded he did, because I consider based on what subsequently occurred that had Mr Pethica been consulted, he would have advised against sending the statement to the reporter. I consider it likely Mr Hill was here conflating his conversation with Mr Pethica about the earlier holding statement.
Meanwhile, Mr Hill had still not received confirmation as to the flight bookings for his family from Mr Pethica and emailed him at 1.45pm on 1 December 2022 forwarding his previous email from 28 November 2022 regarding the flights stating:
Afternoon Simon
Just following up on the below to see if you have had a chance to look into it yet?
Everything is now booked to move on Wednesday 7 December and just need to arrange the flights for the family.
If you would prefer I arrange them, please let me know.
Mr Hill responded to the Age reporter at 5.10pm consistent with the statement from Mr Waite, and added the words ‘on full pay’ with reference to the standing down of the Duty Manager, based on the advice of the Brady Voco Director of Human Resources, who had been involved in the investigation whilst Mr Hill handled the external communications. An article was subsequently published on the Age website which reported Mr Hill’s statement.
Mr Hill forwarded a copy of the statement to others in Brady including Mr Pethica, Mr Brady and Mr De Silva at 5.19pm as ‘an update as to the situation’. Moments after he had sent that email, he received a phone call from Mr Pethica who was clearly upset and abusive that Mr Hill had done such a thing, and said that Brady owns the hotel and ‘at Brady we don’t talk to the media in these situations.’ This was contrary to the approach Mr Hill had been trained to take. Mr Hill said he understood but there was a requirement under the franchise agreement that any brand reputation issue had to be raised with IHG. He had not been given any direction not to speak to the media and he considered that in a General Manager role you are required to speak to the media on many things. There was no mention in the conversation with Mr Pethica that Mr Hill’s employment may not be continued.
Mr Hill knew something was up however, as Mr Pethica and Mr De Silva largely ceased communicating with him, until Mr Pethica came to the hotel on Friday 2 December 2022 and asked Mr Hill for a chronology of what went, as he said, so horribly wrong. They went through the chronology together and Mr Pethica requested that Mr Hill send all the information to him, which he did on 2 December at 3.23pm. In that email Mr Hill stated ‘Once again I know and understand that I have made the matter worse by responding. For this I apologise as this was certainly not the intent.’ That email also attached copies of further emails from the community complaining about the hotel’s decision to reinstate the duty manager and threatening to variously rescind their IHG membership, never stay at the hotel, not recommend the hotel or to publicise what has occurred to ensure other people do not stay in the hotel.
On Monday morning 5 December 2022 Mr Hill telephoned Mr Pethica as it was getting very close to his family travelling to Melbourne and they still needed to book flights. Mr Pethica told Mr Hill to go ahead and book his family’s flights and put an expense claim in. The moment Mr Hill received this confirmation he booked the flights as he was concerned to make sure there were seats available for his family. I am satisfied based on Mr Hill’s email of 28 November 2022 that the flights were the last thing to be arranged.
That afternoon, Mr Pethica and Mr Brady came to his office, closed the door, told him that they were disappointed in his actions, which they described as gross misconduct, said he was not performing his job to his abilities and handed him his termination notice effective immediately. They watched him pack his belongings into a box then escorted him off the property. There had been no previous mention of disciplinary action whatsoever and Mr Hill was unaware of any performance issues of concern. Mr Hill agreed that the reason his employment was terminated was that he had talked to the press, but said that was the role of a general manager.
I am satisfied that Mr Hill had no prior knowledge of his impending termination before the meeting which took place on the afternoon of 5 December 2022 when he was terminated with immediate effect. There was no express indication from Brady that termination was a possibility. Further, whilst Mr Hill thought ‘something was up’ and apologised for how he had handled the issue, in my view there was nothing inherent in the circumstances which unfolded or in Mr Hill’s conduct which ought to have caused him concern that that his employment may be terminated. To the contrary, Mr Pethica’s advice that he should book his family’s flights on the morning of 5 December 2022 was a clear indication that the relocation should and would take place.

The Relocation Costs

Mr Hill’s evidence as to the Relocation Costs was uncontested and I accept it.
Mr Hill received the quotation to transport his car and boat to Melbourne in August 2022 when he moved from Hayman Island to Airlie Beach. His children finished school on Friday 2 December 2022 and the relocation of the car and boat was arranged for Monday 5 December 2022, so he didn’t leave his wife without transportation. His recollection is that the vehicles were picked up in the morning and cartage occurred straight away. An invoice from R Henkins General Cartage dated 8 December 2022 for $9790 was tendered, as was an email exchange from August 2022 in which a consistent quote was provided and Mr Hill was advised that three weeks’ notice of the arrangements would be required. Mr Hill used this contractor because relocation was a constant thing in his previous employment, many of his managers and staff had used the contractor and there was only a handful of operators that were reliable and timely.
Three pallets of the family’s personal effects were placed in storage with Whitsunday Food Services, a company which provided cartage, when the family left Hayman Island and were ready for shipment once a date was provided, which needed to correspond with the lease Mr Hill signed for the family’s property in Melbourne which he signed four days prior to his termination. An invoice dated 8 December 2022 for $1635.22 for this service was tendered.
A taxi invoice/receipt for his family’s travel from the Melbourne Airport to Burnley for $113.53 was tendered, as his family did not have their own transportation including six bags.
Trust account receipts for Ray White for rent for the apartment in Airlie Beach in which Mr Hill’s family were staying while he was in Melbourne for the week beginning 1 December 2022 ($700) and from 8-13 December 2022 (to vacate) ($600) totalling $1300 were tendered. Mr Hill accepted that the family moved on 7 December 2022 and said the $600 sum was for the balance of the notice period to vacate the property.
Mr Hill said the 8 December 2022 date on a number of the invoices reflect the time the goods arrived in Melbourne, and he received the invoices after the items were delivered. He believed the items were picked up on 5 December and delivered on 8 December 2022.

CONSIDERATION

The Previous Pro-rata Bonus clause

Mr Hill contended that the Previous Pro-rata Bonus clause is simply a statement of his entitlement to be paid $52,000 as a bonus for 2022 in the event that his previous employer does not pay that sum. The use of the terms eligible and pro-rata in the phrase ‘[i]n the event your previous employer does not pay you an eligible, pro rata bonus for 2022 of $52,000’ are nothing more than clumsy words used to mean ‘in the event your previous employer does not pay you a bonus for 2022 of $52,000.’
Brady contended that the clause requires Mr Hill to establish that he would have met all of the conditions to qualify for payment of the bonus with his previous employer, in which case, subject to Brady’s approval, Brady’s obligation is to make payment of a pro-rata amount of $52,000, where $52,000 reflects a full year entitlement to a bonus. On this construction, the term ‘eligible’ imports into the clause a requirement that Mr Hill satisfy all of the eligibility requirements for receipt of a bonus from Hayman Island, and the term ‘pro-rata’ provides for the payment to be made of a proportion of the total of $52,000 referable to the proportion of the year Mr Hill worked at Hayman Island.
Brady contended that the Annual Incentive clause supports its construction as to the ‘pro rata’ aspect of the clause, as it provided for an alternative incentive scheme from the date Mr Hill commenced employment with Brady for the remainder of the calendar year. Mr Hill contended that the parties did not intend the Annual Incentive clause to apply in 2022, and contended that to the extent the Previous Pro-rata Bonus clause provides only for pro-rata payment, the Annual Incentive clause allows the Court to effectively make up the difference to Mr Hill’s claimed $52,000.
In light of the competing constructions it is necessary for the Court to determine the meaning of the Pro-rata Bonus clause. This is to be done by reference to the common intention of the parties, objectively determined, having regard to the text, context and purpose of the clause. The subjective beliefs of the parties, or one or other of them, is not relevant to this determination, and I have indicated where I have considered the parties’ evidence to fall within this category. However, to the extent that the clause is ambiguous, evidence as to the surrounding circumstances at the time the contract was made, insofar as these circumstances were commonly known or notorious, may be used to assist in ascertaining the objective meaning of the term.

‘Eligible’

Arising from the competing contentions described above, I am satisfied that the clause is ambiguous as to the meaning of the term ‘eligible.’ I do not consider that the word ‘eligible’ can simply be ignored as a clumsy expression and I consider that having been included in the clause, it must contribute some meaning to the clause. It is capable of meaning that Brady’s obligation to pay a bonus in lieu arises simply on the basis that the bonus Mr Hill was eligible for in his former employment was not paid by Hayman Island. It is also capable of meaning that Brady’s obligation to pay a bonus in lieu arises only when Mr Hill met all the criteria for payment of the bonus at Hayman Island, and it was not paid by Hayman Island. Accordingly I consider it permissible to have regard to the surrounding, commonly known circumstances in objectively construing the clause.
Having done so, I accept the construction contended for by Mr Hill in that I consider it most probable that the reference to ‘eligible’ in the clause was a reference to Mr Hill’s eligibility to participate in the IHG bonus scheme whilst at Hayman Island, rather than his eligibility for payment pursuant to that scheme. I do not consider that the term ‘eligible’ has the meaning contended for by Brady.
In particular I have had regard to the terms of the IHG Bonus Scheme. The Contract was concluded in the context of both parties having knowledge of the terms of the IHG Bonus Scheme, and I consider it to constitute part of the relevant surrounding circumstances. The ‘Plan Rules and Eligibility’ section amongst other things makes provision that employees who transfer from one hotel/business unit to another will be ‘eligible for pro-rated bonus for each portion’. The Previous Pro-rata Bonus clause adopts this language. I consider this context supports an objective interpretation of the clause whereby the term ‘eligible’ refers to the entitlement for an employee to continue to be eligible for participation in the scheme notwithstanding the transfer from one hotel to another, as opposed to referring to eligibility for payment under the scheme.
Both Mr Hill and Mr Pellicano said that the IHG Bonus Scheme did not apply to Voco as it was a franchise and the IHG Bonus Scheme only applied to managed hotels. The parties were both aware that Voco was at the relevant time an IHG managed hotel, but was expected to become a franchise as of 1 September 2022. This had not occurred at the time the Contract was negotiated and concluded on 22 July 2022. Accordingly, I consider both parties were aware that it was likely that the IHG Bonus Scheme would cease to apply to Mr Hill because he no longer met the eligibility requirements to participate in it. However, as the change in status of Voco had not yet occurred, this was not certain. I consider that this context also supports an objective construction of the term whereby the term ‘eligible’ refers to whether or not Mr Hill continued to be eligible for the IHG scheme such that Hayman Island may be required to make the payment irrespective of Mr Hill leaving his employment, not to whether he met all of the requirements for payment under the scheme.
Other contextual matters weigh against the construction contended for by Brady. Having found that it was commonly understood that by leaving Hayman Island at the relevant time and joining Brady as a franchise, Mr Hill would likely be foregoing a bonus payment he expected to otherwise receive, I am satisfied that the purpose of the Pro-rata Bonus clause was to address this issue. I consider this supports an objective construction of the clause whereby Mr Hill’s entitlement to payment under the IHG Bonus Scheme was assumed.
Further, given the likelihood that Brady would become a franchised hotel, I consider it was commonly known to the parties that the capacity for Brady or Mr Hill to obtain financial and other information as to the extent to which Mr Hill had, or would have, satisfied the criteria for payment of a bonus had he stayed at Hayman Island or another managed hotel, was limited. Mr Hill gave that evidence directly. I infer from Brady’s involvement in the transition from managed to franchised hotel that Brady was also aware of this. I consider this context also weighs against Brady’s construction of the clause.
Further again, simply having access to the relevant financial information for the 2022 year would not allow eligibility for the bonus to be objectively determined by Mr Hill or by Brady. The subjectivity of the assessment criteria for payment under the IHG Bonus Scheme also weighs against the construction contended for by Brady. The measurement of performance under the scheme is discretionary to a large extent. For example, the budgeted GOP may be revised during the relevant period. The GSI may be replaced as the relevant assessment criteria with a ‘Guest Love target.’ The OP assessment reflects a manager’s ‘judgment and discretion’ and is capable of resulting in a reduction in the GOP component to zero. IHG reserves the right to change, modify, alter or terminate the plan at any time. It is difficult to envisage how in practical terms Mr Hill could ever satisfy a requirement to establish an entitlement to payment under the IHG Bonus Scheme, having left the employment. The construction contended for by Brady would in effect require a theoretical exercise to be voluntarily undertaken by Hayman Island and the relevant judgment and discretion exercised, including in respect of criteria which may have changed after Mr Hill left his employment. I do not consider that the simple inclusion of the term ‘eligible’ is objectively capable, without more, of imparting into the clause a requirement of this nature. This is particularly so where there was no discussion as to the requirement to verify that the bonus would have been payable or the method for doing so.

For those reasons, I consider the reference to ‘eligible’ in the clause refers to Mr Hill’s eligibility to participate in the IHG Bonus Scheme, not to his eligibility under the payment criteria. I am satisfied that Mr Hill was so eligible whilst employed at Hayman Island, and this requirement in the clause has been met.

‘Pro-rata’

I accept, to an extent, that the clause is ambiguous and capable of more than one meaning insofar as it refers to the term ‘pro-rata’, arising from the competing contentions of the parties. However again I do not accept that that the word can be simply overlooked, and it must impart some meaning. I consider the meaning of the term pro-rata is objectively clear in that it refers to a portion of something – Mr Hill accepted this in his evidence despite contending for a different interpretation of the clause. However I consider that the clause itself is unclear as to whether the sum of $52,000 reflects, in effect, the agreed pro-rated sum, or whether the clause provides for a portion of that sum to be determined. Further, on the latter construction, the clause is ambiguous as to how the portion is determined.
I consider that objectively ascertained, the clause provides that the bonus in lieu is to be calculated as a pro rata portion of $52,000, with reference to the proportion of the 2022 year Mr Hill was employed at Hayman Island.
Again, the clause adopts the language of the IHG Bonus Scheme ‘Plan Rules and Eligibility’ that employees who transfer from one hotel/business unit to another will be ‘eligible for pro-rated bonus for each portion’. It goes on to provide ‘[w]here an employee is eligible for pro-rated bonus, bonus will be calculated on the number of days in the eligible period.’ Accordingly, under the IHG Bonus Scheme, where an employee transfers from one IHG hotel to another, the portion of the bonus for which an employee will be eligible in respect of a location is determined by the number of days in that location. The scheme applied for the 2022 calendar year, and it was commonly known to Mr Hill and Mr Pellicano that Mr Hill would not be serving out the full 2022 calendar year at Hayman Island if he entered the Contract with Brady, but when the clause was being negotiated, they did not know the precise dates. I consider, in light of this context, that the reference to pro-rata in the clause is a reference to a portion based on the number of days Mr Hill was employed at Hayman Island in 2022.
Further, it was commonly known, based on the 20 July 2022 Email from Mr Hines to Mr Hill, subsequently provided by Mr Hill to Mr Pellicano, that the full year bonus Mr Hill was eligible to attain was $52,004.70. Both Mr Hill and Mr Pellicano referred in evidence to the rounded number of $52,000. On this basis, I consider that objectively determined, the clause provides for a pro-rated portion of $52,000 because that sum reflected the full year bonus.
This construction is supported by the inclusion in the Contract of the Annual Incentive clause, which provided access to a Brady incentive plan, with the opportunity to earn up to 30 per cent of Mr Hill’s annual base salary as an incentive payment. The Annual Incentive clause, which provides ‘[d]uring the first year of your employment, you will be entitled to a proportionate payment based on the date you commenced work’ objectively reflects a common intention, objectively ascertained, that the Previous Pro-Rata Bonus clause would apply in respect of the portion of the year Mr Hill worked at Hayman Island and the Annual Incentive clause would apply in respect of the portion of the year he worked for Brady at Voco. Otherwise, Mr Hill would in effect have an entitlement to both payments for the same period of work.
It was not in dispute that targets were never set pursuant to the Annual Incentive clause. However, Mr Hill did not plead any breach of the Annual Incentive clause in his Statement of Claim and accordingly consideration of whether Brady’s failure to set targets was a breach of that clause and/or gives rise to any entitlement on the part of Mr Hill is not within the scope of this proceeding, despite Brady’s reliance on the Annual Incentive clause in support of its contention as to the meaning of ‘pro-rata’.

‘The bonus amount is subject to the Employer’s approval’

The parties also differed as to the construction of the final sentence of the clause. Whilst Brady accepted that the Contract includes an implied term that the Employer must not act unreasonably in withholding approval, Brady contended that pursuant to the final sentence of the clause it was permissible for the Employer to approve a zero sum, and in fact there was no approval. Brady contended this was not unreasonable in the absence of Mr Hill establishing he was entitled to payment of the bonus from Hayman Island. Mr Hill contended that this sentence provides simply that the employer is part of a process to ascertain the payment amount, and does not permit Brady to withhold agreement capriciously. Mr Hill referred to Silverbrook Research Pty Ltd v Lindley (Silverbrook)[1] and Crowe Horwath (Aust) Pty Ltd v Loone (Crowe Horwath)[2] in support of this submission.
[1][2010] NSWCA 357.
[2][2017] VSC 163.
In Silverbrook, in considering an Employer’s failure to set performance objectives pursuant to a contractual bonus clause, Allsop P (Beazley JA agreeing) held:
[5] That the decision as to whether the respondent should receive the bonus was “entirely within the discretion of” the appellant should not be construed so as to permit the appellant to withhold the bonus capriciously or arbitrarily or unreasonably; it should not be construed so as to give the appellant a free choice as to whether to perform or not a contractual obligation. The relevant discretion should be understood against the proper scope and content of the contract. This was a bargained for bonus to be assessed against set objectives. Such a clause should receive a reasonable construction and not permit the appellant to choose arbitrarily or capriciously or unreasonably that it need not pay money the set objectives having been satisfied [cited authorities omitted].
[3][2010] NSWCA 357 [5]-[6], Allsop P.
[6] The discretion is to be exercised honestly and conformably with the purposes of the contract. There may be many circumstances in which it would be legitimate, and conformable with the purposes of the contract, not to pay the bonus. …. What, however, would not be permitted is an unreasoned, unreasonable, arbitrary refusal to pay anything, come what may. This would be a denial of the very clause that had been agreed. If these parties wished to make payment under the clause entirely gratuitous and voluntary, such that payment could be withheld capriciously, notwithstanding the compliance with solemnly set objectives they needed to say so clearly.[3]
In Crowe Horwath, McDonald J held (citing Silverbrook) that notwithstanding a bonus clause conferring an absolute discretion on an employer, a failure by the employer to undertake the promised contractual process for the assessment of the bonus can still constitute a breach of contract.[4]
[4][2017] VSC 163 [38].
Here, leaving aside the final sentence of the clause, the ‘eligibility’ requirement in the clause has been met by Mr Hill, Mr Hill has not been paid by his previous employer and accordingly the clause provides for the bonus in lieu is to be paid by Brady, calculated as a pro rata portion of $52,000, with reference to the portion of the 2022 year Mr Hill worked at Hayman Island. In this context, I do not consider that the final sentence of the clause provides Brady with a discretion not to pay the bonus in lieu so calculated. The ‘approval’ required by the final sentence is not at large, as to whether or not the bonus is to be paid, it expressly relates only to the ‘amount’ of the bonus. Given that the clause in its other terms prescribes these matters, viewed objectively I consider that the approval provided for in the final sentence is limited to approving that the amount to be paid has been calculated consistently with the clause. Further, I do not consider that Brady can escape its obligation pursuant to the clause by simply failing to give an approval. I accept Mr Hill’s submission that the Employer’s approval is a part of a necessary process and failure to participate in that process would be equally capricious, arbitrary, and unreasonable.
Even if the final sentence of the clause were not confined to only the ‘amount’ of the bonus, consistent with Silverbrook, it would not in my view permit Brady to elect to make no payment or make a payment which differs from that otherwise provided for in the clause. This would amount to a ‘denial of the very clause that had been agreed’[5] and would be a capricious, arbitrary and unreasonable exercise of the approval.

Amount of payment in lieu

[5][2010] NSWCA 357, [6], Allsop P.

Accordingly, I am satisfied that Mr Hill is entitled to payment of a payment in lieu pursuant to the Previous Pro-rata Bonus Clause. As to the calculation of that bonus, the evidence did not disclose the date on which Mr Hill ceased employment at Hayman Island in 2022. However, Mr Pellicano’s evidence was that the bonus would have been for 8 months or two thirds of a year. Mr Hill agreed this was the effect of Brady’s interpretation. Having commenced employment with Brady on Monday 29 August 2022, his period of employment at Hayman Island must have ended no later than Sunday 28 August 2022 which is slightly less than two thirds of the calendar year. Doing the best on the evidence available, as I am required to, I infer Mr Hill ceased employment with Hayman Island on Sunday 28 August 2022 and is entitled to a pro-rata bonus calculated to and including that date, reflecting 240 days, totalling $34,191.78.

The relocation expenses

It was not in dispute that the Contract entitled Mr Hill to reasonable relocation costs for he and his family from Hayman Island to Melbourne, or that Brady did not pay a number of relocation costs claimed by Mr Hill. Mr Hill’s claim of $14,326.22 is referable to:
(a)transportation costs for his car and boat totalling $9,790.00 (Car and boat transportation costs);
(b)transportation costs for three pallets of personal effects totalling $1,635.33 (Personal effects transportation costs);
(c)cab fare from Melbourne Airport to Burnley on 7 December 2022, totalling $113.53 (Cab fare);
(d)transportation for Mr Hill’s family from Port of Airlie to Hamilton Island Airport on 7 December 2022, totalling $168.05 (Hamilton Island transfer costs);
(e)flight costs for Mr Hill’s family from Hamilton Island to Melbourne on 7 December 2022, totalling $1,169.31 (flight costs) along with extra baggage costs of $150 (baggage costs);
(f)rental costs for his family at Airlie Beach for the period 1-7 December 2022 totalling $700 (rental costs); and
(g)costs associated with the remainder of the notice period for his family’s Airlie Beach rental for the period 8-13 December 2022 totalling $600 (vacate costs).
Brady conceded during the hearing that the flight costs, baggage costs, rental costs and cab fare were payable, but submitted that the vacate costs were not provided for under the contract and were incurred for a period after the termination of the employment, and submitted that the other costs were incurred after the termination of the employment.
Mr Hill submitted that all of the relocation expenses were due under the Contract, and nothing turns on whether or not invoices were struck after the date of termination. At the time that the circumstances of the termination were unfolding, airfares had already been booked, the services had started before the termination and the goods were already in transit. There was no evidence questioning the reasonableness of those expenses.
Given my findings that Mr Hill had no prior notice of the termination, and in light of the indication provided by Mr Pethica on 5 December 2022, I do not consider there was anything improper about Mr Hill continuing to progress these arrangements to the point of the termination of his employment.
Further, I am satisfied on Mr Hill’s evidence that all of the relocation costs had in practical terms been incurred prior to the termination, and on that basis I consider they are payable under the Contract notwithstanding that the invoices were dated after the date of Mr Hill’s termination. It is apparent from Mr Hill’s email to Mr Pethica of 28 November 2022 that arrangements had already been made for the removalists to assist his family to vacate the rental property on 7 December 2022. His unchallenged evidence was that the car and boat were dispatched on 5 December 2022 in the morning, prior to the termination. The personal effects had been in storage since August 2022 with the cartage service, and I am satisfied that arrangements for delivery of these were made in advance of Mr Hill’s termination. Whether this ultimately occurred before or after the termination, and the date on which the invoice was ultimately provided to Mr Hill, is beside the point. The arrangements for transport of Mr Hill’s family from Airlie Beach to Hamilton Island for their flights were also made on 5 December 2022. This transport was clearly necessary for his family to get to Hamilton Island to catch the flights which had been expressly authorised by Mr Pethica. I am satisfied that each of the relocation costs were properly incurred and were reasonable.
However, I am not satisfied that the $600 vacate costs are payable by Brady. There was no evidence as to why the vacate costs were incurred. They relate to the period after Mr Hill’s family relocated. In the absence of this evidence, I am unable to conclude that those costs were a necessary incidence of his family continuing to reside in Airlie Beach until relocation, or were otherwise a reasonably incurred relocation expense.

Orders

I will order that Brady pay Mr Hill $47,918 comprising the payment in lieu of $34,191.78 and reasonable relocation costs of $13,726.22. The parties will be directed to confer on the form of final orders including interest and costs, with the Court to deal with these matters in the absence of agreement pursuant to procedural orders made today.

Annual incentive	You will be eligible to participate in the incentive plan. Under the plan, you will have the opportunity to earn up to 30% (or higher amount as agreed by the Employer) of your annual base salary as an incentive payment, subject to the achievement of performance goals (target to be determined the Employer [sic]). During the first year of your employment you will be entitled to a proportionate payment based on the date you commenced work. Details of the plan will be provided after you commence work
Relocation costs	Reasonable relocation costs for you and your family from Hayman Island to Melbourne
Temporary Accommodation	Reasonable temporary accommodation to be provided until the earlier of your family’s relocation or 31 December 2022.
Rental Assistance	Rental assistance of $500 per week for your family to continue to reside on Hayman Island until the earlier of your family’s relocation or 31 December 2022.
Previous Pro-rata Bonus	In the event your previous employer does not pay you an eligible pro-rata bonus for 2022 of $52,000, the Employer will pay you a bonus in lieu. The bonus amount is subject to the Employer’s approval.

[2024] VMC 13

23 July 2024